<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
REGISTRATION NO. 333-49957
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EAGLE-PICHER INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
OHIO -- 31-0268670
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
SUITE 500
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 721-7010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID N. HALL
SENIOR VICE PRESIDENT -- FINANCE
EAGLE-PICHER INDUSTRIES, INC.
250 EAST FIFTH STREET, SUITE 500
CINCINNATI, OHIO 45202
(513) 721-7010
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
SCOTT F. SMITH, ESQ.
HOWARD, DARBY & LEVIN
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 841-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] ____________
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
JURISDICTION OF PRIMARY STANDARD IRS EMPLOYER
INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION CODE NUMBER NUMBER
<S> <C> <C> <C>
Eagle-Picher Holdings, Inc............................... Delaware 13-3989553
Daisy Parts, Inc......................................... Michigan 3714 38-1406772
Eagle-Picher Development Company, Inc.................... Delaware 6719 31-1215706
Eagle-Picher Far East, Inc............................... Delaware 5013 31-1235685
Eagle-Picher Fluid Systems, Inc.......................... Michigan 3089 31-1452637
Eagle-Picher Minerals, Inc............................... Nevada 1499 31-1188662
Eagle-Picher Technologies, LLC........................... Delaware 3691 31-1587660
Hillsdale Tool & Manufacturing Co........................ Michigan 3714 38-0946293
Michigan Automotive Research Corporation................. Michigan 8734 38-2185909
</TABLE>
<PAGE>
<PAGE>
CROSS-REFERENCE SHEET PURSUANT TO RULE 404(a) AND ITEM 501 OF REGULATION S-K,
SHOWING THE LOCATION IN THE PROSPECTUS OF THE INFORMATION
REQUIRED TO BE INCLUDED THEREIN IN ACCORDANCE WITH PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING ON FORM S-4 CAPTION OR LOCATION IN PROSPECTUS
----------------------------------------------------------------- ------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover
Page of Prospectus............................................. Facing Page and Outside Front Cover Page
of the Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus.......... Inside Front and Outside Back Cover Pages
of the Prospectus; Available
Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges, and Other
Information.................................................... Forepart of Prospectus; Summary; Risk
Factors; Summary of Historical and Pro
Forma Condensed Consolidated Financial
Information; Selected Historical
Condensed Consolidated Financial
Information; The Notes Exchange Offer
4. Terms of the Transaction......................................... Summary; The Notes Exchange Offer;
Description of the Notes; Certain U.S.
Federal Income Tax Considerations
5. Pro Forma Financial Information.................................. Summary of Historical and Pro Forma
Condensed Consolidated Financial
Information; Unaudited Pro Forma
Consolidated Financial Statements;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
6. Material Contacts with Company Being Acquired.................... *
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters.............................. *
8. Interests of Named Experts and Counsel........................... *
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities..................................... *
10. Information with Respect to S-3 Registrants...................... *
11. Incorporation of Certain Information by Reference................ *
12. Information with Respect to S-2 or S-3 Registrants............... *
13. Incorporation of Certain Information by Reference................ *
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING ON FORM S-4 CAPTION OR LOCATION IN PROSPECTUS
----------------------------------------------------------------- ------------------------------------------
<S> <C> <C>
14. Information with Respect to Registrants Other Than S-3 or S-2
Registrants.................................................... Summary; Risk Factors; Summary of
Historical and Pro Forma Condensed
Consolidated Financial Information;
Selected Historical Condensed
Consolidated Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Description of
Industrial Revenue Bonds; Description of
New Credit Agreement; Description of the
Notes; Description of Preferred Stock;
Description of Exchange Debentures;
Financial Statements
15. Information with Respect to S-3 Companies........................ *
16. Information with Respect to S-2 or S-3 Companies................. *
17. Information with Respect to Companies Other Than S-3 or S-2
Companies...................................................... *
18. Information if Proxies, Consents or Authorizations Are to be
Solicited...................................................... *
19. Information if Proxies, Consents or Authorizations Are Not to be
Solicited, or in an Exchange Offer............................. Management; Executive Compensation;
Security Ownership and Certain
Beneficial Owners and Management of
Parent; Certain Relationships and
Related Transactions; The Notes Exchange
Offer
</TABLE>
- ------------
* Item is inapplicable or response thereto is in the negative.
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 5, 1998
PROSPECTUS
EAGLE-PICHER INDUSTRIES, INC.
(AS SUCCESSOR BY MERGER TO E-P ACQUISITION, INC.)
OFFER TO EXCHANGE ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/8% SENIOR SUBORDINATED NOTES DUE 2008
------------------------
THE NOTES EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JULY 10, 1998, UNLESS EXTENDED
------------------------
Eagle-Picher Industries, Inc., an Ohio corporation (the 'Company'), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the 'Prospectus') and the accompanying Letter of Transmittal (the
'Letter of Transmittal'), to exchange (the 'Notes Exchange Offer') $1,000
principal amount of its 9 3/8% Senior Subordinated Notes due 2008 (the 'New
Notes') which have been registered under the Securities Act of 1933, as amended
(the 'Act') for each $1,000 principal amount tendered of its outstanding 9 3/8%
Senior Subordinated Notes due 2008 (the 'Old Notes' and, together with the New
Notes, the 'Notes'), of which $220 million aggregate principal amount is
outstanding. The form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of Old
Notes for New Notes. The New Notes evidence the same debt as the Old Notes and
will be issued under the Indenture (as defined herein) governing the Old Notes.
See 'The Notes Exchange Offer' and 'Description of the Notes.' Concurrently with
the Notes Exchange Offer, Eagle-Picher Holdings, Inc., a Delaware corporation
('Parent'), which owns all of the capital stock of the Company, is offering to
exchange (the 'Preferred Stock Exchange Offer' and, together with the Notes
Exchange Offer, the 'Exchange Offers') shares of Parent's 11 3/4% Series B
Cumulative Redeemable Preferred Stock (the 'Series B Preferred Stock') for any
and all of its 14,191 outstanding shares of 11 3/4% Series A Cumulative
Redeemable Exchangeable Preferred Stock (the 'Series A Preferred Stock' and,
together with the Series B Preferred Stock, the 'Preferred Stock'). The Notes
and the Preferred Stock are referred to herein as the 'Securities.'
Interest on the New Notes is payable semi-annually on March 1 and September
1 of each year, commencing September 1, 1998. The Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after March 1,
2003, at the redemption prices set forth herein. The Company may also redeem up
to 35% of the aggregate principal amount of the Notes at its option, at any time
on or prior to March 1, 2001, at a redemption price equal to 109.375% of the
principal amount thereof, plus accrued and unpaid interest and Special Interest
(as defined herein), if any, to the redemption date, with the net cash proceeds
of one or more Equity Offerings (as defined herein); provided, that at least
$100.0 million aggregate principal amount of Notes remains outstanding after
such redemption. Upon the occurrence of a Change of Control (as defined herein),
the Company will be required to offer to repurchase all or any part of each
holder's Notes at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Special Interest, if any, to the
date of purchase. There can be no assurance that the Company will have the
financial resources necessary, or be permitted by its debt or other agreements,
to purchase the Notes upon a Change of Control. See 'Description of
Notes -- Change of Control.'
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company, including the borrowings under the New Credit Agreement
(as defined herein). The Notes are fully and unconditionally, jointly and
severally, guaranteed, on an unsecured senior subordinated basis (the 'Note
Guarantees'), by Parent and the Company's domestic subsidiaries. As of February
28, 1998, the Company had approximately $547.0 million of long-term debt and
$327.0 million of Senior Indebtedness outstanding (of which approximately $323.8
million was secured). The ratio of long-term debt to total capitalization at
February 28, 1998 was 75.2%. The Indenture permits the Company to incur
additional indebtedness, including Senior Indebtedness, subject to certain
limitations.
(cover continued on next page)
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BEFORE TENDERING NOTES IN THE NOTES EXCHANGE OFFER.
------------------------
THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURIITES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE , 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
(cover continued)
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on July 10, 1998,
unless extended (the 'Expiration Date'). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Notes Exchange Offer is subject to certain customary conditions. See 'The Notes
Exchange Offer.'
Prior to this offering, there has been no public market for the Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. The Notes
are expected to be eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ('PORTAL') market of the National Association
of Securities Dealers, Inc. (the 'NASD'). There can be no assurance that an
active market for the New Notes will develop.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined herein). Based on interpretations by the staff of the Securities and
Exchange Commission (the 'Commission') set forth in no-action letters issued to
third parties, the Company believes the New Notes issued pursuant to the Notes
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than Restricted Holders
(as defined herein) or Participating Broker-Dealers (as defined herein)) without
compliance with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the 'Securities Act'). Any holder who
tenders in the Notes Exchange Offer with the intention to participate, or for
the purpose of participating, in a distribution of the New Notes or who is an
affiliate of the Company may not rely upon such interpretations by the staff of
the Commission and, in the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Holders of Notes wishing to
accept the Notes Exchange Offer must represent to the Company in the Letter of
Transmittal that such conditions have been met.
Each broker-dealer (other than a Restricted Holder) that receives New Notes
for its own account pursuant to the Notes Exchange Offer (a 'Participating
Broker-Dealer') must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See 'Plan of Distribution.' Any broker-dealer who is an
affiliate of the Company may not rely on such no-action letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
The Company will not receive any proceeds from this Notes Exchange Offer.
No dealer-manager is being used in connection with this Notes Exchange Offer.
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. See 'Plan of Distribution.'
Interest on the New Notes shall accrue from the last March 1 or September 1
on which interest was paid on the Old Notes so surrendered.
2
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<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments, exhibits, annexes and schedules thereto, the
'Registration Statement,') under the Securities Act of 1933, as amended (the
'Securities Act'), with respect to the New Notes being offered by this
Prospectus. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements made in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete. With respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference. The Registration Statement (including the exhibits and schedules
thereto) may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, New York, New York 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.
Upon consummation of the Notes Exchange Offer, the Company will become
subject to the information requirements of the Securities Exchange Act of 1934,
as amended (the 'Exchange Act'), and in accordance therewith will be required to
file periodic reports and other information with the Commission. In the event
that the Company is not subject to the reporting requirements of the Exchange
Act at any time following consummation of the Notes Exchange Offer, the Company
will be required under the Indenture, dated as of February 24, 1998, as
supplemented by the First Supplemental Indenture, dated February 24, 1998 (as so
supplemented, the 'Indenture'), among the Company, Parent, certain subsidiaries
of the Company and The Bank of New York, as trustee (the 'Trustee'), pursuant to
which the Old Notes were, and the New Notes will be, issued, to continue to file
with the Commission, and to furnish holders of the Notes with (i) all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such forms, including a 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' with respect to the Company, and,
with respect to the annual information only, a report on the financial
statements therein by the Company's certified independent accountants, and (ii)
all reports that would be required to be filed with the Commission on Form 8-K
if the Company were required to file such reports. In addition, for so long as
any of the Old Notes remain outstanding, the Company has agreed to make
available to any prospective purchaser of the Old Notes or beneficial owner of
the Old Notes in connection with any sale thereof the information required by
Rule 144A(d)(4) under the Securities Act.
3
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<PAGE>
SUMMARY
The following summary is qualified in its entirety and should be read in
conjunction with by the more detailed information, including the financial
statements and notes thereto, appearing elsewhere in this Prospectus. Except
where otherwise indicated, 'Parent' means Eagle-Picher Holdings, Inc., and
'Eagle-Picher' and the 'Company' mean Eagle-Picher Industries, Inc. and its
subsidiaries. Except as otherwise indicated, a 'Fiscal Year' means the fiscal
year of the Company ended November 30 of the year specified, e.g., '1997 Fiscal
Year' and 'Fiscal 1997' mean the fiscal year ended November 30, 1997.
