-----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, QENulOZpolR+pABi2sw2rkQBUldwYHco/0tcPu8VRKzjOU3Pm2LS5LlDSsjPw4Y3 TlJJke2KnBK/sIIHie/WLg== 0000950152-02-001232.txt : 20020414 0000950152-02-001232.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950152-02-001232 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20011130 FILED AS OF DATE: 20020215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER HOLDINGS INC CENTRAL INDEX KEY: 0001059364 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 133989553 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49971 FILM NUMBER: 02552309 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: HILLSDALE TOOL & MANUFACTURING CO CENTRAL INDEX KEY: 0001059573 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 380946293 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-07 FILM NUMBER: 02552310 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: EPMR CORP CENTRAL INDEX KEY: 0001059575 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382185909 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-08 FILM NUMBER: 02552311 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 FORMER COMPANY: FORMER CONFORMED NAME: MICHIGAN AUTOMOTIVE RESEARCH CORP DATE OF NAME CHANGE: 19980410 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER TECHNOLOGIES LLC CENTRAL INDEX KEY: 0001059576 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311587660 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-09 FILM NUMBER: 02552312 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER MINERALS INC CENTRAL INDEX KEY: 0001059572 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311188662 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-06 FILM NUMBER: 02552313 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 INDUSTRIES INC CENTRAL INDEX KEY: 0000030927 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 310268670 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957 FILM NUMBER: 02552314 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 FAR EAST INC CENTRAL INDEX KEY: 0001059570 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311235685 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-04 FILM NUMBER: 02552315 BUSINESS ADDRESS: STREET 1: 250 EAST FIFTH STREET, SUITE 500 STREET 2: C/O EAGLE PICHER INDUSTRIES INC CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137217010 MAIL ADDRESS: STREET 1: C/O EAGLE PICHER INDUSTRIES INC STREET 2: P O BOX 779 CITY: CINCINNATI STATE: OH ZIP: 45202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PICHER DEVELOPMENT CO INC CENTRAL INDEX KEY: 0001059568 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 311215706 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-03 FILM NUMBER: 02552316 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: DAISY PARTS INC CENTRAL INDEX KEY: 0001059567 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 381406772 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-49957-02 FILM NUMBER: 02552317 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-K405 1 l92796ae10-k405.txt EAGLE PICHER HOLDINGS AND COFILERS FORM 10-K405 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, 2001 COMMISSION FILE NUMBER 333-49957-01 ------------------------ EAGLE-PICHER HOLDINGS, INC. A Delaware Corporation I.R.S. Employer Identification NO. 13-3989553 ------------------------ 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 EAGLE-PICHER HOLDINGS, INC. IS FILING THIS REPORT VOLUNTARILY IN ORDER TO COMPLY WITH THE REQUIREMENTS OF THE TERMS OF ITS 9 3/8% SENIOR SUBORDINATED NOTES AND 11 3/4% SERIES B CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND IS NOT REQUIRED TO FILE THIS REPORT PURSUANT TO EITHER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 [ ] No [X] (See explanatory note immediately above.) 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 Eagle-Picher Industries, Inc., an additional registrant on this filing, 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 [ ] No [X] 1,000,000 shares of common capital stock, $.01 par value each, were outstanding at February 14, 2002. TABLE OF ADDITIONAL REGISTRANTS
JURISDICTION OF IRS EMPLOYER INCORPORATION OR COMMISSION IDENTIFICATION NAME ORGANIZATION FILE NUMBER NUMBER ---- ---------------- ------------ -------------- Eagle-Picher Industries, Inc. Ohio 333-49957 31-0268670 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 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 EPMR Corporation (f/k/a Michigan Michigan 333-49957-08 38-2185909 Automotive Research Corp.)
TABLE OF CONTENTS
ITEM PAGE - ---- ---- PART I 1. Business.................................................... 1 2. Properties.................................................. 7 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......................................... 15 6. Selected Financial Data..................................... 15 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 16 7a. Quantitative and Qualitative Disclosures About Market Risk........................................................ 26 8. Financial Statements and Supplementary Data................. 28 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 65 PART III 10. Directors and Executive Officers of the Registrant.......... 65 11. Executive Compensation...................................... 67 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 71 13. Certain Relationships and Related Transactions.............. 73 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................................... 74 Signatures.................................................. 79 Exhibit Index............................................... 88
i PART I ITEM 1. BUSINESS General Development of Business Eagle-Picher Holdings, Inc. ("EP Holdings") was incorporated under the laws of the State of Delaware in 1997 by Granaria Industries B.V. to serve as the vehicle to acquire Eagle-Picher Industries, Inc., an Ohio corporation ("EPI"). EP Holdings does not conduct any business of its own, rather EP Holdings acts as the holding company of EPI. EPI is a diversified manufacturer of hundreds of products for the automotive, defense and aerospace markets, as well as other industrial markets. Founded in 1843, EPI began as a manufacturer of paint pigments, marketed under the brand name Eagle White Lead. In 1876, the Picher family of Joplin, Missouri formed the Picher Lead Mining Company. The two firms merged in 1916 forming the Eagle-Picher Lead Company, which was renamed Eagle-Picher Industries, Inc. in 1966 to reflect its ongoing expansion into a wide and diversified group of industries. EPI conducts its business through both unincorporated divisions and separately incorporated subsidiaries. EPI is the only subsidiary of EP Holdings. Therefore, EP Holdings' results of operations and cash flow approximate those of EPI. Unless the context indicates otherwise, the term the "Company" as used herein refers to EP Holdings and its subsidiaries. References to divisions of the Company include both unincorporated divisions and separately incorporated subsidiaries. As a result of sales prior to 1971 of asbestos-containing insulation materials, EPI became the target of numerous lawsuits seeking damages for illness resulting from exposure to asbestos. By the end of 1990, EPI had paid hundreds of millions of dollars to asbestos litigation plaintiffs and their lawyers. In January of 1991, EPI filed for protection under chapter 11 of the U.S. Bankruptcy Code as a direct consequence of cash shortfalls attributable to pending asbestos litigation liabilities. 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 (the "Plan") of EPI and seven of its domestic subsidiaries. The Plan became effective November 29, 1996. The Order confirming the Plan contains a permanent injunction which precludes holders of present and future asbestos-related or lead-related personal injury claims from pursuing their claims against the reorganized EPI. Consequently, EPI has no further liability in connection with such asbestos-related or lead-related personal injury claims. Instead, those claims will be channeled to the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust (the "PI Trust") which is an independently administered qualified settlement trust established to resolve and satisfy those claims. Under the terms of the Plan, all of the outstanding common stock of EPI was cancelled and newly issued common stock of the reorganized EPI was contributed to the PI Trust, together with certain notes and cash. On February 24, 1998, EP Holdings acquired EPI from the PI Trust for $702.5 million. Effective December 14, 2001, the Company sold certain of the assets of its Construction Equipment Division. This division represented the Company's entire Machinery Segment. The sale price was $6.1 million in cash plus assumption of approximately $6.7 million of current liabilities. The Company retained the land and buildings of the Construction Equipment Division's main facility in Lubbock, Texas and leased the facility to the buyer of the division's assets and business for a five year term. The buyer has an option to buy the facility for $2.5 million, increasing $100,000 per year over the term. The Company also retained approximately $2.3 million book value of raw materials inventory, which the buyer agreed to purchase within one year, and approximately $0.9 million of accounts receivable. During 2000, as part of its previously announced program to focus management, technical and financial resources on core businesses, the Company completed the sale of its Ross Aluminum Foundries, Fluid Systems, Michigan Automotive Research Corporation, Rubber Molding, and Cincinnati Industrial Machinery divisions for aggregate net proceeds of $85.0 million. These divisions are referred to herein as the "Divested Divisions." On June 30, 2000 the Company's Technologies Division acquired the stock of BlueStar Battery Systems Corporation for $4.9 million in cash. Immediately following the transaction the name of the corporation was 1 changed to Eagle-Picher Energy Products Corp. ("EPEP"). EPEP manufactures batteries using lithium based technology, which is of strategic importance to the battery manufacturing operations at the Technologies Division. Substantially all of EPEP's products are sold to the United States Army, a branch of the military previously not counted among the significant customers of the Technologies Division. The Company's Technologies Division acquired the assets of the isotopically depleted zinc business of Isonics Corporation for $8.2 million effective December 1, 1999. The Technologies Division paid $6.7 million of the purchase price at the closing, and the remaining $1.5 million is payable in three annual $.5 million installments, subject to certain contingencies. The Company is disputing its obligation to make the remaining $1.5 million of deferred payments. See Item 3 -- Legal Proceedings. Isotopically depleted zinc is used as a corrosion inhibiting additive to water in nuclear reactors. This product compliments the enriched boron products sold by the Technologies Division to enhance the safety and efficiency of nuclear power plants. The Company's Hillsdale Division acquired the stock of Charterhouse Automotive Group, Inc., a holding company whose only operating subsidiary was Carpenter Enterprises Limited ("Carpenter"), as of March 1, 1999 for a purchase price of approximately $73.0 million. Carpenter is a supplier of precision machined components to the automotive industry with operations, products and a customer base complimentary to those of the Hillsdale Division. Immediately following the transaction Charterhouse Automotive Group, Inc. was merged into Carpenter. The Company's new management team is completing a strategic and operational review of the Company's businesses, including a review of portfolio mix, within the limits of the Company's financial resources and credit instruments. Financial Information About Industry Segments Commencing with the Company's fiscal year ending November 30, 2000, the Company changed the composition of its reportable business segments to include the following three segments: 1. Automotive; 2. Technologies; and 3. Minerals. Prior to March 1, 2001, the Company also operated a Machinery Segment; from that date until its sale as of December 14, 2001 the Company treated the Machinery Segment as a discontinued operation. The Company has restated items of segment information for earlier periods in order to facilitate comparison. Industry segment data is included in the Company's Consolidated Financial Statements for the years ended November 30, 2001, 2000 and 1999. See Note P to the Consolidated Financial Statements contained in Item 8 below. Narrative Description of Business THE AUTOMOTIVE SEGMENT The Automotive Segment consists of the Company's Hillsdale and Wolverine Divisions. Together these two divisions produce systems, components and raw materials for passenger cars, trucks, vans and sport utility vehicles. These products are sold to major automotive manufacturers and their suppliers in North America, Europe and Asia. The Automotive Segment's products can be broken down into two categories: Precision Machined Components and Rubber Coated Metal Products. The following table sets forth the percentage of the Company's Consolidated Net Sales contributed by each product category:
2001 2000 1999 ---- ---- ---- Precision Machined Components.............................. 50.9% 49.5% 42.5% Rubber Coated Metal Products............................... 10.7% 10.9% 10.1% Divested Automotive Products............................... 0.0% 5.7% 15.8% ---- ---- ---- Total................................................. 61.6% 66.1% 68.4% ==== ==== ====
2 Precision Machined Components. The largest of the Company's divisions, the Hillsdale Division is a provider of noise, vibration and harshness solutions to the worldwide automotive market. The Hillsdale Division also supplies complex machined components and systems for engine, transmission, axle/driveline and chassis/ suspension applications. The Hillsdale Division's expertise runs from product design and development, through prototypes and testing, launch and production. Widely recognized as North America's leading torsional damper manufacturer with custom rubber compounding and manufacturing capabilities, the Hillsdale Division's product line also includes transmission oil pumps, vibration dampening devices and a variety of other products that are precision machined from castings and forgings. The Hillsdale Division is skilled at working with a wide range of metals, including magnesium, aluminum, steel, gray iron and nodular iron. Its products are manufactured in facilities located in the United States, Mexico and the United Kingdom. The Hillsdale Division, through its Tech Center located in Hillsdale, Michigan, offers technical, cost-effective solutions for today's demanding customers and applications. The market for precision machined components has many competitors, including a few strong and well-positioned competitors and the original equipment manufacturers ("OEMs") themselves. The Hillsdale Division competes in this market primarily on the basis of quality, price, delivery and service. Rubber Coated Metal Products. The Company's Wolverine Division pioneered and perfected the technology to produce rubber coated paper and metal using the line coating process. In this process, bulk rolls of metal or paper run through a "coating line," which prepares the material for coating, applies specially formulated and proprietary rubber and other compounds to the material in precise thicknesses, and dries and cures the coated material to bond the compound to the metal or paper and achieve the sealing, heat resistance, durability and precise thickness characteristics required for the intended application. These coated materials are impervious to fluid penetration and can withstand high compression loads, making these materials ideal for applications where high temperature and pressure create a requirement for close tolerances, exceptional sealing characteristics and durability. Typical applications include sealing systems (i.e. gaskets) for engines, transmissions and compressors. These materials are also used as a noise suppressant for brakes, a product in which the Wolverine Division dominates the worldwide market. The rubber coated materials are manufactured in the United States. Certain sealing and insulating products, such as compressor gaskets for air conditioning units and brake noise insulators, are stamped out of the rubber coated materials both in the United States and in Germany. The primary competition of the Wolverine Division's products is a process known as curtain coating, which refers to a process of coating metal products with rubber after stamping or cutting the metal into the required shape. The Company does not believe that the curtain coating process can offer the close tolerances or exceptional sealing characteristics and durability of the Wolverine Division's line coating process. The Automotive Segment distributes its products primarily through internal sales personnel located in offices in North America, Japan and Europe. Generally, competitive conditions for the Automotive Segment are characterized by intense pricing pressures from major customers and by an emphasis on quality, delivery and services. The Automotive Segment's largest customer in fiscal year 2001 was Honda, accounting for $90.9 million of the Company's consolidated net sales. Consolidated net sales to Ford Motor Company were $45.6 million in fiscal year 2001, however, this figure does not include sales to Visteon Corporation, which was spun off by Ford Motor Company in fiscal year 2000, and which were $33.8 million in fiscal year 2001. Consolidated net sales to Ford Motor Company and Visteon Corporation were $118.0 million in fiscal year 2000. Prior to fiscal year 2000, Ford Motor Company (including Visteon) was the Company's largest customer, with consolidated sales amounting to $137.8 million in fiscal year 1999 and $160.9 million in fiscal year 1998. No other customer of the Company accounted for 10% or more of consolidated net sales. THE TECHNOLOGIES SEGMENT The Technologies Segment is a diverse group of businesses with a broad spectrum of technology and capabilities. Its products can be segregated into the following three product categories: Special Purpose 3 Batteries, Specialty Materials and Other Technologies Products. The following table sets forth the percentage of the Company's Consolidated Net Sales contributed by each product category:
2001 2000 1999 ---- ---- ---- Special Purpose Batteries.................................. 15.9% 13.6% 13.8% Specialty Materials........................................ 7.2% 6.2% 5.6% Other Technologies Products................................ 5.8% 5.5% 4.7% ---- ---- ---- Total................................................. 28.9% 25.3% 24.1% ==== ==== ====
Special Purpose Batteries. The Technologies Segment is a major supplier of batteries and power systems components for the aerospace, defense and telecommunications industries. The Company has been providing the aerospace and defense industries with high quality, reliable batteries for more than 50 years. The Company's batteries have been on every United States' manned space flight, and the Company's silver zinc batteries provided the power for the safe return to earth of the famed Apollo 13 flight crew. Its nickel hydrogen batteries power more than 85% of the United States' most advanced communications and surveillance satellites as well as items such as the Hubble Telescope and the International Space Station. Other batteries manufactured by the Technologies Segment serve as launch batteries in booster rockets and support a variety of military applications, including missile guidance, seat ejection and weapons systems. The Technologies Segment also manufactures a line of batteries sold commercially for use in items such as industrial fire and burglary alarm panels, telecommunications backup, remote global positioning units, animal tracking and incarceration bracelets. Major customers of the group include satellite builders, defense contractors and the United States government. The Technologies Segment has only a few competitors for some of its highly technological products and it competes for those products primarily on the basis of quality and performance. The Technologies Segment has many large and small competitors for its other products. For much of its business with the United States government, the Technologies Segment bids competitively against other producers of special purpose batteries. Specialty Materials. The Company's Technologies Segment also manufactures and tests high purity specialty material compounds for a wide range of services and products. For example, the Company is a major source for high purity isotopically enriched boron compounds and isotopically purified zinc, both of which are used in nuclear power plants. The Company's Technologies Segment also refines rare metals, such as high purity germanium, germanium compounds, gallium and gallium compounds. These products serve several markets, including fiber optic cable, plastics, semiconductors, infrared thermal imaging and substrates for satellite solar cell arrays. The major customers for these products include fiber optic cable manufacturers, satellite builders and other aerospace companies. Other Technologies Products. The Technologies Segment 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. The Technologies Segment distributes its products primarily through internal sales personnel. The Technologies Segment also has a sales office in Europe to serve that market. THE MINERALS SEGMENT The Company's Minerals Segment is recognized as a world leader in the mining, process technology and marketing of diatomaceous earth and perlite filter aids. This segment comprised 9.5% of the Company's Consolidated Net Sales in 2001, 8.6% in 2000 and 7.5% in 1999. Diatomaceous earth, or diatomite, is a non-metallic material that is odorless, tasteless and highly stable. With its natural honeycomb structure, strength and low bulk density, diatomite is an ideal medium for filtration applications. Perlite is a mineral of volcanic origin, also with natural qualities that make it valuable as a filter aid. These products are used in a variety of industrial and commercial applications, including liquid solid separation in food and beverage, chemical, pharmaceutical and wastewater industries and as catalyst carriers and for liquid waste solidification. The Minerals Segment is second to Allegheny Corporation in the 4 sale of filter aid products made using diatomaceous earth, perlite and cellulose. The Minerals Segment sells its filter aid products under the trademark CELATOM(R) both directly and through distributors to many large and small customers. The Company's Minerals Segment also produces industrial absorbents, functional fillers and soil amendments and conditioners. The Minerals Segment is the world's number one producer of granular diatomite absorbent products known as FLOOR DRY, as well as AXIS(R) and PLAY BALL!(R) soil amendments and conditioners. In the North American market for industrial absorbents, the Company's Minerals Segment has a variety of competitors due to a number of other materials, such as clay, which are also used for this purpose. The Minerals Segment serves over 35 markets and more than 2,000 customers around the globe with its various products. Shipments to these customers worldwide place Minerals among the top ten container shippers from ports along the West Coast of the United States. The Minerals Segment competes based on price, service and quality as well as technical support provided to filter aid customers. The Minerals Segment operates three mining and processing facilities in the United States. The Minerals Segment's sales offices located in the United States and Europe market diatomite, perlite and cellulose directly and through distributors in North America, Europe, Asia, Africa and the Middle East. THE MACHINERY SEGMENT As noted above, the Company's former Machinery Segment was sold as of December 14, 2001. Since 1964, the Machinery Segment had been the sole supplier of elevating wheel tractor scrapers to Caterpillar Inc. An elevating wheel tractor scraper is a large earth-moving machine used for the removal of overburden for open pit mining, and for site preparation for highways and other commercial, municipal and industrial projects. The Machinery Segment also manufactured its own brand and line of rough terrain lift trucks and various component parts used in agricultural and construction machinery. The Machinery Segment's manufacturing facilities were located in the United States and Mexico. The elevating wheel tractor scrapers were marketed and sold by Caterpillar Inc. and its existing network of distributors, and Caterpillar Inc. was the sole customer of the segment for elevating wheel tractor scrapers. The component parts for agricultural and construction machinery manufactured by the Machinery Segment were sold primarily through internal sales and engineering personnel to the manufacturers of the machinery. The Machinery Segment's branded line of forklifts were also sold through internal sales personnel. For financial information on the Company's former Machinery Segment, see the Company's Consolidated Statements of Income (Loss) and Note B to the Consolidated Financial Statements contained in Item 8 below. OTHER INFORMATION Raw Materials. The prices of the Company's raw materials are subject to volatility. The Company's principal raw materials are rubber, steel, zinc, nickel, gallium, germanium, boron and aluminum. With the exception of gallium and germanium, these raw materials are commodities that are widely available. The Company believes that the gallium and germanium supply available to the Company will be sufficient to satisfy the Company's requirements for 2002. 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. Due to their manufacturing processes, the Minerals Segment and the Wolverine Division are heavy consumers of natural gas. Intellectual Property. The Company holds approximately 34 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 5 to protect these trade secrets. 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, 2001, 2000 and 1999, the Company's order backlog was approximately $134.3 million, $134.6 million and $144.1 million, respectively. The Company expects the order backlog outstanding at November 30, 2001 to be filled within the 2002 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 Segment is not significant. Government Contracts. The Company's Technologies Segment has 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. Research and Development. The Company spent approximately $10.4 million on research and development activities, primarily for the development of new products or the improvement of existing products in 2001. Comparable costs were $11.7 million in 2000 and $13.3 million in 1999. Environmental Regulatory Compliance. The Company had total expenditures for environmental compliance and remediation of $9.1 million in the year ended November 30, 2001, including $0.3 million of capital expenditures. The Company estimates that it will expend $11.5 million, including $0.9 million in capital expenditures, in 2002. Certain amounts resulting from existing conditions relating to past operations have been provided for. As of November 30, 2001, the Company had $15.0 million of liabilities recorded in connection with these environmental matters, and believes such reserves to be adequate under the circumstances. See Item 3 below for information with respect to various other environmental proceedings. Employees. As of November 30, 2001, the Company employed approximately 4,100 persons in its operations, of whom approximately 1,100 were salaried employees and 3,000 were hourly employees. Approximately 50% of the Company's hourly employees are represented by one of five 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 years ended November 30, 2001, 2000 and 1999. (See Note P to the Company's financial statements contained in Item 8 below.) 6 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 SEGMENT LOCATION PROPERTY INTEREST ------- -------- ----------------- AUTOMOTIVE Domestic Blacksburg, Virginia (2 plant locations) owned Hillsdale, Michigan (4 plant locations) owned Hamilton, Indiana owned Inkster, Michigan owned Jonesville, Michigan owned Leesburg, Florida owned Manchester, Tennessee leased Mount Pleasant, Michigan owned Traverse City, Michigan owned Vassar, Michigan leased International Ohringen, Germany owned San Luis Potosi, Mexico owned Tamworth, England owned TECHNOLOGIES Domestic Colorado Springs, Colorado (2 plant locations) owned & leased Galena, Kansas owned Grove, Oklahoma owned Harrisonville, Missouri owned Joplin, Missouri (7 plant locations) owned & leased Lenexa, Kansas owned Miami, Oklahoma (3 plant locations) owned & leased Quawpaw, Oklahoma (2 plant locations) owned Seneca, Missouri owned Stella, Missouri owned International Vancouver, Canada leased MACHINERY Domestic Lubbock, Texas owned International Acuna, Coahuila, Mexico (sold as of December 15, owned 2001) MINERALS(1) Domestic Clark Station, Nevada owned Lovelock, Nevada owned Vale, Oregon owned
- --------------- (1) In addition to the facilities listed, the Company's Minerals Segment has mining locations and numerous claims in Nevada, Oregon and California. 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. In December 2001, the Company announced the relocation of its headquarters office from Cincinnati to Phoenix, Arizona scheduled to take place in the second quarter of 2002. The Company's properties are adequate and suitable for its business and generally have capacity for expansion of existing buildings on owned real estate. Plants range in size from 420,000 square feet of floor space to under 50,000 square feet and generally are located away from large urban centers. Substantially all of its buildings have been well maintained and are in sound operating condition and regular use. 7 Mining. The Minerals Segment owns and leases diatomaceous earth and perlite mining locations as well as numerous claims in Nevada, Oregon and California (collectively, "mining properties"). The Company's owned and leased mining properties, including those not currently being mined, comprise a total of approximately 10,500 acres in Storey, Lyon, Pershing and Churchill Counties in Nevada and 5,000 acres in Malhuer and Harney Counties in Oregon, as well as rights on 2,500 acres not currently being mined in Siskiyou County in California. The Company continually evaluates potential mining properties, and additional mining properties may be acquired in the future. The Minerals division extracts diatomaceous earth and perlite through open-pit mining using a combination of bulldozers, wheel type tractor scrapers, excavators and articulated trucks. The extracted materials are carried by truck to separate processing facilities. A total of approximately 446,000 tons of diatomaceous earth and perlite were extracted from the Company's mining properties in Nevada and Oregon in fiscal year 2001. On average, the Company has extracted a total of approximately 433,000 tons of diatomaceous earth and perlite from its Nevada and Oregon properties each year for the past five years. As ore deposits are depleted, the Company reclaims the land in accordance with plans approved by the relevant federal, state and local regulators. The following mining properties are of major significance to the Company's mining operations. Nevada. The Company's diatomaceous earth mining operations in Nevada commenced in 1945 in Storey County. The Company commenced perlite-mining operations in Churchill County in 1993. The Company extracted a total of approximately 228,000 tons of diatomaceous earth and perlite form Nevada mining properties in fiscal 2001 and, on average, extracted a total of approximately 274,000 tons of diatomaceous earth and perlite from its Nevada mining properties each year for the past five years, or approximately 67% of the Company's total diatomaceous earth and perlite production (and including 100% of its perlite production). Approximately 265 acres in Storey County, where mining activities commenced 55 years ago, and approximately 62 acres in the Counties of Lyon and Churchill are actively being mined by the Company for diatomaceous earth. Diatomaceous earth from Storey, Churchill and Lyon mining properties is processed at the Clark Station, Nevada facility. The Company believes its diatomaceous earth reserves in the Counties of Storey, Churchill and Lyon, including mining properties not actively being mined, are in excess of 30 years at current levels of extraction based upon estimates prepared by its mining and exploration personnel. Diatomaceous earth extractions from the Pershing mining properties, which commenced more than 40 years ago, are processed at the Lovelock, Nevada facility. Approximately 975 acres are actively being mined for diatomaceous earth in Pershing. The Company believes its diatomaceous earth reserves in Pershing, including mining properties not actively being mined, to be in excess of 15 years at the current level of extraction based on estimates prepared by its mining and exploration personnel. Beginning in 1993, the Company has actively mined approximately 25 acres in Churchill County for perlite, which is processed at the Lovelock, Nevada facility. The Company believes its perlite reserves in Churchill County, including mining properties not actively mined, are in excess of 30 years at the current level of extraction based upon estimates prepared by it mining and exploration personnel. Oregon. The Company commenced mining diatomaceous earth in Oregon in 1985 at its mining properties in Harney and Malhuer Counties. Approximately 88 acres in Harney County and 80 acres in Malhuer County are actively being mined. Diatomaceous earth extracted from these mines is processed at the Company's Vale, Oregon facility. The Company extracted approximately 218,000 tons of diatomaceous earth from the Harney County and Malhuer County mining properties during fiscal 2001 and on average, has extracted approximately 159,000 tons of diatomaceous earth each year for the past five years from these mining properties, or approximately 33% of the Company's total diatomaceous earth and perlite production. The Company believes its diatomaceous earth reserves in Harney County and Malhuer County, including mining properties not actively being mined, are in excess of 30 years at the current level of extraction based on estimates prepared by its mining and exploration personnel. 8 ITEM 3. LEGAL PROCEEDINGS (a) Chapter 11 Proceedings. On January 7, 1991 ("Petition Date"), EPI 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"). 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, EPI, together with the Injury Claimants' Committee and the Representative for Future Claimants who was appointed by the Bankruptcy Court, proposed a plan of reorganization to the Bankruptcy Court (the "Plan"). The Bankruptcy Court and the United States District Court for the Southern District of Ohio (the "Ohio District Court") jointly issued the Order confirming the Plan on November 18, 1996 (the "Confirmation Date"), and the Plan was consummated on November 29, 1996 (the "Consummation Date"). The major component of the Plan was a settlement of EPI's liability for present and future asbestos-related personal injury claims arising out of business operations prior to the petition date under which it was agreed that these claims had a total value of $2 billion. Pursuant to the Plan, (i) the Eagle-Picher Personal Injury Settlement Trust (the "PI Trust") was established and EPI contributed assets to the PI Trust valued at approximately $730 million in the aggregate (representing the approximately 37% distribution upon the $2 billion allowed claim of the asbestos claimants, as unsecured creditors), consisting of $51.3 million in cash, $250 million in the 10% Debentures, $69.1 million in Tax Refund Notes, $18.1 million in Divestiture Notes and 10,000,000 shares of Common Stock (representing all outstanding shares of Common Stock), and (ii) the PD Trust was established in 1999 and was funded by EPI with $3 million in cash plus interest that had accrued since EPI had funded this obligation and set aside the $3 million pending establishment of the PD Trust. Pursuant to the Plan, the asbestos-related claims are discharged and EPI has no further liability in connection with such claims. Pursuant to the Plan, EPI is discharged of the burden of defending more than 150,000 asbestos-related claims, as well as any lead-related claims, that had been, as well as any such claims that may in the future be, filed against EPI. This relief has been accomplished through the establishment of the independent trusts under the Plan to assume, administer, settle and pay such claims. In addition, the Order includes an injunction (the "Injunction"), which prohibits claimants with asbestos-related or lead-related claims from bringing actions against EPI, and instead requires these claimants to assert such claims only against the PI Trust or, as to asbestos-related property damage claims, against the PD Trust, each of which was funded by EPI 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 EPI, and the PD Trust will assume all liability and responsibility for asbestos-related property damage claims. EPI believes that the Plan, the Injunction and the Bankruptcy Code together will enjoin any claims against EPI 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 one or more members of EPI in asbestos personal injury lawsuits and have asserted claims against EPI for contribution, indemnity and subrogation. The allowance of contribution claims against EPI 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- 9 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 Subsidiary to a personal injury trust established by such Subsidiary is unconstitutional. The Sixth Circuit in a decision and order issued December 21, 1998, affirmed the Confirmation Order and dismissed the subject appeal as moot. As a result, the Confirmation Order became 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 risk that the Injunction would not apply to future lead-related claimants because lead-related claims are not addressed in Section 524(g), EPI 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 the Ohio District Court, in confirming the Plan and entering the Injunction, specifically ruled that Section 524(g) does not prohibit channeling of non-asbestos related claims along with asbestos-related claims. In the event that Section 524(g) does not operate to protect the Injunction's channeling of lead-related claims, such channeling could be upheld as a necessary or appropriate order under Section 105(a) of the Bankruptcy Code. Although the filing of future lead-related lawsuits cannot be predicted, EPI believes that this risk is limited because to date, only approximately 125 lead-related claims have been asserted against EPI (as compared to the tens of thousands of asbestos-related claims asserted against EPI). On and shortly after the Consummation Date, EPI 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). Following resolution of all claims (other than asbestos-related and lead-related claims), EPI made a second and final distribution of approximately $10.9 million in 2001. 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). EPI has entered into the Environmental Settlement, discussed below, which is intended to relieve EPI of the burden of defending against certain claims asserted under Environmental Laws relating to conditions occurring prior to the date of the bankruptcy petition and governs certain environmentally related claims that have been or may yet be asserted against EPI 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, EPI may have 10 obligations relating to historical noncompliance with environmental laws with respect to sites owned by EPI 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 EPI, 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 has declined the opportunity to intervene or take control of this Qui Tam suit. EPI became aware of the suit on October 20, 1997, when it was served on EPI, after it had been unsealed. The suit involves allegations of irregularities in 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 EPI, 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. EPI, which believes that the U.S. Government did not incur any expense as a result of those 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 EPI 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 EPI'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 EPI's Motion to Dismiss the Amended Complaint was denied on January 20, 1999. Since that time the case has been in a discovery phase. EPI's lawyers recently discovered that Mr. Peoples altered documents produced by EPI in that case, a fact which Mr. Peoples has acknowledged to the court. The Company believes the alterations were an attempt to fabricate evidence against EPI. EPI filed a motion for sanctions, including dismissal of the lawsuit, which was denied by the court. EPI believes that the court erroneously believed that EPI's motion for sanctions related to an earlier discovery dispute that had been resolved. EPI has filed a motion for reconsideration of the denial of its motion for sanctions. If the lawsuit is not dismissed, EPI intends to contest this suit vigorously. EPI does not believe that resolution of this lawsuit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. On May 8, 1997, Caradon Doors and Windows, Inc. ("Caradon"), filed suit against the Company's wholly owned subsidiary, Eagle-Picher Industries, Inc. ("EPI") 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 an amount believed to be in excess of $10 million. In June 1997, EPI filed a Motion with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, ("Bankruptcy Court") seeking an order enforcing EPI's plan of reorganization as confirmed by the Bankruptcy Court in November 1996 (the "Plan") 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 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 Bankruptcy Court held a hearing on this matter on September 24 and 25, 2001 and no decision has been rendered as of February 14, 2002. EPI intends to contest this suit vigorously. EPI does not believe that resolution of this suit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. On December 1, 1999, Eagle-Picher Technologies, LLC ("EPT") acquired the depleted zinc distribution business (the "DZ Business") of Isonics Corporation ("Isonics") for approximately $8.2 million, payable $6.7 million at closing and $1.5 million in three installments of $500,000 each payable on the first three anniversaries of the closing. At the time of the acquisition, a single customer represented approximately 55% of the DZ Business. Following the completion of the acquisition, this customer informed EPT that it would no longer be purchasing depleted zinc from an outside supplier and that Isonics had been informed of this prior to 11 the acquisition of the DZ business by EPT. However, Isonics did not disclose this to EPT. EPT initiated binding arbitration against Isonics on March 26, 2001 with the American Arbitration Association in Dallas, Texas pursuant to contractual dispute resolution procedures. EPT's arbitration demand is based on breach of representations and warranties in the purchase and sale agreement for the DZ Business as well as fraud and negligent misrepresentation, and seeks to recover damages in excess of $10 million and other remedies. While the Company believes it has a meritorious claim against Isonics, there can be no assurance that the Company will obtain any recovery as a result of this claim. In connection with the purchase of the DZ Business, EPT agreed to sell 200 kg of isotopically purified silicon-28 to Isonics. Due to various factors, EPT has not yet delivered any silicon-28 to Isonics. Isonics has asserted a counterclaim against EPT in the DZ Business arbitration described above for failure to deliver silicon-28, seeking damages in excess of $10 million. EPT believes that any obligation to deliver silicon-28 has been excused by, among other things, a force majeure clause in the purchase and sale agreement for the DZ Business. Contemporaneously with the purchase and sale of the DZ Business, EPT and Isonics entered into a supply agreement (the "Supply Agreement") pursuant to which EPT agreed that, commencing upon delivery of 200 kg of silicon-28, EPT would devote the capacity of a pilot plant used to produce such material to producing silicon-28 and sell all silicon-28 produced in such pilot plant and meeting certain specifications, as well as any silicon-29 or silicon-30 actually produced as a byproduct, to Isonics for a ten year term. Isonics amended its counterclaim in the DZ Business arbitration to assert a claim that the Supply Agreement requires EPT to produce a certain amount of silicon-28, silicon-29 and silicon-30 and alleging damages of not less than $75 million for anticipatory breach of such alleged obligation. EPT believes that the terms of the Supply Agreement and applicable law clearly establish that the Supply Agreement does not impose any obligation to produce any quantity of silicon-28, silicon-29 or silicon-30 and that Isonics' claims are without merit. Isonics also amended its counterclaim to allege that EPT's parent company, Eagle-Picher Industries, Inc. ("EPI") is liable for any damages of EPT under an "alter ego" theory, a claim which EPI and EPT believe is also without merit. EPT and EPI intend to assert other defenses as well and to defend this counterclaim vigorously. EPT continues to explore alternative processes that may enable it to produce silicon-28, but there is no assurance that such efforts will be successful. On September 25, 2001, Andries Ruijssenaars, former President and Chief Executive Officer of the Company, filed a lawsuit against the Company, certain of its directors and ABN AMRO Bank in the U.S. District Court for the Southern District of Ohio, Western Division, relating to the purchase of Mr. Ruijssenaar's common stock in the Company and his benefits under EPI's Supplemental Executive Retirement Plan (SERP). Mr. Ruijssenaars claims that the per share price for 2001 under the Company's Incentive Stock Plan, which is generally applicable to all Plan participants and results in approximately $2.8 million for Mr. Ruijssenaars' 30,000 shares of common stock, was not correctly determined and claims approximately $4.7 million for his shares. Mr. Ruijssenaars' lawsuit also challenges a rule adopted by the committee for the Plan deferring the obligation of the Company to repurchase stock in the event contracts to which the Company is a party, including its debt agreements, restrict such repurchase. See "Incentive Stock Plan" under Item 11 below. Mr. Ruijssenaars' lawsuit also challenges EPI's determination of benefits under the SERP and claims that EPI is obligated to purchase an annuity for his additional SERP benefit accrued after 2000 based on theories of promissory estoppel, equitable estoppel, breach of contract and ERISA. Mr. Ruijssenaars has also asserted claims of fraud, conspiracy, breach of fiduciary duty and conversion. Mr. Ruijssenaars seeks approximately $2.3 million with respect to the SERP, as well as punitive damages. The Company intends to contest this suit vigorously. The Company does not believe that resolution of this lawsuit will have a material adverse effect on its financial condition, results of operations or cash flows. On October 30, 2001, GMAC Business Credit, LLC (GMAC) and Eagle Trim, Inc. filed a lawsuit in the United States District Court for the Eastern District of Michigan, Southern Division, against EPI arising out of the sale of EPI's former automotive interior trim division to Eagle Trim in 1998. In connection with that sale, EPI guaranteed to GMAC, which funded the acquisition, that approximately $3.9 million of receivables relating to tooling purchased by EPI on behalf of customers would be paid by November 2001. Eagle Trim 12 ceased operations during 2001, at which time Eagle Trim and GMAC allege that approximately $2.7 million of the tooling receivables had not been collected and did not exist at the time of the sale. GMAC claims $2.7 million plus interest on the guaranty, and GMAC and Eagle Trim have asserted claims for fraud and misrepresentation and are seeking $24.5 million in damages. EPI is currently investigating these allegations, but denies any fraud or misrepresentation. EPI intends to contest this suit vigorously. EPI does not believe that resolution of this lawsuit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. EPI is also involved in various other proceedings incidental to the ordinary conduct of its business. EPI believes that none of these other proceedings will have a material adverse effect on EPI's financial condition, results of operations or cash flows. (c) Environmental Matters. During the pendency of the chapter 11 proceedings, EPI 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 EPI in the bankruptcy proceeding. 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 EPI in connection with pre-petition activities at any site not owned by EPI (the "Additional Sites"), shall be resolved as if they had been asserted during the chapter 11 proceedings. Accordingly, if EPI is found liable or settles any Additional Site claim, such liability is limited to approximately 37% of the liability or settlement amount. Since entering into the Environmental Settlement, EPI has received notice from one or more of the Settling Parties that EPI may have liability in connection with 23 Additional Sites, one of which could be significant. EPI entered into an agreement with two potentially responsible parties ("PRPs") and the EPA in December 2001 to conduct a remedial investigation and feasibility study at the Eagle Zinc site in Hillsboro, Illinois ("the Site") as an Additional Site. EPI owned and operated the zinc smelter and zinc oxide chemical manufacturing plant from the 1920s until 1980. Studies by EPA and the current owner indicate the potential for soil and groundwater contamination at the Site. EPI believes that its potential liability at these Additional Sites is not material to EPI's financial condition, results of operations or cash flows. EPI 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 Construction Equipment Division (the Machinery Segment) sold in December 2001, the Rubber Molding, Fluid Systems and Ross Divisions sold in 2000 and the Bearings Division sold in 1989, EPI has agreed to undertake remedial actions or, alternatively, to indemnify the respective purchasers of particular assets for certain liabilities in connection with those remedial actions under the Environmental Laws relating to that asset's operations or activities prior to the sale. EPI believes that neither these remedial actions nor any claims under these indemnity provisions will have a material adverse effect on EPI's financial condition, results of operations or cash flows. EPI 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, EPI is investigating the nature and extent of contamination from two closed hazardous waste impoundments and over 100 solid waste management units formerly in use during the 130-year operating history of this property. EPI's investigation has identified areas of soil and groundwater contamination or suspected contamination, certain of which likely will require EPI to undertake remedial activities. Following completion of its investigation, EPI, 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, EPI 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, EPI will complete the closure of four former hazardous waste impoundments and evaluate appropriate remedial actions to address contaminated groundwater and soil 13 at and around the facility. EPI 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. EPI owned and operated a lead and zinc smelting facility, which was dismantled in 1982, on the Galena property. The Galena property is located within the Tri-State mining district, formerly one of the largest lead and zinc fields in the world. The Tri-State mining district was actively worked from the mid-1800s until the 1960s and, as a result, soil, groundwater and surface waters have been significantly and adversely impacted. In the 1980s and early 1990s, the EPA addressed both surface contamination (including residential soil contamination) and groundwater contamination issues in the Tri-State mining district in the immediate vicinity of the Galena property. Under the Environmental Settlement, while EPI resolved all of its other liability under the Comprehensive Environmental Response, Compensation, and Liability Act associated with the Tri-State mining district, it specifically retained liability for the Galena property. Environmental impacts are likely at the Galena property as a result of the former smelter operation and from historic materials management practices on the Galena property. The EPA has not required remediation of the Galena property, and EPI has no current expenses in connection with remedial activities at this property. EPI, however, anticipates that certain investigations and remediation may be required at some point in the future. EPI does not believe that it will be assessed any penalty in connection with the remediation of this site, although there can be no assurance that one will not be imposed. EPI 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 During the fourth quarter of 2001, the Company solicited the agreement of holders of its 9 3/8% Senior Subordinated Notes due 2008 that the transfer of all or any portion of the accounts receivable of the Company or any of its subsidiaries, directly or indirectly, to an affiliate in connection with the securitization of such accounts receivable does not constitute an "Asset Sale" as defined in the Indenture for the Notes and does not, without limitation, contravene the "Limitations on Asset Sales" described in Section 4.16 of such Indenture, and that the deferred purchase price to be paid in consideration of the transfer of such accounts receivable does not constitute an "Investment" as defined in the Indenture by the Company or its subsidiaries and does not, without limitation, contravene the "Limitation on Restricted Payments" described in Section 4.5 of the Indenture. Holders of 75.4% of the Notes so agreed. The Bank of New York, as Trustee for the Notes, supplemented the Indenture consistent with the foregoing. During the fourth quarter of 2001, the holder of approximately 51.8% of the outstanding 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock of EP Holdings agreed that the transfer of all or any portion of the accounts receivable of the Company or any of its subsidiaries, directly or indirectly, to an affiliate in connection with the securitization of such accounts receivable does not constitute an "Asset Sale" as defined in the Certificate of Designations for the preferred stock and does not, without limitation, contravene the limitations on "Asset Sales" described in Section 11(g) of the Certificate, and that the deferred purchase price to be paid in consideration of the transfer of such accounts receivable does not constitute an "Investment" as defined in the Certificate by the Company or its subsidiaries and does not, without limitation, contravene the limitation on "Restricted Payments" described in Section 11(d) of the Certificate. 14 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, 2001 2000 1999 1998 1998 1997 -------- -------- ---------- ------------ ------------- ------------- PREDECESSOR A PREDECESSOR A (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE) STATEMENT OF INCOME (LOSS): Net sales (A)..................... $692,450 $754,996 $ 822,948 $ 559,518 $ 183,229 $ 809,269 Operating income (B).............. 4,278 62,288 27,915 7,083 9,170 36,278 Interest expense.................. (40,105) (43,989) (45,475) (33,477) (4,104) (26,722) Income (loss) from continuing operations before taxes......... (31,914) 18,395 (14,000) (24,551) 3,807 8,877 Net income (loss)................. (53,971) 5,610 (17,587) (14,364) 807 (3,854) Preferred stock dividends accreted........................ (13,282) (11,848) (10,569) (7,382) -- -- Basic earnings (loss) per share for continuing operations....... (35.84) (2.53) (24.03) (24.55) 0.40 0.89 Basic earnings (loss) per share... (68.51) (6.26) (28.16) (14.36) 0.08 0.39 Weighted average number of common shares outstanding.............. 981,583 997,125 1,000,000 1,000,000 9,600,071 10,000,000 Dividends per common share........ -- -- -- -- -- -- BALANCE SHEET DATA (END OF PERIOD): Total assets...................... $725,911 $767,699 $ 833,947 $ 807,307 N/A $ 735,910 Total long-term debt and redeemable preferred stock (C)............................. 566,212 567,735 642,035 571,743 N/A 273,397 OTHER DATA: EBITDA (D)........................ 85,746 103,819 113,671 76,194 24,435 91,884 Cash provided by (used in) operating activities............ 67,470 45,564 35,495 71,910 (1,277) 141,079 Cash provided by (used in) investing activities............ (36,791) 35,839 (92,946) (14,113) (5,702) (17,915) Cash provided by (used in) financing activities............ (17,848) (88,570) 44,933 (64,216) (18,954) (113,042) SELECTED RATIOS: Earnings/fixed charges and preferred stock dividends (E)... .18x 1.11x .57x .24x 1.85x 1.31x
- --------------- All prior year figures have been restated to show the Machinery Segment as discontinued operations. See Note B in Item 8. (A) Includes net sales attributed to Divested Divisions of -0- in 2001, $42,764 in 2000, $130,003 in 1999, $112,650 in the nine months ended November 30, 1998, $37,086 in the three months ended February 28, 1998, and, for purposes of Item 6 only, $229,723 in 1997. (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 predecessor A (subsequent to the Reorganization, but before the Acquisition) were derived using different bases. 15 (C) Includes 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock ("Preferred Stock") of $123,086 in 2001, $109,804 in 2000, $97,956 in 1999 and $87,387 in 1998, which was issued in conjunction with the Acquisition. (D) For purposes hereof, EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization, certain items determined by management to be in the nature on nonrecurring items -- namely, one-time management compensation expenses, gain (loss) on sale of divisions, gains from insurance settlement, reorganization items, charge for impairment of net assets of operations to be sold and non cash items relating and accruals for the company's stock appreciation rights plan. EBITDA is presented because management believes it is an indicator of a company's ability to service and incur debt. EBITDA, as defined herein, may not be comparable to similarly titled measures reported by other companies and should not be construed as an alternative to operating income, as determined by Generally Accepted Accounting Principles ("GAAP"), as an indicator of the Company's operating performance, or to cash flows from operating activities, as determined by GAAP, as a measure of liquidity. Funds depicted by EBITDA are not available for management's discretionary use to the extent they are required for debt service and other commitments. Includes EBITDA contributed by Divested Divisions of -0- in 2001, $1,194 in 2000, $9,178 in 1999, $10,458 in the nine months ended November 30, 1998, $3,985 in the three months ended February 28, 1998, and, for purposes of Item 6 only, $15,353 in 1997. (E) For purposes of determining the ratio of earnings to fixed charges and preferred stock dividends, "earnings" consist of income from continuing operations before provision (benefit) for income taxes and fixed charges. "Fixed charges" consist of interest expense (including amortization of deferred financing costs) and approximately 30% of rental expense, representing that portion of rental expense deemed representative of the interest factor. Earnings were insufficient to cover fixed charges and preferred stock dividends in 2001 by $45,196 and 1999 by $24,569 and in the nine months ended November 30, 1998 by $31,933. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Financial information about industry segment data is included in Note P to the Company's Consolidated Financial Statements for the years ended November 30, 2001, 2000 and 1999 included in Item 8 below. All references herein to years are to the Company's fiscal year ending November 30 unless otherwise indicated. Throughout 2001, the Company accounted for the Machinery Segment as a discontinued operation. See Note B, Acquisitions, Divestitures and Discontinued Operations in Item 8 below. The figures presented below exclude the Machinery Segment for 2001, 2000 and 1999. 2001 COMPARED TO 2000 THE AUTOMOTIVE SEGMENT Sales in the Automotive Segment decreased 6.4% from $456.4 million in 2000 (excluding Divested Divisions) to $427.3 million in 2001. The decline in sales was principally attributed to reduced demand for Company products. North American car and light truck build for 2001 was reported at 15.9 million, down more than 10% from 2000 build, reported at 17.7 million. The decline in volumes were partially offset by new product launches. In addition, North American production by the U.S.-based original equipment manufacturers (OEMs -General Motors, Ford and Chrysler) declined on a percentage basis more than North American production by non-U.S. based OEMs, and the Automotive Segment has a higher percentage of sales in North America to non-U.S. based OEMs than North American production in general. Pretax profit decreased $18.0 million from $7.4 million in 2000 to a $(10.6) million loss in 2001. Reduced profitability was primarily a result of lower volumes, $4.5 million in new program launch costs at the Company's Hillsdale Division, increase of depreciation of $3.3 million, pricing reductions of $2.8 million, higher workers compensation expense and higher interest costs of $1.0 million. Although the Company had 16 projected declining sales, offsetting cost reductions could not be achieved in a timely manner. In particular, high fixed costs in the Automotive Segment severely impact profitability in the event of a decrease in sales. Capital expenditures for the Automotive Segment were $28 million in 2001 compared to $34.2 million in 2000. These capital expenditures were related to a significant number of new product launches at the Company's Hillsdale Division and the acquisition of a new rubber coating line at the Company's Wolverine Gasket Division. The Outlook for 2002 Although there are several industry forecasts for North American car and light truck build for 2002, the Company believes those that project demand in the 14.5 million to 15.5 million vehicles range are most valid and has established its 2002 operating plans on a flat to down industry demand for the year. The Company projects sales for the Automotive Segment to be flat year over year, with the first nine months to be down slightly, offset with a modest 2% to 3% improvement in the fourth quarter as new platforms incorporating Company products come on line. Pretax profit is expected to recover to a break even or a slightly positive position due to avoidance of extraordinary launch costs and more timely implementation of cost reduction and avoidance programs. The Company expects continuing strong pressure for further price reductions from automotive manufacturers throughout 2002 which could negatively impact profitability. The Company has also imposed rigid controls over capital expenditures, which are projected to be below $20 million for the Automotive Segment in 2002. THE TECHNOLOGIES SEGMENT Sales of the Technologies Segment increased 4.6% from $191.4 million in 2000 to $200.3 million in 2001. Slightly more than half the increase is attributable to the sales of Eagle-Picher Energy Products Corporation which was acquired in June 2000. Other increases were attributable to sales of specialty materials used in fiber-optic applications along with certain aerospace battery programs. Additionally, volumes of bulk pharmaceutical products increased in 2001 resulting from added capacity from a recent plant expansion. These increases were offset by lower demands for lead based products sold as chemical agents and lead-acid batteries. A decline in orders from telecommunications customers also had a negative impact on the electronics assembly products sold by the segment. Additionally, the Company experienced a fire at its Harrisonville, Missouri bulk pharmaceutical chemical processing plant in August, 2001. The company estimates lost sales in 2001 of approximately $1.5 million from the fire. This plant was restored to full operation in December, 2001. Pretax loss for the segment increased $13.1 million from a $(0.4) million loss in 2000 to a $(13.5) million loss in 2001. Reduced profitability was primarily a result of a $8.7 million restructuring charge taken in the fourth quarter relating to anticipated plant closures and a workforce reduction, lower operating margins, increased reserves ($2.0 million) for bad debt and warranty costs and higher interest costs of $0.2 million. As mentioned above, the Company experienced a fire at one of its chemical plants which resulted in lost margins and incremental costs aggregating an estimated $0.9 million which was offset by an equal amount of benefit from insurance coverage. This claim is expected to be finalized in the second quarter of 2002. The Outlook for 2002 Sales for the Technologies Segment in 2002 are expected to decline by approximately 2% to $195 million. The principal reason for the lower sales is the curtailment and closing of certain operations related to the restructuring of the business announced in late 2001. Partially offsetting these lower sales, the Company anticipates some higher demands for its pharmaceutical chemical products, coupled with the full recovery of those operations impacted by a fire in 2001. The Company has also learned that a customer for germanium wafers may be acquired by a competitor, which places approximately $7 million of revenue at risk. Pretax profit is expected to remain flat (exclusive of 2001 restructuring charge) with inefficiencies related to business restructuring offset by cost improvement and avoidance programs. The Company is also evaluating certain of its specialty chemical operations providing products that incorporate certain rare and exotic materials to the electronics and communication industries. Industry demand has softened significantly and the Company has 17 also been informed of a pending bankruptcy proceeding of one of its major customers for these products. These circumstances may precipitate further restructuring actions by the company that are not reflected in the above forecasts. THE MINERALS SEGMENT The Minerals Segment sales increased 1.0% to $65.7 million in 2001 from $65.1 million in 2000 despite a decrease in the total volume of products sold. Volume decreases were due to the rationalization of existing business and general economic weakness. Revenue increased because of volume increases in higher value-added products, a general price increase, plus an energy surcharge that was in effect for part of the year to defray a portion of the increase of natural gas and electricity costs experienced nationwide. At the end of 2001, the Company also implemented an aggressive price improvement program directed toward improving margins. Pretax income for the segment increased $1.1 million from $0.3 million in 2000 to $1.4 million in 2001. This increase was primarily attributable to lower interest costs ($0.7 million) and reduced Headquarters charges ($0.3 million), both reflective of better working capital management by the operation. The Minerals Segment achieved improved profitability in 2001 despite increased natural gas costs of $2.8 million and power cost increases of $0.4 million. The increases in energy costs were mitigated through the use of alternative fuels, energy conservation measures, and energy surcharges to customers. Natural gas prices have stabilized and the Company expects that trend to continue through 2002. Additionally, penalties of $0.5 million and legal and consultant costs of $0.4 million were incurred in the settlement of regulatory claims for violating gaseous emission permits in Nevada and Oregon. Settlements have been reached in both jurisdictions and the Company is in compliance with current permits or interim orders. The Outlook for 2002 Sales for the Minerals Segment in 2002 are expected to increase by approximately 10% to $72.3 million due to increased demand for the company's products as well as expansion of the product line into new higher value applications. Pretax profit is expected to increase by 14% to $1.6 million on higher sales volume. SUMMARY OF THE COMPANY Net Sales. Sales decreased 8.3% from $755.0 million in 2000 to $692.5 million in 2001 or 2.8% excluding $42.8 million of sales in 2000 from Divested Divisions. The decline in sales was principally attributed to reduced demand for Company products in the Automotive Segment from the automobile manufactures. These decreases were partly offset by gains in the Technologies Segment. Cost of Products Sold. Cost of products sold, excluding that of Divested Divisions, increased from 78.6% of net sales in 2000 to 80.7% of net sales in 2001, largely as a result of poor overhead absorption due to lower volumes, particularly in the Automotive Segment, as well as new product launch costs in the Automotive Segment. Selling and Administrative. Selling and administrative expenses declined $8.3 million (14%) from 2000 to 2001. The Divested Divisions accounted for $4.8 million of the reduction. As a percentage of sales, selling and administrative expenses declined from 7.9% in 2000 to 7.4% in 2001. Depreciation and Amortization. Depreciation and amortization expense increased $1.3 million and $0.4 million, respectively. The increase in depreciation expense is primarily attributable to capital expenditures in the Automotive Segment. Management Compensation -- Special. Management Compensation-Special is severance related to the separation from employment of senior executives. Insurance Settlement. During 2000, the Company settled claims against a former insurer regarding environmental remediation costs for $16 million and received such proceeds in the first quarter of 2000. Restructuring. During the fourth quarter of 2001 the Company announced a restructuring of its Technologies Segment and a restructuring and relocation of its Headquarters to Phoenix, Arizona, recording a 18 charge against income of $14.2 million. Approximately $5.5 million related to facilities, $5.0 million related to involuntary severance and $3.7 million in other costs to exit business activities. Divestitures. During 2001, the Company incurred additional costs of $2.1 million related to divisions divested which were sold in prior years. During 2000, as part of the Company's previously announced program to focus management, technical and financial resources on core businesses, the Company completed the sale of its Ross Aluminum Foundries, Fluid Systems, MARCO, Rubber Molding and Cincinnati Industrial Machinery divisions for aggregate net proceeds of $85.0 million and an aggregate gain on the sale of these divisions of $17.1 million, which was reduced for provisions made for items relating to divisions sold in prior years to $3.1 million. Interest expense. Interest expense was $40.1 million in 2001 (not including interest allocated to discontinued operations of $3.3 million) and $44.0 million in 2000 (not including interest allocated to discontinued operations of $3.4 million), a decrease of $3.9 million. The decrease in interest expense is due to lower interest rates in 2001 and lower debt balances in 2001 as a result of the application of proceeds from the sales of divisions and the insurance settlement in 2000. Income (Loss) from Continuing Operations Before Taxes. Income (loss) from Continuing Operations before taxes was $(31.9) million for 2001 and $18.4 million for 2000. The following items are significant differences between income (loss) from Continuing Operations before taxes for 2001 and 2000: - A restructuring charge of $14.2 million related principally to the Technologies Segment and Headquarters in 2001; - Provisions for Management Compensation -- Special of $3.1 million in 2001 versus $1.6 million in 2000; - Income of $16 million from an insurance settlement in 2000; - Gain on sale of the Divested Divisions of $3.1 million in 2000; - In 2001, recognition of additional costs of $2.1 million related to environmental and litigation matters associated with divisions sold in prior years. See Note B in Item 8. - An increase in Other Income of $3.8 million in 2001 primarily due to gains in foreign currency transactions of $0.5 million in 2001 versus a loss of $(1.4) million in 2000 and an increase in royalty income of $0.9 million year over year. - Loss before tax of Divested Divisions, before the gain on the sale of such divisions, in 2000 of $4.3 million; - Decreases of pretax income of $18.0 million and $4.3 million at the Automotive and Technologies Segments, respectively, and increases in pretax income of $1.1 million in the Minerals Segment; and - A decrease in Headquarters operating expenses of $1.7 million, excluding the insurance settlement proceeds in 2000 and the restructuring charge in 2001. Income Taxes (Benefit). Income taxes (benefit) were $(10.0) million and $9.1 million in 2001 and 2000, respectively. The sale of the Divested Divisions and the income from the insurance settlement in 2000 affect comparability of income taxes and the effective tax rates. The income taxes (benefit) in 2000 is largely attributable to taxable gains resulting from divestitures. Discontinued Operations. Throughout 2001, the Company accounted for the Machinery Segment as a discontinued operation and prior periods have been restated to remain consistent with this same treatment. On December 14, 2001, the Company completed the sale of the assets of this segment. See Note B in Item 8 below. Net Income (Loss). Net income (loss) for 2001 and 2000 were $(54.0) million and $5.6 million, respectively. The significant items are discussed in the Income (Loss) from Continuing Operations Before Taxes and Discontinued Operations sections above. 19 Preferred stock dividend accretion of $13.3 million in 2001 increased net loss of $(54.0) million to a net loss applicable to common shareholders of $(67.3) million. In 2000, preferred stock dividend accretion of $11.8 million in 2000 reduced net income of $5.6 million to a net loss applicable to common shareholders of $(6.2) million. Company Outlook for 2002 The Company is expecting sales for 2002 to be flat at approximately $700 million. Increased sales in the Minerals Segment are expected to be offset by declines in the Technologies Segment. The Automotive Segment is projected flat year over year. Pretax loss is expected to be reduced by approximately $30 million, to a range of $(2) million to $(5) million, without regard to any further potential restructuring charges. Profit improvement is expected to result from improved operations and as well the fact that 2001 pretax income was unfavorably impacted by $17 million in restructuring and other non-recurring charges. After foreign taxes, this level of pretax loss would result in a net loss of approximately $(7) million to $(10) million. After preferred stock dividend accretion of $14.9 million in 2002, this would result in a net loss applicable to common shareholders of approximately $(21.9) million to $(24.9) million. 2000 COMPARED TO 1999 THE AUTOMOTIVE SEGMENT Sales in the Automotive Segment increased 5.2% from $433.8 million in 1999 to $456.4 million in 2000. Contributing to the increase were an additional three months of ownership of Carpenter, which was purchased effective March 1, 1999, and approximately $15.0 million of new business. Price reductions of $4.5 million, matured or lost business of approximately $22.0 million and the effects of production slowdowns during the fourth quarter of fiscal year 2000 reduced year 2000 sales. Production slowdowns during the fourth quarter occurred in part as a result of the shutdown of production at Ford's sport utility vehicle and light truck facilities in order to divert tire production to satisfy demand created by the Firestone tire recall. Higher interests rates and a slowing of the economy also adversely impacted fourth quarter production volume. Pretax profit decreased $3.2 million from $10.6 million in 1999 to $7.4 million in 2000. Pricing reductions of $4.5 million, an additional $1.7 million of interest expense, a $2.0 million increase in depreciation and amortization expense and approximately $1.3 million of foreign currency exchanges losses contributed to the decline in profitability. These drags on profit were offset somewhat by improved operating efficiencies and material cost savings resulting from the Company wide strategic sourcing initiative commenced in 1999. THE TECHNOLOGIES SEGMENT Sales by the Technologies Segment decreased 3.6% from $198.5 million to $191.4 million. Excluding sales of EPEP, which was acquired during the third quarter of fiscal year 2000, sales of the Technologies Segment during 2000 were $186.8 million, a decrease of 5.9%. Special Purpose Batteries lead the decline in sales due to softness in the aerospace and defense markets and the loss of a large customer. Sales declines in Specialty Materials due to lower demand for enriched boron as a result of temporary shutdowns of certain nuclear reactors were offset somewhat by increased sales of bulk pharmaceutical products and clean containers. Sales of depleted zinc were less than half of expected levels due to the loss of the largest customer of that product. Pretax income decreased $12.1 million from $11.7 million in 1999 to a pretax loss of ($.4) million in 2000. Substantially all of the decline in pretax income is attributable to lower volumes resulting in poor absorption of overhead, a $2.3 million increase in interest expense, a $1 million increase in depreciation and amortization expense and significantly higher health care costs during 2000. 20 THE MACHINERY SEGMENT This Segment has been restated as a discontinued operation. See Note B, Acquisitions, Divestitures and Discontinued Operations in Item 8 below. Loss from operations of the discontinued segment was $3.7 million, net of $2 million tax benefit, in 2000 and $4.1 million, net of $2.2 million tax benefit, in 1999. THE MINERALS SEGMENT For the Minerals Segment, results of 2000 were much improved over 1999. During the year, the Minerals Segment undertook a program to rationalize its existing business and implement a more uniform pricing scheme, raising prices on certain low margin business and replacing other low margin business with higher margin business. The strategy was a success, resulting in a 5.5% increase in sales by the Minerals Segment from $61.7 million to $65.1 million while total volume of products sold remained flat. Pretax income at the Minerals Segment also increased significantly from a loss of ($4.1) million to a gain of $.3 million. The improvement in the Minerals Segment's operating margin is attributable not only to the business and pricing rationalization program undertaken during the year, but also significant gains in production efficiency. Notably, these efficiency gains offset an approximately $1.3 million increase in natural gas costs associated with processing the diatomaceous earth. Reduced charges from the Company headquarters as a result of better working capital management and a reduction in depreciation expense of approximately $.7 million also contributed to the increase in pretax income. The depreciation expense was lower in 2000 because certain items on the Minerals Segment's books were fully depreciated in 1999. SUMMARY OF THE COMPANY Net Sales. While the Company's divestiture program resulted in a decrease in year 2000 Consolidated Net Sales of approximately 8.2%, the Company's Consolidated Net Sales actually increased approximately 1.2% after excluding sales of Divested Divisions and EPEP, which was acquired in June 2000. Increased sales in the Automotive Segment and the Minerals Segment were largely offset by decreased sales in the Technologies Segment. Cost of Products Sold. Cost of products sold, excluding that of Divested Divisions, increased from 78.3% of net sales to 78.6%, largely as a result of less overhead absorption due to lower volumes. Selling and Administrative. Selling and administrative expenses, excluding those of Divested Divisions, remained flat from 1999 to 2000 as a percentage of net sales. Depreciation and Amortization. Depreciation and amortization expense decreased $2.5 million and $.7 million, respectively. The decrease in depreciation expense is primarily attributable to the sale of the Divested Divisions. The reduction in amortization expense is attributable to the sale of the Divested Divisions. Management Compensation -- Special. Management Compensation-Special is severance-related to the separation from employment of a senior executive. Insurance Settlement. The Company settled claims against a former insurer regarding environmental remediation costs for $16 million and received such proceeds in the first quarter of 2000. Divestitures. During 2000, as part of the Company's previously announced program to focus management, technical and financial resources on core businesses, the Company completed the sale of its Ross Aluminum Foundries, Fluid Systems, MARCO, Rubber Molding and Cincinnati Industrial Machinery divisions for aggregate net proceeds of $85.0 million and an aggregate gain on the sale of these divisions of $17.1 million, which was reduced for provisions made for items relating to divisions sold in prior years to $3.1 million. Interest expense. Interest expense was $43.9 million in 2000 and $45.4 million in 1999, a decrease of $1.5 million. The decrease in interest expense is due to the application of proceeds from the sales of the Ross Aluminum Foundries, Marco and Fluid Systems Divisions and the insurance settlement in the first quarter of 2000 to the outstanding debt balances. In the second and third quarters of 2000, the proceeds of the sale of Rubber Molding and Cincinnati Industrial Machinery Divisions were applied to outstanding debt balances. 21 Income (Loss) From Continuing Operations Before Taxes. Income (loss) from continuing operations before taxes was $18.3 million for 2000 and $(14.0) million for 1999. The following items affect the comparability between income (loss) before taxes for 2000 and 1999: - A provision for impairment of assets held for sale of $21.4 million in 1999; - Provisions for Management Compensation -- Special of $1.6 million in 2000 versus $0.6 million in 1999; - Proceeds of $16 million from an insurance settlement in 2000; - Gains on sales of divisions of $3.1 million in 2000; - Income (loss) before tax of Divested Divisions, net of the gain on the sale of such divisions in 2000 and net of the provision for the impairment of assets in 1999, of $(4.3) million in 2000 and $(6.6) million in 1999; - Decreased deprecation, amortization and interest expense as a result of the sale of the Divested Divisions and the application of the proceeds to pay down debt; - Increase of pretax income of $4.4 million at the Minerals Segments, and decreases in pretax income of $3.5 million and $12.1 million in the Automotive and Technologies Segments, respectively; and - A decrease in the net loss at the Headquarters, excluding the insurance settlement proceeds, of $1.0 million. Income Taxes (Benefit). Income taxes (benefit) were $9.0 million and $0.5 million in 2000 and 1999, respectively. The acquisition of Carpenter in 1999 and in the sale of the Divested Divisions in 2000 affect comparability of income taxes and the effective tax rates. The increase in income taxes (benefit) in 2000 is largely attributable to taxable gains resulting from divestitures. Net Income (Loss). Net income (loss) for 2000 and 1999 were $5.6 million and $(17.6) million, respectively. In 1999, net income was significantly impacted by the effects of the non-cash provision related to the impairment of net assets of operations to be sold of $21.4 million. In 2000, net income was significantly impacted by the $16 million proceeds from the insurance settlement and $3.1 million in divestitures. Preferred stock dividend accretion of $11.8 million in 2000 reduced net income of $5.6 million to a net loss applicable to common shareholders of $(6.2) million. In 1999, preferred stock dividend accretion of $10.6 million increased the net loss applicable to common shareholders to $(28.2) million. FINANCIAL CONDITION EBITDA The Company's EBITDA is defined for purposes hereof as earnings before interest expense, income taxes, depreciation and amortization, and certain items determined by management to be in the nature of nonrecurring items - namely, management compensation - special, gains from insurance settlement, (gain) loss on sale of divisions, charge for impairment of net assets of operations to be sold and non-cash items relating to accruals for the Company's stock appreciation rights plan. EBITDA, as defined herein, may not be comparable to similarly titled measures reported by other companies and should not be construed as an alternative to operating income or cash flows from operating activities, as determined by generally accepted accounting principles, as a measure of the Company's operating performance or liquidity, respectively. Funds depicted by EBITDA are not available for management's discretionary use to the extent they are required for debt service and other commitments. EBITDA is $85.7 million for 2001, $103.8 million for 2000 and $113.7 million for 1999. Excluding the Divested Divisions, EBITDA was $102.6 million in 2000 and $104.5 million in 1999. In 2001, EBITDA losses in the Automotive Segment and the Technologies Segment were the principal reasons for the year over year deterioration. In 2000, EBITDA gains in the Minerals segment was largely offset by reduced EBITDA in the Technologies Segment. The Automotive Segment EBITDA was flat from 1999 to 2000. 22 EBITDA Outlook for 2002 The Company is projecting 2002 EBITDA to be in a range of $93 million to $97 million, an increase of approximately 9% to 13% from 2001 EBITDA. The increase is expected as a result of cost reduction initiatives across the Company and a reduction of new product launch costs in the Automotive Segment on relatively flat sales due to continued economic weakness. OPERATING ACTIVITIES Net cash provided by operating activities for the fiscal year ended November 30, 2001 was $67.5 million compared to $45.6 million for the comparable 2000 period (when adjusted for the sale of the Company's Machinery Segment, which is shown as a discontinued operation). The increase in net inflow of cash from operating activities in the fiscal year 2001 period occurred largely as a result of changes in the balances of certain current assets and liabilities. Receivables decreased $0.8 million, inventories decreased $8.2 million, and accounts payable and accruals increased $28.4 million and $4.5 million respectively, as the Company continued to emphasize better management of its working capital position. During 2001, the Company reported its Machinery Segment as a discontinued operation as discussed in Note B, Acquisitions, Divestitures and Discontinued Operations in Item 8 below. The Company recorded a provision for discontinued operations of $30.4 million, net of tax benefits of $6.1 million. Net cash provided by the Machinery Segment during 2001 was $4.3 million, compared to $4.6 million in 2000. INVESTING ACTIVITIES Investing activities used $36.8 million in cash during 2001, compared to 2000 where $35.8 million was provided, of which $72.7 million was provided from proceeds from sales of divisions, net of acquisitions. Capital expenditures amounted to $36.5 million for 2001 as the Company continued to invest in plant and equipment related to new product launches at the Hillsdale Division, the addition of a new coating line at the Wolverine Division, improved manufacturing efficiencies and general maintenance in all segments. FINANCING ACTIVITIES The Company used $17.8 million for financing activities in 2001 while $88.6 million was used for these activities in 2000. The Company borrowed $6.2 million under its revolving credit facilities and permanently repaid $20.8 million under its long-term debt obligations. The Company also purchased stock from a former senior officer for $2.1 million. Scheduled debt payments, excluding the Receivables Agreement which was subsequently replaced with a new securitization facility, for 2002 and 2003 are $27.7 million and $25.6 million, respectively. OUTLOOK FOR 2002 Net cash provided by operating activities in 2002 is expected to be approximately $37 million. Most of the change from 2001 will be attributable to a modest increase in working capital compared to a significant decrease in working capital in 2001. This will be partially offset by a reduced net loss from continuing operations. Investing activities are expected to use approximately $17 million, reflecting projected capital expenditures of $22 million and receipt of proceeds from the sale of the machinery segment.. The Company anticipates required repayment of approximately $28 million of long term debt in 2002 which will be partially offset by increases in other debt facilities of approximately $8 million. EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Earnings to fixed charges and preferred stock dividends ("Ratio") were 0.18x in 2001, 1.11x in 2000 and 0.57x in 1999. In 2001, earnings were not sufficient to cover fixed charges and accreted preferred stock dividends by $45.2 million. However, excluding the $14.2 million charge for restructuring, reduces this 23 shortfall to $31 million and the ratio would be improved to 0.44x. In 2000, if the insurance proceeds and the gain on the sale of divisions was excluded, the Ratio would be 0.78x and earnings would not be sufficient to cover fixed charges and preferred stock dividends by $12.6 million. In 1999, earnings were not sufficient to cover fixed charges and accreted preferred stock dividends by $24.5 million. However, excluding the impairment of the net assets of operations held for sale, this shortfall is reduced to $3.1 million and the Ratio is improved to 0.95x. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flow from operations and available credit facilities are considered adequate to fund both the short-term and long-term capital needs of the Company. As of November 30, 2001, the Company had $41.6 million unused under its senior secured revolving credit facility, $30.8 unused under its accounts receivable loan agreement (the "Receivables Agreement"), and $4.7 million unused under its European unsecured lines of credit. However, due to various financial covenant limitations under the Company's senior secured credit agreement (the "Credit Agreement") measured at the end of each quarter, on November 30, 2001, the Company could incur only an additional $14.2 million of indebtedness. At November 30, 2001, the Company was in compliance with the covenants of its senior secured credit agreement and senior subordinated notes. Certain of the Company's European operations did not meet the terms of the European credit agreements as of November 30, 2001; however, the Company has obtained the necessary waivers from the lender. Subsequent to November 30, 2001, the Company entered into an agreement with a GE Capital sponsored commercial paper conduit to sell substantially all of its domestic accounts receivable through an unconsolidated special purpose entity, Eagle-Picher Funding Corporation ("EPFC"). Proceeds from this new facility were used to payoff amounts outstanding under the Company's existing Receivables Agreement on the closing date and other corporate purposes. The agreement involves the sale of receivables of the Company and certain of its Domestic subsidiaries to EPFC, which in turn sells an undivided interest in a revolving pool of receivables to the financial institution. EPFC has no recourse to the Company and its subsidiaries for failure of the debtors to pay when due. The agreement provides for continuation of the program on a revolving basis for approximately a three-year period. The Company has adopted Financial Accounting Standards Board SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." However, under the definitions contained in the Credit Agreement, the aggregate amount of capital investment by the conduit at a given point in time is treated as indebtedness for purposes of various financial covenants in the Credit Agreement. The Company has entered into various interest rate swap agreements to manage its variable interest rate exposure. Per the terms of the swap agreements, the Company exchanges, at specified intervals, the difference between fixed and variable interest amounts based on a notional amount of $90 million. The swap agreements effectively fix the interest rate on $90 million of the debt under the Credit Agreement at a weighted average interest rate of 5.678% beginning March 5, 2001 and maturing December 15, 2003. Based on the projections described above, the Company believes that it will be in compliance with all of its debt covenants throughout 2002. However, any adverse changes in actual results from projections, along with the contractual tightening of the covenants under the Credit Agreement, which begins in the quarter ending May 31, 2002, would place the Company at risk of not being able to comply with all of the covenants of the Credit Agreement. In the event the Company cannot comply with the terms of the Credit Agreement as currently written, it would be necessary for the Company to obtain a waiver or renegotiate its loan covenants, and there can be no assurance that such negotiations will be successful. Any agreements to amend the covenants would likely require a payment of a fee and increase in the interest rate payable by the Company on its debt under the Credit Agreement. The amount of such fee and increase in interest rate would be determined in the negotiations of the amendment. Commencing March 1, 2003, dividends on the Company's Convertible Exchangeable Preferred Stock become cash payable at 11 3/4% per annum; the first semi-annual dividend payment of $8.3 million is due September 1, 2003. If the Company does not pay cash dividends on the preferred stock, then holders of the 24 preferred stock become entitled to elect a majority of the Board of Directors of Eagle-Picher Holdings. Dakruiter S.A., a company controlled by Granaria Holdings B.V., holds approximately 51.8% of the preferred stock and therefore Granaria Holdings would continue to be able to elect the entire Board of Directors of Eagle-Picher Holdings. The Company's $220 million revolving credit facility in its senior Credit Agreement expires February 28, 2004. The Company will be required to extend or replace this facility before that date. As of November 30, 2001, the Company had borrowed approximately $142 million and had approximately $36.5 million of letters of credit issued under this facility. The Company's new management team is completing a strategic and operational review of the Company's businesses, including a review of portfolio mix, within the limits of the Company's financial resources and credit instruments. OTHER NEW ACCOUNTING STANDARDS In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -- a replacement of FASB Statement No. 125" ("SFAS 140"). SFAS 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS 125's provisions without reconsideration. This Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. This Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The Company adopted this statement for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for the year ended November 30, 2001; however the Statement was not applicable to the company until EPFC was established in the first quarter of 2002. See Note F in Item 8. In June 2001, the FASB issued three additional pronouncements. SFAS No. 141, "Business Combinations," requires that all acquisitions be accounted for using the purchase method and in certain situations, requires the segregation of intangible assets from goodwill. SFAS No. 142, "Goodwill and Intangible Assets," presumes that goodwill and other intangible assets have infinite lives and, as such, prescribes that these assets will not be amortized, but rather tested at least annually for impairment. This pronouncement also provides specific guidance on testing intangible assets. SFAS No. 143, "Accounting for Asset Retirement Obligations," requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 141 is effective for all business combinations initiated after June 30, 2001. The Company will be required to adopt SFAS No. 142 and SFAS No. 143 no later than the first quarter of the fiscal year ending November 30, 2003. In September 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which superceded SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." The primary difference is that goodwill has been removed from the scope of SFAS No. 144. It also broadens the presentation of discontinued operations to include a component of an entity rather than segment of a business. A component of an entity comprises operations and cash flows that can clearly be distinguished operationally and for financial accounting purposes from the reset of the entity. The Company will be required to adopt the provisions of SFAS No. 144 no later than the first quarter of our fiscal year ended November 30, 2003. The Company has not completed the process of evaluating the impact that will result from adopting these statements. The Company therefore is unable to disclose the impact, if any, that adopting these statements will have on its financial position and results of operations when such statements are adopted. 25 FORWARD LOOKING STATEMENTS This report contains statements which, to the extent that they are not statements of historical fact, constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934. The words "estimate," "anticipate," "project," "intend," "believe," "expect," and similar expressions are intended to identify forward-looking statements. Forward looking statements in this report include, but are not limited to, any statements under the heading "Outlook for 2002." Such forward-looking information involves risks and uncertainties that could cause actual results to differ materially from those expressed in any such forward-looking statements. These risks and uncertainties include, but are not limited to, the ability of the Company to maintain existing relationships with customers, demand for the Company's products, the ability of the Company to successfully implement productivity improvements and/or cost reduction initiatives, the ability of the Company to develop, market and sell new products, the ability of the Company to obtain raw materials, increased government regulation or changing regulatory policies resulting in conditions, acquisitions and divestitures, technological developments and changes in the competitive environment in which the Company operates. Persons reading this report are cautioned that such forward-looking statements are only predictions and that actual events or results may differ materially. ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK RISK MANAGEMENT ACTIVITIES The Company is exposed to market risk including changes in interest rates, currency exchange rates and commodity prices. The Company uses derivative instruments to manage its interest rate and foreign currency exposures. The Company does not use derivative instruments for speculative or trading purposes. Generally, the Company enters into hedging relationships such that changes in the fair values or cash flows of items and transactions being hedged are expected to be offset by corresponding changes in the values of the derivatives. Interest Rate Management The Company enters into interest rate swap agreements to manage interest rate costs and risks associated with changing interest rates. The differential to be paid or received under these agreements is accrued and recognized as adjustments to interest expense. The fair value of the swap agreements and changes in the fair value as a result of changes in market interest rates are recognized in Accumulated Other Comprehensive Income (loss) in the Company's consolidated balance sheets. At November 30, 2001, the Company had interest rate swap agreements outstanding with a commercial bank having a notional principal amount of $90 million. These agreements effectively changed the interest rate exposure on $90 million of the Company's floating debt to a weighted fixed rate of 5.678% plus the applicable spread. The Company anticipates entering into additional interest rate swap agreements through the maturity date of the Credit Agreement. The remaining amount of loans outstanding under the Credit Agreement bear interest at the floating rates as described in Note F to the Consolidated Financial Statements contained in Item 8. In addition, the Company has loans outstanding under the Receivables Agreement which bear interest at variable rates equal to market rates on commercial paper having a term similar to applicable interest periods. Accordingly, the combined effect of a 1% increase in an applicable index rates would result in additional interest expense of approximately $1.2 million annually, assuming no change in the level of borrowings. At November 30, 2001, the Company had unrealized net losses under interest rate swap agreements of $(4.8) million which has been recorded in Accumulated Other Comprehensive Income (loss) in the consolidated balance sheet. The Company does not hold collateral for these instruments and therefore is exposed to credit loss in the event of nonperformance by the other party to the interest rate swap agreement. However, the Company does not anticipate any such nonperformance. The following table presents information for all dollar-denominated interest rate instruments. In addition, the Company has several working capital facilities denominated in multiple currencies (see Note F to the 26 Consolidated Financial Statement in Item 8). The fair value presented below approximates the cost to settle the outstanding contract.
EXPECTED MATURITY DATE ------------------------------------------------------------------- (IN MILLIONS OF DOLLARS) 2002 2003 2004 2005 2006 THEREAFTER TOTAL FAIR VALUE - ------------------------ ---- ---- ----- ---- ---- ---------- ----- ---------- LIABILITIES Long-Term Debt Variable Rate Debt ($)................ 42.0 25.6 143.8 11.8 0 0 223.2 223.2 Average Interest Rate............... 4.7% 4.8% 4.6% 1.9% 0 0 4.8% Fixed Rate ($)........................ 220.0 220.0 114.0 Average Interest Rate............... 9.4% 9.4% 9.4% 9.4% 9.4% 9.4% 9.4% INTEREST RATE DERIVATIVES Interest Rate Swaps Variable to Fixed ($)................. 90.0 90.0 (4.8) Average Pay Rate.................... 5.68% 5.68% Average Receive Rate................ 2.03% 2.03%
Currency Rate Management The Company has operations and sells its products in a number of countries and, as a result, is exposed to changes in foreign currency exchange rates. The Company uses forward contracts to hedge a portion of its forecasted sales, generally within the next 12 months. The Company manages most of these exposures on a consolidated basis, which allows netting certain exposures to take advantage of any natural offsets. To the extent the net exposures are hedged, forward contracts are used. Foreign exchange forward contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date. The foreign exchange forward contracts require the Company to exchange foreign currencies for U.S. dollars or vice versa, and generally mature in twelve months or less. As of November 30, 2001, the Company had outstanding foreign exchange forward contracts with aggregate notional amounts of $14.5 million. Unrealized net losses on these contracts, based on prevailing financial market information as of November 30, 2001, was $(.1) million and was included in Accumulated Other Comprehensive Income (loss) in the Consolidated Balance Sheet. During the fiscal year ended November 30, 2000, gains and losses on contracts that became due were included in the measurement of the related foreign currency transactions. As of November 30, 2001, all forecasted transactions being hedged are expected to occur in fiscal year 2002. The Company's principal areas of exposure are related to sales denominated in the currencies of Europe and Canada, with the majority of this exposure related to European currencies. Credit Risk As part of its ongoing control procedures, the Company monitors concentrations of credit risk associated with financial institutions with which it conducts business. Credit risk is minimal as credit exposure is limited with any single high quality financial institution to avoid concentration. The Company also monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. Concentrations of credit risk associated with these trade receivables are considered minimal due to the Company's geographically diverse customer base. Bad debts have been minimal. The Company does not normally require collateral or other security to support credit sales. 27 ITEM 8. FINANCIAL STATEMENTS EAGLE-PICHER HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999
2001 2000 1999 -------- -------- -------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) NET SALES.............................................. $692,450 $754,966 $822,948 -------- -------- -------- OPERATING COSTS AND EXPENSES Cost of products sold (exclusive of depreciation shown separately below).................................... 558,693 593,658 644,502 Selling and administrative............................. 51,077 59,357 67,871 Management compensation -- special..................... 3,125 1,560 556 Insurance settlement................................... -- (16,000) -- Restructuring.......................................... 14,163 -- -- Divestitures........................................... 2,105 (3,149) 21,407 Depreciation........................................... 42,617 41,313 43,842 Amortization of intangibles............................ 16,490 16,113 16,825 Other.................................................. (98) (174) 30 -------- -------- -------- 688,172 692,678 795,033 -------- -------- -------- OPERATING INCOME....................................... 4,278 62,288 27,915 Interest expense....................................... (40,105) (43,989) (45,475) Other income........................................... 3,913 96 3,560 -------- -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES................................................ (31,914) 18,395 (14,000) INCOME TAXES (BENEFIT)................................. (10,016) 9,061 (546) -------- -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS............... (21,898) 9,334 (13,454) DISCONTINUED OPERATIONS: Loss from operations of discontinued segment, net of income tax benefits of $900, $2,061 and $2,254.......................................... (1,657) (3,724) (4,133) Loss on disposal of business segment, including provision of $5,695 for operating losses during phase-out period, net of income tax benefits of $6,084.......................................... (30,416) -- -- -------- -------- -------- NET INCOME (LOSS)...................................... (53,971) 5,610 (17,587) PREFERRED STOCK DIVIDENDS ACCRETED..................... (13,282) (11,848) (10,569) -------- -------- -------- LOSS APPLICABLE TO COMMON SHAREHOLDERS................. $(67,253) $ (6,238) $(28,156) ======== ======== ======== BASIC LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS: Loss from Continuing Operations................. $ (35.84) $ (2.53) $ (24.03) Loss from Discontinued Operations............... (32.67) (3.73) (4.13) -------- -------- -------- NET LOSS........................................ $ (68.51) $ (6.26) $ (28.16) ======== ======== ========
See accompanying notes to consolidated financial statements. 28 EAGLE-PICHER HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 2001 AND 2000
2001 2000 ----------- ----------- (IN THOUSANDS OF DOLLARS) ASSETS CURRENT ASSETS Cash and cash equivalents................................... $ 24,620 $ 7,467 Receivables, less allowances of $1,000 in 2001 and $1,072 in 2000...................................................... 100,052 98,149 Income tax refund receivable................................ 5,570 6,726 Inventories................................................. 75,344 83,519 Net assets of operations to be sold......................... 3,258 44,080 Prepaid expenses............................................ 9,552 7,141 Deferred income taxes....................................... 24,287 12,860 -------- -------- Total Current Assets................................. 242,683 259,942 -------- -------- PROPERTY, PLANT AND EQUIPMENT Land and land improvements.................................. 15,665 13,987 Buildings................................................... 68,749 60,822 Machinery and equipment..................................... 243,272 216,996 Construction in progress.................................... 25,197 25,174 -------- -------- 352,883 316,979 Less accumulated depreciation............................... 136,128 90,975 -------- -------- Net Property, Plant and Equipment.................... 216,755 226,004 EXCESS OF ACQUIRED NET ASSETS OVER COST, net of accumulated amortization of $57,624 in 2001 and $41,799 in 2000........................................... 179,762 195,575 OTHER ASSETS................................................ 86,711 86,178 -------- -------- TOTAL ASSETS......................................... $725,911 $767,699 ======== ========
See accompanying notes to consolidated financial statements. 29 EAGLE-PICHER HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 2001 AND 2000
2001 2000 ----------- ---------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable............................................ $ 86,297 $ 57,865 Long-term debt -- current portion........................... 41,957 65,358 Compensation and employee benefits.......................... 18,909 20,045 Income taxes................................................ 1,209 2,682 Reorganization items........................................ -- 10,550 Other accrued liabilities................................... 52,907 34,640 --------- -------- Total Current Liabilities............................ 201,279 191,140 LONG-TERM DEBT, less current portion........................ 401,169 392,573 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 17,873 17,489 DEFERRED INCOME TAXES....................................... 6,277 10,278 OTHER LONG-TERM LIABILITIES................................. 9,882 7,218 --------- -------- TOTAL LIABILITIES.................................... 636,480 618,698 --------- -------- 11 3/4% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK: Authorized 50,000 Shares; issued and outstanding 14,191 Shares; mandatorily redeemable @$10,000 per share on March 1, 2008................................................... 123,086 109,804 --------- -------- SHAREHOLDERS' EQUITY (DEFICIT) Common stock voting -- $.01 par value each: authorized; issued and outstanding 1,000,000 shares................... 10 -- Class A Common Stock, voting -- $.01 par value each: authorized 625,001 shares; issued and outstanding 625,001 shares.................................................... -- 6 Class B Common Stock, nonvoting -- $.01 par value each: authorized 374,999 shares; issued and outstanding 374,999 shares.................................................... -- 4 Additional paid-in capital.................................. 99,991 99,991 Deficit..................................................... (123,393) (56,140) Accumulated other comprehensive income (loss)............... (5,730) (2,293) --------- -------- (29,122) 41,568 Treasury stock, at cost: 27,750 shares in 2001 and 11,500 shares in 2000............................................ (4,533) (2,371) --------- -------- TOTAL SHAREHOLDERS' EQUITY (DEFICIT)................. (33,655) 39,197 --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)........................................... $ 725,911 $767,699 ========= ========
See accompanying notes to consolidated financial statements. 30 EAGLE-PICHER HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999
2001 2000 1999 -------- -------- -------- (IN THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)...................................... $(53,971) $ 5,610 $(17,587) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization.................. 62,814 60,672 64,240 Provisions for discontinued operations......... 30,416 -- -- Divestitures................................... 2,105 (3,149) 21,407 Changes in assets and liabilities, net of effects of acquisitions and divestitures: Receivables.................................... (773) 9,460 (466) Inventories.................................... 8,175 (8,655) (9,799) Deferred taxes................................. (9,344) 4,897 (9,400) Accounts payable............................... 28,432 10,959 (1,102) Accrued liabilities............................ 4,476 (23,384) (8,901) Other.......................................... (4,860) (10,846) (2,897) -------- -------- -------- Net cash provided by operating activities...... 67,470 45,564 35,495 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of divisions....................... - 85,048 12,400 Acquisitions........................................... - (12,306) (60,251) Capital expenditures................................... (36,544) (41,367) (44,485) Other.................................................. (247) 4,464 (610) -------- -------- -------- Net cash provided by (used in) investing activities................................... (36,791) 35,839 (92,946) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt............................ (20,795) (24,374) (140,776) Borrowings (repayments) under revolving credit agreements.......................................... 6,229 (61,774) 187,614 Purchase of treasury shares............................ (2,162) (2,371) -- Other.................................................. (1,120) (51) (1,905) -------- -------- -------- Net cash provided by (used in) financing activities................................... (17,848) (88,570) 44,933 -------- -------- -------- Net Cash provided by Discontinued Operations............. 4,322 4,563 8,908 -------- -------- -------- Net increase (decrease) in cash and cash equivalents..... 17,153 (2,604) (3,610) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............. 7,467 10,071 13,681 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR................... $ 24,620 $ 7,467 $ 10,071 ======== ======== ========
See accompanying notes to consolidated financial statements. 31 EAGLE-PICHER HOLDINGS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999
ACCUMULATED CLASS A CLASS B ADDITIONAL OTHER COMMON COMMON COMMON PAID-IN COMPREHENSIVE TREASURY STOCK STOCK STOCK CAPITAL DEFICIT INCOME (LOSS) STOCK ------ ------- ------- ---------- --------- ------------- -------- (IN THOUSANDS OF DOLLARS) BALANCE NOVEMBER 30, 1998......... $ -- $ 6 $ 4 $99,991 $ (21,746) $ 2,357 $ -- Comprehensive Income: Net income.................... -- -- -- -- (17,587) -- -- Foreign currency translation, net......................... -- -- -- -- -- (3,145) -- Preferred stock dividend accretion..................... -- -- -- -- (10,569) -- -- ---- --- --- ------- --------- ------- ------- BALANCE NOVEMBER 30, 1999......... -- 6 4 99,991 (49,902) (788) -- Comprehensive Income: Net income.................... -- -- -- -- 5,610 -- -- Foreign currency translation, net......................... -- -- -- -- -- (1,505) -- Purchase of treasury stock...... -- -- -- -- -- -- (2,371) Preferred stock dividend accretion..................... -- -- -- -- (11,848) -- -- ---- --- --- ------- --------- ------- ------- BALANCE NOVEMBER 30, 2000......... -- 6 4 99,991 (56,140) (2,293) (2,371) Comprehensive Income: Net loss...................... -- -- -- -- (53,971) -- -- Foreign currency translation, net......................... -- -- -- -- -- 1,382 -- Gains (losses) on foreign currency hedging and interest rate swap contracts..................... -- -- -- -- -- (4,819) -- Amendment to Capital structure..................... 10 (6) (4) -- -- -- -- Purchase of treasury stock...... -- -- -- -- -- -- (2,162) Preferred stock dividend accretion..................... -- -- -- -- (13,282) -- -- ---- --- --- ------- --------- ------- ------- BALANCE NOVEMBER 30, 2001......... $ 10 $-- $-- $99,991 $(123,393) $(5,730) $(4,533) ==== === === ======= ========= ======= ======= TOTAL SHAREHOLDERS' TOTAL EQUITY COMPREHENSIVE (DEFICIT) INCOME (LOSS) ------------- ------------- (IN THOUSANDS OF DOLLARS) BALANCE NOVEMBER 30, 1998......... $ 80,612 $(12,007) ======== Comprehensive Income: Net income.................... (17,587) $(17,587) Foreign currency translation, net......................... (3,145) (3,145) Preferred stock dividend accretion..................... (10,569) -- -------- -------- BALANCE NOVEMBER 30, 1999......... 49,311 $(20,732) ======== Comprehensive Income: Net income.................... 5,610 $ 5,610 Foreign currency translation, net......................... (1,505) (1,505) Purchase of treasury stock...... (2,371) -- Preferred stock dividend accretion..................... (11,848) -- -------- -------- BALANCE NOVEMBER 30, 2000......... 39,197 $ 4,105 ======== Comprehensive Income: Net loss...................... (53,971) $(53,971) Foreign currency translation, net......................... 1,382 1,382 Gains (losses) on foreign currency hedging and interest rate swap contracts..................... (4,819) (4,819) Amendment to Capital structure..................... -- -- Purchase of treasury stock...... (2,162) -- Preferred stock dividend accretion..................... (13,282) -- -------- -------- BALANCE NOVEMBER 30, 2001......... $(33,655) $(57,408) ======== ========
See accompanying notes to consolidated financial statements. 32 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999 (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) A. SIGNIFICANT ACCOUNTING POLICIES Eagle-Picher Holdings, Inc. ("EP Holdings") is a majority-owned subsidiary of Granaria Industries, B.V. ("Granaria Industries"). Granaria Industries acquired Eagle-Picher Industries, Inc. ("EPI"). EPI, which is the operating entity, was formed as an acquisition vehicle. EP Holdings results of operations and cash flows approximate those of EPI. Unless the context indicates otherwise, the term "Company" as used herein refers to EP Holdings and its subsidiaries. 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. Significant 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 The Company recognizes revenue when risk and title passes to the customer, which is generally upon shipment of products except for certain products sold under cost reimbursable contracts and subcontracts with various United States Government agencies and aerospace and defense contractors. On cost-reimbursable contracts, sales are recognized as costs are incurred and include a portion of the total estimated earnings to be realized in the ratio that costs incurred relate to total estimated costs. On fixed-price contracts, sales are recognized using the percentage of completion method, when deliveries are made or upon completion of specified tasks. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 H). 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 conducts periodic credit evaluations of its customers' financial condition and generally does not require collateral. The Company's customer base includes all significant automotive manufacturers and their first tier suppliers in North America 33 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 2001. Effective December 1, 2000, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an Amendment of SFAS 133." Under this guidance, all derivative instruments, including foreign currency exchange contracts and interest rate swaps, are recognized as assets or liabilities in the consolidated balance sheet at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability (fair value hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or hedge of a net investment in a foreign operation (net investment hedge). Changes in the fair value of derivatives are either recognized periodically in income or shareholders' equity as a component of Other Comprehensive Income, depending on whether the derivative is being used to hedge changes in fair value or cash flows. The ineffective portion of derivatives that are designated as hedges are recorded in the consolidated statement of income. Upon initial application of SFAS 133, the Company recorded the fair value of existing foreign currency exchange contracts and interest rate swaps on the consolidated balance sheet and a corresponding unrecognized gain as a cumulative effect adjustment of Accumulated Other Comprehensive Income. The adjustment was not material to the Company. From time to time, the Company enters into interest rate swaps and currency forwards contracts in its management of interest costs and foreign currency exposures. Interest differentials to be paid or received under interest rate swaps are recognized over the life of the underlying agreement or indebtedness, respectively, as adjustments to interest expense. Gains and losses on currency contracts are included in income as they mature. As of November 30, 2001, the Company had unrealized net losses under interest rate swap agreements and foreign currency forward contracts of $4,760 and $149, respectively, of which $2,434 is expected to be recognized in income over the next twelve months. These unrealized net losses are recorded in Accumulated Other Comprehensive Income (loss) in the consolidated balance sheet. Interest rate swap contracts are used to adjust the proportion of total debt that is subject to variable and fixed interest rates. Under the Company's interest rate swap contracts, the Company agrees to pay an amount equal to a specified fixed-rate interest and receives in return an amount equal to a variable-rate amount times the same notional principal amount. The notional amounts of the contract are not exchanged. No other cash payments are made unless the contract is terminated prior to maturity, in which case the amount paid or received in settlement is established by agreement at the time of termination, and usually represents the net present value, at current rates of interest, of the remaining obligations to exchange payments under the terms of the contract. Although no collateral is held or exchanged for these contracts, interest rate swap contracts are entered into with a major financial institution in order to minimize counterparty credit risk. For interest rate swap contracts under which the Company agrees to pay fixed-rates of interest, these contracts are considered to be a hedge against changes in the amount of future cash flows associated with the Company's interest payments on variable-rate debt obligations. Accordingly, the interest rate swap contracts are designated as cash flow hedges and are reflected at fair value in the consolidated balance sheet and the related gains or losses on these contracts are deferred in shareholders' equity (as a component of accumulated other comprehensive income (loss)). These deferred gains and losses are then amortized as an adjustment to interest expense over the same period in which the related interest payments being hedged are recognized in income. However, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the interest payments being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income. The net effect of this 34 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accounting on the Company's operating results is that interest expense on the portion of variable-rate debt being hedged is generally recorded based on fixed interest rates. At November 30, 2001, the Company had interest rate swap contracts to pay fixed-rates of interest (average rate of 5.678%) and receive variable-rates of interest (average rate of 1.90%) on $90 million notional amount of indebtedness. This resulted in approximately 20% of the Company's underlying debt being subject to fixed interest rates under interest rate swap contracts. The $90 million notional amount of outstanding contracts will mature during fiscal year 2004. At November 30, 2000, the Company had interest rate swap contracts on $150 million notional amount of indebtedness. Forward foreign exchange contracts are designated as cash flow hedges and are used primarily by the Company to hedge the risk of cash flow fluctuations due to changes in exchange rates on sales denominated in foreign currencies. As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, the Company hedges a portion of its foreign currency exposures anticipated over the ensuing twelve-month period. At November 30, 2001 the Company had effectively hedged approximately one-third of the estimated foreign currency exposures that principally relate to anticipated cash flows to be remitted to the U.S. over the ensuing twelve-month period. To hedge this exposure, the Company used foreign exchange contracts that generally have maturities that approximate the timing of the forecasted transaction. Foreign exchange contracts are placed with a number of major financial institutions in order to minimize credit risk. The Company records these foreign exchange contracts at fair value in its consolidated balance sheets and the related unrealized gains or losses on these contracts are deferred in shareholders' equity (as a component of Accumulated Other Comprehensive Income (loss)). These deferred unrealized gains and losses are recognized in income in the period in which the related transactions being hedged are recognized in income. However, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income. Unrealized gains and losses on foreign exchange contracts generally are included as a component of accumulated other income (loss), net, in the company's consolidated statement of income. At November 30, 2001, the Company had outstanding foreign exchange contracts with an aggregate notional amount of $14,500. Net unrealized gains and losses on these contracts, based on prevailing financial market information as of November 30, 2001 was ($149) and was included in Accumulated Other Comprehensive Income (loss) in the consolidated balance sheet. Inventories Inventories are valued at the lower of cost or market in accordance with Accounting Research Bulletin No. 43. 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 30 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. Property, plant and equipment acquired in the acquisition of a business, are stated at fair value, based on independent appraisals, as of the date of the acquisition. 35 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pre-Production Costs Related to Long-Term Supply Arrangements The Company capitalizes costs incurred to design and develop molds, dies and other tools used to manufacture products that will be sold under long-term supply arrangements, primarily in the automotive segment. The costs are amortized over the life of the related programs. At November 30, 2001 and 2000, the unamortized balance of these assets was $2,292 and $3,212, respectively. The Company also capitalizes costs incurred to design and develop molds, dies and other tools that it will sell to customers under long-term supply arrangements. The Company is typically reimbursed for these costs. At November 30, 2001 and 2000, the unamortized balances of assets the Company will not own were $4,287 and $5,601, respectively. 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. 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. Environmental Remediation Costs The Company accrues for environmental expenses resulting from existing conditions relating to operations when the costs are probable and can be reasonably estimated. The estimated liabilities are not discounted or reduced for possible recoveries from insurance carriers. Research and Development Research and development expenditures are expensed as incurred. Research and development expense was $10,400 in 2001, $11,700 in 2000 and $13,300 in 1999. 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. The valuation allowance represents a provision for uncertainty on the realization on certain deferred tax assets. 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 included in Accumulated Other Comprehensive Income (Loss). Gains and losses from foreign currency transactions are included in the determination of net income (loss). Reclassifications Certain prior year amounts have been reclassified to conform with the 2001 consolidated financial statement presentation. 36 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) New Accounting Standards In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -- a replacement of FASB Statement No. 125". SFAS 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS 125's provisions without reconsideration. This Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The Company adopted this statement for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for the year ended November 30, 2001, however the statement was not applicable to the Company until the Eagle-Picher Funding Corporation, a qualifying special purpose entity, was established in the first quarter of 2002 (See Note F). In June 2001, the FASB issued three additional pronouncements. SFAS No. 141, "Business Combinations," requires that all acquisitions be accounted for using the purchase method and in certain situations, requires the segregation of intangible assets from goodwill. SFAS No. 142, "Goodwill and Intangible Assets," presumes that goodwill and other intangible assets have infinite lives and, as such, prescribes that these assets will not be amortized, but rather tested at least annually for impairment. This pronouncement also provides specific guidance on testing intangible assets. SFAS No. 143, "Accounting for Asset Retirement Obligations," requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 141 is effective for all business combinations initiated after June 30, 2001. The Company will be required to adopt SFAS No. 142 and SFAS No. 143 no later than the first quarter of the fiscal year ending November 30, 2003. In September 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Asset," which superceded SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." The primary difference is that goodwill has been removed from the scope of SFAS No. 144. It also broadens the presentation of discontinued operations to include a component of an entity rather than segment of a business. A component of an entity comprises operations and cash flows that can clearly be distinguished operationally and for financial accounting purposes from the rest of the entity. The Company will be required to adopt the provisions of SFAS No. 144 no later than the first quarter of the fiscal year ending November 30, 2003. The Company has not completed the process of evaluating the impact that will result from adopting these statements. The Company therefore is unable to disclose the impact, if any, that adopting these statements will have on its financial position and results of operations when such statements are adopted. B. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS Acquisitions During the 2000 fiscal year, the Company acquired the assets of the depleted zinc business of Isonics Corporation and the stock of the Blue Star Battery Systems Corporation, a manufacturer of special purpose batteries. These acquisitions were made at an aggregate cost, including expenses, of $13,806, consisting of $12,306 in cash and contingent cash payments of $500 annually for three years. These acquisitions were financed from the Company's revolving credit facility and were accounted for using the purchase method. The excess of the purchase prices over the assessed values of the net assets of $6,949 was allocated to Excess of Acquired Net Assets Over Cost and is being amortized over 15 years. In addition, the Company negotiated a warrant to acquire four million shares of the common stock of the Isonics Corporation in exchange for materials that were to be delivered in 2000. The Company elected to 37 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) exercise its warrant using a "cashless exercise" feature, whereby the Company claimed approximately 3.3 million shares of stock and paid for them by surrendering the remaining warrant shares. The Company did not deliver the subject materials in 2000 as a result of both mechanical and technical problems beyond its reasonable control. Isonics has disputed the Company's exercise of the warrant and the Company's right to retain the warrant shares. (See further discussion in Note N Other Litigation Claims.) The Company accounted for this investment using the equity method. The impact of the transaction on the Company's results of operations in 2000 was not material. In 1999, the Company acquired the stock of Charterhouse Automotive Group, Inc., a holding company whose only operating subsidiary was Carpenter Enterprises, Ltd. ("Carpenter"), a supplier of precision-machined components to the automotive industry, for approximately $59,600 in cash and $12,700 of existing indebtedness of Carpenter. The total cash requirements of the acquisition were $60,251, which included transaction costs. The acquisition was accounted for as a purchase. The excess of the purchase price over the assessed values of the net assets of $16,445 was allocated to Excess of Acquired Net Assets Over Cost and is being amortized over 15 years. The following proforma information for the year ended November 30, 1999 gives effect to the acquisition of Carpenter as if it had been consummated on December 1, 1998. 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.
1999 ----------- (UNAUDITED) Net sales................................................... $ 944,800 Net loss.................................................... $ (18,000) Net loss applicable to common shareholders.................. $ (28,500) Net loss per common share................................... $ (28.50) Average number of common shares............................. 1,000,000
Divestitures The Company recognized amounts related to divestitures as follows:
2001 2000 1999 ------------------- -------- ------- Impairment of net assets of operations to be sold...... $ -- $ (6,000) $21,407 Gains on sales of divisions sold....................... (2,635) (11,077) -- Net losses recognized related to divisions sold in prior years.......................................... 4,740 13,928 -- ------------------- -------- ------- $ 2,105 $ (3,149) $21,407 =================== ======== =======
On September 1, 1999, the Board of Directors approved a plan to explore the sale of several of the Company's smaller divisions and to focus on core businesses. In connection with this plan, the Company recorded a non-cash provision of $21,407 primarily related to the impairment of the recorded asset values because the expected net realizable value of certain of the divisions for sale was estimated to be insufficient to recover the related carrying values of those divisions. In addition, the Company indemnified the buyers for certain liabilities related to items such as environmental remediation and warranty issues. Liabilities for certain of these amounts had been previously recorded by the Company and additional amounts were recorded in 2000 when the divisions were sold. The divestiture of all divisions included in the plan was completed in 2000 and the aggregate net proceeds from all such transactions was $85,048. The aggregate net gain resulting from these transactions for the year ended November 30, 2000 was approximately $17,077 representing the reversal of asset impairment reserves of $6,000 and net gains of $11,077, which includes a gain of $3,737 38 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recognized in the fourth quarter of 2000 resulting from a curtailment of the Company's pension and postretirement plans (see Note M) caused by the divestitures. In the fourth quarter of 2001, additional amounts totaling $937 were recorded for certain litigation related matters. An analysis of the asset impairment and other liabilities related to the 1999 divestiture plan, included in Other Accrued Liabilities in the consolidated balance sheets is as follows:
OTHER LIABILITIES ASSET IMPAIRMENT RELATED TO DIVESTITURES TOTAL ---------------- ----------------------- -------- Original Charges........................ $ 20,530 $ 877 $ 21,407 Amounts offset with asset values...... (10,440) -- (10,440) Amounts transferred................... (4,090) 4,090 -- Additional amounts recorded for transaction expenses and other items.............................. -- 3,459 3,459 Amounts spent......................... -- (5,600) (5,600) Amounts reversed...................... (6,000) -- (6,000) -------- ------- -------- Balance at November 30, 2000............ -- 2,826 2,826 Additional amounts recorded........... 180 757 937 Amounts spent......................... -- (403) (403) -------- ------- -------- Balance at November 30, 2001............ $ 180 $ 3,180 $ 3,360 ======== ======= ========
In addition to the divestitures occurring in 2000, the Company has sold several divisions in years prior to 1999. In 2000, certain events occurred that required the Company to record additional liabilities related to these transactions, primarily in the fourth quarter of 2000. These liabilities were recorded primarily for environmental remediation, costs related to certain litigation issues and losses on guarantees of indebtedness. The effect of these items was to reduce the gain on the sale of divisions recorded in 2000 in the amount of $13,928. In the fourth quarter of 2001, additional amounts totaling $3,803 were recorded for various environmental and litigation related matters. An analysis of the additional liabilities related to the acquisitions occurring prior to 1999 included in Other Accrued Liabilities in the consolidated balance sheet is as follows:
OTHER LIABILITIES ASSET IMPAIRMENT RELATED TO DIVESTITURES TOTAL ---------------- ----------------------- ------- Original Charges......................... $ -- $13,928 $13,928 Amounts spent.......................... -- (1,754) (1,754) ---- ------- ------- Balance at November 30, 2000............. -- 12,174 12,174 Additional amounts recorded............ 800 3,003 3,803 Amounts reversed....................... -- (367) (367) Amounts spent.......................... -- (1,160) (1,160) ---- ------- ------- Balance at November 30, 2001............. $800 $13,650 $14,450 ==== ======= =======
In the fourth quarter of 2001, the Company received $2,635 held in an escrow account for environmental matters related to a division sold in a prior year. The amount was recorded as a gain on sales of division sold. In connection with the sale of the Company's Trim Division in November 1998, the Company received a $2,100 note, of which $1,834 was due on November 30, 2000. The note was secured by a first mortgage on the real estate. The Company also guaranteed approximately $3,900 of the original principal amount of the buyer's debt related to tooling receivables from both original equipment manufacturers and their suppliers. The buyer is in default on the mortgage loan and its financing with its primary lender, and the lender has demanded payment of the guaranty from the Company. Accordingly, the Company has recorded a provision related to these items included in the liability recorded in fiscal year 2000 discussed in the previous paragraph. 39 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company remains a guarantor on the lease of the building in which its former Transicoil Division is located, and is liable should the buyer not perform on the lease. The remaining lease payments total approximately $5,400 over the lease term which expires in 2005. The Company believes the likelihood of being liable for the lease to be remote. See Note P for information regarding sales and pre-tax income or loss of the divisions which were divested in the years ended November 30, 2000 and 1999. Discontinued Operations In the first quarter of 2001, the Board of Directors authorized management to sell the assets and business of the Construction Equipment Division (CED), which comprises the Machinery Segment. The sale to Construction Equipment Direct, Inc., a Tennessee corporation, was completed subsequent to year end on December 14, 2001. The proceeds were $6,100 in cash, plus an estimated working capital adjustment of $1,000 to be finalized in the second quarter of 2002, plus the buyer's assumption of approximately $6,700 in current liabilities. The Company retained the land and buildings at CED's main facility in Lubbock, Texas and leased the facility to the buyer for a five year term. The buyer has the option to purchase the building for $2,500, increasing $100 per year over the term of the lease. The Company also retained $2,300 of CED lift truck raw materials inventory, which the buyer agreed to purchase at book value within one year, $900 of CED accounts receivable and retained or assumed liabilities, pursuant to the transaction, of $5,600. Through November 30, 2001, the Company recorded provisions totaling $30,416, net of an income tax benefit of $6,084. This provision included estimated losses and costs to be incurred in connection with the disposition of the Machinery Segment, including $5,695 in expected losses during the phase out period from March 1, through December 14, 2001. An operating loss of $1,657, net of a $900 tax benefit, was incurred in the first quarter of 2001. The results of the Machinery Segment's operations have been reported separately as discontinued operations in the consolidated statement of income (loss). Prior year amounts have been restated to present the operations of the Machinery Segment as a discontinued operation. The net assets of the discontinued operations, less accounts receivable and building subsequently retained as noted above, have been recorded at their estimated net realizable value under the caption "Net assets of operations to be sold" in the consolidated balance sheets at November 30, 2001 and 2000. This balance contains the $2,300 in inventory retained by the Company as it is deemed held for sale. Net sales for discontinued operations were $65,082, $82,614 and $90,313 for the years ended November 30, 2001, 2000 and 1999 respectively. Total assets for discontinued operations were $39,000, $51,800 and $58,100 at November 30, 2001, 2000 and 1999 respectively. C. RESTRUCTURING In the fourth quarter of 2001, the Company recorded asset write-downs and other charges totaling $14,163 in connection with a restructuring plan (the Plan) announced in November 2001. The Plan primarily relocates the Company's corporate headquarters from Cincinnati, Ohio to Phoenix, Arizona and closes three plants in the Technologies segment as it eliminates certain product lines in the Special Purpose Battery category. The costs related to the Plan, which were recognized as a separate component of operating expenses in the fourth quarter of 2001, included approximately $5,425 related to the facilities, $5,044 related to involuntary severance of approximately 165 employees and $3,694 in other costs to exit business activities. The facility costs of $5,425 include an adjustment of $1,250 to write down the carrying value of the three plants to their estimated fair value in holding them for sale. $2,325 represents the estimated loss on abandoning the machinery and equipment and other assets at the plant locations and corporate headquarters, 40 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and $1,850 represents an estimate of the total future lease commitments less estimated proceeds received from subleasing the various spaces. The asset impairment adjustments are recorded against Property Plant and Equipment and the liability for future lease commitments is included in Other Accrued Liabilities in the consolidated balance sheets. Approximately $202 of involuntary severance had been paid out as of year-end. The remaining $4,842 of severance is included in Other Accrued Liabilities, along with the $3,694 in other costs. Subsequent to year-end, the Company began analyzing whether a portion of the assets in its overfunded pension plan could be made available to pay severance costs related to the restructuring plan. The Company anticipates an amendment to the pension plan and has provided new or amended severance plans to allow for such payments. Up to $4,200 of severance could be paid out of the pension plan. This could result in a gain to restructuring in 2002 if the amendment to the pension plan is approved and if severed employees elect the new or amended severance plans. See Note M, Pension and Other Postretirement Benefit Plans. D. INVENTORIES Inventories consisted of:
2001 2000 ------- ------- Raw materials and supplies.................................. $22,527 $32,987 Work-in-process............................................. 34,504 37,237 Finished goods.............................................. 19,271 13,880 ------- ------- 76,302 84,104 Adjustment to state inventory at LIFO value................. (958) (585) ------- ------- $75,344 $83,519 ======= =======
The percentage of inventories valued using the LIFO method was 84% in 2001 and 86% in 2000. The effects of liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years were not material. E. OTHER ASSETS Other assets consisted of:
2001 2000 ------- ------- Prepaid pension cost -- Note M.............................. $54,676 $51,391 Debt issuance costs, net of accumulated amortization of $12,568 in 2001 and $8,861 in 2000........................ 14,887 17,715 Other....................................................... 17,148 17,072 ------- ------- $86,711 $86,178 ======= =======
The debt issuance costs are being amortized on a straight-line basis over the term of the related debt. 41 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) F. LONG-TERM DEBT, SHORT TERM BORROWINGS AND LEASE COMMITMENTS Long-term debt consisted of:
2001 2000 -------- -------- Credit Agreement: Revolving Credit Facility 5.03%, due 2004........................................ $142,000 $105,660 Accounts Receivable Loan Agreement 2.10%, due 2002........................................ 14,250 42,750 Term Loan 5.03%, due 2003........................................ 47,739 66,834 Senior Subordinated Notes 9 3/8%, due 2008.......................................... 220,000 220,000 Industrial Revenue Bonds 1.8% to 2.2%, due 2005.................................... 17,000 18,700 Debt of Foreign Subsidiaries................................ 2,137 3,987 -------- -------- 443,126 457,931 Less current portion........................................ 41,957 65,358 -------- -------- Long-term debt, less current portion........................ $401,169 $392,573 ======== ========
The Company has a syndicated senior secured loan facility ("Credit Agreement") providing a term loan ("Term Loan") and a $220,000 revolving credit facility ("Facility"), which is available for issuance of letters of credit. The Company also has an accounts receivable loan agreement ("Receivables Agreement"). At November 30, 2001, letters of credit totaling $36,449 were outstanding, which together with borrowings of $142,000 left the Company with $41,551 of borrowing capacity on the Facility. In connection with the Receivables Agreement, the Company sells its domestic trade receivables on an ongoing basis to a wholly-owned, consolidated subsidiary, Eagle-Picher Acceptance Corporation. The receivables are then used as security for loans made under a separate revolving credit facility providing up to $50,000. Availability under the Receivables Agreement is determined based on a formula of total receivables outstanding as of a certain date. As of November 30, 2001, total availability under the Receivables Agreement was $45,000, of which $14,250 was borrowed. The Receivables Agreement has a maturity of May 2002. Subsequent to fiscal year end 2001, the Company entered into an agreement with a major U.S. financial institution to sell an undivided interest in certain receivables of the company and certain of its domestic subsidiaries through an unconsolidated qualifying special purpose entity, Eagle-Picher Funding Corporation ("EPFC"). Proceeds from this new facility were used to payoff amounts outstanding under the Company's existing Receivables Agreement on the closing date and for other corporate purposes. The agreement involves the sale of receivables of the Company and certain of its domestic subsidiaries to EPFC, which in turn sells an undivided beneficial interest in a revolving pool of receivables to the financial institution. EPFC has no recourse to the Company and its subsidiaries for failure of the debtors to pay when due. The agreement provides for continuation of the program on a revolving basis for approximately a three-year period. The Facility and the Term Loan bear interest, at the Company's option, of an adjusted LIBOR rate plus 3% or the bank's prime rate plus 2%. There is a commitment fee on the Facility equal to 1/2% per annum on the undrawn portion of the Facility and fees for letters of credit are equal to 3% per annum. If the Company meets or fails to meet certain financial benchmarks, the interest rate spreads, commitment fees and fees for letters of credit may be reduced or increased, respectively. Loans outstanding under the Receivables Agreement are at 42 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) variable rates equal to market rates on commercial paper with fees of 1 1/4% on the maximum commitment amount. In 2001, the Company entered into three year interest rate swap agreements ("Swap Agreements") to manage its variable interest rate exposure. Per the terms of the Swap Agreements, the Company exchanges, at specified intervals, the difference between fixed and variable interest amounts based on a notional principal amount of $90,000. The Swap Agreements effectively fix the interest rate on $90,000 of the debt under the Credit Agreement at 5.678% plus the applicable spread for the duration of the interest rate swap. The difference between the amount of interest to be paid and the amount of interest to be received under the Swap Agreements due to changing interest rates is charged or credited to interest expense over the life of the agreements. As of November 30, 2001, the fair value of the Swap Agreements, which was determined using discounted cash flow analysis based on current rates offered for similar issues of debt, was a liability of approximately $4,760. As of November 30, 2001, $189,739 in debt was outstanding under the Credit Agreement, of which interest on $90,000 is essentially fixed by the Swap Agreements. Loans under the Receivables Agreement bear interest at a variable rate equal to market rates on commercial paper having a term similar to applicable interest periods. $113,989 of debt outstanding bears interest at variable rates under either the Credit Agreement or Receivables Agreement. Accordingly, the effect of a one percent increase in the applicable index rates would result in additional interest expense of approximately $1,140 annually, assuming no change in the level of borrowing. The Swap Agreements expire in December 2003. In addition to regularly scheduled payments on the Term Loan, the Company is required to make mandatory prepayments, of 50% 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 certain new debt issued and 50% of the net proceeds of any equity securities issued. No excess cash flow payment is due for the year ended November 30, 2001. The Credit Agreement is guaranteed by the Company and the United States subsidiaries of EPI. It is secured by the capital stock of EPI and the United States subsidiaries of EPI, up to 65% of the capital stock of certain foreign subsidiaries and substantially all other property of EPI and its United States subsidiaries. The Credit Agreement contains covenants which restrict or limit EPI'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, 2001. 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 had the option to 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 were 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. The Indenture for the Subordinated Notes contains covenants which restrict or limit EPI'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 Company is in compliance with these covenants at November 30, 2001. The Subordinated Notes are also guaranteed by the Company and the United States subsidiaries of EPI. Due to various financial covenant limitations under the Credit Agreement measured at the end of each quarter, on November 30, 2001, the Company could incur only an additional $14,200 of indebtedness as defined under the Credit Agreement. The Company believes that it will be in compliance with all of its debt covenants throughout 2002. However, any adverse changes in actual results from projections, along with the contractual tightening of the covenants under the Credit Agreement, which begins in the quarter ending May 31, 2002, would place the Company at risk of not being able to comply with all of the covenants of the Credit Agreement. In the event the Company cannot comply with the terms of the Credit Agreement as currently written, it would be 43 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) necessary for the Company to obtain a waiver or renegotiate its loan covenants, and there can be no assurance that such negotiations will be successful. Any agreements to amend the covenants would likely require a payment of a fee and increase in the interest rate payable by the Company on its debt under the Credit Agreement. The amount of such fee and increase in interest rate would be determined in the negotiations of the amendment. 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 $6,900 at November 30, 2001. At November 30, 2001, $2,137 of borrowings were outstanding leaving $4,751 in borrowing capacity. These agreements, which are unsecured, are either committed lines of credit expiring in 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 .35% to .5% per annum on the unused portion of the committed facilities. These agreements also contain covenants which include minimum financial requirements. Certain of the Company's foreign subsidiaries did not meet the minimum financial requirement covenant of one of these credit facilities as of November 30, 2001; however, the Company has received the necessary waiver from the lender. Long term debt had an estimated fair value of approximately $337,200 and $338,000 at November 30, 2001 and 2000, 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, net of amounts capitalized, of $38,419 in 2001, $43,589 in 2000 and $46,931 in 1999. Long-term debt is scheduled to mature over the next five years as follows: $41,957 in 2002, of which $14,250 is outstanding under the Receivables Agreement; $25,600 in 2003, $143,800 in 2004, and $11,800 in 2005. Lease Commitments Future minimum rental commitments over the next five years as of November 30, 2001 under noncancellable operating leases, which expire at various dates, are as follows: $2,925 in 2002, $2,461 in 2003, $2,087 in 2004, $1,800 in 2005 and $1,106 in 2006. Rental expense was approximately $5,700 in 2001, $4,800 in 2000 and $5,200 in 1999. G. SUPPLEMENTAL GUARANTOR INFORMATION (UNAUDITED) Both the Credit Agreement and the Subordinated Notes, which were issued by EPI, are guaranteed on a full, unconditional, and joint and several basis by the Company and certain of EPI's wholly-owned domestic subsidiaries ("Subsidiary Guarantors") including Eagle-Picher Acceptance Corporation and Carpenter Enterprises, Ltd. Management has determined that full financial statements and other disclosures concerning EPI or the Subsidiary 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 EPI, the Subsidiary Guarantors and the subsidiaries that did not guarantee the debt. EPI and the Subsidiary Guarantors are subject to restrictions on the payment of dividends under the terms of both the Credit Agreement and the Indenture supporting the subordinated notes. 44 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) YEAR ENDED NOVEMBER 30, 2001
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) NET SALES Customers.................. $ 47,892 $ -- $555,614 $ 88,944 $ -- $692,450 Intercompany............... 15,398 -- 15,185 (30,583) -- OPERATING COSTS AND EXPENSES: Cost of products sold...... 35,492 -- 481,374 72,410 (30,583) 558,693 Selling & administrative... 21,725 5 21,163 8,184 -- 51,077 Intercompany charges....... (6,329) -- 6,537 (208) -- -- Depreciation............... 3,752 -- 35,611 3,254 -- 42,617 Amortization of intangibles.............. 3,733 -- 11,279 1,478 -- 16,490 Other...................... 12,024 -- 7,375 (93) (11) 19,295 -------- -------- -------- -------- -------- -------- Total............... 70,397 5 563,339 85,025 (30,594) 688,172 -------- -------- -------- -------- -------- -------- OPERATING INCOME (LOSS)...... (7,107) (5) 7,460 3,919 11 4,278 OTHER INCOME (EXPENSE) Interest expense........... (11,227) -- (36,006) (586) 7,714 (40,105) Other income (expense)..... 1,069 -- 8,689 1,869 (7,714) 3,913 Equity in earnings of consolidated subsidiaries............. (15,145) (53,966) 2,183 -- 66,928 -- -------- -------- -------- -------- -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES.... (32,410) (53,971) (17,674) 5,202 66,939 (31,914) INCOME TAXES (BENEFIT)....... (12,689) -- (8) 2,681 -- (10,016) -------- -------- -------- -------- -------- -------- Income (Loss) from Continuing Operations................. (19,721) (53,971) (17,666) 2,521 66,939 (21,898) Discontinued Operations...... (32,073) -- -- -- -- (32,073) -------- -------- -------- -------- -------- -------- NET INCOME (LOSS)............ $(51,794) $(53,971) $(17,666) $ 2,521 $ 66,939 $(53,971) ======== ======== ======== ======== ======== ========
45 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEETS (UNAUDITED) AS OF NOVEMBER 30, 2001
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) ASSETS Cash and cash equivalents.... $ 17,145 $ 1 $ 471 $ 6,936 $ 67 $ 24,620 Receivables, net............. (12,668) -- 103,168 15,122 -- 105,622 Intercompany accounts receivable................. 46,674 -- 3,559 65 (50,298) -- Inventories.................. 4,129 -- 59,704 12,882 (1,371) 75,344 Net assets of discontinued operations................. 3,610 -- -- 5,954 (6,306) 3,258 Prepaid expenses............. 1,378 -- 6,152 2,887 (865) 9,552 Deferred income taxes........ 24,287 -- -- -- -- 24,287 -------- -------- -------- -------- --------- -------- Total current assets... 84,555 1 173,054 43,846 (58,773) 242,683 PROPERTY, PLANT & EQUIPMENT, net........................ 28,733 -- 157,653 30,401 (32) 216,755 Investment in Subsidiaries... 83,571 95,169 16,058 -- (194,798) -- EXCESS OF ACQUIRED NET ASSETS OVER COST, net............. 41,939 -- 120,969 19,994 (3,140) 179,762 OTHER ASSETS................. 73,049 -- 13,789 10,719 (10,846) 86,711 -------- -------- -------- -------- --------- -------- TOTAL ASSETS............... $311,847 $ 95,170 $481,523 $104,960 $(267,589) $725,911 ======== ======== ======== ======== ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Accounts payable............. $ 16,156 $ -- $ 62,171 $ 7,970 $ -- $ 86,297 Intercompany accounts payable.................... 76 -- 48 7,404 (7,528) -- Long-term debt -- current portion.................... 25,569 -- 14,250 9,430 (7,292) 41,957 Income taxes................. (283) -- -- 1,491 1 1,209 Other current liabilities.... 42,342 -- 26,363 3,111 -- 71,816 -------- -------- -------- -------- --------- -------- Total current liabilities......... 83,860 -- 102,832 29,406 (14,819) 201,279 LONG-TERM DEBT -- less current portion............ 401,169 -- 42,452 -- (42,452) 401,169 DEFERRED INCOME TAXES........ 9,362 -- -- -- (3,085) 6,277 OTHER LONG-TERM LIABILITIES................ 25,911 19 1,000 825 -- 27,755 -------- -------- -------- -------- --------- -------- TOTAL LIABILITIES...... 520,302 19 146,284 30,231 (60,356) 636,480 Intercompany Accounts........ (288,578) -- 262,878 35,782 (10,082) -- 11 3/4% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK...................... -- 123,086 -- -- -- 123,086 SHAREHOLDERS' EQUITY (DEFICIT).................. 80,123 (27,935) 72,361 38,947 (197,151) (33,655) -------- -------- -------- -------- --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT).............. $311,847 $ 95,170 $481,523 $104,960 $(267,589) $725,911 ======== ======== ======== ======== ========= ========
46 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED FINANCIAL INFORMATION SUPPLEMENTAL COMBINING STATEMENTS OF CASH FLOWS YEAR ENDED NOVEMBER 30, 2001
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss)......... $(51,794) $(53,971) $(17,666) $ 2,521 $66,939 $(53,971) Equity in earnings of consolidated subsidiaries............ 15,145 53,966 (2,183) -- (66,928) -- Depreciation and amortization............ 11,192 -- 46,890 4,732 -- 62,814 Provision for discontinued operations.............. 30,416 -- -- -- -- 30,416 Divestitures.............. 2,105 2,105 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Working capital and other................. 3,506 5 (3,737) (1,797) 28,129 26,106 -------- -------- -------- -------- ------- -------- Net cash provided by operating activities............ 10,570 -- 23,304 5,456 28,140 67,470 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...... (7,208) -- (16,469) (12,867) -- (36,544) Other..................... 26 -- 3,753 (4,026) -- (247) -------- -------- -------- -------- ------- -------- Net cash provided by (used in) investing activities............ (7,182) -- (12,716) (16,893) -- (36,791) CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt.................... (20,795) -- 20,186 -- (20,186) (20,795) Borrowings (repayments) on revolving credit agreement............... 36,340 -- (28,500) (1,611) -- 6,229 Other..................... (3,043) -- -- (239) -- (3,282) -------- -------- -------- -------- ------- -------- Net cash provided by (used in) financing activities............ 12,502 -- (8,314) (1,850) (20,186) (17,848) -------- -------- -------- -------- ------- -------- Net cash provided by discontinued operations............ 4,322 -- -- -- -- 4,322 -------- -------- -------- -------- ------- -------- Increase (decrease) in cash & cash equivalents........ 20,212 -- 2,274 (13,287) 7,954 17,153 Intercompany accounts....... (4,364) -- (2,342) 15,910 (9,204) -- CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD....... 1,297 1 539 4,313 1,317 7,467 -------- -------- -------- -------- ------- -------- CASH & CASH EQUIVALENTS, END OF PERIOD............. $ 17,145 $ 1 $ 471 $ 6,936 $ 67 $ 24,620 ======== ======== ======== ======== ======= ========
47 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) YEAR ENDED NOVEMBER 30, 2000
GUARANTORS NON-GUARANTORS --------------------------- FOREIGN EAGLE-PICHER SUBSIDIARY GUARANTORS ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) NET SALES Customers.................. $ 74,650 $ -- $577,908 $102,408 $ -- $754,966 Intercompany............... 16,470 -- 12,856 9,997 (39,323) -- OPERATING COSTS AND EXPENSES: Cost of products sold (exclusive of depreciation)............ 55,066 -- 481,662 96,168 (39,238) 593,658 Selling and administrative........... 25,628 9 24,144 9,874 (298) 59,357 Intercompany charges....... (11,370) -- 11,370 (298) 298 -- Management compensation -- special.................. 1,560 1,560 Depreciation............... 4,155 -- 32,998 4,160 -- 41,313 Insurance settlement....... (16,000) (16,000) Amortization of intangibles.............. 4,073 -- 10,642 1,398 -- 16,113 Divestitures............... 14,965 -- (3,870) (14,244) -- (3,149) Other...................... (36) -- (187) 6 43 (174) -------- -------- -------- -------- -------- -------- Total............... 78,041 9 556,759 97,064 (39,195) 692,678 -------- -------- -------- -------- -------- -------- OPERATING INCOME (LOSS)...... 13,079 (9) 34,005 15,341 (128) 62,288 OTHER INCOME (EXPENSE) Interest expense........... (16,311) -- (31,969) (4,027) 8,318 (43,989) Other income (expense)..... 1,247 -- 7,790 (623) (8,318) 96 Equity in earnings of consolidated subsidiaries............. 13,538 5,619 1,920 -- (21,077) -- -------- -------- -------- -------- -------- -------- INCOME (LOSS) BEFORE TAXES... 11,553 5,610 11,746 10,691 (21,205) 18,395 INCOME TAXES (BENEFIT)....... 2,082 -- 6,099 880 -- 9,061 -------- -------- -------- -------- -------- -------- Income (Loss) from Continuing Operations................. 9,471 5,610 5,647 9,811 (21,205) 9,334 Discontinued Operations...... (3,724) -- -- -- -- (3,724) -------- -------- -------- -------- -------- -------- NET INCOME (LOSS)............ $ 5,747 $ 5,610 $ 5,647 $ 9,811 $(21,205) $ 5,610 ======== ======== ======== ======== ======== ========
48 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEETS (UNAUDITED) AS OF NOVEMBER 30, 2000
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) ASSETS Cash and cash equivalents..... $ 1,297 $ 1 $ 539 $ 4,313 $ 1,317 $ 7,467 Receivables, net.............. 3,139 -- 84,004 17,732 -- 104,875 Intercompany accounts receivable.................. 22,266 -- 9,768 980 (33,014) -- Inventories................... 4,919 -- 67,299 12,630 (1,329) 83,519 Net assets of operations to be sold........................ 44,080 -- -- -- -- 44,080 Prepaid expenses.............. 906 -- 4,999 1,503 (267) 7,141 Deferred income taxes......... 12,860 -- -- -- -- 12,860 -------- -------- -------- -------- --------- -------- Total current assets.... 89,467 1 166,609 37,158 (33,293) 259,942 PROPERTY, PLANT & EQUIPMENT, net......................... 21,838 -- 181,898 22,311 (43) 226,004 Investment in Subsidiaries.... 124,495 151,302 12,377 -- (288,174) -- EXCESS OF ACQUIRED NET ASSETS OVER COST, net.............. 45,673 -- 131,637 21,404 (3,139) 195,575 OTHER ASSETS.................. 64,119 -- 17,799 14,374 (10,114) 86,178 -------- -------- -------- -------- --------- -------- TOTAL ASSETS............ $345,592 $151,303 $510,320 $ 95,247 $(334,763) $767,699 ======== ======== ======== ======== ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY ACCOUNTS PAYABLE.............. $ 10,987 $ -- $ 42,119 $ 4,759 $ -- $ 57,865 Intercompany accounts payable..................... 92 -- -- 9,327 (9,419) -- Long-term debt -- current portion..................... 20,795 -- 42,750 1,813 -- 65,358 Income taxes.................. 2,162 -- -- 520 -- 2,682 Other current liabilities..... 41,092 -- 22,046 2,364 (267) 65,235 -------- -------- -------- -------- --------- -------- Total current liabilities.......... 75,128 -- 106,915 18,783 (9,686) 191,140 LONG-TERM DEBT -- LESS CURRENT PORTION..................... 390,398 -- 22,266 2,175 (22,266) 392,573 DEFERRED INCOME TAXES......... 11,512 -- -- -- (1,234) 10,278 OTHER LONG-TERM LIABILITIES... 22,075 14 1,000 1,618 -- 24,707 -------- -------- -------- -------- --------- -------- TOTAL LIABILITIES....... 499,113 14 130,181 22,576 (33,186) 618,698 Intercompany Accounts......... (290,399) -- 290,081 36,777 (36,459) -- 11 3/4% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK....................... -- 109,804 -- -- -- 109,804 SHAREHOLDERS' EQUITY.......... 136,878 41,485 90,058 35,894 (265,118) 39,197 -------- -------- -------- -------- --------- -------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY.... $345,592 $151,303 $510,320 $ 95,247 $(334,763) $767,699 ======== ======== ======== ======== ========= ========
49 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS (UNAUDITED) YEAR ENDED NOVEMBER 30, 2000
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss).................... $ 5,747 $ 5,610 $ 5,647 $ 9,811 $(21,205) $ 5,610 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Equity in earnings (loss) of consolidated subsidiaries........ (13,538) (5,619) (1,920) -- 21,077 -- Depreciation and amortization...... 11,474 -- 43,640 5,558 -- 60,672 Divestitures....................... 14,965 -- (3,870) (14,244) -- (3,149) Changes in assets and liabilities, net of effect of acquisitions and divestitures..................... (22,043) 9 11,230 (17,558) 10,793 (17,569) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities.......... (3,395) -- 54,727 (16,433) 10,665 45,564 -------- -------- -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of divisions..... 47,002 -- 10,430 27,616 -- 85,048 Acquisition of divisions............. -- -- (12,306) -- -- (12,306) Capital expenditures................. (6,183) -- (30,320) (4,864) -- (41,367) Other................................ 6,871 -- 876 (2,871) (412) 4,464 -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities............. 47,690 -- (31,320) 19,881 (412) 35,839 -------- -------- -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt.......... (24,374) -- -- -- -- (24,374) Purchase of Treasury Stock........... (2,371) (2,371) Net borrowings (repayments) under revolving credit agreements........ (30,340) -- (21,000) (10,434) -- (61,774) Other................................ (51) -- -- -- -- (51) -------- -------- -------- -------- -------- -------- Net cash financing activities...... (57,136) -- (21,000) (10,434) -- (88,570) -------- -------- -------- -------- -------- -------- Net cash provided by discontinued operations........................... 4,563 -- -- -- -- 4,563 -------- -------- -------- -------- -------- -------- Increase (decrease) in cash and cash equivalents.......................... (8,278) -- 2,407 (6,986) 10,253 (2,604) Intercompany accounts.................. 5,511 -- (2,738) 6,211 (8,984) -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................... 4,064 1 870 5,088 48 10,071 -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD............................... $ 1,297 $ 1 $ 539 $ 4,313 $ 1,317 $ 7,467 ======== ======== ======== ======== ======== ========
50 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME (LOSS) (UNAUDITED) YEAR ENDED NOVEMBER 30, 1999
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) NET SALES TO CUSTOMERS....... $125,535 $ -- $582,723 $114,690 $ -- $822,948 Intercompany............... 12,619 -- 15,551 11,249 (39,419) -- OPERATING COSTS AND EXPENSES: Cost of products sold (exclusive of depreciation)............ 90,674 -- 482,892 110,331 (39,395) 644,502 Selling and administrative........... 33,765 5 22,701 11,599 (199) 67,871 Management compensation -- special.................. 556 -- -- -- -- 556 Impairment of net assets of operations to be sold.... 9,630 -- 1,635 10,142 -- 21,407 Intercompany charges....... (9,816) -- 9,817 (200) 199 -- Depreciation............... 5,897 -- 32,977 4,968 -- 43,842 Amortization of intangibles.............. 5,434 -- 10,420 971 -- 16,825 (Gain) loss on sale of assets................... (107) -- 109 28 -- 30 -------- -------- -------- -------- -------- -------- Total............... 136,033 5 560,551 137,839 (39,395) 795,033 -------- -------- -------- -------- -------- -------- OPERATING INCOME (LOSS)...... 2,121 (5) 37,723 (11,900) (24) 27,915 OTHER INCOME (EXPENSE) Interest expense........... (17,662) -- (24,709) (4,297) 1,193 (45,475) Other income (expense)..... 1,070 -- 3,596 87 (1,193) 3,560 Equity in earnings (loss) of consolidated subsidiaries............. (10,957) (17,587) 416 -- 28,128 -- -------- -------- -------- -------- -------- -------- INCOME (LOSS) BEFORE TAXES... (25,428) (17,592) 17,026 (16,110) 28,104 (14,000) INCOME TAXES (BENEFIT)....... (12,419) -- 9,679 2,194 -- (546) -------- -------- -------- -------- -------- -------- Income (Loss) from Continuing Operations................. (13,009) (17,592) 7,347 (18,304) 28,104 (13,454) Discontinued Operations...... (4,133) -- -- -- -- (4,133) -------- -------- -------- -------- -------- -------- NET INCOME (LOSS)............ $(17,142) $(17,592) $ 7,347 $(18,304) $ 28,104 $(17,587) ======== ======== ======== ======== ======== ========
51 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOWS (UNAUDITED) YEAR ENDED NOVEMBER 30, 1999
GUARANTORS --------------------------- NON-GUARANTORS EAGLE-PICHER SUBSIDIARY FOREIGN ISSUER HOLDINGS, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL -------- -------------- ---------- -------------- ------------ -------- (IN THOUSANDS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss)......... $(17,142) $(17,592) $ 7,347 $(18,304) $ 28,104 $(17,587) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Equity in earnings (loss) of consolidated subsidiaries............ 10,957 17,587 (416) -- (28,128) -- Depreciation and amortization............ 14,694 -- 43,607 5,939 -- 64,240 Impairment of net assets of operations to be sold.................... 9,630 -- 1,635 10,142 -- 21,407 Changes in assets and liabilities, net of effect of acquisitions and divestitures........ (20,966) 5 (23,676) (993) 13,065 (32,565) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities............ (2,827) -- 28,497 (3,216) 13,041 35,495 -------- -------- -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of division................ 12,400 -- -- -- -- 12,400 Acquisition of division... -- -- (60,251) -- -- (60,251) Capital expenditures...... (2,686) -- (31,986) (9,813) -- (44,485) Other..................... 2,312 -- 617 (1,589) (1,950) (610) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities............ 12,026 -- (91,620) (11,402) (1,950) (92,946) -------- -------- -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt.................... (140,776) -- -- -- -- (140,776) Borrowings(repayments)under revolving credit agreements.............. 116,175 -- 63,750 7,689 -- 187,614 Other..................... (54) -- (1,851) -- -- (1,905) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities............ (24,655) -- 61,899 7,689 -- 44,933 -------- -------- -------- -------- -------- -------- Net cash provided by discontinued operations............ 8,908 -- -- -- -- 8,908 -------- -------- -------- -------- -------- -------- Increase (decrease) in cash and cash equivalents............. (6,548) -- (1,224) (6,929) 11,091 (3,610) Intercompany accounts..... 3,148 -- 1,382 6,892 (11,422) -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....... 7,464 1 712 5,125 379 13,681 -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD............. $ 4,064 $ 1 $ 870 $ 5,088 $ 48 $ 10,071 ======== ======== ======== ======== ======== ========
52 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) H. 11 3/4% CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK The Company has 14,191 shares of 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock outstanding. The Preferred Stock had an initial liquidation preference at February 24, 1998 of $5,637.70 per share which accretes during the first five years after issuance at 11 3/4% per annum, compounded semiannually, ultimately reaching $10,000 per share on March 1, 2003. No dividends will accrue prior to March 1, 2003, but will be cumulative at 11 3/4% per annum thereafter. The Preferred Stock is mandatorily redeemable by the Company on March 1, 2008 or earlier under certain circumstances, but may be redeemed at the option of the Company, in whole or in part, at any time after February 28, 2003 at set redemption prices. At that time, the Company may also exchange all of the Preferred Stock for 11 3/4% Exchange Debentures with similar terms. The Company is required to offer to purchase the Preferred Stock should there be a change in control of the Company. Holders of Preferred Stock have no voting rights except in certain circumstances. The terms of the Preferred Stock contain covenants similar to the covenants in the Subordinated Notes. The Company is in compliance with these covenants as of November 30, 2001. The Preferred Stock had an estimated fair value of $21,300 at November 30, 2001. The estimated fair value was based on the market price as this is a publicly traded issue. I. COMMON STOCK On August 31, 2001, the Company adopted an amendment to its Amended and Restated Certificate of Incorporation to change its capital structure. Effective with this amendment, the total number of shares of common stock which the Company is authorized to issue is 1,000,000 shares, par value $0.01 per share (the "Common Stock"). The holders of shares of Common Stock are entitled to one vote per share on all matters which may be submitted to the holders of Common Stock of the Company. At the effective time of this amendment, each share of Class A Common Stock of the Company and each share of the Class B Common Stock of the Company outstanding immediately prior to the effective time changed into and was reclassified as one share of Common Stock of the Company. J. INCOME TAXES The sources of income (loss) from continuing operations before income taxes (benefit) are as follows:
2001 2000 1999 -------- ------- -------- United States......................................... $(39,337) $11,067 $(12,509) Foreign............................................... 7,423 7,328 (1,491) -------- ------- -------- $(31,914) $18,395 $(14,000) ======== ======= ========
53 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a summary of the components of income taxes (benefit) from continuing operations:
2001 2000 1999 -------- ------ ------ Current: Federal................................................ $ (5,066) $1,445 $4,300 Foreign................................................ 2,700 900 2,200 State and local........................................ (700) 60 100 -------- ------ ------ (3,066) 2,405 6,600 -------- ------ ------ Deferred: Federal................................................ (6,950) 6,916 (6,696) Other.................................................. -- (260) (450) -------- ------ ------ (6,950) 6,656 (7,146) -------- ------ ------ $(10,016) $9,061 $ (546) ======== ====== ======
The differences between the total income tax expense from operations and the income tax expense computed using the Federal income tax rate were as follows:
2001 2000 1999 -------- ------- ------- Income tax expense (benefit) at Federal statutory rate................................................. $(11,170) $ 6,438 $(4,900) Foreign taxes rate differential........................ -- (2,500) 1,300 State and local taxes, net of Federal benefit.......... (100) -- 100 Non-deductible amortization and other items relating to excess of acquired net assets over cost.............. 700 5,400 2,300 Other.................................................. 554 (277) 654 -------- ------- ------- Total income tax expense (benefit)..................... $(10,016) $ 9,061 $ (546) ======== ======= =======
54 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Components of deferred tax balances as of November 30 are as follows:
2001 2000 ------- ------- Current deferred tax assets attributable to: Accrued liabilities....................................... $15,442 $11,371 Reserve for discontinued operations and restructuring..... 14,210 -- Other..................................................... 1,135 1,489 ------- ------- Current deferred tax asset................................ 30,787 12,860 Valuation allowance....................................... (6,500) -- ------- ------- Current deferred tax asset, net of valuation allowance.... 24,287 12,860 ------- ------- Noncurrent deferred tax assets (liabilities) attributable to: Property, plant and equipment............................. (10,857) (10,808) Prepaid pension........................................... (19,137) (17,987) Net operating loss carryforwards.......................... 6,564 1,568 Alternative minimum tax credit carryforwards.............. 5,963 10,319 Amortization of intangibles............................... 5,879 2,334 Other..................................................... 5,311 4,296 ------- ------- Noncurrent deferred tax liability, net................. (6,277) (10,278) ------- ------- Net deferred tax asset................................. $18,010 $ 2,582 ======= =======
As of November 30, 2001 the Company has net operating loss carryforwards of $12,117 in the United States and $7,476 in the United Kingdom available to offset future taxable income. The United States net operating loss carryforwards will expire in 2021, however, the United Kingdom net operating loss carryforwards have no expiration date. The Company has alternative minimum tax credit carryforwards of $5,963 available to offset future tax liability, which do not have an expiration date. A tax election to treat the purchase of stock as a purchase of assets ("Election") was made in connection with the acquisition of EPI on February 24, 1998 establishing tax goodwill 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 $145,590 at November 30, 2001, 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 $12,370 at November 30, 2001. SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. At November 30, 2001, a valuation allowance of $6,500 was recorded against deferred tax assets relating to reversing deductible temporary differences arising from the loss on disposal of a business segment due to uncertainty as to the amount of taxable income that the Company would generate in future years. The Company received refunds (net of taxes paid) of $4,500 in 2001, and paid income taxes (net of refunds received) of $6,300 in 2000, $10,000 in 1999. 55 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) K. 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 981,583; 997,125 and 1,000,000 for the years ended November 30, 2001, 2000 and 1999, respectively. No potential common stock was outstanding during the three year period ended November 30, 2001. L. MANAGEMENT COMPENSATION -- SPECIAL Management compensation expense consisted of payments to former officers upon their separation from the Company. These payments aggregated $3,125 in 2001, $1,560 in 2000 and $556 in 1999. M. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS Substantially all employees of the Company and its subsidiaries are covered by various pension or profit sharing retirement plans, including a supplemental executive retirement plan to provide senior management with benefits in excess of normal pension benefits. 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. 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. Net periodic pension and postretirement benefit cost included the following components:
PENSION BENEFITS POSTRETIREMENT BENEFITS ------------------------------ ------------------------ 2001 2000 1999 2001 2000 1999 -------- -------- -------- ------ ------ ------ Service cost -- benefits earned during the period............... $ 4,790 $ 5,006 $ 5,659 $ 546 $ 519 $ 546 Interest cost on projected benefit obligations..................... 15,314 15,662 14,754 1,271 1,191 1,149 Expected return on plan assets.... (24,152) (23,831) (22,834) -- -- -- Net amortization and deferral..... 210 107 68 -- -- -- -------- -------- -------- ------ ------ ------ Net periodic cost (income)........ (3,838) (3,056) (2,353) $1,817 $1,710 $1,695 ====== ====== ====== Supplemental executive retirement plan............................ 552 (260) 1,298 Other retirement plans............ 1,131 1,228 1,125 -------- -------- -------- Total cost of (income from) providing retirement benefits................ $ (2,155) $ (2,088) $ 70 ======== ======== ========
In addition, in 2000, the Company recognized curtailment gains of $3,168 and $569 due to the reduction in active participants in the Company's pension plans and eligible employees in the Company's postretirement 56 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) plans, respectively, that resulted primarily from the divestiture of divisions. See also Note C for potential effects of restructuring on the pension plan. The pension plans' assets consist primarily of listed equity securities and publicly traded notes and bonds. The following tables set forth the plans' changes in benefit obligation, plan assets and funded status on the measurement dates, November 30, 2001 and 2000, and amounts recognized in the Company's Consolidated Balance Sheets as of those dates.