THE COMPANY
Founded in 1843, Eagle-Picher is a diversified manufacturer of industrial
products for the automotive, aerospace, defense, telecommunications, food and
beverage and construction industries. The Company's long history of innovation
in technology and engineering has helped it become a leader in certain niche
markets in which it competes. Eagle-Picher operates more than 50 plants in the
U.S., England, Germany, Spain and Mexico, and sells its products in over 60
countries worldwide. The Company has achieved significant internal growth in
both sales and EBITDA (as defined herein), with a compounded annual growth rate
since 1993 of 8.2% and 10.9%, respectively. For the 1997 Fiscal Year, the
Company realized net sales and EBITDA of $906.1 million and $104.0 million,
respectively. For the 1997 Fiscal Year, the Company had a net loss of $3.9
million. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' for a discussion of the Company's net income (loss). The
Company's operations are organized under three major business groups: the
Automotive Group, the Machinery Group and the Industrial Group, which accounted
for 48.1%, 29.8% and 22.1% of the Company's net sales and, after allocation of
corporate overhead, accounted for 49.2%, 27.0% and 23.8% of the Company's
EBITDA, respectively, for the 1997 Fiscal Year.
On February 24, 1998, the Company was acquired (the 'Acquisition') by
Granaria Industries BV ('Granaria Industries') from the Eagle-Picher Industries,
Inc. Personal Injury Settlement Trust (the 'Trust'). At November 30, 1997 and
for the fiscal year then ended, after giving effect to the Acquisition, the pro
forma consolidated financial statements of the Company compared to the audited
consolidated financial statements for the 1997 Fiscal Year reflected an increase
in total debt from $273.4 million to $547.5, an increase in interest expense
from $31.3 million to $54.9 million, an increase in the net loss from $3.9
million to $9.3 million, and a decrease in shareholders' equity from $336.1
million to $170.6 million.
The Automotive Group. The Automotive Group designs, develops, and
manufactures precision machined and rubber coated metal components for the
global automotive industry. Its customers include automotive original equipment
manufacturers ('OEMs') such as Ford Motor Company ('Ford'), General Motors
Corporation ('GM'), Chrysler Corporation ('Chrysler'), Toyota Motor Corporation
('Toyota'), Nissan Motor Manufacturing Corporation U.S.A. ('Nissan'), Honda of
America, Inc. ('Honda'), FMA (SPA) ('Fiat'), Bayerische Motoren Werke AG ('BMW')
and BMW's subsidiary, Rover Group Limited ('Rover'), as well as direct suppliers
to OEMs (referred to herein as 'Tier I' suppliers). The Company pioneered the
development of materials and processes for coating metal with elastomer (rubber)
compounds, and the Company believes its proprietary technologies in this area
give it competitive advantages. The Company's rubber coated metal products
consist of highly specialized gaskets and materials for high-temperature and
high-pressure applications, including disc brake noise insulators, air
conditioning compressor gaskets, and gaskets and coated materials for automotive
powertrains. More than 150 precision machined components are produced by the
Automotive Group, including vibration dampening devices for engine and
drivetrain applications and automatic transmission pump assemblies. The Company
believes that it is the only non-OEM in North America manufacturing high volumes
of automatic transmission oil pumps and is one of the top three companies
worldwide that design and produce torsional crankshaft dampers. The Automotive
Group also produces fluid systems assemblies, molded rubber products, aluminum
castings, and interior trim products.
4
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The Machinery Group. The Machinery Group designs and produces special
purpose batteries, construction equipment and can washing and coating machinery.
The Company has played a crucial role in the development of power systems for
U.S. space flight, and its batteries have powered missions from the back-up
system that safely brought Apollo 13 back to Earth 28 years ago, to last year's
Mars Pathfinder. The Company's batteries are also used in virtually every U.S.
missile system, including the Patriot and Tomahawk missiles. Recognized as one
of the world leaders in nickel-hydrogen technology since it powered the first
communication satellite launch in 1983, the Company believes it is a world
leader in providing power systems for communications and surveillance
satellites, including Motorola Inc.'s ('Motorola') Iridium'r' project.
Construction equipment produced by the Machinery Group includes elevating wheel
tractor scrapers, which are made under a sole-source contract with Caterpillar,
Inc. ('Caterpillar'), and a premium line of heavy duty forklift trucks, as well
as related replacement parts. The Machinery Group also designs, manufactures and
installs specialized high volume can washing and coating machinery for the
manufacturers of two-piece cans primarily for the food and beverage industry.
The Industrial Group. The Industrial Group is a leading producer of
specialty materials, filter aids and absorbents which are used in a wide range
of applications. The Company's specialty materials business, which has grown by
approximately 60%, as measured by net sales, in the past two years, develops,
manufactures and tests high-purity materials including germanium wafers (used in
solar cells for the satellite industry), germanium tetrachloride (used in fiber
optic cables for the telecommunications industry) and boron (used as a neutron
absorber in nuclear power plants and as a semiconductor dopant). With a 30-year
history of developing processing techniques, the Company produces the highest
purity boron and germanium available in the market. Recent innovations by the
Industrial Group have led to development stage production of a zinc selenide
crystal that adds blue and green to the existing red color spectrum of light
emitting diodes (LEDs), with potential use in flat panel displays and signage.
The Industrial Group is also one of the world's largest producers of
diatomaceous earth filter aids, which are used for high purity filtration by
food and beverage processors and by chemical and pharmaceutical companies.
BUSINESS STRATEGY
The Company's strategy is to enhance its competitive position as a leading
global manufacturer for the automotive, aerospace, defense, telecommunications,
food and beverage, and construction industries. To achieve this objective, the
Company will continue to build upon the following strengths:
Leading Positions in Niche Markets. Eagle-Picher's long history of
innovation and reputation for quality have afforded it leading positions in
certain niche markets. The Company enjoys leading positions in, among others,
the market for rubber coated metal products, the North American non-OEM market
for transmission pumps, the market for nickel-hydrogen batteries and the market
for two-piece can washers. The Company believes that it has achieved significant
market share in these markets because of its customer relationships, engineering
excellence, high quality standards and industry reputation.
Strong Customer Relationships. The Company has established long-term
relationships with many of its customers. It has been supplying its products to
each of Ford, GM and Chrysler for more than 45 years; Lockheed Martin
Corporation ('Lockheed Martin') for more than 40 years; and Motorola for more
than 30 years. The Company believes it has developed strong customer
relationships by working closely with customers to design products that meet the
customers' specifications. Often, the Company provides innovative and
cost-efficient engineering solutions to customer problems. For example, the
Industrial Group continuously works with customers to develop lighter and
longer-lasting battery systems to complement the latest generations of missiles
and satellites. In addition, through the development of a new camshaft damper,
the Automotive Group recently solved a significant powertrain vibration problem
for certain OEMs.
Many of the Company's facilities are located near customer plants,
enhancing the Company's ability to respond to its customers' needs. The
Automotive Group recently built a new transmission pump
5
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production facility in Manchester, Tennessee and a new manufacturing facility in
San Luis Potosi, Mexico, in each case to meet the increasing needs of OEMs
located nearby. The Company believes that its strong relationships with
customers, particularly automotive and capital equipment OEMs, give the Company
a competitive advantage and position the Company to capitalize on a growing
trend toward outsourcing.
Diversified Product Lines; Global Presence. The Company manufactures
hundreds of products for the automotive, aerospace, defense, telecommunications,
food and beverage and construction industries. The Company sells its products to
customers located in over 60 countries through its extensive network, including
global manufacturing facilities throughout the U.S. and Europe. The Automotive
Group alone serves virtually all major automotive OEMs worldwide. The Company
believes that its product diversification and global sales reduce its exposure
to any one market segment or customer.
Superior Product Quality. The Company believes it has a reputation among
its customers for providing technologically advanced, high quality products. The
Company has been honored by many of its customers for its commitment to quality
and service, and, in the last two years, has earned Ford's 'Supplier of the Year
Award' (Ford's Sharonville facility), Hughes Space and Communications Company's
('Hughes SC') 'Performance Excellence Award,' McDonnell Douglas Corporation's
('MD') 'Preferred Supplier Award' and Lockheed Martin's 'Tradition of Excellence
Award.'
Low Cost Structure. The Company is committed to controlling costs and
improving operating efficiencies. The Company believes that it is a low cost
producer in many of the markets in which it competes. The Company attributes its
low cost position to its leading positions in niche markets, relatively low
overhead costs due to the small town locations of many of its facilities, a
primarily non-union workforce, advanced proprietary technology and advanced
manufacturing processes, including the Toyota Production System at one of the
Automotive Group's facilities. Low cost is essential to the Company's ability to
continue to remain competitive.
The Company's principal executive offices are located at 250 East Fifth
Street, Suite 500, Cincinnati, Ohio 45202 and its telephone number is
(513) 721-7010.
THE ACQUISITION AND USE OF PROCEEDS
On February 24, 1998, the Company was acquired by Granaria Industries BV
from the Trust. The Trust was established pursuant to the Company's Consolidated
Plan of Reorganization upon its emergence from bankruptcy. See 'Company
History;' 'Business -- Plan of Reorganization and Related Injunction.' The
Acquisition was effected pursuant to the Merger Agreement, dated as of December
23, 1997, as amended by Amendment No. 1, dated February 23, 1998 (the 'Merger
Agreement'), among E-P Acquisition, Inc., a Delaware corporation (the 'Issuer'),
Parent, the Company and the Trust. In accordance with the Merger Agreement, on
February 24, 1998, the Issuer was merged into the Company, with the Company
continuing as the surviving corporation (the 'Merger').
At the closing of the Acquisition (the 'Closing'): (i) $100 million (the
'Equity Investment') was contributed to Parent by Granaria Industries and Lange
Voorhout Investments B.V. ('LV Investment'), an affiliate of ABN AMRO Bank, N.V.
('ABN AMRO Bank'); (ii) Parent received gross proceeds of approximately $80
million from an offering of its 11 3/4% Cumulative Redeemable Exchangeable
Preferred Stock (the 'Preferred Stock Offering'); (iii) Parent contributed to
the Issuer in the form of common equity approximately $180 million (the 'Equity
Contribution') comprising the Equity Investment and all of the proceeds of the
Preferred Stock Offering; (iv) the Issuer borrowed $225 million in term loans
and $79.1 million in revolving loans under a syndicated senior secured loan
facility (the 'New Credit Agreement') with ABN AMRO Bank, and completed the
offering of the Old Notes; (v) the Company (a) terminated the Credit Agreement
dated as of November 29, 1996 by and among the Company, certain subsidiaries of
the Company, PNC Bank, Ohio, National Association, as Agent, and the banks named
as parties therein (the 'PNC Bank Facility,' under which there was no
outstanding indebtedness at Closing) and (b) redeemed 660,000 shares of common
stock, par value $.01 per share (the 'Common Stock') of the Company from the
Trust for an aggregate purchase price of $29
6
<PAGE>
<PAGE>
million (the 'Redemption Amount'); and (vi) the Issuer was merged into the
Company. As a result of these transactions, the Company became a wholly-owned
subsidiary of Parent and assumed all of the obligations and liabilities of the
Issuer, including the Issuer's obligations and liabilities under the Old Notes,
the Indenture, the Registration Rights Agreement and the New Credit Agreement.
Simultaneously with the effectiveness of the Merger (the 'Effective Time'), the
Company paid the total outstanding amount under the Company's 10% Senior
Unsecured Sinking Fund Debentures due November 29, 2006 (the '10% Debentures').
In connection with the Acquisition, the Trust, the sole holder of the 10%
Debentures, waived the prepayment penalty on the 10% Debentures.
The following table sets forth the approximate cash sources and uses of
funds, including the application of the proceeds therefrom, at the Effective
Time.