PENSION BENEFITS POSTRETIREMENT BENEFITS ------------------- ----------------------- 2001 2000 2001 2000 -------- -------- ---------- ---------- Change in Benefit Obligations: Benefit Obligation, beginning of year.............. $222,353 $213,740 $ 17,549 $ 16,444 Service cost....................................... 4,790 5,006 546 519 Interest cost...................................... 15,314 15,662 1,270 1,191 Amendments......................................... 644 1,096 -- -- Actuarial (gain)/loss.............................. (10,166) 3,418 (1,424) 1,549 Divestitures and other............................. 109 (3,444) -- (569) Plan participant's contributions................... -- -- 700 547 Benefits paid...................................... (13,228) (13,125) (2,132) (2,132) -------- -------- -------- -------- Benefit obligation, end of year.................... 219,816 222,353 16,509 17,549 -------- -------- -------- -------- Change in Plan Assets: Fair value of plan assets, beginning of year....... 267,410 270,592 -- -- Actual return on plan assets....................... 9,922 9,943 -- -- Employer contributions............................. -- -- 1,432 1,585 Plan participants' contributions................... -- -- 700 547 Benefits paid...................................... (13,228) (13,125) (2,132) (2,132) -------- -------- -------- -------- Fair value of plan assets, end of year............. 264,104 267,410 -- -- -------- -------- -------- -------- Funded status...................................... 44,288 45,057 (16,509) (17,549) Unrecognized actuarial (gain)/loss................. 8,052 4,485 (1,364) 60 Unrecognized prior service cost.................... 2,336 1,849 -- -- -------- -------- -------- -------- Net prepaid benefit cost (accrued benefit liability recognized)...................................... $ 54,676 $ 51,391 $(17,873) $(17,489) ======== ======== ======== ========
Weighted average assumptions as of November 30:
PENSION BENEFITS POSTRETIREMENT BENEFITS -------------------- ------------------------ 2001 2000 2001 2000 ------- ------- --------- --------- Discount rate...................................... 7.25% 7.25% 7.25% 7.25% Expected rate of return on plan assets............. 9.25% 9.00% N/A N/A Rate of compensation increase...................... 3.00% 4.20% N/A N/A
Postretirement benefit costs were estimated assuming retiree health care costs would initially increase at a 7% annual rate which decreases to an ultimate rate of 5.75% for 2004 and remain at that level thereafter. If this annual trend rate would increase by 1%, the accumulated postretirement obligation as of November 30, 2001 would increase by $1,443 with a corresponding increase of $209 in the postretirement benefit expense in 57 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2001. A 1% decrease in this annual trend rate would decrease the accumulated postretirement benefit obligation by $1,202 and the postretirement benefit expense by $170 in 2001. Changing the rate of compensation increase from 4.20% in 2000 to 3.00% in 2001 decreased the projected benefit obligation by approximately $4,500. The effect of the change in the ultimate health care trend rate from 5.75% to 5% and extending the assumption time to 2007 was to increase the projected benefit obligation for the other postretirement plans by $469 in 2001. 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 $2,082 in 2001, $2,047 in 2000 and $ 2,250 in 1999. 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 Company recognized income of $1,000 related to this plan in the fourth quarter of 2001 because the calculated value of the units at November 30, 2001 was below the base price. Expense related to the SAR Plan in 2000 was $635 and in 1999 was not material. N. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS 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. 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 Matters The Company has policies and procedures in place to ensure that its operations are conducted in keeping with good corporate citizenship and with a commitment to the protection of the environment. In addition, the Company is subject to extensive and evolving federal, state and local environmental laws and regulations. Compliance with such laws and regulations can be costly. Governmental authorities may enforce these laws and regulations with a variety of enforcement measures, including monetary penalties and remediation requirements. The Company is involved in various stages of investigation and remediation related to environmental remediation projects at a number of sites as a result of past and present operations, including currently-owned and formerly-owned plants. Also, the Company has received notice that it may have liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as a Potentially Responsible Party at a number of sites ("Superfund Sites"). In June 1996, the Bankruptcy Court approved a settlement agreement among EPI, the Environmental Protection Agency and the United States Department of Interior ("EPA Settlement Agreement"). 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 Site, or settles any claims for any Additional Sites, the Company is required to pay as if such claims had been resolved in the reorganization 58 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) under chapter 11 of the bankruptcy code. Thus, EPI's liability at any Additional Sites will be paid at approximately 37% of any amount due. All of the Superfund Sites where the Company is involved as a Potentially Responsible Party are Additional Sites under the EPA Settlement Agreement. The ultimate cost of site remediation is difficult to predict given the uncertainties regarding the extent of the required remediation, the interpretation of applicable laws and regulations and alternative remediation methods. Based on the Company's experience with environmental remediation matters, the Company has accrued an aggregate amount of $14,982 included in Other Accrued Liabilities. There can be no assurances that environmental laws and regulations will not become more stringent in the future or that the Company will not incur significant costs in the future to comply with such laws and regulations. Accordingly, future information and developments will require the Company to continually reassess the expected impact of these environmental matters. In 2000, EPI received $16,000 from insurance companies in settlement of certain claims relating primarily to environmental remediation. Other Litigation Claims On January 25, 1996, Richard Darrell Peoples, a former employee of EPI, 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 statue, allegedly on beheld of the U.S. Government. The U.S. Government has declined the opportunity to intervene or take control of this Qui Tam suit. EPI became aware of the suit on October 20, 1997, when it was served on EPI, after it had been unsealed. The suit involves allegations of irregularities in 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 EPI, 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. EPI, which believes that the U.S. Government did not incur any expense as a result of those matters, reported to the U.S. Government the employee's allegations and the results of outside counsel's investigations. The employee also initiated a different action against EPI 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 EPI'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 EPI's Motion to Dismiss the Amended Complains was denied on January 20, 1999. Since that time the case has been in a discovery phase. EPI filed a motion for sanctions, including dismissal of the lawsuit, which was denied by the court. EPI believes that the court erroneously believed that EPI's motion for sanctions related to an earlier discovery dispute that had been resolved. EPI has filed a motion for reconsideration of the denial of its motion for sanctions. If the lawsuit is not dismissed, EPI intends to contest this suit vigorously. EPI does not believe that resolution of this lawsuit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. On May 8, 1997, Caradon Doors and Windows, Inc. ("Caradon"), filed suit against the Company's wholly owned subsidiary, Eagle-Picher Industries, Inc. ("EPI") 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 an amount believed to be in excess of $10 million. In June 1997, EPI filed a Motion with the United States Bankruptcy Court for the Southern District of Ohio, Western Division, ("Bankruptcy Court") seeking an order enforcing EPI's plan of reorganization as confirmed by the Bankruptcy Court in November 1996 (the "Plan") 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 59 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) did violate the Plan 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 Bankruptcy Court held a hearing on this matter on September 24 and 25, 2001 and no decision has been rendered as of February 14, 2002. EPI intends to contest this suit vigorously. EPI does not believe that resolution of this suit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. On December 1, 1999, Eagle-Picher Technologies, LLC ("EPT") acquired the depleted zinc distribution business (the "DZ Business") of Isonics Corporation ("Isonics") for approximately $8.2 million, payable $6.7 million at closing and $1.5 million in three installments of $500,000 each payable on the first three anniversaries of the closing. At the time of the acquisition, a single customer represented approximately 55% of the DZ Business. Following the completion of the acquisition, this customer informed EPT that it would no longer be purchasing depleted zinc from an outside supplier. EPT initiated binding arbitration against Isonics on March 26, 2001 with the American Arbitration Association in Dallas, Texas pursuant to contractual dispute resolution procedures. EPT's arbitration demand is based on breach of representations and warranties in the purchase and sale agreement for the DZ Business as well as fraud and negligent misrepresentation, and seeks to recover damages in excess of $10 million and other remedies. While the Company believes it has a meritorious claim against Isonics, there can be no assurance that the Company will obtain any recovery as a result of this claim. In connection with the purchase of the DZ Business, EPT agreed to sell 200 kg of isotopically purified silicon-28 to Isonics. Due to various factors, EPT has not yet delivered any silicon-28 to Isonics. Isonics has asserted a counterclaim against EPT in the DZ Business arbitration described above for failure to deliver silicon-28, seeking damages in excess of $10 million. EPT believes that any obligation to deliver silicon-28 has been excused by, among other things, a force majeure clause in the purchase and sale agreement for the DZ Business. Contemporaneously with the purchase and sale of the DZ Business, EPT and Isonics entered into a supply agreement (the "Supply Agreement") pursuant to which EPT agreed that, commencing upon delivery of 200 kg of silicon-28, EPT would devote the capacity of a pilot plant used to produce such material to producing silicon-28 and sell all silicon-28 produced in such pilot plant and meeting certain specifications, as well as any silicon-29 or silicon-30 actually produced as a byproduct, to Isonics for a ten year term. Isonics amended its counterclaim in the DZ Business arbitration to assert a claim that the Supply Agreement requires EPT to produce a certain amount of silicon-28, silicon-29 and silicon-30 and alleging damages of not less than $75 million for anticipatory breach of such alleged obligation. EPT believes that the terms of the Supply Agreement and applicable law clearly establish that the Supply Agreement does not impose any obligation to produce any quantity of silicon-28, silicon-29 or silicon-30 and that Isonics' claims are without merit. Isonics also amended its counterclaim to allege that EPT's parent company, Eagle-Picher Industries, Inc. ("EPI") is liable for any damages of EPT under an "alter ego" theory, a claim which EPI and EPT believe is also without merit. EPT and EPI intend to assert other defenses as well and to defend this counterclaim vigorously. EPT continues to explore alternative processes that may enable it to produce silicon-28, but there is no assurance that such efforts will be successful. On September 25, 2001, Andries Ruijssenaars, former President and Chief Executive Officer of the Company, filed a lawsuit against the Company, certain of its directors and ABN AMRO Bank in the U.S. District Court for the Southern District of Ohio, Western Division, relating to the purchase of Mr. Ruijssenaar's common stock in the Company and his benefits under EPI's Supplemental Executive Retirement Plan (SERP). Mr. Ruijssenaars claims that the per share price for 2001 under the Company's Incentive Stock Plan, which is generally applicable to all Plan participants and results in approximately $2.8 million for Mr. Ruijssenaars' 30,000 shares of common stock, was not correctly determined and claims approximately $4.7 million for his shares. Mr. Ruijssenaars' lawsuit also challenges a rule adopted by the committee for the Plan deferring the obligation of the Company to repurchase stock in the event contracts to 60 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) which the Company is a party, including its debt agreements, restrict such repurchase. See "Incentive Stock Plan" under Item 11 below. Mr. Ruijssenaars' lawsuit also challenges EPI's determination of benefits under the SERP and claims that EPI is obligated to purchase an annuity for his additional SERP benefit accrued after 2000 based on theories of promissory estoppel, equitable estoppel, breach of contract and ERISA. Mr. Ruijssenaars has also asserted claims of fraud, conspiracy, breach of fiduciary duty and conversion. Mr. Ruijssenaars seeks approximately $2.3 million with respect to the SERP, as well as punitive damages. The Company intends to contest this suit vigorously. The Company does not believe that resolution of this lawsuit will have a material adverse effect on its financial condition, results of operations or cash flows. On October 30, 2001, GMAC Business Credit, LLC (GMAC) and Eagle Trim, Inc. filed a lawsuit in the United States District Court for the Eastern District of Michigan, Southern Division, against EPI arising out of the sale of EPI's former automotive interior trim division to Eagle Trim. In connection with that sale, EPI guaranteed to GMAC, which funded the acquisition, that approximately $3.9 million of receivables relating to tooling purchased by EPI on behalf of customers would be paid by November 2001. Eagle Trim ceased operations during 2001, at which time Eagle Trim and GMAC allege that approximately $2.7 million of the tooling receivables had not been collected and did not exist at the time of the sale. GMAC claims $2.7 million plus interest on the guaranty, and GMAC and Eagle Trim have asserted claims for fraud and misrepresentation and are seeking $24.5 million in damages. EPI is currently investigating these allegations, but denies any fraud or misrepresentation. EPI intends to contest this suit vigorously. EPI does not believe that resolution of this lawsuit will have a material adverse effect on EPI's financial condition, results of operations or cash flows. EPI is also involved in various other proceedings incidental to the ordinary conduct of its business. EPI believes that none of these other proceedings will have a material adverse effect on EPI's financial condition, results of operations or cash flows. Permanent Injunction and Final Bankruptcy Distribution The court order confirming EPI's plan of reorganization ("Confirmation Order") became effective on November 29, 1996. The Confirmation Order 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 EPI. Those claims are being channeled to the PI Trust, which is an independently administered qualified settlement trust which was established to resolve and satisfy those claims. The Plan also resulted in the discharge of pre-petition liabilities through the distribution of cash and securities to the PI Trust and the other creditors. A final distribution of approximately $10,900 was made to the PI Trust and all other eligible unsecured claimants in June 2001. O. RELATED PARTY TRANSACTIONS The Company has an advisory and consulting agreement with Granaria Holdings B.V. ("Granaria Holdings") pursuant to which the Company has paid Granaria Holdings an annual management fee of $1.75 million, plus out-of-pocket expenses. Fees and expenses relating to these services amounted to approximately $2.1 million in 2001, 2000 and 1999. At November 30, 2001 and 2000, $.6 million and $.5 million, respectively, relating to these fees and expenses were due Granaria Holdings. Granaria Holdings waived this fee for the first quarter of fiscal year 2001. P. INDUSTRY SEGMENT INFORMATION The Company is a diversified manufacturer serving global markets and many industries. The Company's reportable segments are strategic business units that operate in different industries and are managed separately. 61 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Automotive The operations in the Automotive Segment provide mechanical and structural parts and raw materials 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. Consolidated sales to the Honda Motor Company were $90,966 in 2001 and $98,200 in 2000. Consolidated sales to Ford Motor Company amounted to $137,800 in 1999. Consolidated sales to Ford Motor Company declined to $71,200 in 2000 due to in part its spin-off of Visteon Corporation and the Company's divestitures. Sales to Visteon were $47,000 in 2000. No other customer accounted for 10% or more of consolidated sales. Technologies The operations in the Technologies Segment produce special purpose batteries and components, high-purity specialty material compounds and rare metals, industrial chemicals, bulk pharmaceuticals and super-clean containers, which meet strict EPA protocols, for environmental sampling. It serves the commercial aerospace, nuclear, telecommunication electronics and other industrial markets globally. Some of these products are also used in defense applications. A $8,711 restructuring charge was recorded in the fourth quarter of 2001. See Note C. Machinery The operations in the Machinery Segment produce construction equipment for the construction industry in the United States and material handling equipment. This segment was sold effective December 14, 2001. See Note B, Acquisitions, Divestitures and Discontinued Operations. Minerals The Minerals Segment mines and refines diatomaceous earth products, which are used in high purity filtration applications, primarily by the food and beverage industry globally. These products are also used as industrial absorbents. Sales between segments were not material. United States net sales include export sales to non-affiliated customers of $50,100 in 2001, $75,300 in 2000 and $86,800 in 1999. 62 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company's continuing foreign operations are located primarily in Europe and 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:
UNITED TRANSFER SALES/ STATES FOREIGN ELIMINATIONS CONSOLIDATED -------- -------- --------------- ------------ YEAR ENDED NOVEMBER 30, 2001 Sales......................................... $633,189 $ 88,994 $(29,683) $692,450 ======== ======== ======== ======== Income (loss) from continuing operations before taxes................................ (31,925) 5,202 (5,191) (31,914) ======== ======== ======== ======== Identifiable assets........................... $690,161 $104,960 $(69,210) 725,911 ======== ======== ======== ======== YEAR ENDED NOVEMBER 30, 2000 Sales......................................... $681,203 $102,411 $(28,648) $754,966 ======== ======== ======== ======== Income (loss) from continuing operations before taxes................................ $ 10,588 $ 7,653 $ 154 $ 18,395 ======== ======== ======== ======== Identifiable assets........................... $744,000 $ 90,733 $(67,036) $767,699 ======== ======== ======== ======== YEAR ENDED NOVEMBER 30, 1999 Sales......................................... $735,357 $114,690 $(27,099) $822,948 ======== ======== ======== ======== Income (loss) from continuing operations before taxes................................ $(16,732) $(15,573) $ 18,305 $(14,000) -------- -------- -------- -------- Identifiable assets........................... $780,592 $ 83,307 $(29,952) $833,947 ======== ======== ======== ========
SEGMENT INFORMATION (In millions of dollars)
2001 2000 1999 2001 2000 1999 ------ ------ ------ ------ ------ ------ PRE-TAX INCOME (LOSS) FROM CONTINUING SALES OPERATIONS Automotive............. $427.3 $456.4 $433.8 Automotive............... $(10.6) $ 7.4 $ 10.9 Technologies........... 200.3 191.4 198.5 Technologies............. (13.5) (.4) 11.7 Minerals............... 65.7 65.1 61.7 Minerals................. 1.4 .3 (4.1) Divested Divisions..... -- 42.8 130.0 Divested Divisions....... (2.1) (1.1) (27.1) Corporate/ Corporate/ Intersegment......... (.8) (.7) (1.1) Intersegment............. (7.1) 12.2 (5.4) ------ ------ ------ ------ ------ ------ $692.5 $755.0 $822.9 $(31.9) $ 18.4 $(14.0) ====== ====== ====== ====== ====== ======
63 EAGLE-PICHER HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999 2001 2000 1999 ------ ------ ------ ------ ------ ------ DEPRECIATION AND AMORTIZATION CAPITAL EXPENDITURES Automotive............. $ 38.8 $ 34.7 $ 32.7 Automotive............... $ 28.0 $ 34.2 $ 26.7 Technologies........... 14.6 14.4 13.4 Technologies............. 5.5 3.3 6.3 Minerals............... 5.5 5.7 6.4 Minerals................. 2.6 2.1 2.8 Divested Divisions..... -- 2.4 8.0 Divested Divisions....... -- 1.4 8.4 Corporate/ Corporate/ Intersegment......... .2 .2 .2 Intersegment............. .4 .4 .3 ------ ------ ------ ------ ------ ------ $ 59.1 $ 57.4 $ 60.7 $ 36.5 $ 41.4 $ 44.5 ====== ====== ====== ====== ====== ====== INTEREST EXPENSE IDENTIFIABLE ASSETS Automotive............. $ 19.8 $ 18.8 $ 17.1 Automotive............... $334.4 $350.6 $350.1 Technologies........... 14.1 13.9 11.6 Technologies............. 206.0 222.7 210.3 Minerals............... 2.7 3.3 3.3 Minerals................. 52.0 54.8 58.4 Divested Divisions..... -- 2.1 5.0 Divested Divisions....... -- -- 64.2 Corporate/ Corporate/Intersegment/ Intersegment......... 3.5 5.9 8.5 Discontinued Operations.. 133.5 139.6 150.9 ------ ------ ------ ------ ------ ------ $ 40.1 $ 44.0 $ 45.5 $725.9 $767.7 $833.9 ====== ====== ====== ====== ====== ======
64 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........................ 52 Director, Chairman of the Board Daniel C. Wyler...................... 50 Director Dr. Wendelin Wiedeking............... 49 Director Dr. Paul G. Kaminski................. 59 Director Albert Iedema........................ 41 Director, Senior Vice President and Chief Financial Officer John H. Weber........................ 45 Director, President and Chief Executive Officer David G. Krall....................... 40 Senior Vice President, General Counsel and Secretary Jeffrey D. Sisson.................... 45 Senior Vice President of Human Resources Thomas R. Pilholski.................. 46 Senior Vice President and Chief Financial Officer (effective February 18, 2002) John F. Sullivan..................... 59 Vice President and Controller David N. Evans....................... 48 Vice President and Director of Taxes Tom B. Scherpenberg.................. 42 Treasurer
Mr. Joel P. Wyler has been a Director of the Company and Chairman of its Board since the Company was formed in December 1997. He also has been a Director and Chairman of the Board of EPI since 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 in January 1999. He has been the Chief Executive Officer of Granaria Holdings B.V. since 1989. Dr. Wiedeking was appointed as a Director 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. Dr. Kaminski was appointed as a Director in January 2001. He had previously served as a Director of EPI's wholly-owned subsidiary, Eagle-Picher Technologies, LLC from 1998 until December 2000. Dr. Kaminski has been Chairman and Chief Executive Officer of Technovation, Inc. since 1997. Mr. Iedema was appointed a Director in September 2001. He also has served as Senior Vice President and Chief Financial Officer of the Company in an interim capacity since October 2001, and will continue until Mr. Pilholski becomes the Chief Financial Officer effective February 18, 2002. Mr. Iedema has been Executive Vice President and Chief Financial Officer of Granaria Holdings B.V. since September 2000. Mr. Iedema had previously been employed as the Chief Financial Officer of SSM Coal B.V. in The Netherlands from 1996 until August 2000. Mr. Iedema is also a certified public accountant in The Netherlands. 65 Mr. Weber has been President and Chief Executive Officer and a Director since July 2001. Prior to coming to the Company, he had been with the Industrial Controls and Friction Materials Group of Honeywell International serving as President of that Group from July 2000 until July 2001, and serving as President of the Friction Materials Group from March 1999 until July 2000. Mr. Weber's previous business experience included serving as President of KN Energy Inc. from 1997 to 1998, and as President of Vickers Inc. from 1994 to 1997. Mr. Krall has been Senior Vice President, General Counsel and Secretary since November 2000. He had been Vice President, General Counsel and Secretary since he 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 1995. Mr. Sisson has been Senior Vice President of Human Resources since October 2001. Prior to coming to the Company, he had been Senior Director, Human Resources for Snap-On Incorporated from March 2000 until September 2001. Mr. Sisson's prior business experience included serving as Director of Human Resources and Director of Global Compensation for Whirlpool Corporation during the period from February 1998 until February 2000. Mr. Sisson was previously employed by UtilCorp United of Kansas City as Director of Compensation, and as Senior Employee Relations Consultant during the period from May 1995 until January 1998. Mr. Pilholski has been chosen to become Senior Vice President and Chief Financial Officer effective February 18, 2002. Prior to coming to the Company, he was employed by Honeywell Corporation (formerly Allied Signal Inc.) as a General Auditor from June 1998 until August 2001, and as Vice President-Chief Financial Officer for Honeywell Consumer Products Group from August 2001 until January 2002. Mr. Pilholski had previously been employed as Senior Vice President and Chief Financial Officer of Inamed Corporation from November 1997 until March 1998, and as Vice President and Chief Financial Officer of the Zimmer Orthopedic Implant Division of Zimmer, Inc., a subsidiary of Bristol-Myers Squibb Co. Mr. Pilholski is also a certified public accountant. Mr. Sullivan has been Vice President and Controller since October 2001. He had been Vice President-Chief Financial Officer for Honeywell Incorporated's Friction Materials division from 1999 until May 2001. Mr. Sullivan had previously been employed as Vice President-Operations Controller for KN Energy, Inc. from 1998 until 1999, and Vice President-Global Business Development and Control and Industrial Group Controller for Vickers, Incorporated during the period from 1994 until 1998. Mr. Evans has been Vice President and Director of Taxes since December 1998. He has been Director of Taxes since 1992. Mr. Evans joined EPI's Tax Department in 1984 as Manager, State and Local Taxes. Mr. Evans is also an attorney. Mr. Scherpenberg has been Treasurer since November 2000. Prior to coming to the Company, he had been with Provident Financial Group as Vice President of Credit Administration from February 2000 until November 2000, and as Vice President of Commercial Lending from September 1993 until May 1999. Mr. Scherpenberg also had been Chief Financial Officer of AEI Resources, a large coal producer, from May 1999 until November 1999. Mr. Joel P. Wyler and Mr. Daniel C. Wyler are brothers. 66 ITEM 11. EXECUTIVE COMPENSATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following Summary Compensation Table sets forth the compensation for the fiscal years indicated of (i) those persons who served as the Chief Executive Officer of the Company during fiscal 2001, (ii) the Company's three other executive officers at the end of fiscal 2001, and (iii) one additional individual who was among the Company's three most highly compensated executive officers but who was not serving as an executive officer of the Company at the end of fiscal 2001 (collectively, the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION FISCAL -------------------------------------------- YEAR OTHER ANNUAL ALL OTHER NAME AND PRINCIPAL POSITION ENDED SALARY($) BONUS($)(1) COMPENSATION($)(2) COMPENSATION($)(3) --------------------------- -------- --------- ----------- ------------------ ------------------ John H. Weber(4).............. 11/30/01 225,000 -- -- 4,182 President and Chief Executive Officer Andries Ruijssenaars(5)....... 11/30/01 198,610 -- -- 1,883,974 Former President and 11/30/00 575,000 -- 179,528 465,125 Chief Executive Officer 11/30/99 575,000 -- 448,812 697,814 Philip F. Schultz(6).......... 11/30/01 290,000 125,000 -- 306,644 Former Interim President 11/30/00 265,000 -- -- 903 And Chief Executive Officer 11/30/99 34,144 259,963 192,664 -- David G. Krall................ 11/30/01 221,666 115,000 -- 5,490 Senior Vice President, 11/30/00 200,000 -- -- 5,466 General Counsel and Secretary 11/30/99 185,000 75,000 -- 3,057 David N. Evans................ 11/30/01 155,000 60,000 -- 4,824 Vice President and 11/30/00 145,000 -- 4,376 69,765 Director of Taxes 11/30/99 135,000 35,000 5,002 22,119 Tom B. Scherpenberg(7)........ 11/30/01 125,000 40,000 -- 240 Treasurer 11/30/00 8,093 20,000 -- 20 Michael E. Aslanian(8)........ 11/30/01 215,346 150,000 -- 335,500 Former Senior Vice 11/30/00 290,000 -- 50,543 152,350 President -- Operations 11/30/99 280,000 130,000 34,108 87,005
- --------------- (1) Includes for Mr. Schultz in fiscal 1999, $220,588 representing the dollar value of a restricted stock award which was immediately vested. (2) 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 $50,000). For each fiscal year, the column is comprised of amounts for the payment of taxes on purchases of annuities under the Company's Supplemental Executive Retirement Plan (the "SERP") for participating Named Executive Officers. For fiscal 1999, the column also includes amounts for the payment of taxes on shares awarded under the Company's Incentive Stock Plan to Mr. Schultz. 67 (3) For fiscal 2001 this column includes the following amounts:
CONTRIBUTIONS TO VALUE OF EAGLE-PICHER PAID LIFE SEVERANCE SALARIED 401(K) INSURANCE PAYMENTS/ NAMED EXECUTIVE OFFICER PLAN($) PREMIUMS($) BENEFITS($) TOTAL($) ----------------------- ---------------- ----------- ----------- --------- John H. Weber....................... -- 120 -- 120 Andries Ruijssenaars................ 4,191 344 1,879,439 1,883,974 Philip F. Schultz................... 5,250 240 301,154 306,644 David G. Krall...................... 5,250 240 -- 5,490 David N. Evans...................... 4,650 174 -- 4,824 Tom B. Scherpenberg................. -- 240 -- 240 Michael E. Aslanian................. 5,140 360 330,000 335,500
Additionally, in fiscal 2001, the Company paid $4,062 in connection with temporary living expenses for Mr. Weber. (4) Mr. Weber was named President and Chief Executive Officer of the Company effective July 12, 2001. (5) Mr. Ruijssenaars resigned as President and Chief Executive Officer of the Company on March 28, 2001. (6) Mr. Schultz's employment with the Company ended on December 31, 2001. In addition to serving as Senior Vice President and Chief Financial Officer until October 8, 2001, he also served as Interim President and Chief Executive Officer from June 14, 2001 to July 12, 2001. (7) Mr. Scherpenberg was first employed by the Company on November 8, 2000. (8) Mr. Aslanian's employment with the Company ended on July 6, 2001. RETIREMENT BENEFITS The following table shows the estimated total combined annual benefits payable to the Named Executive Officers upon retirement at age 62 under Social Security, the Salaried Plan and the SERP, computed on the basis of a straight-life annuity: PENSION PLAN TABLE
YEARS OF SERVICE ----------------------------------------- REMUNERATION 10 15 20 25+ - ------------ -------- -------- -------- -------- $ 250,000 ..................................... $ 60,000 $ 90,000 $120,000 $150,000 300,000 ..................................... 72,000 108,000 144,000 180,000 350,000 ..................................... 84,000 126,000 168,000 210,000 400,000 ..................................... 96,000 144,000 192,000 240,000 450,000 ..................................... 108,000 162,000 216,000 270,000 500,000 ..................................... 120,000 180,000 240,000 300,000 550,000 ..................................... 132,000 198,000 264,000 330,000 600,000 ..................................... 144,000 216,000 288,000 360,000 650,000 ..................................... 156,000 234,000 312,000 390,000 700,000 ..................................... 168,000 252,000 336,000 420,000 750,000 ..................................... 180,000 270,000 360,000 450,000 800,000 ..................................... 192,000 288,000 384,000 480,000 850,000 ..................................... 204,000 306,000 408,000 510,000 900,000 ..................................... 216,000 324,000 432,000 540,000 950,000 ..................................... 228,000 342,000 456,000 570,000 1,000,000 ..................................... 240,000 360,000 480,000 600,000 1,050,000 ..................................... 252,000 378,000 504,000 630,000 1,100,000 ..................................... 264,000 396,000 528,000 660,000 1,150,000 ..................................... 276,000 414,000 552,000 690,000
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 68 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. These payments are reported in the Summary Compensation Table. "Covered compensation" for Messrs. Ruijssenaars and Aslanian for 2001 was $586,058 and $496,500 respectively. The estimated credited years of service for the Named Executive Officers at age 62 will be: John H. Weber............................................... 16 Andries Ruijssenaars........................................ 23(A) Philip F. Schultz........................................... --(B) David G. Krall.............................................. 25 David N. Evans.............................................. 31 Tom B. Scherpenberg......................................... 20 Michael E. Aslanian......................................... 26(A)
- --------------- (A) Represents final credited years of service for purposes of calculating benefits under the Retirement Plans for Mr. Ruijssenaars and Mr. Aslanian. (B) Mr. Schultz, at the time of his termination, was not vested in the Retirement Plans. COMPENSATION OF DIRECTORS Directors who are not employees of the Company receive an annual retainer of $50,000, payable quarterly, with no additional fees for attendance or committee membership, except for Dr. Wendelin Wiedeking who was issued 2,500 shares of Class A Common Stock in the Company in 1999 in lieu of the retainer, and except for Mr. Iedema, who was appointed without a retainer. Directors who are also employees of the Company receive no fees for their services as Directors. The Company has an Incentive Stock Plan for Outside Directors. Under the Plan, nonemployee directors of the Company who also are directors of EPI may be awarded shares of the Company's Class A Common Stock in lieu of directors' fees. The right to receive the shares is conditioned on the participant's execution of a shareholders' agreement which, among other things, governs the transferability of the shares, and a voting trust agreement under which the shares are held of record and voted by Granaria Holdings B.V. In connection with his becoming a director, Dr. Wendelin Wiedeking was awarded 2,500 shares as of April 12, 1999. All or a portion of the shares will be forfeited, in accordance with a declining scale of 20% per year, if Dr. Wiedeking leaves either Board prior to April 12, 2004. The forfeiture provisions terminate in the event of Dr. Wiedeking's death or incapacity or if a change of control occurs or an initial public offering is made. If Dr. Wiedeking is involuntarily removed from the Boards, other than for cause, EPI will reimburse him for his tax liability relating to any forfeited shares. Joel P. Wyler and Daniel C. Wyler, as named Directors of the Company and EPI, provide services on behalf of and pursuant to their employment by Granaria Holdings B.V. All directors' fees due as a result of their services as named Directors are paid to Granaria Holdings B.V. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 2001 the Compensation Committee of the Board of Directors of the Company was comprised of Joel P. Wyler, Chairman of Granaria Holdings B.V. and Chairman of the Company and EPI, Daniel C. Wyler, CEO of Granaria Holdings B.V., Dr. Wendelin Wiedeking, Chairman, President and CEO of Porsche AG and John Weber, President and Chief Executive Officer of the Company and EPI. 69 EMPLOYMENT AGREEMENTS; SEVERANCE Effective November 18, 1996, EPI adopted the Eagle-Picher Industries, Inc. Officer Severance Plan (the "Severance Plan"). Messrs. Krall, Evans and Scherpenberg are participants in the Severance Plan. Under the terms of the Severance Plan, if a participant is terminated by EPI other than for cause, he is entitled to: (a) a "supplemental severance" benefit equal to one year's base pay (at the then-current base salary), (b) a "base severance" benefit equal to one week's pay for each completed year of service with EPI, and (c) continued group medical and group life insurance benefits for the same period as set forth in (b). Benefits will not be paid if a participant voluntarily leaves the employ of EPI or remains employed by EPI following a change of control. If a participant is employed by another company while receiving benefits under this Plan, the base severance benefit will be reduced by all wages received from the new employer. Similarly, continued insurance benefits will be discontinued if comparable benefits are offered by the new employer. Mr. Weber has an Employment Agreement with EPI, which became effective on July 15, 2001, pursuant to which he has served as President and Chief Executive Officer of EPI since July 12, 2001. Under the agreement, Mr. Weber receives a base salary of $600,000 per year (which commenced July 15, 2001) and is entitled to an annual incentive bonus based on the achievement of agreed-upon objectives for the year. For the fiscal year ending November 30, 2002, Mr. Weber is guaranteed a bonus of at least 45% of his base salary. The agreement also entitles Mr. Weber to: (a) annual grants through September 22, 2004 of long-term cash bonuses which vest over time and will have exercise values dependent upon EPI's earnings before interest, taxes, depreciation and amortization (EBITDA), debt and outstanding preferred stock book value; (b) participate in all EPI pension, health, welfare and other benefit plans in effect for executives; (c) miscellaneous perquisites, including the use of an automobile (and a tax gross-up for related payments made by EPI), payment of club dues and payment of apartment rental expenses in Cincinnati, Ohio; and (d) a cash bonus if certain preferred stock of EPI currently held by an affiliated entity (the "SPV") is refinanced by a transfer to EPI or a third party for cash or other liquid assets, with the amount of the bonus being a percentage of the SPV's profit (as defined) from the transaction but not less than $2.5 million if the refinancing is completed at 100% of the face value of the shares; Mr. Weber's employment is terminable by EPI for "cause," by him for "good reason" (each as defined in the agreement), and by either party without cause or good reason on 90 days' written notice. If the Company terminates Mr. Weber's employment without cause, or he terminates his employment for good reason, Mr. Weber will be entitled to severance pay equal to 18 months of his then-current base salary, to 150% of his annual bonus for the preceding year and to a pro-rata portion of the prior year's annual bonus for the portion of the year in which employment terminates, as well as to continuation of his benefits and perquisites for the 18-month severance period. In addition, Mr. Weber will be entitled to a preferred stock financing bonus if a refinancing is completed during the severance period and to specified continuing rights to his long-term cash bonuses. Mr. Schultz served as an officer of EPI until October 8, 2001 and as an employee through December 31, 2001. In connection with his termination of employment, Mr. Schultz entered into a negotiated Separation Agreement with EPI under which he received severance pay equal to one year's salary ($290,000), one week's pay for each year of service ($11,154), group medical and life insurance coverage for up to one year and other miscellaneous benefits. In addition, in partial consideration for special assistance provided by Mr. Schultz on a financing transaction completed in January 2002, EPI purchased the 1,250 shares of Common Stock for a total of $255,575. 70 In connection with his resignation from employment on July 6, 2001, Mr. Aslanian entered into a Resignation Agreement with EPI under which he continues to receive his base salary of $330,000 for one year, as well as group medical and life insurance for up to a year. Mr. Aslanian also received title to his company car, and EPI purchased the 6,250 shares of Common Stock for a price of $587,875. Mr. Ruijssenaars resigned as President and Chief Executive Officer on March 28, 2001. Pursuant to an Executive Employment Agreement dated November 7, 2000, the Company paid Mr. Ruijssenaars $1,879,439 representing his base salary through July 3, 2004, when Mr. Ruijssenaars reaches age 62. INCENTIVE STOCK PLAN EPI has an Incentive Stock Plan pursuant to which restricted shares of the Company's Class A Common Stock have been and may be allocated to members of EPI's senior management. The right to receive the shares is conditioned on the participant's execution of a shareholders' agreement which, among other things, governs the transferability of the shares, and a voting trust agreement under which the shares are held of record and voted by Granaria Holdings B.V. However, shares awarded are beneficially owned by the recipient and generally are immediately vested. Under the terms of the Plan, EPI is obligated to reimburse Plan participants for any tax obligations associated with their receipt of the shares. The shareholders' agreement also gives participants the right to require EPI to purchase such participants' shares on, or for certain senior officers, within a five-year period following, termination of employment at a formula price. Such purchase would constitute a "Restricted Payment" as such term is defined in the Indenture (the "Indenture") for EPI's 9 3/8% Senior Subordinated Notes (the "Notes") and the terms of the Company's 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock (the "Preferred Stock"). Among the terms of the Indenture and the Preferred Stock, Restricted Payments cannot exceed 50% of the Company's cumulative consolidated net income from March 1, 1998 (plus the proceeds of certain securities issuances). The Company currently has a cumulative consolidated net loss since March 1, 1998. There is an exception from the limitations on Restricted Payments permitting the purchase of up to $5 million of Company common stock held by current or former directors, officers or employees. As of the date hereof, all of this exception has been used. Following his resignation, Mr. Ruijssenaars put his 30,000 shares of common stock to the Company. The Company believes that the formula price for these shares is approximately $2.8 million. In 2001, the committee for the Incentive Stock Plan adopted a rule postponing the Company's obligation to purchase stock if the terms of any agreement to which the Company was a party at that time prohibit such purchase. Mr. Ruijssenaars has filed a lawsuit against the Company challenging the price for his shares and the validity of the rule described above. See Item 3 -- Legal Proceedings above. If Mr. Ruijssenaars were to prevail, the Company could be required to seek a waiver from holders of the Notes and the Preferred Stock. 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 Company's Common Stock as of February 15, 2002, by each person known by the Company to own beneficially 5% or more of the outstanding shares of Common Stock, currently the Company's only voting security. In 2001, each of the Company's 625,001 outstanding shares of Class A Common Stock and 374,999 outstanding shares of 71 Class B (nonvoting) Common Stock were converted into one share of Common Stock (with full voting rights).
SHARES BENEFICIALLY OWNED ------------------------- NUMBER OF PERCENTAGE OF NAME SHARES SHARES ---- --------- ------------- Granaria Holdings B.V. ..................................... 709,501 70.95% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(1),(2),(3),(4) Joel P. Wyler............................................... 715,001 71.50% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(2),(3),(4),(5) Daniel C. Wyler............................................. 709,501 70.95% Lange Voorhout 16 P.O. Box 233 2501 CE The Hague The Netherlands(2),(3),(4) Lange Voorhout Investments B.V. ............................ 284,999 28.50% c/o ABN AMRO Participaties B.V. P.O. Box 283 [AA4140] Amsterdam 1000 EA The Netherlands
Granaria Holdings informed the Company that Dakruiter S.A., an entity owned by Granaria Holdings and Lange Voorhout Investments B.V., acquired in the second quarter of 2001 approximately 51.8% of the outstanding 11 3/4% Cumulative Redeemable Exchangeable Preferred Stock issued by EP Holdings. Granaria Holdings has also informed the Company that neither it nor any of its affiliates have purchased any 9 3/8% Senior Subordinated Notes issued by EPI. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth certain information as of February 15, 2002, regarding the ownership of the Company's Common Stock, currently the Company's only voting security and the only equity security held by the Company's directors or executive officers. All shares are subject both to a Voting Trust Agreement that allows all of the shares owned by the Company's management to be voted by Granaria Holdings B.V. and to a Shareholders Agreement that restricts their disposition.
SHARES BENEFICIALLY OWNED ------------------------- NUMBER OF PERCENTAGE OF NAME SHARES SHARES - ---- --------- ------------- Joel P. Wyler(2),(3),(4),(5)................................ 715,001 71.50% Daniel C. Wyler(2),(3),(4).................................. 709,501 70.95% David G. Krall(5)........................................... 5,500 * David N. Evans.............................................. 1,000 * All directors and executive officers as a group (seven persons).................................................. 715,001 71.50%
- --------------- (*) 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. 72 (2) Includes 525,001 shares held by Granaria Industries B.V., which is majority owned by Granaria Holdings B.V. (3) Includes 83,500 shares held by Granaria Holdings B.V. as voting trustee either for certain members of management or for the Company. (4) Includes 101,000 shares held by Dakruiter S.A., which is controlled by Granaria Holdings B.V. (5) Includes 5,500 shares held by the E-P Management Trust, of which Messrs. Joel P. Wyler and David G. Krall are trustees. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS The Company has an advisory and consulting agreement with Granaria Holdings B.V. ("Granaria Holdings") pursuant to which the Company has paid Granaria Holdings an annual management fee of $1.75 million plus out-of-pocket expenses. Fees and expenses relating to these services amounted to $2.1 million in 2001. At November 30, 2001, $.6 million relating to these fees and expenses is due Granaria Holdings. 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 used to acquire certain restricted stock of Granaria Industries B.V. which was later exchanged for common stock of the Company. Certain of the shares of the Company 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 $.0 million in 2001 for the restricted shares and related tax reimbursements. On December 28, 2001, in a negotiated transaction, EPI purchased the 1,250 shares of Class A Common Stock previously awarded to Mr. Krall under the Incentive Stock Plan for a price of $160,000. 73 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. ("EPI")()(1) 2.2 -- Exhibits to Third Amended Plan of Reorganization of EPI()(1) 3.1 -- Articles of Incorporation of EPI, as amended()(1) 3.2 -- Regulations of EPI()(1) 3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc. (the "Company")()(1) 3.4 -- Bylaws of the Company()(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 -- Restated Articles of Incorporation of EPMR Corporation (f/k/a Michigan Automotive Research Corporation)(8) 3.20 -- Bylaws of EPMR Corporation (f/k/a Michigan Automotive Research Corporation)(8) 3.21 -- Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on August 31, 2001(14) 3.22 -- Amended and Restated Bylaws of Daisy Parts, Inc. as of November 16, 2001 3.23 -- Amended and Restated Bylaws of Hillsdale Tool & Manufacturing Co. as of November 16, 2001 3.24 -- Amendment to the Bylaws of Eagle-Picher Minerals, Inc. as of November 16, 2001 4.1 -- Indenture, dated as of February 24, 1998, between EPI, the Company as a Guarantor, 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 EPI and the Trustee(1)
74 4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1)(1) 4.5 -- Certified Copy of the Certificate of Designations, Preferences and Rights of 11 3/4% Series A Cumulative Redeemable Exchangeable Preferred Stock and 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock of the Company(1) 4.6 -- Form of Certificate and Global Share of 11 3/4% Series A Cumulative Redeemable Exchangeable Preferred Stock and 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock (attached as Exhibit A to the Certificate of Designations filed as Exhibit 4.5)(1) 4.7 -- Form of Exchange Debentures Indenture relating to 11 3/4% Exchange Debentures due 2008 of the Company(1) 4.8 -- Cross Reference Table showing the location in the Exchange Debentures Indenture of the provisions of Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939(1) 4.9 -- Form of 11 3/4% Exchange Debenture due 2008 (attached as Exhibit A to the Exchange Debentures Indenture filed as Exhibit 4.7)(1) 9.1 -- Voting Trust Agreement dated November 16, 1998 with owners of Class A (Voting) Common Stock of the Company(4) 10.1 -- Merger Agreement, dated as of December 23, 1997, among EPI, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, the Company and E-P Acquisition, Inc.(1) 10.2 -- Amendment No. 1 to the Merger Agreement, dated as of February 23, 1998, among EPI, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, the Company and E-P Acquisition, Inc.(1) 10.3 -- Supplemental Executive Retirement Plan of EPI(2) 10.4 -- Notes Purchase Agreement, dated February 19, 1998, among E-P Acquisition, Inc., EPI, The Company, 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 EPI and the Subsidiary Guarantors(1) 10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, Inc., 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 EPI(1) 10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (merged with and into EPI), 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 EPI and the Agent(1) 10.10 -- Security Agreement, dated as of February 24, 1998, among EPI, the Agent and the Domestic Subsidiaries(1) 10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between the Company and the Agent(1) 10.12 -- Borrower and Subsidiary Pledge Agreement, dated as of February 24, 1998, among EPI, Eagle-Picher Development Company, Eagle-Picher Minerals, Inc. and the Agent(1) 10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by the Company, 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 EPI and the Agent(1) 10.16 -- Patent Collateral Agreement, dated February 24, 1998, between EPI and the Agent(1) 10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between EPI and the Agent(1)
75 10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc., EPI and the Domestic Subsidiaries(2) 10.19 -- Management Agreement dated as of February 24, 1998, between EPI 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 EPI, effective as of February 25, 1998(2) 10.22 -- Employment Agreements dated November 29, 1996, between EPI and each Named Executive Officer as defined in EPI'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 EPI and each Named Executive Officer as defined in EPI's Form S-4(2) 10.24 -- Sales Incentive Program of EPI(2) 10.25 -- Letter Agreements dated August 5, 1997, between EPI and each Named Executive Officer as defined in EPI's Form S-4 regarding Short Term Sale Program(2) 10.26 -- Letter Agreement dated September 12, 1997, between EPI and Carroll D. Curless regarding Sale Incentive Bonus(2) 10.27 -- Letter Agreements dated February 18, 1998, between EPI and each Named Executive Officer as defined in EPI'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) 10.29 -- Preferred Stock Purchase Agreement, dated February 19, 1998, between the Company and the initial purchasers(1) 10.30 -- Preferred Stock Registration Rights Agreement, dated as of February 24, 1998, between the Company and the initial purchasers(1) 10.31 -- Transfer Agency Agreement, dated as of February 24, 1998, between the Company and The Bank of New York, as Transfer Agent(2) 10.32 -- The Company Incentive Stock Plan for Outside Directors effective January 1, 1999(4) 10.33 -- Amended and Restated Incentive Stock Plan of EPI(4) 10.34 -- Second Amended and Restated Incentive Stock Plan of EPI(4) 10.35 -- Shareholders Agreement dated October 15, 1998, among Granaria Holdings B.V., Granaria Industries B.V., the Company and EPI(4) 10.36 -- Voting Trust Agreement dated as of November 16, 1998, by and among certain shareholders of the Company and Granaria Holdings B.V.(5) 10.37 -- Stock Purchase Agreement dated April 8, 1999, between Hillsdale Tool & Manufacturing Co., Charterhouse Automotive Group Inc. and the Shareholders of Charterhouse Automotive Group, Inc.(6) 10.38 -- Shareholders Agreement dated April 12, 1999, among Granaria Holdings B.V., the Company, EPI, and certain shareholders of the Company(5) 10.39 -- Voting Trust Agreement dated April 13, 1999, between certain shareholders of the Company and Granaria Holdings B.V. as voting trustee(5) 10.40 -- Amendment to Credit Agreement and Consent, dated as of May 18, 1999, among EPI, the lenders party thereto, ABN AMRO Bank N.V., as Agent, PNC Bank, National Association, as Documentation Agent, and NBD Bank, N.A., as Syndication Agent(5) 10.41 -- Receivables Loan Agreement dated as of May 18, 1999, among Eagle-Picher Acceptance Corporation, EPI, ABN AMRO Bank N.V., the Lender Agents, the Related Bank Lenders, Amsterdam Funding Corporation and the Other Conduit Lenders(5) 10.42 -- Receivables Purchase Agreement dated as of May 18, 1999, between EPI and Eagle-Picher Acceptance Corporation(5)
76 10.43 -- Receivables Purchase Agreement dated as of May 18, 1999, between Carpenter Enterprises Limited and Eagle-Picher Acceptance Corporation(5) 10.44 -- Receivables Purchase Agreement dated as of May 18, 1999, between Daisy Parts, Inc. and Eagle-Picher Acceptance Corporation(5) 10.45 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Development Company and Eagle-Picher Acceptance Corporation(5) 10.46 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Fluid Systems, Inc. and Eagle-Picher Acceptance Corporation(5) 10.47 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Minerals, Inc. and Eagle-Picher Acceptance Corporation(5) 10.48 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Technologies, LLC and Eagle-Picher Acceptance Corporation(5) 10.49 -- Receivables Purchase Agreement dated as of May 18, 1999, between Hillsdale Tool & Manufacturing Co. and Eagle-Picher Acceptance Corporation(5) 10.50 -- Receivables Purchase Agreement dated as of May 18, 1999, between Michigan Automotive Research Corporation and Eagle-Picher Acceptance Corporation(5) 10.51 -- Share Appreciation Plan of EPI(7) 10.52 -- Amendment to Credit Agreement and Consent dated as of August 1, 2000, among EPI, the lenders party thereto, ABN AMRO Bank N.V. as Agent, PNC Bank, National Association as Documentation Agent, and Bank One, Indiana, N.A. as Syndication Agent(9) 10.53 -- Resignation, Release and Severance Pay Agreement dated May 31, 2000 between EPI and Wayne R. Wickens(10) 10.54 -- Executive Employment Agreement dated November 7, 2000 between EPI and Andries Ruijssenaars(10) 10.55 -- Supplemental Executive Retirement Plan (as amended and restated effective March 27, 2001)(11) 10.56 -- Fourth Amendment to Credit Agreement and Consent dated as of May 31, 2001, among the Company, the lenders party hereto, ABN AMRO Bank N.V., as Agent, PNC Bank, National Association, as Documentation Agent and NBD Bank, N.A., as Syndication Agent(12) 10.57 -- Fifth Amendment to Receivables Loan Agreement dated as of June 29, 2001 among the Company, EPAC, Amsterdam Funding Corporation, as a Conduit Lender and as the administrative agent for the Lenders, ABN AMRO Bank N.V., as the Amsterdam Lender Agent, Market Street Funding Corporation, as a Conduit Lender, PNC Bank, National Association, as the Market Lender Agent and the Related Bank Lenders party hereto(12) 10.58 -- Resignation Agreement effective July 6, 2001 between EPI and Michael E. Aslanian(13) 10.59 -- Executive Employment Agreement effective July 15, 2001 between EPI and John H. Weber(14) 10.60 -- Separation Agreement effective November 1, 2001 between EPI and Philip F. Schultz 10.61 -- Supplemental Indenture among EPI, the Guarantors (Daisy Parts, Inc., Eagle-Picher Development Company, Inc., Eagle-Picher Holdings, Inc., Eagle-Picher Far East, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Technologies, LLC, Hillsdale Tool & Manufacturing Co., EPMR Corporation and Carpenter Enterprises Limited) and The Bank of New York, as Trustee, dated December 14, 2001. 10.62 -- Receivables Sales Agreement dated January 8, 2002 by and among Eagle-Picher Funding Corporation and each of the "Originators" defined therein which include EPI, Carpenter Enterprises Limited, Daisy Parts, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Technologies, LLC, and Hillsdale Tool & Manufacturing Co.