<TABLE>
<CAPTION>
SOURCES OF FUNDS(A)
(DOLLARS IN MILLIONS)
<S> <C>
New Credit Agreement:
Revolving Credit Facility(B)............. $ 79.1
Term Loans............................... 225.0
Senior Subordinated Notes(C).................. 219.6
Equity Contribution(D)........................ 180.0
Cash.......................................... 39.5
------
Total............................... $743.2
------
------
<CAPTION>
USES OF FUNDS(A)
(DOLLARS IN MILLIONS)
<S> <C>
Merger Consideration(E)....................... $417.6
Repayment of Existing Indebtedness(F)......... 255.9
Common Stock Redemption(G).................... 29.0
Estimated Transaction Fees and Expenses(H).... 27.8
Management Compensation(I).................... 12.9
------
Total............................... $743.2
------
------
</TABLE>
- ------------
(A) Sources and uses of funds are based on (i) the borrowings of debt
outstanding under the Company's existing credit facilities on February 24,
1998 (the 'Closing Date') and (ii) the purchase price paid for the Company
in connection with the Acquisition.
(B) Immediately following the Acquisition, the Company borrowed approximately
$28.6 million under the revolving credit facility under the New Credit
Agreement for use as credit support in the form of letters of credit,
leaving approximately $52.3 million available for additional borrowings
under the revolving credit facility under the New Credit Agreement.
(C) Includes original issue discount of $0.4 million.
(D) Parent funded the Equity Contribution from the Equity Investment and the
Preferred Stock Offering (the fees and expenses of which were paid by the
Company).
(E) Merger Consideration (the 'Merger Consideration') represents the sum of (i)
$410.0 million and (ii) an additional amount equal to 8% on an annual basis
on $410.0 million from December 1, 1997 up to and including the Closing
Date.
(F) Consists of payment of $250.0 million principal amount due under the 10%
Debentures and $5.9 million of interest accrued thereon from December 1,
1997 up to and including the Closing Date.
(G) The Company redeemed 660,000 shares of Common Stock immediately prior to
the Effective Time.
(H) Approximately $27.8 million in transaction fees and expenses (including an
amount equal to approximately 1% of the transaction value payable to
Granaria Holdings (as defined herein)) was paid on the Closing Date. This
amount includes $2.6 million in fees and expenses of Parent related to the
Preferred Stock Offering.
(I) Following the Acquisition, the Company paid approximately $10.0 million to
a trust established for the benefit of certain members of senior management
of the Company (the 'E-P Management Trust') and $2.9 million for the
related tax obligation. The E-P Management Trust used the $10.0 million to
satisfy a loan from Granaria Holdings, the proceeds of which were used by
the E-P Management Trust to acquire 16% of the common stock of Granaria
Industries. See 'Executive Compensation -- Compensation to Senior
Management.' The Company made additional payments to certain members of
senior management of the Company in the amount of approximately $7.6
million, which consists of $2.7 million in stay-put bonuses and $4.9
million in sales incentive bonuses under the STSP (as defined herein). See
'Executive Compensation -- Short Term Sale Program.'
7
<PAGE>
<PAGE>
THE NOTES OFFERING
<TABLE>
<S> <C>
The Issuer................................ The Old Notes were sold by the Issuer on February 24, 1998 (i) to
'qualified institutional buyers' (as defined in Rule 144A under the
Securities Act) in reliance upon Rule 144A under the Securities Act
and (ii) outside the United States to persons other than U.S. persons
in reliance upon Regulation S under the Securities Act. Immediately
following the sale of the Old Notes, the Issuer was merged into
Eagle-Picher Industries, Inc. Upon consummation of the Merger, the
Old Notes became obligations of Eagle-Picher Industries, Inc.
Registration Rights Agreement............. In connection with the sale of the Old Notes, the Issuer entered into
a Registration Rights Agreement, dated February 24, 1998 (the
'Registration Rights Agreement'), providing for, among other things,
the Notes Exchange Offer. Upon consummation of the Merger, the
Company assumed all of the obligations and liabilities of the Issuer
under the Registration Rights Agreement.
THE NOTES EXCHANGE OFFER
The Notes Exchange Offer.................. The Company is offering to exchange up to $220,000,000 aggregate
principal amount of New Notes for up to $220,000,000 aggregate
principal amount of Old Notes issued in the Notes Offering in
reliance upon an exemption from registration under the Securities
Act. Upon consummation of the Notes Exchange Offer, the terms of the
New Notes (including principal amount, interest rate, maturity and
ranking) will be identical in all material respects to the terms of
the Old Notes for which they may be exchanged pursuant to the Notes
Exchange Offer, except that the New Notes have been registered under
the Securities Act and therefore will not bear legends restricting
their transfer and will not contain terms providing for an increase
in the interest rate thereon under certain circumstances described in
the Registration Rights Agreement.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that
New Notes issued pursuant to the Notes Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a Restricted Holder or a
Participating Broker-Dealer) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such
holder's business and that such holder is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with
any person to participate in, the distribution of such New Notes.
Any Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired
by such broker or dealer as a result of
</TABLE>
8
<PAGE>
<PAGE>
<TABLE>
<S> <C>
market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an 'underwriter'
within the meaning of the Securities Act. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with the resale of New
Notes received in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it
will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See 'Plan
of Distribution.'
Any holder who tenders in the Notes Exchange Offer with the intention
of participating, or for the purpose of participating, in a
distribution of the New Notes may not rely on the position of the
staff of the Commission enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply with the registration
and prospectus delivery requirements of the Securities Act in
connection with any resale.
Expiration Date........................... 5:00 p.m., New York City time, on July 10, 1998, unless the Notes
Exchange Offer is extended, in which case the term 'Expiration
Date' means the latest date and time to which the Notes Exchange
Offer is extended.
Conditions to the Notes
Exchange Offer.......................... The obligation of the Company to consummate the Notes Exchange Offer
is subject to certain conditions. See 'The Notes Exchange
Offer -- Conditions.' The Company reserves the right to terminate or
amend the Notes Exchange Offer at any time prior to the Expiration
Date upon the occurrence of any such condition.
Procedures for Tendering
Old Notes............................... Each holder of Old Notes wishing to accept the Notes Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, or transmit an Agent's Message (as defined herein)
in connection with a book-entry transfer, in accordance with the
instructions contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, such facsimile or such Agent's
Message, together with the Old Notes and any other required
documentation to the exchange agent (the 'Exchange Agent') at the
address set forth herein. By executing the Letter of Transmittal or
Agent's Message, each holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Notes
Exchange Offer are being obtained in the ordinary course of business
of the person receiving such New Notes, whether or not such person is
the holder, that neither the holder nor any such other person (i) has
any arrangement or
</TABLE>
9
<PAGE>
<PAGE>
<TABLE>
<S> <C>
understanding with any person to participate in the distribution of
such New Notes, (ii) is engaging or intends to engage in the
distribution of such New Notes or (iii) is an 'affiliate,' as defined
under Rule 405 of the Securities Act, of the Company. See 'The Notes
Exchange Offer -- Purpose and Effect of the Notes Exchange Offer,'
' -- Procedures for Tendering' and 'Plan of Distribution.'
Special Procedures for
Beneficial Owners....................... Any beneficial owner whose Old Notes are registrered in the name of a
broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly
and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may
take considerable time. See 'The Notes Exchange Offer -- Procedures
for Tendering.'
Guaranteed Delivery
Procedures.............................. Holders of Old Notes who wish to tender their Old Notes and whose Old
Notes are not entirely available or who cannot deliver their Old
Notes, the Letter of Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to the
guaranteed delivery procedures set forth in 'The Notes Exchange
Offer -- Guaranteed Delivery Procedures.'
Withdrawal Rights......................... Tenders may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. See 'The Notes Exchange
Offer -- Withdrawal of Tenders.'
Acceptance of Old Notes and
Delivery of New Notes................... The Company will accept for exchange any and all Old Notes which are
properly tendered in the Notes Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The New Notes issued pursuant
to the Notes Exchange Offer will be delivered promptly following the
Expiration Date. See 'The Notes Exchange Offer -- Terms of the Notes
Exchange Offer.'
Exchange Agent............................ The Bank of New York is serving as Exchange Agent in connection with
the Exchange Offers. See 'The Notes Exchange Offer -- Exchange
Agent.'
</TABLE>
10
<PAGE>
<PAGE>
THE NEW NOTES
The Notes Exchange Offer applies to $220.0 million aggregate principal
amount of Old Notes. The terms of the New Notes are identical in all material
respects to the Old Notes, except for certain transfer restrictions and
registration and other rights relating to the exchange of the Old Notes for New
Notes. The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture under which both the Old Notes were,
and the New Notes will be, issued. See 'Description of the Notes.'
<TABLE>
<S> <C>
Notes Offered............................. $220,000,000 principal amount of 9 3/8% Senior Subordinated Notes due
2008.
Maturity Date............................. March 1, 2008.
Interest Payment Dates.................... March 1 and September 1 of each year, commencing September 1, 1998.
Sinking Fund.............................. None.
Subordination............................. The Notes are general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company (including the Company's obligations
under the New Credit Agreement). At February 28, 1998, after giving
effect to the issuance of the Notes and the related financing
transactions, the Company had approximately $327.0 million of Senior
Indebtedness outstanding of which approximately $323.8 million was
secured.
Guarantees................................ The Notes are fully and unconditionally, jointly and severally,
guaranteed on an unsecured senior subordinated basis by Parent and
all domestic subsidiaries of the Company (the 'Subsidiary Guarantors'
and, together with Parent, the 'Guarantors'). Each Note Guarantee is
a general unsecured obligation of the Guarantor thereof, subordinated
in right of payment to the Guarantor's guarantee of the Company's
obligations under the New Credit Agreement and to all Senior
Indebtedness of such Guarantor.
Optional Redemption....................... The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after March 1, 2003, at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the
redemption date. The Company may also redeem up to 35% of the
aggregate principal amount of the Notes at its option, at any time
prior to March 1, 2001, at a redemption price equal to 109.375% of
the principal amount thereof, plus accrued and unpaid interest and
Special Interest, if any, to the redemption date, with the net
proceeds of one or more Equity Offerings (as defined herein);
provided, however, that at least $100 million in aggregate principal
amount of the Notes remains outstanding following each such
redemption. See 'Description of the Notes -- Optional Redemption of
the Notes.'
Change of Control......................... Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all or any part of each holder's Notes
at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Special
</TABLE>
11
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Interest, if any, to the date of purchase. There can be no assurance
that the Company will have the financial resources necessary, or be
permitted by its debt or other agreements, to purchase the Notes upon
a Change of Control. See 'Description of the Notes -- Change of
Control.'
Certain Covenants......................... The Indenture (as defined herein) contains certain covenants that,
among other things, will limit the ability of the Company and the
Restricted Subsidiaries (as defined herein) to incur additional
indebtedness; issue capital stock of Restricted Subsidiaries; make
restricted payments; pay dividends or make other distributions; incur
liens; enter into certain transactions with affiliates; or enter into
certain mergers or consolidations or sell all or substantially all of
the assets of the Company and its subsidiaries. These covenants are
subject to a number of significant exceptions and qualifications. See
'Description of the Notes -- Certain Covenants.'
Use of Proceeds........................... There will be no proceeds to the Company from any exchange pursuant
to the Notes Exchange Offer.
</TABLE>
RISK FACTORS
See 'Risk Factors' for a discussion of certain factors that should be
considered before tendering Old Notes in the Notes Exchange Offer.
12
<PAGE>
<PAGE>
SUMMARY OF HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following historical condensed consolidated financial information is
derived from the Consolidated Financial Statements of the Company. The unaudited
pro forma condensed consolidated statement of income (loss) for the year ended
November 30, 1997 gives effect to the Acquisition and the application of the
proceeds as if it had been consummated on December 1, 1996. Effective November
29, 1996, the Company emerged from bankruptcy and, accordingly, it adopted
fresh-start reporting in accordance with Statement of Position 90-7, 'Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code.' As a result,
the condensed consolidated financial information for the periods subsequent to
the adoption of fresh-start reporting are presented on a different cost basis
than the information for prior periods and, therefore, are not comparable.
Accordingly, a vertical black line is shown to separate post-emergence
operations. The Company recorded a number of charges in 1995 and 1996 in
connection with its reorganization and emergence from bankruptcy as set forth in
the financial information herein. Given that the Company has emerged from
bankruptcy, there will be no further reorganization charges. The unaudited
condensed consolidated financial information presented for the three months
ended February 28, 1997 and 1998 and as of February 28, 1998 are derived from
the unaudited consolidated financial statements of the Company and include, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial information for
such periods. As a result of the Acquisition, which was accounted for as a
purchase, the Company's results of operations and financial position for periods
after February 24, 1998 are not comparable to prior periods. See Note (A) below.
The unaudited pro forma condensed consolidated statement of income (loss) for
the three months ended February 28, 1998 gives effect to the Acquisition as if
it had been consummated on December 1, 1996. Pro forma balance sheet data as of
February 28, 1998 are not included herewith because the effects of the
Acquisition have already been reflected in such balance sheet data. Neither the
historical condensed consolidated financial data nor the pro forma condensed
consolidated financial data are necessarily indicative of either the future
results of operations or the results of operations that would have occurred if
those events had been consummated on the indicated dates. The following
condensed consolidated financial information should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' the Pro Forma Condensed Consolidated Financial Statements (as
defined herein) and the historical Consolidated Financial Statements, related
notes, and other financial information all included elsewhere herein.
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
FEBRUARY 28, FISCAL YEAR ENDED NOVEMBER 30,
------------------------------ -------------------------------------------------
1998(A) 1997
------------------ ---------------------
PRO PRO
ACTUAL FORMA 1997 ACTUAL FORMA 1996 1995
-------- -------- -------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME (LOSS):
Net sales(B).................... $205,842 $205,842 $223,607 $906,077 $906,077 $891,287 $ 848,548
Operating income................ 11,027 11,024 9,040 45,558(C) 29,843 62,106 63,087
Adjustment for asbestos
litigation.................... -- -- -- -- -- 502,197 (1,005,511)
Fresh start revaluation......... -- -- -- -- -- 118,684(D) --
Reorganization items and
claims(E)..................... -- -- -- -- -- (6,593) (2,225)
Interest expense................ (6,940) (12,969) (8,927) (31,261) (54,881) (3,083) (1,926)
Other income (expense).......... 820 820 1,703 (251) (251) 1,345 11,704(F)
Income (loss) before taxes,
extraordinary items and
accounting changes............ 4,907 (1,125) 1,816 14,046 (25,289) 674,656 (934,871)
Income (loss) before
extraordinary items and
accounting changes............ 807 (1,675) (1,220) (3,854) (15,089) 622,086 (944,171)
Extraordinary items and
accounting changes............ -- -- 1,524,305(G) --
Net income (loss)............... 807 (1,675) (1,220) (3,854) (15,089) 2,146,391 (944,171)
BALANCE SHEET DATA (END OF PERIOD):
Working capital................. $162,450 -- $208,373 $187,968 -- $211,808 $ 243,495
Property, plant and equipment,
net........................... 239,337 -- 260,850 243,538 -- 256,351 155,818
Total assets.................... 867,139 -- 831,943 746,881 -- 848,880 580,073
Total debt...................... 546,996 -- 372,170 273,397 -- 386,439 20,628
Shareholder's equity
(deficit)..................... 180,005 -- 338,642 336,117 -- 341,807 (2,211,308)
OTHER DATA:
EBITDA(H)....................... $ 25,905 $25,905 $ 23,482 $103,958 $103,958 $ 92,856 $ 91,795
Depreciation and amortization... 12,822 13,221 14,442 55,989 56,749 30,750 28,708
Capital expenditures............ 5,692 5,692 15,857 51,324(I) 51,324 44,957 40,558
Cash provided by (used in)
operating activities.......... (9,083) 176 17,914 147,883 107,279 72,861 30,456
Cash used in investing
activities.................... (6,734) (6,734) (17,040) (13,827) (13,827) (41,770) (28,713)
Cash used in financing
activities.................... (18,955) (2,860) (14,223) (113,042) (139,337) (3,198) (1,019)
SELECTED RATIOS:
EBITDA/interest expense......... 3.73x 1.97x 2.63x 3.33x 1.89x 30.12x 47.66x
Total debt/EBITDA............... N/M N/M N/M 2.63 N/M 4.16 0.22
Total debt/capitalization....... 75.2% N/M 52.4% 44.9% N/M 53.1% N/M
Earnings/fixed changes(J)....... 1.69x N/M(K) 1.20x 1.43x N/M (K) 173.50x(L) --(L)
</TABLE>
(footnotes on next page)
13
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<PAGE>
NOTES TO HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands)
(A) The unaudited condensed consolidated financial statements as of and for the
three months ended February 28, 1998 include the effects of the Acquisition
that result as of February 24, 1998, the Closing Date. Accordingly, the
historical condensed consolidated statement of income (loss) for the three
months ended February 28, 1998 includes results of operations from (1)
December 1, 1997 through February 24, 1998 of the Company prior to the
consummation of the Acquisition (for clarity, sometimes referred to herein
as the 'Predecessor Company') and (2) February 25 through February 28, 1998
of the Company.
(B) In 1997, the Company sold the Plastics division, the Transicoil division
and the Fabricon Products division and contributed the Suspension Systems
division to the Eagle-Picher-Boge L.L.C. joint venture (collectively, the
'Divested Divisions'). In 1997, 1996, 1995, and the three months ended
February 28, 1997, the Divested Divisions contributed net sales of $78,604,
$138,116, $145,339 and $29,254, respectively.
(C) Operating income in 1997 includes (i) amortization of reorganization value
in excess of amounts allocable to identifiable assets in the amount of
$16,284, (ii) depreciation of assets written up to fair value in the amount
of $9,804 and (iii) loss on sale of divisions of $2,411. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Effects of Reorganization on Operations and Financial
Condition.'
(D) Fresh-start valuation gain of $118,684 reflects transactions related to
emergence from bankruptcy and reorganization in accordance with Statement
of Position 90-7, 'Financial Reporting by Entities in Reorganization under
the United States Bankruptcy Code.' See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Effects of
Reorganization on Operations and Financial Condition.'
(E) Reflects provision for claims of $4,244 in 1996. Remaining reorganization
items is net expense resulting from the Company's bankruptcy filing. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Effects of Reorganization on Operations and Financial
Condition.'
(F) Other income (expense) reflects a gain of $11,505 in 1995 relating to the
sale of an investment in a Canadian mining concern.
(G) Reflects (i) a gain of $1,525,540 in 1996 related to emergence from
bankruptcy and reorganization in accordance with Statement of Position
90-7, 'Financial Reporting by Entities in Reorganization under the United
States Bankruptcy Code' and (ii) a loss of $1,235 in 1996 due to an
accounting change of its method of computing LIFO inventories.
(H) 'EBITDA' is used as defined in the Indenture and may not be comparable to
similarly titled measures reported by other companies. See 'Description of
the Notes.' 'EBITDA' is presented because management believes it is an
indicator of a company's ability to service and incur debt. EBITDA does not
represent net income or cash flows from operations as those terms are
defined by generally accepted accounting principles and does not
necessarily indicate whether cash flows will be sufficient to fund cash
needs. Certain funds depicted by 'EBITDA' are not available for
management's discretionary use due to requirements to conserve funds for
debt service, interest and dividend payments and other commitments and
uncertainties. Under the Indenture, the definition of EBITDA excludes loss
on sale of divisions and any other non-cash items affecting Consolidated
Net Income (including, without limitation, charges for asbestos litigation
and reversal of asbestos litigation reserves). The Divested Divisions
contributed $361, $3,615, $7,695 and ($652) of EBITDA in 1997, 1996, 1995,
and the three months ended February 28, 1997, respectively.
(I) Includes capital expenditures in 1997 of (i) $10,157 in connection with the
new facility in Manchester, Tennessee, (ii) $6,495 in connection with the
completion of a $13,054 diatomaceous
(footnotes continued on next page)
14
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(footnotes continued from previous page)
earth processing facility in Vale, Oregon and (iii) $4,651 in connection
with a new automotive facility in Tamworth, England.
(J) For the purpose of determining the ratio of earnings to fixed charges,
'earnings' consist of income before provision (benefit) for income taxes
and fixed charges. 'Fixed charges' consist of interest expense (including
amortization of deferred financing costs) and approximately 30% of rental
expense, representing that portion of rental expense deemed representative
of the interest factor.
(K) Pro forma earnings were insufficient to cover fixed charges for the three
months ended February 28, 1998 by $1,125 and for the year ended November
30, 1997 by $25,289.
(L) Such ratio of earnings to fixed charges is not meaningful for 1995 because
of significant charges for an asbestos litigation and is not meaningful for
1996 because of significant reversal of asbestos litigation reserves,
fresh-start revaluation and extraordinary items. Earnings were inadequate
to cover fixed charges by $937,409 for the year ended November 30, 1995.
15
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<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, holders of the Old
Notes should consider carefully the following risk factors before deciding to
tender their Old Notes in the Notes Exchange Offer.
SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
The Company is highly leveraged and has significant debt service
requirements. At November 30, 1997 and for the fiscal year then ended, after
giving effect to the Acquisition, the pro forma consolidated financial
statements of the Company compared to the audited consolidated financial
statements for the 1997 Fiscal Year reflected an increase in total debt from
$273.4 million to $547.5, an increase in interest expense from $31.3 million to
$54.9 million, an increase in the net loss from $3.9 million to $15.1 million,
and a decrease in shareholders' equity from $336.1 million to $164.8 million. At
February 28, 1998, after giving effect to the Acquisition, the Company had
$547.0 million of long-term debt outstanding, $323.8 million of which was
secured, and the Company's ratio of long-term debt to total capitalization was
75.2%. Under the New Credit Agreement, the Company has scheduled principal
payments aggregating $5.3 million, $10.4 million and $15.4 million for the years
1998, 1999 and 2000, respectively, increasing to a maximum of $73.9 million in
2006. The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including: (i) the Company's ability to
obtain additional financing, whether for working capital, acquisitions, capital
expenditures, or other purposes, may be impaired; (ii) a substantial portion of
the Company's cash flow from operations will be required for debt service,
thereby reducing funds available to the Company for its operations; (iii)
certain of the Company's indebtedness contains financial and other restrictive
covenants which, if breached, would result in an event of default under such
indebtedness; (iv) the Company's flexibility in planning for or reacting to
changes in market conditions may be limited; (v) the Company may be more
vulnerable upon a downturn in its business or in an industry in which it
operates; and (vi) to the extent that the Company incurs any indebtedness at
variable rates, including under the New Credit Agreement, the Company will be
vulnerable to increases in interest rates.
Based on the current level of operations (assuming the Company does not
incur any material liabilities not presently known to the Company (including any
environmental liabilities)) and anticipated future growth, the Company believes
that its operating cash flow, together with available borrowings under the New
Credit Agreement, will be sufficient to meet the debt service requirements on
its indebtedness, meet its working capital needs and fund its capital
expenditures and other operating expenses. However, there can be no assurance
that the Company's business will generate cash flow at levels sufficient to meet
these requirements. If the Company is unable to generate sufficient cash flow
from operations to service its debt obligations and to meet other cash
requirements, it may be required to sell assets, reduce capital expenditures,
refinance all or a portion of its existing debt (including the Notes) or obtain
additional financing. There can be no assurance that any such asset sales or
refinancing would be possible or that any additional financing would be
available, if at all, on terms acceptable to the Company. The Company's ability
to meet its debt service obligations will be dependent upon its future
performance which, in turn, will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond the Company's
control.