77 10.63 -- Receivables Sales and Servicing Agreement dated January 8, 2002 by and among Eagle-Picher Funding Corporation, Redwood Receivables Corporation, Eagle-Picher Industries, Inc. and General Electric Capital Corporation. 10.64 -- Annex X to Receivables Sales Agreement at Exhibit 10.62 and to Receivables Purchase and Servicing Agreement at Exhibit 10.63 -- "Definitions and Interpretations" 12.1 -- Ratios of Earnings to Fixed Charges and Preferred Stock Dividends 21.1 -- Subsidiaries of EPI 24(a),(b) -- Powers of Attorney
- --------------- (1) Incorporated by reference to the Company's Form S-4 Registration Statement No. 333-49957-01 filed on April 11, 1998. (2) Incorporated by reference to EPI's Amendment No. 1 to Form S-4 Registration Statement No. 333-49957 filed on May 20, 1998. (3) Incorporated by reference to EPI'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-K filed on March 1, 1999. (5) Incorporated by reference to the Company's Form 10-Q filed on June 30, 1999. (6) Incorporated by reference to the Company's Form 8-K filed on April 21, 1999. (7) Incorporated by reference to EPI's Form 10-Q filed on June 29, 1998. (8) Incorporated by reference to the Company's Form 10-Q filed on April 12, 2000. (9) Incorporated by reference to the Company's Form 10-Q filed on October 16, 2000. (10) Incorporated by reference to the Company's Form 10-K filed on February 28, 2001. (11) Incorporated by reference to the Company's Form 10-Q filed on April 10, 2001. (12) Incorporated by reference to the Company's Form 8-K filed on July 9, 2001. (13) Incorporated by reference to the Company's Form 10-Q filed on July 16, 2001. (14) Incorporated by reference to the Company's Form 10-Q filed on October 12, 2001. - --------------- (b)1. Reports on Form 8-K -- None filed in the Company's fourth quarter for the period covered by the report. 78 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 HOLDINGS, INC. By /s/ JOHN H. WEBER ------------------------------------ John H. Weber President and Chief Executive Officer Date: February 14, 2002 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/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, President, Chief Executive Officer and Director /s/ ALBERT IEDEMA Date: February 14, 2002 - -------------------------------------------------------- Albert Iedema, Senior Vice President, Chief Financial Officer and Director (Principal Financial Officer) /s/ JOHN F. SULLIVAN Date: February 14, 2002 - -------------------------------------------------------- John F. Sullivan, Vice President and Controller (Principal Accounting Officer) /s/ JOEL P. WYLER* Date: February 14, 2002 - -------------------------------------------------------- Joel P. Wyler, Director and Chairman of the Board /s/ DANIEL C. WYLER* Date: February 14, 2002 - -------------------------------------------------------- Daniel C. Wyler, Director *By /s/ DAVID G. KRALL ---------------------------------------------------- David G. Krall Attorney-in-Fact
79 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 INDUSTRIES, INC. By /s/ JOHN H. WEBER ------------------------------------ John H. Weber President and Chief Executive Officer Dated: February 14, 2002 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/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, President, Chief Executive Officer and Director (Principal Executive Officer) /s/ ALBERT IEDEMA Date: February 14, 2002 - -------------------------------------------------------- Albert Iedema, Senior Vice President, Chief Financial Officer and Director (Principal Financial Officer) /s/ JOHN F. SULLIVAN Date: February 14, 2002 - -------------------------------------------------------- John F. Sullivan, Vice President and Controller (Principal Accounting Officer) /s/ JOEL P. WYLER* Date: February 14, 2002 - -------------------------------------------------------- Joel P. Wyler, Director and Chairman of the Board /s/ DANIEL C. WYLER* Date: February 14, 2002 - -------------------------------------------------------- Daniel C. Wyler, Director *By /s/ DAVID G. KRALL ---------------------------------------------------- David G. Krall Attorney-in-Fact
80 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. By /s/ JOHN H. WEBER ------------------------------------ John H. Weber President (Principal Executive Officer) Dated: February 14, 2002 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/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, President and Sole Director (Principal Executive Officer) /s/ TOM B. SCHERPENBERG Date: February 14, 2002 - -------------------------------------------------------- Tom B. Scherpenberg, Treasurer (Principal Financial Officer) /s/ DAVID P. KELLEY Date: February 14, 2002 - -------------------------------------------------------- David P. Kelley, Vice President (Principal Accounting Officer)
81 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. By /s/ DAVID N. EVANS ------------------------------------ David N. Evans President (Principal Executive Officer) Dated: February 14, 2002 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/ DAVID N. EVANS Date: February 14, 2002 - -------------------------------------------------------- David N. Evans, President (Principal Executive Officer) /s/ TOM B. SCHERPENBERG Date: February 14, 2002 - -------------------------------------------------------- Tom B. Scherpenberg, Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, Sole Director
82 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. EPMR CORPORATION (f/k/a Michigan Automotive Research Corporation) By /s/ DAVID N. EVANS ------------------------------------ David N. Evans President (Principal Executive Officer) Dated: February 14, 2002 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, EPMR CORPORATION, AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ DAVID N. EVANS Date: February 14, 2002 - -------------------------------------------------------- David N. Evans, President (Principal Executive Officer) /s/ TOM B. SCHERPENBERG Date: February 14, 2002 - -------------------------------------------------------- Tom B. Scherpenberg, Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, Sole Director
83 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. By /s/ DAVID N. EVANS ------------------------------------ David N. Evans President (Principal Executive Officer) Dated: February 14, 2002 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/ DAVID N. EVANS Date: February 14, 2002 - -------------------------------------------------------- David N. Evans, President (Principal Executive Officer) /s/ TOM B. SCHERPENBERG Date: February 14, 2002 - -------------------------------------------------------- Tom B. Scherpenberg, Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, Sole 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. HILLSDALE TOOL & MANUFACTURING CO. By /s/ JOHN H. WEBER ------------------------------------ John H. Weber President (Principal Executive Officer) Dated: February 14, 2002 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/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, President and Sole Director (Principal Executive Officer) /s/ TOM B. SCHERPENBERG Date: February 14, 2002 - -------------------------------------------------------- Tom B. Scherpenberg, Treasurer (Principal Financial Officer) /s/ DAVID P. KELLEY Date: February 14, 2002 - -------------------------------------------------------- David P. Kelley, Vice President (Principal Accounting Officer)
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. EAGLE-PICHER MINERALS, INC. By /s/ JAMES L. LAURIA ------------------------------------ James L. Lauria President (Principal Executive Officer) Dated: February 14, 2002 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/ JAMES L. LAURIA Date: February 14, 2002 - -------------------------------------------------------- James L. Lauria, President (Principal Executive Officer) /s/ TOM B. SCHERPENBERG Date: February 14, 2002 - -------------------------------------------------------- Tom B. Scherpenberg, Treasurer (Principal Financial Officer) /s/ PAUL R. WONDER Date: February 14, 2002 - -------------------------------------------------------- Paul R. Wonder, Vice President (Principal Accounting Officer) /s/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, Sole 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 TECHNOLOGIES, LLC By /s/ GRANT T. HOLLETT ------------------------------------ Grant T. Hollett, President (Principal Executive Officer) Dated: February 14, 2002 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/ GRANT T. HOLLETT Date: February 14, 2002 - -------------------------------------------------------- Grant T. Hollett, President and Director (Principal Executive Officer) /s/ JOHN V. RUBERTO Date: February 14, 2002 - -------------------------------------------------------- John V. Ruberto, Executive Vice President and Director /s/ R. DOUGLAS WRIGHT Date: February 14, 2002 - -------------------------------------------------------- R. Douglas Wright, Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer) /s/ JOEL P. WYLER* Date: February 14, 2002 - -------------------------------------------------------- Joel P. Wyler, Director /s/ JOHN H. WEBER Date: February 14, 2002 - -------------------------------------------------------- John H. Weber, Director *By /s/ DAVID G. KRALL ---------------------------------------------------- David G. Krall Attorney-in-Fact
87 EXHIBIT INDEX
EXHIBIT NUMBER - ------- 2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. ("EPI")* 2.2 -- Exhibits to Third Amended Plan of Reorganization of EPI* 3.1 -- Articles of Incorporation of EPI, as amended* 3.2 -- Regulations of EPI* 3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc. (the "Company")* 3.4 -- Bylaws of the Company* 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 -- Restated Articles of Incorporation of EPMR Corporation (f/k/a Michigan Automotive Research Corporation)* 3.20 -- Bylaws of EPMR Corporation (f/k/a Michigan Automotive Research Corporation)* 3.21 -- Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delaware on August 31, 2001* 3.22 -- Amended and Restated Bylaws of Daisy Parts, Inc. as of November 16, 2001 3.23 -- Amended and Restated Bylaws of Hillsdale Tool & Manufacturing Co. as of November 16, 2001 3.24 -- Amendment to the Bylaws of Eagle-Picher Minerals, Inc. as of November 16, 2001 4.1 -- Indenture, dated as of February 24, 1998, between E-P Acquisition, Inc., the Company 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 EPI and the Trustee* 4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1)* 4.5 -- Certified Copy of the certificate of Designations, Preferences and Rights of 11 3/4% Series A Cumulative Redeemable Exchangeable Preferred Stock and 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock of the Company* 4.6 -- Form of Certificate and Global Share of 11 3/4% Series A Cumulative Redeemable Exchangeable Preferred Stock and 11 3/4% Series B Cumulative Redeemable Exchangeable Preferred Stock (attached as Exhibit A to the Certificate of Designations filed as Exhibit 4.5)*
88
EXHIBIT NUMBER - ------- 4.7 -- Form of Exchange Debentures Indenture relating to 11 3/4% Exchange Debentures due 2008 of Registrant* 4.8 -- Cross Reference Table showing the location in the Exchange Debentures Indenture of the provisions of Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939* 4.9 -- Form of 11 3/4% Exchange Debenture due 2008 (attached as Exhibit A to the Exchange Debentures Indenture filed as Exhibit 4.7)* 9.1 -- Voting Trust Agreement dated November 16, 1998, with owners of Class A (Voting) Common Stock of the Company* 10.1 -- Merger Agreement, dated as of December 23, 1997, among EPI, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, the Company and E-P Acquisition, Inc.* 10.2 -- Amendment No. 1 to the Merger Agreement, dated as of February 23, 1998, among EPI, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, the Company and E-P Acquisition, Inc.* 10.3 -- Supplemental Executive Retirement Plan of EPI* 10.4 -- Notes Purchase Agreement, dated February 19, 1998, among E-P Acquisition, Inc., EPI, the Company, SBC Warburg Dillon Read and ABN AMRO Incorporated* 10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24, 1998, between EPI and the Subsidiary Guarantors* 10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, Inc., SBC Warburg Dillon Read and ABN AMRO Incorporated* 10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24, 1998, of EPI* 10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (merged with and into EPI), 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 EPI and the Agent* 10.10 -- Security Agreement, dated as of February 24, 1998, among EPI, the Agent and the Domestic Subsidiaries* 10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between the Company and the Agent* 10.12 -- Borrower and Subsidiary Pledge Agreement, dated as of February 24, 1998, among EPI, Eagle-Picher Development Company, Eagle-Picher Minerals, Inc. and the Agent* 10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by the Company, 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 EPI and the Agent* 10.16 -- Patent Collateral Agreement, dated February 24, 1998, between EPI and the Agent* 10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between EPI and the Agent* 10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc., EPI and the Domestic Subsidiaries* 10.19 -- Management Agreement dated as of February 24, 1998, between EPI 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 EPI, effective as of February 25, 1998* 10.22 -- Employment Agreements dated November 29, 1996, between EPI and each Named Executive Officer as defined in EPI's Form S-4 filed in 1998, as amended (Messrs. Petry, Ruijssenaars, Hall, Wickens, Curless and Ralston)*
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EXHIBIT NUMBER - ------- 10.23 -- Amendments dated August 5, 1997 to Employment Agreements between EPI and each Named Executive Officer as defined in EPI's Form S-4* 10.24 -- Sales Incentive Program of EPI* 10.25 -- Letter Agreements dated August 5, 1997, between EPI and each Named Executive Officer as defined in EPI's Form S-4 regarding Short Term Sale Program* 10.26 -- Letter Agreement dated September 12, 1997, between EPI and Carroll D. Curless regarding Sale Incentive Bonus* 10.27 -- Letter Agreements dated February 18, 1998, between EPI and each Named Executive Officer as defined in EPI'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 -- Preferred Stock Purchase Agreement, dated February 19, 1998, between the Company and the initial purchasers* 10.30 -- Preferred Stock Registration Rights Agreement, dated as of February 24, 1998, between the Company and the initial purchasers* 10.31 -- Transfer Agency Agreement, dated as of February 24, 1998, between the Company and The Bank of New York, as Transfer Agent* 10.32 -- The Company Incentive Stock Plan for Outside Directors effective January 1, 1999* 10.33 -- Amended and Restated Incentive Stock Plan of EPI* 10.34 -- Second Amended and Restated Incentive Stock Plan of EPI* 10.35 -- Shareholders Agreement dated October 15, 1998, among Granaria Holdings B.V., Granaria Industries B.V., the Company, EPI* 10.36 -- Voting Trust Agreement dated as of November 16, 1998, by and among certain shareholders of the Company and Granaria Holdings B.V.* 10.37 -- Stock Purchase Agreement dated April 8, 1999, between Hillsdale Tool & Manufacturing Co., Charterhouse Automotive Group Inc. and the Shareholders of Charterhouse Automotive Group, Inc.* 10.38 -- Shareholders Agreement dated April 12, 1999, among Granaria Holdings B.V., the Company, EPI, and certain shareholders of the Company* 10.39 -- Voting Trust Agreement dated April 13, 1999, between certain shareholders of the Company and Granaria Holdings B.V. as voting trustee* 10.40 -- Amendment to Credit Agreement and Consent, dated as of May 18, 1999, among EPI, the lenders party thereto, ABN AMRO Bank N.V., as Agent, PNC Bank, National Association, as Documentation Agent, and NBD Bank, N.A., as Syndication Agent* 10.41 -- Receivables Loan Agreement dated as of May 18, 1999, among Eagle-Picher Acceptance Corporation, EPI, ABN AMRO Bank N.V., the Lender Agents, the Related Bank Lenders, Amsterdam Funding Corporation and the Other Conduit Lenders* 10.42 -- Receivables Purchase Agreement dated as of May 18, 1999, between EPI and Eagle-Picher Acceptance Corporation* 10.43 -- Receivables Purchase Agreement dated as of May 18, 1999, between Carpenter Enterprises Limited and Eagle-Picher Acceptance Corporation* 10.44 -- Receivables Purchase Agreement dated as of May 18, 1999, between Daisy Parts, Inc. and Eagle-Picher Acceptance Corporation* 10.45 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Development Company and Eagle-Picher Acceptance Corporation* 10.46 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Fluid Systems, Inc. and Eagle-Picher Acceptance Corporation* 10.47 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Minerals, Inc. and Eagle-Picher Acceptance Corporation* 10.48 -- Receivables Purchase Agreement dated as of May 18, 1999, between Eagle-Picher Technologies, LLC and Eagle-Picher Acceptance Corporation* 10.49 -- Receivables Purchase Agreement dated as of May 18, 1999, between Hillsdale Tool & Manufacturing Co. and Eagle-Picher Acceptance Corporation*
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EXHIBIT NUMBER - ------- 10.50 -- Receivables Purchase Agreement dated as of May 18, 1999, between Michigan Automotive Research Corporation and Eagle-Picher Acceptance Corporation* 10.51 -- Share Appreciation Plan of EPI* 10.52 -- Amendment to Credit Agreement and Consent dated as of August 1, 2000, among EPI, the lenders party thereto, ABN AMRO Bank N.V. as Agent, PNC Bank, National Association as Documentation Agent, and Bank One, Indiana, N.A. as Syndication Agent.* 10.53 -- Resignation, Release and Severance Pay Agreement dated May 31, 2000 between EPI and Wayne R. Wickens* 10.54 -- Executive Employment Agreement dated November 7, 2000 between EPI and Andries Ruijssenaars* 10.55 -- Supplemental Executive Retirement Plan (as amended and restated effective March 27, 2001).* 10.56 -- Fourth Amendment to Credit Agreement and Consent dated as of May 31, 2001, among the Company, the lenders party hereto, ABN AMRO Bank N.V., as Agent, PNC Bank, National Association, as Documentation Agent and NBD Bank, N.A., as Syndication Agent.* 10.57 -- Fifth Amendment to Receivables Loan Agreement dated as of June 29, 2001 among the Company, EPAC, Amsterdam Funding Corporation, as a Conduit Lender and as the administrative agent for the Lenders, ABN AMRO Bank N.V., as the Amsterdam Lender Agent, Market Street Funding Corporation, as a Conduit Lender, PNC Bank, National Association, as the Market Lender Agent and the Related Bank Lenders party hereto.* 10.58 -- Resignation Agreement effective July 6, 2001 between EPI and Michael E. Aslanian.* 10.59 -- Executive Employment Agreement effective July 15, 2001 between EPI and John H. Weber.* 10.60 -- Separation Agreement effective November 1, 2001 between EPI and Philip F. Schultz 10.61 -- Supplemental Indenture among EPI, the Guarantors (Daisy Parts, Inc., Eagle-Picher Development Company, Inc., Eagle-Picher Holdings, Inc., Eagle-Picher Far East, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Technologies, LLC, Hillsdale Tool & Manufacturing Co., EPMR Corporation and Carpenter Enterprises Limited) and The Bank of New York, as Trustee, dated December 14, 2001 10.62 -- Receivables Sales Agreement dated January 8, 2002 by and among Eagle-Picher Funding Corporation and each of the "Originators" defined therein which include EPI, Carpenter Enterprises Limited, Daisy Parts, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher Technologies, LLC, and Hillsdale Tool & Manufacturing Co. 10.63 -- Receivables Sales and Servicing Agreement dated January 8, 2002 by and among Eagle-Picher Funding Corporation, Redwood Receivables Corporation, Eagle-Picher Industries, Inc. and General Electric Capital Corporation 10.64 -- Annex X to Receivables Sales Agreement at Exhibit 10.62 and to Receivables Purchase and Servicing Agreement at Exhibit 10.63 -- "Definitions and Interpretations" 12.1 -- Ratio of Earnings to Fixed Charges and Preferred Stock Dividends 21.1 -- Subsidiaries of EPI 24(a),(b) -- Powers of Attorney
- --------------- * Incorporated by reference. See Item 14 above. 91 EX-3.22 3 l92796aex3-22.txt EXHIBIT 3.22 Ex 3.22 ACTION OF SOLE SHAREHOLDER WITHOUT A MEETING * * * * * * * * Eagle-Picher Industries, Inc., being the sole shareholder of Daisy Parts, Inc., a Michigan corporation ("the Corporation"), hereby amends and restates the Bylaws of the Corporation to provide as follows: BYLAWS ARTICLE 1 STOCK SECTION 1. CERTIFICATES OF SHARES. The Certificates for shares of the Capital Stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation of the Corporation, as shall be prepared or be approved by the Board of Directors. The Certificates shall be signed by the President or Vice President, and also by the Secretary. SECTION 2. TRANSFER OF SHARES. Shares of the Capital Stock of the Corporation shall be transferred by endorsement of the certificate representing said shares by the registered holder thereof or his attorney and surrender of the certificate to the Secretary for cancellation. Whereupon the Secretary shall issue to the transferee or transferees, as specified by the endorsement upon the surrendered certificate, a new certificate for a like number of shares. Transfers shall only be made upon the books of the Corporation upon said surrender and cancellation. Transfers shall entitle the transferee to all the privileges, rights and interests of a shareholder of the Corporation. SECTION 3. CLOSING THE STOCK BOOKS. The stock books shall be closed for the meeting of the shareholders, and for the payment of dividends during such period, not more than forty days nor less than ten days before the date of the shareholders' meeting, as from time to time may be determined by the Board of Directors, and during such period no stock shall be transferred upon said books. SECTION 4. LOST CERTIFICATES. In case of the loss of any certificate of shares of stock, upon affidavit by the registered holder or his representative of such loss, and subject to any additional requirement of the Board of Directors, the Secretary shall issue a duplicate certificate in its place, upon the Corporation's being fully indemnified therefor. 1 SECTION 5. DIVIDENDS. The Board of Directors, in its discretion from time to time, may declare dividends upon the Capital Stock from the surplus and net profits of the Corporation. SECTION 6. FISCAL YEAR. The fiscal year of the Corporation shall end on the 30th day of November in each year. SECTION 7. CORPORATE SEAL. The Corporation shall have no seal unless and until the Board of Directors adopts a seal in such form as the Board may designate or approve. ARTICLE 2 SHAREHOLDERS' MEETING SECTION 1. TIME, PLACE AND PURPOSE. Meetings of the shareholders of the Corporation shall be held annually at the registered office of the Corporation at 10:00 a.m. on the third (3rd) Tuesday of August of each year, if not a legal holiday, and if a legal holiday, then on the day following, for the purpose of electing directors, and for the transaction of such other business as may be brought before the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the President and Secretary, and shall be called by either of them at the request in writing or by vote of a majority of the Board of Directors, or at the request in writing by shareholders of record owning a majority in amount of the entire Capital Stock of the Corporation issued and outstanding. SECTION 3. NOTICE. Written notice of any shareholders' meeting shall be mailed to each shareholder at his last known address, as the same appears on the stock books of the Corporation, or otherwise, at least ten days prior to any meeting. Any notice of a special meeting shall indicate briefly the object or objects thereof. If all the shareholders waive notice of the meeting, no notice of the same shall be required; and whenever all the shareholders shall meet in person or by proxy, such meeting shall be valid for all purposes, without call or notice, and at such meeting any corporate action shall not be invalid for want of notice. SECTION 4. QUORUM. At any meeting of the shareholders, the holders of sixty percent of all the voting shares of the Capital Stock of the Corporation issued and outstanding, present in person or represented by proxy, shall constitute a quorum. Meetings at which less than a quorum is represented may, however, be adjourned from time to time to a future date by those who attend, without further notice other than the announcement at such meeting; and when a quorum shall be present upon any such adjourned day, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 5. VOTING. Each shareholder shall be entitled to one vote for each 2 share of voting stock standing registered in his or her name on the stock books of the Corporation, in person or by proxy duly appointed in writing and filed with the Secretary of the meeting, on all questions and elections. No proxy shall be voted after three years from its date unless said proxy provides for a longer period. SECTION 6. ORGANIZATION. The President shall call meetings of the shareholders to order and shall act as Chairman of such meetings, unless otherwise determined by the holders of a majority of all the shares of the Capital Stock issued and outstanding, present in person or by proxy. The Secretary of the Corporation shall act as Secretary of all meetings of the Corporation; but in the absence of the Secretary at any meeting of the shareholders or his inability to act as Secretary, the presiding officer may appoint any person to act as Secretary of the meeting. SECTION 7. INSPECTORS. Whenever any shareholder present at a meeting of shareholders shall request the appointment of inspectors, a majority of the shareholders present at such meeting and entitled to vote thereat shall appoint inspectors who need not be shareholders. If the right of any person to vote at such meeting shall be challenged, the inspectors of election shall determine such right. The inspectors shall receive and count the votes either upon an election or for the decision of any question and shall determine the result. A writing by the inspectors certifying any vote shall be prima facie evidence thereof. SECTION 8. NEW SHAREHOLDERS. Every person becoming a shareholder in the Corporation shall be deemed to assent to these Bylaws, and shall designate to the Secretary the address to which he desires that the notice herein required to be given may be sent; and all notices mailed to such addresses, with postage prepaid, shall be considered as duly given at the date of mailing. Any person failing to so designate his address shall be deemed to have waived notice of such meeting. SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the shareholders at any annual or special meeting may be taken by a writing signed by all of the shareholders indicating their unanimous consent. ARTICLE 3 DIRECTORS SECTION 1. DUTIES, NUMBER, CLASSIFICATION AND TERM OF OFFICE. The business and the property of the Corporation shall be managed and controlled by the Board of Directors. The number of Directors shall consist of one or more members, but such number may be changed from time to time by action of the shareholders. Directors shall hold office for a term of one year and until their successors are elected and qualified, or until their resignation or removal. SECTION 2. PLACE OF MEETING. The Directors may hold their meetings in such place or places within or without this State as a majority of the Board of Directors may from 3 time to time determine. SECTION 3. MEETINGS. Meetings of the Board of Directors may be called at any time by the President or Secretary, or by a majority of the Board of Directors. Directors shall be notified in writing, personally or by telephone of the time, place and purpose of all meetings of the Board at least three days prior to the meeting, except the regular meeting held immediately after the annual meeting of shareholders. Any Director shall, however, be deemed to have waived such notice by his attendance at any meeting. SECTION 4. QUORUM. A majority of the Board of Directors shall constitute a quorum for the transaction of business; and if at any meeting of the Board of Directors there be less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 5. VACANCIES. Vacancies in the Board of Directors shall be filled by the remaining members of the Board. A Director so elected to fill any vacancy shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose. SECTION 6. COMPENSATION. No Director shall receive any salary or compensation for his services as Director, unless otherwise especially ordered by the Board of Directors or by Bylaw. SECTION 7. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors at any regular, annual, or special meeting may be taken by the Directors by a writing signed by all of the Directors indicating their unanimous consent. ARTICLE 4 OFFICERS SECTION 1. The Board of Directors shall select a President, a Secretary and a Treasurer and may select one or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers, who shall be elected by the Board of Directors at their regular meeting held immediately after the adjournment of the regular annual shareholders' meeting. The term of office shall be for one year and/or until their successors are chosen. No one of such officers need be a director. Any two of the above offices, except those of President and Vice-President, may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. The Board of Directors may fix the salaries of the officers of the Corporation. SECTION 2. The Board of Directors may also appoint such other officers and agents as it may deem necessary for the transaction of the business of the Corporation. All officers and agents shall respectively have such authority and perform such duties in the management of the property and affairs of the Corporation as may be designated by the Board of Directors. Any officer or agent may be removed, or any vacancies filled, by the Board of Directors whenever in its 4 judgment the business interests of the Corporation will be served thereby. SECTION 3. The Board of Directors may secure the fidelity of any or all of such officers by bond or otherwise. ARTICLE 5 DUTIES OF OFFICERS SECTION 1. PRESIDENT. The President shall be the chief executive officer of the Corporation, and in the recess of the Board of Directors shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors to delegate any specific power to any other officer or officers of the Corporation, except such as may be by statute exclusively conferred upon the President. SECTION 2. VICE-PRESIDENT. In case the office of President shall become vacant by death, resignation, or otherwise, or in case of the absence of the President, or his disability to discharge the duties of his office, such duties shall, for the time being, devolve upon the Vice-President designated by the Board, who shall do and perform such other acts as the Board of Directors may, from time to time, authorize him to do. SECTION 3. TREASURER. The Treasurer shall have custody and keep account of all money, funds and property of the Corporation, unless otherwise determined by the Board of Directors, and he shall render such accounts and present such statements to the Directors and President as may be required of him. He shall deposit all funds of the Corporation which may come into his hands in such bank or banks as the Board of Directors may designate. He shall keep all bank accounts in the name of the Corporation and shall exhibit his books and accounts, at all reasonable times, to any Director of the Corporation upon application at the office of the Corporation during business hours. He shall pay out money as the business may require upon the order of the properly constituted officer or officers of the Corporation, taking proper vouchers therefor; provided, however, that the Board of Directors shall have the power by resolution to delegate any of the duties of the Treasurer to other officers, and to provide by what officers, if any, all bills, notes, checks, vouchers, orders or other instruments shall be countersigned. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. SECTION 4. SECRETARY. The Secretary of the Corporation shall keep the minutes of all the meetings of the shareholders and Board of Directors in books provided for that purpose. He shall attend to the giving and receiving of all notices of the Corporation. He shall have charge of the stock books and such other books and records as the Board of Directors may direct, all of which, shall at all reasonable times be open to the examination of any Director upon application at the office of Secretary. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. 5 ARTICLE 6 NOTICE NOTICE. Any notice required by statute or by these Bylaws to be given to the shareholders, to directors, or to any officer of the Corporation, shall be deemed to be sufficiently given by depositing the same in a post office box, in a sealed, post-paid wrapper, addressed to such shareholder, director, or officer at his last known address, and such notice shall be deemed to have been given at the time of such mailing. ARTICLE 7 AMENDMENTS The shareholders or the Board of Directors may alter, amend, add to or repeal these Bylaws by majority vote, or by a writing signed by all of the shareholders or all of the directors indicating their unanimous consent, including the fixing and altering of the Board of Directors; provided that the Board of Directors shall not make or alter any Bylaws fixing their qualifications, classification, or term of office. IN WITNESS WHEREOF, Eagle-Picher Industries, Inc. has caused this Action of Sole Shareholder Without a Meeting to be executed by a duly authorized officer this 16th day of November, 2001. EAGLE-PICHER INDUSTRIES, INC. By /s/ David G. Krall --------------------------------- David G. Krall, Senior Vice President, General Counsel and Secretary 6 EX-3.23 4 l92796aex3-23.txt EXHIBIT 3.23 Ex 3.23 ACTION OF SOLE SHAREHOLDER WITHOUT A MEETING * * * * * * * * Eagle-Picher Industries, Inc., being the sole shareholder of Hillsdale Tool & Manufacturing Co., a Michigan corporation ("the Corporation"), hereby amends and restates the Bylaws of the Corporation to provide as follows: BYLAWS ARTICLE 1 STOCK SECTION 1. CERTIFICATES OF SHARES. The Certificates for shares of the Capital Stock of the Corporation shall be in such form, not inconsistent with the Articles of Incorporation of the Corporation, as shall be prepared or be approved by the Board of Directors. The Certificates shall be signed by the President or Vice President, and also by the Secretary. SECTION 2. TRANSFER OF SHARES. Shares of the Capital Stock of the Corporation shall be transferred by endorsement of the certificate representing said shares by the registered holder thereof or his attorney and surrender of the certificate to the Secretary for cancellation. Whereupon the Secretary shall issue to the transferee or transferees, as specified by the endorsement upon the surrendered certificate, a new certificate for a like number of shares. Transfers shall only be made upon the books of the Corporation upon said surrender and cancellation. Transfers shall entitle the transferee to all the privileges, rights and interests of a shareholder of the Corporation. SECTION 3. CLOSING THE STOCK BOOKS. The stock books shall be closed for the meeting of the shareholders, and for the payment of dividends during such period, not more than forty days nor less than ten days before the date of the shareholders' meeting, as from time to time may be determined by the Board of Directors, and during such period no stock shall be transferred upon said books. SECTION 4. LOST CERTIFICATES. In case of the loss of any certificate of shares of stock, upon affidavit by the registered holder or his representative of such loss, and subject to any additional requirement of the Board of Directors, the Secretary shall issue a duplicate certificate in its place, upon the Corporation's being fully indemnified therefor. 1 SECTION 5. DIVIDENDS. The Board of Directors, in its discretion from time to time, may declare dividends upon the Capital Stock from the surplus and net profits of the Corporation. SECTION 6. FISCAL YEAR. The fiscal year of the Corporation shall end on the 30th day of November in each year. SECTION 7. CORPORATE SEAL. The Corporation shall have no seal unless and until the Board of Directors adopts a seal in such form as the Board may designate or approve. ARTICLE 2 SHAREHOLDERS' MEETING SECTION 1. TIME, PLACE AND PURPOSE. Meetings of the shareholders of the Corporation shall be held annually at the registered office of the Corporation at 10:00 a.m. on the third (3rd) Tuesday of August of each year, if not a legal holiday, and if a legal holiday, then on the day following, for the purpose of electing directors, and for the transaction of such other business as may be brought before the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the President and Secretary, and shall be called by either of them at the request in writing or by vote of a majority of the Board of Directors, or at the request in writing by shareholders of record owning a majority in amount of the entire Capital Stock of the Corporation issued and outstanding. SECTION 3. NOTICE. Written notice of any shareholders' meeting shall be mailed to each shareholder at his last known address, as the same appears on the stock books of the Corporation, or otherwise, at least ten days prior to any meeting. Any notice of a special meeting shall indicate briefly the object or objects thereof. If all the shareholders waive notice of the meeting, no notice of the same shall be required; and whenever all the shareholders shall meet in person or by proxy, such meeting shall be valid for all purposes, without call or notice, and at such meeting any corporate action shall not be invalid for want of notice. SECTION 4. QUORUM. At any meeting of the shareholders, the holders of sixty percent of all the voting shares of the Capital Stock of the Corporation issued and outstanding, present in person or represented by proxy, shall constitute a quorum. Meetings at which less than a quorum is represented may, however, be adjourned from time to time to a future date by those who attend, without further notice other than the announcement at such meeting; and when a quorum shall be present upon any such adjourned day, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 5. VOTING. Each shareholder shall be entitled to one vote for each 2 share of voting stock standing registered in his or her name on the stock books of the Corporation, in person or by proxy duly appointed in writing and filed with the Secretary of the meeting, on all questions and elections. No proxy shall be voted after three years from its date unless said proxy provides for a longer period. SECTION 6. ORGANIZATION. The President shall call meetings of the shareholders to order and shall act as Chairman of such meetings, unless otherwise determined by the holders of a majority of all the shares of the Capital Stock issued and outstanding, present in person or by proxy. The Secretary of the Corporation shall act as Secretary of all meetings of the Corporation; but in the absence of the Secretary at any meeting of the shareholders or his inability to act as Secretary, the presiding officer may appoint any person to act as Secretary of the meeting. SECTION 7. INSPECTORS. Whenever any shareholder present at a meeting of shareholders shall request the appointment of inspectors, a majority of the shareholders present at such meeting and entitled to vote thereat shall appoint inspectors who need not be shareholders. If the right of any person to vote at such meeting shall be challenged, the inspectors of election shall determine such right. The inspectors shall receive and count the votes either upon an election or for the decision of any question and shall determine the result. A writing by the inspectors certifying any vote shall be prima facie evidence thereof. SECTION 8. NEW SHAREHOLDERS. Every person becoming a shareholder in the Corporation shall be deemed to assent to these Bylaws, and shall designate to the Secretary the address to which he desires that the notice herein required to be given may be sent; and all notices mailed to such addresses, with postage prepaid, shall be considered as duly given at the date of mailing. Any person failing to so designate his address shall be deemed to have waived notice of such meeting. SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the shareholders at any annual or special meeting may be taken by a writing signed by all of the shareholders indicating their unanimous consent. ARTICLE 3 DIRECTORS SECTION 1. DUTIES, NUMBER, CLASSIFICATION AND TERM OF OFFICE. The business and the property of the Corporation shall be managed and controlled by the Board of Directors. The number of Directors shall consist of one or more members, but such number may be changed from time to time by action of the shareholders. Directors shall hold office for a term of one year and until their successors are elected and qualified, or until their resignation or removal. SECTION 2. PLACE OF MEETING. The Directors may hold their meetings in such place or places within or without this State as a majority of the Board of Directors may from 3 time to time determine. SECTION 3. MEETINGS. Meetings of the Board of Directors may be called at any time by the President or Secretary, or by a majority of the Board of Directors. Directors shall be notified in writing, personally or by telephone of the time, place and purpose of all meetings of the Board at least three days prior to the meeting, except the regular meeting held immediately after the annual meeting of shareholders. Any Director shall, however, be deemed to have waived such notice by his attendance at any meeting. SECTION 4. QUORUM. A majority of the Board of Directors shall constitute a quorum for the transaction of business; and if at any meeting of the Board of Directors there be less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 5. VACANCIES. Vacancies in the Board of Directors shall be filled by the remaining members of the Board. A Director so elected to fill any vacancy shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the stockholders or at any special meeting duly called for that purpose. SECTION 6. COMPENSATION. No Director shall receive any salary or compensation for his services as Director, unless otherwise especially ordered by the Board of Directors or by Bylaw. SECTION 7. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors at any regular, annual, or special meeting may be taken by the Directors by a writing signed by all of the Directors indicating their unanimous consent. ARTICLE 4 OFFICERS SECTION 1. The Board of Directors shall select a President, a Secretary and a Treasurer and may select one or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers, who shall be elected by the Board of Directors at their regular meeting held immediately after the adjournment of the regular annual shareholders' meeting. The term of office shall be for one year and/or until their successors are chosen. No one of such officers need be a director. Any two of the above offices, except those of President and Vice-President, may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity. The Board of Directors may fix the salaries of the officers of the Corporation. SECTION 2. The Board of Directors may also appoint such other officers and agents as it may deem necessary for the transaction of the business of the Corporation. All officers and agents shall respectively have such authority and perform such duties in the management of the property and affairs of the Corporation as may be designated by the Board of Directors. Any officer or agent may be removed, or any vacancies filled, by the Board of Directors whenever in its 4 judgment the business interests of the Corporation will be served thereby. SECTION 3. The Board of Directors may secure the fidelity of any or all of such officers by bond or otherwise. ARTICLE 5 DUTIES OF OFFICERS SECTION 1. PRESIDENT. The President shall be the chief executive officer of the Corporation, and in the recess of the Board of Directors shall have the general control and management of its business and affairs, subject, however, to the right of the Board of Directors to delegate any specific power to any other officer or officers of the Corporation, except such as may be by statute exclusively conferred upon the President. SECTION 2. VICE-PRESIDENT. In case the office of President shall become vacant by death, resignation, or otherwise, or in case of the absence of the President, or his disability to discharge the duties of his office, such duties shall, for the time being, devolve upon the Vice-President designated by the Board, who shall do and perform such other acts as the Board of Directors may, from time to time, authorize him to do. SECTION 3. TREASURER. The Treasurer shall have custody and keep account of all money, funds and property of the Corporation, unless otherwise determined by the Board of Directors, and he shall render such accounts and present such statements to the Directors and President as may be required of him. He shall deposit all funds of the Corporation which may come into his hands in such bank or banks as the Board of Directors may designate. He shall keep all bank accounts in the name of the Corporation and shall exhibit his books and accounts, at all reasonable times, to any Director of the Corporation upon application at the office of the Corporation during business hours. He shall pay out money as the business may require upon the order of the properly constituted officer or officers of the Corporation, taking proper vouchers therefor; provided, however, that the Board of Directors shall have the power by resolution to delegate any of the duties of the Treasurer to other officers, and to provide by what officers, if any, all bills, notes, checks, vouchers, orders or other instruments shall be countersigned. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. SECTION 4. SECRETARY. The Secretary of the Corporation shall keep the minutes of all the meetings of the shareholders and Board of Directors in books provided for that purpose. He shall attend to the giving and receiving of all notices of the Corporation. He shall have charge of the stock books and such other books and records as the Board of Directors may direct, all of which, shall at all reasonable times be open to the examination of any Director upon application at the office of Secretary. He shall perform, in addition, such other duties as may be delegated to him by the Board of Directors. 5 ARTICLE 6 NOTICE NOTICE. Any notice required by statute or by these Bylaws to be given to the shareholders, to directors, or to any officer of the Corporation, shall be deemed to be sufficiently given by depositing the same in a post office box, in a sealed, post-paid wrapper, addressed to such shareholder, director, or officer at his last known address, and such notice shall be deemed to have been given at the time of such mailing. ARTICLE 7 AMENDMENTS The shareholders or the Board of Directors may alter, amend, add to or repeal these Bylaws by majority vote, or by a writing signed by all of the shareholders or all of the directors indicating their unanimous consent, including the fixing and altering of the Board of Directors; provided that the Board of Directors shall not make or alter any Bylaws fixing their qualifications, classification, or term of office. IN WITNESS WHEREOF, Eagle-Picher Industries, Inc. has caused this Action of Sole Shareholder Without a Meeting to be executed by a duly authorized officer this 16th day of November, 2001. EAGLE-PICHER INDUSTRIES, INC. By /s/ David G. Krall --------------------------------- David G. Krall, Senior Vice President, General Counsel and Secretary 6 EX-3.24 5 l92796aex3-24.txt EXHIBIT 3.24 Exhibit 3.24 EAGLE-PICHER MINERALS, INC. ACTION OF SOLE SHAREHOLDER ***** Eagle-Picher Industries, Inc., being the sole shareholder of Eagle-Picher Minerals, Inc., a Nevada corporation (the "Corporation"), hereby consents to the adoption of the following resolution: RESOLVED, that the By-laws of the Corporation be, and they hereby are, amended as follows: ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be determined from time to time by the stockholders of the Corporation, but shall be no less than three (3), except that if all outstanding shares of all classes of capital stock of the Corporation are held of record by less than three (3) persons, the number of directors may be less than three (3) but not less than the number of stockholders of record. The directors shall be elected at the annual meeting of the stockholders, and except as provided in Section 2 of this article, each director elected shall hold office, until his successor is elected and qualified. Directors need not be stockholders. IN WITNESS WHEREOF, Eagle-Picher Industries, Inc., by its duly authorized officer, has signed this Action of Sole Shareholder effective the 16th day of November, 2001. EAGLE-PICHER INDUSTRIES, INC. /s/ David G. Krall ------------------------------------ David G. Krall Senior Vice President, General Counsel and Secretary EX-10.60 6 l92796aex10-60.txt EXHIBIT 10.60 Exhibit 10.60 SEPARATION AGREEMENT This Separation Agreement is entered into by and between Philip F. Schultz ("Employee") and Eagle-Picher Industries, Inc., an Ohio corporation ("Employer"). In exchange for the payments provided herein, the mutual undertakings, and other good and valuable consideration, the parties agree as follows: 1. Employee's employment with Employer shall terminate effective as of the later of (a) November 30, 2001, or (b) the earlier of (i) December 31, 2001, or (ii) the date of closing of the "Securitization Transaction" (as defined in Paragraph 3 below) (as the case may be, the "Separation Date"). Employer shall pay Employee at Employee's current rate of pay according to Employer's ordinary payroll practices for all wages due up to and including the Separation Date. Employer shall also compensate Employee for fifteen (15) unused vacation days as of the Separation Date. Employee's positions as an officer or director of Employer or any of its affiliates shall terminate effective October 8, 2001. 2. Employer shall pay or provide to Employee: a) SEVERANCE PAY. Employer shall pay to Employee, without setoff or deduction, the amount of $290,000 (the "Annual Salary Amount"), which Annual Salary Amount shall be paid as follows: i) If the Annual Salary Amount has not previously been paid in full, commencing on the day following the Separation Date and continuing until the Annual Salary Amount has been paid in full, Employer shall pay to Employee each month in accordance with Employer's normal payroll practices an amount equal to one-twelfth (1/12) of the Annual Salary Amount; ii) On or before the earlier of (x) March 1, 2002, or (y) the date of closing of the Securitization Transaction (as the case may be, the "Deferred Payment Date"), Employer shall pay to Employee in a lump sum the then unpaid balance of the Annual Salary Amount. As a material inducement to Employee to enter into this Agreement, Employer agrees and intends that the covenant of Employer to pay the Annual Salary Amount at the times and in the manner set forth in this Paragraph 2 (a) is an independent covenant, and Employer is and intends to be unconditionally obligated to pay the Annual Salary Amount without setoff or deduction and regardless of any breach of this Agreement by Employee or any other claims or defenses to payment Employer may have against Employee. b) SALARY CONTINUATION. Commencing on the day following the Separation Date and continuing for a period of fifty-two (52) consecutive weeks, Employer shall pay Employee the annual amount of $11,154, such amount to be paid in equal installments in accordance with Employer's normal payroll practices for the fifty-two (52) weeks following the Separation Date (the "Severance Period"). For avoidance of doubt, no bonuses will be due to Employee except as provided in Paragraph 3 below, and Employee shall have no obligations to Employer during the Severance Period and shall not be obligated to provide any services to Employer in connection with any payments during the Severance Period. c) MEDICAL BENEFITS. At Employer's sole cost (but subject to applicable co-pays and deductibles, which shall be the responsibility of Employee), Employer will provide 2 Employee and his immediate family with medical benefits under the Employer's Group Medical Plan until the earlier of (A) the last day of the Severance Period, or (B) if during the Severance Period Employee obtains employment with a new employer that offers Medical coverage for Employee and his family that does not exclude coverage for any pre-existing conditions (but regardless of any co-pay or contribution requirements for such medical coverage), the date Employee is eligible for such Medical coverage ("New Coverage"). Employee shall give Employer notice of New Coverage. While covered by the Employer's Group Medical Plan, Employee will also be entitled to participate in Employer's Dental Plan and Flex Plan. d) LIFE INSURANCE. Employee shall have basic coverage under Employer's Group Life Insurance Plan during the Severance Period. e) COMPANY CAR. Employer shall continue to insure and timely to pay all lease payments applicable to, and provide Employee the exclusive use of, Employee's leased company vehicle through the Deferred Payment Date. Employee intends to purchase such vehicle at the buy-out price available to Employer under the lease immediately following the Deferred Payment Date, and Employer shall cooperate with Employee to cause outright ownership of Employee's leased vehicle to be transferred to Employee in exchange for payment by Employee of the applicable buy-out price within thirty (30) days of the Deferred Payment Date. f) PERSONAL ELECTRONICS. On the Separation Date Employer shall be deemed to have transferred to Employee ownership of the Palm V (together with related software, chargers and modems) currently used by Employee and the cellular phone (including related phone number, cases and chargers) used by Employee. Employer and Employee 3 shall cooperate in the transfer of any related third party accounts as of the Separation Date. g) OUTPLACEMENT. Employer shall pay for outplacement services and career counseling at Drake Beam Morin (or a comparable facility selected by Employee), which services shall commence immediately and shall end on the last day of the Severance Period. h) RESTRICTED STOCK PURCHASE. Employer shall purchase from Employee for cash, and Employee shall sell to Employer or its designee, the 1,250 shares of Restricted Stock of Eagle-Picher Holdings, Inc. beneficially owned by Employee (the "Employee Stock Interest") for an aggregate purchase price of $139,575 (the "Down Payment") plus the "Contingent Payment" described in Paragraph 3 below. The Down Payment shall be paid by Employer to Employee, without setoff or deduction, on or before the Deferred Payment Date and the Contingent Payment shall be paid, if at all, in accordance with Paragraph 3 below. As a material inducement to Employee to enter into this Agreement, Employer agrees and intends that the covenant of Employer to pay the Down Payment at the times and in the manner set forth in this Paragraph 2 (h) is an independent covenant, and Employer is and intends to be unconditionally obligated to pay the Down Payment without setoff or deduction and regardless of any breach of this Agreement by Employee or any other claims or defenses to payment Employer may have against Employee. Employee acknowledges that this Agreement provides for payments and benefits not contemplated under the terms and conditions applicable to his employment. All lump sum and periodic payments and other benefits and distributions under this Agreement shall be subject to any withholding and employment taxes consistent with the character of the 4 payments in accordance with law. Employee shall pay the income tax costs for all payments and benefits under this Agreement. 3. SECURITIZATION AND INCENTIVE. Employer is attempting to obtain financing through the securitization of certain of the accounts receivable of Employer and its subsidiaries (the "Securitization Transaction"). Employer has requested Employee's continued assistance with the Securitization Transaction, which assistance Employee is willing to provide. In consideration of assistance provided by Employee in connection with the Securitization Transaction, Employer agrees that if the closing of the Securitization Transaction occurs on or before May 31, 2002, Employer shall pay to Employee the additional aggregate amount of $116,000 for the Employee Stock Interest (the "Contingent Payment") within ten (10) days after the closing of the Securitization Transaction. Employer further agrees that if Employer at any time prior to May 31, 2002 ceases to diligently and continuously pursue the Securitization Transaction to closing, Employer shall pay the Contingent Payment to Employee within ten (10) days after such cessation, but in any event on or before May 31, 2002. 4. Employee releases, holds harmless, and covenants not to sue or bring any charge or other claim against Employer and it affiliates and the officers, directors, shareholders, owners, employees and agents of Employer and its affiliates (collectively, the "Released Parties") in connection with any matter relating to, connected with, or arising out of his employment by Employer (other than personal injury) or the termination of that employment. Further, Employee expressly waives any rights under any Employer severance plan, or, except as expressly provided herein, any other Employer benefit plan. Specifically, but without limitation, Employee releases Employer and the Released Parties from, and agrees that he 5 will not bring any action against Employer or any of the Released Parties based on, any claim or denial of equal employment opportunity or discrimination in violation of any statute or regulation governing employment practices and specifically releases any such claim or action relating to age discrimination, including any claim under the federal Age Discrimination in Employment Act. Further, also without limitation, Employee agrees that he will not bring any action or other claim against Employer or any Released Party based on any theory of wrongful termination, intentional or negligent infliction of mental distress or other tort, breach of express or implied contract, or promissory estoppel. Any rights Employee is entitled to under his employment with Employer that are not specifically enumerated in this Agreement are canceled upon the Separation Date. This paragraph shall not preclude Employee from bringing an action to enforce the terms of this Agreement. 5. Employee will be entitled to benefits under the Eagle-Picher Salaried Pension Plan, the Eagle-Picher Supplemental Executive Retirement Plan ("SERP"), and the Eagle-Picher Salaried 401(k) Plan in accordance with the terms of those plans. Benefits under each of those plans will be calculated utilizing the Separation Date as the date of the Employee's termination of employment. Employee specifically acknowledges, agrees to and accepts the amendments to Employer's Supplemental Executive Retirement Plan made as of March 27, 2001. Employee specifically acknowledges, agrees to and accepts Rule No. 1 under the Second Amended and Restated Incentive Stock Plan of Eagle-Picher Industries, Inc. (the "Stock Plan") adopted by the Committee for the Stock Plan; provided, however, that the payments and benefits contemplated by this Agreement shall in no event be, or be deemed to be, prohibited, limited or otherwise restricted by such Rule, it being the intent and agreement of the parties that the negotiated payments and benefits provided for in this Agreement not be 6 the same as those contemplated under the terms and conditions applicable to Employee's employment with Employer. Employee also specifically acknowledges, agrees to and accepts the adjustments to the Agreed Share Price made by the Committee for the Plan on March 27, 2001 and agrees that the Agreed Share Price for shares of Restricted Stock under the Stock Plan shall be $94.06; provided, however, that the payments and benefits contemplated by this Agreement shall in no event be, or be deemed to be, prohibited, limited or otherwise restricted by such Rule, it being the intent and agreement of the parties that the negotiated payments and benefits provided for in this Agreement not be the same as those contemplated under the terms and conditions applicable to Employee's employment with Employer. 6. Employee shall hold all Confidential Information (as defined below) in strict confidence and not disclose any Confidential Information except as expressly provided herein and shall not use any Confidential Information for his own benefit or otherwise against the best interests of Employer. As used herein, "Confidential Information" shall mean any information regarding Employer and/or its affiliates (whether written, oral or otherwise), received or obtained before, on or after the date hereof, including without limitation any product design, specification or other technical information, manufacturing or other process information, financial information, customer information, general business information, or market information, WHETHER OR NOT marked or designated as "Confidential," "Proprietary" or the like, in any form, including electronic or optical data storage and retrieval mechanisms, and including all forms of communication, including but not limited to physical demonstrations, in-person conversations and telephone conversations, email and other means of information transfer such as facility tours, regardless of whether any such information is protected by applicable trade secret or similar laws. The term "Confidential Information" shall not include 7 information which: (i) is or becomes generally available to the public other than as a result of the disclosure by Employee or another person bound by a confidentiality agreement with, or other legal or fiduciary or other obligation of secrecy or confidentiality to, Employer or another party with respect to such information; or (ii) becomes available to Employee from a source other than Employer or any of its directors, officers, employees, agents, affiliates, representatives, or advisors, provided that such source is not bound by a confidentiality agreement with, or other legal or fiduciary or other obligation of secrecy or confidentiality to, Employer or another party with respect to such information. If Employee shall be required by subpoena or similar government order or other legal process ("Legal Process") to disclose any Confidential Information, then Employee shall provide Employer with prompt written notice of such requirement and cooperate if requested with Employer in efforts to resist disclosure or to obtain a protective order or similar remedy. Subject to the foregoing, if Confidential Information is required by Legal Process to be disclosed, then Employee may disclose such Confidential Information but shall not disclose any Confidential Information for a reasonable period of time, unless compelled under imminent threat of penalty, sanction, contempt citation or other violation of law, in order to allow Employer time to resist disclosure or to obtain a protective order or similar remedy. If Employee discloses any Confidential Information, then Employee shall disclose only that portion of the Confidential Information which, in the opinion of counsel, is required by such Legal Process to be disclosed. Employee represents and warrants to Employer that as of the date this Agreement becomes irrevocable, Employee will not have in his possession or in the possession of any of his family members any Confidential Information in tangible form (including electronic 8 computer files). Employee also agrees not to disparage Employer or any of its shareholders, directors, officers or employees and Employer agrees not to disparage Employee. 7. If Employee brings an action or other claim against Employer or any Released Party in violation of paragraph 5 or otherwise materially breaches this Agreement, in addition to any and all damages to which Employer or a Released Party may be entitled, all payments and benefits to Employee set forth in paragraph 2 above shall cease (excepting any benefit received in accordance with the requirements of C.O.B.R.A.). Employer shall give Employee notice of a claim that Employee has materially breached this Agreement and Employee shall have a period of thirty (30) days to cure such breach if it is capable of cure (provided that Employer may seek immediate injunctive relief for a breach or threatened breach of this Agreement). Employee acknowledges and agrees that in the event of any breach or threatened breach of this Agreement by Employee, then Employer shall be entitled to specific performance and injunctive relief as a remedy for any such breach or threatened breach hereof without necessity of posting bond or other security, the requirement for which is expressly waived. Employee agrees not to raise and hereby waives any defense to injunctive relief based on lack of irreparable harm or sufficiency of monetary damages. Such remedy shall not be deemed to be the exclusive remedy for any breach of this Agreement, but shall be in addition to all other remedies available to Employer at law or in equity. 8. Employee recognizes that the release and waiver provisions of this Agreement may surrender valuable legal rights. He acknowledges full awareness of the extinguishment of such rights in exchange for the consideration provided under this Agreement. Employee further acknowledges that he has been advised by Employer to consult an attorney with respect to this Agreement prior to executing it. Further, Employee acknowledges that he has been given 9 twenty-one (21) calendar days from initial presentation of this Agreement on October 12, 2001 in order to consult an attorney. 9. This Agreement shall be binding upon Employer as of the date of its execution and presentation by Employer if it is executed by the Employee within twenty-one (21) calendar days of presentation by Employer and not later rescinded as provided herein. If Employee does not execute this Agreement and deliver it to Employer within twenty-one (21) calendar days of presentation by Employer, it shall be voidable at the option of Employer. Employee, at his sole election and option, shall be entitled to rescind and withdraw from this Agreement without further obligation at anytime within seven (7) calendar days from the date Employee executes the Agreement. Employee shall evidence any withdrawal and rescission by giving written notice to Employer's Senior Vice President and General Counsel, 250 E. 5th Street, 5th Floor, Cincinnati, Ohio 45202, telecopy (513) 629-2571, with a written notice stating that Employee rescinds the Agreement and withdraws from it. If Employee has not given Employer such written notice on or before the expiration of such seven (7) calendar days from the date Employee executes the Agreement, this Agreement shall be irrevocable. The day on which such seven day period ends shall be referred to herein as the ("Effective Date"). Executed and presented as of the 1st day of November 2001. EAGLE-PICHER INDUSTRIES, INC. By: ---------------------------- Name: DAVID G. KRALL ---------------------------- Title: SENIOR VICE PRESIDENT ---------------------------- 10 Executed and agreed to this 1st day of November 2001. By: ------------------------ Philip F. Schultz 11 EX-10.61 7 l92796aex10-61.txt EXHIBIT 10.61 Exhibit 10.61 ================================================================================ SUPPLEMENTAL INDENTURE among EAGLE-PICHER INDUSTRIES INC., as successor to E-P Acquisition, Inc. and THE GUARANTORS PARTY HERETO and THE BANK OF NEW YORK, as Trustee Dated as of December 14, 2001 ----------------------- supplementing that certain INDENTURE dated as of February 24, 1998 securing 9-3/8% SENIOR SUBORDINATED NOTES DUE 2008 of E-P ACQUISITION, INC. ================================================================================ SUPPLEMENTAL INDENTURE ---------------------- THIS SUPPLEMENTAL INDENTURE, dated as of December 14, 2001, is entered into by and among EAGLE-PICHER INDUSTRIES, INC., an Ohio corporation, as successor to E-P Acquisition, Inc. (the "COMPANY"), the GUARANTORS party hereto and THE BANK OF NEW YORK, a New York banking corporation (the "TRUSTEE"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture dated as of February 24, 1998 (the "INDENTURE") among E-P Acquisition, Inc, the Guarantors named therein and the Trustee. W I T N E S S E T H: - - - - - - - - - -- WHEREAS, pursuant to the Indenture, the Company heretofore issued and currently has outstanding its 9-3/8% Senior Subordinated Notes due March 1, 2008 in the principal amount of $220,000,000 (the "NOTES"); WHEREAS, the scope and lack of clarity of certain of the defined terms in the Indenture, and the possibility of differing interpretations of such defined terms, could hinder the Company's flexibility to engage in the securitization of all or a portion of its accounts receivable through an asset securitization (the "A/R SECURITIZATION"), which the Company believes is an efficient method of financing its accounts receivables;; WHEREAS, the Company desires to amend the Indenture to clarify that the Company is permitted to engage in an A/R Securitization; WHEREAS, the Company has complied with the requirements of Article 9 of the Indenture with respect to the execution of this Supplemental Indenture, including obtaining the written consent of the Holders of at least a majority in aggregate principal amount of the Notes outstanding; WHEREAS, all acts and proceedings required by law to make this Supplemental Indenture in the form hereof a valid, binding and legal instrument, in accordance with its terms and for the purposes herein expressed, have been done and performed, and the execution and delivery hereof have been in all respects duly authorized; WHEREAS, this Supplemental Indenture shall, upon execution, become an effective, valid, binding and legal instrument, in accordance with its terms and for the purposes herein expressed; WHEREAS, in accordance with the terms of this Supplemental Indenture, the Indenture is being amended and restated to reflect the amendments set forth herein; NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Guarantors represent, covenant and agree with the Trustee, for the equal and proportionate benefit of the Holders of the Notes: -1- SECTION 1. AMENDMENTS TO INDENTURE. The Indenture is hereby amended as follows: (a) The following definitions contained in Section 1.1 of the Indenture are hereby amended and restated in their entirety as follows: "ASSET SALE" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition to any Person other than the Company or any of its Restricted Subsidiaries (including, without limitation, by means of a Sale and Leaseback Transaction or a merger or consolidation)(collectively, for purposes of this definition, a "transfer"), directly or indirectly, in one transaction or a series of related transactions, of (a) any Capital Stock of any Subsidiary or (b) any other properties or assets of the Company or any of its Subsidiaries other than transfers of cash, Cash Equivalents, accounts receivable, inventory or other properties or assets in the ordinary course of business or transfers in connection with the securitization or financing of accounts receivable or other property or assets. For the purposes of this definition, the term "Asset Sale" shall not include any of the following: (i) any transfer of properties or assets (including Capital Stock) that is governed by, and made in accordance with, the provisions of Article 5; (ii) any transfer of properties or assets to an Unrestricted Subsidiary, if permitted under Section 4.05 or to a special purpose Affiliate or an Unrestricted Subsidiary as part of a securitization of the Company's or a Restricted Subsidiary's accounts receivable or other property; (iii) sales of damaged, worn-out or obsolete equipment or assets that, in the Company's reasonable judgment, are either no longer used or useful in the business of the Company or its Subsidiaries, provided that the proceeds thereof are used to purchase replacement or similar assets for use in the business of the Company and its Subsidiaries; and (iv) any transfers that, but for this clause (iv), would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the properties or assets transferred in such transaction or any such series of related transactions does not exceed $500,000. "INDEBTEDNESS" of any Person at any date means, without duplication: (i) all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof); (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto); (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except that any deferred purchase price to be paid to the Company or any Restricted Subsidiary by any special purpose Affiliate or an Unrestricted Subsidiary or other third party in connection with the transfer of the Company's or such Restricted Subsidiary's accounts receivable or other property in an asset securitization shall not be considered Indebtedness and except trade payables and accrued expenses incurred by such Person in the ordinary course of business in -2- connection with obtaining goods, materials or services, which payable is not overdue by more than 60 days according to the original terms of sale unless such payable is being contested in good faith; (v) the maximum fixed redemption or repurchase price of all Disqualified Capital Stock of such Person; (vi) all Capitalized Lease Obligations of such Person; (vii) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; (viii) all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Company or its Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Company and its Subsidiaries on a consolidated basis; (ix) all Attributable Indebtedness; and (x) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (vii), the lesser of (A) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (B) the amount of the Indebtedness secured. For purposes of the preceding sentence, the "maximum fixed redemption or repurchase price" of any Disqualified Capital Stock that does not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased or redeemed on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock (or any equity security for which it may be exchanged or converted), such fair market value shall be determined in good faith by the Board of Directors of such Person, which determination shall be evidenced by a Board Resolution. "INVESTMENTS" of any Person means (i) all investments by such Person in any other Person in the form of loans, advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business and excluding the deferred purchase price to be paid to the Company or any Restricted Subsidiary by any special purpose Affiliate including an Unrestricted Subsidiary or other third party in connection with the transfer of the Company's or such Restricted Subsidiary's accounts receivable or other property in an asset securitization) or similar credit extensions constituting Indebtedness of such Person, and any guarantee of Indebtedness of any other Person, (ii) all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Capital Stock or other securities of any other Person and (iii) all other items that would be classified as investments (including without limitation purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. -3- "LIEN" means, with respect to any asset or property, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset or property, whether or not filed, recorded or otherwise perfected under applicable law, including without limitation any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases or filings of any financing statement under the Uniform Commercial Code to evidence the transfer of accounts receivable or other property to a special purpose Affiliate or an Unrestricted Subsidiary in an asset securitization). (b) Section 4.16(a) of the Indenture is hereby amended and restated in its entirety as follows: SECTION 4.16. Limitations on Asset Sales. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale (evidenced by the delivery by the Company to the Trustee of an Officers' Certificate certifying that such Asset Sale complies with this clause (i)), (ii) immediately before and immediately giving effect to such Asset Sale, no Default or Event of Default shall have occurred and be continuing, and (iii) at least 80% of the consideration received by the Company or such Restricted Subsidiary therefor is in the form of cash paid at the closing thereof. The amount (without duplication) of any (x) Indebtedness (other than Subordinated Indebtedness) of the Company or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Company or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, and (y) any Cash Equivalents, or other notes, securities or items of property received from such transferee that are promptly (but in any event within 15 days) converted by the Company or such Restricted Subsidiary to cash (to the extent of the cash actually so received), shall be deemed to be cash for purposes of clause (ii) and, in the case of clause (x) above, shall also be deemed to constitute a repayment of, and a permanent reduction in, the amount of such Indebtedness for purposes of the following paragraph (b). If at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.16. A transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a Restricted Subsidiary will not be deemed to be an Asset Sale, a -4- transfer of assets that constitutes a Restricted Investment and that is permitted under Section 4.05 will not be deemed to be an Asset Sale and a transfer of accounts receivable or other property of the Company or a Restricted Subsidiary to a special purpose Affiliate or an Unrestricted Subsidiary or other third party in an asset securitization will not be deemed to be an Asset Sale. SECTION 2. INTERPRETATION OF AMENDED INDENTURE. The Indenture shall be deemed to be modified and amended in accordance herewith and the respective rights, limitations of rights, obligations, duties and immunities under the Indenture of the Trustee, the Company, the Guarantors and the Holders of outstanding Notes shall, as of the date hereof, be determined, exercised and enforced under the Indenture, subject in all respects to such modifications and amendments made by this Supplemental Indenture, and all the terms and conditions of this Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. SECTION 3. DUTIES AND RESPONSIBILITIES OF TRUSTEE. The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture and agrees to execute the trust created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, which terms and provisions define and limit its liabilities and responsibilities in the performance of the trust created by the Indenture as hereby amended, and, without limiting the generality of the foregoing, the Trustee makes no representation as to (i) the proper authorization hereof by the Company and the Guarantors by corporate action or otherwise, (ii) the due execution hereof by the Company and the Guarantors or (iii) the validity, accuracy or sufficiency of this Supplemental Indenture. The recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness. SECTION 4. COUNTERPARTS. This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument. SECTION 5. RATIFICATION AND CONFIRMATION OF INDENTURE. Except as hereby expressly supplemented and amended, the Indenture and the Notes issued thereunder are in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. SECTION 6. GOVERNING LAW. This Supplemental Indenture shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws provisions thereof. (remainder of page intentionally left blank) -5- IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed, as of the date and year first above written. EAGLE-PICHER INDUSTRIES, INC., as successor to E-P Acquisition, Inc, By: --------------------------------------------------- Name: Title: DAISY PARTS, INC. By: --------------------------------------------------- Name: Title: EAGLE-PICHER DEVELOPMENT COMPANY, INC. By: --------------------------------------------------- Name: Title: EAGLE-PICHER HOLDINGS, INC. By: --------------------------------------------------- Name: Title: EAGLE-PICHER FAR EAST, INC. By: --------------------------------------------------- Name: Title: -6- EAGLE-PICHER MINERALS, INC. By: --------------------------------------------------- Name: Title: EAGLE-PICHER TECHNOLOGIES, INC. By: --------------------------------------------------- Name: Title: HILLSDALE TOOL & MANUFACTURING CO. By: --------------------------------------------------- Name: Title: EPMR CORPORATION By: --------------------------------------------------- Name: Title: CARPENTER ENTERPRISES LIMITED By: --------------------------------------------------- Name: Title: THE BANK OF NEW YORK, as Trustee -7- By: --------------------------------------------------- Name: Title: -8- EX-10.62 8 l92796aex10-62.txt EXHIBIT 10.62 Exhibit 10.62 EXECUTION COPY RECEIVABLES SALE AGREEMENT Dated as of January 8, 2002 by and among THE ENTITIES PARTY HERETO FROM TIME TO TIME AS ORIGINATORS and EAGLE-PICHER FUNDING CORPORATION.
TABLE OF CONTENTS PAGE ---- ARTICLE I DEFINITIONS AND INTERPRETATION.........................................................................1 Section 1.01. Definitions...................................................................................1 Section 1.02. Rules of Construction.........................................................................1 ARTICLE II TRANSFERS OF RECEIVABLES..............................................................................1 Section 2.01. Agreement to Transfer.........................................................................1 Section 2.02. Grant of Security Interest....................................................................3 Section 2.03. Joint and Severable Obligations...............................................................3 ARTICLE III CONDITIONS PRECEDENT.................................................................................3 Section 3.01. Conditions to Initial Transfer................................................................3 Section 3.02. Conditions to all Transfers...................................................................4 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................................5 Section 4.01. Representations and Warranties of the Originators.............................................5 Section 4.02. Affirmative Covenants of the Originators.....................................................12 Section 4.03. Negative Covenants of the Originators........................................................19 Section 4.04. Breach of Representations, Warranties or Covenants...........................................22 ARTICLE V INDEMNIFICATION.......................................................................................22 Section 5.01. Indemnification..............................................................................22 ARTICLE VI INTENTIONALLY-OMITTED................................................................................25 ARTICLE VII COLLATERAL SECURITY.................................................................................25 Section 7.01. Security Interest............................................................................25 Section 7.02. Other Collateral; Rights in Receivables......................................................26 Section 7.03. Delivery of Collateral.......................................................................26 Section 7.04. Originators Remain Liable....................................................................26 ARTICLE VIII MISCELLANEOUS......................................................................................27 Section 8.01. Notices......................................................................................27 Section 8.02. No Waiver; Remedies..........................................................................28 Section 8.03. Successors and Assigns.......................................................................28 Section 8.04. Termination; Survival of Obligations.........................................................29
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Section 8.05. Complete Agreement; Modification of Agreement................................................29 Section 8.06. Amendments and Waivers.......................................................................29 Section 8.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.................................30 Section 8.08. Counterparts.................................................................................31 Section 8.09. Severability.................................................................................31 Section 8.10. Section Titles...............................................................................32 Section 8.11. No Setoff....................................................................................32 Section 8.12. Confidentiality..............................................................................32 Section 8.13. Further Assurances...........................................................................33 Section 8.14. Fees and Expenses............................................................................33