The terms of the New Credit Agreement, the Indenture, and the other
agreements governing the Company's indebtedness impose operating and financing
restrictions on the Company. Such restrictions affect, and in many respects
limit or prohibit, among other things, the ability of the Company to incur
additional indebtedness, pay dividends or repurchase stock or make other
distributions, create liens, make certain investments, sell assets, or enter
into mergers or consolidations. The New Credit Agreement will require the
Company to comply with certain financial ratios and tests, under which the
Company is required to achieve certain financial and operating results. The
restrictions could limit the ability of the Company to plan for or react to
market conditions or meet extraordinary capital needs or otherwise could
restrict corporate activities. There can be no assurance that such restrictions
will not adversely affect the Company's ability to finance its future operations
or capital needs or to engage in other business activities that would be in the
interest of the Company. Moreover, any default under the documents governing the
indebtedness of the Company could have a significant adverse effect on the
market value of the Notes.
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SUBORDINATION OF NOTES; GUARANTEES
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Indebtedness of the Company, including
all amounts owing or guaranteed under the New Credit Agreement. The Guarantees
will be similarly subordinated to all existing and future Senior Indebtedness of
the Guarantors. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company or
a Guarantor, assets of the Company or such Guarantor will be available to pay
obligations on the Notes or Subsidiary Guarantees only after all Senior
Indebtedness of the Company or the Senior Indebtedness of the Guarantors, as
applicable, has been paid in full, and there can be no assurance that there will
be sufficient assets to pay amounts due on any or all of the Notes. In addition,
upon the occurrence of payment defaults in respect of the Senior Indebtedness,
the Company and the Guarantors will be prohibited from paying principal,
premium, interest or other amounts on account of the Notes or any Guarantee
under certain circumstances.
As of February 28, 1998, after giving effect to the Acquisition, the
Company had $322.5 million of Senior Indebtedness outstanding (excluding debt of
the Company's foreign subsidiaries), all of which was secured, and $4.5 million
of debt of the Company's foreign subsidiaries, $1.3 million of which was
secured, to which the Notes were structurally subordinated. See 'Description of
the Notes -- Ranking.' In Fiscal 1997, the Subsidiary Guarantors accounted for
approximately 54%, 58% and 43% of the Company's net sales, EBITDA and total
assets, respectively, and the Company's foreign subsidiaries (which are not
Subsidiary Guarantors) accounted for approximately 9%, 9% and 10% of the
Company's net sales, EBITDA and total assets, respectively.
Parent has fully and unconditionally and jointly and severally guaranteed,
on a senior subordinated basis, all principal and interest payments on the
Notes. However, because Parent's only significant asset following the
Acquisition is the capital stock of the Company (and such asset is pledged to
the lenders under the New Credit Agreement), should the Company be unable to
meet its payment obligations with respect to the Notes, it is unlikely that
Parent would be able to do so.
FRAUDULENT CONVEYANCE STATUTES
The Company, the Issuer, Parent and each Subsidiary Guarantor each believes
that Parent's, the Issuer's and the Company's incurrence of indebtedness in
connection with the issuance of the Securities and the guarantees by Parent and
the Subsidiary Guarantors of indebtedness in connection with the Notes was
incurred for proper purposes and in good faith and that, based on present
forecasts, asset valuations and other financial information, the Company, the
Issuer, Parent and each Subsidiary Guarantor is, and after the issuance of the
Securities was, solvent, will have sufficient capital for carrying on its
business and will be able to pay its debts as they mature. However, if a court
of competent jurisdiction were to find that the Issuer, the Company, Parent or
such Subsidiary Guarantor did not receive fair consideration or reasonably
equivalent value for incurring such indebtedness or obligation (including any
guarantee thereof) and, at the time of such incurrence, the Issuer, the Company,
Parent or such Subsidiary Guarantor (i) was insolvent, (ii) was rendered
insolvent by reason of such incurrence or the Acquisition, (iii) was engaged in
a business or transaction for which the assets remaining in the Issuer, the
Company, Parent or such Subsidiary Guarantor, as the case may be, constituted
unreasonably small capital, or (iv) intended to incur or believed it would incur
debts beyond its ability to pay such debts as they mature, such court, subject
to applicable statutes of limitation, could, among other things, (a) invalidate,
in whole or in part, such indebtedness and obligation (including any guarantee
thereof) as fraudulent conveyances, the effect of which could be that the
holders of the Securities may not be repaid in full, and/or (b) subordinate such
indebtedness and obligation (including any guarantee thereof) to existing or
future creditors of the Issuer, the Company, Parent or such Subsidiary
Guarantor, as the case may be, the effect of which would be to entitle such
other creditors to be paid in full before any payment could be made on the
Securities. If a court were to find that the Issuer, the Company, Parent or any
Subsidiary Guarantor, as the case may be, satisfied the measures of insolvency
or capital inadequacy described in (i) through (iv) above, such court could
avoid any previous distribution by such entity in respect of such indebtedness
(including, without limitation, any
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payment of principal or interest) or obligation, (including any guarantee
thereof) and order that it be returned to the Issuer, the Company, Parent or
such Subsidiary Guarantor, as the case may be, or to a fund for the benefit of
the creditors of such entity.
With respect to each Subsidiary Guarantee, a court may compare its estimate
of the value received by each Subsidiary Guarantor with the magnitude of its
obligation under such Subsidiary Guarantee. If the value received by the
Subsidiary Guarantor is found to be disproportionately small as compared with
its obligation under such Subsidiary Guarantee, then, to that extent, there
would be a lack of fair consideration for the giving of the Subsidiary Guarantee
and if the Subsidiary Guarantee came within any of the foregoing clauses (i)
through (iv) above, such Subsidiary Guarantee could be held invalid to such
extent. The obligation of each Subsidiary Guarantor under its Subsidiary
Guarantee will be limited in a manner intended to avoid it being deemed a
fraudulent conveyance under applicable law.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, the Issuer,
the Company, Parent or any of the Subsidiary Guarantors would be considered
insolvent at a particular time if the sum of its debts was then greater than all
of its property at a fair valuation or if the present fair saleable value of its
assets was then less than the amount that would be required to pay its probable
liabilities on its existing debts as they became absolute and matured. The
Company believes, based upon the financial information, the recent operating
history as discussed in 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and other factors, that, after giving
effect to the issuance of the Notes, none of the Issuer, the Company, Parent, or
any of the Subsidiary Guarantors will be rendered insolvent, each such entity
will have sufficient capital for the businesses in which it is engaged and it
will be able to pay its debts as they mature. While the Company believes each of
the Issuer, the Company, Parent and each Subsidiary Guarantor is solvent, there
can be no assurance as to whether a court would concur with such beliefs.
CYCLICALITY OF MARKETS
Certain industries in which the Company competes are highly cyclical and
can be affected by the strength of the economy generally. In particular, the
Company's automotive and construction equipment businesses depend, in large
part, on the overall strength of demand for light trucks, passenger cars,
forklifts and wheel tractor scrapers. There can be no assurance that the
industries for which the Company supplies components will not experience
downturns in the future. An economic recession typically impacts substantially
leveraged companies such as the Company more than similarly situated companies
with less leverage. A decrease in overall demand for light trucks, passenger
cars, forklifts and wheel tractor scrapers could have a material adverse effect
on the Company's financial condition, results of operations or cash flows.
RELIANCE ON PRINCIPAL CUSTOMERS; GOVERNMENT APPROVALS
Sales to the Company's three largest customers, Ford, GM and Caterpillar,
accounted for approximately 18.8%, 7.1% and 6.1%, respectively, of the Company's
net sales for Fiscal 1997. Although the Company has ongoing relationships with
Ford, GM and Caterpillar, there can be no assurance that sales to these
customers will continue at the same levels.
Ford has notified the Company that from December 1997 through March 1999,
it will no longer purchase certain product lines of the Company. These product
lines contributed approximately $19.4 million, or 2.1%, of the Company's net
sales for Fiscal 1997 (which represents 11.4% of the Company's sales to Ford in
Fiscal 1997). Although the Company believes that this revenue will be replaced
by new programs currently being implemented with other customers, there can be
no assurance that Ford or other customers will continue to purchase products for
the Company at current levels. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
Continuation of the Company's relationships with its principal customers is
dependent upon the customers' satisfaction with the price, quality and delivery
of the Company's products. While the Company believes its relationships with its
customers (including Ford) are satisfactory, if any of its principal customers
were to reduce substantially or discontinue its purchases from the Company, the
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financial condition, results of operations or cash flows of the Company could be
materially adversely affected.
The Company manufactures certain products for U.S. government agencies
(including National Aeronautics and Space Administration ('NASA') and the U.S.
Department of Defense ('DOD')), many of which have concerns about doing business
with non-U.S. entities and some of which require the Company to maintain special
security clearance and other arrangements. Because the Company is controlled by
a non-U.S. citizen as a result of the Acquisition, it is required to enter into
additional special security clearance and other arrangements with the DOD. The
Company is currently in discussions with the DOD regarding the terms of the
special security clearance arrangements and a filing under the Exon-Florio
provisions of the Defense Production Act. There can be no assurance, however,
that the U.S. government will continue as a customer of the Company or will
continue to do business with the Company at its current level. Contracts funded,
directly or indirectly, by various agencies of the federal government that
require security clearance represented approximately 6% of the Company's net
sales for Fiscal 1997.
THE OEM SUPPLIER INDUSTRY
The Company's automotive business competes in the global OEM supplier
industry. The automotive industry is characterized by a small number of OEMs
that are able to exert considerable pressure on component and system suppliers
to reduce costs, improve quality and provide additional design and engineering
capabilities. In the past, OEMs have generally demanded and received price
reductions and measurable increases in quality by implementing competitive
selection processes, rating programs and various other arrangements. Also,
through increased partnering on platform work, OEMs have generally required
component and system suppliers to provide more design engineering input at
earlier stages of the product development process, the costs of which have, in
some cases, been absorbed by the suppliers. There can be no assurance that
future price reductions, increased quality standards or additional engineering
capabilities required by OEMs will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
ENVIRONMENTAL MATTERS
Like companies involved in similar manufacturing businesses, the Company's
operations and properties are subject to extensive federal, state, local and
foreign environmental laws and regulations, including those concerning, among
other things, the treatment, storage and disposal of wastes, the investigation
and remediation of soil and groundwater affected by hazardous substances, the
discharge or emission of substances into the soil, water or air or otherwise
relating to environmental protection and various health and safety matters
(collectively and as amended, 'Environmental Laws'). Certain Environmental Laws,
such as the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended ('CERCLA'), impose strict, retroactive and joint and several
liability upon persons responsible for releases of hazardous substances. Failure
to comply with such Environmental Laws can lead to the imposition of civil or
criminal penalties, injunctive relief and denial or loss of, or imposition of
significant restrictions on, environmental permits. In addition, the Company
could be subject to suit by third parties in connection with violations of or
liability under Environmental Laws. The Company currently is undertaking
remedial activities at a number of its facilities and properties, and has
received notices under CERCLA or analogous state laws of liability or potential
liability in connection with the disposal of material from the Company's
operations or former operations. See 'Business -- Environmental Matters.'
The Company's expenditures related to environmental matters have not had,
and are not currently expected to have, a material adverse effect on the
Company's financial condition, results of operations or cash flows. However, the
Environmental Laws under which the Company's facilities operate are numerous,
complicated and often ambiguous. Moreover, the Environmental Laws are constantly
changing, historically have become increasingly more stringent, and may be
applied retroactively. Accordingly, there can be no assurance that the Company
will not be required to make substantial additional expenditures to remain in or
to achieve compliance with Environmental Laws in the future or
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that any such additional expenditures will not have a material adverse effect on
the Company's financial condition, results of operations or cash flows.
COMPETITION
The Company operates in highly competitive industries. The Company competes
with major national and international manufacturers in each of its product
lines, and its competitors include customers of the Company, such as automotive
OEMs, many of which are significantly larger and have greater financial,
technical, marketing, distribution and other resources than the Company. The
Company competes with such other companies in different product lines to various
degrees on the basis of price, technical performance, product features, product
system compatibility, customized design, availability, quality and sales and
technical support. The Company's ability to compete successfully depends on
elements both within and outside of the Company's control, including its product
mix, successful and timely development of new technology, products and
manufacturing processes, product performance and quality, manufacturing yields
and product availability, customer service, pricing, industry trends and general
economic trends. The Company believes that its experience in product design and
development, design engineering and implementing cost reduction programs and
ability to control manufacturing and development costs should allow the
Company's products and prices to remain competitive. However, there can be no
assurance that the Company will be able to improve or maintain its sales or its
profit margins on sales to OEMs or other customers.
TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT
Certain industries in which the Company competes are subject to rapid
technological change resulting in the frequent introduction of new and
increasingly complex and powerful products, evolving industry standards, rapid
product obsolescence and price erosion, and fluctuations in end user demand. The
Company believes that its success depends, in part, on its ability to improve
its existing core products, to develop new products, to develop and implement
new technologies, to adapt products and processes to technological changes and
to adopt emerging industry standards. If the Company is not able to implement
new technologies or develop or introduce new products successfully, the Company
may lose its position as a market leader and its financial condition, results of
operations or cash flows may be adversely affected. The Company must continue to
develop and introduce new products that compete effectively on the basis of
price and performance and that satisfy customer requirements.
In order to attempt to anticipate its customers' needs and market trends,
the Company monitors technological changes in the various industries in which it
competes and works closely with certain of its customers to develop new
products. Because the development process can be time consuming, decisions to
undertake development must anticipate both future demand and changes in the
technology to supply such demand. There can be no assurance that the Company
will be able to identify new product opportunities or that the Company will be
able to develop and market new products successfully. Delays in developing new
products or achieving volume production of certain new products could have a
material adverse effect on the Company's financial condition, results of
operations or cash flows. In addition, there can be no assurance that such
products, if introduced, will gain market acceptance or that the Company will be
able to respond effectively to new technological changes or new product
announcements by others.
ACCESS TO RAW MATERIALS
Certain of the Company's manufacturing operations depend upon obtaining
adequate supplies of raw materials such as steel, rubber, germanium, gallium,
chemicals and gases and other inputs on a timely basis. The Company purchases
such raw materials and other inputs from a limited number of suppliers which the
Company believes to be reliable. The Company's financial condition, results of
operations or cash flows would be adversely affected if it were unable to obtain
adequate supplies of raw materials and other inputs in a timely manner or if
there were significant increases in the costs of raw materials and other inputs.
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RELIANCE ON KEY MANAGEMENT AND PERSONNEL
The Company's success depends to a significant extent upon, among other
factors, its ability to continue to attract, retain and motivate qualified
personnel, including key senior executives and research and development,
engineering, marketing, sales, manufacturing, support and other personnel.
Although all of the key management employees have employment contracts with the
Company and own shares of common stock of Granaria Industries, there can be no
assurance that such individuals will remain employed with the Company. If, for
any reason, such key personnel do not continue to be active in the Company's
management, the Company's financial condition, results of operations or cash
flows could be adversely affected. The Company has no key man life insurance
policies with respect to any of its senior executives.
CONTROL BY PRINCIPAL SHAREHOLDERS
Granaria Holdings and LV Investment (the 'Shareholders') beneficially own
approximately 90% of the outstanding common stock of Parent and the Company.
Circumstances may occur in which the interests of the Shareholders could be in
conflict with the interests of the holders of the Securities. In particular, ABN
AMRO Bank, an affiliate of LV Investment, acted as agent and arranger for loan
facilities of $385 million under the New Credit Agreement. See 'Description of
New Credit Agreement.' If the Company encounters financial difficulties, or is
unable to pay certain of its debts as they mature, the interests of the
Shareholders (whether or not as holders of the Company's equity securities)
might conflict with those of the holders of the Securities. In addition, the
Shareholders may have an interest in pursuing acquisitions, divestitures or
other transactions that, in their judgment, could enhance their equity
investment, even though such transactions might involve risks to the holders of
the Securities.
PLAN OF REORGANIZATION AND RELATED INJUNCTION
In January 1991, Eagle-Picher and seven of its U.S. subsidiaries
(collectively, the 'Eagle-Picher Group') filed voluntary petitions for
reorganization under the United States Bankruptcy Code, as amended (the
'Bankruptcy Code'). The Consolidated Plan of Reorganization (the 'Plan') of the
Eagle-Picher Group was jointly confirmed by an order (the 'Order') of the United
States Bankruptcy Court for the Southern District of Ohio (the 'Bankruptcy
Court') and the United States District Court for the Southern District of Ohio
(the 'Ohio District Court') in November 1996. A consolidated appeal of the Order
(the 'Appeal') is currently pending before the United States Circuit Court for
the Sixth Circuit (the 'Sixth Circuit'); however, the Order was not stayed
pending the Appeal and the Plan was consummated and, commencing on November 29,
1996, distributions were made pursuant to the Plan. See 'Business -- Plan of
Reorganization and Related Injunction.'
Among other things, the Plan discharges all past, present and future
asbestos-related and lead-related claims against Eagle-Picher and the
Eagle-Picher Group arising out of business operations prior to the date of the
bankruptcy petitions by (i) requiring the establishment of the Trust and of a
separate Eagle-Picher Industries, Inc. Property Damage Settlement Trust (the 'PD
Trust'), (ii) contributing to the Trust assets valued at approximately $730.0
million in the aggregate, consisting of $51.3 million in cash, $250.0 million in
10% Debentures, $69.1 million in Tax Refund Notes (as defined herein), $18.1
million in Divestiture Notes (as defined herein) and 10 million shares of Common
Stock (representing all outstanding shares of Common Stock), and an escrow of
$3.0 million in cash for use in funding the PD Trust once it is established and
(iii) imposing injunctions (collectively, the 'Injunction') prohibiting the
assertion of any asbestos-related and lead-related claims against Eagle-Picher
and the Eagle-Picher Group and directing that such claims be asserted only
against the Trust or the PD Trust. See 'Business -- Plan of Reorganization and
Related Injunction.'
Although the Injunction has not, to the Company's knowledge, been the
subject of any filed legal challenges (other than the Appeal), it is possible
that one or more components of the Injunction could be vacated, modified or
restricted in applicability pursuant to the Appeal or otherwise. The Company
believes that the Injunction is critical to its ability to continue to operate
its business. See 'Business -- Plan of Reorganization and Related Injunction.'
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CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the holders of the Notes have
the right to require the Company to offer to purchase all of the outstanding
Notes at 101% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of repurchase. There can be no assurance that the
Company will have sufficient funds available or will be permitted by its other
debt agreements to repurchase the Notes upon the occurrence of a Change of
Control. In addition, the occurrence of a Change of Control may require the
Company to offer to repurchase other outstanding indebtedness and may cause a
default under the New Credit Agreement. The inability to purchase all of the
tendered Notes would constitute an Event of Default (as defined herein) under
the Indenture. See 'Description of the Notes -- Change of Control.'
ABSENCE OF PUBLIC MARKET
The New Notes are being offered exclusively to holders of the Old Notes.
The Old Notes were issued to a limited number of institutional investors on
February 24, 1998. There is currently no established market for the New Notes.
There can be no assurance as to the liquidity of any markets that may develop
for the New Notes, the ability of the holders of the New Notes to sell their
Notes or the price at which holders would be able to sell their Notes. Future
trading prices of the New Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results, and
the market for similar securities. The Company does not intend to apply for
listing of the New Notes on any securities exchange.
The liquidity of, and trading market for, the New Notes may also be
materially and adversely affected by declines in the market for high yield
securities generally. Such a decline may materially and adversely affect such
liquidity and trading independent of the financial performance of, and prospects
for, the Company and Parent.
To the extent Old Notes are tendered and accepted in the Notes Exchange
Offer, the principal amount of outstanding Old Notes will decrease with a
resulting decrease in the liquidity in the market therefor. Following the
consummation of the Notes Exchange Offer, holders of Old Notes will continue to
be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for the Old Notes will be adversely affected.
CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Notes Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to the tenders of Old Notes for exchange.
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Notes Exchange Offer, including holders of Old Notes whose Old
Notes are tendered but not accepted, will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon
and, except in certain limited circumstances, will no longer have any
registration rights with respect to the Old Notes. In general, the Old Notes may
not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act.
New Notes issued pursuant to the Notes Exchange Offer in exchange for Old
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than Restricted Holders or Participating Broker-Dealers) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such holder represents, among other things, that
such holder is not an 'affiliate' of the Company or any Guarantor (as defined in
Rule 405 of the Securities Act), that such New Notes are acquired in the
ordinary course of such holder's business and that such holder is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
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with any person to participate in, the distribution of such New Notes. Any
holder unable to make such representations will not be able to participate in
the Notes Exchange Offer and may only sell its Old Notes pursuant to a
registration statement and prospectus meeting the requirements of the Securities
Act, or pursuant to an exemption from the registration requirements of the
Securities Act.
Each Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that, by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale. See 'Plan of Distribution.' However, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdictions or an exemption from registration or qualification is
available and is complied with. To the extent that Old Notes are tendered and
accepted in the Notes Exchange Offer, the trading market for untendered and
tendered but unaccepted Old Notes will be adversely affected.
FORWARD-LOOKING STATEMENTS
Certain information included in this Prospectus is forward-looking,
including statements contained in 'Summary,' 'Risk Factors,' 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
'Business,' and includes statements regarding the intent, belief and current
expectations of the Company and Parent and their directors and officers. Such
forward-looking information involves important risks and uncertainties that
could materially alter results in the future from those expressed in any
forward-looking statements made by, or on behalf of, the Company. These risks
and uncertainties include, but are not limited to, the ability of the Company to
maintain existing relationships with long-standing customers, the ability of the
Company to successfully implement productivity improvements, cost reduction
initiatives, facilities expansion and the ability of the Company and Parent to
develop, market and sell new products and to continue to comply with
environmental laws, rules and regulations. Other risks and uncertainties include
uncertainties relating to economic conditions, acquisitions and divestitures,
government and regulatory policies, technological developments and changes in
the competitive environment in which the Company operates. Persons reading this
Prospectus are cautioned that such statements are only predictions and that
actual events or results may differ materially. In evaluating such statements,
readers should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated by such
forward-looking statements, including those discussed in 'Risk Factors.'
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COMPANY HISTORY
The Company was founded in Cincinnati in 1843 and was incorporated in 1867
under the laws of the State of Ohio. The Company evolved into a diversified
manufacturer of industrial products, a small portion of which included
asbestos-containing insulating cements. In 1971, the Company made the management
decision to discontinue operations relating to such products, and ceased
production and sale of such products in August of that year, except for filling
a few special orders until April 1972. In January 1991, the Eagle-Picher Group
filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy
Code in the Bankruptcy Court. The filings were precipitated primarily by costs
and expenses resulting from litigation arising out of the Eagle-Picher Group's
previous asbestos-related business operations. In connection with the bankruptcy
proceedings and pursuant to the Plan, which was confirmed by the Bankruptcy
Court and the Ohio District Court in November 1996, all of the outstanding
shares of Common Stock were transferred to the Trust on November 29, 1996. See
'Risk Factors -- Plan of Reorganization and Related Injunction;'
'Business -- Plan of Reorganization and Related Injunction.'
THE ACQUISITION
On February 24, 1998, the Company was acquired by Granaria Industries from
the Trust. The Acquisition was effected pursuant to the Merger Agreement, in
accordance with which, among other things, the Issuer was merged into the
Company, with the Company continuing as the surviving corporation.