INDEX OF APPENDICES Exhibit 2.01(a) Form of Receivables Assignment Schedule 4.01(a) Jurisdictions of Organization Schedule 4.01(b) Executive Offices; Collateral Locations; Corporate, Legal or Other Names; Organizational Identification Number/FEIN Schedule 4.01(d) Litigation Schedule 4.01(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock, Debt Schedule 4.01(i) Tax Matters Schedule 4.01(j) Intellectual Property Schedule 4.01(m) ERISA Schedule 4.01(t) Deposit and Disbursement Accounts Schedule 4.02(g) Corporate or Legal and Trade Names Schedule 4.03(b) Existing Liens Annex X Definitions Annex Y Schedule of Documents ii THIS RECEIVABLES SALE AGREEMENT (as amended, supplemented or otherwise modified and in effect from time to time, this "AGREEMENT") is entered into as of January 8, 2002, by and among EAGLE-PICHER FUNDING CORPORATION, a Delaware corporation (the "BUYER"), as buyer hereunder, and each of the entities listed on the signature pages hereto as an "Originator" (each, an "ORIGINATOR") as a seller hereunder. RECITALS A. Each Originator intends to sell, and the Buyer intends to purchase, certain Receivables originated by such Originator, from time to time, as described herein. B. The Buyer has been formed for the sole purpose of purchasing and reselling to the Purchasers all Receivables originated by the Parent and each other Originator. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.01. DEFINITIONS. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in ANNEX X. Section 1.02. RULES OF CONSTRUCTION. For purposes of this Agreement, the rules of construction set forth in ANNEX X shall govern. All Appendices hereto, or expressly identified to this Agreement, are incorporated herein by reference and, taken together with this Agreement, shall constitute but a single agreement. ARTICLE II TRANSFERS OF RECEIVABLES Section 2.01. AGREEMENT TO TRANSFER. (a) RECEIVABLES TRANSFERS. Subject to the terms and conditions hereof, each Originator agrees to sell (without recourse except to the extent specifically provided herein) to Buyer on the Closing Date and on each Business Day thereafter (each such date, a "TRANSFER DATE") all Receivables owned by it on each such Transfer Date, and Buyer agrees to purchase all such Receivables on each such Transfer Date (each such sale and purchase, a "TRANSFER"). All Transfers by an Originator to the Buyer shall collectively be evidenced by a certificate of assignment substantially in the form of EXHIBIT 2.01(a) (each, a "RECEIVABLES ASSIGNMENT," and collectively, the "RECEIVABLES ASSIGNMENTS"), and each Originator and Buyer shall execute and deliver a Receivables Assignment on or before the Closing Date. (b) DETERMINATION OF TRANSFERRED RECEIVABLES. On and as of each Transfer Date, all Receivables owned by each Originator and not previously acquired by Buyer shall be identified for sale to Buyer (each such Receivable identified for sale, individually, a "TRANSFERRED RECEIVABLE" and, collectively, the "TRANSFERRED RECEIVABLES"). The Transferred Receivables will be identified by reference to the General Trial Balance of each Originator. (c) PAYMENT OF PURCHASE PRICE. (i) In consideration for each Sale of Transferred Receivables hereunder, Buyer shall pay to the Originator thereof the Sale Price therefor in Dollars in a combination of (A) immediately available funds on the Transfer Date therefore in an amount equal to the cash available to Buyer for the payment thereof and (B) payment of the remaining portion of such Sale Price (the "DEFERRED PURCHASE PRICE") after such Transfer Date in accordance with the provisions of this SECTION 2.01(c). All such payments by Buyer under this SECTION 2.01(c) shall be effected by means of a wire or intrabank transfer on the day when due to such account or accounts as the Originators may designate. (ii) Each Originator agrees to accept the portion of the Sale Price for each Sale of Transferred Receivables hereunder in excess of the Buyer's then-available cash in accordance with the following provisions, and agrees that no interest shall accrue on the unpaid portion of any such Deferred Purchase Price. The Buyer agrees to pay in full, in immediately available funds, the Deferred Purchase Price with respect to each Sale hereunder within 90 days after the Transfer Date for such Sale and agrees that such Deferred Purchase Price shall be paid regardless of whether or not the Obligor under any applicable Receivable pays such Receivable. Each Originator and the Buyer agree that payment of the Deferred Purchase Price shall be made by Buyer only from amounts available to the Buyer pursuant to Sections 6.03(c), 6.04(a)(iv) and 6.05(g) of the Purchase Agreement. At any time on and after the ninetieth day following the Closing Date, the aggregate outstanding Deferred Purchase Price owed by the Buyer may not exceed the Maximum Deferred Purchase Price for more than five (5) consecutive Business Days. (iii) Each of the Originators and Buyer acknowledge and agree that the arrangements hereunder with respect to the Deferred Purchase Price component of each Sale hereunder are provided as a convenience to the Buyer and are not intended to derogate from the expressed intention of the parties hereto regarding the characterization of Sales hereunder as true sales occurring on the applicable Transfer Date for each such Sale. (d) OWNERSHIP OF TRANSFERRED RECEIVABLES. On and after each Transfer Date and after giving effect to the Transfers to be made on each such date, Buyer shall own the Transferred Receivables and no Originator shall take any action inconsistent with such ownership nor shall any Originator claim any ownership interest in such Transferred Receivables. (e) RECONSTRUCTION OF GENERAL TRIAL BALANCE. If at any time any Originator fails to generate its General Trial Balance, Buyer shall have the right to reconstruct such General Trial Balance 2 so that a determination of the Transferred Receivables can be made pursuant to SECTION 2.01(b). Each Originator agrees to cooperate with such reconstruction, including by delivery to Buyer, upon Buyer's request, of copies of all Contracts and Records. (f) SERVICING OF RECEIVABLES. So long as no Event of Servicer Termination shall have occurred and be continuing and no Successor Servicer has assumed the responsibilities and obligations of the Servicer pursuant to Section 9.02 of the Purchase Agreement, the Servicer and each Sub-Servicer shall (i) conduct the servicing, administration and collection of the Transferred Receivables and shall take, or cause to be taken, all such actions as may be necessary or advisable to service, administer and collect the Transferred Receivables, all in accordance with (A) the terms of the Purchase Agreement, (B) customary and prudent servicing procedures for trade receivables of a similar type and (C) all applicable laws, rules and regulations, and (ii) hold all Invoices and other documents and incidents (other than Contracts) relating to the Transferred Receivables in trust for the benefit of Buyer, as the owner thereof, and for the sole purpose of facilitating the servicing of the Transferred Receivables in accordance with the terms of the Purchase Agreement. Section 2.02. GRANT OF SECURITY INTEREST. The parties hereto intend that each Transfer shall constitute a purchase and sale and not a loan. Notwithstanding the foregoing, in addition to and not in derogation of any rights now or hereafter acquired by Buyer under SECTION 2.01 hereof, the parties hereto intend that this Agreement shall constitute a security agreement under applicable law and that each Originator shall be deemed to have granted, and each Originator does hereby grant, to the Buyer a continuing security interest in all of such Originator's right, title and interest in, to and under the Transferred Receivables and the Originator Collateral whether now owned or hereafter acquired by such Originator to secure the obligations of such Originator to the Buyer hereunder (including, if and to the extent that any Transfer is recharacterized as a transfer for security, the repayment of a loan deemed to have been made by the Buyer in the amount of the Sale Price with respect thereto and which secures the Buyer's right to receive all Collections of the Transferred Receivables as otherwise contemplated under this Agreement). Section 2.03. JOINT AND SEVERABLE OBLIGATIONS. Each Originator hereby agrees that each agreement, representation, warranty, covenant and obligation of any Originator hereunder shall be the joint and several liability of each Originator hereunder and each Originator hereby agrees that, promptly upon the demand of the Buyer or any assignee of Buyer (including the Administrative Agent or any Purchaser) it will fully perform each agreement, covenant and obligation of each other Originator party hereto. ARTICLE III CONDITIONS PRECEDENT Section 3.01. CONDITIONS TO INITIAL TRANSFER. The initial Transfer hereunder shall be subject to satisfaction of each of the following conditions precedent (any one or more of which may be waived in writing by each of Buyer and the Administrative Agent): 3 (a) THIS AGREEMENT; INFORMATION; OTHER DOCUMENTS. This Agreement or counterparts hereof shall have been duly executed by, and delivered to, each Originator and Buyer, and Buyer shall have received such information, documents, instruments, and agreements as Buyer shall request in connection with the transactions contemplated by this Agreement, including all documents, instruments, agreements and legal opinions identified in the Schedule of Documents, each in form and substance satisfactory to Buyer. (b) GOVERNMENTAL APPROVALS. Buyer shall have received (i) satisfactory evidence that the Originators have obtained all required consents and approvals of all Persons, including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Related Documents and the consummation of the transactions contemplated hereby and thereby or (ii) an Officer's Certificate from each Originator in form and substance satisfactory to Buyer affirming that no such consents or approvals are required. (c) COMPLIANCE WITH LAWS. Each Originator shall be in compliance with all applicable foreign, federal, state and local laws and regulations, including, without limitation, those specifically referenced in SECTION 4.02(f) except to the extent that the failure to so comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) PAYMENT OF FEES AND TAXES. Each Originator and each Domestic Subsidiary of each Originator shall have paid all fees required to be paid by it on the Closing Date, including all fees, costs and expenses required hereunder or required to be paid by it in connection with closing the transactions contemplated hereunder and under the other Related Documents. Each Originator and each Domestic Subsidiary of each Originator shall have paid all taxes, including without limitation any stamp duty which may be imposed as a result of the transactions contemplated by this Agreement and the Related Documents. (e) PURCHASE AGREEMENT CONDITIONS. Each of those conditions precedent set forth in SECTIONS 3.01 and 3.02 of the Purchase Agreement shall have been satisfied or waived in writing as provided therein. Section 3.02. CONDITIONS TO ALL TRANSFERS. Each Transfer hereunder (including the initial Transfer) shall be subject to satisfaction of the following further conditions precedent as of the Transfer Date therefor: (a) the representations and warranties of each Originator contained herein or in any other Related Document (including, in the case of the Parent, in its role as Servicer) shall be true and correct as of such Transfer Date, both before and after giving effect to such Transfer and to the application of the Sale Price therefor, except to the extent that any such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted by this Agreement; 4 (b) (i) the Administrative Agent shall not have declared the Facility Termination Date to have occurred after the occurrence of a Termination Event and (ii) the Facility Termination Date shall not have occurred automatically, in either event in accordance with Section 9.01 of the Purchase Agreement; (c) each Originator and each other Domestic Subsidiary of the Parent shall be in compliance with each of its covenants and other agreements set forth herein or in any Related Document and applicable to such Person (including, in the case of the Parent, in its role as Servicer); and (d) each Originator shall have taken such other action, including delivery of approvals, consents, opinions, documents and instruments to Buyer as Buyer may request. The acceptance by any Originator of the Sale Price for any Transferred Receivables on any Transfer Date shall be deemed to constitute, as of any such Transfer Date, a representation and warranty by such Originator that the conditions in this SECTION 3.02 have been satisfied. Upon any such acceptance, title to the Transferred Receivables sold on such Transfer Date shall be vested absolutely in Buyer, whether or not such conditions were in fact so satisfied. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS Section 4.01. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATORS. To induce Buyer to purchase the Transferred Receivables, each Originator makes the following representations and warranties to Buyer as of the Closing Date and, except to the extent provided otherwise below, as of each Transfer Date, each and all of which shall survive the execution and delivery of this Agreement. (a) LEGAL EXISTENCE; COMPLIANCE WITH LAW. Each Originator (i) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as set forth on SCHEDULE 4.01(a) hereto (which is such Originator's only state of organization); (ii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified is not reasonably likely to result in a Material Adverse Effect; (iii) has the requisite corporate or limited liability company power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business, in each case, as now, heretofore and proposed to be conducted; (iv) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except where the failure to obtain such licenses, permits, consents or approvals is not reasonably likely to result in a Material Adverse Effect; (v) is in compliance with its charter, bylaws, limited liability company agreement and other organizational documents, as applicable; and (vi) subject to specific representations set forth herein regarding 5 ERISA, Environmental Laws, tax laws and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) EXECUTIVE OFFICES; COLLATERAL LOCATIONS; CORPORATE, LEGAL OR OTHER NAMES; FEIN. As of the Closing Date, the current location of each Originator's chief executive office, principal place of business, other offices, the warehouses and premises within which any Originator Collateral is stored or located, and the locations of its records concerning the Originator Collateral are set forth in SCHEDULE 4.01(b) and none of such locations have changed within the past 12 months. During the prior five years, except as set forth in SCHEDULE 4.01(B), no Originator has been known as or used any corporate, legal, fictitious or trade name. In addition, SCHEDULE 4.01(b) lists the organizational identification number issued by each Originator's state of organization or states that no such number has been issued and lists the federal employer identification number of each Originator. (c) CORPORATE OR LIMITED LIABILITY COMPANY POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by each Originator of this Agreement and the other Related Documents to which it is a party and the creation and perfection of all Transfers and Liens provided for herein and therein: (i) are within such Person's corporate or limited liability company power; (ii) have been duly authorized by all necessary or proper corporate and shareholder or limited liability company action; (iii) do not contravene any provision of such Person's charter, bylaws, limited liability company agreement or other organizational documents, as applicable; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (vi) do not result in the creation or imposition of any Adverse Claim upon any of the property of such Person; and (vii) do not require the consent or approval of any Governmental Authority or any other Person, except those which will have been duly obtained, made or complied with prior to the Closing Date as provided SECTION 3.01(b) and, with respect solely to the Transfer of Governmental Receivables, which are not Eligible Receivables, notices or consents not given or obtained under applicable Assignment of Government Claims Laws. The exercise by Buyer of any of its rights and remedies under any Related Document to which it is a party, does not require the consent or approval of any Governmental Authority or any other Person (other than consents or approvals solely relating to or required to be obtained by the Buyer, and subject to the Bankruptcy Code), except those which will have been duly obtained, made or complied with prior to the Closing Date as provided in SECTION 3.01(b) and, with respect solely to the Transfer of Governmental Receivables, which are not Eligible Receivables, notices or consents not given or obtained under applicable Assignment or Government Claims Laws. On or prior to the Closing Date, each of the Related Documents shall have been duly executed and delivered by each Originator that is a party thereto and on the Closing Date each such Related Document shall then constitute a legal, valid and binding obligation of such Originator enforceable against it in accordance with its terms. 6 (d) NO LITIGATION. No Litigation is now pending or, to the knowledge of any Originator, threatened against any Originator (or any Domestic Subsidiary of any Originator) that (i) challenges any Originator's right or power to enter into or perform any of its obligations under the Related Documents to which it is a party, or the validity or enforceability of any Related Document or any action taken thereunder, (ii) seeks to prevent the Transfer, Purchase, contribution or pledge of any Receivable or Originator Collateral or the consummation of any of the transactions contemplated under this Agreement or the other Related Documents or (iii) has a reasonable risk of being determined adversely to any Originator (or any Domestic Subsidiary of any Originator) and that, if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on SCHEDULE 4.01(d), as of the Closing Date there is no Litigation pending or threatened that seeks damages in excess of $500,000 or injunctive relief against, or alleges criminal misconduct by, any Originator (or any Domestic Subsidiary of any Originator). (e) SOLVENCY. Both before and after giving effect to (i) the transactions contemplated by this Agreement and the other Related Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, each Originator is and will be Solvent. No event of the type described in SECTION 9.01(c) of the Purchase Agreement has been commenced or threatened against any Originator. (f) MATERIAL ADVERSE EFFECT. Between September 30, 2001 and the Closing Date, (i) no Originator has incurred any obligations, contingent or non-contingent liabilities, liabilities for charges, long-term leases or unusual forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (ii) no contract, lease or other agreement or instrument has been entered into by any Originator or has become binding upon any Originator's assets and no law or regulation applicable to any Originator has been adopted that has had or could reasonably be expected to have a Material Adverse Effect, and (iii) no Originator is in default and no third party is in default under any material contract, lease or other agreement or instrument to which any Originator is a party that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Between September 30, 2001, and the Closing Date no event has occurred that alone or together with other events could reasonably be expected to have a Material Adverse Effect. (g) OWNERSHIP OF RECEIVABLES; LIENS. Each Originator owns each Receivable originated or acquired by it free and clear of any Adverse Claim (other than Permitted Seller Encumbrances) and, from and after each Transfer Date, Buyer will acquire valid and properly perfected title to and the sole record and beneficial ownership interest in each Transferred Receivable purchased or otherwise acquired on such date, free and clear of any Adverse Claim or restrictions on transferability. As of the Closing Date, none of the properties and assets of any Originator are subject to any Adverse Claims other than Permitted Originator Encumbrances, and there are no facts, circumstances or conditions known to any Originator that may result in any Adverse Claims (including Adverse Claims arising under Environmental Laws) other than Permitted Originator Encumbrances. Each Originator has received all assignments, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Originator's right, title and interest in and to the Receivables 7 originated by it, the Originator Collateral attributable to it, and its other properties and assets. Each Originator has rights in and the power to transfer the Receivables. Each Originator has rights in and the power to transfer each item of the Originator Collateral upon which it purports to grant a Lien hereunder free and clear of any and all Liens other than Permitted Originator Encumbrances. The Liens granted to Buyer pursuant to SECTION 7.01 will at all times be fully perfected first priority Liens in and to the Originator Collateral, subject only to Permitted Originator Encumbrances. (h) VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND DEBT. Except as set forth in SCHEDULE 4.01(h), no Originator has any Subsidiaries, is engaged in any joint venture or partnership with any other Person, or is an Affiliate of any other Person. All of the issued and outstanding Stock of each Originator is owned, directly or indirectly, by the Parent. There are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Originator may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Debt of each Originator as of the Closing Date is described in SCHEDULE 4.01(h). (i) TAXES. All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Originator and each of its Affiliates included in the Parent Group have been filed with the appropriate Governmental Authority and all charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding charges or other amounts being contested in accordance with SECTION 4.02(l). Proper and accurate amounts have been withheld by each Originator (and each such Affiliate) from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. SCHEDULE 4.01(i) sets forth as of the Closing Date (i) those taxable years for which any Originator's (or such Affiliate's) tax returns are currently being audited by the IRS or any other applicable Governmental Authority and (ii) any assessments or threatened assessments in connection with such audit or otherwise currently outstanding. Except as described on SCHEDULE 4.01(i), as of the Closing Date, no Originator (or such Affiliate) has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any charges. None of the Originators, such Affiliates and their respective predecessors are liable for any charges: (A) under any agreement (including any tax sharing agreements) or (B) to the best of each Originator's (and each such Affiliate's) knowledge, as a transferee. As of the Closing Date, no Originator (or such Affiliate) has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, that would have a Material Adverse Effect. (j) INTELLECTUAL PROPERTY. As of the Closing Date, each Originator owns or has rights to use all intellectual property necessary to continue to conduct its business as now or heretofore conducted by it or proposed to be conducted by it. Each Originator conducts its business and affairs without infringement of or interference with any intellectual property of any other Person, except to the extent such infringement or interference could not reasonably be expected to have a 8 Material Adverse Effect. As of the Closing Date, except as set forth in SCHEDULE 4.01(j), no Originator is aware of any infringement or claim of infringement by others of any intellectual property of any Originator. (k) FULL DISCLOSURE. As of the dates specified therein (or, if no such dates are specified, as of the date furnished or delivered), (i) all information contained in this Agreement, any of the other Related Documents, or any written statement furnished by or on behalf of any Originator to Buyer, any Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the other Related Documents is true and accurate in every material respect, and (ii) none of this Agreement, any of the other Related Documents, or any written statement furnished by or on behalf of any Originator to Buyer, any Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the other Related Documents (including any such statement furnished by an Originator in its capacity as a Servicer or Sub-Servicer), is misleading as a result of the failure to include therein a material fact. (l) NOTICES TO OBLIGORS. Each Originator has directed all Obligors of Transferred Receivables originated by it to remit all payments with respect to such Transferred Receivables for deposit in a Lockbox or Lockbox Account. (m) ERISA. (i) SCHEDULE 4.01(m) lists all Plans as of the Closing Date and separately identifies all Pension Plans, including all Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare Plans. Each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status. Except as otherwise provided in SCHEDULE 4.01(m), (x) each Plan is in compliance with the applicable provisions of ERISA and the IRC, including the timely filing of all reports required under the IRC or ERISA, (y) no Originator or ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan and (z) no Originator or ERISA Affiliate has engaged in a "prohibited transaction," as defined in Section 4975 of the IRC, in connection with any Plan that would subject any Originator to a material tax on prohibited transactions imposed by Section 4975 of the IRC. (ii) Except as set forth in SCHEDULE 4.01(m): (A) no Title IV Plan has any Unfunded Pension Liability; (B) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur; (C) there are no pending or, to the knowledge of any Originator, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (D) no Originator or ERISA Affiliate has incurred or reasonably expects to incur any liability as a result of a complete or partial withdrawal from a Multiemployer Plan; 9 (E) within the last five years no Title IV Plan with Unfunded Pension Liabilities has been transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any Originator or ERISA Affiliate; (F) Stock of all Originators and their ERISA Affiliates makes up, in the aggregate, no more than 10% of the assets of any Plan, measured on the basis of fair market value as of the last valuation date of any Plan; and (G) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by S&P or an equivalent rating by another nationally recognized rating agency. (n) BROKERS. No broker or finder acting on behalf of any Originator was employed or utilized in connection with this Agreement or the other Related Documents or the transactions contemplated hereby or thereby and no Originator has any obligation to any Person in respect of any finder's or brokerage fees in connection herewith or therewith. (o) MARGIN REGULATIONS. No Originator is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin security" as such terms are defined in Regulations T, U or X of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as "MARGIN STOCK"). No portion of the proceeds the Sale Price for any Sale will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Debt that was originally incurred to purchase or carry any Margin Stock or for any other purpose that might cause any portion of such proceeds to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. No Originator will take or permit to be taken any action that might cause any Related Document to violate any regulation of the Federal Reserve Board applicable to such Originator. (p) NONAPPLICABILITY OF BULK SALES LAWS. No transaction contemplated by this Agreement or any of the other Related Documents requires compliance with any bulk sales act or similar law. (q) SECURITIES ACT AND INVESTMENT COMPANY ACT EXEMPTIONS. Each purchase of Transferred Receivables under this Agreement constitutes (i) a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act and (ii) a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act. (r) GOVERNMENT REGULATION. No Originator is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act. No Originator is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Debt or to perform its obligations hereunder or under any other Related Document. The purchase or acquisition of the Transferred 10 Receivables by Buyer hereunder, the application of the Sale Price therefor and the consummation of the transactions contemplated by this Agreement and the other Related Documents will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission. (s) BOOKS AND RECORDS; MINUTES. Each Originator maintains (i) books and records of account and (ii) minutes of the meetings and other proceedings of its Stockholders and board of directors (or analogous governing body). (t) DEPOSIT AND DISBURSEMENT ACCOUNTS. SCHEDULE 4.01(t) lists all banks and other financial institutions at which any Originator maintains a deposit account established for the receipt of collections on accounts receivable as of the Closing Date, including any Lockbox Accounts and the Concentration Account (including a notation as to whether any such account receives or has received collections of Excluded Receivables), and such schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor, in each case as of the Closing Date. (u) REPRESENTATIONS AND WARRANTIES IN OTHER RELATED DOCUMENTS. Each of the representations and warranties of each Originator contained in the Related Documents (other than this Agreement) is true and correct in all material respects and such Originator hereby makes each such representation and warranty to, and for the benefit of, the Buyer, the Purchasers and the Administrative Agent as if the same were set forth in full herein, and each Originator consents to the assignment of Buyer's rights with respect thereto to the Purchasers and the Administrative Agent (and their successors and assigns) as contemplated in SECTION 4.02(e). (v) RECEIVABLES. With respect to each Transferred Receivable designated as an Eligible Receivable in any Investment Base Certificate delivered on or after the Transfer Date of such Transferred Receivable: (i) such Transferred Receivable satisfies the criteria for an Eligible Receivable; (ii) prior to its Sale to Buyer such Transferred Receivable was owned by the Originator thereof free and clear of any Adverse Claim (other than Permitted Seller Encumbrances), and such Originator had the full right, power and authority to sell, assign, transfer and pledge its interest therein as contemplated under this Agreement and the other Related Documents and, upon such Sale, Buyer will acquire valid and properly perfected title to and the sole record and beneficial ownership interest in such Transferred Receivable, free and clear of any Adverse Claim and, following such Transfer, such Transferred Receivable will not be subject to any Adverse Claim as a result of any action or inaction on the part of such Originator; 11 (iii) the Transfer of each such Transferred Receivable pursuant to this Agreement and the Receivables Assignment executed by the Originator in respect thereof constitutes, as applicable, a valid sale, transfer, assignment, setover and conveyance to Buyer of all right, title and interest of such Originator in and to such Transferred Receivable; and (iv) the Originator of such Transferred Receivable has no knowledge of any fact (including any defaults by the Obligor thereunder on any other Receivable) that would cause it or should have caused it to expect that any payments on such Transferred Receivable will not be paid in full when due or to expect any other Material Adverse Effect. The representations and warranties described in this SECTION 4.01 shall survive the Transfer of the Transferred Receivables to Buyer, any subsequent assignment of the Transferred Receivables by Buyer, and the termination of this Agreement and the other Related Documents and shall continue until the indefeasible payment in full of all Transferred Receivables. Section 4.02. AFFIRMATIVE COVENANTS OF THE ORIGINATORS. Each Originator covenants and agrees that, unless otherwise consented to by Buyer and the Administrative Agent, from and after the Closing Date and until the Termination Date: (a) OFFICES AND RECORDS. Each Originator shall maintain its principal place of business and chief executive office and the office at which it keeps its Records at the respective locations specified in SCHEDULE 4.01(b) or, upon 30 days' prior written notice to Buyer and the Administrative Agent, at such other location in a jurisdiction where all action requested by Buyer, any Purchaser or the Administrative Agent pursuant to SECTION 8.13 shall have been taken with respect to the Transferred Receivables. Each Originator shall at its own cost and expense, for not less than three years from the date on which each Transferred Receivable was originated, or for such longer period as may be required by law, maintain adequate Records with respect to such Transferred Receivable, including records of all payments received, credits granted and merchandise returned with respect thereto. Each Originator will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records relating to the Transferred Receivables with the legend set forth in Section 7.07(a) of the Purchase Agreement and (B) segregate (from all other receivables then owned or being serviced by such Originator) all Invoices relating to each Transferred Receivable. (b) ACCESS. Each Originator shall, during normal business hours, from time to time upon one Business Day's prior notice and as frequently as Buyer, the Servicer or the Administrative Agent determines to be appropriate: (i) subject to compliance with such Originator's insurance, safety and security requirements, provide Buyer, the Servicer or the Administrative Agent and any of their respective officers, employees and agents access to its properties (including properties of such Originator utilized in connection with the collection, processing or servicing of the Transferred Receivables), facilities, advisors and employees (including officers) of each Originator, each Originator's Domestic Subsidiaries and to the 12 Originator Collateral, (ii) permit Buyer, the Servicer or the Administrative Agent and any of their respective officers, employees and agents, to inspect, audit and make extracts from such Originator's books and records, including all Records maintained by such Originator, (iii) permit Buyer, the Servicer or the Administrative Agent and their respective officers, employees and agents, to inspect, review and evaluate the Transferred Receivables and other Originator Collateral of any Originator, and (iv) permit Buyer, the Servicer or the Administrative Agent and their respective officers, employees and agents to discuss matters (other than legally privileged information) relating to the Transferred Receivables or such Originator's performance under this Agreement or the affairs, finances and accounts of such Originator or its Domestic Subsidiaries with any of such Person's officers, directors, employees, representatives or agents (in each case, with those Persons having knowledge of such matters) and with its independent certified public accountants. If an Incipient Termination Event or a Termination Event shall have occurred and be continuing, or the Administrative Agent, in good faith, believes that an Incipient Termination Event or a Termination Event has occurred or is imminent or deems any Purchaser's rights or interests in the Transferred Receivables or the Seller Collateral insecure, each such Originator shall provide such access at all times and without advance notice and shall provide Buyer, the Servicer and the Administrative Agent with access to its suppliers and customers. Each Originator shall make available to Buyer, the Servicer and the Administrative Agent and their respective counsel, as quickly as is possible under the circumstances, originals or copies of all books and records, including Records maintained by such Originator and each Domestic Subsidiary of such Originator, as the Buyer, the Servicer or the Administrative Agent may request. Each Originator shall deliver any document or instrument necessary for Buyer, the Servicer or the Administrative Agent, as they may from time to time request, to obtain records from any service bureau or other Person that maintains records for such Originator and each Domestic Subsidiary of such Originator, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Originator and each Domestic Subsidiary of such Originator. (c) COMMUNICATION WITH ACCOUNTANTS. Each Originator authorizes Buyer, the Servicer and the Administrative Agent to communicate directly with its independent certified public accountants, and authorizes and shall instruct those accountants and advisors to disclose and make available to Buyer, the Servicer and the Administrative Agent any and all financial statements and other supporting financial documents, schedules and information (other than legally privileged information) relating to any Originator (including copies of any issued management letters required to be submitted to the Administrative Agent pursuant to the Related Documents) with respect to the business, financial condition and other affairs of any Originator as they relate to the Transferred Receivables, the Originator Collateral, and any other matters which relate to events, circumstances or facts which the Administrative Agent reasonably believes may result in, constitute or relate to a Material Adverse Effect. Each Originator agrees to render to Buyer, the Servicer and the Administrative Agent at such Originator's own cost and expense, such clerical and other assistance as may be reasonably requested with regard to the foregoing. If any Termination Event shall have occurred and be continuing, each Originator shall, promptly upon request therefor, assist Buyer in delivering to the Administrative Agent Records reflecting activity through the close of business on the Business Day immediately preceding the date of such request. 13 (d) COMPLIANCE WITH CREDIT AND COLLECTION POLICIES, TRANSFERRED RECEIVABLES AND CONTRACTS. Each Originator shall comply in all material respects with the Credit and Collection Policies and with the terms of each Transferred Receivable and any Invoice with respect thereto. Each Originator will comply with the terms of each Contract (other than an Invoice) except to the extent that the failure to so comply (i) could not reasonably be expected to have a Material Adverse Effect or (ii) is not reasonably likely to have a material adverse effect on the value of a Transferred Receivable or the Originator Collateral or the interests of Buyer therein (PROVIDED, that a breach of this CLAUSE (ii) shall not constitute a Termination Event so long as the provisions of SECTION 4.04 hereof are complied with with respect thereto). (e) ASSIGNMENT. Each Originator agrees that, to the extent permitted under the Purchase Agreement, Buyer may assign all of its right, title and interest in, to and under the Transferred Receivables and this Agreement, including its right to exercise the remedies set forth in SECTION 4.04. Each Originator agrees that, upon any such assignment, the assignee thereof may enforce directly, without joinder of Buyer, all of the obligations of such Originator hereunder, including any obligations of such Originator set forth in SECTIONS 4.02(O), 4.04, 5.01 and 8.14. (f) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each Originator shall (and shall cause each of its Domestic Subsidiaries to) perform each of its obligations under this Agreement and the other Related Documents and comply with all federal, state and local laws and regulations applicable to it and the Receivables, including those relating to truth in lending, retail installment sales, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, licensing, securities laws, margin regulation, taxation, ERISA and labor matters and Environmental Laws and Environmental Permits, except to the extent that the failure to so comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Each Originator shall (and shall cause each of its Domestic Subsidiaries to) continue to pay all governmental fees and all taxes, including without limitation any stamp duty, which may be imposed as a result of the transactions contemplated by this Agreement and the Related Documents. (g) MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Originator shall: (i) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate or limited liability company existence and its rights and franchises; (ii) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder and in accordance with the terms of its certificate or articles of incorporation and bylaws, limited liability company agreement and other organizational documents, as applicable; (iii) at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, including all licenses, permits, charters and registrations, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and (iv) transact business only in such corporate, legal and trade names as are set forth in SCHEDULE 4.02(g) or, upon 30 days' prior written notice to Buyer, the Administrative Agent and each Rating Agency, in such other corporate, legal or trade names with respect to which all action requested by Buyer, any 14 Purchaser or the Administrative Agent pursuant to SECTION 8.13 shall have been taken with respect to the Transferred Receivables. No Originator shall change the type of entity it is, its jurisdiction of incorporation or organization, or its organization number, if any, issued by its state of incorporation or organization, except upon 30 days' prior written notice to Buyer and the Administrative Agent, and with respect to which jurisdiction all action requested by Buyer, any Purchaser or the Administrative Agent pursuant to SECTION 8.13 shall have been taken with respect to the Transferred Receivables. (h) NOTICE OF MATERIAL EVENT. Each Originator shall (and shall cause each of its Domestic Subsidiaries to) promptly inform Buyer in writing of the occurrence of any of the following, in each case setting forth the details thereof, any notices or other correspondence relating thereto, and what action, if any, such Originator or such Domestic Subsidiary proposes to take with respect thereto: (i) any Litigation commenced or threatened against any Originator or any such Domestic Subsidiary or with respect to or in connection with all or any portion of the Transferred Receivables that (A) seeks damages or penalties in an uninsured amount in excess of $500,000 in any one instance or $1,000,000 in the aggregate, (B) seeks injunctive relief, (C) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Originator or ERISA Affiliate in connection with any Plan, (D) alleges criminal misconduct by any Originator or any such Domestic Subsidiary, (E) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liability, or (F) could reasonably be expected to have a Material Adverse Effect; (ii) the commencement of a case or proceeding by or against any Originator or any such Domestic Subsidiary seeking a decree or order in respect of any Originator or any such Domestic Subsidiary (A) under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy, liquidation, insolvency, moratorium, receivership or reorganization law, (B) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any Originator or any such Domestic Subsidiary or for any substantial part of such Person's assets, or (C) ordering the winding-up or liquidation of the affairs of any Originator or any such Domestic Subsidiary; (iii) the receipt of notice that (A) such Originator or any such Domestic Subsidiary is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of such Originator's or any such Domestic Subsidiary's business is to be, or may be, suspended or revoked, or (C) such Originator or any such Domestic Subsidiary is to cease and desist any practice, procedure or policy employed by such Originator or any such Domestic Subsidiary in the conduct of its business if such cessation may have a Material Adverse Effect; (iv) (A) any Adverse Claim made or asserted against any of the Transferred Receivables or Originator Collateral of which it becomes aware or (B) any determination 15 that a Transferred Receivable designated as an Eligible Receivable in an Investment Base Certificate or otherwise was not an Eligible Receivable at the time of such designation; (v) (A) each infringement or claim of infringement by any other Person of any intellectual property of any Originator and (B) each item of intellectual property necessary to continue its business as then conducted by such Originator which it does not own or have rights to use; (vi) the execution or filing with the IRS or any other Governmental Authority of any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any taxes, assessments or other charges; (vii) the establishment of any Plan, Pension Plan, Title IV Plan, Multiemployer Plan, ESOP, Welfare Plan or Retiree Welfare Plan not listed on SCHEDULE 4.01(M); or (viii) any other event, circumstance or condition that has had or could reasonably be expected to have a Material Adverse Effect. The requirements of this SECTION 4.02(h) shall be satisfied so long as any Originator has provided the notice and details required herein. (i) USE OF PROCEEDS. Each Originator shall utilize the proceeds of the Sale Price obtained by it for each Sale made by it hereunder solely for general corporate purposes (including the retirement or repayment of third party debt and loans from or made to Affiliates) and to pay any related expenses payable by such Originator under this Agreement and the other Related Documents in connection with the transactions contemplated hereby and thereby and for no other purpose. (j) SEPARATE IDENTITY. (i) Each Originator shall, and shall cause each of its Affiliates included in the Parent Group to, maintain corporate records and books of account separate from those of Buyer. (ii) The financial statements of each Originator (including the Parent) and its consolidated Subsidiaries shall disclose that (A) Buyer's sole business consists of the purchase of the Receivables from the Originators and the subsequent resale of such Receivables to the Purchasers, (B) Buyer is a separate corporate entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Buyer's assets prior to any value in Buyer becoming available to Buyer's equity holders and (C) the assets of Buyer are not available to pay creditors of the Parent or any other Affiliate of the Parent. 16 (iii) The resolutions, agreements and other instruments underlying the transactions described in this Agreement shall be continuously maintained by each Originator as official records. (iv) Each Originator shall, and shall cause each Affiliate included in the Parent Group to, maintain an arm's-length relationship with Buyer and shall not hold itself out as being liable for the Debts of Buyer. (v) Each Originator shall, and shall cause each Affiliate included in the Parent Group to, keep its assets and its liabilities wholly separate from those of Buyer. (vi) Each Originator shall, and shall cause each Affiliate included in the Parent Group to, conduct its business solely in its own name through its duly Authorized Officers or agents and in a manner designed not to mislead third parties as to the separate identity of the Buyer. (vii) No Originator shall (and each Originator shall cause each Affiliate included in the Parent Group not to) mislead third parties by conducting or appearing to conduct business on behalf of Buyer or expressly or implicitly representing or suggesting that the Parent or such Affiliate is liable or responsible for the Debts of Buyer or that the assets of any Originator or such Affiliate are available to pay the creditors of Buyer. (viii) The operating expenses and liabilities of Buyer shall be paid from Buyer's own funds and not from the funds of any Originator. (ix) Each Originator shall at all times have, and cause each Affiliate included in the Parent Group at all times to have, stationery and other business forms and a mailing address and telephone number separate from those of Buyer. (x) Each Originator shall, and shall cause each Affiliate included in the Parent Group to, at all times limit its transactions with Buyer only to those expressly permitted hereunder or under any other Related Document. (xi) Each Originator shall, and shall cause each Affiliate included in the Parent Group to, comply with (and cause to be true and correct) each of the facts and assumptions contained in the opinion of Squire, Sanders & Dempsey L.L.P. delivered pursuant to the Schedule of Documents. (k) ERISA AND ENVIRONMENTAL NOTICES. Each Originator shall give Buyer and the Administrative Agent prompt written notice of (i) any event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA and (ii) any environmental claims against any Originator or any other Domestic Subsidiary of the Parent or any other Originator which, individually could reasonably be expected to exceed $500,000 or in the aggregate could reasonably be expected to exceed $1,000,000. 17 (l) PAYMENT, PERFORMANCE AND DISCHARGE OF OBLIGATIONS. (i) Subject to SECTION 4.02(l)(ii), each Originator shall (and shall cause each of its Domestic Subsidiaries to) pay, perform and discharge or cause to be paid, performed and discharged all of its obligations and liabilities, including all taxes, assessments and governmental charges upon its income and properties and all lawful claims for labor, materials, supplies and services, promptly when due. (ii) Each Originator (and each such Domestic Subsidiary) may in good faith contest, by appropriate proceedings, the validity or amount of any charges or claims described in SECTION 4.02(l)(i); PROVIDED, that (A) adequate reserves with respect to such contest are maintained on the books of such Originator (or such Domestic Subsidiary), in accordance with GAAP, (B) such contest is maintained and prosecuted continuously and with diligence, (C) none of the Originator Collateral may become subject to forfeiture or loss as a result of such contest, (D) no Lien may be imposed to secure payment of such charges or claims other than inchoate tax liens and (E) Buyer and such Originator (or Domestic Subsidiary, as applicable) have fully considered and reasonably believe that nonpayment or nondischarge thereof could not reasonably be expected to have or result in a Material Adverse Effect. (m) DEPOSIT OF COLLECTIONS. Each Originator shall (and shall cause each of its Domestic Subsidiaries to) instruct all Obligors to remit all payments with respect to any Transferred Receivables directly into a Lockbox Account and shall deposit and cause its Subsidiaries to deposit or cause to be deposited promptly into a Lockbox Account, and in any event no later than the first Business Day after receipt thereof, all Collections it may receive in respect of Transferred Receivables, and until so deposited all such items or other proceeds shall be held in trust, as trustee, for the benefit of the Buyer and its assigns (including the Administrative Agent and the Purchasers). Neither the Buyer nor the Servicer shall make any deposits into a Lockbox or any Lockbox Account except in accordance with the terms of this Agreement or any other Related Document. (n) ACCOUNTING CHANGES. If any Accounting Changes occur and such changes result in a change in the standards or terms used herein, then the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of such Persons and their Subsidiaries shall be the same after such Accounting Changes as if such Accounting Changes had not been made. If the parties hereto agree upon the required amendments to this Agreement, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained herein shall, only to the extent of such Accounting Change, refer to GAAP consistently applied after giving effect to the implementation of such Accounting Change. If such parties cannot agree upon the required amendments within 30 days following the date of implementation of any Accounting Change, then all financial statements delivered and all 18 standards and terms used herein shall be prepared, delivered and used without regard to the underlying Accounting Change. (o) ADJUSTMENTS TO SALE PRICE. If on any day the Billed Amount of any Transferred Receivable is reduced as a result of any Dilution Factors, and the amount of such reduction exceeds the amount, if any, of Dilution Factors taken into account in the calculation of the Sale Price for such Transferred Receivable, the Originator thereof shall make a cash payment to Buyer in the amount of such excess by remitting such amount to the Collection Account in accordance with the terms of the Purchase Agreement. (p) BOOKS AND RECORDS. Each Originator shall cause its books and Records to be marked as to clearly distinguish Excluded Receivables from Transferred Receivables. (q) PARENT FINANCIAL COVENANTS. The Parent shall comply with any of the financial covenants set forth in ANNEX G to the Purchase Agreement. (r) COLLECTIONS AND PROCEEDS OF TRANSFERRED RECEIVABLES. Each Originator shall ensure that no Collections or other proceeds with respect to a Transferred Receivable reconveyed to it pursuant to SECTION 4.04 hereof are paid or deposited into any Lockbox Account. (s) REPORTS AND RECORDS REGARDING TRANSFERRED RECEIVABLES AND RECONVEYED RECEIVABLES. Each Originator hereby agrees that, from and after the Closing Date until the Termination Date, it shall prepare and deliver all reports, statements and records required to be delivered by it hereunder or under any other Related Document so as to clearly distinguish (i) Excluded Receivables from Transferred Receivables and (ii) Transferred Receivables that are subsequently reconveyed to the appropriate Originator pursuant to SECTION 4.04 hereof from Transferred Receivables that are not so reconveyed. Section 4.03. NEGATIVE COVENANTS OF THE ORIGINATORS. Each Originator covenants and agrees that, without the prior written consent of Buyer and the Administrative Agent, from and after the Closing Date and until the Termination Date: (a) SALE OF STOCK AND ASSETS. Except for sales of inventory and equipment in the ordinary course of business as permitted by the Senior Debt Facility, no Originator shall sell, transfer, convey, assign (by operation of law or otherwise) or otherwise dispose of, or assign any right to receive income in respect of, any of its properties or other assets, including capital Stock, any Transferred Receivable or Invoice with respect thereto, any of its rights with respect to any Lockbox or Lockbox Account or any other Originator Collateral. (b) LIENS. No Originator shall create, incur, assume or permit to exist any Adverse Claim on or with respect to (i) its Receivables other than Permitted Seller Encumbrances or (ii) any other Originator Collateral (whether now owned or hereafter acquired) except for the Liens set forth in SCHEDULE 4.03(b) and other Permitted Originator Encumbrances. 19 (c) MODIFICATIONS OF RECEIVABLES OR CONTRACTS. No Originator shall (i) extend, amend, forgive, discharge, compromise, cancel or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any term or condition of any Invoice or other Contract therefor; PROVIDED, that as long as no Incipient Termination Event or Termination Event has occurred and is continuing, (A) any Originator, in its capacity as Servicer or Sub-Servicer, may take such actions as are permitted under the terms of the Purchase Agreement, and (B) any Originator may amend any Contract (other than an Invoice) related to a Transferred Receivable PROVIDED, that such action would not, (1) cause any Transferred Receivable which prior to such amendment did not constitute an Eligible Receivable to be an Eligible Receivable, (2) cause any Transferred Receivable which prior to such amendment constituted an Eligible Receivable to cease to be an Eligible Receivable, (3) cause an Incipient Termination Event or a Termination Event to occur or (4) have a material adverse effect on the value or collectibility of, the interests of the Purchasers in, or the security for, any Transferred Receivable, or (ii) amend, modify or waive any term or provision of the Credit and Collection Policies. (d) SALE CHARACTERIZATION. No Originator shall (and will not allow any of its Domestic Subsidiaries to) make statements or disclosures or prepare any financial statements for any purpose, including for federal income tax, reporting or accounting purposes, that shall account for the transactions contemplated by this Agreement in any manner other than as a true sale of its full right, title and ownership interest in such Transferred Receivable to Buyer. (e) CAPITAL STRUCTURE AND BUSINESS. No Originator shall (i) make any changes in any of its business objectives, purposes or operations that could have or result in a Material Adverse Effect or (ii) make any change in its capital structure as described on SCHEDULE 4.01(h), including the issuance of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock or (iii) amend, supplement or otherwise modify its certificate or articles of incorporation, bylaws, limited liability company agreement or other organizational documents, as applicable, in a manner that could have or result in a Material Adverse Effect. No Originator shall change its jurisdiction of incorporation or organization or reincorporate or reorganize itself except as permitted by SECTION 4.02(g). No Originator shall engage in any business other than the businesses currently engaged in by the Originators. (f) ACTIONS AFFECTING RIGHTS. No Originator shall (i) take any action, or fail to take any action, if such action or failure to take action may interfere with the enforcement of any rights hereunder or under the other Related Documents, including rights with respect to the Transferred Receivables; (ii) waive or alter any rights with respect to the Transferred Receivables (or any agreement or instrument relating thereto) except to the extent permitted under SECTION 4.03(c); or (iii) fail to pay any tax, assessment, charge, fee or other obligation of such Originator with respect to the Transferred Receivables, or fail to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the perfected title of Buyer to and the sole record and beneficial ownership interest of Buyer in the Transferred Receivables or, prior to their Sale hereunder, such Originator's right, title or interest therein. 20 (g) ERISA. No Originator shall (and shall not cause or permit any ERISA Affiliate or any of its Domestic Subsidiaries to) cause or permit to occur an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to cause an ERISA Event to the extent such ERISA Event could reasonably be expected to have a Material Adverse Effect. (h) CHANGE TO CREDIT AND COLLECTION POLICIES. No Originator shall fail to comply with, and no amendment or modification shall be made to, the Credit and Collection Policies without the prior written consent of Buyer and the Administrative Agent. (i) ADVERSE TAX CONSEQUENCES. No Originator shall take or permit to be taken any action (other than with respect to actions taken or to be taken solely by a Governmental Authority), or fail or neglect to perform, keep or observe any of its obligations hereunder or under the other Related Documents, that would have the effect directly or indirectly of subjecting any payment to Buyer, any Purchaser or holders of the Commercial Paper who are residents of the United States of America to withholding taxation. (j) NO PROCEEDINGS. From and after the Closing Date and until the date one year plus one day following the date on which the Commercial Paper allocable to Buyer with the latest maturity has been indefeasibly paid in full in cash, no Originator shall, directly or indirectly, institute or cause to be instituted against Buyer or Conduit Purchaser any proceeding of the type referred to in SECTIONS 9.01(c) and 9.01(d) of the Purchase Agreement (k) COMMINGLING. No Originator shall (and each Originator shall cause each of its Domestic Subsidiaries not to) deposit or permit the deposit of any funds that do not constitute Collections of Transferred Receivables into any Lockbox or Lockbox Account or the Concentration Account. Further, no Originator shall (and each Originator shall cause each of its Domestic Subsidiaries not to) deposit or permit the deposit of any funds that constitute Collections of Excluded Receivables into any Lockbox Account or the Concentration Account. If such funds are nonetheless deposited into a Lockbox, Lockbox Account or Concentration Account and the Originator so notifies the Applicable Purchaser, such Purchaser shall notify the Administrative Agent to promptly remit any such amounts to the applicable Originator. (l) PURCHASE OF RECEIVABLES. No Originator or the Parent shall, directly or indirectly, purchase any accounts receivable from any Person without the express written consent of the Administrative Agent. (m) DEBT. No Originator shall (and shall not allow any of its Domestic Subsidiaries to) create, incur, assume or permit to exist any Debt, except (i) Debt of such Person to the Buyer, the Servicer, any Affected Person, any Indemnified Person or any other Person expressly permitted by this Agreement and the Related Documents, (ii) deferred taxes, (iii) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, (iv) indorser liabilities in connection with the indorsement of negotiable instruments for deposit or collection in the ordinary course of 21 business and (v) indebtedness that is not prohibited under the terms of the Senior Debt Facility as in effect on the Closing Date. (n) MERGERS, SUBSIDIARIES, ETC. No Originator shall (and shall not allow any of its Domestic Subsidiaries to) directly or indirectly, by operation of law or otherwise, (i) form or acquire any Subsidiary or (ii) merge with, consolidate with, convey, transfer, lease or otherwise dispose of all (or substantially all) of its assets (whether now owned or hereafter acquired) to, or acquire all (or substantially all) of the assets or capital Stock or other ownership interests of, or otherwise combine with or acquire, any Person (whether in one transaction or in a series of transactions) other than (A) dispositions of accounts receivable and related assets as contemplated by this Agreement and (B) transactions with respect to the Parent, a Subsidiary Originator or any other Domestic Subsidiary of the Parent (excluding in any event the Buyer) which are not prohibited under the terms of the Senior Debt Facility as in effect on the Closing Date. Section 4.04. BREACH OF REPRESENTATIONS, WARRANTIES OR COVENANTS. Upon discovery by any Originator or Buyer of any breach of any representation, warranty or covenant described in SECTIONS 4.01, 4.02 or 4.03 (other than a representation, warranty or covenant relating to the absence of Dilution Factors), which breach is reasonably likely to have a material adverse effect on the value of a Transferred Receivable or the Originator Collateral or the interests of Buyer therein, the party discovering the same shall give prompt written notice thereof to the other parties hereto. The Originator that breached such representation, warranty or covenant may, at any time on any Business Day, or shall, if requested by notice from Buyer, on the first Business Day following receipt of such notice, either (a) repurchase such Transferred Receivable from Buyer for cash or (b) transfer ownership of a new Eligible Receivable or new Eligible Receivables to Buyer on such Business Day, in each case in an amount equal to the Billed Amount of such Transferred Receivable MINUS the sum of (A) Collections received in respect thereof and (B) the amount of any Dilution Factors taken into account in the calculation of the Sale Price therefor. Notwithstanding the foregoing, if any Transferred Receivable is not paid in full on account of any Dilution Factors, the Originator's repurchase obligation under this SECTION 4.04 with respect to such Transferred Receivable shall be reduced by the amount of any such Dilution Factors taken into account in the calculation of the Sale Price therefor. ARTICLE V INDEMNIFICATION Section 5.01. INDEMNIFICATION. Without limiting any other rights that Buyer or any of its Stockholders, officers, directors, employees, attorneys, agents or representatives (each, an "ORIGINATOR INDEMNIFIED PERSON") may have hereunder or under applicable law, each Originator hereby agrees to indemnify and hold harmless each Originator Indemnified Person from and against any and all Indemnified Amounts that may be claimed or asserted against or incurred by any such Originator Indemnified Person in connection with or arising out of the transactions contemplated under this Agreement or under any other Related Document, any actions or failures to act in connection therewith, including any and all legal costs and expenses arising out of or 22 incurred in connection with disputes between or among any parties to any of the Related Documents, or in respect of any Transferred Receivable or Originator Collateral or any Contract therefor or the use by such Originator of the Sale Price therefor; PROVIDED, that no Originator shall be liable for any indemnification to an Originator Indemnified Person to the extent that any such Indemnified Amounts result solely from (a) such Originator Indemnified Person's gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction, (b) recourse for uncollectible or uncollected Transferred Receivables due to the lack of creditworthiness of the Obligor or the occurrence of any event of bankruptcy with respect to such Obligor, or (c) any income tax or franchise tax incurred by any Originator Indemnified Person, except to the extent that the incurrence of any such tax results from a breach of or default under this Agreement or any other Related Document. Subject to the exceptions set forth in clauses (a), (b) and (c) of the immediately preceding sentence but otherwise without limiting the generality of the foregoing, each Originator shall pay on demand to each Originator Indemnified Person any and all Indemnified Amounts relating to or resulting from: (i) reliance on any representation or warranty made or deemed made by such Originator (or any of its officers) under or in connection with this Agreement or any other Related Document or on any other information delivered by such Originator pursuant hereto or thereto that shall have been incorrect in any material respect when made or deemed made or delivered; (ii) the failure by such Originator to comply with any term, provision or covenant contained in this Agreement, any other Related Document or any agreement executed in connection herewith or therewith, any applicable law, rule or regulation with respect to any Transferred Receivable or Originator Collateral or Contract therefor, or the nonconformity of any Transferred Receivable or Originator Collateral or the Contract therefor with any such applicable law, rule or regulation; (iii) the failure to vest and maintain vested in Buyer, or to Transfer to Buyer, valid and properly perfected title to and sole record and beneficial ownership of the Receivables that constitute Transferred Receivables, together with all Collections in respect thereof, free and clear of any Adverse Claim; (iv) any dispute, claim, offset or defense of any Obligor (other than its discharge in bankruptcy) to the payment of any Transferred Receivable (including a defense based on such Transferred Receivable or the Contract therefor not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services giving rise to such Transferred Receivable or the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Transferred Receivable (if such collection activities were performed by the Originator or any Affiliate acting as the Servicer or a Sub-Servicer), except to the extent that such dispute, claim, offset or defense results solely from any action or inaction on the part of Buyer; 23 (v) any products liability claim or other claim arising out of or in connection with merchandise, insurance or services that is the subject of any Contract; (vi) the commingling of Collections with respect to Transferred Receivables by such Originator at any time with its other funds or the funds of any other Person; (vii) any failure by such Originator to cause the filing of, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or any other applicable laws with respect to any Receivable that is the subject of a Transfer hereunder, whether at the time of any such Transfer or at any subsequent time, or Originator Collateral; (viii) any failure by any Originator or the Servicer to perform, keep or observe any of their respective duties or obligations hereunder, under any other Related Document or under any Contract related to a Transferred Receivable, or Originator Collateral; (ix) any failure of a Lockbox Account Bank or a Concentration Account Bank to comply with the terms of the applicable Lockbox Account Agreement; (x) any investigation, Litigation or proceeding related to this Agreement or the use of the Sale Price obtained in connection with any Sale or the ownership of Receivables or Collections with respect thereto or in respect of any Receivable or Contract, or; (xi) any claim brought by any Person other than an Originator Indemnified Person arising from any activity by such Originator or any of its Affiliates in servicing, administering or collecting any Transferred Receivables or Originator Collateral. NO ORIGINATOR INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. 24 ARTICLE VI INTENTIONALLY-OMITTED ARTICLE VII COLLATERAL SECURITY Section 7.01. SECURITY INTEREST. To secure the prompt and complete payment, performance and observance of any and all recourse and indemnity obligations of each Originator to Buyer, including those set forth in SECTIONS 4.02(o), 4.04, 5.01 and 8.14, and to induce Buyer to enter into this Agreement in accordance with the terms and conditions hereof, each Originator hereby grants, assigns, conveys, pledges, hypothecates and transfers to Buyer a Lien upon all of such Originator's right, title and interest in, to and under the following property, whether now owned by or owing to, or hereafter acquired by or arising in favor of, such Originator (including under any trade names, styles or derivations of such Originator), and whether owned by or consigned by or to, or leased from or to, such Originator, and regardless of where located (all of which being hereinafter collectively referred to as the "ORIGINATOR COLLATERAL"): (a) all Transferred Receivables, Invoices therefor and Collections thereon; (b) all of the Originator's rights in the merchandise (including returned goods) relating to the Transferred Receivables; (c) all of Buyer's credits and balances with the Originator existing at any time; (d) all Lockboxes, Lockbox Accounts, the Concentration Account and all funds on deposit therein and all certificates and instruments, if any, from time to time representing or evidencing any Lockbox, Lockbox Account or the Concentration Account; (e) all notes, certificates of deposit and other instruments from time to time delivered to or otherwise possessed by the Buyer, the Administrative Agent or any Purchaser or any assignee or agent on behalf of any such person in substitution for or in addition to any of the then existing Originator Collateral; (f) all interest, dividends, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed with respect to or in exchange for any and all of the then existing Originator Collateral; (g) all Related Documents to which the Originator is a party; (h) all other property that may from time to time hereafter be granted and pledged by any Originator or by any Person on its behalf under this Agreement; and 25 (i) to the extent not otherwise included, all proceeds (whether constituting accounts, general intangibles, documents, chattel paper, instruments or investment property) of the foregoing and all accessions to, and substitutions and replacements for, each of the foregoing. Section 7.02. OTHER COLLATERAL; RIGHTS IN RECEIVABLES. Nothing contained in this ARTICLE VII shall limit the rights of Buyer in and to any other collateral that may have been or may hereafter be granted to Buyer by any Originator or any third party pursuant to any other agreement or the rights of Buyer under any of the Transferred Receivables. Section 7.03. DELIVERY OF COLLATERAL. All certificates or instruments representing or evidencing the Originator Collateral shall be delivered to and held by or on behalf of the Buyer (and its assigns including the Administrative Agent) and shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Buyer (and its assigns including the Administrative Agent). The Buyer (and its assigns including the Administrative Agent) shall have the right (a) at any time to exchange certificates or instruments representing or evidencing Originator Collateral for certificates or instruments of smaller or larger denominations and (b) at any time in its discretion following the occurrence and during the continuation of a Termination Event and without notice to any Originator, to transfer to or to register in the name of the Buyer (and its assigns including the Administrative Agent) or its nominee any or all of the Originator Collateral. Each Originator will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with the legend set forth in SECTION 7.07 (a) of the Purchase Agreement, and (B) segregate (from all other receivables then owned or being serviced by such Originator) all Invoices relating to each Receivable. Section 7.04. ORIGINATORS REMAIN LIABLE. It is expressly agreed by the Originators that, anything herein to the contrary notwithstanding, each Originator shall remain liable under any and all of the Receivables originated by it, the Contracts therefor and all other Originator Collateral to observe and perform all the conditions and obligations to be observed and performed by it thereunder. The Buyer shall not have any obligation or liability under any such Receivables, Contracts or Originator Collateral by reason of or arising out of this Agreement or the granting herein of a Lien thereon or the receipt by the Buyer of any payment relating thereto pursuant hereto. The exercise by the Buyer of any of its respective rights under this Agreement shall not release any Originator from any of its respective duties or obligations under any such Receivables, Contracts or Originator Collateral. The Buyer shall not be required or obligated in any manner to perform or fulfill any of the obligations of any Originator under or pursuant to any such Receivable, Contract or Originator Collateral, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such Receivable, Contract or Originator Collateral, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times. 26 ARTICLE VIII MISCELLANEOUS Section 8.01. NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission on a Business Day prior to 3:00 p.m. (local time) (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this SECTION 8.01), (c) one Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger on a Business Day prior to 3:00 p.m. (local time), all of which shall be addressed to the party to be notified and sent to the address or facsimile number set forth below in this SECTION 8.01 or to such other address (or facsimile number) as may be substituted by notice given as herein provided: BUYER: 250 East Fifth Street, Suite 500 Cincinnati, OH 45202 Facsimile: (513) 629-2571 PARENT: 250 East Fifth Street, Suite 500 Cincinnati, OH 45202 Attn: Treasurer Facsimile: (513) 629-2571 with a copy to: the attention of the General Counsel at the same address EACH ORIGINATOR: c/o Eagle-Picher Industries, Inc. 250 East Fifth Street, Suite 500 Cincinnati, OH 45202 Attn: Treasurer Facsimile: (513) 629-2571 with a copy to: the attention of the General Counsel at the same address 27 PROVIDED, that each such declaration or other communication shall be deemed to have been validly delivered to the Administrative Agent under this Agreement only upon delivery to the Administrative Agent in accordance with the terms of the Purchase Agreement. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Buyer) designated in any written communication provided hereunder to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. Notwithstanding the foregoing, whenever it is provided herein that a notice is to be given to any other party hereto by a specific time, such notice shall only be effective if actually received by such party prior to such time, and if such notice is received after such time or on a day other than a Business Day, such notice shall only be effective on the immediately succeeding Business Day. Section 8.02. NO WAIVER; REMEDIES. Buyer's failure, at any time or times, to require strict performance by the Originators of any provision of this Agreement or any Receivables Assignment shall not waive, affect or diminish any right of Buyer thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of any breach or default hereunder shall not suspend, waive or affect any other breach or default whether the same is prior or subsequent thereto and whether the same or of a different type. None of the undertakings, agreements, warranties, covenants and representations of any Originator contained in this Agreement or any Receivables Assignment, and no breach or default by any Originator hereunder or thereunder, shall be deemed to have been suspended or waived by Buyer unless such waiver or suspension is by an instrument in writing signed by an officer of or other duly authorized signatory of Buyer and directed to such Originator specifying such suspension or waiver. Buyer's rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Buyer may have under any other agreement, including the other Related Documents, by operation of law or otherwise. Recourse to the Originator Collateral shall not be required. Section 8.03. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of each Originator and Buyer and their respective successors and permitted assigns, except as otherwise provided herein. No Originator may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder without the prior express written consent of Buyer, the Purchasers and the Administrative Agent and unless the Rating Agency Condition shall have been satisfied with respect to any such assignment. Any such purported assignment, transfer, hypothecation or other conveyance by any Originator without the prior express written consent of Buyer, the Purchasers and the Administrative Agent shall be void. Each Originator acknowledges that Buyer may, to the extent permitted in the Purchase Agreement, assign its rights granted hereunder, including the benefit of any indemnities under ARTICLE V and any of its rights in the Originator Collateral granted under ARTICLE VII . Upon each such assignment, such assignee shall have, to the extent of such assignment, all rights of Buyer hereunder and, to the extent permitted under the Purchase Agreement, the Purchaser or any assignee thereof may in turn assign such rights. Each Originator agrees that, upon any such 28 assignment, such assignee may enforce directly, without joinder of Buyer, the rights set forth in this Agreement. All such assignees, including parties to the Purchase Agreement in the case of any assignment to such parties, shall be third party beneficiaries of, and shall be entitled to enforce Buyer's rights and remedies under, this Agreement to the same extent as if they were parties hereto. Without limiting the generality of the foregoing, all notices to be provided to the Buyer hereunder shall be delivered to the Buyer and the Administrative Agent under the Purchase Agreement, and shall be effective only upon such delivery to the Administrative Agent in accordance with the terms of the Purchase Agreement. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of each Originator and Buyer with respect to the transactions contemplated hereby and, except for the Purchasers and the Administrative Agent, no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement. Section 8.04. TERMINATION; SURVIVAL OF OBLIGATIONS. (a) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Termination Date. (b) Except as otherwise expressly provided herein or in any other Related Document, no termination or cancellation (regardless of cause or procedure) of any commitment made by Buyer under this Agreement shall in any way affect or impair the obligations, duties and liabilities of any Originator or the rights of Buyer relating to any unpaid portion of any and all recourse and indemnity obligations of such Originator to Buyer, including those set forth in SECTIONS 4.02(o), 4.04, 5.01 and 8.14, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Facility Termination Date. Except as otherwise expressly provided herein or in any other Related Document, all undertakings, agreements, covenants, warranties and representations of or binding upon each Originator, and all rights of Buyer hereunder, all as contained in the Related Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; PROVIDED, that the rights and remedies pursuant to SECTIONS 4.02(o), 4.04, the indemnification and payment provisions of ARTICLE V, and the provisions of SECTIONS 4.03(j), 8.12 and 8.14 shall be continuing and shall survive any termination of this Agreement. Section 8.05. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the other Related Documents constitute the complete agreement between the parties with respect to the subject matter hereof and thereof, supersede all prior agreements and understandings relating to the subject matter hereof and thereof, and may not be modified, altered or amended except as set forth in SECTION 8.06. Section 8.06. AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver of any provision of this Agreement or any of the other Related Documents, or any 29 consent to any departure by any Originator therefrom, shall in any event be effective unless the same shall be in writing and signed by each of the parties hereto, the Purchasers and the Administrative Agent. No consent or demand in any case shall, in itself, entitle any party to any other consent or further notice or demand in similar or other circumstances. Section 8.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND EACH RELATED DOCUMENT (EXCEPT TO THE EXTENT THAT ANY RELATED DOCUMENT EXPRESSLY PROVIDES TO THE CONTRARY) AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES), EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR PRIORITY OF THE INTERESTS OF THE BUYER IN THE RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. (b) EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THEM PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT; PROVIDED, THAT EACH PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF MANHATTAN IN NEW YORK CITY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE BUYER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE ORIGINATOR COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OF THE ORIGINATORS ARISING HEREUNDER, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF BUYER. EACH PARTY HERETO SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, 30 COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE SIGNATURE PAGES HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH PARTY'S RECEIPT THEREOF. EACH PARTY HERETO AGREES THAT "RECEIPT" OF ANY SUCH SUMMONS, COMPLAINT OR OTHER SERVICE OF PROCESS MAY BE EVIDENCED, WITHOUT LIMITATION, BY ANY OF THE FOLLOWING: 1) CONFIRMATION OF DELIVERY IN ANY FORM ISSUED BY THE UNITED STATES POSTAL SERVICE, 2) A DELIVERY CONFIRMATION IN THE FORM PROVIDED BY ANY NATIONALLY RECOGNIZED COURIER SERVICE OR 3) A RECEIPT SIGNED BY ANY EMPLOYEE, OFFICER, DIRECTOR OR INDEPENDENT CONTRACTOR OF THE PERSON RECEIVING SUCH NOTICE PHYSICALLY PRESENT AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE SIGNATURE PAGES HERETO. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. (c) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section 8.08. COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. Section 8.09. SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 31 Section 8.10. SECTION TITLES. The section titles and table of contents contained in this Agreement are provided for ease of reference only and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. Section 8.11. NO SETOFF. Each Originator's obligations under this Agreement shall not be affected by any right of setoff, counterclaim, recoupment, defense or other right such Originator might have against Buyer, any Purchaser or the Administrative Agent, all of which rights are hereby expressly waived by such Originator. Section 8.12. CONFIDENTIALITY. (a) Except to the extent otherwise required by applicable law, as required to be filed publicly with the Securities and Exchange Commission, or unless each Affected Party shall otherwise consent in writing, each Originator and Buyer agree to maintain the confidentiality of this Agreement (and all drafts hereof and documents ancillary hereto) in its communications with third parties other than any Affected Party or any Originator Indemnified Person and otherwise and not to disclose, deliver or otherwise make available to any third party (other than its directors, officers, employees, accountants or counsel) the original or any copy of all or any part of this Agreement (or any draft hereof and documents ancillary hereto) except to an Affected Party or an Originator Indemnified Person. (b) Each Originator agrees that it shall not (and shall not permit any of its Subsidiaries to) issue any news release or make any public announcement pertaining to the transactions contemplated by this Agreement and the Related Documents without the prior written consent of Buyer and each of the Committed Purchaser and the Conduit Purchaser (which consent shall not be unreasonably withheld) unless such news release or public announcement is required by law, in which case such Originator shall consult with Buyer and each of the Committed Purchaser and the Conduit Purchaser prior to the issuance of such news release or public announcement. Any Originator may, however, disclose the general terms of the transactions contemplated by this Agreement and the Related Documents to trade creditors, suppliers and other similarly-situated Persons so long as such disclosure is not in the form of a news release or public announcement. (c) Except to the extent otherwise required by applicable law, or in connection with any judicial or administrative proceedings, as required to be filed publicly with the Securities Exchange Commission, or unless the Originators otherwise consent in writing, the Buyer agrees (i) to maintain the confidentiality of (A) this Agreement (and all drafts hereof and documents ancillary hereto) and (B) all other confidential proprietary information with respect to the Originators and their respective Affiliates and each of their respective businesses obtained by the Buyer in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other documents ancillary hereto, in each case, in its communications with third parties other than any Affected Party, or Originator Indemnified Person or any Originator and (ii) not to disclose, deliver, or otherwise make available to any third party (other than its directors, officers, employees, accountants or counsel) the original or any 32 copy of all or any part of this Agreement (or any draft hereof and documents ancillary hereto) except to an Affected Party or any Originator. Section 8.13. FURTHER ASSURANCES. (a) Each Originator shall, at its sole cost and expense, upon request of Buyer, any Purchaser or the Administrative Agent, promptly and duly execute and deliver any and all further instruments and documents and take such further actions that may be necessary or desirable or that Buyer, any Purchaser or the Administrative Agent may request to carry out more effectively the provisions and purposes of this Agreement or any other Related Document or to obtain the full benefits of this Agreement and of the rights and powers herein granted, including (i) using its best efforts to secure all consents and approvals necessary or appropriate for the assignment to or for the benefit of Buyer of any Transferred Receivable or Originator Collateral held by such Originator or in which such Originator has any rights not heretofore assigned, (ii) filing any financing or continuation statements under the UCC with respect to the ownership interests or Liens granted hereunder or under any other Related Document, (iii) transferring Originator Collateral to Buyer's possession if such Originator Collateral consists of chattel paper or instruments or if a Lien upon such Originator Collateral can be perfected only by possession, or if otherwise requested by Buyer; and (iv) entering into "control agreements" (as defined in the UCC with respect to any Originator Collateral to the extent that a first priority Lien upon such Originator Collateral can be perfected only by control. Each Originator hereby authorizes Buyer, each Purchaser and the Administrative Agent to file any such financing or continuation statements without the signature of such Originator to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Agreement or of any notice or financing statement covering the Transferred Receivables, the Originator Collateral or any part thereof shall be sufficient as a notice or financing statement where permitted by law. If any amount payable under or in connection with any of the Originator Collateral is or shall become evidenced by any instrument, such instrument, other than checks and notes received in the ordinary course of business, shall be duly endorsed in a manner satisfactory to Buyer immediately upon such Originator's receipt thereof and promptly delivered to Buyer. (b) If any Originator fails to perform any agreement or obligation under this SECTION 8.13, Buyer, any Purchaser or the Administrative Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the reasonable expenses of Buyer, such Purchaser or the Administrative Agent incurred in connection therewith shall be payable by such Originator upon demand of Buyer, such Purchaser or the Administrative Agent. Section 8.14. FEES AND EXPENSES. In addition to its indemnification obligations pursuant to ARTICLE V, each Originator agrees, jointly and severally, to pay on demand all costs and expenses incurred by Buyer in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Related Documents, including the fees and out-of-pocket expenses of Buyer's counsel, advisors, consultants and auditors retained in connection with the transactions contemplated thereby and advice in connection therewith, and each Originator agrees, jointly and severally, to pay all costs and expenses, if any (including 33 attorneys' fees and expenses but excluding any costs of enforcement or collection of the Transferred Receivables), in connection with the enforcement of this Agreement and the other Related Documents. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have caused this Receivables Sale Agreement to be executed by their respective duly authorized representatives, as of the date first above written. EAGLE-PICHER FUNDING CORPORATION, AS BUYER: By ------------------------------------ Name: Title: ORIGINATORS: EAGLE-PICHER INDUSTRIES, INC., AS PARENT AND AS AN ORIGINATOR By ------------------------------------ Name: Title: Eagle-Picher Receivables Sale Agreement dated as of January ___, 2002 CARPENTER ENTERPRISES LIMITED, AS AN ORIGINATOR By ----------------------------- Name: Title: DAISY PARTS, INC., AS AN ORIGINATOR By ----------------------------- Name: Title: Eagle-Picher Receivables Sale Agreement dated as of January ___, 2002 EAGLE-PICHER MINERALS, INC., AS AN ORIGINATOR By ----------------------------- Name: Title: EAGLE-PICHER TECHNOLOGIES, LLC, AS AN ORIGINATOR By ----------------------------- Name: Title: Eagle-Picher Receivables Sale Agreement dated as of January ___, 2002 HILLSDALE TOOL & MANUFACTURING CO., AS AN ORIGINATOR By ----------------------------- Name: Title: Eagle-Picher Receivables Sale Agreement dated as of January ___, 2002 EXHIBIT 2.01(a) Form of RECEIVABLES ASSIGNMENT THIS RECEIVABLES ASSIGNMENT (the "RECEIVABLES ASSIGNMENT") is entered into as of January [___], 2002, by and between [Name of Originator] (the "ORIGINATOR") and EAGLE-PICHER FUNDING CORPORATION ("BUYER"). 1. We refer to that certain Receivables Sale Agreement (as amended, restated, supplemented or otherwise modified from time to time, the "SALE AGREEMENT") of even date herewith among the Buyer and the Originators party thereto. All of the terms, covenants and conditions of the Sale Agreement are hereby made a part of this Receivables Assignment and are deemed incorporated herein in full. Unless otherwise defined herein, capitalized terms or matters of construction defined or established in the Sale Agreement shall be applied herein as defined or established therein. 2. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Originator hereby sells without recourse, except as provided in Sections 4.02(o) and 4.04 of the Sale Agreement, all of the Originator's right, title and interest in, to and under all of its Receivables (including all Collections, Invoices and proceeds with respect thereto) existing as of the Closing Date and thereafter created or arising at any time until the earliest of (i) the date Administrative Agent has declared the Facility Termination Date to have occurred after the occurrence of a Termination Event or (ii) the Facility Termination Date shall have occurred automatically, in either event in accordance with SECTION 9.01 of the Purchase Agreement. 3. Subject to the terms and conditions of the Sale Agreement, the Originator hereby covenants and agrees to sign, sell or contribute, as applicable, execute and deliver, or cause to be signed, sold, executed and delivered, and to do or make, or cause to be done or made, upon request of Buyer and at the Originator's expense, any and all agreements, instruments, papers, deeds, acts or things, supplemental, confirmatory or otherwise, as may be reasonably required by Buyer for the purpose of or in connection with acquiring or more effectively vesting in Buyer or evidencing the vesting in Buyer of the property, rights, title and interests of the Originator sold hereunder or intended to be sold hereunder. 4. Wherever possible, each provision of this Receivables Assignment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Receivables Assignment shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Receivables Assignment. Eagle-Picher Receivables Sale Agreement 1 5. THIS RECEIVABLES ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. IN WITNESS WHEREOF, the parties have caused this Receivables Assignment to be executed by their respective officers thereunto duly authorized, as of the day and year first above written. [NAME OF ORIGINATOR] EAGLE-PICHER FUNDING CORPORATION By: By: --------------------------- ----------------------------------- Name: Name: Title: Title: 2 EX-10.63 9 l92796aex10-63.txt EXHIBIT 10.63 Ex 10.63 EXECUTION COPY RECEIVABLES PURCHASE AND SERVICING AGREEMENT Dated as of January 8, 2002 by and among EAGLE-PICHER FUNDING CORPORATION as Seller, REDWOOD RECEIVABLES CORPORATION, as Conduit Purchaser, EAGLE-PICHER INDUSTRIES, INC., as Servicer, and GENERAL ELECTRIC CAPITAL CORPORATION, as Committed Purchaser and as Administrative Agent TABLE OF CONTENTS
PAGE ARTICLE I. DEFINITIONS AND INTERPRETATION.........................................................................1 Section 1.01. Definitions...............................................................................1 Section 1.02. Rules of Construction.....................................................................2 ARTICLE II. AMOUNTS AND TERMS OF PURCHASES........................................................................2 Section 2.01. Purchases.................................................................................2 Section 2.02. Optional Changes in Maximum Purchase Limit................................................2 Section 2.03. Investment Base Certificates; Notices Relating to Purchases and Reductions in Capital Investment.....................................................................3 Section 2.04. Conveyance of Receivables.................................................................4 Section 2.05. Facility Termination Date.................................................................5 Section 2.06. Daily Yield...............................................................................6 Section 2.07. Fees......................................................................................6 Section 2.08. Time and Method of Payments...............................................................6 Section 2.09. Capital Requirements; Additional Costs....................................................7 Section 2.10. Breakage Costs............................................................................8 Section 2.11. Purchase Excess...........................................................................8 ARTICLE III. CONDITIONS PRECEDENT.................................................................................9 Section 3.01. Conditions to Effectiveness of Agreement..................................................9 Section 3.02. Conditions Precedent to All Purchases....................................................11 ARTICLE IV. REPRESENTATIONS AND WARRANTIES.......................................................................12 Section 4.01. Representations and Warranties of the Seller.............................................12 Section 4.02. Representations and Warranties of the Servicer...........................................19 ARTICLE V. GENERAL COVENANTS OF THE SELLER.......................................................................20 Section 5.01. Affirmative Covenants of the Seller......................................................20 Section 5.02. Reporting Requirements of the Seller.....................................................22 Section 5.03. Negative Covenants of the Seller.........................................................22 ARTICLE VI. COLLECTIONS AND DISBURSEMENTS........................................................................25 Section 6.01. Establishment of Accounts................................................................25 Section 6.02. Funding of Collection Account............................................................28 Section 6.03. Daily Disbursements From the Collection Account; Revolving Period........................30 Section 6.04. Disbursements From the Retention Account; Settlement Date Procedures; Revolving Period................................................................................31 Section 6.05. Liquidation Settlement Procedures........................................................33 Section 6.06. Investment of Funds in Accounts..........................................................34
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Section 6.07. Termination Procedures...................................................................34 ARTICLE VII. SERVICER PROVISIONS.................................................................................34 Section 7.01. Appointment of the Servicer..............................................................34 Section 7.02. Duties and Responsibilities of the Servicer..............................................35 Section 7.03. Collections on Receivables...............................................................35 Section 7.04. Authorization of the Servicer............................................................36 Section 7.05. Servicing Fees...........................................................................36 Section 7.06. Representations and Warranties of the Servicer...........................................37 Section 7.07. Covenants of the Servicer................................................................38 Section 7.08. Reporting Requirements of the Servicer...................................................39 ARTICLE VIII. GRANT OF SECURITY INTERESTS........................................................................39 Section 8.01. Seller's Grant of Security Interest......................................................39 Section 8.02. Seller's Certification...................................................................41 Section 8.03. Consent to Assignment....................................................................41 Section 8.04. Delivery of Collateral...................................................................41 Section 8.05. Seller Remains Liable....................................................................42 Section 8.06. Covenants of the Seller and the Servicer Regarding the Seller Collateral.................42 ARTICLE IX. TERMINATION EVENTS...................................................................................45 Section 9.01. Termination Events.......................................................................45 Section 9.02. Events of Servicer Termination...........................................................48 ARTICLE X. REMEDIES..............................................................................................50 Section 10.01. Actions Upon Termination Event..........................................................50 Section 10.02. Exercise of Remedies....................................................................52 Section 10.03. Power of Attorney.......................................................................52 Section 10.04. Continuing Security Interest............................................................52 ARTICLE XI. SUCCESSOR SERVICER PROVISIONS........................................................................52 Section 11.01. Servicer Not to Resign..................................................................52 Section 11.02. Appointment of the Successor Servicer...................................................53 Section 11.03. Duties of the Servicer..................................................................53 Section 11.04. Effect of Termination or Resignation....................................................54 ARTICLE XII. INDEMNIFICATION.....................................................................................54 Section 12.01. Indemnities by the Seller...............................................................54 Section 12.02. Indemnities by the Servicer.............................................................56 Section 12.03. Limitation of Damages; Indemnified Persons..............................................56 ARTICLE XIII. AGENT..............................................................................................57
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Section 13.01. Authorization and Action................................................................57 Section 13.02. Reliance................................................................................57 Section 13.03. GE Capital and Affiliates...............................................................58 ARTICLE XIV. MISCELLANEOUS.......................................................................................58 Section 14.01. Notices.................................................................................58 Section 14.02. Binding Effect; Assignability...........................................................59 Section 14.03. Termination; Survival of Seller Secured Obligations Upon Facility Termination Date..................................................................................59 Section 14.04. Costs, Expenses and Taxes...............................................................60 Section 14.05. Confidentiality.........................................................................61 Section 14.06. No Proceedings..........................................................................62 Section 14.07. Complete Agreement; Modification of Agreement...........................................62 Section 14.08. Amendments and Waivers..................................................................62 Section 14.09. No Waiver; Remedies.....................................................................62 Section 14.10. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL............................63 Section 14.11. Counterparts............................................................................65 Section 14.12. Severability............................................................................65 Section 14.13. Section Titles..........................................................................65 Section 14.14. Limited Recourse........................................................................65 Section 14.15. Further Assurances......................................................................65
EXHIBITS, SCHEDULES AND ANNEXES Exhibit 2.02(a) Form of Commitment Reduction Notice Exhibit 2.02(b) Form of Commitment Termination Notice Exhibit 2.03(a) Form of Investment Base Certificate Exhibit 2.03(b) Form of Capital Purchase Request Exhibit 2.03(c) Form of Repayment Notice Exhibit 2.04(a) Form of Purchase Assignment Exhibit 3.01(a)(i) Form of Solvency Certificate Exhibit 3.01(a)(ii)(A) Form of Seller Certificate (Closing) Exhibit 3.01(a)(ii)(B) Form of Seller Certificate (Post-Closing) Exhibit 3.01(a)(iii)(A) Form of Servicer's Certificate (Closing) Exhibit 3.01(a)(iii)(B) Form of Servicer's Certificate (Post-Closing) Exhibit 3.01(a)(iv) Form of Monthly Report Exhibit 3.01(n) Form of Response to Solicitation Exhibit 10.03 Form of Power of Attorney Exhibit A Credit and Collection Policy Schedule 4.01(b) Executive Offices; Collateral Locations; Corporate or Other Names; Organizational Identification Number/FEIN/Seller Schedule 4.01(d) Litigation Schedule 4.01(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock and Debt/Seller