Granaria Industries, which owns all of the voting stock of Parent, is
controlled by Granaria Holdings B.V., a private Dutch company ('Granaria
Holdings'). See 'Security Ownership and Certain Beneficial Owners and Management
of Parent.' Granaria Holdings is a Netherlands-based food processing and
investment company, which was founded in 1912 by Louis Wyler. Granaria Holdings'
food processing division, which processes and distributes nuts and dried fruits,
portion pack and partly-baked bread from its manufacturing facilities in The
Netherlands, France, Poland and Russia, has annual net sales in excess of $200.0
million. Granaria Holdings' investment portfolio includes real estate
investments in The Netherlands, the United Kingdom and the U.S., and minority
holdings in special situation funds and private companies. The principal owner
of Granaria Holdings is the Wyler family of The Netherlands.
At the Closing the following occurred: (i) the Equity Investment was
contributed to Parent by Granaria Industries and LV Investment; (ii) Parent
received gross proceeds of approximately $80.0 million from the Preferred Stock
Offering; (iii) Parent contributed to the Issuer in the form of common equity
approximately $180.0 million comprising the Equity Investment and all of the
proceeds of the Preferred Stock Offering; (iv) the Issuer borrowed $225.0
million in term loans and $79.1 million in revolving loans under the New Credit
Agreement and completed the Notes Offering; (v) the Company (a) terminated the
PNC Credit Facility (under which there was no outstanding indebtedness at
Closing) and (b) redeemed 660,000 shares of Common Stock from the Trust for the
Redemption Amount; and (vi) the Issuer was merged into the Company. See
'Security Ownership and Certain Beneficial Owners and Management of Parent.' As
a result of these transactions, the Company became a wholly-owned subsidiary of
Parent and assumed all of the obligations and liabilities of the Issuer,
including the Issuer's obligations and liabilities under the Old Notes, the
Indenture, the Registration Rights Agreement and the New Credit Agreement.
Simultaneously with the Effective Time, the Company paid the total outstanding
amount under the 10% Debentures. In connection with the Acquisition, the Trust
waived the prepayment penalty on the 10% Debentures.
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<PAGE>
The following table sets forth the approximate cash sources and uses of funds,
including the application of the proceeds therefrom, at the Effective Time.
<TABLE>
<CAPTION>
SOURCES OF FUNDS(A)
(DOLLARS IN MILLIONS)
<S> <C>
New Credit Agreement:
Revolving Credit Facility(B)................ $ 79.1
Term Loans.................................. 225.0
Senior Subordinated Notes(C).................. 219.6
Equity Contribution(D)........................ 180.0
Cash.......................................... 39.5
------
Total............................... $743.2
------
------
<CAPTION>
USES OF FUNDS(A)
(DOLLARS IN MILLIONS)
<S> <C>
Merger Consideration(E)....................... $417.6
Repayment of Existing Indebtedness(F)......... 255.9
Common Stock Redemption(G).................... 29.0
Estimated Transaction Fees and Expenses(H).... 27.8
Management Compensation(I).................... 12.9
------
Total............................... $743.2
------
------
</TABLE>
- ------------
(A) Sources and uses of funds are based on (i) the borrowings of debt
outstanding under the Company's existing credit facilities on the Closing
Date and (ii) the purchase price paid for the Company in connection with
the Acquisition.
(B) Immediately following the Acquisition, the Company borrowed approximately
$28.6 million under the revolving credit facility under the New Credit
Agreement for use as credit support in the form of letters of credit,
leaving approximately $52.3 million available for additional borrowings
under such facility.
(C) Includes original issue discount of $0.4 million.
(D) Parent funded the Equity Contribution from the Equity Investment and the
Preferred Stock Offering (the fees and expenses of which were paid by the
Company).
(E) Merger Consideration represents the sum of (i) $410.0 million and (ii) an
additional amount equal to 8.0% on an annual basis on $410.0 million from
December 1, 1997 up to and including the Closing Date.
(F) Consists of payment of $250.0 million principal amount due under the
Company's 10% Debentures and $5.9 million of interest accrued on the 10%
Debentures from December 1, 1997 up to and including the Closing Date.
(G) The Company redeemed 660,000 shares of Common Stock immediately prior to
the Effective Time.
(H) Approximately $27.8 million in transaction fees and expenses (including an
amount equal to approximately 1% of the transaction value payable to
Granaria Holdings) was paid on the Closing Date. This amount includes
approximately $2.6 million in fees and expenses of Parent related to the
Preferred Stock Offering.
(I) Following the Acquisition, the Company paid approximately $10.0 million to
the E-P Management Trust and $2.9 million for the related tax obligation.
The E-P Management Trust used the $10.0 million to satisfy a loan from
Granaria Holdings, the proceeds of which were used by the E-P Management
Trust to acquire 16% of the common stock of Granaria Industries. See
'Executive Compensation -- Compensation to Senior Management.' The Company
made additional payments to certain members of senior management of the
Company shortly after the Acquisition in the amount of approximately $7.6
million, which consists of $2.7 million in stay-put bonuses and $4.9
million in sales incentive bonuses under the STSP. See 'Executive
Compensation -- Short Term Sale Program.'
USE OF PROCEEDS
There will be no proceeds to the Company from any exchange pursuant to the
Exchange Offers.
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THE NOTES EXCHANGE OFFER
PURPOSE AND EFFECT OF THE NOTES EXCHANGE OFFER
The Old Notes were sold by the Issuer on February 24, 1998 to SBC
Warburg/Dillon Read Inc. and ABN AMRO Incorporated (together, the 'Initial
Purchasers') who resold the Old Notes (i) to 'qualified institutional buyers'
(as defined in Rule 144A under the Securities Act) in reliance upon Rule 144A
under the Securities Act and (ii) outside the United States to persons other
than U.S. persons in reliance upon Regulation S under the Securities Act. In
connection therewith, the Issuer and the Initial Purchasers entered into the
Registration Rights Agreement. Pursuant to the Merger, the Company assumed all
of the Issuer's obligations and liabilities under the Registration Rights
Agreement.
The Registration Rights Agreement requires that, among other things, as
soon as practicable within 45 days following the original issuance of the Old
Notes, the Company file with the Commission a Registration Statement (the 'Notes
Exchange Offer Registration Statement,' of which this Prospectus is a part)
under the Securities Act with respect to an issue of new notes of the Company
identical in all material respects to the Old Notes, use its best efforts to
cause such Notes Exchange Offer Registration Statement to be declared effective
by the Commission under the Securities Act on or prior to 90 days after the
issuance of the Old Notes and, upon the effectiveness of the Notes Exchange
Offer Registration Statement, offer to the Holders of the Old Notes the
opportunity to exchange their Old Notes for a like principal amount of New
Notes, to be issued without a legend restricting their transfer and which may,
subject to certain exceptions described below, be reoffered and resold by the
holder without restrictions or limitations under the Securities Act. A copy of
the Registration Rights Agreement has been filed as an exhibit to the Notes
Exchange Offer Registration Statement. The term 'Holder' with respect to any
Note means any person in whose name such Note is registered on the books of the
Company.
Each Holder desiring to participate in the Notes Exchange Offer will be
required to represent, among other things, that (i) it is not an 'affiliate' (as
defined in Rule 405 of the Securities Act) of the Company or any Guarantor (ii)
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the New
Notes and (iii) it is acquiring the New Notes in the ordinary course of its
business (a Holder unable to make the foregoing representation is referred to as
a 'Restricted Holder'). A Restricted Holder will not be able to participate in
the Notes Exchange Offer and may only sell its Old Notes pursuant to a
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K under the Securities Act, or pursuant to
an exemption from the registration requirement of the Securities Act.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Notes Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder of such New Notes (other than
Restricted Holders or Participating Broker-Dealers) without compliance with the
registration and prospectus delivery provisions of the Securities Act. Any
Holder who tenders in the Notes Exchange Offer for the purpose of participating
in a distribution of the New Notes cannot rely on the staff position enunciated
in the no-action letters issued to third parties referred to above and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Each Participating Broker-Dealer must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an 'underwriter' within the meaning of the Securities Act. Based upon
interpretations by the staff of the Commission, the Company believes that New
Notes issued pursuant to the Notes Exchange Offer to Participating
Broker-Dealers may be offered for resale, resold and otherwise transferred by a
Participating Broker-Dealer upon compliance with the prospectus delivery
requirements, but without compliance with the registration requirements, of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-dealer in
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connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days after
the date the Notes Exchange Offer Registration Statement is declared effective
by the Commission, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. By acceptance of this Notes Exchange
Offer, each broker-dealer that receives New Notes pursuant to the Notes Exchange
Offer agrees to notify the Company prior to using this Prospectus in connection
with the sale or transfer of New Notes. See 'Plan of Distribution.'
As a result of the filing and the effectiveness of the Notes Exchange Offer
Registration Statement and the consummation of the Notes Exchange Offer, the
Company's obligation to make certain semi-annual payments with respect to the
Old Notes will be terminated. The Old Notes were issued to a limited number of
institutional investors on February 24, 1998 and there is no public market for
them at present. To the extent Old Notes are tendered and accepted in the
exchange, the principal amount of outstanding Old Notes will decrease with a
resulting decrease in the liquidity in the market therefor. Following the
consummation of the Notes Exchange Offer, holders of Old Notes will continue to
be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for the Old Notes could be adversely affected.
The Registration Rights Agreement provides that if (i) the Company is not
required to file the Notes Exchange Offer Registration Statement because the
Notes Exchange Offer is not permitted by applicable law or Commission policy or
(ii) any holder of Transfer Restricted Securities (as defined herein) notifies
the Company within 20 days after the commencement of the Notes Exchange Offer
that (a) it is prohibited by law or Commission policy from participating in the
Notes Exchange Offer or (b) it may not resell the New Notes acquired by it in
the Notes Exchange Offer to the public without delivering a prospectus, and the
Prospectus contained in the Notes Exchange Offer Registration Statement is not
appropriate or available for such resales or (c) it is a broker-dealer and holds
Old Notes acquired directly from the Company or an affiliate of the Company, the
Company will file with the Commission a shelf registration statement (the 'Shelf
Registration Statement') to cover resales of the Notes by the holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. For purposes of the foregoing,
'Transfer Restricted Securities' means each Old Note or New Note until (i) the
date on which such Old Note has been exchanged by a person other than a
broker-dealer for a New Note in the Notes Exchange Offer, (ii) following the
exchange by a broker-dealer in the Notes Exchange Offer of an Old Note for a New
Note, the date on which such New Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Notes Exchange Offer Registration Statement, (iii) the date on
which such Old Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Old Note could be resold pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that if (a) the Company fails to
file within 45 days of the Issue Date, or cause to become effective within 90
days of the Issue Date, the Notes Exchange Offer Registration Statement or (b)
the Company is obligated to file the Shelf Registration Statement and such Shelf
Registration Statement is not filed within 45 days, or declared effective within
90 days, of the date on which the Company became so obligated or (c) the Company
fails to consummate the Notes Exchange Offer within 45 days of the Notes
Exchange Offer Effective Date or (d) the Shelf Registration Statement or the
Notes Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
'Registration Default'), interest ('Special Interest') will accrue on the
principal amount of the Old Notes and the New Notes (in addition to the stated
interest on the Old Notes and the New Notes) from and including the date on
which any such Registration Default shall occur to but excluding the date on
which any such Registration Defaults have been cured. Special Interest will
accrue at a rate of 0.25% per annum during the 90-day period immediately
following the occurrence of any Registration Default and shall increase by 0.25%
per annum at the end of each subsequent 90-day period, but in no event shall
such rate exceed 1.5% per annum.