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Schedule 4.01(i) Tax Matters/Seller Schedule 4.01(r) Deposit and Disbursement Accounts/Seller Schedule 5.01(b) Corporate and Trade Names/Seller Schedule 5.03(b) Existing Liens/Seller Annex G Financial Covenants Annex 5.02(a) Reporting Requirements of the Seller Annex 5.02(b) Investment Reports Annex X Definitions Annex Y Schedule of Documents
iv THIS RECEIVABLES PURCHASE AND SERVICING AGREEMENT (as amended, supplemented or otherwise modified and in effect from time to time, the "AGREEMENT") is entered into as of January 8, 2002, by and among EAGLE-PICHER FUNDING CORPORATION, a Delaware corporation (the "SELLER"), EAGLE-PICHER INDUSTRIES, INC., an Ohio corporation (the "PARENT"), in its capacity as servicer hereunder (in such capacity, the "SERVICER"), REDWOOD RECEIVABLES CORPORATION, a Delaware corporation (the "CONDUIT PURCHASER"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as a Committed Purchaser (the "COMMITTED PURCHASER") and as administrative agent for the Conduit Purchaser and the Committed Purchaser hereunder (in such capacity, the "ADMINISTRATIVE Agent"). RECITALS A. The Seller is a special purpose corporation wholly-owned, directly or indirectly, by Eagle-Picher Holdings, Inc. B. The Seller has been formed for the purpose of purchasing certain trade receivables generated by the Originators. C. The Seller intends to sell, and, subject to the terms and conditions hereof, the Conduit Purchaser and the Committed Purchaser intend to purchase, undivided percentage interests in such trade receivables, from time to time, as described herein. D. The Administrative Agent has been requested and is willing to act as administrative agent on behalf of each of the Conduit Purchaser and the Committed Purchaser in connection with the making and financing of such purchases. E. In order to effectuate the purposes of this Agreement, the Conduit Purchaser and the Committed Purchaser each desires to appoint the Parent to service, administer and collect the receivables acquired by the Purchasers pursuant to this Agreement and the Parent is willing to act in such capacity as Servicer hereunder on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I. DEFINITIONS AND INTERPRETATION Section 1.01. DEFINITIONS. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in ANNEX X. Section 1.02. RULES OF CONSTRUCTION. For purposes of this Agreement, the rules of construction set forth in ANNEX X shall govern. All Appendices hereto, or expressly identified to this Agreement, are incorporated herein by reference and, taken together with this Agreement, shall constitute but a single agreement. ARTICLE II. AMOUNTS AND TERMS OF PURCHASES Section 2.01. PURCHASES. From and after the Closing Date and until the Facility Termination Date and subject to the terms and conditions hereof, the Conduit Purchaser and the Committed Purchaser severally agree to purchase Purchaser Interests (each such purchase hereunder, a "PURCHASE") from the Seller from time to time and the Seller agrees to sell such Purchaser Interests to the Purchasers. The obligation of the Conduit Purchaser to make Purchases hereunder shall be from the Closing Date until the occurrence of either a Committed Purchaser Funding Event or the Facility Termination Date. The obligation of the Committed Purchaser to make Purchases hereunder shall be from and after the occurrence of a Committed Purchaser Funding Event until the Facility Termination Date. Under no circumstances shall a Purchaser make any Purchase if, after giving effect thereto, a Purchase Excess would exist. Each purchase of undivided percentage ownership interests in the Receivables by the Purchasers hereunder shall consist of either (i) a purchase made by the applicable Purchasers with new funds provided by such Purchasers (each, a "CAPITAL PURCHASE") or (ii) a purchase made by the applicable Purchasers with funds consisting of Collections allocated to the Purchaser Interests pursuant to the terms of this Agreement (each, a "REINVESTMENT PURCHASE"). On each Business Day following the Closing Date until the Facility Termination Date, but subject to SECTION 3.02 hereof, each Purchaser holding a Purchaser Interest at such time shall be automatically deemed to have made a Reinvestment Purchase with the amount of funds to be distributed to the Seller pursuant to SECTION 6.03(c), if any. Section 2.02. OPTIONAL CHANGES IN MAXIMUM PURCHASE LIMIT. (a) So long as no Incipient Termination Event or Termination Event shall have occurred and be continuing, the Seller may, not more than twice during each calendar year, reduce the Maximum Purchase Limit permanently; PROVIDED, that (i) the Seller shall give thirty (30) Business Days' prior written notice of any such reduction to the Administrative Agent substantially in the form of EXHIBIT 2.02(a) (each such notice, a "COMMITMENT REDUCTION NOTICE"), (ii) any partial reduction of the Maximum Purchase Limit shall be in a minimum amount of $5,000,000 or an integral multiple thereof, (iii) no such reduction shall reduce the Maximum Purchase Limit below the greater of (x) Capital Investment at such time and (y) $50,000,000, and (iv) any such reduction must be accompanied by payment of the fee required by SECTION 2.02(c). (b) The Seller may at any time on at least 90 days' prior written notice by the Seller to the Administrative Agent irrevocably terminate the Maximum Purchase Limit; 2 PROVIDED, that (i) such notice of termination shall be substantially in the form of EXHIBIT 2.02(b) (the "COMMITMENT TERMINATION NOTICE"), (ii) the Seller shall reduce the Capital Investment to zero and make all payments required by SECTION 2.03(C) at the time and in the manner specified therein, and (iii) such reduction must be accompanied by payment of the fee required by SECTION 2.02(c). Upon such termination, the Seller's right to request that any Purchaser make Purchases hereunder shall simultaneously terminate and the Facility Termination Date shall automatically occur. (c) If all or any portion of the Maximum Purchase Limit is reduced or terminated in accordance with this SECTION 2.02 prior to the first anniversary of the Closing Date, then the Seller shall pay the Administrative Agent, for the account of the Purchasers, an amount equal to (i) the amount by which the Maximum Purchase Limit is so reduced multiplied by (ii) 1.00%; PROVIDED, that such amount shall not be payable if, without the consent of the Seller, the Conduit Purchaser or the Committed Purchaser has assigned all or any portion of its rights and obligations hereunder or interests herein to any Person other than GE Capital, an Affiliate of GE Capital or any investment vehicle administered by GE Capital or an Affiliate of GE Capital. (d) Each written notice required to be delivered pursuant to SECTIONS 2.02(a) and (b) shall be irrevocable and shall be effective (i) on the day of receipt if received by the Administrative Agent and the Purchasers not later than 4:00 p.m. (New York time) on any Business Day and (ii) on the immediately succeeding Business Day if received by the Administrative Agent and the Purchasers after such time on such Business Day or if any such notice is received on a day other than a Business Day (regardless of the time of day such notice is received). Each such notice of termination or reduction shall specify, respectively, the amount of, or the amount of the proposed reduction in, the Maximum Purchase Limit. Section 2.03. INVESTMENT BASE CERTIFICATES; NOTICES RELATING TO PURCHASES AND REDUCTIONS IN CAPITAL INVESTMENT. (a) Not later than 11:00 a.m. (New York time) on the third Business Day of each calendar week, the Seller shall deliver to the Purchasers, the Administrative Agent and the Collateral Agent an Officer's Certificate substantially in the form of EXHIBIT 2.03(a) (each, an "INVESTMENT BASE CERTIFICATE") which shall be prepared by the Seller or the Servicer with information as of the close of business on the last day of the immediately preceding calendar week; PROVIDED, that if (i) an Incipient Termination Event or a Termination Event shall have occurred and be continuing or (ii) the Administrative Agent, in good faith, believes that an Incipient Termination Event or a Termination Event is imminent or deems any Purchaser's rights or interests in the Transferred Receivables or the Seller Collateral insecure, the Seller shall deliver an Investment Base Certificate to the Purchasers, the Administrative Agent and the Collateral Agent at such more frequent intervals and with respect to such time periods as the Administrative Agent may request from time to time. Capital Investment Available shall be determined by the Administrative Agent using its good faith and commercially reasonable credit judgment, based on information related to the Seller Collateral available to it, including (A) any information obtained in connection with any audit or reflected in the most recent Investment 3 Base Certificate or any other Investment Report delivered to the Purchasers and the Administrative Agent or (B) any other information that may be available to the Purchasers and the Administrative Agent. (b) Each Purchase resulting in an increase in Capital Investment shall be made upon the provision of notice by the Seller to the Administrative Agent in the manner provided herein. Any such notice must be given in writing so that it is received no later than 4:00 p.m. (New York time) on the Business Day immediately preceding the proposed Purchase Date set forth therein. Each such notice (a "CAPITAL PURCHASE REQUEST") shall (i) be substantially in the form of EXHIBIT 2.03(b), (ii) be irrevocable, (iii) specify the amount of the requested increase in Capital Investment (which shall be in an amount not less than $500,000) and the proposed Purchase Date (which shall be a Business Day), (iv) be accompanied by an Investment Base Certificate setting forth all applicable information as of the close of business on the third Business Day prior to the proposed Purchase Date and (v) include such other information as may be required by the Purchasers and the Administrative Agent. (c) The Seller may at any time reduce the Capital Investment; PROVIDED, that (i) the Seller shall give one Business Day's prior written notice of any such reduction to the Administrative Agent substantially in the form of EXHIBIT 2.03(C) (each such notice, a "REPAYMENT NOTICE"), (ii) each such notice shall be irrevocable, (iii) each such notice shall specify the amount of the requested reduction in the Capital Investment and the proposed date of such reduction (which shall be a Business Day) and (iv) any such reduction must be accompanied by payment of (A) all Daily Yield accrued and unpaid on the Capital Investment being reduced through but excluding the date of such reduction and (B) the costs, if any, required by SECTION 2.10. Any such notice of reduction must be received by the Administrative Agent no later than 4:00 p.m. (New York time) on the Business Day immediately preceding the date of the proposed reduction in Capital Investment. Section 2.04. CONVEYANCE OF RECEIVABLES. (a) PURCHASE ASSIGNMENT. On or prior to the Closing Date, the Seller shall complete, execute and deliver to the Administrative Agent for the benefit of the Purchasers an assignment substantially in the form of EXHIBIT 2.04(A) (the "PURCHASE ASSIGNMENT") in order to evidence the Purchases. (b) FUNDING OF COLLECTION ACCOUNT; INCREASES IN CAPITAL INVESTMENT. (i) FUNDING OF COLLECTION ACCOUNT BY PURCHASER. Following receipt of any Capital Purchase Request, and subject to satisfaction of the conditions set forth in SECTION 3.02, the Applicable Purchaser shall make available to or on behalf of the Seller on the Purchase Date specified therein the lesser of (A) the requested increase in Capital Investment specified in such Capital Purchase Request and (B) the Capital Investment Available, by depositing such amount in same day funds into the Collection Account. 4 (ii) PAYMENT OF PURCHASE PRICE. The Applicable Purchaser shall, or shall cause the Administrative Agent to, deposit into the Seller Account on each Business Day during the Revolving Period, in same day funds, all amounts on deposit in the Collection Account that are to be disbursed to or on behalf of the Seller pursuant to SECTION 6.03(C) as payment for the Purchaser Interests. (c) VESTING OF OWNERSHIP. (i) Effective on and as of each Purchase Date (A) prior to the occurrence of the Committed Purchaser Funding Event, the Conduit Purchaser shall own the Purchaser Interests sold by the Seller hereunder on such Purchase Date, and (B) on and after the occurrence of the Committed Purchaser Funding Event, the Committed Purchaser shall own the Purchaser Interests sold by the Seller hereunder on such Purchase Date. The Seller shall not take any action inconsistent with such ownership and shall not claim any ownership interest in such Purchaser Interests. (ii) The Seller shall indicate in its Records that interests in the Transferred Receivables have been sold hereunder and that ownership of such interests is vested in the Administrative Agent on behalf of the Purchasers. In addition, the Seller shall respond to any inquiries with respect to the ownership of any Transferred Receivable by stating that interests therein have been sold hereunder and that ownership of such interests is vested in the Purchasers. The Seller and the Servicer shall hold all Invoices and other documents and incidents (other than Contracts) relating to such Transferred Receivables in trust for the benefit of the Administrative Agent on behalf of the Conduit Purchaser and the Committed Purchaser, as the owner thereof, and for the sole purpose of facilitating the servicing of such Transferred Receivables. The Seller and the Servicer hereby acknowledge that their retention and possession of such Invoices and documents shall at all times be at the sole discretion of the Administrative Agent and in a custodial capacity for the Administrative Agent's benefit (on behalf of the Purchasers) only. (d) REPURCHASES OF TRANSFERRED RECEIVABLES. If any Originator is required to repurchase Transferred Receivables from the Seller pursuant to SECTION 4.04 of the Sale Agreement, the Applicable Purchaser shall sell and reconvey its Purchaser Interests in such Transferred Receivables to the Seller either (i) through a transfer of such Purchaser Interests in exchange for Purchaser Interests in other Transferred Receivables with an Outstanding Balance equal to the Outstanding Balance of the Receivables being repurchased or (ii) if and to the extent a Purchase Excess exists or would exist pursuant to such sale and reconveyance, for cash in an amount equal to the Outstanding Balance of the Receivables being repurchased. Section 2.05. FACILITY TERMINATION DATE. Notwithstanding anything to the contrary set forth herein, no Purchaser shall have any obligation to purchase any additional Purchaser Interests from and after the Facility Termination Date. 5 Section 2.06. DAILY YIELD. (a) The Seller shall pay Daily Yield to the Administrative Agent, for the account of the Purchasers, for each day on which any Capital Investment is outstanding, in the manner and at the times specified in SECTIONS 6.03, 6.04 and 6.05. (b) Notwithstanding the foregoing, the Seller shall pay interest at the applicable Daily Yield Rate on unpaid Daily Yield and on any other amount payable by the Seller hereunder (to the extent permitted by law) that shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof to (but excluding) the date the same is indefeasibly paid in full. Section 2.07. FEES. (a) On or prior to the Closing Date and on each Settlement Date thereafter, the Seller shall pay to the Administrative Agent, for the account of itself and the Purchasers, the fees set forth in the Fee Letter that are payable on the Closing Date or such Settlement Date, as applicable. (b) On each Settlement Date, the Seller shall pay to the Servicer or to the Successor Servicer, as applicable, the Servicing Fee or the Successor Servicing Fees and Expenses, respectively, in each case to the extent of available funds therefor as provided in SECTION 6.04. (c) The Seller shall pay to the Administrative Agent, for the account of itself and the Purchasers, the Unused Commitment Fee, in accordance with the provisions of SECTION 6.03, 6.04 and 6.05 hereof. Section 2.08. TIME AND METHOD OF PAYMENTS. (a) Subject to the provisions of SECTIONS 6.02, 6.03, 6.04 and 6.05, all payments in reduction of Capital Investment and all payments of yield, fees and other amounts payable by the Seller hereunder shall be made in Dollars, in immediately available funds, to the Administrative Agent (for its account or the account of the applicable Purchasers, Affected Parties or Indemnified Persons) not later than 11:00 a.m. (New York time) on the due date therefor. Any such payment made on such date but after such time shall be deemed to have been made on, and Daily Yield shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any such payment becomes due on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day and Daily Yield thereon shall be payable during such extension. (b) Any and all payments by the Seller hereunder shall be made in accordance with this SECTION 2.08 without setoff or counterclaim and free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, excluding franchise taxes and taxes imposed on or measured by the net income of any Affected 6 Party by the jurisdictions under the laws of which such Affected Party is organized or by any political subdivisions thereof (such non-excluded taxes, levies, imposts, deductions, charges and withholdings being "INDEMNIFIED TAXES"). If the Seller shall be required by law to deduct any Indemnified Taxes from or in respect of any sum payable hereunder, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 2.08) the Affected Party entitled to receive any such payment receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Seller shall make such deductions, and (iii) the Seller shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within 30 days after the date of any payment of Indemnified Taxes, the Seller shall furnish to the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof. The Seller shall indemnify any Affected Party from and against, and, within ten days of demand therefor, pay any Affected Party for, the full amount of Indemnified Taxes (together with any taxes imposed by any jurisdiction on amounts payable under this SECTION 2.08) paid by such Affected Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Section 2.09. CAPITAL REQUIREMENTS; ADDITIONAL COSTS. (a) If the Administrative Agent on behalf of any Affected Party shall have determined that the adoption after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by such Affected Party with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law) from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Affected Party against commitments made by it under this Agreement, any other Related Document or any Program Document and thereby reducing the rate of return on such Affected Party's capital as a consequence of its commitments hereunder or thereunder, then the Seller shall from time to time upon demand by the Administrative Agent pay to the Administrative Agent on behalf of such Affected Party additional amounts sufficient to compensate such Affected Party for the Seller's Share of such reduction together with interest thereon from the date of any such demand until payment in full at the applicable Daily Yield Rate. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by the Administrative Agent to the Seller shall be final, binding and conclusive on the parties hereto (absent manifest error) for all purposes. Such Affected Party agrees that, as promptly as practicable after it becomes aware of any circumstance referred to above that would result in any such increased capital, reserve or similar requirements, it shall, to the extent not inconsistent with its internal policies of general application, use reasonable commercial efforts to minimize the increased capital, reserve or similar requirements applicable it and the additional amounts payable to it by the Seller pursuant to this SECTION 2.09(a). (b) If, due to any Regulatory Change, there shall be any increase in the cost to any Affected Party of agreeing to make or making, funding or maintaining any commitment 7 hereunder, under any other Related Document or under any Program Document, including with respect to any Purchases, Capital Investment, LOC Draws or Liquidity Loans, or any reduction in any amount receivable by such Affected Party hereunder or thereunder, including with respect to any Purchases, Capital Investment, LOC Draws or Liquidity Loans (any such increase in cost or reduction in amounts receivable are hereinafter referred to as "ADDITIONAL COSTS"), then the Seller shall, from time to time upon demand by the Administrative Agent, pay to the Administrative Agent on behalf of such Affected Party additional amounts sufficient to compensate such Affected Party for the Seller's Share of such Additional Costs together with interest thereon from the date demanded until payment in full thereof at the applicable Daily Yield Rate. Such Affected Party agrees that, as promptly as practicable after it becomes aware of any circumstance referred to above that would result in any such Additional Costs, it shall, to the extent not inconsistent with its internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by the Seller pursuant to this SECTION 2.09(b). (c) Determinations by any Affected Party for purposes of this SECTION 2.09 of the effect of any Regulatory Change on its costs of making, funding or maintaining any commitments hereunder, under any other Related Document or under any Program Document or on amounts receivable by it hereunder or thereunder or of the additional amounts required to compensate such Affected Party in respect of any Additional Costs shall be set forth in a written notice to the Seller in reasonable detail and shall be final, binding and conclusive on the Seller (absent manifest error) for all purposes. Section 2.10. BREAKAGE COSTS. The Seller shall pay to the Administrative Agent for the account of the requesting Purchaser, upon request of such Purchaser, such amount or amounts as shall compensate such Purchaser for any loss, cost or expense incurred by such Purchaser (as determined by such Purchaser in its sole discretion) as a result of any reduction by the Seller in Capital Investment (and accompanying loss of Daily Yield thereon) other than on the maturity date of the Commercial Paper (or other financing source) funding such Capital Investment, which compensation shall include an amount equal to any loss or expense incurred by such Purchaser during the period from the date of such reduction to (but excluding) the maturity date of such Commercial Paper (or other financing source) if the rate of interest obtainable by such Purchaser upon the redeployment of funds in an amount equal to such reduction is less than the interest rate applicable to such Commercial Paper (or other financing source) (any such loss, cost or expense, "BREAKAGE COSTS"). The determination by such Purchaser of the amount of any such loss or expense shall be set forth in a written notice to the Seller in reasonable detail and shall be final, binding and conclusive on the Seller (absent manifest error) for all purposes. Section 2.11. PURCHASE EXCESS. On each Business Day during the Revolving Period and after completion of the disbursements specified in SECTION 6.03, the Administrative Agent shall notify the Seller and the Servicer of any Purchase Excess on such day, and the Seller shall deposit the amount of such Purchase Excess in the Collection Account by 11:00 a.m. (New York time) on the immediately succeeding Business Day. 8 ARTICLE III. CONDITIONS PRECEDENT Section 3.01. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. Neither the Conduit Purchaser nor the Committed Purchaser shall be obligated to purchase Purchaser Interests hereunder on the occasion of the initial Purchase, nor shall any Purchaser or the Administrative Agent be obligated to take, fulfill or perform any other action hereunder, until the following conditions have been satisfied, in the sole discretion of, or waived in writing by each of, the Purchasers and the Administrative Agent: (a) PURCHASE AGREEMENT; INFORMATION, OTHER RELATED DOCUMENTS. This Agreement shall have been duly executed by, and delivered to, the parties hereto and the Purchasers and the Administrative Agent shall have received such other information, documents, instruments and agreements as each Purchaser and the Administrative Agent shall request in connection with the transactions contemplated by this Agreement, including all documents, instruments, agreements and legal opinions listed in the Schedule of Documents, each in form and substance satisfactory to each Purchaser and the Administrative Agent. (b) GOVERNMENTAL APPROVALS. The Purchasers and the Administrative Agent shall have received (i) satisfactory evidence that the Seller, the Parent, each Originator and the Servicer have obtained all required consents and approvals of all Persons, including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Related Documents and the consummation of the transactions contemplated hereby or thereby or (ii) an Officer's Certificate from each of the Seller, the Parent, each Originator and the Servicer in form and substance satisfactory to the Purchasers and the Administrative Agent affirming that no such consents or approvals are required. (c) COMPLIANCE WITH LAWS. The Seller, the Parent, each Originator and the Servicer shall be in compliance in all material respects with all applicable foreign, federal, state and local laws and regulations, including, without limitation, those specifically referenced in SECTION 5.01(a). (d) PAYMENT OF FEES AND TAXES. The Seller shall have paid all fees required to be paid by it on the Closing Date, including all fees required hereunder and under the Fee Letter, and shall have reimbursed each Purchaser for all fees, costs and expenses of closing the transactions contemplated hereunder and under the other Related Documents, including each Purchaser's legal, rating agency and audit expenses, and other negotiation and document preparation costs. The Seller shall have paid all taxes, including without limitation any stamp duty which may be imposed as a result of the transactions contemplated by this Agreement and the Related Documents. (e) REPRESENTATIONS AND WARRANTIES. Each representation and warranty by the Seller contained herein and in each other Related Document shall be true and correct as of the 9 Closing Date, except to the extent that such representation or warranty expressly relates solely to an earlier date. (f) NO TERMINATION EVENT. No Incipient Termination Event or Termination Event hereunder or any "Event of Default" under (and as defined in) the Credit Agreement (as in effect on the Closing Date) or any "Event of Default" under (and as defined in) the Indenture shall have occurred and be continuing or would result after giving effect to any of the transactions contemplated on the Closing Date. (g) CONFIRMATION OF COMMERCIAL PAPER RATINGS. The Administrative Agent shall have received written confirmation from each Rating Agency that the then current rating of the Commercial Paper shall not be withdrawn or downgraded after giving effect to this Agreement and the transactions contemplated thereby. (h) MATERIAL ADVERSE EFFECT. As of the Closing Date, there has been (i) since September 30, 2001, no material adverse change (x) in the business, financial or other condition or prospects of the of the Parent and its Subsidiaries, taken as a whole, (y) in the Transferred Receivables, taken as a whole, or (z) in the financial condition or prospects of the Seller, (ii) no litigation commenced which could reasonably be expected to have a material adverse impact on the Parent and its Subsidiaries, taken as a whole, or which would challenge the transactions contemplated herein and in the Related Documents, and (iii) since September 30, 2001, no material increase in the liabilities (liquidated or contingent) of the Parent and its Subsidiaries, taken as a whole, or material decrease (other than resulting from the sale of the assets of the "construction equipment division" of Eagle-Picher Industries, Inc.) in the assets of the Parent and the Subsidiary Originators, taken as a whole. (i) SALE AGREEMENT AND RELATED DOCUMENTS. (i) The Seller and the Originators shall have entered into the Sale Agreement and each Related Document in form, scope and substance acceptable to the Administrative Agent and each Purchaser, (ii) the Sale Agreement and each Related Document shall be in full force and effect and shall provide for "true sale" treatment of all sales of Transferred Receivables thereunder under all applicable laws and for all purposes, and (iii) the Administrative Agent shall have received all such other information, documents, instruments and agreements as any Purchaser or the Administrative Agent shall request in connection with the transactions contemplated by the Sale Agreement, including all documents, instruments, agreements and legal opinions listed in the Schedule of Documents, each in form and substance satisfactory to each Purchaser and the Administrative Agent. (j) ACTIONS WITH RESPECT TO SENIOR DEBT FACILITY. The Administrative Agent shall be satisfied, in its sole discretion, that all actions have been taken with respect to the Senior Debt Facility as may be necessary to permit the Parent, each Originator and the Seller to (i) enter into the transactions contemplated by this Agreement and the Related Documents, (ii) sell Transferred Receivables and the Purchaser Interest, (iii) grant security interests in the Transferred Receivables, Seller Collateral and related rights to the Seller and the Administrative 10 Agent (for the benefit of the Purchasers), as applicable, and (iv) otherwise effectuate the transactions contemplated by this Agreement and the Related Documents, including, without limitation, all releases and arrangements necessary or desirable to ensure that each Transferred Receivable, Seller Collateral, other transferred property and related security are transferred to the Seller and the Administrative Agent (for the benefit of the Purchasers), as applicable, free and clear of all Adverse Claims. (k) RESPONSES TO SOLICITATION. The Administrative Agent shall have received written copies of (i) Responses to Solicitation under the Indenture in the form attached hereto as EXHIBIT 3.01(n), executed by or on behalf of the holders of Notes (issued pursuant to the Indenture) constituting a majority of the aggregate principal amount of such Notes outstanding, (ii) a Supplemental Indenture to the Indenture giving effect to the agreements referred to in the Reponses to Solicitation under clause (i), and (iii) an opinion of a law firm acting as counsel to the Parent, in form and substance acceptable to the Administrative Agent, opining, among other things, as to the due authorization, execution, delivery and enforceability of such Supplemental Indenture. Section 3.02. CONDITIONS PRECEDENT TO ALL PURCHASES. No Purchaser shall be obligated to purchase Purchaser Interests hereunder on any date if, as of such date: (a) any representation or warranty of the Seller or the Servicer contained herein or in any of the other Related Documents shall be untrue or incorrect as of such date, either before or after giving effect to the Purchase of Purchaser Interests on such date and to the application of the proceeds therefrom, except to the extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted by this Agreement; (b) any event shall have occurred, or would result from the Purchase of Purchaser Interests on such Purchase Date or from the application of the proceeds therefrom, that constitutes, (i) a Termination Event or an Event of Servicer Termination, or (ii) except in the case of Reinvestment Purchases, an Incipient Servicer Termination Event or an Incipient Termination Event; (c) the Seller shall not be in compliance with any of its covenants or other agreements set forth herein or in any Related Document; (d) the Facility Termination Date shall have occurred; (e) either before or after giving effect to such Purchase and to the application of the proceeds therefrom, a Purchase Excess would exist; (f) the Purchaser Interests sold hereunder would, after giving effect to such purchase, exceed 100%; 11 (g) the Seller shall have failed to timely deliver the Investment Base Certificate as most recently required pursuant to SECTION 2.03(A) or (B) hereof; (h) any Originator, the Seller or the Servicer shall fail to have taken such other action, including delivery of information, approvals, consents, opinions, documents and instruments to the Purchasers and the Administrative Agent and, if applicable, either Rating Agency, (i) as any Purchaser or the Administrative Agent may reasonably request, or (ii) as either Rating Agency may request; or (i) the Administrative Agent shall have determined that any event or condition has occurred that has had, or could reasonably be expected to have or result in, a Material Adverse Effect. The delivery by the Seller of a Capital Purchase Request and the acceptance by the Seller of the funds from such Capital Purchase or any Reinvestment Purchase on any Purchase Date shall be deemed to constitute, as of any such Purchase Date, a representation and warranty by the Seller that the conditions in this SECTION 3.02 have been satisfied. ARTICLE IV. REPRESENTATIONS AND WARRANTIES Section 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER. To induce each Purchaser to purchase the Purchaser Interests and the Administrative Agent to take any action hereunder, the Seller makes the following representations and warranties to each Purchaser and the Administrative Agent as of the Closing Date and, except to the extent provided otherwise below, as of each Purchase Date, each and all of which shall survive the execution and delivery of this Agreement. (a) CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Seller (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, the state of Delaware (which is Seller's only state of incorporation); (ii) is 100% owned, directly or indirectly by the Parent and the Securitization Trust, (iii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification; (iv) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business, in each case, as now, heretofore and proposed to be conducted; (v) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (vii) is in compliance with its charter and bylaws; and (viii) subject to specific representations set forth herein regarding ERISA, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, 12 individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) EXECUTIVE OFFICES; COLLATERAL LOCATIONS; CORPORATE OR OTHER NAMES; FEIN. As of the Closing Date, the current location of the Seller's chief executive office, principal place of business, other offices, the warehouses and premises within which any Seller Collateral is stored or located, and the locations of its records concerning the Seller Collateral (including originals of the Seller Assigned Agreements) are set forth in SCHEDULE 4.01(b) and none of such locations has changed within the past 12 months (or such shorter time as the Seller has been in existence). During the prior five years (or such shorter time as the Seller has been in existence), except as set forth in SCHEDULE 4.01(b), the Seller has not been known as or used any corporate, fictitious or trade name. In addition, SCHEDULE 4.01(b) lists the organizational identification number issued by Seller's state of organization or states that no such number has been issued and lists the federal employer identification number of the Seller. (c) CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by the Seller of this Agreement and the other Related Documents to which it is a party, the creation and perfection of all Liens and ownership interests provided for herein and therein: (i) are within the Seller's corporate power; (ii) have been duly authorized by all necessary or proper corporate and shareholder action; (iii) do not contravene any provision of the Seller's charter or bylaws; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which the Seller, the Parent or any Originator is a party or by which the Seller, the Parent or any Originator or any of the property of the Seller or any Originator is bound; (vi) do not result in the creation or imposition of any Adverse Claim upon any of the property of the Seller, the Parent or any Originator; and (vii) do not require the consent or approval of any Governmental Authority or any other Person, except those which have been duly obtained, made or complied with prior to the Closing Date as provided in SECTION 3.01(b). The exercise by each of the Seller, the Purchasers and the Administrative Agent of any of its rights and remedies under any Related Document to which it is a party, does not require the consent or approval of any Governmental Authority or any other Person (other than consents or approvals solely relating to or required to be obtained by a Purchaser or the Administrative Agent), except those which will have been duly obtained, made or complied with prior to the Closing Date as provided in SECTION 3.01(b). On or prior to the Closing Date, each of the Related Documents to which the Seller is a party shall have been duly executed and delivered by the Seller and on the Closing Date each such Related Document shall then constitute a legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms. (d) NO LITIGATION. No Litigation is now pending or, to the knowledge of the Seller, threatened against the Seller that (i) challenges the Seller's right or power to enter into or perform any of its obligations under the Related Documents to which it is a party, or the validity or enforceability of any Related Document or any action taken thereunder, (ii) seeks to prevent 13 the transfer, sale, pledge or contribution of any Receivable or Seller Collateral or the consummation of any of the transactions contemplated under this Agreement or the other Related Documents, or (iii) has a reasonable risk of being determined adversely to the Seller and that, if so determined, could have a Material Adverse Effect. Except as set forth on SCHEDULE 4.01(d), as of the Closing Date there is no Litigation pending or threatened that seeks damages or injunctive relief against, or alleges criminal misconduct by, the Seller. (e) SOLVENCY. Both before and after giving effect to (i) the transactions contemplated by this Agreement and the other Related Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, the Seller is and will be Solvent. No event of the type described in Section 9.01(c) has been commenced or threatened against the Seller, the Parent or any Originator. (f) MATERIAL ADVERSE EFFECT. Since the date of the Seller's organization, (i) the Seller has not incurred any obligations, contingent or non-contingent liabilities, liabilities for charges, long-term leases or forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (ii) no contract, lease or other agreement or instrument has been entered into by the Seller or has become binding upon the Seller's assets and no law or regulation applicable to the Seller has been adopted that has had or could reasonably be expected to have a Material Adverse Effect and (iii) the Seller is not in default and no third party is in default under any material contract, lease or other agreement or instrument to which the Seller is a party that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Since the date of the Seller's organization, no event has occurred that alone or together with other events could reasonably be expected to have a Material Adverse Effect. (g) OWNERSHIP OF PROPERTY; LIENS. No Transferred Receivable is subject to any Adverse Claim, none of the other properties and assets of the Seller are subject to any Adverse Claims other than Permitted Seller Encumbrances, and there are no facts, circumstances or conditions known to the Seller that may result in (i) with respect to the Transferred Receivables, any Adverse Claims (including Adverse Claims arising under Environmental Laws) and (ii) with respect to its other properties and assets, any Adverse Claims (including Adverse Claims arising under Environmental Laws) other than Permitted Seller Encumbrances. The Seller has received all assignments, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect the Seller's right, title and interest in and to the Transferred Receivables, the Seller Collateral and its other properties and assets. The Seller has rights in and the power to transfer the Transferred Receivables. The Seller has rights in and the power to transfer each item of the Seller Collateral upon which it purports to grant a Lien hereunder free and clear of any and all Liens other than Permitted Seller Encumbrances. The Liens granted to the Purchaser pursuant to SECTION 8.01 will at all times be fully perfected first priority Liens in and to the Seller Collateral. (h) VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND DEBT. Except as set forth in SCHEDULE 4.01(h), the Seller has no Subsidiaries, is not engaged in any joint 14 venture or partnership with any other Person, and is not an Affiliate of any other Person. All of the issued and outstanding Stock of the Seller is owned by each of the Stockholders in the amounts set forth on SCHEDULE 4.01(h). There are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which the Seller may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Debt of the Seller as of the Closing Date is described in SECTION 5.03(i). (i) TAXES. All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by the Seller have been filed with the appropriate Governmental Authority and all charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding charges or other amounts being contested in accordance with SECTION 5.01(e). Proper and accurate amounts have been withheld by the Seller from its employees for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. SCHEDULE 4.01(i) sets forth as of the Closing Date (i) those taxable years for which the Seller's tax returns are currently being audited by the IRS or any other applicable Governmental Authority and (ii) any assessments or threatened assessments in connection with any such audit or otherwise currently outstanding. Except as described on SCHEDULE 4.01(i), as of the Closing Date, the Seller has not executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any charges. The Seller is not liable for any charges: (A) under any agreement (including any tax sharing agreements) or (B) to the best of the Seller's knowledge, as a transferee. As of the Closing Date, the Seller has not agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, that would have a Material Adverse Effect. (j) FULL DISCLOSURE. As of the dates specified therein (or, if no such dates are specified, as of the date furnished or delivered), (i) all information contained in this Agreement, any Investment Base Certificate or any of the other Related Documents, or any written statement furnished by or on behalf of the Seller to any Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the other Related Documents is true and accurate in every material respect and (ii) none of this Agreement, any Investment Base Certificate or any of the other Related Documents, or any written statement furnished by or on behalf of the Seller to either Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the other Related Documents is misleading as a result of the failure to include therein a material fact. (k) ERISA. The Seller is in compliance with ERISA and has not incurred and does not expect to incur any liabilities (except for premium payments arising in the ordinary course of business) payable to the PBGC under ERISA. 15 (l) BROKERS. No broker or finder acting on behalf of the Seller was employed or utilized in connection with this Agreement or the other Related Documents or the transactions contemplated hereby or thereby and the Seller has no obligation to any Person in respect of any finder's or brokerage fees in connection herewith or therewith. (m) MARGIN REGULATIONS. The Seller is not engaged in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin security," as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as "MARGIN STOCK"). The Seller owns no Margin Stock, and no portion of the proceeds of the purchase price for Transferred Receivables sold hereunder will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Debt that was originally incurred to purchase or carry any Margin Stock or for any other purpose that might cause any portion of such proceeds to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. The Seller will not take or permit to be taken any action that might cause any Related Document to violate any regulation of the Federal Reserve Board applicable to the Seller. (n) NONAPPLICABILITY OF BULK SALES LAWS. No transaction contemplated by this Agreement or any of the Related Documents requires compliance with any bulk sales act or similar law. (o) SECURITIES ACT AND INVESTMENT COMPANY ACT EXEMPTIONS. Each Purchase of Purchaser Interests under this Agreement will constitute (i) a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act and (ii) a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act. (p) GOVERNMENT REGULATION. The Seller is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act. The Purchase of Purchaser Interests by the Purchasers hereunder, the application of the proceeds thereof and the consummation of the transactions contemplated by this Agreement and the other Related Documents will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission. (q) NONCONSOLIDATION. The Seller is operated in such a manner that the separate corporate existence of the Seller, on the one hand, and any member of the Parent Group, on the other hand, would not be disregarded in the event of the bankruptcy or insolvency of any member of the Parent Group and, without limiting the generality of the foregoing: (i) the Seller is a limited purpose corporation whose activities are restricted in its certificate or articles of incorporation to those activities expressly 16 permitted hereunder and under the other Related Documents and the Seller has not engaged, and does not presently engage, in any activity other than those activities expressly permitted hereunder and under the other Related Documents, nor has the Seller entered into any agreement other than this Agreement, the other Related Documents to which it is a party and, with the prior written consent of the Purchasers and the Administrative Agent, any other agreement necessary to carry out more effectively the provisions and purposes hereof or thereof; (ii) the Seller's business is managed solely by its own officers and directors, each of whom when acting for the Seller shall be acting solely in his or her capacity as an officer or director of the Seller, and not as an officer, director, employee or agent of any member of the Parent Group; (iii) other than the purchase and sale of Transferred Receivables, the making of capital contributions, the payment of dividends and the return of capital to its Stockholders, the payment of Servicing Fees to the Servicer under this Agreement and the transactions evidenced by the Ancillary Services and Lease Agreement, the Seller engages and has engaged in no intercorporate transactions with any member of the Parent Group; (iv) the Seller maintains corporate records and books of account separate from that of each member of the Parent Group, holds regular corporate meetings and otherwise observes corporate formalities and has a business office segregated from that of each member of the Parent Group; (v) the financial statements and books and records of the Seller, the Parent, Eagle-Picher Holdings, Inc. and the Originators reflect the separate corporate existence of the Seller; (vi) (A) the Seller maintains its assets separately from the assets of each member of the Parent Group, including through the maintenance of separate bank accounts and, except for any Records to the extent necessary to assist the Servicer in connection with the servicing of the Transferred Receivables, through the maintenance of separate records and books of account, (B) the Seller's funds (including all money, checks and other cash proceeds) and assets, and records relating thereto, have not been and are not commingled with those of any member of the Parent Group and (C) the separate creditors of the Seller will be entitled to be satisfied out of the Seller's assets prior to any value in the Seller becoming available to the Seller's Stockholder(s); (vii) except as otherwise expressly permitted hereunder, under the other Related Documents and under the Seller's organizational documents, no member of the Parent Group (A) pays the Seller's expenses, (B) guarantees the Seller's obligations, or (C) advances funds to the Seller for the payment of expenses or otherwise; 17 (viii) all business correspondence and other communications of the Seller are conducted in the Seller's own name, on its own stationery and through a separately-listed telephone number; (ix) the Seller does not act as agent for any member of the Parent Group, but instead presents itself to the public as a corporation separate from each such member and independently engaged in the business of purchasing and financing Receivables; (x) (A) subject to CLAUSE (B) below, the Seller maintains at least two independent directors each of whom (1) is not a Stockholder, director, officer, employee or associate, or any relative of the foregoing, of any member of the Parent Group (other than the Seller), all as provided in its certificate or articles of incorporation, (2) is affiliated with Global Securitization Services, LLC, Lord Securities Corporation or Amacar Group, L.L.C. or a similar nationally recognized organization acceptable to the Administrative Agent which is in the business of providing independent directors for special-purpose financing entities such as the Seller, and (3) is otherwise acceptable to the Purchasers and the Administrative Agent and (B) the Seller's articles of incorporation and by-laws provide that in the event of the death, incapacity, resignation or removal of an independent director, the board of directors of the Seller will promptly appoint a replacement independent director and will not vote on any matter requiring the vote of an independent director unless and until at least two independent directors have been duly appointed to serve on such board of directors; and (xi) the bylaws or the certificate or articles of incorporation of the Seller require (A) the affirmative vote of each independent director before a voluntary petition under Section 301 of the Bankruptcy Code may be filed by the Seller, and (B) the Seller to maintain (1) correct and complete books and records of account and (2) minutes of the meetings and other proceedings of its Stockholders and board of directors. (r) DEPOSIT AND DISBURSEMENT ACCOUNTS. SCHEDULE 4.01(r) lists all banks and other financial institutions at which the Seller maintains deposit or other bank accounts as of the Closing Date, including any Lockbox Accounts, and such schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor. (s) TRANSFERRED RECEIVABLES. (i) TRANSFERS. Each Transferred Receivable was purchased by the Seller on the relevant Transfer Date pursuant to the Sale Agreement. (ii) ELIGIBILITY. Each Transferred Receivable designated as an Eligible Receivable in each Investment Base Certificate constitutes an Eligible Receivable as of the date specified in such Investment Base Certificate. 18 (iii) NO MATERIAL ADVERSE EFFECT. At the time of delivery of each Investment Base Certificate hereunder, the Seller has no knowledge of any fact (including any defaults by the Obligor thereunder on any other Receivable) that would cause it or should have caused it to expect that any payments on any Transferred Receivable designated as an Eligible Receivable in such Investment Base Certificate will not be paid in full when due or to expect any other Material Adverse Effect to occur at any time. (iv) NONAVOIDABILITY OF TRANSFERS. The Seller shall (1) have purchased each Transferred Receivable from the applicable Originator for cash consideration (and/or an agreement to pay a deferred purchase price) and (2) have accepted assignment of any Eligible Receivables transferred pursuant to CLAUSE (b) of SECTION 4.04 of the Sale Agreement, in each case in an amount that constitutes fair consideration and reasonably equivalent value therefor. Each Sale of a Transferred Receivable effected pursuant to the terms of the Sale Agreement shall not have been made for or on account of an antecedent debt owed by any Originator to the Seller and no such Sale is or may be avoidable or subject to avoidance under any bankruptcy laws, rules or regulations. (t) REPRESENTATIONS, WARRANTIES AND COVENANTS IN OTHER RELATED DOCUMENTS. Each of the representations and warranties of the Seller contained in the Related Documents (other than this Agreement) is true and correct in all respects and the Seller hereby makes each such representation and warranty to, and for the benefit of, the Purchasers and the Administrative Agent as if the same were set forth in full herein. The Seller and, to the best of the Seller's knowledge (except as otherwise notified to the Administrative Agent by the Seller in writing), the Parent, each of the Originators and each Domestic Subsidiary of each of the Parent and the Originators, is in compliance with all covenants and agreements contained in the Related Documents. (u) SERVICING SOFTWARE. The Seller has all necessary licenses and rights to use the Servicing Software. (v) TERMINATION EVENT. No Incipient Termination Event or Termination Event has occurred and is continuing. Section 4.02. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. To induce the Purchasers to purchase the Purchaser Interests and the Administrative Agent to take any action required to be performed by it hereunder, in addition to the representations and warranties contained in SECTION 7.06, the Servicer represents and warrants to the Purchasers and the Administrative Agent, which representation and warranty shall survive the execution and delivery of this Agreement, that each of the representations and warranties of the Servicer (whether made by the Servicer in its capacity as an Originator or as Servicer) contained in any Related Document is true and correct and, if made by the Servicer in its capacity as an Originator, applies with equal force to the Servicer in its capacity as Servicer, and the Servicer 19 hereby makes each such representation and warranty to, and for the benefit of, the Purchasers and the Administrative Agent as if the same were set forth in full herein. ARTICLE V. GENERAL COVENANTS OF THE SELLER Section 5.01. AFFIRMATIVE COVENANTS OF THE SELLER. The Seller covenants and agrees that from and after the Closing Date and until the Termination Date: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Seller shall perform each of its obligations under this Agreement and the other Related Documents and comply with all federal, state and local laws and regulations applicable to it and the Transferred Receivables, including those relating to truth in lending, retail installment sales, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, licensing, securities laws, margin regulations, taxation, ERISA and labor matters and Environmental Laws and Environmental Permits, except to the extent that the failure to so comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. The Seller shall continue to pay all fees required to be paid by it under the Fee Letter, all governmental fees and all taxes, including without limitation any stamp duty which may be imposed as a result of the transactions contemplated by this Agreement and the Related Documents. The Seller shall comply in all respects with the Credit and Collection Policies with respect to each Transferred Receivable and with the Contract therefor. (b) MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. The Seller shall: (i) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; (ii) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder and in accordance with (1) the terms of its certificate of incorporation and bylaws, (2) SECTIONS 4.01(a), (q) and (t) and (3) the assumptions set forth in the legal opinion of Squire, Sanders & Dempsey L.L.P. or other counsel to the Seller from time to time delivered pursuant to Section 3.02(d) of the Sale Agreement with respect to issues of substantive consolidation and true sale and absolute transfer; (iii) at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, including all licenses, permits, charters and registrations, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and (iv) transact business only in such corporate and trade names as are set forth in SCHEDULE 5.01(b). The Seller shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the financial statements delivered pursuant to SECTION 5.02(a). 20 (c) DEPOSIT OF COLLECTIONS. The Seller shall instruct all Obligors to remit all payments with respect to any Transferred Receivable directly into a Lockbox Account and shall deposit or cause to be deposited promptly into a Lockbox Account, and in any event no later than the first Business Day after receipt thereof, all Collections the Seller may receive with respect to any Transferred Receivable. (d) USE OF PROCEEDS. The Seller shall utilize the proceeds of the Purchases made hereunder solely for (i) the purchase of Receivables from the Originators pursuant to the Sale Agreement, (ii) the payment of dividends to its Stockholders, (iii) the payment of administrative fees or Servicing Fees or expenses to the Servicer or routine administrative or operating expenses, in each case only as expressly permitted by and in accordance with the terms of this Agreement and the other Related Documents and (iv) the payment of costs, fees, expenses, indemnities and reimbursements due and owing by the Seller to the extent expressly provided in this Agreement and in the Related Documents. (e) PAYMENT, PERFORMANCE AND DISCHARGE OF OBLIGATIONS. (i) Subject to SECTION 5.01(e)(ii), the Seller shall pay, perform and discharge or cause to be paid, performed and discharged promptly all charges payable by it, including (A) charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all charges with respect to taxes, social security and unemployment withholding with respect to its employees, and (B) lawful claims for labor, materials, supplies and services or otherwise before any such amounts shall become past due. (ii) The Seller may in good faith contest, by appropriate proceedings, the validity or amount of any charges or claims described in SECTION 5.01(e)(i); PROVIDED, that (A) adequate reserves with respect to such contest are maintained on the books of the Seller, in accordance with GAAP, (B) such contest is maintained and prosecuted continuously and with diligence, (C) none of the Seller Collateral becomes subject to forfeiture or loss as a result of such contest, (D) no Lien shall be imposed to secure payment of such charges or claims other than inchoate tax liens and (E) none of the Purchasers or the Administrative Agent has advised the Seller in writing that such Affected Party reasonably believes that failure to pay or to discharge such claims or charges could have or result in a Material Adverse Effect. (f) ERISA AND ENVIRONMENTAL NOTICES. The Seller shall give the Administrative Agent prompt written notice of (i) any event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA and (ii) any environmental claims against the Parent, any Originator, any other Domestic Subsidiary of the Parent or the Seller which, individually could reasonably be expected to exceed $500,000 or in the aggregate could reasonably be expected to exceed $1,000,000. 21 (g) BOOKS AND RECORDS. The Seller shall cause its books and Records to be marked as to clearly distinguish Excluded Receivables from Transferred Receivables. Section 5.02. REPORTING REQUIREMENTS OF THE SELLER. (a) The Seller hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Purchasers, the Administrative Agent and, in the case of PARAGRAPH (f) therein only, to the Rating Agencies, the financial statements, notices and other information at the times, to the Persons and in the manner set forth in ANNEX 5.02(a). (b) The Seller hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Purchasers, the Administrative Agent and the Collateral Agent, Investment Base Certificates in accordance with the provisions of Section 2.03(a). (c) The Seller hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Purchaser, the Administrative Agent and the Collateral Agent such other reports, statements and reconciliations with respect to the Investment Base or Seller Collateral as the Purchaser, the Administrative Agent or the Collateral Agent shall from time to time request in its reasonable discretion. (d) The Seller hereby agrees that, from and after the Closing Date until the Termination Date, it shall prepare and deliver all reports, statements and records required to be delivered by it hereunder or under any other Related Document so as to clearly distinguish (i) Excluded Receivables from Transferred Receivables and (ii) Transferred Receivables that are subsequently reconveyed to the appropriate Originator pursuant to Section 4.04 of the Sale Agreement from Transferred Receivables that are not so reconveyed. Section 5.03. NEGATIVE COVENANTS OF THE SELLER. The Seller covenants and agrees that, without the prior written consent of the Purchasers and the Administrative Agent, from and after the Closing Date until the Termination Date: (a) SALE OF STOCK AND ASSETS. The Seller shall not sell, transfer, convey, assign or otherwise dispose of, or assign any right to receive income in respect of, any of its properties or other assets, including its capital Stock (whether in a public or a private offering or otherwise), any Transferred Receivable, Seller Collateral or Invoice with respect thereto or any of its rights with respect to any Lockbox or any Lockbox Account, the Collection Account, the Concentration Account, the Retention Account or any other deposit account in which any Collections of any Transferred Receivable are deposited except as otherwise expressly permitted by this Agreement or any of the other Related Documents. (b) LIENS. The Seller shall not create, incur, assume or permit to exist (i) any Adverse Claim on or with respect to its Transferred Receivables or (ii) any Adverse Claim on or with respect to its other properties or assets (whether now owned or hereafter acquired) except 22 for the Liens set forth in SCHEDULE 5.03(b) and other Permitted Seller Encumbrances. In addition, the Seller shall not become a party to any agreement, note, indenture or instrument or take any other action that would prohibit the creation of a Lien on any of its properties or other assets in favor of the Purchasers as additional collateral for the Seller Secured Obligations, except as otherwise expressly permitted by this Agreement or any of the other Related Documents. (c) MODIFICATIONS OF RECEIVABLES, CONTRACTS OR CREDIT AND COLLECTION POLICIES. The Seller shall not, without the prior written consent of the Administrative Agent and, with respect to CLAUSE (ii) only, upon provision of written notice to the Rating Agencies, (i) extend, amend, rescind, forgive, discharge, compromise, waive, cancel or otherwise modify the terms of any Transferred Receivable or amend, modify or waive any term or condition of any Invoice or other Contract related thereto, PROVIDED, that as long as no Incipient Termination Event or Termination Event has occurred and is continuing, the Seller may authorize the Servicer to (A) extend the maturity or adjust the Outstanding Balance of any Transferred Receivables or amend, modify or waive the terms of any Invoice related thereto, in each case to the extent expressly permitted by the terms of the Credit and Collection Policies, as the Servicer deems appropriate to maximize the Collections thereof and (B) amend any Contract (other than an Invoice) related to a Transferred Receivable, PROVIDED FURTHER, in each case, that such action would not (1) cause any Transferred Receivable which prior to such amendment did not constitute an Eligible Receivable to be an Eligible Receivable, (2) cause any Transferred Receivable which prior to such amendment constituted an Eligible Receivable to cease to be an Eligible Receivable, (3) cause an Incipient Termination Event or a Termination Event to occur or (4) have a material adverse effect on the value or collectibility of, the interests of the Purchasers in, or the security for, any Transferred Receivable, or (ii) amend, modify or waive any term or provision of the Credit and Collection Policies. (d) CHANGES IN INSTRUCTIONS TO OBLIGORS. The Seller shall not make any change in its instructions to Obligors regarding the deposit of Collections with respect to the Transferred Receivables without the prior written consent of the Administrative Agent. (e) CAPITAL STRUCTURE AND BUSINESS. The Seller shall not (i) make any changes in any of its business objectives, purposes or operations that could have or result in a Material Adverse Effect, (ii) make any change in its capital structure as described on SCHEDULE 4.01(h), including the issuance of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock, (iii) reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof without the prior written consent of the Administrative Agent, or (iv) amend its certificate or articles of incorporation or bylaws. The Seller shall not engage in any business other than as provided in its organizational documents and the Related Documents. (f) MERGERS, SUBSIDIARIES, ETC. The Seller shall not directly or indirectly, by operation of law or otherwise, (i) form or acquire any Subsidiary, or (ii) merge with, consolidate with, convey, transfer, lease or otherwise dispose of, all (or substantially all) of its assets (whether now owned or hereafter acquired) to, or acquire all (or substantially all) of the assets or 23 capital Stock or other ownership interests of, or otherwise combine with or acquire, any Person (whether in one transaction or in a series of transaction) other than dispositions of accounts receivable and related assets as contemplated by this Agreement. (g) SALE CHARACTERIZATION; SALE AGREEMENT. The Seller shall not make statements or disclosures, prepare any financial statements or in any other respect account for or treat the transactions contemplated by the Sale Agreement (including for accounting, tax and reporting purposes) in any manner other than as a true sale and absolute assignment of the title to and sole record and beneficial ownership interest of the Transferred Receivables by the Originators to the Seller. (h) RESTRICTED PAYMENTS. The Seller shall not enter into any lending transaction with any other Person. The Seller shall not at any time (i) advance credit to any Person or (ii) declare any dividends, repurchase any Stock, return any capital, or make any other payment or distribution of cash or other property or assets in respect of the Seller's Stock if, after giving effect to any such advance or distribution, a Purchase Excess, Incipient Termination Event or Termination Event would exist or otherwise result therefrom. (i) DEBT. The Seller shall not create, incur, assume or permit to exist any Debt, except (i) Debt of the Seller to any Affected Party, Originator, Indemnified Person, the Servicer or any other Person in each case expressly permitted by this Agreement or any other Related Document, (ii) accrued or deferred taxes, and (iii) indorser liability in connection with the indorsement of negotiable instruments for deposit or collection in the ordinary course of business. (j) PROHIBITED TRANSACTIONS. The Seller shall not enter into, or be a party to, any transaction with any Person except as expressly permitted hereunder or under any other Related Document. (k) INVESTMENTS. Except as otherwise expressly permitted hereunder or under the other Related Documents, the Seller shall not make any investment in, or make or accrue loans or advances of money to, any Person, including any Stockholder, director, officer or employee of the Seller, the Parent or any of the Parent's other Subsidiaries or Affiliates, through the direct or indirect lending of money, holding of securities or otherwise, except with respect to Transferred Receivables and Permitted Investments. (l) COMMINGLING. The Seller shall not deposit or permit the deposit of any funds that (i) do not constitute Collections of Transferred Receivables or (ii) constitute Collections of Excluded Receivables, into any Lockbox or Lockbox Account or the Concentration Account. If such funds are nonetheless deposited into a Lockbox or Lockbox Account or the Concentration Account, the Seller shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly remit any such amounts to the applicable Originator. 24 (m) ERISA. The Seller shall not, and shall not cause or permit any of its ERISA Affiliates to, cause or permit to occur an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA. (n) RELATED DOCUMENTS. The Seller shall not amend, modify or waive any term or provision of any Related Document without the prior written consent of the Administrative Agent. (o) BOARD POLICIES. The Seller shall not modify the terms of any policy or resolutions of its board of directors if such modification could have or result in a Material Adverse Effect. (p) PURCHASE OF RECEIVABLES. The Seller shall not, directly or indirectly, purchase any accounts receivables from any Person (other than the Originators pursuant to the terms of the Sale Agreement) without the express written consent of the Administrative Agent. ARTICLE VI. COLLECTIONS AND DISBURSEMENTS Section 6.01. ESTABLISHMENT OF ACCOUNTS. (a) THE LOCKBOX ACCOUNTS. (i) The Seller has established with each Lockbox Account Bank one or more Lockbox Accounts. The Seller has established the Concentration Account with the Concentration Account Bank. The Seller agrees that the Administrative Agent shall have exclusive dominion and control of each Lockbox Account and the Concentration Account and all monies, instruments and other property from time to time on deposit therein. The Seller shall not make or cause to be made, or have any ability to make or cause to be made, any withdrawals from any Lockbox Account except as provided in SECTION 6.01(b)(ii). (ii) The Seller and the Servicer have instructed all existing Obligors of Transferred Receivables, and shall instruct all future Obligors of such Transferred Receivables, to make payments in respect thereof only (A) by check or money order mailed to one or more lockboxes or post office boxes under the control of the Administrative Agent (each a "LOCKBOX" and collectively the "LOCKBOXES") or (B) by wire or interbank transfer or moneygram directly to a Lockbox Account. SCHEDULE 4.01(r) lists all Lockboxes and all Lockbox Account Banks at which the Seller maintains Lockbox Accounts as of the Closing Date, and such schedule correctly identifies (1) with respect to each such Lockbox Account Bank, the name, address and telephone number thereof, (2) with respect to each Lockbox Account, the name in which such account is held and the complete account number therefor, and (3) with respect to each Lockbox, the lockbox number and address thereof. The Seller and the Servicer shall endorse, to the 25 extent necessary, all checks or other instruments received in any Lockbox so that the same can be deposited in the Lockbox Account, in the form so received (with all necessary endorsements), on the first Business Day after the date of receipt thereof. In addition, each of the Seller and the Servicer shall deposit or cause to be deposited into a Lockbox Account or the Concentration Account all cash, checks, money orders or other proceeds of Transferred Receivables or Seller Collateral received by it other than in a Lockbox or a Lockbox Account, in the form so received (with all necessary endorsements), not later than the close of business on the second Business Day following the date of receipt thereof, and until so deposited all such items or other proceeds shall be held in trust, as trustee, for the benefit of the Collateral Agent. Neither the Seller nor the Servicer shall make any deposits into a Lockbox or any Lockbox Account except in accordance with the terms of this Agreement or any other Related Document. (iii) If, for any reason, a Lockbox Account Agreement terminates or any Lockbox Account Bank fails to comply with its obligations under the Lockbox Account Agreement to which it is a party, then the Seller shall promptly notify all Obligors of Transferred Receivables who had previously been instructed to make any payments to a Lockbox Account maintained at any such Lockbox Account Bank to make all future payments to a new Lockbox Account in accordance with this SECTION 6.01(a)(iii). The Seller shall not close any such Lockbox Account unless it shall have (A) received the prior written consent of the Administrative Agent, (B) established a new account with the same Lockbox Account Bank or with a new depositary institution satisfactory to the Administrative Agent, (C) entered into an agreement covering such new account with such Lockbox Account Bank or with such new depositary institution substantially in the form of such Lockbox Account Agreement or that is satisfactory in all respects to the Administrative Agent (whereupon, for all purposes of this Agreement and the other Related Documents, such new account shall become a Lockbox Account, such new agreement shall become a Lockbox Account Agreement and any new depositary institution shall become a Lockbox Account Bank), and (D) taken all such action as the Administrative Agent shall require to grant and perfect a first priority Lien in such new Lockbox Account to the Purchaser under SECTION 8.01 of this Agreement. Notwithstanding the foregoing, if the Lockbox Account Agreement for any Specified Obligor Lockbox is terminated on or after the Exclusion Date in accordance with the written consent of the Administrative Agent, no new Lockbox Account Agreement nor new Lockbox Account for such Specified Obligor Lockbox need be established. Except as permitted by this SECTION 6.01(a), neither the Seller nor the Servicer shall open any new Lockbox or Lockbox Account without the prior written consent of the Administrative Agent. (iv) SCHEDULE 4.01(r) correctly identifies the Concentration Account, the name, address and telephone number of the Concentration Account Bank, and the name in which the Concentration Account is held and the complete account number therefor. If, for any reason, the Lockbox Account Agreement applicable to the Concentration Account terminates or the Concentration Account Bank fails to comply 26 with its obligations under such Lockbox Account Agreement, then the Administrative Agent may direct the Lockbox Account Banks to forward all Collections received in the Lockbox Accounts to the Collection Account. The Seller shall not close the Concentration Account unless it shall have (A) received the prior written consent of the Administrative Agent, (B) established a new account with the same Concentration Account Bank or with a new depositary institution satisfactory to the Administrative Agent, (C) entered into an agreement covering such new account with such Concentration Account Bank or with such new depositary institution substantially in the form of a Lockbox Account Agreement or that is satisfactory in all respects to the Administrative Agent (whereupon, for all purposes of this Agreement and the other Related Documents, such new account shall become a Concentration Account, such new agreement shall become a Lockbox Account Agreement and any new depositary institution shall become a Concentration Account Bank), and (D) taken all such action as the Administrative Agent shall require to grant and perfect a first priority Lien in such new Concentration Account to the Purchaser under SECTION 8.01 of this Agreement. Except as permitted by this SECTION 6.01(a), neither the Seller nor the Servicer shall open any Concentration Account without the prior written consent of the Administrative Agent. (v) Pursuant to SECTION 6.02, the Seller shall instruct each Lockbox Account Bank to transfer, and the Seller hereby grants the Administrative Agent the authority to instruct each such Lockbox Account Bank to transfer, on each Business Day in same day funds, all available funds in each Lockbox Account to the Concentration Account. (b) COLLECTION ACCOUNT. (i) The Purchasers have established and shall maintain the Collection Account with the Depositary. The Collection Account shall be registered in the name of the Administrative Agent and the Administrative Agent shall, subject to the terms of this Agreement, have exclusive dominion and control thereof and of all monies, instruments and other property from time to time on deposit therein. (ii) Pursuant to SECTION 6.02, the Seller shall instruct the Concentration Account Bank to transfer, and the Seller hereby grants the Administrative Agent the authority to instruct each such Concentration Account Bank to transfer, no later than 11:00 a.m. (New York time) on each Business Day in same day funds, all available funds in the Concentration Account to the Collection Account. The Purchasers and the Administrative Agent may deposit into the Collection Account from time to time all monies, instruments and other property received by any of them as proceeds of the Transferred Receivables. On each Business Day prior to the Facility Termination Date the Administrative Agent shall instruct and cause the Depositary (which instruction may be in writing or by telephone confirmed promptly thereafter in writing) to release funds on deposit in the Collection Account in the order of priority set forth in SECTION 6.03. On 27 each Business Day from and after the Facility Termination Date the Administrative Agent shall apply all amounts when received in the Collection Account in the order of priority set forth in SECTION 6.05. (iii) If, for any reason, the Depositary wishes to resign as depositary of the Collection Account or fails to carry out the instructions of the Administrative Agent, then the Administrative Agent shall promptly notify the Purchasers. Neither the Purchasers nor the Administrative Agent shall close the Collection Account unless (A) a new deposit account has been established with the Depositary or a new depository institution, (B) the Purchasers and the Administrative Agent have entered into an agreement covering such new account with such depositary institution satisfactory in all respects to the Administrative Agent (whereupon such new account shall become the Collection Account for all purposes of this Agreement and the other Related Documents), and (C) the Purchasers and the Administrative Agent have taken all such action as the Administrative Agent shall require to grant and perfect a first priority Lien in such new Collection Account to the Administrative Agent on behalf of the Purchasers and to the Collateral Agent on behalf of the Conduit Purchaser under the Collateral Agent Agreement. (c) RETENTION ACCOUNT. (i) The Administrative Agent has established and shall maintain the Retention Account with the Depositary. The Retention Account shall be registered in the name of the Administrative Agent and the Administrative Agent shall, subject to the terms of this Agreement, have exclusive dominion and control thereof and of all monies, instruments and other property from time to time on deposit therein. (ii) If, for any reason, the Depositary wishes to resign as depositary of the Retention Account or fails to carry out the instructions of the Administrative Agent, then the Administrative Agent shall promptly notify the Purchasers. Neither the Purchasers nor the Administrative Agent shall close the Retention Account unless (A) a new deposit account has been established with the Depositary or a new depository institution, (B) the Purchasers and the Administrative Agent have entered into an agreement covering such new account with such depositary institution satisfactory in all respects to the Administrative Agent (whereupon such new account shall become the Retention Account for all purposes of this Agreement and the other Related Documents), and (C) the Purchasers and the Administrative Agent have taken all such action as the Administrative Agent shall require to grant and perfect a first priority Lien in such new Retention Account to the Administrative Agent on behalf of the Purchasers and to the Collateral Agent on behalf of the Conduit Purchaser under the Collateral Agent Agreement. Section 6.02. FUNDING OF COLLECTION ACCOUNT. (a) As soon as practicable, and in any event no later than 11:00 a.m. (New York time) on each Business Day: 28 (i) the Administrative Agent shall transfer or cause to be transferred, to the extent then available, all Collections deposited in any Lockbox Account prior to such Business Day to the Concentration Account and all amounts subsequently on deposit in the Concentration Account to the Collection Account; (ii) the Applicable Purchaser or the Administrative Agent shall deposit in the Collection Account the amount, if any, required pursuant to SECTION 2.04(B)(I); (iii) if, on the immediately preceding Business Day, the Administrative Agent shall have notified the Seller of any Purchase Excess, then the Seller shall deposit cash in the amount of such Purchase Excess in the Collection Account; (iv) if on such Business Day the Seller is required to make other payments under this Agreement not previously retained out of Collections (including Additional Amounts and Indemnified Amounts as to which any Indemnified Person has made a demand on the Seller and which remain unpaid for five (5) or more Business Days), then the Seller shall deposit an amount equal to such payments in the Collection Account; (v) if, on the immediately preceding Business Day, any Originator has repurchased a Transferred Receivable pursuant to SECTION 4.04 of the Sale Agreement or made a payment as a result of any Dilution Factors pursuant to SECTION 4.02(O) of the Sale Agreement, then the Seller shall deposit in the Collection Account cash in the amount so received from such Originator for such contribution or for such repurchase or payment; (vi) the Servicer shall deposit in the Collection Account the Outstanding Balance of any Transferred Receivable the Servicer elects to pay pursuant to SECTION 7.04; AND (vii) the Seller shall deposit in the Collection Account the Outstanding Balance of any Transferred Receivable the Seller elects to pay pursuant to SECTION 8.06(D). (b) If, on or before the second Business Day immediately preceding any Settlement Date, the Administrative Agent shall have notified the Seller of any Retention Account Deficiency pursuant to SECTION 6.04(B), then the Seller shall deposit cash in the amount of such deficiency in the Collection Account no later than 11:00 a.m. (New York time) on such Settlement Date. (c) From and after the Facility Termination Date, the Administrative Agent shall transfer all amounts on deposit in the Retention Account as of that date to the Collection Account. 29 Section 6.03. DAILY DISBURSEMENTS FROM THE COLLECTION ACCOUNT; REVOLVING PERIOD. On each Business Day no later than 1:00 p.m. (New York time) during the Revolving Period, and following the transfers made pursuant to SECTION 6.02, the Administrative Agent shall disburse an amount equal to the product of (1) the Purchaser Interest and (2) the amount of all Collections then on deposit in the Collection Account and its related subaccounts in the following priority: (a) (x) prior to the occurrence of a Committed Purchaser Funding Event, to the Retention Account or (y) after the occurrence of a Committed Purchaser Funding Event, to the Administrative Agent: (i) an amount equal to any Retention Account Deficiency, FIRST from amounts deposited pursuant to SECTION 6.02(B) and SECOND from Collections then on deposit in the Collection Account; and (ii) an amount equal to the sum of: (A) Daily Yield; (B) the Yield Shortfall as of the close of business on the immediately preceding Business Day; (C) the Investor Portion of the Servicing Fee (calculated assuming that the Servicing Fee Rate is the applicable rate); PROVIDED, HOWEVER, that if the Parent, or any Affiliate of the Parent, is the Servicer, then such amount will not be deposited in the Retention Account on such day but the Seller shall pay the Servicing Fee in accordance with the provisions of SECTION 7.05(B); (D) the Investor Portion of the Servicing Fee Shortfall as of the close of business on the immediately preceding Business Day; PROVIDED, HOWEVER, that if the Parent, or any Affiliate of the Parent, is the Servicer, then such amount will not be deposited in the Retention Account on such day but the Seller shall pay the Servicing Fee in accordance with the provisions of SECTION 7.05(B); (E) the Unused Commitment Fee for such day; (F) the Unused Commitment Fee Shortfall as of the close of business on the immediately preceding Business Day; and (G) any Additional Amounts or Indemnified Amounts as to which any Indemnified Person has made a demand on the 30 Seller and which remain unpaid for five (5) or more Business Days; (b) to the Purchasers: (i) an amount equal to any Purchase Excess to be applied in reduction of Capital Investment, to the Purchasers ratably based on the amount of their respective Capital Investments; (ii) an amount equal to the deposits made in the Collection Account pursuant to SECTION 6.02(A)(IV) and not otherwise disbursed pursuant to SECTION 6.03(A), to be disbursed ratably based on the amounts owed to the applicable Purchasers; (iii) if, pursuant to a Repayment Notice, the Seller has requested a reduction of the Capital Investment of the Purchasers, then to the Purchasers, ratably based on the amount of their respective Capital Investments, the lesser of (A) the amount of such requested reduction of Capital Investment and (B) the balance remaining on deposit in the Collection Account; (c) to the Seller Account, the balance of any amounts remaining in the Collection Account after making the foregoing disbursements. Section 6.04. DISBURSEMENTS FROM THE RETENTION ACCOUNT; SETTLEMENT DATE PROCEDURES; REVOLVING PERIOD. (a) During the Revolving Period, (x) on each Settlement Date prior to the occurrence of a Committed Purchaser Funding Event and (y) on each Business Day on and after the occurrence of a Committed Purchaser Funding Event, the amounts on deposit in the Retention Account or transferred to the Administrative Agent pursuant to SECTION 6.03(A) shall be disbursed or retained by the Administrative Agent in the following priority: (i) to the applicable Purchasers (or, if applicable, any Indemnified Person or Affected Party), an amount equal to: (A) if such Settlement Date occurs on or prior to the occurrence of a Committed Purchaser Funding Event, an amount equal to: (1) the accrued and unpaid Accrued Monthly Yield as of the end of the immediately preceding Settlement Period; (2) the accrued and unpaid Unused Commitment Fee as of the end of the immediately preceding Settlement Period; 31 (3) all Additional Amounts incurred and payable to any Affected Party as of the end of the immediately preceding Settlement Period; (4) all other amounts accrued and payable under this Agreement (including Indemnified Amounts incurred and payable to any Indemnified Person) as of the end of the immediately preceding Settlement Period to the extent not already transferred pursuant to SECTION 6.03(B)(II). (5) if a Purchase Excess exists on such date, an amount equal to such excess to the extent not already transferred pursuant to SECTION 6.03(B)(I), to be applied in reduction of Capital Investment; (B) if such Business Day occurs after the occurrence of a Committed Purchaser Funding Event, an amount equal to: (1) the accrued and unpaid Daily Yield as of such date; (2) the accrued and unpaid Unused Commitment Fee as of such date; (3) all Additional Amounts as to which any Affected Party has made a demand on the Seller and which remain unpaid for five (5) or more Business Days; (4) all other amounts accrued and payable under this Agreement (including Indemnified Amounts as to which any Indemnified Person has made a demand on the Seller and which remain unpaid for five (5) or more Business Days to the extent not already transferred pursuant to SECTION 6.03(B)(II). (5) if a Purchase Excess exists on such date, an amount equal to such excess to the extent not already transferred pursuant to SECTION 6.03(B)(I), to be applied in reduction of Capital Investment; (ii) to the extent any funds have been deposited in the Retention Account in accordance with SECTION 6.03(A)(II)(C) and (D), to the Servicer or the Successor Servicer, as applicable, on behalf of the Seller, an amount equal to the accrued and unpaid Investor Portion of the Servicing Fee or Successor Servicing Fees and Expenses as of (x) the end of the immediately preceding Settlement Period (if such Settlement Date occurs on or prior to the occurrence of a Committed Purchaser Funding Event) or (y) such date (if such date occurs after the occurrence of a Committed 32 Purchaser Funding Event); PROVIDED, however, that any such amount shall be paid net of any amounts paid, or that should have been paid, as provided in SECTION 7.05(B); (iii) to be retained in the Retention Account, if such Settlement Period occurs prior to the occurrence of a Committed Purchaser Funding Event, an amount equal to the Accrued Monthly Yield, Accrued Unused Commitment Fee and, to the extent any funds have been deposited in the Retention Account pursuant to SECTIONS 6.03(A)(II)(C) and (D), Accrued Servicing Fee as of such date; and (iv) to the Seller Account, the balance of any funds remaining in the Collection Account after retaining or disbursing the foregoing amounts (and, prior to the occurrence of a Committed Purchaser Funding Event, the Administrative Agent shall also transfer to the Seller Account on such date any and all interest earned on, and paid by the Depository with respect to, any funds on deposit in the Retention Account during the preceding Settlement Period). (b) No later than the second Business Day immediately preceding each Settlement Date, the Administrative Agent shall determine and notify the Seller of any Retention Account Deficiency for the preceding Settlement Period, and the Seller shall deposit cash in the amount of such Retention Account Deficiency to the Collection Account pursuant to SECTION 6.02(B). Section 6.05. LIQUIDATION SETTLEMENT PROCEDURES. On each Business Day from and after the Facility Termination Date until the Termination Date, the Administrative Agent shall, as soon as practicable, transfer all amounts then on deposit in the Retention Account to the Collection Account and shall transfer all amounts in the Collection Account (including amounts transferred from the Retention Account pursuant to SECTION 6.02(C) and amounts which are not allocable to the Purchaser Interests) in the following priority: (a) if an Event of Servicer Termination has occurred and a Successor Servicer has assumed the responsibilities and obligations of the Servicer in accordance with SECTION 11.02, then to the Successor Servicer an amount equal to its accrued and unpaid Successor Servicing Fees and Expenses; (b) to the Purchasers, ratably, an amount equal to accrued and unpaid Daily Yield through and including the date of maturity (if any) of the Commercial Paper (or other funding source) maintaining the Capital Investment; (c) to the Purchasers, an amount equal to the unpaid Capital Investment; (d) to the Administrative Agent, an amount equal to accrued and unpaid Unused Commitment Fees; (e) pro rata to all Additional Amounts incurred and payable to any Affected Party and Indemnified Amounts incurred and payable to any Indemnified Person; and 33 (f) if an Event of Servicer Termination shall not have occurred, to the Servicer in an amount equal to the accrued and unpaid Servicing Fee; and (g) to the Seller Account, the balance of any funds remaining in the Collection Account after payment in full of all other amounts set forth in this SECTION 6.05. Section 6.06. INVESTMENT OF FUNDS IN ACCOUNTS. To the extent uninvested amounts are on deposit in the Retention Account on any given day during the Revolving Period, the Administrative Agent shall invest all such amounts in Permitted Investments selected by the Administrative Agent that mature no later than the immediately succeeding Settlement Date. From and after the Facility Termination Date, any investment of such amounts shall be solely at the discretion of the Administrative Agent, subject to the restrictions described above. All proceeds of any such investment shall be deposited upon receipt into the Retention Account. Section 6.07. TERMINATION PROCEDURES. (a) On the earlier of (i) the first Business Day after the Facility Termination Date on which the Capital Investment has been reduced to zero or (ii) the Final Purchase Date, if the obligations to be paid pursuant to SECTION 6.05 have not been paid in full, the Seller shall immediately deposit in the Collection Account an amount sufficient to make such payments in full. (b) On the Termination Date, all amounts on deposit in the Collection Account and the Retention Account shall be disbursed to the Seller and all ownership interests or Liens of the Purchasers in and to all Transferred Receivables and all Liens of the Purchasers and the Administrative Agent in and to the Seller Collateral shall be released by each Purchaser and the Administrative Agent. Such disbursement shall constitute the final payment to which the Seller is entitled pursuant to the terms of this Agreement. (c) Seller acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the written consent of Administrative Agent and agrees that it will not do so without the prior written consent of Administrative Agent, subject to Seller's rights under Section 9-509(d)(2) of the UCC. ARTICLE VII. SERVICER PROVISIONS Section 7.01. APPOINTMENT OF THE SERVICER. Each of the Conduit Purchaser and the Committed Purchaser hereby appoints the Servicer as its agent, and the Seller hereby acknowledges such appointment, to service the Transferred Receivables and enforce its rights and interests in and under each Transferred Receivable and Contract therefor and the Seller Collateral and to serve in such capacity until the termination of its responsibilities pursuant to SECTIONS 9.02 or 11.01. In connection therewith, the Servicer hereby accepts such appointment 34 and agrees to perform the duties and obligations set forth herein. The Servicer may, with the prior written consent of each Purchaser and the Administrative Agent, subcontract with a Sub-Servicer for the collection, servicing or administration of the Transferred Receivables; PROVIDED, that (a) the Servicer shall remain liable for the performance of the duties and obligations of such Sub-Servicer pursuant to the terms hereof and (b) any Sub-Servicing Agreement that may be entered into and any other transactions or services relating to the Transferred Receivables involving a Sub-Servicer shall be deemed to be between the Sub-Servicer and the Servicer alone, and the Purchasers and the Administrative Agent shall not be deemed parties thereto and shall have no obligations, duties or liabilities with respect to the Sub-Servicer. Subject to compliance with the proviso set forth in the immediately preceding sentence, each of the Purchasers and the Administrative Agent hereby consent to each Originator acting as a sub-servicer with respect to the Transferred Receivables originated by such Person. Any Sub-Servicing Agreement will be terminated upon any termination or replacement of the Servicer pursuant to SECTIONS 9.02 or 11.01. Section 7.02. DUTIES AND RESPONSIBILITIES OF THE SERVICER. Subject to the provisions of this Agreement, the Servicer shall conduct the servicing, administration and collection of the Transferred Receivables and the Seller Collateral and shall take, or cause to be taken, all actions that (i) may be necessary or advisable to service, administer and collect each Transferred Receivable and the Seller Collateral from time to time, (ii) the Servicer would take if the Transferred Receivables and the Seller Collateral were owned by the Servicer, (iii) are consistent with industry practice for the servicing of such Transferred Receivables and the Seller Collateral and (iv) are in compliance with the provisions of the Credit and Collection Policies. Section 7.03. COLLECTIONS ON RECEIVABLES. (a) In the event that the Servicer is unable to determine the specific Receivables on which Collections have been received from the Obligor thereunder, the parties agree for purposes of this Agreement only that such Collections shall be deemed to have been received on such Receivables in the order in which they were originated with respect to such Obligor. In the event that the Servicer is unable to determine the specific Receivables on which discounts, offsets or other non-cash reductions have been granted or made with respect to the Obligor thereunder, the parties agree for purposes of this Agreement only that such reductions shall be deemed to have been granted or made (i) prior to a Termination Event, on such Receivables as determined by the Servicer, and (ii) from and after the occurrence of a Termination Event, in the reverse order in which they were originated with respect to such Obligor. (b) If the Servicer determines that amounts unrelated to the Transferred Receivables ("UNRELATED AMOUNTS") have been deposited in the Collection Account, then the Servicer shall provide written evidence thereof to the Purchasers and the Administrative Agent no later than the first Business Day following the day on which the Servicer had actual knowledge thereof, which evidence shall be provided in writing and shall be otherwise satisfactory to each such Affected Party. Upon receipt of any such notice, the Administrative 35 Agent shall segregate the Unrelated Amounts and the same shall not be deemed to constitute Collections on Transferred Receivables and shall not be subject to the provisions of ARTICLE VI. Section 7.04. AUTHORIZATION OF THE SERVICER. Each of the Conduit Purchaser and the Committed Purchasers hereby authorizes the Servicer, and the Seller acknowledges such authorization, to take any and all reasonable steps in its name and on its behalf necessary or desirable and not inconsistent with the ownership of the Purchaser Interests purchased by such Purchaser hereunder and the pledge of the Conduit's Purchaser Interest by the Conduit Purchaser to the Collateral Agent pursuant to the Collateral Agent Agreement, in the determination of the Servicer, to (a) collect all amounts due under any Transferred Receivable and the Seller Collateral, including endorsing its name on checks and other instruments representing Collections on such Transferred Receivable, and execute and deliver any and all instruments of satisfaction or cancellation or of partial or full release or discharge and all other comparable instruments with respect to any such Transferred Receivable and (b) after any Transferred Receivable becomes a Defaulted Receivable and to the extent permitted under and in compliance with applicable law and regulations, commence proceedings with respect to the enforcement of payment of any such Transferred Receivable and the Contract therefor and adjust, settle or compromise any payments due thereunder, in each case to the same extent as the applicable Originator could have done if it had continued to own such Transferred Receivable. Each Originator, the Seller, the Administrative Agent and each Purchaser shall furnish the Servicer with any powers of attorney and other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. Notwithstanding anything to the contrary contained herein, the Purchasers and the Administrative Agent shall have the absolute and unlimited right to direct the Servicer (whether the Servicer is the Parent or otherwise) (i) to commence or settle any legal action to enforce collection of any Transferred Receivable or (ii) to foreclose upon, repossess or take any other action that the Administrative Agent deems necessary or advisable with respect thereto; PROVIDED, that in lieu of commencing any such action or taking other enforcement action, the Servicer may, at its option, elect to (x) deposit an amount equal to the Outstanding Balance for such Transferred Receivable into the Collection Account or (y) replace such Transferred Receivable with an Eligible Receivable(s) of equal or greater amount to the Capital Investment with respect to the Purchasers' Purchaser Interest in such Transferred Receivable. In no event shall the Servicer be entitled to make any Affected Party a party to any Litigation without such Affected Party's express prior written consent, or to make the Seller a party to any Litigation without the Administrative Agent's consent. Section 7.05. SERVICING FEES. (a) As compensation for its servicing activities and as reimbursement for its reasonable expenses in connection therewith, the Servicer shall be entitled to receive the Servicing Fees in accordance with SECTIONS 6.04 and 6.05. The Servicer shall be required to pay for all expenses incurred by it in connection with its activities hereunder (including any payments to accountants, counsel or any other Person) and shall not be entitled to any payment therefor other than the Servicing Fees. 36 (b) For any period that the Parent or any Affiliate of the Parent is the Servicer, the Seller agrees that it shall pay to the Servicer on each Settlement Date the applicable Servicing Fee, to the extent of funds available to the Seller on such Settlement Date. The Seller agrees that it will pay the Servicing Fee to the Servicer prior to using any funds available to it on such Settlement Date for any other purpose, including, without limitation, the purchase of additional Receivables. If the Seller does not have sufficient funds available to so pay the Servicing Fee in full on any Settlement Date, the shortfall shall be paid on the next Business Day on which the Seller does have available funds but only to the extent that funds are then available to the Seller in accordance with the provisions of ARTICLE VI. The Servicer waives any right it has or may at any time have to demand payment and/or take any action to or in furtherance of payment of any shortfall in the payment of the Servicing Fee and agrees that it shall not have a "claim" under Section 101(5) of the Bankruptcy Code for the payment of any such shortfall, except for, and only to the extent of, any excess available funds, as described above. Section 7.06. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. To induce the Purchasers to purchase the Purchaser Interests and the Administrative Agent to take any action required to be performed by it hereunder, the Servicer represents and warrants to the Purchasers and the Administrative Agent, which representation and warranty shall survive the execution and delivery of this Agreement: (a) CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Servicer (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, the state of Ohio (which is the Servicer's only state of incorporation); (ii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification except where such failure to be so qualified is not reasonably likely to result in a Material Adverse Effect; (iii) has the requisite corporate power and authority and the legal right to own and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore and proposed to be conducted; (iv) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct except where such failure to obtain such licenses, permits, consents or approvals is not reasonably likely to result in a Material Adverse Effect; (v) is in compliance with its charter and bylaws; and (vi) subject to specific representations set forth herein regarding ERISA, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by the Servicer of this Agreement and the other Related Documents to which it is a party and, solely with respect to CLAUSE (VII) below, the exercise by each of the Seller, the Purchasers or the Administrative Agent of any of its rights and remedies under any Related Document to which it is a party: (i) are within the Servicer's corporate power; (ii) have been duly authorized by all necessary or proper corporate and shareholder action; (iii) do not 37 contravene any provision of the Servicer's charter or bylaws; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which the Servicer is a party or by which the Servicer or any of the property of the Servicer is bound; (vi) do not result in the creation or imposition of any Adverse Claim upon any of the property of the Servicer; and (vii) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in SECTION 3.01(B), all of which will have been duly obtained, made or complied with prior to the Closing Date. On or prior to the Closing Date, each of the Related Documents to which the Servicer is a party shall have been duly executed and delivered by the Servicer and on the Closing Date each such Related Document shall then constitute a legal, valid and binding obligation of the Servicer enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights and by general principles of equity. (c) NO LITIGATION. No Litigation is now pending or, to the knowledge of the Servicer, threatened against the Servicer that (i) challenges the Servicer's right or power to enter into or perform any of its obligations under the Related Documents to which it is a party, or the validity or enforceability of any Related Document or any action taken thereunder, (ii) seeks to prevent the transfer, sale, pledge or contribution of any Receivable or Seller Collateral or the consummation of any of the transactions contemplated under this Agreement or the other Related Documents, or (iii) has a reasonable risk of being determined adversely to the Servicer and that, if so determined, could have a Material Adverse Effect. (d) FULL DISCLOSURE. As of the dates specified therein (or, if no such dates are specified, as of the date furnished or delivered), no information contained in this Agreement, any Investment Base Certificate or any of the other Related Documents, or any written statement furnished by or on behalf of the Servicer to either Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the other Related Documents contains any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. (e) OTHER REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of the Servicer (whether made by the Servicer in its capacity as an Originator or as the Servicer) contained in any Related Document is true and correct and, if made by the Servicer in its capacity as an Originator, applies with equal force to the Servicer in its capacity as Servicer. Section 7.07. COVENANTS OF THE SERVICER. The Servicer covenants and agrees that from and after the Closing Date and until the Termination Date: (a) OWNERSHIP OF TRANSFERRED RECEIVABLES. The Servicer shall identify the Transferred Receivables clearly and unambiguously in its Servicing Records to reflect that such 38 Transferred Receivables have been sold to the Seller and that interests therein have been transferred to the Purchasers by marking each Servicing Record with the following legend: "The accounts receivable and other obligations set forth herein, together with certain related property interests, have been sold to Eagle-Picher Funding Corporation, and interests therein have been further transferred to certain purchasers for whom General Electric Capital Corporation acts as agent." The Servicer shall maintain its books and records so as to clearly distinguish Excluded Receivables from Transferred Receivables. (b) COMPLIANCE WITH CREDIT AND COLLECTION POLICIES; TRANSFERRED RECEIVABLES AND CONTRACTS. The Servicer shall comply in all respects with the Credit and Collection Policies and with the terms of each Transferred Receivable and any Invoice with respect thereto. The Servicer shall not amend, waive or modify any term or provision of the Credit and Collection Policies without the prior written consent of the Administrative Agent. The Servicer will comply with the terms of each Contract (other than Invoices) except to the extent that the failure to so comply could not reasonably be expected to have a Material Adverse Effect. (c) COVENANTS IN OTHER RELATED DOCUMENTS. The Servicer shall perform, keep and observe all covenants applicable to it in its capacity as an Originator under the Sale Agreement and the other Related Documents (including those covenants set forth in SECTIONS 4.02 and 4.03 of the Sale Agreement) and the Servicer hereby agrees to be bound by such covenants in its capacity as Servicer hereunder for the benefit of the Purchasers and the Administrative Agent as if the same were set forth in full herein. Section 7.08. REPORTING REQUIREMENTS OF THE SERVICER. The Servicer hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Purchasers and the Administrative Agent the financial statements, notices, and other information at the times, to the Persons and in the manner set forth in ANNEX 5.02(A). The Servicer hereby agrees that it shall prepare and deliver all reports, statements and records required to be delivered by it hereunder or under any other Related Document so as to clearly distinguish Excluded Receivables from Transferred Receivables. ARTICLE VIII. GRANT OF SECURITY INTERESTS Section 8.01. SELLER'S GRANT OF SECURITY INTEREST. The parties hereto intend that each Purchase of Purchaser Interests to be made hereunder shall constitute a purchase and sale of undivided percentage ownership interests in the Transferred Receivables and not a loan. Notwithstanding the foregoing, in addition to and not in derogation of any rights now or hereafter acquired by any Purchaser or the Administrative Agent hereunder, the parties hereto intend that this Agreement shall constitute a security agreement under applicable law. In such regard and, in any event, to secure the prompt and complete payment, performance and observance of all Seller Secured Obligations, and to induce the Administrative Agent, the Conduit Purchaser and the Committed Purchaser to enter into this Agreement and perform the 39 obligations required to be performed by it hereunder in accordance with the terms and conditions thereof, the Seller hereby grants, assigns, conveys, pledges, hypothecates and transfers to the Administrative Agent, for the benefit of itself, the Conduit Purchaser and the Committed Purchaser, a Lien upon and security interest in all of its right, title and interest in, to and under, but none of its obligations arising from, the following property, whether now owned by or owing to, or hereafter acquired by or arising in favor of, the Seller (including under any trade names, styles or derivations of the Seller), and regardless of where located (all of which being hereinafter collectively referred to as the "SELLER COLLATERAL"): (a) all Transferred Receivables, Invoices related thereto and Collections thereon; (b) the Sale Agreement, all Lockbox Account Agreements and all other Related Documents now or hereafter in effect relating to the purchase, servicing or processing of Receivables (collectively, the "SELLER ASSIGNED AGREEMENTS"), including (i) all rights of the Seller to receive moneys due and to become due thereunder or pursuant thereto, (ii) all rights of the Seller to receive proceeds of any insurance, indemnity, warranty or guaranty with respect thereto, (iii) all claims of the Seller for damages or breach with respect thereto or for default thereunder and (iv) the right of the Seller to amend, waive or terminate the same and to perform and to compel performance and otherwise exercise all remedies thereunder; (c) all of the following (collectively, the "SELLER ACCOUNT COLLATERAL"): (i) all deposit accounts, including the Lockbox Accounts, the Concentration Account, the Lockboxes, and all funds on deposit therein and all certificates and instruments, if any, from time to time representing or evidencing any deposit account, the Lockbox Accounts, the Concentration Account, the Lockboxes or such funds, (ii) the Collection Account, the Retention Account and all funds on deposit therein and all certificates and instruments, if any, from time to time representing or evidencing the Collection Account, the Retention Account or such funds, (iii) all Investments from time to time of amounts in the Collection Account and the Retention Account, and all certificates, instruments and investment property, if any, from time to time representing or evidencing such Investments, (iv) all notes, certificates of deposit and other instruments from time to time delivered to or otherwise possessed by any Purchaser or any assignee or agent on behalf of any Purchaser in substitution for or in addition to any of the then existing Seller Account Collateral, and (v) all interest, dividends, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed with respect to or in exchange for any and all of the then existing Seller Account Collateral; 40 (d) all other property that may from time to time hereafter be granted and pledged by the Seller or by any Person on its behalf under this Agreement, including any deposit with any Purchaser or the Administrative Agent of additional funds by the Seller; and (e) to the extent not otherwise included, all proceeds and products of the foregoing and all accessions to, substitutions and replacements for, and profits of, each of the foregoing Seller Collateral (including proceeds that constitute property of the types described in SECTIONS 8.01(A) through (D). Section 8.02. SELLER'S CERTIFICATION. The Seller hereby certifies that (a) the benefits of the representations, warranties and covenants of each Originator made to the Seller under the Sale Agreement have been assigned by the Seller to the Administrative Agent on behalf of the Purchasers hereunder and, accordingly, any payments received or to be received by the Seller under the Sale Agreement as a result of the breach of a representation, warranty or covenant or as an indemnification payment shall be paid to the Administrative Agent hereunder, and (b) the Sale Agreement provides that the representations, warranties and covenants described in SECTIONS 4.01, 4.02 and 4.03 thereof, the rights and remedies contained in SECTIONS 4.02(O) and 4.04, the indemnification and payment provisions of ARTICLE V thereof and the provisions of SECTIONS 4.03(J), 8.12 and 8.14 thereof shall survive the sale of the Transferred Receivables (and undivided percentage ownership interests therein) and the termination of the Sale Agreement and this Agreement. The Seller hereby acknowledges that the Conduit Purchaser has assigned to the Collateral Agent under the Collateral Agent Agreement the benefits of the representations, warranties and covenants certified in this SECTION 8.02(A) to have been assigned to the Conduit Purchaser. Section 8.03. CONSENT TO ASSIGNMENT. Each of the Seller and the Servicer acknowledges and consents to the grant by the Conduit Purchaser to the Collateral Agent pursuant to the Collateral Agent Agreement of a Lien upon all of the Conduit Purchaser's rights, title and interest in, to and under the Seller Collateral and acknowledges the rights of the Collateral Agent hereunder and thereunder and the covenants made by the Conduit Purchaser in favor of the Collateral Agent set forth therein, and further acknowledges and consents that, upon the occurrence and during the continuance of an Incipient Termination Event or a Termination Event prior to a Committed Purchaser Funding Event, the Collateral Agent shall be entitled to enforce the provisions of the Seller Assigned Agreements and shall be entitled to all the rights and remedies of the Conduit Purchaser thereunder. In addition, each of the Seller and the Servicer hereby authorizes the Collateral Agent to rely on the representations and warranties made by it in the Seller Assigned Agreements to which it is a party and in any other certificates or documents furnished by it to any party in connection therewith. Nothing in this SECTION 8.03 shall be deemed to impose any obligation on the Seller or the Servicer to comply with any term or provision of the Collateral Agent Agreement other than to recognize the rights of the Collateral Agent set forth herein. Section 8.04. DELIVERY OF COLLATERAL. All certificates or instruments representing or evidencing the Seller Collateral shall be delivered to and held by or on behalf of the 41 Administrative Agent and shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Administrative Agent. The Administrative Agent shall have the right (a) at any time to exchange certificates or instruments representing or evidencing Seller Collateral for certificates or instruments of smaller or larger denominations and (b) at any time in its discretion following the occurrence and during the continuation of a Termination Event and without notice to the Seller, to transfer to or to register in the name of the Administrative Agent or its nominee any or all of the Seller Collateral. The Seller will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with the legend set forth in SECTION 7.07(A), (B) segregate (from all other receivables then owned or being serviced by the Seller) all contracts relating to each Receivable. Section 8.05. SELLER REMAINS LIABLE. It is expressly agreed by the Seller that, anything herein to the contrary notwithstanding, the Seller shall remain liable under any and all of the Transferred Receivables, the Contracts therefor, the Seller Assigned Agreements and any other agreements constituting the Seller Collateral to which it is a party to observe and perform all the conditions and obligations to be observed and performed by it thereunder. The Purchasers, the Administrative Agent, the Collateral Agent and the other Conduit Purchaser Secured Parties shall not have any obligation or liability under any such Receivables, Contracts or agreements by reason of or arising out of this Agreement or the Collateral Agent Agreement or the granting herein or therein of a Lien thereon or the receipt by the Administrative Agent, Purchasers, the Collateral Agent or any Purchaser Secured Party of any payment relating thereto pursuant hereto or thereto. The exercise by any Purchaser or the Administrative Agent of any of its respective rights under this Agreement shall not release any Originator, the Seller or the Servicer from any of their respective duties or obligations under any such Receivables, Contracts or agreements. None of the Purchasers, the Administrative Agent, the Collateral Agent or any of the Conduit Purchaser Secured Parties shall be required or obligated in any manner to perform or fulfill any of the obligations of any Originator, the Seller or the Servicer under or pursuant to any such Receivable, Contract or agreement, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such Receivable, Contract or agreement, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times. Section 8.06. COVENANTS OF THE SELLER AND THE SERVICER REGARDING THE SELLER COLLATERAL. (a) OFFICES AND RECORDS. The Seller shall maintain its principal place of business and chief executive office and the office at which it stores its Records at the respective locations specified in SCHEDULE 4.01(B) or, upon 30 days' prior written notice to the Administrative Agent, at such other location in a jurisdiction where all action requested by the Administrative Agent pursuant to SECTION 14.15 shall have been taken with respect to the Seller Collateral. Each of the Seller and the Servicer shall, at its own cost and expense, maintain adequate and complete records of the Transferred Receivables and the Seller Collateral, 42 including records of any and all payments received, credits granted and merchandise returned with respect thereto and all other dealings therewith. Each of the Seller and the Servicer shall mark conspicuously with the legend set forth in SECTION 7.07(A) hereof, its books and records, computer tapes, computer disks and credit files pertaining to the Seller Collateral, and its file cabinets or other storage facilities where it maintains information pertaining thereto, to evidence this Agreement and the assignment and Liens granted pursuant to this ARTICLE VIII. Upon the occurrence and during the continuance of a Termination Event, the Seller and the Servicer shall deliver and turn over such books and records to the Administrative Agent or its representatives at any time on demand of the Administrative Agent. Prior to the occurrence of a Termination Event and upon notice from the Administrative Agent, the Seller and the Servicer shall permit any representative of the Administrative Agent to inspect such books and records and shall provide photocopies thereof to the Administrative Agent as more specifically set forth in SECTION 8.06(B). (b) ACCESS. Each of the Seller and the Servicer shall, at its own expense, during normal business hours, from time to time upon one Business Day's prior notice as frequently as the Administrative Agent determines to be appropriate: (i) subject to compliance with applicable insurance, safety and security requirements, provide the Purchasers, the Administrative Agent and any of their respective officers, employees and agents access to its properties (including properties utilized in connection with the collection, processing or servicing of the Transferred Receivables), facilities, advisors and employees (including officers) and to the Seller Collateral, (ii) permit the Purchasers, the Administrative Agent and any of their respective officers, employees and agents to inspect, audit and make extracts from its books and records, including all Records, (iii) permit the Purchasers or the Administrative Agent and their respective officers, employees and agents to inspect, review and evaluate the Transferred Receivables and the Seller Collateral and (iv) permit the Purchasers or the Administrative Agent and their respective officers, employees and agents to discuss matters (other than legally privileged information) relating to the Transferred Receivables and the Seller Collateral or its performance under this Agreement or the other Related Documents or its affairs, finances and accounts with any of its officers, directors, employees, representatives or agents (in each case, with those persons having knowledge of such matters) and with its independent certified public accountants; all the costs, fees and expenses of each such audit shall be borne by the Servicer as part of the duties and obligations for which it receives the Servicing Fee. If (A) an Incipient Termination Event or a Termination Event shall have occurred and be continuing or (B) the Administrative Agent, in good faith, believes that an Incipient Termination Event or a Termination Event is imminent or deems any Purchaser's rights or interests in the Transferred Receivables, the Seller Assigned Agreements or any other Seller Collateral insecure, then each of the Seller and the Servicer, at its own expense, shall provide such access at all times and without advance notice and provide the Purchasers or the Administrative Agent with access to its suppliers and customers. Each of the Seller and the Servicer shall make available to the Administrative Agent and its counsel, as quickly as is possible under the circumstances, originals or copies of all books and records, including Records, that the Administrative Agent may request. Each of the Seller and the Servicer shall deliver any document or instrument necessary for the Administrative Agent, as the Administrative Agent may from time to time request, to 43 obtain records from any service bureau or other Person that maintains records for the Seller or the Servicer, and shall maintain duplicate records or supporting documentation on media, including computer tapes and disks owned by the Seller or the Servicer. (c) COMMUNICATION WITH ACCOUNTANTS. Each of the Seller and the Servicer authorizes the Purchasers and the Administrative Agent to communicate directly with its independent certified public accountants and authorizes and shall instruct those accountants and advisors to disclose and make available to the Purchasers and the Administrative Agent any and all financial statements and other supporting financial documents, schedules and information (other than legally privileged information) relating to the Seller or the Servicer (including copies of any issued management letters required to be submitted to the Administrative Agent pursuant to the Related Documents) with respect to its business, financial condition and other affairs as they relate to the Transferred Receivables, the Seller Collateral and any other matters which relate to events, circumstances or facts which the Administrative Agent reasonably believes may result in, constitute or relate to a Material Adverse Effect. (d) COLLECTION OF TRANSFERRED RECEIVABLES. Except as otherwise provided in this SECTION 8.06(D), the Servicer shall continue to collect or cause to be collected, at its sole cost and expense, all amounts due or to become due to the Seller under the Transferred Receivables, the Seller Assigned Agreements and any other Seller Collateral. In connection therewith, the Seller and the Servicer shall take such action as it, and from and after the occurrence and during the continuance of a Termination Event, the Administrative Agent, may deem necessary or desirable to enforce collection of the Transferred Receivables, the Seller Assigned Agreements and the other Seller Collateral; PROVIDED, that the Seller or the Servicer may, rather than commencing any such action or taking any other enforcement action, at its option, elect to pay to the Administrative Agent, for the account of the Applicable Purchaser (in accordance with its Purchaser Interests), the Outstanding Balance of any such Transferred Receivable by depositing such amount into the Collection Account; PROVIDED FURTHER, that if an Incipient Termination Event or a Termination Event shall have occurred and be continuing, then the Administrative Agent may, without prior notice to the Seller or the Servicer, notify or cause the Servicer to notify any Obligor under any Transferred Receivable or obligors under the Seller Assigned Agreements of the assignment of such Transferred Receivables or Seller Assigned Agreements, as the case may be, to the Administrative Agent on behalf of the Purchasers hereunder and direct that payments of all amounts due or to become due to the Seller thereunder be made directly to the Administrative Agent or any servicer, collection agent or lockbox or other account designated by the Administrative Agent and, upon such notification and at the sole cost and expense of the Seller and the Servicer, the Administrative Agent may enforce collection of any such Transferred Receivable or the Seller Assigned Agreements and adjust, settle or compromise the amount or payment thereof. (e) PERFORMANCE OF SELLER ASSIGNED AGREEMENTS. Each of the Seller and the Servicer shall (i) perform and observe all the terms and provisions of the Seller Assigned Agreements to be performed or observed by it, maintain the Seller Assigned Agreements in full force and effect, enforce the Seller Assigned Agreements in accordance with their terms and take 44 all action as may from time to time be requested by the Administrative Agent in order to accomplish the foregoing, and (ii) upon the request of and as directed by the Administrative Agent, make such demands and requests to any other party to the Seller Assigned Agreements as are permitted to be made by the Seller or the Servicer thereunder. ARTICLE IX. TERMINATION EVENTS Section 9.01. TERMINATION EVENTS. If any of the following events (each, a "TERMINATION EVENT") shall occur (regardless of the reason therefor): (a) (i) the Seller shall fail to make any payment of any Seller Secured Obligation when due and payable and the same shall remain unremedied for one Business Day or more, (ii) any Originator shall fail to make any payment when due and payable pursuant to the Sale Agreement and the same shall remain unremedied for one Business Day or (iii) the Seller shall fail or neglect to perform, keep or observe any other provision of this Agreement or the other Related Documents (other than any provision embodied in or covered by any other clause of this SECTION 9.01) and the same shall remain unremedied for (i) in the case of delivery of Investment Base Certificates, one (1) Business Day or more, or (ii) otherwise, five (5) Business Days or more, in each case, after written notice thereof shall have been given by the Administrative Agent to the Seller; or (b) (i) any event, default or breach shall occur under any other agreement, document or instrument to which the Seller is a party or by which the Seller or its property is bound which entitles any Person to accelerate any indebtedness of the Seller, or (ii) any event, default or breach shall occur under any other agreement, document or instrument to which any Originator or any Subsidiary of the Parent is a party or by which any Originator or any Subsidiary of the Parent or its property is bound evidencing indebtedness in excess of a principal amount of $1,000,000 (or, solely with respect to that certain loan facility extended by Barclays Bank plc to English Affiliates of the Parent, $5,000,000) and (A) any lender thereunder refuses or declares its intention to refuse to make further advances or other fundings thereunder or (B) all or any portion of such indebtedness is accelerated or (C) such default or breach remains unwaived and uncured for a period of forty-five (45) consecutive calendar days; or (c) a case or proceeding shall have been commenced against the Seller or any Originator seeking a decree or order in respect of any such Person (i) under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy, liquidation, insolvency, moratorium, receivership or reorganization law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person's assets, or (iii) ordering the winding-up or liquidation of the affairs of any such Person; or 45 (d) the Seller or any Originator shall (i) file a petition seeking relief under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy, liquidation, insolvency, moratorium, receivership or reorganization law, (ii) consent or fail to object in a timely and appropriate manner to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person's assets, (iii) make an assignment for the benefit of creditors, or (iv) take any corporate action in furtherance of any of the foregoing; or (e) (i) any Originator, the Seller or the Servicer generally does not pay its debts as such debts become due or admits in writing its inability to, or is generally unable to, pay its Debts as such Debts become due or (ii) the sum of any Originator's or the Seller's liabilities (whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured) exceeds the fair market value of its assets; or (f) a final judgment or one or more judgments for the payment of money in excess of $2,500,000 in the aggregate at any time outstanding, net of insurance proceeds, shall be rendered against any Originator or any Affiliate thereof and either (i) enforcement proceedings shall have been commenced with respect to any such judgment or (ii) any such judgement shall not, within 30 days after the entry thereof, have been discharged or execution thereof stayed or bonded pending appeal, or shall not have been discharged prior to the expiration of any such stay; or (g) a judgment or order for the payment of money shall be rendered against the Seller; or (h) (i) any information contained in any Investment Base Certificate is untrue or incorrect in any respect, or (ii) any representation or warranty of any Originator or the Seller herein or in any other Related Document or in any written statement, report, financial statement or certificate (other than an Investment Base Certificate) made or delivered by or on behalf of such Originator or the Seller to any Affected Party hereto or thereto is untrue or incorrect in any material respect as of the date when made or deemed made; or (i) any Governmental Authority (including the IRS or the PBGC) shall file notice of a Lien with regard to any assets of any Originator (other than a Lien (i) limited by its terms to assets other than Receivables and (ii) not materially adversely affecting the financial condition of such Originator or the ability of the Parent to perform as Servicer hereunder); or (j) any Governmental Authority (including the IRS or the PBGC) shall file notice of a Lien with regard to any of the assets of the Seller; or 46 (k) the Administrative Agent shall have determined (and so notified the Seller) that any event or condition has occurred since the Closing Date that has had or could reasonably be expected to have or result in a Material Adverse Effect; or (l) (i) a default or breach shall occur under any provision of SECTIONS 4.02(O), 4.04, 5.01 or 8.14 of the Sale Agreement and the same shall remain unremedied for one Business Day or more after the occurrence thereof, (ii) a default or breach shall occur under any other provision of the Sale Agreement and the same shall remain unremedied for five (5) Business Days or more after written notice thereof shall have been given by the Administrative Agent to the Seller, (iii) a default or breach by the Seller or any Originator of any of the covenants and agreements contained herein and in the Related Documents and the same shall remain unremedied for five (5) Business Days or more after written notice thereof shall have been given by the Administrative Agent to the Seller, (iv) the Seller shall fail to fully comply with its agreements with respect to the Deferred Purchase Price arrangements contained in SECTION 2.01(C) of the Sale Agreement at any time or (v) the Sale Agreement shall for any reason cease to evidence the transfer to the Seller of the legal and equitable title to, and ownership of, the Transferred Receivables; or (m) except as otherwise expressly provided herein, any Lockbox Account Agreement or the Sale Agreement shall have been modified, amended or terminated without the prior written consent of the Purchasers and the Administrative Agent; or (n) an Event of Servicer Termination shall have occurred; or (o) (i) with respect to the Transferred Receivables, (A) prior to the Purchase of Purchaser Interests therein hereunder, the Seller shall cease to hold valid and properly perfected title to and sole record and beneficial ownership in such Transferred Receivables or (B) after the Purchase of Purchaser Interests hereunder, (1) the Administrative Agent (on behalf of the Purchasers) shall cease to hold either (a) valid and properly perfected title to and sole record and beneficial ownership in the related Transferred Receivables or (b) a first priority, perfected Lien in the related Transferred Receivables or any of the Seller Collateral; or (p) a Change of Control shall occur; or (q) the Seller shall amend its bylaws or its certificate or articles of incorporation without the express prior written consent of the Purchasers and the Administrative Agent; or (r) (i) the Default Ratio shall exceed five percent (5%); (ii) the Delinquency Ratio shall exceed six percent (6%); (iii) the Dilution Trigger Ratio shall exceed six percent (6%); (iv) the Receivables Collection Turnover shall exceed sixty-five (65) days; or (v) the Net Worth Percentage shall be less than five percent (5%); or (s) any material provision of any Related Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms (or any Originator or the 47 Seller shall challenge the enforceability of any Related Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Related Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms); (t) for any period of five consecutive Business Days, either (i) the Seller Capital shall be less than the Minimum Seller Capitalization or (ii) on and after the ninetieth day following the Closing Date, the Deferred Purchase Price shall be greater than the Maximum Deferred Purchase Price; or (u) the Seller shall have received capital contributions in an aggregate amount in excess of the maximum amount permitted under the terms of the Indenture; then, and in any such event, the Administrative Agent shall, at the request of, or may, with the consent of, the Purchaser or the Administrative Agent, by notice to the Seller, declare the Facility Termination Date to have occurred without demand, protest or further notice of any kind, all of which are hereby expressly waived by the Seller; PROVIDED, that the Facility Termination Date shall automatically occur (i) upon the occurrence of any of the Termination Events described in SECTIONS 9.01(C), (D) or (E) or (ii) three days after the occurrence of the Termination Event described in SECTION 9.01(A)(I) if the same shall not have been remedied by such time, in each case without demand, protest or any notice of any kind, all of which are hereby expressly waived by the Seller. Section 9.02. EVENTS OF SERVICER TERMINATION. If any of the following events (each, an "EVENT OF SERVICER TERMINATION") shall occur (regardless of the reason therefor): (a) the Servicer shall (i) fail to make any payment or deposit required to be made by it under this Agreement or any other Related Document and such failure shall remain unremedied for one (1) Business Day or more, (ii) fail to deliver any Investment Base Certificate required to be delivered by it under this Agreement or any other Related Document and such failure shall remain unremedied for one (1) Business Day or more, (iii) fail to deliver any reports required to be delivered by it under this Agreement or any other Related Document (excluding any Investment Base Certificate) and such failure shall remain unremedied for five (5) Business Days or more, or (iv) fail or neglect to perform, keep or observe any other provision of this Agreement or the other Related Documents (whether in its capacity as an Originator or as Servicer) and the same shall remain unremedied for five (5) Business Days or more after written notice thereof shall have been given by the Purchasers or the Administrative Agent to the Servicer; or (b) any event, default or breach shall occur under any other agreement, document or instrument to which any Originator is a party or by which any Originator or its property is bound evidencing indebtedness in excess of a principal amount of $1,000,000 (or, solely with respect to that certain loan facility extended by Barclays Bank plc to English Affiliates of the Parent, $5,000,000) and (i) any lender thereunder refuses or declares its 48 intention to refuse to make further advances or other fundings thereunder or (ii) all or any portion of such indebtedness is accelerated or (iii) such default or breach remains unwaived and uncured for a period of forty-five (45) consecutive calendar days; or (c) a case or proceeding shall have been commenced against the Servicer or any Affiliate thereof which acts as a Sub-Servicer seeking a decree or order in respect of any such Person (i) under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy, liquidation, insolvency ,moratorium, receivership or reorganization law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person's assets, or (iii) ordering the winding-up or liquidation of the affairs of any such Person; or (d) the Servicer or any Affiliate thereof which acts as a Sub-Servicer shall (i) file a petition seeking relief under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy, liquidation, insolvency, moratorium, receivership or reorganization law, (ii) consent or fail to object in a timely and appropriate manner to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person's assets, (iii) make an assignment for the benefit of creditors, or (iv) take any corporate action in furtherance of any of the foregoing; or (e) (i) the Servicer or any Affiliate thereof which acts as a Sub-Servicer generally does not pay its debts as such debts become due or admits in writing its inability to, or is generally unable to, pay its Debts as such Debts become due or (ii) the sum of the Servicer's or any such Sub-Servicer's liabilities (whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured) exceeds the fair market value of its assets; or (f) a final judgment or judgments for the payment of money in excess of $2,500,000 in the aggregate at any time outstanding shall be rendered against the Servicer or any Affiliate thereof which acts as a Sub-Servicer and the same shall not, within 30 days after the entry thereof, have been discharged or execution thereof stayed or bonded pending appeal, or shall not have been discharged prior to the expiration of any such stay; or (g) (i) any information contained in any Investment Base Certificate is untrue or incorrect in any respect, or (ii) any representation or warranty of the Servicer any Affiliate thereof which acts as a Sub-Servicer herein or in any other Related Document or in any written statement, report, financial statement or certificate (other than an Investment Base Certificate) made or delivered by the Servicer to any Affected Party hereto or thereto is untrue or incorrect in any respect as of the date when made or deemed made; or (h) the Administrative Agent shall have determined that any event or condition that materially adversely affects the ability of the Servicer to collect the Transferred Receivables or to otherwise perform hereunder has occurred; or 49 (i) a Termination Event shall have occurred or this Agreement shall have been terminated; or (j) a deterioration has taken place in the quality of servicing of Transferred Receivables or other Receivables serviced by the Servicer that the Administrative Agent, in its sole discretion, determines to be material, and such material deterioration has not been eliminated within 30 days after written notice thereof shall have been given by the Administrative Agent to the Servicer; or (k) any Originator shall, or the Servicer shall, assign or purport to assign any of their respective obligations hereunder or under the Sale Agreement without the prior written consent of the Administrative Agent; or (l) a default or breach of any of the covenants set forth in ANNEX G shall have occurred; or (m) Eagle-Picher Holdings, Inc. shall cease to own and control, directly or indirectly, 100% of the Stock of the Servicer; or (n) the Seller's board of directors shall have determined that it is in the best interests of the Seller to terminate the duties of the Servicer hereunder and shall have given the Servicer, the Purchasers and the Administrative Agent at least 30 days' written notice thereof, then, and in any such event, the Administrative Agent shall, at the request of, or may, with the consent of, the Purchasers or the Administrative Agent, by delivery of a Servicer Termination Notice to the Seller and the Servicer, terminate the servicing responsibilities of the Servicer hereunder, without demand, protest or further notice of any kind, all of which are hereby waived by the Servicer. Upon the delivery of any such notice, all authority and power of the Servicer under this Agreement and the Sale Agreement shall pass to and be vested in the Successor Servicer acting pursuant to SECTION 11.02; PROVIDED, that notwithstanding anything to the contrary herein, the Servicer agrees to continue to follow the procedures set forth in SECTION 7.02 with respect to Collections on the Transferred Receivables until a Successor Servicer has assumed the responsibilities and obligations of the Servicer in accordance with SECTION 11.02. ARTICLE X. REMEDIES Section 10.01. ACTIONS UPON TERMINATION EVENT. If any Termination Event shall have occurred and be continuing and the Administrative Agent shall have declared the Facility Termination Date to have occurred or the Facility Termination Date shall be deemed to have occurred pursuant to SECTION 9.01, then the Administrative Agent may exercise in respect of the Seller Collateral, in addition to any and all other rights and remedies granted to it hereunder, under any other Related Document or under any other instrument or agreement securing, evidencing or relating to the Seller Secured Obligations or otherwise available to it, all of the 50 rights and remedies of a secured party upon default under the UCC (such rights and remedies to be cumulative and nonexclusive), and, in addition, may take the following actions: (a) The Administrative Agent may, without notice to the Seller except as required by law and at any time or from time to time, charge, offset or otherwise apply amounts payable to the Seller from the Collection Account, any Lockbox Account, the Retention Account or any part of such accounts in accordance with the priorities set forth in SECTIONS 6.05 and 6.07 against all or any part of the Seller Secured Obligations. (b) The Administrative Agent may, without notice except as specified below, solicit and accept bids for and sell the Seller Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or any of the Purchasers', or Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. The Administrative Agent shall have the right to conduct such sales on the Seller's premises or elsewhere and shall have the right to use any of the Seller's premises without charge for such sales at such time or times as the Administrative Agent deems necessary or advisable. The Seller agrees that, to the extent notice of sale shall be required by law, at least ten Business Days' notice to the Seller of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Seller Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed for such sale, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Every such sale shall operate to divest all right, title, interest, claim and demand whatsoever of the Seller in and to the Seller Collateral so sold, and shall be a perpetual bar, both at law and in equity, against each Originator, the Seller, any Person claiming the Seller Collateral sold through any Originator or the Seller, and their respective successors or assigns. The Administrative Agent shall deposit the net proceeds of any such sale in the Collection Account and such proceeds shall be disbursed in accordance with SECTION 6.05. (c) Upon the completion of any sale under SECTION 10.01(B), the Seller or the Servicer shall deliver or cause to be delivered to the purchaser or purchasers at such sale on the date thereof, or within a reasonable time thereafter if it shall be impracticable to make immediate delivery, all of the Seller Collateral sold on such date, but in any event full title and right of possession to such property shall vest in such purchaser or purchasers upon the completion of such sale. Nevertheless, if so requested by the Administrative Agent or by any such purchaser, the Seller shall confirm any such sale or transfer by executing and delivering to such purchaser all proper instruments of conveyance and transfer and releases as may be designated in any such request. (d) At any sale under SECTION 10.01(B), the Purchasers, the Administrative Agent or any other Purchaser Secured Party may bid for and purchase the property offered for sale and, upon compliance with the terms of sale, may hold, retain and dispose of such property without further accountability therefor. 51 (e) The Administrative Agent may exercise, at the sole cost and expense of the Seller, any and all rights and remedies of the Seller under or in connection with the Seller Assigned Agreements or the other Seller Collateral, including any and all rights of the Seller to demand or otherwise require payment of any amount under, or performance of any provisions of, the Seller Assigned Agreements. Section 10.02. EXERCISE OF REMEDIES. No failure or delay on the part of the Administrative Agent in exercising any right, power or privilege under this Agreement and no course of dealing between any Originator, the Seller or the Servicer, on the one hand, and the Administrative Agent, on the other hand, shall operate as a waiver of such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. The rights and remedies under this Agreement are cumulative, may be exercised singly or concurrently, and are not exclusive of any rights or remedies that the Administrative Agent would otherwise have at law or in equity. No notice to or demand on any party hereto shall entitle such party to any other or further notice or demand in similar or other circumstances, or constitute a waiver of the right of the party providing such notice or making such demand to any other or further action in any circumstances without notice or demand. Section 10.03. POWER OF ATTORNEY. On the Closing Date, each of the Seller and the Servicer shall execute and deliver a power of attorney substantially in the form attached hereto as EXHIBIT 10.03 (each, a "POWER OF Attorney"). The power of attorney granted pursuant to each Power of Attorney is a power coupled with an interest and shall be irrevocable until all of the Seller Secured Obligations are indefeasibly paid or otherwise satisfied in full. The powers conferred on the Administrative Agent under each Power of Attorney are solely to protect the Purchaser's Liens upon and interests in the Seller Collateral and shall not impose any duty upon the Administrative Agent to exercise any such powers. The Administrative Agent shall not be accountable for any amount other than amounts that it actually receives as a result of the exercise of such powers and none of the Administrative Agent's officers, directors, employees, agents or representatives shall be responsible to the Seller or the Servicer for any act or failure to act, except in respect of damages attributable solely to their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. Section 10.04. CONTINUING SECURITY INTEREST. This Agreement shall create a continuing Lien in the Seller Collateral until the conditions to the release of the Liens of the Purchaser and the Administrative Agent thereon set forth in SECTION 6.07(B) have been satisfied. ARTICLE XI. SUCCESSOR SERVICER PROVISIONS Section 11.01. SERVICER NOT TO RESIGN. The Servicer shall not resign from the obligations and duties hereby imposed on it except upon a determination that (a) the performance 52 of its duties hereunder has become impermissible under applicable law or regulation and (b) there is no reasonable action that the Servicer could take to make the performance of its duties hereunder become permissible under applicable law. Any such determination shall (i) with respect to CLAUSE (A) above, be evidenced by an opinion of counsel to such effect and (ii) with respect to CLAUSE (B) above, be evidenced by an Officer's Certificate to such effect, in each case delivered to the Purchaser and the Administrative Agent. No such resignation shall become effective until a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with SECTION 11.02. Section 11.02. APPOINTMENT OF THE SUCCESSOR SERVICER. In connection with the termination of the Servicer's responsibilities or the resignation by the Servicer under this Agreement pursuant to SECTIONS 9.02 or 11.01, the Administrative Agent shall (a) succeed to and assume all of the Servicer's responsibilities, rights, duties and obligations as Servicer (but not in any other capacity, it being specifically understood that the Administrative Agent shall not assume any of the obligations of the Servicer set forth in SECTION 12.02) under this Agreement (and except that the Administrative Agent makes no representations and warranties pursuant to SECTION 4.02) and (b) may at any time appoint a successor servicer to the Servicer that shall be acceptable to the Administrative Agent, that shall have satisfied the Rating Agency Condition in respect thereof and shall succeed to all rights and assume all of the responsibilities, duties and liabilities of the Servicer under this Agreement (the Administrative Agent, in such capacity, or such successor servicer being referred to as the "SUCCESSOR Servicer"); PROVIDED, that the Successor Servicer shall have no responsibility for any actions of the Servicer prior to the date of its appointment or assumption of duties as Successor Servicer. In selecting a Successor Servicer, the Administrative Agent may obtain bids from any potential Successor Servicer and may agree to any bid it deems appropriate. The Successor Servicer shall accept its appointment by executing, acknowledging and delivering to the Administrative Agent an instrument in form and substance acceptable to the Administrative Agent. Section 11.03. DUTIES OF THE SERVICER. The Servicer covenants and agrees that, following the appointment of, or assumption of duties by, a Successor Servicer: (a) The Servicer shall terminate its activities as Servicer hereunder in a manner that facilitates the transfer of servicing duties to the Successor Servicer and is otherwise acceptable to each Purchaser and the Administrative Agent and, without limiting the generality of the foregoing, shall timely deliver (i) any funds to the Administrative Agent that were required to be remitted to the Administrative Agent for deposit in the Collection Account and (ii) all Servicing Records and other information with respect to the Transferred Receivables to the Successor Servicer at a place selected by the Successor Servicer. The Servicer shall account for all funds and shall execute and deliver such instruments and do such other things as may be required to vest and confirm in the Successor Servicer all rights, powers, duties, responsibilities, obligations and liabilities of the Servicer. 53 (b) The Servicer shall terminate each existing Sub-Servicing Agreement and the Successor Servicer shall not be deemed to have assumed any of the Servicer's interests therein or to have replaced the Servicer as a party thereto. Section 11.04. EFFECT OF TERMINATION OR RESIGNATION. Any termination of or resignation by the Servicer hereunder shall not affect any claims that the Seller, the Purchasers, or the Administrative Agent may have against the Servicer for events or actions taken or not taken by the Servicer arising prior to any such termination or resignation. ARTICLE XII. INDEMNIFICATION Section 12.01. INDEMNITIES BY THE SELLER. (a) Without limiting any other rights that the Conduit Purchaser, the Committed Purchaser, the Administrative Agent, the Collateral Agent, the Liquidity Agent, any Liquidity Lender, the Letter of Credit Agent or any Letter of Credit Provider or any of their respective officers, directors, employees, attorneys, agents or representatives (each, an "INDEMNIFIED PERSON") may have hereunder or under applicable law, the Seller hereby agrees to indemnify and hold harmless each Indemnified Person from and against any and all Indemnified Amounts that may be claimed or asserted against or incurred by any such Indemnified Person in connection with or arising out of the transactions contemplated under this Agreement or under any other Related Document or any actions or failures to act in connection therewith, including any and all legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Related Documents; PROVIDED, that the Seller shall not be liable for any indemnification to a Indemnified Person to the extent that any such Indemnified Amount (x) results from (i) with respect to any Indemnified Person other than the Conduit Purchaser, such Indemnified Person's gross negligence or (ii) with respect to any Indemnified Person, such Indemnified Person's willful misconduct, in each case as finally determined by a court of competent jurisdiction or (y) constitutes recourse for uncollectible or uncollected Transferred Receivables. Without limiting the generality of the foregoing, the Seller shall pay on demand to each Indemnified Person any and all Indemnified Amounts relating to or resulting from: (i) reliance on any representation or warranty made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement or any other Related Document or on any other information delivered by the Seller pursuant hereto or thereto that shall have been incorrect in any material respect when made or deemed made or delivered; (ii) the failure by the Seller to comply with any term, provision or covenant contained in this Agreement, any other Related Document or any agreement executed in connection herewith or therewith, any applicable law, rule or regulation with 54 respect to any Transferred Receivable or the Contract therefor, or the nonconformity of any Transferred Receivable or the Contract therefor with any such applicable law, rule or regulation; or (iii) (1) the failure to vest and maintain vested in the Seller or the Purchasers valid and properly perfected title to and sole record and beneficial ownership of the Receivables that constitute Transferred Receivables, together with all Collections in respect thereof, free and clear of any Adverse Claim, (2) the failure to maintain or transfer to the Purchasers a first, priority, perfected Lien in the Seller Collateral and (3) the failure to maintain or transfer to the Administrative Agent a first priority, perfected Lien therein; (iv) any dispute, claim, offset or defense of any Obligor (other than its discharge in bankruptcy to the payment of any Transferred Receivable that is the subject of a Purchase hereunder (including a defense based on such Transferred Receivable or the Contract therefor not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services giving rise to such Transferred Receivable or the furnishing of or failure to furnish such merchandise or services or relating to collection activities with respect to such Transferred Receivable (if such collection activities were performed by any of its Affiliates acting as Servicer), except to the extent that such dispute, claim, offset or defense results solely from any action or inaction on the part of any Indemnified Person; (v) any products liability claim or other claim arising out of or in connection with merchandise, insurance or services that is the subject of any Contract with respect to any Transferred Receivable; (vi) the commingling of Collections with respect to Transferred Receivables by the Seller at any time with its other funds or the funds of any other Person; (vii) any failure by the Seller to cause the filing of, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or any other applicable laws with respect to any Transferred Receivable that is the subject of a Purchase hereunder, whether at the time of any such Purchase or at any subsequent time; or (viii) any failure of a Lockbox Account Bank or a Concentration Account Bank to comply with the terms of the applicable Lockbox Account Agreement. (b) Any Indemnified Amounts subject to the indemnification provisions of this SECTION 12.01 not paid in accordance with ARTICLE VI shall be paid by the Seller to the Indemnified Person entitled thereto within five Business Days following demand therefor. 55 Section 12.02. INDEMNITIES BY THE SERVICER. (a) Without limiting any other rights that an Indemnified Person may have hereunder or under applicable law, the Servicer hereby agrees to indemnify and hold harmless each Indemnified Person from and against any and all Indemnified Amounts that may be claimed or asserted against or incurred by any such Indemnified Person in connection with or arising out of any breach by the Servicer of its obligations hereunder or under any other Related Document; PROVIDED, that the Servicer shall not be liable for any indemnification to an Indemnified Person to the extent that any such Indemnified Amount (x) results solely from (i) with respect to any Indemnified Person other than the Conduit Purchaser, such Indemnified Person's gross negligence or (ii) with respect to any Indemnified Person, such Indemnified Person's willful misconduct, in each case as finally determined by a court of competent jurisdiction, or (y) constitutes recourse for uncollectible or uncollected Transferred Receivables. Without limiting the generality of the foregoing, the Servicer shall pay on demand to each Indemnified Person any and all Indemnified Amounts relating to or resulting from: (i) reliance on any representation or warranty made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement or any other Related Document or on any other information delivered by the Servicer pursuant hereto or thereto that shall have been incorrect in any material respect when made or deemed made or delivered; (ii) the failure by the Servicer to comply with any term, provision or covenant contained in this Agreement, any other Related Document or any agreement executed in connection herewith or therewith, any applicable law, rule or regulation with respect to any Transferred Receivable or the Contract therefor, or the nonconformity of any Transferred Receivable or the Contract therefor with any such applicable law, rule or regulation; (iii) the imposition of any Adverse Claim with respect to any Transferred Receivable or the Seller Collateral as a result of any action taken by the Servicer; or (iv) the commingling of Collections with respect to Transferred Receivables by the Servicer at any time with its other funds or the funds of any other Person. (b) Any Indemnified Amounts subject to the indemnification provisions of this SECTION 12.02 not paid in accordance with ARTICLE VI shall be paid by the Servicer to the Indemnified Person entitled thereto within five Business Days following demand therefor. Section 12.03. LIMITATION OF DAMAGES; INDEMNIFIED PERSONS. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY 56 SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. ARTICLE XIII. AGENT Section 13.01. AUTHORIZATION AND ACTION. (a) The Administrative Agent may take such action and carry out such functions under this Agreement as are authorized to be performed by it pursuant to the terms of this Agreement, any other Related Document or otherwise contemplated hereby or thereby or are reasonably incidental thereto; PROVIDED, that the duties of the Administrative Agent hereunder shall be determined solely by the express provisions of this Agreement, and, other than the duties set forth in SECTION 13.02, any permissive right of the Administrative Agent hereunder shall not be construed as a duty. Section 13.02. RELIANCE. None of the Administrative Agent, any of its Affiliates or any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or the other Related Documents, except for damages solely caused by its or their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. Without limiting the generality of the foregoing, and notwithstanding any term or provision hereof to the contrary, the Seller, the Servicer, the Conduit Purchaser and the Committed Purchaser hereby acknowledge and agree that the Administrative Agent (a) acts as agent hereunder for the Conduit Purchaser and the Committed Purchaser and has no duties or obligations to, shall incur no liabilities or obligations to, and does not act as an agent in any capacity for, the Seller (other than, with respect to the Administrative Agent, under the Power of Attorney with respect to remedial actions) or the Originators, (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts, (c) makes no representation or warranty hereunder to any Affected Party and shall not be responsible to any such Person for any statements, representations or warranties made in or in connection with this Agreement or the other Related Documents, (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, or the other Related Documents on the part of the Seller, the Servicer, the Conduit Purchaser or the Committed Purchaser or to inspect the property (including the books and records) of the Seller, the Servicer, the Conduit Purchaser or the Committed Purchaser, (e) shall not be responsible to the Seller, the Servicer or any Purchaser for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Related Documents or any other instrument or document furnished pursuant hereto 57 or thereto, (f) shall incur no liability under or in respect of this Agreement or the other Related Documents by acting upon any notice, consent, certificate or other instrument or writing believed by it to be genuine and signed, sent or communicated by the proper party or parties and (g) shall not be bound to make any investigation into the facts or matters stated in any notice or other communication hereunder and may rely on the accuracy of such facts or matters. Notwithstanding the foregoing, the Administrative Agent acknowledges that it has a duty to transfer funds between and among the Accounts and the Collection Account, and make investments of funds on deposit in the Retention Account, in accordance with ARTICLE VI and the instructions of the Servicer. Section 13.03. GE CAPITAL AND AFFILIATES. GE Capital and its Affiliates may generally engage in any kind of business with any Obligor, the Originators, the Seller, the Servicer, the Conduit Purchaser or the Committed Purchaser, any of their respective Affiliates and any Person who may do business with or own securities of such Persons or any of their respective Affiliates, all as if GE Capital were not the Administrative Agent and without the duty to account therefor to any Obligor, any Originator, the Seller, the Servicer, any Purchaser or any other Person. ARTICLE XIV. MISCELLANEOUS Section 14.01. NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by facsimile (with such facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this SECTION 14.01), (c) one Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number set forth under its name on the signature page hereof or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than the Conduit Purchaser, the Committed Purchaser and the Administrative Agent) designated in any written notice provided hereunder to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. Notwithstanding the foregoing, whenever it is provided herein that a notice is to be given to any other party hereto by a specific time, such notice shall only be 58 effective if actually received by such party prior to such time, and if such notice is received after such time or on a day other than a Business Day, such notice shall only be effective on the immediately succeeding Business Day. Section 14.02. BINDING EFFECT; ASSIGNABILITY. (a) This Agreement shall be binding upon and inure to the benefit of the Seller, the Servicer, the Conduit Purchaser, the Committed Purchaser and the Administrative Agent and their respective successors and permitted assigns. Neither the Seller nor the Servicer may assign, transfer, hypothecate or otherwise convey any of their respective rights or obligations hereunder or interests herein without the express prior written consent of the Conduit Purchaser, the Committed Purchaser and the Administrative Agent and unless the Rating Agency Condition shall have been satisfied with respect to any such assignment. Any such purported assignment, transfer, hypothecation or other conveyance by the Seller or the Servicer without the prior express written consent of the Conduit Purchaser, the Committed Purchaser and the Administrative Agent shall be void. (b) The Conduit Purchaser, the Committed Purchaser or the Administrative Agent may, at any time, assign any of its rights and obligations hereunder or interests herein to any Person which has a short-term debt rating of at least A-1 by S&P and P-1 by Moody's, and any such assignee may further assign at any time its rights and obligations hereunder or interests herein (including any rights it may have in and to the Purchaser Interests and the Seller Collateral and any rights it may have to exercise remedies hereunder), in each case without the consent of any Originator, the Seller or the Servicer. The Seller acknowledges and agrees that, upon any such assignment, the assignee thereof may enforce directly, without joinder of any Purchaser, all of the obligations of the Seller hereunder. (c) The Seller hereby acknowledges that in accordance with the provisions of the LAPA, on the day of the Committed Purchaser Funding Event, (A) the Liquidity Lenders may purchase from the Conduit Purchaser all or any part of the Purchaser Interests sold by the Seller hereunder on each Purchase Date prior to the Committed Purchaser Funding Event, and (B) the Conduit Purchaser may assign all or any part of its rights and interest in the Seller Collateral to the Liquidity Lenders. Section 14.03. TERMINATION; SURVIVAL OF SELLER SECURED OBLIGATIONS UPON FACILITY TERMINATION DATE. (a) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Termination Date. (b) Except as otherwise expressly provided herein or in any other Related Document, no termination or cancellation (regardless of cause or procedure) of any commitment made by any Affected Party under this Agreement shall in any way affect or impair the 59 obligations, duties and liabilities of the Seller or the rights of any Affected Party relating to any unpaid portion of the Seller Secured Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Facility Termination Date. Except as otherwise expressly provided herein or in any other Related Document, all undertakings, agreements, covenants, warranties and representations of or binding upon the Seller or the Servicer, and all rights of any Affected Party hereunder, all as contained in the Related Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; PROVIDED, that the rights and remedies provided for herein with respect to any breach of any representation or warranty made by the Seller or the Servicer pursuant to ARTICLE IV, the indemnification and payment provisions of ARTICLE XII and SECTIONS 14.04, 14.05 and 14.06 shall be continuing and shall survive the Termination Date. Section 14.04. COSTS, EXPENSES AND TAXES. (a) The Servicer, as part of its duties and obligations for which it receives the Servicer Fee, shall reimburse each Purchaser and the Administrative Agent for all out-of-pocket expenses incurred in connection with the negotiation and preparation of this Agreement and the other Related Documents (including the fees and expenses of all of its special counsel, advisors, consultants and auditors retained in connection with the transactions contemplated thereby and advice in connection therewith). The Seller shall reimburse the Conduit Purchaser, the Committed Purchaser and the Administrative Agent for all fees, costs and expenses, including the fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers) for advice, assistance, or other representation in connection with: (i) the forwarding to the Seller or any other Person on behalf of the Seller by any Purchaser of any payments for Purchases made by it hereunder; (ii) any amendment, modification or waiver of, consent with respect to, or termination of this Agreement or any of the other Related Documents or advice in connection with the administration thereof or their respective rights hereunder or thereunder; (iii) any Litigation, contest or dispute (whether instituted by the Seller, the Conduit Purchaser, the Committed Purchaser, the Administrative Agent or any other Person as a party, witness, or otherwise) in any way relating to the Seller Collateral, any of the Related Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any Litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against the Seller or any other Person that may be obligated to the Purchaser or the Administrative Agent by virtue of the Related Documents, including any such Litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the transactions contemplated hereby during the pendency of one or more Termination Events; 60 (iv) any attempt to enforce any remedies of the Conduit Purchaser, the Committed Purchaser or the Administrative Agent against the Seller or any other Person that may be obligated to them by virtue of any of the Related Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the transactions contemplated hereby during the pendency of one or more Termination Events; (v) any work-out or restructuring of the transactions contemplated hereby during the pendency of one or more Termination Events; and (vi) efforts to (A) monitor the Purchases or any of the Seller Secured Obligations, (B) evaluate, observe or assess the Originators, the Seller or the Servicer or their respective affairs, and (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Seller Collateral; including all attorneys' and other professional and service providers' fees arising from such services, including those in connection with any appellate proceedings, and all expenses, costs, charges and other fees incurred by such counsel and others in connection with or relating to any of the events or actions described in this SECTION 14.04, all of which shall be payable, on demand, by the Seller to the Conduit Purchaser, the Committed Purchaser or the Administrative Agent, as applicable. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, attorneys, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or facsimile charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. (b) In addition, the Seller shall pay on demand any and all stamp, sales, excise and other taxes (excluding franchise and income taxes) and fees payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement or any other Related Document, and the Seller agrees to indemnify and save each Indemnified Person harmless from and against any and all liabilities with respect to or resulting from any delay or failure to pay such taxes and fees. Section 14.05. CONFIDENTIALITY. (a) Except to the extent otherwise required by applicable law, as required to be filed publicly with the Securities and Exchange Commission, or unless the Administrative Agent shall otherwise consent in writing, the Seller and the Servicer each agrees to maintain the confidentiality of this Agreement (and all drafts hereof and documents ancillary hereto) in its communications with third parties other than any Affected Party or any Indemnified Person and otherwise and not to disclose, deliver or otherwise make available to any third party (other than its directors, officers, employees, accountants or counsel) the original or any copy of all or any 61 part of this Agreement (or any draft hereof and documents ancillary hereto) except to an Affected Party or an Indemnified Person. (b) The Seller and the Servicer each agrees that it shall not (and shall not permit any of its Subsidiaries to) issue any news release or make any public announcement pertaining to the transactions contemplated by this Agreement and the other Related Documents without the prior written consent of the Conduit Purchaser, the Committed Purchaser and the Administrative Agent (which consent shall not be unreasonably withheld) unless such news release or public announcement is required by law, in which case the Seller or the Servicer, as applicable, shall consult with the Conduit Purchaser, the Committed Purchaser and the Administrative Agent prior to the issuance of such news release or public announcement. The Seller may, however, disclose the general terms of the transactions contemplated by this Agreement and the other Related Documents to trade creditors, suppliers and other similarly-situated Persons so long as such disclosure is not in the form of a news release or public announcement. Section 14.06. NO PROCEEDINGS. Each of the Seller and the Servicer hereby agrees that, from and after the Closing Date and until the date one year plus one day following the date on which the Commercial Paper with the latest maturity has been indefeasibly paid in full in cash, it will not, directly or indirectly, institute or cause to be instituted against the Conduit Purchaser or the Committed Purchaser any proceeding of the type referred to in SECTIONS 9.01(C) and 9.01(D). This SECTION 14.06 shall survive the termination of this Agreement. Section 14.07. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the other Related Documents constitute the complete agreement among the parties hereto with respect to the subject matter here of and thereof, supersede all prior agreements and understandings relating to the subject matter hereof and thereof, and may not be modified, altered or amended except as set forth in SECTION 14.08. Section 14.08. AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver of any provision of this Agreement or any of the other Related Documents, or any consent to any departure by the Seller or the Servicer therefrom, shall in any event be effective unless the same shall be in writing and signed by each of the parties hereto or thereto and by the Collateral Agent; PROVIDED, that (i) the Administrative Agent shall notify each of the Rating Agencies concurrently with the execution of any amendment to any provision of this Agreement or any of the other Related Documents, and (ii) it shall be a condition precedent to the effectiveness of any material amendment to any provision of this Agreement or any of the other Related Documents that the Rating Agency Condition shall have been satisfied in respect thereof. Section 14.09. NO WAIVER; REMEDIES. The failure by the Conduit Purchaser, the Committed Purchaser or the Administrative Agent, at any time or times, to require strict performance by the Seller or the Servicer of any provision of this Agreement or any Purchase Assignment shall not waive, affect or diminish any right of any Purchaser or the Administrative 62 Agent thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of any breach or default hereunder shall not suspend, waive or affect any other breach or default whether the same is prior or subsequent thereto and whether the same or of a different type. None of the undertakings, agreements, warranties, covenants and representations of the Seller or the Servicer contained in this Agreement or any Purchase Assignment, and no breach or default by the Seller or the Servicer hereunder or thereunder, shall be deemed to have been suspended or waived by any Purchaser or the Administrative Agent unless such waiver or suspension is by an instrument in writing signed by an officer of or other duly authorized signatory of the Conduit Purchaser, the Committed Purchaser, the Collateral Agent and the Administrative Agent and directed to the Seller or the Servicer, as applicable, specifying such suspension or waiver. The rights and remedies of the Conduit Purchaser, the Committed Purchaser, the Collateral Agent and the Administrative Agent under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that the Conduit Purchaser, the Committed Purchaser, the Collateral Agent and the Administrative Agent may have under any other agreement, including the other Related Documents, by operation of law or otherwise. Recourse to the Seller Collateral shall not be required. Section 14.10. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND EACH OTHER RELATED DOCUMENT (EXCEPT TO THE EXTENT THAT ANY RELATED DOCUMENT EXPRESSLY PROVIDES TO THE CONTRARY) AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR PRIORITY OF THE INTERESTS OF THE ADMINISTRATIVE AGENT IN THE RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. (b) EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THEM PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT; PROVIDED, THAT EACH PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF MANHATTAN IN NEW YORK CITY; 63 PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY PURCHASER OR THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE SELLER COLLATERAL OR ANY OTHER SECURITY FOR THE SELLER SECURED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE CONDUIT PURCHASER, THE COMMITTED PURCHASER OR THE ADMINISTRATIVE AGENT. EACH PARTY HERETO SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE SIGNATURE PAGES HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH PARTY'S RECEIPT THEREOF. EACH PARTY HERETO AGREES THAT "RECEIPT" OF ANY SUCH SUMMONS, COMPLAINT OR OTHER SERVICE OF PROCESS MAY BE EVIDENCED, WITHOUT LIMITATION, BY ANY OF THE FOLLOWING: 1) CONFIRMATION OF DELIVERY IN ANY FORM ISSUED BY THE UNITED STATES POSTAL SERVICE, 2) A DELIVERY CONFIRMATION IN THE FORM PROVIDED BY ANY NATIONALLY RECOGNIZED COURIER SERVICE OR 3) A RECEIPT SIGNED BY ANY EMPLOYEE, OFFICER, DIRECTOR OR INDEPENDENT CONTRACTOR OF THE PERSON RECEIVING SUCH NOTICE PHYSICALLY PRESENT AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE SIGNATURE PAGES HERETO. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. (c) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR 64 INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section 14.11. COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. Section 14.12. SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 14.13. SECTION TITLES. The section titles and table of contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. Section 14.14. LIMITED RECOURSE. The obligations of the Conduit Purchaser and the Committed Purchaser under this Agreement and all Related Documents are solely the corporate obligations of each such Purchaser. No recourse shall be had for the payment of any amount owing in respect of Purchases or for the payment of any fee hereunder or any other obligation or claim arising out of or based upon this Agreement or any other Related Document against any Stockholder, employee, officer, director, agent or incorporator of such Purchaser. Any accrued obligations owing by the Conduit Purchaser or the Committed Purchaser under this Agreement shall be payable by such Purchaser solely to the extent that funds are available therefor from time to time in accordance with the provisions of ARTICLE VI of this Agreement, and, with respect to the Conduit Purchaser, in accordance with ARTICLE VI of the Collateral Agent Agreement (and such accrued obligations shall not be extinguished until paid in full). The Conduit Purchaser shall not, and shall not be obligated to, pay any amount pursuant to the Related Documents unless (i) the Conduit Purchaser has received funds which may be used to make such payment pursuant to the Program Documents, and (ii) after giving effect to such payment, either (A) the Conduit Purchaser could issue Commercial Paper to refinance all outstanding Commercial Paper (assuming such outstanding Commercial Paper matured at such time) without violating the Program Documents, or (B) all Commercial Paper is paid in full. Any amount which the Conduit Purchaser does not pay pursuant to the operation of the preceding sentence shall not constitute a claim (as defined in Section 101 of the Bankruptcy Code) against or an obligation of the Conduit Purchaser for any insufficiency unless and until the Conduit Purchaser satisfies the provisions of such preceding sentence. This SECTION 14.14 shall survive the termination of this Agreement. Section 14.15. FURTHER ASSURANCES. 65 (a) Each of the Seller and the Servicer shall, at its sole cost and expense, upon request of the Conduit Purchaser, the Committed Purchaser or the Administrative Agent, promptly and duly execute and deliver any and all further instruments and documents and take such further action that may be necessary or desirable or that the Conduit Purchaser, the Committed Purchaser or the Administrative Agent may request to (i) perfect, protect, preserve, continue and maintain fully the Purchases made and the right, title and interests (including Liens) granted to such Purchaser under this Agreement, (ii) enable the Conduit Purchaser, the Committed Purchaser or the Administrative Agent to exercise and enforce its rights under this Agreement or any of the other Related Documents or (iii) otherwise carry out more effectively the provisions and purposes of this Agreement or any other Related Document. Without limiting the generality of the foregoing, the Seller shall, upon request of the Conduit Purchaser and the Committed Purchaser or the Administrative Agent, (A) execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices that may be necessary or desirable or that the Purchasers or the Administrative Agent may request to perfect, protect and preserve the Purchases made and the Liens granted pursuant to this Agreement, free and clear of all Adverse Claims, (B) mark, or cause the Servicer to mark, each Contract evidencing each Transferred Receivable with the legend set forth in SECTION 7.07(A), (C) mark, or cause the Servicer to mark, its master data processing records evidencing such Transferred Receivables with such legend and (D) notify or cause the Servicer to notify Obligors of the sale of undivided percentage ownership interests in the Transferred Receivables effected hereunder. (b) Without limiting the generality of the foregoing, the Seller hereby authorizes the Conduit Purchaser, the Committed Purchaser and the Administrative Agent, and each of the Conduit Purchaser and the Committed Purchaser hereby authorizes the Administrative Agent, to file one or more financing or continuation statements, or amendments thereto or assignments thereof, relating to all or any part of the Transferred Receivables, including Collections with respect thereto, or the Seller Collateral without the signature of the Seller or, as applicable, the Conduit Purchaser or the Committed Purchaser, as applicable, to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Agreement or of any notice or financing statement covering the Transferred Receivables, the Seller Collateral or any part thereof shall be sufficient as a notice or financing statement where permitted by law. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have caused this Receivables Purchase and Servicing Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. EAGLE-PICHER FUNDING CORPORATION, as the Seller By ------------------------------------------- Name: Title: ADDRESS: EAGLE-PICHER INDUSTRIES, INC., as the Servicer By ------------------------------------------- Name: Title: ADDRESS: REDWOOD RECEIVABLES CORPORATION, as the Conduit Purchaser By ------------------------------------------- Name: Title: Assistant Secretary ADDRESS: c/o General Electric Capital Corporation 3001 Summer Street, 2nd Floor Stamford, Connecticut 06927 Telephone: (203) 602-9330 Facsimile: (203) 961-2953 GENERAL ELECTRIC CAPITAL CORPORATION, as Committed Purchaser By ------------------------------------------- Name: Title: Duly Authorized Signatory ADDRESS: 201 High Ridge Road Stamford, Connecticut 06927 Attention: Vice President - Portfolio/Eagle-Picher Telephone: (203) 316- ---- Facsimile: (203) 316-7821 GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent By ------------------------------------------- Name: Title: Duly Authorized Signatory ADDRESS: 201 High Ridge Road Stamford, Connecticut 06927 Attention: Vice President - Portfolio/Eagle-Picher Telephone: (203) 316- ---- Facsimile: (203) 316-7821 ACKNOWLEDGED AND AGREED: GENERAL ELECTRIC CAPITAL CORPORATION, as Collateral Agent By ------------------------------------------- Name: Title: Duly Authorized Signatory Address: 201 High Ridge Road Stamford, Connecticut 06927 Attention: Vice President Telephone: (203) 316- ---- Facsimile: (203) 316-7821 EX-10.64 10 l92796aex10-64.txt EXHIBIT 10.64 Exhibit 10.64 EXECUTION COPY ANNEX X To RECEIVABLES SALE AGREEMENT and RECEIVABLES PURCHASE AND SERVICING AGREEMENT each dated as of January 8, 2002 DEFINITIONS AND INTERPRETATIONS SECTION 1. DEFINITIONS AND CONVENTIONS. Capitalized terms used in the Sale Agreement and the Purchase Agreement shall have (unless otherwise provided elsewhere therein) the following respective meanings: "ACCESSION AGREEMENT" shall mean an Accession Agreement substantially in the form of EXHIBIT A to the Collateral Agent Agreement. "ACCOUNTING CHANGES" shall mean, with respect to any Person, (a) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion of the Financial Accounting Standards Board and the American Institute of Certified Public Accountants (or any successor thereto or any agency with similar functions) and (b) changes in accounting principles concurred in by such Person's certified public accountants. "ACCOUNTS" shall mean the Collection Account, the Concentration Account, the Lockbox Accounts and the Retention Account, collectively. "ACCRUED MONTHLY YIELD" shall mean, as of any date of determination within a Settlement Period, the sum of the Daily Yields for each day from and including the first day of the Settlement Period through and including such date. "ACCRUED SERVICING FEE" shall mean, as of any date of determination within a Settlement Period, the sum of the Servicing Fees calculated for each day from and including the first day of the Settlement Period through and including such date. "ACCRUED UNUSED COMMITMENT FEE" shall mean, as of any date of determination within a Settlement Period, the sum of the Unused Commitment Fees calculated for each day from and including the first day of the Settlement Period through and including such date. "ACCUMULATED FUNDING DEFICIENCY" shall mean an "accumulated funding deficiency" as defined in Section 412 of the IRC and Section 302 of ERISA, whether or not waived. "ADDITIONAL AMOUNTS" shall mean any amounts payable to any Affected Party under SECTIONS 2.09 or 2.10 of the Purchase Agreement. "ADDITIONAL COSTS" shall have the meaning assigned to it in SECTION 2.09(B) of the Purchase Agreement. "ADMINISTRATIVE AGENT" shall have the meaning set forth in the Preamble of the Purchase Agreement. "ADMINISTRATIVE SERVICES AGREEMENT" shall mean that certain Administrative Services Agreement dated as of March 7, 2000, between Redwood and the Operating Agent. "ADVERSE CLAIM" shall mean any claim of ownership or any Lien, other than any ownership interest or Lien created under the Sale Agreement or the Purchase Agreement or any Lien created under the Collateral Agent Agreement. "AFFECTED PARTY" shall mean each of the following Persons: the Conduit Purchaser, the Committed Purchaser, the Liquidity Agent, each Liquidity Lender, the Administrative Agent, the Operating Agent, the Letter of Credit Agent, each Letter of Credit Provider, the Collateral Agent, the Depositary and each Affiliate of the foregoing Persons. "AFFILIATE" shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, ten percent (10%) or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, or (c) each of such Person's officers, directors, joint venturers and partners. For the purposes of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "AGGREGATE OFFSET RESERVE" means, at any time, the aggregate Offset Reserve for all Obligors as reported on each Investment Base Certificate and Monthly Report, in each case, in a manner satisfactory to the Administrative Agent in its sole discretion. "AICPA" means the American Institute of Certified Public Accountants (or any successor thereto or any agency with similar functions). "ANCILLARY SERVICES AND LEASE AGREEMENT" shall mean that certain Ancillary Services and Lease Agreement dated as of January 8, 2002 between the Parent and the Seller. "APPENDICES" shall mean, with respect to any Related Document, all exhibits, schedules, annexes and other attachments thereto, or expressly identified thereto. "APPLICABLE PURCHASER" shall mean (i) prior to the occurrence of a Committed Purchaser Funding Event, the Conduit Purchaser, and (ii) on and after the occurrence of a Committed Purchaser Funding Event, the Committed Purchaser. "ASSIGNMENT OF CLAIMS ACT" shall mean the Assignment of Claims Act of 1940 (31 U. S. C. Section 3727 and 41 U. S. C. Section 15) and any successor statute thereto, together with all laws, rules and regulations promulgated in connection therewith, including, without limitation, 48 C. F. R. Section 32.805. "ASSIGNMENT OF GOVERNMENT CLAIMS LAWS" means, collectively, the Assignment of Claims Act and each other similar law, rule and regulation enacted by any Governmental Authority. "AUTHORIZED OFFICER" shall mean, with respect to any Person, the Chairman or Vice-Chairman of the Board of such Person, the President, any Vice President, the Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer and each other officer of such Person specifically authorized in resolutions of the Board of Directors of such Person or other similar authorizations to sign agreements, instruments or other documents on behalf of such Person in 2 connection with the transactions contemplated by the Sale Agreement, the Purchase Agreement and the other Related Documents. "AVAILABILITY" shall mean, as of any date of determination, the amount equal to the lesser of: (a) (i) the Investment Base MULTIPLIED BY the Purchase Discount Rate, MINUS (ii) the Discount Reserve, and (b) the Maximum Purchase Limit. "AVAILABLE LOC PERCENTAGE" shall mean fifteen percent (15%). "BANKRUPTCY CODE" shall mean the provisions of title 11 of the United States Code, 11 U.S.C. Sections 101 ET SEQ. "BILLED AMOUNT" shall mean, with respect to any Receivable, the amount billed on the Billing Date to the Obligor thereunder. "BILLING DATE" shall mean, with respect to any Receivable, the date on which the Invoice with respect thereto was generated. "BREAKAGE COSTS" shall have the meaning assigned to it in SECTION 2.10 of the Purchase Agreement. "BRINGDOWN CERTIFICATE" shall mean, as applicable, a certificate in substantially the form attached as EXHIBIT 3.01(a)(ii)(b) or 3.01(a)(iii)(b) to the Purchase Agreement. "BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York. "BUYER" shall mean Eagle-Picher Funding Corporation, a Delaware corporation, in its capacity as purchaser under the Sale Agreement. "CAPITAL INVESTMENT" shall mean, as of any date of determination with respect to any Purchaser, the amount equal to (a) the aggregate deposits made by such Purchaser to the Collection Account pursuant to SECTION 2.04(b)(i) of the Purchase Agreement on or before such date, PLUS (b) in the case of the Committed Purchaser only, any amounts advanced by the Committed Purchaser to the Conduit Purchaser under the LAPA in respect of Capital Investment when purchasing the Conduit Purchaser's Purchaser Interests, MINUS (c) in the case of the Conduit Purchaser only, any amounts advanced by the Committed Purchasers to the Conduit Purchaser under the LAPA in respect of Capital Investment when purchasing the Conduit Purchaser's Purchaser Interests, MINUS (d) the sum of all amounts disbursed to such Purchaser in reduction of Capital Investment pursuant to SECTIONS 6.03, 6.04 or 6.05 of the Purchase Agreement on or before such date. "CAPITAL INVESTMENT AVAILABLE" shall mean, as of any date of determination, the amount, if any, by which Availability exceeds Capital Investment, in each case as of the end of the immediately preceding day. 3 "CAPITAL LEASE" shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. "CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. "CAPITAL PURCHASE" shall have the meaning assigned to it in SECTION 2.01 of the Purchase Agreement. "CAPITAL PURCHASE REQUEST" shall have the meaning assigned to it in SECTION 2.03(B) of the Purchase Agreement. "CHANGE OF CONTROL" shall mean any event, transaction or occurrence as a result of which (a) the Parent and the Securitization Trust shall cease to collectively own and control, directly or indirectly, 100% of the Stock of the Seller, (b) the Parent shall cease to own and control, directly or indirectly, 100% of the capital stock and other equity interests in any Subsidiary Originator, or (c) Granaria Holdings BV and ABN Amro shall cease collectively to own and control, directly or indirectly at least 50.1% of the voting stock of the Parent or Eagle-Picher Holdings, Inc. "CLOSING DATE" shall mean January 8, 2002. "COLLATERAL AGENT" shall mean GE Capital, in its capacity as collateral agent for the Conduit Purchaser and the Conduit Purchaser Secured Parties pursuant to the Collateral Agent Agreement. "COLLATERAL AGENT AGREEMENT" shall mean that certain Third Amended and Restated Collateral Agent and Security Agreement dated as of March 7, 2000, among Redwood, the Depositary and GE Capital, in its capacities as (a) the Collateral Agent, (b) the Operating Agent, (c) the Liquidity Agent and (d) the Letter of Credit Agent. "COLLECTION ACCOUNT" shall mean (a) prior to a Committed Purchaser Funding Event, that certain segregated deposit account established by the Conduit Purchaser and maintained with the Depositary designated as the "Redwood Main Collection Account," account number 00386310, ABA No. 021001033, Reference: Eagle-Picher Collection Account 33132, or such other account established in accordance with the requirements set forth in SECTION 6.01(b) of the Purchase Agreement, and (b) following the occurrence of a Committed Purchaser Funding Event, an account established by the Administrative Agent designated as the Purchasers' Collection Account and otherwise in accordance with the requirements set forth in SECTION 6.01(b) of the Purchase Agreement. 4 "COLLECTIONS" shall mean, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable (including late charges, fees and interest arising thereon, and all recoveries with respect thereto that have been written off as uncollectible), and any payments by an Originator, the Seller or the Servicer in respect thereof under SECTION 4.02(o) or SECTION 4.04 of the Sale Agreement or SECTION 7.04 of the Purchase Agreement. "COMMERCIAL PAPER" shall mean those certain short-term promissory notes issued by the Conduit Purchaser (or, with respect to the Committed Purchaser, by GE Capital), from time to time in the United States of America commercial paper market. "COMMITTED PURCHASER" shall mean GE Capital, its successors and assigns. "COMMITTED PURCHASER DAILY YIELD" means, for any day, the product of (i) the sum of the Committed Purchaser Daily Yield Rate for such day, PLUS the Daily Margin on such day, PLUS, if a Termination Event has occurred and is continuing, the Daily Default Margin, MULTIPLIED BY (ii) the Committed Purchaser's Capital Investment outstanding on such day. "COMMITTED PURCHASER DAILY YIELD RATE" means, for any day during a Settlement Period, (a) the weighted average Committed Purchaser Yield Rates applicable to the Committed Purchaser's Capital Investment on such day, weighted by outstanding Capital Investment, DIVIDED BY (b) 360. "COMMITTED PURCHASER EXPIRY DATE" shall mean January 7, 2003, which date shall be automatically extended to the 364th day after the then-current Committed Purchaser Expiry Date as long as no Termination Event or Incipient Termination Event shall have occurred and then be continuing on the date of such automatic extension; PROVIDED, HOWEVER, that in no event shall the Committed Purchaser Expiry Date be extended to a date beyond the Final Purchase Date without a written agreement executed by each of the Conduit Purchaser, the Administrative Agent and the Committed Purchaser. "COMMITTED PURCHASER FUNDING EVENT" shall mean the occurrence of either (A) a Redwood Termination Date, but only if both (i) no Termination Event has occurred and is continuing, and (ii) the Committed Purchaser Expiry Date has not occurred or (B) the Redwood Transfer Date. "COMMITTED PURCHASER YIELD RATE" means, with respect to any portion of the Committed Purchaser's Capital Investment on any day during a Settlement Period, the LIBOR Rate for such Settlement Period. "COMMITMENT REDUCTION NOTICE" shall have the meaning assigned to it in SECTION 2.02(a) of the Purchase Agreement. "COMMITMENT TERMINATION NOTICE" shall have the meaning assigned to it in SECTION 2.02(b) of the Purchase Agreement. 5 "CONCENTRATION ACCOUNT" shall mean that certain concentration account listed on EXHIBIT 4.01(r) to the Purchase Agreement established in the name of the Seller and held at the Concentration Account Bank. "CONCENTRATION ACCOUNT BANK" shall mean any bank or other financial institution at which the Concentration Account is maintained. "CONCENTRATION DISCOUNT AMOUNT" shall mean, with respect to any Obligor, and as of any date of determination after giving effect to all Eligible Receivables to be transferred on such date, the amount by which the Outstanding Balance of Eligible Receivables owing by such Obligor exceeds the product of (a) the larger of (i) the smallest percentage set forth in the table below for such Obligor based upon (1) the long-term unsecured debt rating assigned to it at such time by S&P, (2) the long-term unsecured debt rating assigned to it at such time by Moody's, (3) the short-term unsecured debt rating assigned to it at such time by S&P and (4) the short-term unsecured debt rating assigned to it at such time by Moody's and (ii) the Special Limit, if any, applicable to such Obligor, AND (b) the Outstanding Balance of all Eligible Receivables on such date; PROVIDED, that the Concentration Discount Amount for all Governmental Authorities collectively shall be the amount by which the aggregate Outstanding Balance of Eligible Receivables collectively owing by all Governmental Authorities exceeds the product of ten percent (10%) and the Outstanding Balance of all Eligible Receivables on such date; PROVIDED, FURTHER, that the Concentration Discount Amount for all Federal-Mogul Entities collectively shall be the amount by which the aggregate Outstanding Balance of Eligible Receivables collectively owing by the Federal-Mogul Entities exceeds the lesser of (x) $1,000,000 and (y) the product of three percent (3.0%) and the Outstanding Balance of all Eligible Receivables on such date. 6
S&P LONG TERM MOODY'S LONG S&P SHORT TERM MOODY'S SHORT TERM ALLOWABLE % OF RATING TERM RATING RATING RATING ELIGIBLE RECEIVABLES AA- or higher Aa3 or higher A-1+ P-1 12.0% A or A+ A2 or A1 A-1 P-1 10.0% BBB+ or A- Baa1 or A3 A-2 P-2 8.0% BBB- or BBB Baa3 or Baa2 A-3 P-3 6.0% Below BBB- or Not Below Baa3 or Below A-3 or Not Below P-3 or Not 3.0% Rated by either Not Rated by Rated by either Rated by either S&P or Moody's either S&P or S&P or Moody's S&P or Moody's Moody's
It is understood that all debt ratings as used above refer to the public ratings of an Obligor's senior, unsecured and unguaranteed obligations. "CONDUIT PURCHASER" shall mean Redwood and its assigns. "CONDUIT PURCHASER SECURED PARTIES" shall mean the Administrative Agent, the Collateral Agent, the CP Holders, the Depositary, the Liquidity Agent, the Liquidity Lenders, the Letter of Credit Agent, the Letter of Credit Providers and the Operating Agent. "CONTRACT" shall mean any agreement (excluding any Invoice) pursuant to, or under which, an Obligor shall be obligated to make payments with respect to any Receivable. "CP HOLDER" shall mean any Person that holds record or beneficial ownership of Commercial Paper. "CREDIT AND COLLECTION POLICIES" shall mean the credit, collection, customer relations and service policies of the Originators in effect on the Closing Date, as the same may from time to time be amended, restated, supplemented or otherwise modified with the written consent of the Administrative Agent. "CREDIT AGREEMENT" shall mean that certain Credit Agreement dated as of February 19, 1998, among E-P Acquisition, Inc. (now known as Eagle-Picher Industries, Inc.), 7 the Persons party thereto as "lenders", ABN Amro Bank N.V., as agent, PNC Bank, National Association, as documentation agent, and NBD Bank, N.A., as syndication agent. "DAILY DEFAULT MARGIN" shall mean, for any day on which a Termination Event has occurred and is continuing, two percent (2.0%) DIVIDED BY 360. "DAILY MARGIN" shall mean, for any day, the Per Annum Daily Margin on such day DIVIDED BY 360. "DAILY YIELD" means, for any day, the sum of (a) the Redwood Daily Yield for such day, and (b) the Committed Purchaser Daily Yield for such day. "DAILY YIELD RATE" shall mean the Redwood Daily Yield Rate or the Committed Purchaser Daily Yield Rate, as the case may be. "DEALER" shall mean any dealer party to a Dealer Agreement. "DEALER AGREEMENT" shall mean any dealer agreement entered into by Redwood for the distribution of Commercial Paper. "DEBT" of any Person shall mean, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services payment for which is deferred 90 days or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are not overdue by more than 90 days unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all liabilities of such Person under Title IV of ERISA, (i) all Guaranteed Indebtedness of such Person, (j) all indebtedness referred to in CLAUSES (a) through (i) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness, (k) the "Obligations" as such term is defined in the Credit Agreement (as in effect on the Closing Date), and (l) the Seller Secured Obligations. 8 "DEFAULTED RECEIVABLE" shall mean any Receivable (a) with respect to which any payment, or part thereof, remains unpaid for more than 120 days from its Billing Date, (b) with respect to which the Obligor thereunder has taken any action, or suffered any event to occur, of the type described in SECTIONS 9.01(c) or 9.01(d) of the Purchase Agreement, unless otherwise agreed by the Administrative Agent acting in its sole discretion, or (c) that otherwise is determined to be uncollectible and has been or should be written off as uncollectible in accordance with the Credit and Collection Policies. "DEFAULT RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) of: (a) (i) the sum of the aggregate Outstanding Balances of all Transferred Receivables which constituted Defaulted Receivables as of the last day of each of the three Settlement Periods immediately preceding such date, PLUS (ii) the aggregate Outstanding Balance of Transferred Receivables that were written off as uncollectible during such three Settlement Periods as a result of the insolvency of the Obligor thereunder or such Obligor's inability to pay, TO (b) the sum of the respective aggregate Outstanding Balances of all Transferred Receivables as of the last day of each of the three Settlement Periods immediately preceding such date. "DEFERRED PURCHASE PRICE" shall have the meaning assigned to it in SECTION 2.01(c) of the Sale Agreement. "DELINQUENCY RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) of: (a) the sum of the aggregate Outstanding Balances of all Transferred Receivables which remained unpaid for more than 90 days but less than 121 days from their respective Billing Date as of the last day of each of the three Settlement Periods immediately preceding such date TO (b) the sum of the aggregate Outstanding Balances of all Transferred Receivables as of the last day of each of the three Settlement Periods immediately preceding such date. "DEPOSITARY" shall mean Bankers Trust Company, or any other Person designated as the successor Depositary pursuant to and in accordance with the terms of the Depositary Agreement, in its capacity as issuing and paying agent or trustee in connection with the issuance of Commercial Paper. 9 "DEPOSITARY AGREEMENT" shall mean that certain Depositary Agreement dated March 15, 1994, by and between Redwood and the Depositary and consented to by the Liquidity Agent. "DILUTION FACTORS" shall mean, with respect to any Receivable, any credits issued for rebates, freight charges, cash discounts, volume discounts, cooperative advertising expenses, royalty payments, warranties, cost of parts required to be maintained by agreement (whether express or implied), warehouse and other allowances, disputes, setoffs, chargebacks, defective returns, other returned or repossessed goods, inventory transfers, allowances for early payments and other similar allowances and credits that are reflected on the books of each Originator and made or coordinated with the usual practices of the Originator thereof; provided, that any allowances or adjustments in accordance with the Credit and Collection Policies made on account of the insolvency of the Obligor thereunder or such Obligor's inability to pay shall not constitute a Dilution Factor; PROVIDED, FURTHER, that "Dilution Factors" shall not include any such allowances or credits to the extent that such allowances or credits have been fully included in the Offset Reserve for an Obligor in a manner acceptable to the Administrative Agent in its sole discretion. "DILUTION RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) of: (a) the aggregate Dilution Factors during the first Settlement Period immediately preceding such date TO (b) the aggregate Billed Amount of all Transferred Receivables originated during the second Settlement Period immediately preceding such date. "DILUTION RESERVE RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) equal to the greater of (a) eleven percent (11%) and (b) the ratio calculated in accordance with the following formula: [(ADR x 2.00) + [(HDR - ADR) x HDR]] x DILHOR --- ------ ADR NRPB where: ADR = the average of the respective Dilution Ratios as of the last day of the 12 Settlement Periods immediately preceding such date. HDR = the highest Two Month Rolling Dilution Ratio during the 12 Settlement Periods immediately preceding such date. DILHOR = the aggregate Billed Amount of Transferred Receivables originated during the two Settlement Periods immediately preceding such date. 10 NRPB = the Outstanding Balance of Transferred Receivables as of the last day of the first Settlement Period immediately preceding such date. Notwithstanding the foregoing, the Dilution Reserve Ratio may be changed at any time by the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), and, in the case of a decrease only, upon satisfaction of the Rating Agency Condition with respect thereto; PROVIDED that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to such modification. "DILUTION TRIGGER RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) of: (a) the aggregate Dilution Factors during the first, second and third Settlement Periods immediately preceding such date TO (b) the aggregate Billed Amount of all Transferred Receivables originated during the first, second and third Settlement Periods immediately preceding such date. "DISCOUNT RESERVE" means, at any time, the product of (a) the Prime Rate plus 2.00%, (b) Capital Investment and (c) a fraction, the numerator of which is the higher of (i) 30 and (ii) the most recently reported Receivables Collection Turnover, and the denominator of which is 360; provided, that, the Discount Reserve may be changed at any time by the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), and, in the case of decreases only, upon satisfaction of the Rating Agency Condition with respect thereto. "DOLLARS" or "$" shall mean lawful currency of the United States of America. "DOMESTIC SUBSIDIARY" shall mean a Subsidiary organized or incorporated under the laws of any state of the United States of America and domiciled in the United States of America. "DYNAMIC PURCHASE DISCOUNT RATE" shall mean, as of any date of determination, the rate equal to (a) 100% MINUS (b) the sum of (i) the Loss Reserve Ratio PLUS (ii) the Dilution Reserve Ratio, PLUS (c) the Available LOC Percentage. "ELIGIBLE RECEIVABLE" shall mean, as of any date of determination, a Transferred Receivable: (a) that is not a liability of an Excluded Obligor; 11 (b) that is not a liability of an Obligor (i) organized under the laws of any jurisdiction outside of the United States of America (including the District of Columbia but otherwise excluding its territories and possessions) or (ii) having its principal place of business outside of the United States of America (including the District of Columbia but otherwise excluding its territories and possessions); (c) that is denominated and payable only in Dollars in the United States of America; (d) that is not and will not be subject to any right of rescission, set-off, recoupment, counterclaim or defense, whether arising out of transactions concerning the Contract therefor or otherwise, except to the extent that any such amount has been reserved for in the Offset Reserve for the related Obligor in a manner satisfactory to the Administrative Agent in its sole discretion; (e) that is not a Defaulted Receivable or an Unapproved Receivable; (f) with respect to which all obligations on the part of the applicable Originator have been performed in full (including completed delivery and performance of all goods and services covered thereby); for which no portion represents "billed but not yet shipped," "bill and hold" or "progress-billed" goods or merchandise, unperformed services, consigned goods or "sale or return" goods; and which does not arise from a transaction for which any additional performance by the Originator thereof, or acceptance by or other act of the Obligor thereunder, remains to be performed as a condition to any payments on such Receivable; (g) as to which the representations and warranties of SECTIONS 4.01(v)(ii)-(iv) of the Sale Agreement are true and correct in all respects as of the Transfer Date therefor; (h) that is not the liability of an Obligor that has any claim of a material nature against or affecting the Originator thereof or the property of such Originator; (i) that is a true and correct statement of a BONA FIDE indebtedness incurred in the amount of the Billed Amount of such Receivable for merchandise sold to or services rendered and accepted by the Obligor thereunder; (j) that was originated by an Originator in the ordinary course of business in accordance with and satisfies all applicable requirements of the Credit and Collection Policies and which was not purchased from any other Person; (k) that represents the genuine, legal, valid, binding and enforceable obligation of the Obligor thereunder enforceable by the holder thereof in accordance with its terms; (l) that is entitled to be paid pursuant to the terms of the Contract therefor, has not been paid in full or been compromised, adjusted, extended, satisfied, subordinated, rescinded or modified, and is not subject to compromise, adjustment, extension, satisfaction, 12 subordination, rescission, or modification by the Originator thereof (except for adjustments to the Outstanding Balance thereof to reflect Dilution Factors made in accordance with the Credit and Collection Policy); (m) with respect to which the Originator thereof has submitted all necessary documentation for payment to the Obligor thereunder and such Originator has fulfilled all of its other obligations in respect thereof; (n) the stated term of which, if any, is not greater than 60 days after its Billing Date; (o) that was created in compliance with and otherwise does not contravene any laws, rules or regulations applicable thereto (including laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no party to the Contract therefor is in violation of any such law, rule or regulation, in each case except to the extent that such noncompliance or contravention could not reasonably be expected to have a material adverse effect on the collectibility, enforceability, value or payment terms of such Receivable; (p) with respect to which no proceedings or investigations are pending or threatened before any Governmental Authority (i) asserting the invalidity of such Receivable or the Contract therefor, (ii) unless otherwise agreed to by the Administrative Agent and each Rating Agency in each such Person's sole discretion, asserting the bankruptcy or insolvency of the Obligor thereunder, (iii) seeking payment of such Receivable or payment and performance of such Contract or (iv) seeking any determination or ruling that might materially and adversely affect the validity or enforceability of such Receivable or such Contract; (q) with respect to which the Obligor thereunder is not, unless otherwise agreed to by the Administrative Agent and each Rating Agency in each such Person's sole discretion: (i) bankrupt or insolvent, (ii) unable to make payment of its obligations when due, (iii) a debtor in a voluntary or involuntary bankruptcy proceeding, or (iv) the subject of a comparable receivership or insolvency proceeding; (r) that is an "account" (and is not evidenced by a promissory note or other instrument and is not chattel paper) within the meaning of the UCC of the jurisdictions in which each of the Originators, the Parent and the Seller are organized; (s) that is payable solely and directly to an Originator and not to any other Person (including any shipper of the merchandise or goods that gave rise to such Receivable), except to the extent that payment thereof may be made to the Collection Account or otherwise as directed pursuant to ARTICLE VI of the Purchase Agreement; (t) with respect to which all material consents, licenses, approvals or authorizations of, or registrations with, any Governmental Authority required to be obtained, 13 effected or given in connection with the creation of such Receivable or the Contract therefor have been duly obtained, effected or given and are in full force and effect; (u) that is created through the provision of merchandise, goods or services by the Originator thereof in the ordinary course of its business in a current transaction; (v) that complies with such other criteria and requirements as the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), may from time to time specify to the Seller or the Originator thereof upon written notice or, if so required by any Rating Agency, upon such notice as may be specified by such Rating Agency; PROVIDED that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to such modification. (w) that is not the liability of an Obligor that is receiving or, under the terms of the Credit and Collection Policies, should receive merchandise, goods or services on a "cash on delivery" basis; (x) that does not constitute (i) a rebilled amount arising from a deduction taken by an Obligor with respect to a previously arising Receivable or (ii) the balance owed on a Receivable with respect to which one or more partial payments have been made; (y) with respect to which no check, draft or other item of payment has previously been received which was returned unpaid or otherwise dishonored; (z) no portion of which constitutes (i) sales tax or (ii) late fees, service charges or any other similar charges; (aa) that is not subject to any Lien, right, claim, security interest or other interest of any other Person, other than Liens in favor of the Administrative Agent (for the benefit of the Purchasers); (bb) if the Obligor for such Receivable is a Federal-Mogul Entity, that was created after Federal-Mogul Corporation became a debtor-in-possession under Chapter 11 of the Bankruptcy Code but only if and so long as (i) no trustee or examiner has been appointed and no application is pending for the appointment of a trustee or examiner in a case under Chapter 11 of the Bankruptcy Code involving any Federal-Mogul Entity, (ii) no motion has been made for an order liquidating all or any substantial portion of any Federal-Mogul Entity's assets in such case, (iii) no motion has been made for the conversion of such case under Chapter 7 of the Bankruptcy Code, (iv) no restriction prescribed by the bankruptcy court is in effect which would restrict the applicable Federal-Mogul Entity's payment of such Receivable, (v) such bankruptcy court shall have given its approval to the payment by such Federal-Mogul Entity of such Receivable, (vi) no more than 25% of the aggregate Outstanding Balance of all Receivables collectively owed by all Federal-Mogul Entities remain unpaid after the date that is ninety (90) days after its Billing Date and (vii) neither such Receivable nor any part thereof remains unpaid after the date that is ninety (90) days after the Billing Date 14 for such Receivable; PROVIDED, HOWEVER, that the Administrative Agent shall have the right, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), to give notice at any time to the Seller that no Receivable the Obligor of which is any Federal-Mogul Entity shall be considered an Eligible Receivable; and (cc) if the Obligor for such Receivable is Marion Industries Inc., only if and so long as (i) no more than 25% of the aggregate Outstanding Balance of all Receivables owed by Marion Industries, Inc. remain unpaid after the date that is ninety (90) days after its Billing Date and (ii) neither such Receivable nor any part thereof remains unpaid after the date that is ninety (90) days after its Billing Date. "ENVIRONMENTAL LAWS" shall mean all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 ET SEQ.); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. Sections 5101 ET SEQ.); the FederaL Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 ET SEQ.); the Solid Waste Disposal Act (42 U.S.C. Sections 6901 ET SEQ.); the Toxic Substance Control Act (15 U.S.C. Sections 2601 ET SEQ.); the Clean Air Act (42 U.S.C. Sections .7401 ET SEQ.); the Federal Water Pollution Control Act (33 U.S.C. Sections .1251 ET SEQ.); the Occupational Safety and Health Act (29 U.S.C. Sections .651 ET SEQ.); and the Safe Drinking Water Act (42 U.S.C. Sections 300(f) ET SEQ.), each as from time to time amended, and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes. "ENVIRONMENTAL PERMITS" shall mean all permits, licenses, authorizations, certificates, approvals, registrations or other written documents required by any Governmental Authority under any Environmental Laws. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder, and any successor thereto. "ERISA AFFILIATE" shall mean, with respect to any Originator, any trade or business (whether or not incorporated) that, together with such Originator, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC. 15 "ERISA EVENT" shall mean, with respect to any Originator or any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Originator or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a "substantial employer," as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Originator or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Originator or ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 of ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status; or (j) the termination of a Plan described in Section 4064 of ERISA. "ESOP" shall mean a Plan that is intended to satisfy the requirements of Section 4975(e)(7) of the IRC. "EVENT OF SERVICER TERMINATION" shall have the meaning assigned to it in SECTION 9.02 of the Purchase Agreement. "EXCLUDED OBLIGOR" shall mean any Obligor (a) that is an Affiliate of any Originator or the Seller, (b) that is a Governmental Authority UNLESS (i) the applicable Originator and the Seller have, in a manner satisfactory to the Administrative Agent in its sole discretion, fully complied with the Assignment of Claims Act and each other applicable law, rule, regulation and statute with respect to the assignment and pledge of such Obligor's Transferred Receivables, (ii) such Governmental Authority has waived all rights of set-off (whether arising out of transactions concerning the Contract therefor or otherwise) with respect to Transferred Receivables owing by it and (iii) the applicable Originator and the Seller have delivered a legal opinion, in form and substance satisfactory to the Administrative Agent in its sole discretion, stating that the applicable Originator and the Seller have fully complied with the Assignment of Claims Act and each other applicable law, rule, regulation and statute with respect to the assignment and pledge of Transferred Receivables owing by such Obligor or (c) that is an Obligor with respect to which 50% or more of the aggregate Outstanding Balance of all Receivables owing by such Obligor are Defaulted Receivables. "EXCLUDED RECEIVABLE" shall mean any account receivable or other indebtedness (and each other item listed in the definition of "Receivable" with respect solely to such account receivable or other indebtedness) (a) that arises out of the use of a credit or charge card, (b) that arises from the sale of goods or the provision of services by the "construction equipment division" of the Parent, or (c) the Obligor with respect to which is any of: (i) an Affiliate of any Originator or the Seller (unless such Receivable was originated by Eagle-Picher Technologies, 16 LLC), (ii) from and after the applicable Exclusion Date, any Specified Obligor, (iii) any Obligor with respect to a Receivable originated by Eagle-Picher Minerals, Inc. which is organized under the laws of or domiciled in Canada or (iv) any other Obligor as the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), may from time to time specify to the Seller or the Originator in a written notice; PROVIDED that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to such modification. "EXCLUSION DATE" shall mean, with respect to any Specified Obligor, the date after the Closing Date and following the written request of the Parent on which the Administrative Agent confirms in writing to the Parent that the Administrative Agent has received sufficient confirmation that Collections on such Specified Obligor's Receivables are being paid to a Specified Obligor Lockbox and that all data and information provided to the Administrative Agent reflects the termination of sales of such Receivables from and after such date. "FACILITY TERMINATION DATE" shall mean the earliest of (a) the date so designated pursuant to SECTION 9.01 of the Purchase Agreement, (b) 90 days prior to the Final Purchase Date, (c) 90 days prior to the date of termination of the Maximum Purchase Limit specified in a notice from the Seller to the Purchaser delivered pursuant to and in accordance with SECTION 2.02(B) of the Purchase Agreement, (d) two (2) Business Days prior to the occurrence of the Committed Purchaser Expiry Date and (e) the scheduled termination or maturity date of the revolving credit subfacility of the Senior Debt Facility. "FAIR LABOR STANDARDS ACT" shall mean the provisions of the Fair Labor Standards Act, 29 U.S.C. Sections 201 ET SEQ. "FASB" means the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or any successor thereto or any agency with similar functions). "FEDERAL FUNDS RATE" means, for any day, a floating rate equal to the weighted average of the rates on overnight federal funds transactions among members of the Federal Reserve System, as determined by the Administrative Agent. "FEDERAL-MOGUL ENTITIES" shall mean, collectively, Federal-Mogul Corporation and each domestic Affiliate of Federal-Mogul Corporation. "FEDERAL RESERVE BOARD" shall mean the Board of Governors of the Federal Reserve System. "FEE LETTER" shall mean that certain letter agreement dated November 8, 2001, between the Seller, the Administrative Agent, the Committed Purchaser and the Conduit Purchaser. 17 "FINAL PURCHASE DATE" shall mean January 7, 2005. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect on the Closing Date, consistently applied as such term is further defined in SECTION 2(A) of this ANNEX X. "GE CAPITAL" shall mean General Electric Capital Corporation, a Delaware corporation, and its successors and assigns. "GENERAL TRIAL BALANCE" shall mean, with respect to any Originator and as of any date of determination, such Originator's accounts receivable trial balance (whether in the form of a computer printout, magnetic tape or diskette) as of such date, listing Obligors and the Receivables owing by such Obligors as of such date together with the aged Outstanding Balances of such Receivables, in form and substance satisfactory to the Seller and the Purchasers. "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GOVERNMENTAL RECEIVABLE" means any Receivable for which the Obligor is a Governmental Authority. "GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("PRIMARY OBLIGATION") of any other Person (the "PRIMARY OBLIGOR") in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be the amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness; or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof. "INCIPIENT SERVICER TERMINATION EVENT" shall mean any event that, with the passage of time or notice or both, would, unless cured or waived, become an Event of Servicer Termination. 18 "INCIPIENT TERMINATION EVENT" shall mean any event that, with the passage of time or notice or both, would, unless cured or waived, become a Termination Event. "INDEMNIFIED AMOUNTS" shall mean, with respect to any Person, any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal). "INDEMNIFIED PERSON" shall have the meaning assigned to it in SECTION 12.01(A) of the Purchase Agreement. "INDEMNIFIED TAXES" shall have the meaning assigned to it in SECTION 2.08(B) of the Purchase Agreement. "INDENTURE" shall mean that certain Indenture, dated as of February 24, 1998 among E-P Acquisition, Inc. (now known as Eagle-Picher Industries, Inc.), as issuer, the Persons party thereto as "guarantors" and The Bank of New York, as trustee. "INDEX RATE" shall mean, for any day, a floating rate equal to the higher of (i) the rate publicly quoted from time to time by THE WALL STREET JOURNAL as the "base rate on corporate loans at large U.S. money center commercial banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each change in any interest rate provided for in the Purchase Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate. "INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor Agreement dated as of the Closing Date, among GE Capital, as Administrative Agent, ABN Amro Bank N.V., as agent with respect to the Senior Debt Facility, the Originators and Seller. "INVESTMENT BASE" shall mean, as of any date of determination, the amount equal to the Outstanding Balance of Eligible Receivables MINUS the Reserves with respect thereto, in each case, as disclosed in the most recently submitted Investment Base Certificate or as otherwise determined by the Purchaser or the Administrative Agent, using its good faith and commercially reasonable credit judgment and based on Seller Collateral information available to any of them, including any information obtained from any audit or from any other reports with respect to the Seller Collateral, which determination shall be final, binding and conclusive on all parties to the Purchase Agreement (absent manifest error). "INVESTMENT BASE CERTIFICATE" shall have the meaning assigned to it in SECTION 2.03(a) of the Purchase Agreement. 19 "INVESTMENT COMPANY ACT" shall mean the provisions of the Investment Company Act of 1940, 15 U.S.C. Sections 80a ET SEQ., and any regulations promulgated thereunder. "INVESTMENT REPORTS" shall mean the reports with respect to the Transferred Receivables and the Seller Collateral referred to in ANNEX 5.02(b) to the Purchase Agreement. "INVESTMENTS" shall mean, with respect to any Seller Account Collateral, the certificates, instruments, investment property or other investments in which amounts constituting such collateral are invested from time to time. "INVESTOR PORTION" shall mean, with respect to any specified amount, the product of (a) the fraction calculated in the definition of Purchaser Interest and (b) such specified amount. "INVOICE" means any invoice or similar document setting forth the amount of or obligation to pay a Receivable, including any instrument or chattel paper representing the same, and each other Record (other than a Contract) relating solely to such Receivable. "IRC" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder, and any successor thereto. "IRS" shall mean the Internal Revenue Service. "LAPA" shall mean that certain Liquidity Loan and Asset Purchase Agreement dated as of January 8, 2002, among Redwood and GE Capital, in its capacities as (a) the Administrative Agent, (b) the Collateral Agent and Operating Agent for Redwood, (c) the initial Liquidity Lender, (d) the Liquidity Agent, and (e) the Committed Purchaser, as amended, restated, supplemented or otherwise modified from time to time. "LETTER OF CREDIT" shall mean that certain Irrevocable Letter of Credit No. RRC-3 dated March 7, 2000, issued by the Letter of Credit Providers at the request of Redwood in favor of the Collateral Agent pursuant to the Letter of Credit Agreement. "LETTER OF CREDIT AGENT" shall mean GE Capital, in its capacity as agent for the Letter of Credit Providers under the Letter of Credit Agreement. "LETTER OF CREDIT AGREEMENT" shall mean that certain Third Amended and Restated Letter of Credit Reimbursement Agreement dated as of March 7, 2000, among Redwood, the Letter of Credit Agent, the Letter of Credit Providers and the Collateral Agent. "LETTER OF CREDIT PROVIDERS" shall mean, initially, GE Capital, in its capacity as issuer of the Letter of Credit under the Letter of Credit Agreement, and thereafter its successors and permitted assigns in such capacity. "LIBOR BUSINESS DAY" shall mean a Business Day on which banks in the city of London are generally open for interbank or foreign exchange transactions. 20 "LIBOR RATE" shall mean for each Settlement Period, a rate of interest determined by the Administrative Agent equal to: (a) the offered rate for deposits in United States Dollars for the applicable Settlement Period which appears on Reuters Libor Screen 01 and Libor Screen 02 as of 11:00 a.m., London time, on the second full LIBOR Business Day preceding the first day of each Settlement Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); DIVIDED BY (b) a number equal to 1.0 MINUS the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day which is two (2) LIBOR Business Days prior to the beginning of such Settlement Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Federal Reserve Board which are required to be maintained by a member bank of the Federal Reserve System; PROVIDED, that if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for the Committed Purchaser to agree to make or to make or to continue to fund or maintain any Purchases or Capital Investment at the LIBOR Rate, then, unless the Committed Purchaser is able to make or to continue to fund or to maintain such Purchases or Capital Investment at another branch or office of the Committed Purchaser without, in the Committed Purchaser's opinion, adversely affecting it or its Capital Investment or the income obtained therefrom, the LIBOR Rate shall in all such cases be equal to the Index Rate. If such interest rates shall cease to be available from Reuters, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to the Administrative Agent and the Seller. "LIEN" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction). "LIQUIDITY AGENT" shall mean GE Capital, in its capacity as agent for the Liquidity Lenders pursuant to the LAPA. "LIQUIDITY LENDERS" shall mean, collectively, GE Capital and any other provider of Liquidity Loans under the LAPA. 21 "LIQUIDITY LOANS" shall mean any and all borrowings by Redwood under the LAPA. "LITIGATION" shall mean, with respect to any Person, any action, claim, lawsuit, demand, investigation or proceeding pending or threatened against such Person before any court, board, commission, agency or instrumentality of any federal, state, local or foreign government or of any agency or subdivision thereof or before any arbitrator or panel of arbitrators. "LOC DRAW" shall mean any draw under the Letter of Credit. "LOCKBOX" shall have the meaning assigned to it in SECTION 6.01(a)(ii) of the Purchase Agreement. "LOCKBOX ACCOUNT" shall mean each lockbox account listed on EXHIBIT 4.01(R) to the Purchase Agreement established in the name of the Seller and held at a Lockbox Account Bank, together with any other segregated deposit account established by the Seller for the deposit of Collections pursuant to and in accordance with SECTION 6.01(a) of the Purchase Agreement. "LOCKBOX ACCOUNT AGREEMENT" shall mean any agreement among an Originator, the Seller, GE Capital, as Administrative Agent, and a Lockbox Account Bank and/or Concentration Account Bank with respect to a Lockbox and Lockbox Account and/or Concentration Account that provides, among other things, that (a) all items of payment deposited in such Lockbox and Lockbox Account and/or Concentration Account are held by such Lockbox Account Bank and/or Concentration Account Bank, as the case may be, as custodian for GE Capital, as Administrative Agent, (b) neither the Lockbox Account Bank nor the Concentration Account Bank has any rights of setoff or recoupment or any other claim against such Lockbox Account or Concentration Account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such Account and for returned checks or other items of payment and (c) such Lockbox Account Bank agrees to forward all Collections received in such Lockbox Account to the Concentration Account within one Business Day of receipt of available funds, and such Concentration Account Bank agrees to forward all Collections received in the Concentration Account to the Collection Account within one Business Day of receipt of available funds, and is otherwise in form and substance acceptable to the Administrative Agent. "LOCKBOX ACCOUNT BANK" shall mean any bank or other financial institution at which one or more Lockbox Accounts are maintained. "LOSS RESERVE RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) calculated in accordance with the following formula: 2 x ARR x DEFHOR -------- NRPB where: 22 ARR = the highest Three Month Aged Receivables Ratio during the 12 Settlement Periods immediately preceding such date. DEFHOR = the aggregate Billed Amount of Transferred Receivables originated during the four Settlement Periods immediately preceding such date. NRPB = the Outstanding Balance of Transferred Receivables as of the last day of the first Settlement Period immediately preceding such date. Notwithstanding the foregoing, the Loss Reserve Ratio may be changed at any time by the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), and, in the case of a decrease only, upon satisfaction of the Rating Agency Condition with respect thereto; PROVIDED that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to such modification. "MARGIN STOCK" shall have the meaning assigned to it in Section 4.01(o) of the Purchase Agreement. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the business, financial or other condition or prospects of (i) the Originators considered as a whole, (ii) the Seller, (iii) the Parent and its Subsidiaries, considered as a whole, or (iv) the Servicer and the Sub-Servicers considered as a whole, (b) the ability of any Originator, the Seller or the Servicer to perform any of its obligations under the Related Documents in accordance with the terms thereof, (c) the validity or enforceability of any Related Document or the rights and remedies of the Seller, the Purchasers, the Administrative Agent or the Collateral Agent under any Related Document, (d) the federal income tax attributes of the sale, contribution or pledge of the Transferred Receivables pursuant to any Related Document or (e) the Transferred Receivables and the Contracts therefor taken as a whole, the Originator Collateral taken as a whole, the Seller Collateral taken as a whole or the ownership interests or Liens of the Seller or the Purchasers or the Administrative Agent thereon or the priority of such interests or Liens. "MATURITY DATE" shall mean, with respect to any Receivable, the due date for payment therefor specified in the Contract therefor, or, if no date is so specified, 60 days from the Billing Date. "MAXIMUM DEFERRED PURCHASE PRICE" shall mean at any time on and after the ninetieth day following the Closing Date, an amount equal to ten times the Seller Capital at such time. "MAXIMUM PURCHASE LIMIT" shall mean $75,000,000, as such amount may be reduced in accordance with SECTION 2.02(a) of the Purchase Agreement. 23 "MINIMUM SELLER CAPITALIZATION" shall mean (a) at any time between the Closing Date and the ninetieth day following the Closing Date, $1,400,000, and (b) at any time on and after the ninetieth day following the Closing Date, an amount equal to the greater of (i) ten percent (10%) of the Deferred Purchase Price then outstanding under the Sale Agreement, and (ii) the average, for the three preceding Settlement Periods, of the aggregate Outstanding Balances of all Transferred Receivables as of the last day of such Settlement Period which then remained unpaid for more than 90 days but less than 121 days from their respective Billing Dates. "MONTHLY REPORT" shall have the meaning assigned to it in PARAGRAPH (a) of ANNEX 5.02(a) to the Purchase Agreement. "MOODY'S" shall mean Moody's Investors Service, Inc. or any successor thereto. "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA with respect to which any Originator or ERISA Affiliate is making, is obligated to make, or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "NET WORTH PERCENTAGE" shall mean a fraction (expressed as a percentage) (a) the numerator of which equals the aggregate Outstanding Balance of the Transferred Receivables minus the aggregate outstanding Capital Investment and (b) the denominator of which equals the Outstanding Balance of Transferred Receivables. "NOTES" means those 9-3/8% Senior Subordinated Notes due 2008 issued pursuant to the Indenture. "OBLIGOR" shall mean, with respect to any Receivable, the Person primarily obligated to make payments in respect thereof. "OFFICER'S CERTIFICATE" shall mean, with respect to any Person, a certificate signed by an Authorized Officer of such Person. "OFFSET RESERVE" means, at any time, with respect to any Obligor, the amount established by the Servicer as a reserve for offsets to the aggregate Outstanding Balance of such Obligor's Transferred Receivables as a result of liabilities owing by the Originators to such Obligor, which shall not exceed the lesser of (i) such aggregate Outstanding Balance and (ii) the aggregate amount of such liabilities. "OPERATING AGENT" shall mean GE Capital, in its capacity as operating agent for the Conduit Purchaser under the Administrative Services Agreement. "ORIGINATOR" shall mean each of the Parent and each Subsidiary Originator as a seller of Receivables under the Sale Agreement. 24 "ORIGINATOR COLLATERAL" shall have the meaning assigned to it in SECTION 7.01 of the Sale Agreement. "ORIGINATOR INDEMNIFIED PERSON" shall have the meaning assigned to it in SECTION 5.01 of the Sale Agreement. "OTHER FUNDING AGREEMENTS" shall mean any agreements entered into from time to time by any Purchaser for the purchase or financing of receivables. "OUTSTANDING BALANCE" shall mean, with respect to any Receivable and as of any date of determination, the amount (which amount shall not be less than zero) equal to (a) the Billed Amount thereof, minus (b) all Collections received from the Obligor thereunder, MINUS (c) all discounts to or any other modifications that reduce such Billed Amount; PROVIDED, that if the Administrative Agent or the Servicer makes a determination that all payments by such Obligor with respect to such Billed Amount have been made, the Outstanding Balance shall be zero. "PARENT" shall mean Eagle-Picher Industries, Inc., an Ohio corporation. "PARENT GROUP" shall mean the Parent and each of its Affiliates other than the Seller. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "PENSION PLAN" shall mean a Plan described in Section 3(2) of ERISA. "PER ANNUM DAILY MARGIN" shall mean (a) with respect to Capital Investment made by the Conduit Purchaser, 0.90%, and (b) with respect to Capital Investment made by the Committed Purchaser, (i) at the LIBOR Rate, 2.50% and (ii) at the Index Rate, 0.50%. "PERMITTED INVESTMENTS" shall mean any of the following: (a) obligations of, or guaranteed as to the full and timely payment of principal and interest by, the federal government of the United States or obligations of any agency or instrumentality thereof if such obligations are backed by the full faith and credit of the federal government of the United States, in each case with maturities of not more than 90 days from the date acquired; (b) repurchase agreements on obligations of the type specified in CLAUSE (a) of this definition; PROVIDED, that the short-term debt obligations of the party agreeing to repurchase are rated at least A-1+ or the equivalent by S&P and P-1 or the equivalent by Moody's; (c) federal funds, certificates of deposit, time deposits and bankers' acceptances of any depository institution or trust company incorporated under the federal laws of the United States or any state, in each case with original maturities of not more than 90 days or, in the case of bankers' acceptances, original maturities of not more than 365 days; PROVIDED, that 25 the short-term obligations of such depository institution or trust company are rated at least A-1+ or the equivalent by S&P and P-1 or the equivalent by Moody's; (d) commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with original maturities of not more than 30 days that on the date of acquisition are rated at least A-1+ or the equivalent by S&P and P-1 or the equivalent by Moody's; (e) securities of money market funds rated at least Aam or the equivalent by S&P and P-1 or the equivalent by Moody's; and (f) such other investments approved in writing by the Administrative Agent with respect to which each Rating Agency shall have confirmed in writing to the Purchaser and Collateral Agent that such investments shall not result in a withdrawal or reduction of the then current rating by such Rating Agency of the Commercial Paper. "PERMITTED ORIGINATOR ENCUMBRANCES" shall mean the following encumbrances: (a) Liens for taxes or assessments or other governmental charges not yet due and payable (other than with respect to environmental matters); (b) pledges or deposits securing obligations under worker's compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Originator, the Seller or the Servicer is a party as lessee made in the ordinary course of business; (d) deposits securing statutory obligations of any Originator, the Seller or the Servicer; (e) inchoate and unperfected workers', mechanics', suppliers' or similar Liens arising in the ordinary course of business; (f) carriers', warehousemen's or other similar possessory Liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess of $500,000 at any one time; (g) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Originator, the Seller or the Servicer is a party; (h) any attachment or judgment Lien not constituting a Termination Event under SECTION 9.01(f) of the Purchase Agreement; (i) Liens existing on the Closing Date and listed on SCHEDULE 4.03(b) of the Sale Agreement or SCHEDULE 5.03(b) of the Purchase Agreement; (j) Liens expressly permitted under SECTION 4.03(b) of the Sale Agreement (except that such Liens shall not be deemed "Permitted Originator Encumbrances" until such Liens have satisfied the criteria set forth in such section), (l) Liens securing Debt which is incurred to extend, refinance, renew, replace, defease or refund Debt which has been secured by a Lien permitted under the Sale Agreement and is permitted to be extended, refinanced, renewed, replaced, defeased or refunded under the Sale Agreement but only to the extent that such Lien is limited to the same collateral as that covered by the prior Lien, (m) Liens arising under the Senior Debt Facility, and (n) presently existing or hereinafter created Liens in favor of the Seller, the Purchasers, the Administrative Agent or the Collateral Agent. "PERMITTED SELLER ENCUMBRANCES" shall mean the following encumbrances: (a) Liens for taxes or assessments or other governmental charges not yet due and payable (other than with respect to environmental matters); (b) deposits securing statutory obligations of the Seller; 26 (c) presently existing or hereinafter created Liens in favor of the Purchasers, the Administrative Agent or the Collateral Agent and (d) any Lien created pursuant to the terms of the Senior Debt Facility that is released in full on the applicable Transfer Date. "PERSON" shall mean any individual, sole proprietorship, partnership, joint venture, unincorporated organization, trust, association, corporation (including a business trust), limited liability company, institution, public benefit corporation, joint stock company, Governmental Authority or any other entity of whatever nature. "PLAN" shall mean, at any time, an "employee benefit plan," as defined in Section 3(3) of ERISA, that any Originator or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any Originator or ERISA Affiliate. "PROGRAM DOCUMENTS" shall mean the Letter of Credit Agreement, the LAPA, the Collateral Agent Agreement, the Depositary Agreement, the Commercial Paper, the Administrative Services Agreement, each Accession Agreement and the Dealer Agreements. "PROJECTIONS" shall mean the Parent's and the Originators' forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared in a manner consistent with the historical financial statements of the Parent and the Originators, together with appropriate supporting details and a statement of underlying assumptions. "PURCHASE" shall have the meaning assigned to it in SECTION 2.01 of the Purchase Agreement. "PURCHASE AGREEMENT" shall mean that certain Receivables Purchase and Servicing Agreement dated as of January 8, 2002, among the Seller, the Conduit Purchaser, the Committed Purchaser, the Servicer and the Administrative Agent. "PURCHASE ASSIGNMENT" shall mean that certain Purchase Assignment dated as of the Closing Date by and between the Seller and the Applicable Purchaser in the form attached as EXHIBIT 2.04(A) to the Purchase Agreement. "PURCHASE DATE" shall mean each day on which a Purchase is made. "PURCHASE DISCOUNT RATE" shall mean, as of any date of determination, a rate equal to the lesser of (a) the Dynamic Purchase Discount Rate and (b) the Purchase Discount Rate Cap. "PURCHASE DISCOUNT RATE CAP" shall mean a rate equal to eighty-five percent (85%); PROVIDED, that the Purchase Discount Rate Cap may be changed at any time by the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), and, in the case of an increase only, upon satisfaction of the 27 Rating Agency Condition with respect thereto; PROVIDED that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to such modification. "PURCHASE EXCESS" shall mean, as of any date of determination, the extent to which the Capital Investment exceeds the Availability, in each case as disclosed in the most recently submitted Investment Base Certificate or as otherwise determined by the Applicable Purchaser or the Administrative Agent based on Seller Collateral information available to any of them, including any information obtained from any audit or from any other reports with respect to the Seller Collateral, which determination shall be final, binding and conclusive on all parties to the Purchase Agreement (absent manifest error). "PURCHASER INTEREST" shall mean the undivided percentage ownership interest of the Purchasers in the Transferred Receivables which are purchased under the Purchase Agreement. The Purchaser Interest of the Purchasers shall be expressed as a fraction of the total Transferred Receivables computed as follows: PI = C + DR ------------ IB x PDR where: PI = the Purchaser Interest at the time of determination; C = the aggregate Capital Investment at such time; DR = the Discount Reserve; IB = the Investment Base at such time; and PDR = the Purchase Discount Rate at such time. (a) The Purchaser Interest shall be calculated (or deemed to be calculated) on each Business Day from the Closing Date through the Facility Termination Date; (b) from and after the Facility Termination Date until the Termination Date, the Purchaser Interest of the Purchasers shall be fixed at 100%, and (c) after the Termination Date, the Purchaser Interest of the Purchasers shall equal zero. "PURCHASERS" shall mean the Conduit Purchaser and the Committed Purchaser "QUALIFIED PLAN" shall mean a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC. "RATING AGENCY" shall mean Moody's and/or S&P, as applicable. 28 "RATING AGENCY CONDITION" shall mean, with respect to any action, that each Rating Agency has notified the Conduit Purchaser and the Administrative Agent in writing that such action will not result in a reduction or withdrawal of the rating of any outstanding Commercial Paper. "RATIOS" shall mean, collectively, the Default Ratio, the Delinquency Ratio, the Dilution Ratio, the Dilution Reserve Ratio, the Dilution Trigger Ratio, the Loss Reserve Ratio, the Receivables Collection Turnover, the Two Month Rolling Dilution Ratio and the Three Month Aged Receivables Ratio. "RECEIVABLE" shall mean, with respect to any Obligor: (a) indebtedness of such Obligor (whether constituting an account, chattel paper, document, instrument or general intangible) arising from the provision of merchandise, goods or services to such Obligor, including the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto; (b) all rights to returned merchandise or goods the sale of which gave rise to such indebtedness, and all Liens and property subject thereto from time to time securing or purporting to secure any such indebtedness of such Obligor; (c) all guaranties, indemnities and warranties, insurance policies, financing statements and other agreements or arrangements of whatever character from time to time supporting or securing payment of any such indebtedness; (d) all Collections with respect to any of the foregoing; (e) all Invoices with respect to any of the foregoing; and (f) all proceeds (whether constituting accounts, chattel paper, documents, instruments or general intangibles) with respect to the foregoing; PROVIDED that the foregoing definition of "Receivable" shall exclude all Excluded Receivables. "RECEIVABLES ASSIGNMENT" shall have the meaning assigned to such term in SECTION 2.01(a) of the Sale Agreement. "RECEIVABLES COLLECTION TURNOVER" shall mean, as of any date of determination, the amount (expressed in days) equal to: (a) a fraction, (i) the numerator of which is equal to the average of the Outstanding Balances of Transferred Receivables on the first day of each of the 3 Settlement Periods immediately preceding such date and (ii) the denominator of which is equal to aggregate Collections received during such 3 Settlement Periods with respect to all Transferred Receivables, 29 MULTIPLIED BY (b) the number of days contained in such 3 Settlement Periods. "RECORDS" shall mean all Invoices and other documents, books, records and other information (including computer programs, tapes, disks, data processing software and related property and rights) prepared and maintained by any Originator, the Servicer, any Sub-Servicer or the Seller with respect to the Receivables and the Obligors thereunder, the Originator Collateral and the Seller Collateral. "REDWOOD" shall mean Redwood Receivables Corporation, a Delaware corporation. "REDWOOD DAILY YIELD" shall mean, for any day, the product of (a) the Redwood Daily Yield Rate for such day, MULTIPLIED BY (b) Redwood's Capital Investment outstanding on such day. "REDWOOD DAILY YIELD RATE" means, on any day, a floating per annum rate equal to the sum of (a) the Daily Margin on such day, PLUS (b) if a Termination Event has occurred and is continuing, the Daily Default Margin, PLUS (c)(i) to the extent the Conduit Purchaser's Purchases hereunder are being funded by the sale of Commercial Paper, (A) the per annum rate equivalent to the weighted average of the rates paid or payable by the Conduit Purchaser from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of Commercial Paper that is allocated, in whole or in part, to fund or maintain the Conduit Purchaser's Capital Investment during the relevant Settlement Period, which rates shall reflect and give effect to Dealer fees, commissions of placement agents and other issuance costs in respect of such Commercial Paper, DIVIDED BY (B) 360 days; PROVIDED, HOWEVER, that if any component of such rate is a discount rate the rate used shall be the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum and (ii) to the extent the Conduit Purchaser's Purchases hereunder are not being financed by the sale of Commercial Paper, the daily rate to the Conduit Purchaser of borrowing such funds under the LAPA. "REDWOOD TERMINATION DATE" means the date elected by Redwood or the Collateral Agent, by notice to the Seller and the Administrative Agent as the Redwood Termination Date; PROVIDED, that on such date, one or more of the following events shall have occurred and be continuing: (a) a Seller LOC Draw; (b) the obligations of the Liquidity Lenders to make Liquidity Loans shall have terminated and such Liquidity Lenders shall not have otherwise been replaced; (c) an event of default under the Collateral Agent Agreement or any other Program Document shall have occurred; (d) the short term debt rating of a Liquidity Lender shall have been downgraded by a Rating Agency and such Liquidity Lender shall not have been replaced in accordance with the terms of the LAPA within 30 days thereafter; (e) Redwood or the Collateral Agent shall have determined that the funding of Transferred Receivables by Redwood under the Purchase Agreement is impracticable for any reason whatsoever, including as a result of (1) a drop in or withdrawal of any of the ratings assigned to the Commercial Paper by any Rating Agency, (2) the imposition of Additional Amounts, 30 (3) restrictions imposed by any Person on the amount of Transferred Receivables Redwood may finance or (4) the inability of Redwood to issue Commercial Paper; (f) any change in accounting standards shall occur or any pronouncement or release of any accounting or regulatory body (including FASB, AICPA or the Securities and Exchange Commission) shall be issued, or any other change in the interpretation of accounting standards shall occur, such that all or any portion of the Conduit Purchaser's assets and liabilities are deemed to be consolidated with the assets and liabilities of GE Capital or any of its Affiliates; (g) a Termination Event shall have occurred and be continuing; or (h) the outstanding loans to the Conduit Purchaser under the LAPA equal or exceed the Conduit Purchaser's Capital Investment at such time and no interest or other amounts are owed to the Conduit Purchaser under the Purchase Agreement or the other Related Documents. "REDWOOD TRANSFER DATE" means the date on which the Conduit Purchaser transfers to the Liquidity Lenders all of the Conduit Purchaser's right, title and interest in and to its Purchaser Interest in the Transferred Receivables, which transfer may be made at any time when any of the following has occurred: (i) a Termination Event, (ii) the Redwood Termination Date or (iii) both (a) the outstanding loans made to the Conduit Purchaser pursuant to the LAPA equal or exceed the Conduit Purchaser's Capital Investment at such time and (b) no other amounts are owed to the Conduit Purchaser under the Purchase Agreement. "REGULATORY CHANGE" shall mean any change after the Closing Date in any federal, state or foreign law or regulation (including Regulation D of the Federal Reserve Board) or the adoption or making after such date of any interpretation, directive or request under any federal, state or foreign law or regulation (whether or not having the force of law) by any Governmental Authority charged with the interpretation or administration thereof that, in each case, is applicable to any Affected Party. "REINVESTMENT PURCHASE" shall have the meaning assigned to it in SECTION 2.01 of the Purchase Agreement. "RELATED DOCUMENTS" shall mean each Lockbox Account Agreement, the Fee Letter, the Intercreditor Agreement, the Sale Agreement, the Purchase Agreement, each Receivables Assignment, the Purchase Assignment, and all other agreements, instruments, documents and certificates identified in the Schedule of Documents and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Person, or any employee of any Person, and delivered in connection with the Sale Agreement, the Purchase Agreement or the transactions contemplated thereby. Any reference in the Sale Agreement, the Purchase Agreement or any other Related Document to a Related Document shall include all Appendices thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to such Related Document as the same may be in effect at any and all times such reference becomes operative. "REPAYMENT NOTICE" shall have the meaning assigned to it in SECTION 2.03(c) of the Purchase Agreement. 31 "REPORTABLE EVENT" shall mean any of the events set forth in Section 4043(b) of ERISA. "RESERVES" shall mean the aggregate Concentration Discount Amount for all Obligors of Transferred Receivables, the Aggregate Offset Reserve and such other reserves as the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), may establish from time to time; PROVIDED that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to such modification. "RESPONSE TO SOLICITATION" means that certain Response to Solicitation Pursuant to Section 9.2 of Indenture with respect to the Indenture. "RETAINED MONTHLY YIELD" shall mean, as of any date of determination within a Settlement Period, the sum of all amounts transferred to or retained in the Retention Account with respect to Daily Yield from and including the first day of such Settlement Period through and including such date pursuant to SECTION 6.03(a)(ii)(a) AND (b) of the Purchase Agreement. "RETAINED SERVICING FEE" shall mean, as of any date of determination within a Settlement Period, the sum of all amounts transferred to or retained in the Retention Account with respect to the Servicing Fee from and including the first day of such Settlement Period through and including such date pursuant to SECTION 6.03(a)(ii)(c) AND (d) of the Purchase Agreement. "RETAINED UNUSED COMMITMENT FEE" shall mean, as of any date of determination within a Settlement Period, the sum of all amounts transferred to or retained in the Retention Account with respect to the Unused Commitment Fee from and including the first day of such Settlement Period through and including such date in accordance with SECTION 6.03(a)(ii)(e) AND (f) of the Purchase Agreement. "RETENTION ACCOUNT" shall mean, (i) with respect to the Conduit Purchaser, that certain segregated deposit account established by the Administrative Agent and maintained with the Depositary designated as the "Redwood Main Collection Account," account number 00386310, ABA No. 021001033, Reference: Eagle-Picher Retention Account 33133, and (ii) with respect to the Committed Purchaser, such other segregated deposit account as may be established by the Administrative Agent for the Committed Purchaser. "RETENTION ACCOUNT DEFICIENCY" shall mean, as of any Settlement Date, (A) prior to the occurrence of a Committed Purchaser Funding Event, the amount, if any, by which (1) the amounts necessary to make the payments required under SECTIONS 6.04(a)(i), (ii) and (iii) of the Purchase Agreement exceeds (2) the amounts on deposit in the Retention Account or (B) after the occurrence of a Committed Purchaser Funding Event, the amount, if any, by which (1) the amounts necessary to make the payments required under SECTIONS 6.04(a)(i), (ii) and (iii) of the 32 Purchase Agreement exceeds (2) the amounts actually disbursed to the Administrative Agent pursuant to SECTIONS 6.04(a)(i), (ii) and (iii) of the Purchase Agreement. "RETIREE WELFARE PLAN" shall mean, at any time, a Welfare Plan that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant. "REVOLVING PERIOD" shall mean the period from and including the Closing Date through and including the day immediately preceding the Facility Termination Date. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto. "SALE" shall mean a sale of Receivables by an Originator to the Seller in accordance with the terms of the Sale Agreement. "SALE AGREEMENT" shall mean that certain Receivables Sale Agreement dated as of January 8, 2002, between each Originator and the Seller, as the buyer thereunder. "SALE PRICE" shall mean, with respect to any Sale of Transferred Receivables, the price calculated by the Seller and approved from time to time by the Administrative Agent equal to: (a) the aggregate Outstanding Balance of such Transferred Receivables, MINUS (b) the expected costs to be incurred by the Seller in financing the purchase of such Transferred Receivables until the aggregate Outstanding Balance of such Transferred Receivables is paid in full, MINUS (c) the portion of such Transferred Receivables that are reasonably expected by such Originator to be written off as uncollectible, MINUS (d) the portion of such Transferred Receivables that are reasonably expected by such Originator to be reduced by means other than the receipt of Collections thereon or pursuant to CLAUSE (c) above, MINUS (e) amounts expected to be paid to the Servicer with respect to the servicing, administration and collection of such Transferred Receivables; PROVIDED, that such calculations shall be determined based on the historical experience of (x) such Originator, with respect to the calculations required in each of CLAUSES (c) and (d) above, and (y) the Seller, with respect to the calculations required in CLAUSES (b) and (e) above. 33 "SCHEDULE OF DOCUMENTS" shall mean the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Sale Agreement, the Purchase Agreement and the other Related Documents and the transactions contemplated thereunder, substantially in the form attached as ANNEX Y to the Purchase Agreement and the Sale Agreement. "SECURITIES ACT" shall mean the provisions of the Securities Act of 1933, 15 U.S.C. Sections 77a ET SEQ., and any regulations promulgated thereunder. "SECURITIES EXCHANGE ACT" shall mean the provisions of the Securities Exchange Act of 1934, 15 U.S.C. Sections 78a ET SEQ., and any regulations promulgated thereunder. "SECURITIZATION TRUST" shall mean the Securitization Vehicle Stockholder Trust established for the purpose of holding Stock of the Seller. "SELLER" shall mean Eagle-Picher Funding Corporation, a Delaware corporation, in its capacity as seller under the Purchase Agreement. "SELLER ACCOUNT" shall mean a deposit account maintained in the name of the Seller at a commercial bank in the United States of America, as designated by the Seller from time to time. "SELLER ASSIGNED AGREEMENTS" shall have the meaning assigned to it in SECTION 8.01(B) of the Purchase Agreement. "SELLER CAPITAL" shall mean, at any time, an amount equal to (a) the aggregate paid-in capital of the Seller, PLUS (b) the Seller's net income since the Closing Date to such time, if any, MINUS (c) the Seller's net losses since the Closing Date to such time, if any, MINUS (d) the aggregate amount of dividends and distributions declared and paid on the Seller's Stock since the Closing Date. "SELLER COLLATERAL" shall have the meaning assigned to it in SECTION 8.01 of the Purchase Agreement. "SELLER ACCOUNT COLLATERAL" shall have the meaning assigned to it in SECTION 8.01(c) of the Purchase Agreement. "SELLER LOC DRAWS" shall mean any payments made to the Purchaser in connection with the Letter of Credit and allocated to the Seller. "SELLER SECURED OBLIGATIONS" shall mean all loans, advances, debts, liabilities, indemnities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by the Seller to any Affected Party under the Purchase Agreement and any document or instrument delivered pursuant thereto, and all amendments, extensions or renewals thereof, and all covenants and duties regarding such 34 amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising thereunder, including Capital Investment, Daily Yield, Yield Shortfall, Unused Commitment Fees, Unused Commitment Fee Shortfall, amounts in reduction of Purchase Excess, Successor Servicing Fees and Expenses, Additional Amounts and Indemnified Amounts. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against the Seller in bankruptcy, whether or not allowed in such case or proceeding), fees, charges, expenses, attorneys' fees and any other sum chargeable to the Seller thereunder, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations that are paid to the extent all or any portion of such payment is avoided or recovered directly or indirectly from any Purchaser or the Administrative Agent or any transferee of the Purchaser or the Administrative Agent as a preference, fraudulent transfer or otherwise. "SELLER'S SHARE" shall mean the ratio of (a) the Maximum Purchase Limit under the Purchase Agreement TO (b) the aggregate maximum purchase limits or commitments under the Purchase Agreement and all Other Funding Agreements. "SENIOR DEBT FACILITY" shall mean the Credit Agreement and the other loan documents executed in connection therewith, together with such amendments, restatements, supplements or modifications thereto or any refinancings, replacements or refundings thereof as may be agreed to by the Purchasers and the Administrative Agent. "SERVICER" shall mean the Parent, in its capacity as the Servicer under the Purchase Agreement, or any other Person designated as a Successor Servicer. "SERVICER'S CERTIFICATE" shall mean an Officer's Certificate substantially in the form of EXHIBIT 3.01(a)(iii)(a) AND (b) to the Purchase Agreement. "SERVICER TERMINATION NOTICE" shall mean any notice by the Administrative Agent to the Servicer that (a) an Event of Servicer Termination has occurred and (b) the Servicer's appointment under the Purchase Agreement has been terminated. "SERVICING FEE" shall mean, for any day within a Settlement Period, the amount equal to (a) (i) the Servicing Fee Rate DIVIDED BY (ii) 360, MULTIPLIED BY (b) the aggregate Outstanding Balance of the Transferred Receivables on such day. "SERVICING FEE RATE" shall mean 1.00%. "SERVICING FEE SHORTFALL" shall mean, as of any date of determination within a Settlement Period, the amount, if any, by which the Accrued Servicing Fee exceeds the Retained Servicing Fee, in each case as of such date. 35 "SERVICING OFFICER" shall mean any officer of the Servicer involved in, or responsible for, the administration and servicing of the Transferred Receivables and whose name appears on any Officer's Certificate listing servicing officers furnished to the Administrative Agent by the Servicer, as such certificate may be amended from time to time. "SERVICING RECORDS" shall mean all documents, books, Records and other information (including computer programs, tapes, disks, data processing software and related property and rights) prepared and maintained by the Servicer with respect to the Transferred Receivables and the Obligors thereunder. "SERVICING SOFTWARE" shall mean the data processing software used by the Originators, Servicer and/or Seller for the purpose of servicing, monitoring, and retaining data regarding the Transferred Receivables, the Seller Collateral and the Obligors thereunder. "SETTLEMENT DATE" shall mean the tenth Business Day following the end of each Settlement Period. "SETTLEMENT PERIOD" shall mean (a) solely for purposes of determining the Ratios, (i) with respect to all Settlement Periods other than the final Settlement Period, each calendar month, whether occurring before or after the Closing Date, and (ii) with respect to the final Settlement Period, the period ending on the Termination Date and beginning with the first day of the calendar month in which the Termination Date occurs, and (b) for all other purposes, (i) with respect to the initial Settlement Period, the period from and including the Closing Date through and including the last day of the calendar month in which the Closing Date occurs, (ii) with respect to the final Settlement Period, the period ending on the Termination Date and beginning with the first day of the calendar month in which the Termination Date occurs, and (iii) with respect to all other Settlement Periods, each calendar month; PROVIDED, HOWEVER, that upon the occurrence of the Committed Purchaser Funding Event, such Settlement Period shall terminate on the day prior to the Committed Purchaser Funding Event, and the next Settlement Period shall be the period from and including the day of the Committed Purchaser Funding Event through and including the last day of the calendar month in which the Committed Purchaser Funding Event occurs. "SOLVENCY CERTIFICATE" shall mean an Officer's Certificate substantially in the form of EXHIBIT 3.01(a)(i) to the Purchase Agreement. "SOLVENT" shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its Debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur Debts or liabilities beyond such Person's ability to pay as such Debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as 36 Litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can reasonably be expected to become an actual or matured liability. "SPECIAL LIMIT" shall mean, (i) with respect to Ford Motor Company as long as such Person's (a) short-term unsecured debt rating is at least "A-2" from S&P and (b) long-term unsecured debt rating is at least "A3" from Moody's, 20%, (ii) with respect to General Motors Corporation as long as such Person's short-term unsecured debt rating is at least "A-2" from S&P and as least "P-2" from Moody's, 15%, (iii) with respect to Marion Industries, Inc., 10%, and (iv) with respect to any other Person, subject to satisfaction of the Rating Agency Condition, such percentage as may be specified by the Administrative Agent using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto); PROVIDED, HOWEVER, that each of the percentages contained in the foregoing definition may be changed at any time by the Administrative Agent, using its good faith and commercially reasonable credit judgment following a detailed analysis of the Transferred Receivables (or upon receipt of additional information with respect thereto), and, in the case of an increase only, upon satisfaction of the Rating Agency Condition with respect thereto; PROVIDED, FURTHER, that, as long as no Termination Event has occurred, the Administrative Agent shall give advance written notice to the Seller with respect to each such modification. "SPECIFIED OBLIGOR" shall mean each Obligor which the Administrative Agent agrees may be a "Specified Obligor" in a writing addressed to the Seller. "SPECIFIED OBLIGOR LOCKBOXES" shall mean each Lockbox which the Administrative Agent agrees may be a "Specified Obligor Lockbox" in a writing addressed to the Seller. "STOCK" shall mean all shares, options, warrants, member interests, general or limited partnership interests or other equivalents (regardless of how designated) of or in a corporation, limited liability company, partnership or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act). "STOCKHOLDER" shall mean, with respect to any Person, each holder of Stock of such Person. "SUB-SERVICER" shall mean any Person with whom the Servicer enters into a Sub-Servicing Agreement. "SUB-SERVICING AGREEMENT" shall mean any written contract entered into between the Servicer and any Sub-Servicer pursuant to and in accordance with SECTION 7.01 of the Purchase Agreement relating to the servicing, administration or collection of the Transferred Receivables. 37 "SUBSIDIARY" shall mean, with respect to any Person, any corporation or other entity (a) of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person or (b) that is directly or indirectly controlled by such Person within the meaning of control under Section 15 of the Securities Act. "SUBSIDIARY ORIGINATOR" shall mean each of the Subsidiaries of the Parent which are party to the Sale Agreement as a seller of Receivables thereunder. "SUCCESSOR SERVICER" shall have the meaning assigned to it in SECTION 11.02 of the Purchase Agreement. "SUCCESSOR SERVICING FEES AND EXPENSES" shall mean the fees and expenses payable to the Successor Servicer as agreed to by the Seller, the Purchasers and the Administrative Agent. "SUPPLEMENTAL INDENTURE" means that certain Supplemental Indenture dated as of December 14, 2001, among the Parent, certain Persons party thereto as "guarantors" and The Bank of New York, as trustee, with respect to the Indenture. "TERMINATION DATE" shall mean the date on which (a) Capital Investment has been permanently reduced to zero, (b) all other Seller Secured Obligations under the Purchase Agreement and the other Related Documents have been indefeasibly repaid in full and completely discharged and (c) the Maximum Purchase Limit has been irrevocably terminated in accordance with the provisions of SECTION 2.02(b) of the Purchase Agreement. "TERMINATION EVENT" shall have the meaning assigned to it in SECTION 9.01 of the Purchase Agreement. "THREE MONTH AGED RECEIVABLES RATIO" shall mean, as of any date of determination, the average of the ratios (each expressed as a percentage) for each of the three Settlement Periods immediately preceding such date, of: (a) the sum of the respective Outstanding Balances of Transferred Receivables with respect to which any payment, or part thereof, remained unpaid for more than 120 but less than 151 days from their respective Billing Dates as of the last day of such Settlement Period TO (b) the aggregate Billed Amount of Transferred Receivables originated during the fourth Settlement Period immediately preceding such Settlement Period. "TITLE IV PLAN" shall mean a Pension Plan (other than a Multiemployer Plan) that is covered by Title IV of ERISA and that any Originator or ERISA Affiliate maintains, 38 contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "TRANSFER" shall have the meaning given it in SECTION 2.01(A) of the Sale Agreement. "TRANSFER DATE" shall have the meaning given it in SECTION 2.01(a) of the Sale Agreement. "TRANSFERRED RECEIVABLE" shall have the meaning assigned to it in SECTION 2.01(b) of the Sale Agreement; PROVIDED, that any Receivable repurchased by the Originator thereof pursuant to SECTION 4.04 of the Sale Agreement shall not be deemed to be a Transferred Receivable from and after the date of such repurchase unless such Receivable has subsequently been repurchased by or contributed to the Seller. "TWO MONTH ROLLING DILUTION RATIO" shall mean, as of any date of determination, the ratio (expressed as a percentage) of: (a) the aggregate Dilution Factors during the first and second Settlement Periods immediately preceding such date TO (b) the aggregate Billed Amount of all Transferred Receivables originated during the second and third Settlement Periods immediately preceding such date. "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in such jurisdiction. "UNAPPROVED RECEIVABLE" shall mean any receivable (a) with respect to which the obligor thereunder is not an Obligor on any Transferred Receivable and whose customer relationship with an Originator arises as a result of the acquisition by such Originator of another Person, any such Person's assets or such receivable or (b) that was originated in accordance with standards established by another Person where such Person, any of such Person's assets or such receivable was acquired by an Originator, in each case, solely with respect to any such acquisitions that have not been approved in writing by the Administrative Agent and then only for the period prior to any such approval. "UNDERFUNDED PLAN" shall mean any Plan that has an Underfunding. "UNDERFUNDING" shall mean, with respect to any Plan, the excess, if any, of (a) the present value of all benefits under the Plan (based on the assumptions used to fund the Plan pursuant to Section 412 of the IRC) as of the most recent valuation date over (b) the fair market value of the assets of such Plan as of such valuation date. 39 "UNFUNDED PENSION LIABILITY" shall mean, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five years following a transaction that might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Originator or any ERISA Affiliate as a result of such transaction. "UNITED STATES" shall mean the United States of America (including the District of Columbia but otherwise excluding its territories and possessions). "UNUSED COMMITMENT FEE" shall mean, for any day within a Settlement Period, the amount equal to (a) (i) the Unused Commitment Fee Rate DIVIDED BY (ii) 360, MULTIPLIED BY (b) the positive difference, if any, between (i) the Maximum Purchase Limit and (ii) the Capital Investment on such day. "UNUSED COMMITMENT FEE RATE" shall mean 0.25%. "UNUSED COMMITMENT FEE SHORTFALL" shall mean, as of any date of determination within a Settlement Period, the amount, if any, by which the Accrued Unused Commitment Fee exceeds the Retained Unused Commitment Fee, in each case as of such date. "WELFARE PLAN" shall mean a Plan described in Section 3(1) of ERISA. "YIELD SHORTFALL" shall mean, as of any date of determination within a Settlement Period, the amount, if any, by which the Accrued Monthly Yield exceeds the Retained Monthly Yield, in each case as of such date. SECTION 2. OTHER TERMS AND RULES OF CONSTRUCTION. (a) ACCOUNTING TERMS. Unless otherwise specifically provided in the Purchase Agreement or the Sale Agreement, any accounting term used in any Related Document shall have the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. (b) OTHER TERMS. All other undefined terms contained in any of the Related Documents shall, unless the context indicates otherwise, have the meanings provided for by the UCC as in effect in the State of New York from time to time to the extent the same are used or defined therein. (c) RULES OF CONSTRUCTION. Unless otherwise specified, references in any Related Document or any of the Appendices thereto to a Section, subsection or clause refer to such 40 Section, subsection or clause as contained in such Related Document. The words "herein," "hereof" and "hereunder" and other words of similar import used in any Related Document refer to such Related Document as a whole, including all annexes, exhibits and schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular section, subsection or clause contained in such Related Document or any such annex, exhibit or schedule. Any reference to or definition of any document, instrument or agreement shall, unless expressly noted otherwise, include the same as amended, restated, supplemented or otherwise modified from time to time. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; the word "or" is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Related Documents) or, in the case of Governmental Authorities, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. (d) RULES OF CONSTRUCTION FOR DETERMINATION OF RATIOS. The Ratios as of the last day of the Settlement Period immediately preceding the Closing Date shall be established by the Administrative Agent on or prior to the Closing Date and the underlying calculations for periods immediately preceding the Closing Date to be used in future calculations of the Ratios shall be established by the Administrative Agent on or prior to the Closing Date in accordance with SCHEDULE 1 attached to this ANNEX X. For purposes of calculating the Ratios, (i) averages shall be computed by rounding to the third decimal place and (ii) the Settlement Period in which the date of determination thereof occurs shall not be included in the computation thereof and the first Settlement Period immediately preceding such date of determination shall be deemed to be the Settlement Period immediately preceding the Settlement Period in which such date of determination occurs. EX-12.1 11 l92796aex12-1.txt EXHIBIT 12.1 EXHIBIT 12.1 RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
NINE MONTHS THREE MONTHS YEAR YEARS ENDED NOVEMBER 30 ENDED ENDED ENDED --------------------------- NOVEMBER 30 FEBRUARY 28, NOVEMBER 30 2001 2000 1999 1998 1998 1997 (DOLLARS IN THOUSANDS) ------- ------- ------- ----------- ------------ ----------- Income (Loss) from continuing operations before taxes.............. (31,914) 18,395 (14,000) (24,551) 3,807 8,877 ======= ======= ======= ======= ===== ====== Fixed Charges: Interest.................. 40,105 43,989 45,475 33,477 4,104 26,722 Interest factor portion of rentals................ 1,710 1,440 1,560 1,110 360 1,740 ------- ------- ------- ------- ----- ------ Total fixed charges........... 41,815 45,429 47,035 34,587 4,464 28,462 ------- ------- ------- ------- ----- ------ Earnings before income taxes and fixed charges......... 81,920 89,418 92,510 68,064 8,568 (1,740) ======= ======= ======= ======= ===== ====== Preferred stock dividends... 13,282 11,848 10,569 7,382 -- -- ======= ======= ======= ======= ===== ====== Ratio of earnings to fixed charges and preferred stock dividends........... 0.44 0.78 0.95 0.24 1.85 1.31 ======= ======= ======= ======= ===== ====== Earnings inadequate to cover fixed charges and preferred stock dividends................. (31,033) (12,602) (3,612) (31,933) ======= ======= ======= ======= ===== ======
EX-21.1 12 l92796aex21-1.txt EXHIBIT 21.1 EXHIBIT 21.1 EAGLE-PICHER HOLDINGS, INC. SUBSIDIARIES OF EAGLE-PICHER INDUSTRIES, INC. ("EPI") Cincinnati Industrial Machinery Sales Company [Ohio] Daisy Parts, Inc. [Michigan] Eagle-Picher Acceptance Corporation [Ohio] Eagle-Picher Development Company, Inc. [Delaware] EPMR Corporation [Michigan] Eagle-Picher Far East, Inc. [Delaware] Eagle-Picher Funding Corporation [Delaware] 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 UK Limited [England and Wales] Eagle-Picher Hillsdale Limited [England and Wales] Eagle-Picher Wolverine GmbH [Germany] Eagle-Picher Technologies GmbH [Germany] Eagle-Picher Minerals, Inc. [Nevada] Eagle-Picher Minerals International S.A.R.L. [France] Eagle-Picher Minerals Europe GmbH & Co. KG [Germany] Eagle-Picher Minerals Europe Verwaltungs- und Beteiligungs GmbH [Germany] Eagle-Picher Technologies, LLC [Delaware] Eagle-Picher Energy Products Corp. [Canada] EPTEC, S.A. de C.V. [Mexico] Equipos de Acuna, S.A. de C.V. [Mexico]* Hillsdale Tool & Manufacturing Co. [Michigan] Carpenter Enterprises Limited [Michigan] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. * Equipos de Acuna, S.A. de C.V. was sold to the purchaser of the Company's former Construction Equipment Division as of December 14, 2001. EX-24.A 13 l92796aex24-a.txt EXHIBIT 24(A) EXHIBIT 24(a) POWER OF ATTORNEY The undersigned as an officer and director of both Eagle-Picher Holdings, Inc. and Eagle-Picher Industries, Inc., and as director of Eagle-Picher Technologies, LLC, hereby consents to and appoints David G. Krall and John F. Sullivan, and each of them, as his true and lawful attorneys-in-fact and agents with all power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the 2001 fiscal year of both Eagle-Picher Holdings, Inc. and Eagle-Picher Industries, Inc., corporations organized and existing under the laws of the State of Delaware and the State of Ohio respectively, and of Eagle-Picher Technologies, LLC, a limited liability company organized and existing under the laws of the State of Delaware, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the same as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. In Witness Whereof, the undersigned has hereunto set his hand on this 13th day of February, 2002. /s/ JOEL P. WYLER - --------------------------------------------------------- Joel P. Wyler EX-24.B 14 l92796aex24-b.txt EXHIBIT 24(B) EXHIBIT 24(b) POWER OF ATTORNEY The undersigned director of both Eagle-Picher Holdings, Inc. and Eagle-Picher Industries, Inc. hereby consents to and appoints David G. Krall and John F. Sullivan, and each of them, as his true and lawful attorneys-in-fact and agents with all power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the 2001 fiscal year of both Eagle-Picher Holdings, Inc. and Eagle-Picher Industries, Inc., corporations organized and existing under the laws of the State of Delaware and the State of Ohio respectively, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the same as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. In Witness Whereof, the undersigned has hereunto set his hand on this 14th day of February, 2002. /s/ DANIEL C. WYLER - --------------------------------------------------------- Daniel C. Wyler -----END PRIVACY-ENHANCED MESSAGE-----