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<PAGE>
TERMS OF THE NOTES EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. As of the date of this Prospectus, an aggregate of $220
million principal amount of the Old Notes is outstanding. The Company will issue
$1,000 principal amount at maturity of New Notes in exchange for each $1,000
principal amount at maturity of outstanding Old Notes accepted in the Notes
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Notes Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes have
been registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of the Indenture under which
the Old Notes were, and the New Notes will be, issued.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under law or the Indenture in connection with the Notes Exchange Offer. The
Company intends to conduct the Notes Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral (promptly confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purpose of receiving the New Notes from
the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Notes Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Notes Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Notes
Exchange Offer. See ' -- Fees and Expenses.'
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term 'Expiration Date' means 5:00 p.m., New York City time, on
July 10, 1998, unless the Company, in its sole discretion, extends the Notes
Exchange Offer, in which case the term 'Expiration Date' shall mean the latest
date and time to which the Notes Exchange Offer is extended.
In order to extend the Notes Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral (promptly confirmed in writing) or
written notice and will make a public announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date unless otherwise required by applicable law or
regulation.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Old Notes, to extend the Notes Exchange Offer or, if any of the
conditions set forth below under 'Conditions' shall not have been satisfied, to
terminate the Notes Exchange Offer, by giving oral or written notice of such
delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Notes Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by a public announcement thereof. If the Notes Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders, and the Company will extend the
Notes Exchange Offer for a period of five to ten business days, depending upon
the significance of the amendment and the manner
28
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of disclosure to the registered holders, if the Notes Exchange Offer would
otherwise expire during such five to ten business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Notes
Exchange Offer, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a Holder of Old Notes may tender such Old Notes in the Notes Exchange
Offer. To tender in the Notes Exchange Offer, a Holder must complete, sign and
date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes (or a confirmation of an appropriate book-entry transfer into the
Exchange Agent's account at The Depository Trust Company ('DTC' or the
'Depositary') (as described below)) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Old Notes (or a timely confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC
as described below), Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under 'Exchange
Agent' prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender by a holder will constitute an agreement between such holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
The Exchange Agent has established an account with respect to the Old Notes
at DTC, and any financial institution which is a participant in DTC may make
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account in accordance with DTC's procedure for such
transfer. Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, the Letter of Transmittal,
with any required signature guarantees and any other required documents, must in
any case be transmitted to and received by the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date at one of its addresses set
forth below under 'Exchange Agent', or the guaranteed delivery procedure
described below must be complied with. Delivery of documents to DTC in
accordance with its procedures does not constitute delivery to the Exchange
Agent. All references in this Prospectus to deposit or delivery of Old Notes
shall be deemed to include DTC's book-entry delivery method.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent, including delivery through DTC,
is at the election and risk of the holder. Instead of delivery by mail, it is
recommended that Holders use an overnight or hand delivery service. If Old Notes
are sent by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company.
Holders may request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect the above transactions for such holders.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto
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are tendered (i) by a registered holder who has not completed the box entitled
'Special Issuance Instructions' or 'Special Delivery Instructions' on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be by a member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an 'eligible guarantor institution'
within the meaning of Rule 17Ad-15 under the Exchange Act (an 'Eligible
Institution').
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Notes Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders
(or, in the case of Old Notes delivered by book-entry transfer within DTC, will
be credited to the account maintained within DTC by the participant in DTC which
delivered such Old Notes), unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth below under 'Conditions,' to terminate the
Notes Exchange Offer and, to the extent permitted by applicable law, purchase
Old Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
Notes Exchange Offer.
By tendering, each Holder will represent to the Company that, among other
things, such Holder is not a Restricted Holder. In addition, each Participating
Broker-Dealer must acknowledge that it will deliver a prospectus in connection
with any resale of New Notes. See 'Plan of Distribution.'
BOOK-ENTRY TRANSFER
The Exchange Agent will establish a new account or utilize an existing
account with respect to the Old Notes at the Depositary promptly after the date
of this Prospectus, and any financial institution that is a participant in the
Depositary and whose name appears on a security position listing as the owner of
Old Notes may make a book-entry tender of Old Notes by causing the Depositary to
transfer such Old Notes into the Exchange Agent's account in accordance with the
Depositary's procedures for such transfer. However, although tender of Old Notes
may be effected through book-entry transfer into the Exchange Agent's account at
the Depositary, the Letter of Transmittal (or a manually-signed facsimile
thereof), properly completed and validly executed, with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any
other required documents, must, in any case, be received by the Exchange Agent
at its address set forth below under the caption 'Exchange Agent' on or prior to
the Expiration Date, or the guaranteed delivery procedures described below must
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<PAGE>
be complied with. The confirmation of book-entry transfer of Old Notes into the
Exchange Agent's account at the Depositary as described above is referred to
herein as a 'Book-Entry Confirmation.' Delivery of documents to the Depositary
in accordance with the Depositary's procedures does not constitute delivery to
the Exchange Agent.
The term 'Agent's Message' means a message transmitted by the Depositary
to, and received by, the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Depositary has received an express
acknowledgment from the participant in the Depositary tendering Old Notes
stating (i) the aggregate principal amount of Old Notes which have been tendered
by such participant, (ii) that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and (iii) that the Company may
enforce such agreement against the participant.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes (or a
confirmation of book-entry transfer of Old Notes into the Exchange Agent's
account at DTC), the Letter of Transmittal or any other required documents to
the Exchange Agent prior to the Expiration Date or (iii) who cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made by or through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within three (3) New York Stock
Exchange, Inc. trading days after the Expiration Date, a duly executed
Letter of Transmittal (or facsimile thereof) together with the Old Notes
(or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC), and any other documents required by the
Letter of Transmittal and the instructions thereto, will be deposited by
such Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), and all tendered Old Notes in proper form for transfer
(or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC) and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three (3)
New York Stock Exchange, Inc. trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Notes Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m.. New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the 'Depositor'),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes). (iii) be signed by the holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. If the
Old Notes have been delivered pursuant to the book-entry procedure set forth
above under ' -- Procedures for Tendering,' any notice of withdrawal must
specify the name and number of
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<PAGE>
<PAGE>
the participant's account at DTC to be credited with the withdrawn Old Notes.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Notes Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under ' -- Procedures for Tendering' at any time
prior to the Expiration Date.
Any Old Notes which are tendered but which are not accepted due to
withdrawal, rejection of tender or termination of the Notes Exchange Offer will
be returned as soon as practicable to the holder thereof without cost to such
holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such Book-Entry Transfer Facility for the Old
Notes).
CONDITIONS
Notwithstanding any other term of the Notes Exchange Offer, the Company
shall not be required to accept for exchange, or exchange New Notes for, any Old
Notes, and may terminate the Notes Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Notes Exchange
Offer which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Notes Exchange Offer
or materially impair the contemplated benefits of the Notes Exchange Offer
to the Company, or any material adverse development has occurred in any
existing action or proceeding with respect to the Company or any of its
subsidiaries, or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the reasonable judgment of the Company, might
materially impair the ability of the Company to proceed with the Notes
Exchange Offer or materially impair the contemplated benefits of the Notes
Exchange Offer to the Company; or
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Notes Exchange Offer
or materially impair the contemplated benefits of the Notes Exchange Offer
to the Company; or
(d) there shall have occurred (i) any general suspension of trading
in, or general limitation on prices for, securities on the New York Stock
Exchange, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by any
governmental agency or authority that adversely affects the extension of
credit to the Company or (iii) a commencement of war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States; or, in the case any of the foregoing exists at the time of
commencement of the Notes Exchange Offer, a material acceleration or
worsening thereof; or
(e) any governmental approval has not been obtained, which approval
the Company shall in its reasonable judgment, deem necessary, for the
consummation of the Notes Exchange Offer as contemplated hereby.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
32
<PAGE>
<PAGE>
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders (or, in the case of
Old Notes delivered by book-entry transfer within DTC, credit such Old Notes to
the account maintained within DTC by the participant in DTC which delivered such
Notes), (ii) extend the Notes Exchange Offer and retain all Old Notes tendered
prior to the expiration of the Notes Exchange Offer, subject, however, to the
rights of Holders to withdraw such tenders of Old Notes (see 'Withdrawal of
Tenders' above) or (iii) waive such unsatisfied conditions with respect to the
Notes Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Notes
Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Notes Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, if the Notes Exchange Offer would
otherwise expire during such five to ten business day period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Notes
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Hand or Overnight Delivery: By Facsimile Transmission By Registered or Certified Mail:
101 Barclay Street (Eligible Institutions Only): 101 Barclay Street, 7E
Corporate Trust Services Window (212) 815-6339 New York, New York 10286
Ground Level Attn: Reorganization Section, 7E;
New York, New York 10286 Santino Ginocchietti
Attn: Reorganization Section, 7E; To Confirm Facsimile
Santino Ginocchietti or for Information Call:
(212) 815-2963
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Notes Exchange Offer and will not make any payments to brokers, dealers or
others soliciting acceptance of the Notes Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and will pay the reasonable fees and expenses of one firm acting as counsel for
the holders of Old Notes should such holders deem it advisable to appoint such
counsel.
The cash expenses to be incurred in connection with the Notes Exchange
Offer will be paid by the Company. Such expenses include fees and expenses of
the Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Notes Exchange Offer. If, however, New Notes or Old
Notes for principal amounts not tendered or accepted for exchange are to be
registered, or are to be issued in the name of, or delivered to, any person
other than the registered holder, or if tendered Old Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Notes Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not
33
<PAGE>
<PAGE>
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Notes Exchange
Offer and the unamortized expenses relating to the issuance of the Old Notes
will be amortized over the term of the New Notes.
34
<PAGE>
<PAGE>
CAPITALIZATION
COMPANY
The following table sets forth, as of November 30, 1997, the consolidated
capitalization of (i) the Company and its subsidiaries on a historical basis and
(ii) the Company and its subsidiaries on an unaudited pro forma basis to give
effect to the Acquisition. This table should be read in conjunction with the
Company's Consolidated Financial Statements, including the notes thereto, and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
----------------------------------------
PRO FORMA COMPANY
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------------- ---------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Long-term Debt, including Current Maturities
10% Debentures................................................... $250,000 $(250,000)(A) $ --
New Credit Agreement:
Term Loan A................................................. -- 100,000(B) 100,000
Term Loan B................................................. -- 50,000(B) 50,000
Term Loan C................................................. -- 75,000(B) 75,000
Revolving Credit Facility................................... -- 79,100(C) 79,100
9 3/8% Senior Subordinated Notes due 2008........................ -- 220,000(D) 220,000
Industrial Revenue Bonds......................................... 18,400 -- 18,400
Debt of Foreign Subsidiaries..................................... 4,997 -- 4,997
-------- ----------------- ---------
Total Long-term Debt, including Current Maturities.......... 273,397 274,100 547,497
-------- ----------------- ---------
Shareholder's Equity
Old Common Stock................................................. 341,807 (341,807)(E) --
New Common Stock................................................. -- 180,005(F) 180,005
Foreign Currency Translation..................................... (1,836) 1,836(G) --
Retained Earnings (Deficit)...................................... (3,854) (5,571)(H) (9,425)
-------- ----------------- ---------
Total Shareholder's Equity (Deficit)........................ 336,117 (165,537) 170,580
-------- ----------------- ---------
Total Capitalization.................................................. $609,514 $ 108,563 $718,077
-------- ----------------- ---------
-------- ----------------- ---------
</TABLE>
- ------------
NOTES TO CAPITALIZATION TABLE OF THE COMPANY
(Dollars in thousands)
(A) Reflects the payment of $250,000 in principal amount of the 10% Debentures
to the Trust.
(B) Reflects senior secured term loans under the New Credit Agreement of
$100,000, $50,000 and $75,000 for Term Loans A, B and C, respectively.
(C) Reflects revolving credit loans under the New Credit Agreement of $160,000
of which $79,100 was drawn at Closing, $28,600 was used for credit support
in the form of letters of credit and $52,300 was undrawn at Closing. See
'Description of New Credit Agreement.'
(D) Reflects senior subordinated notes of $220,000.
(E) Reflects the redemption of the common stock, all of which is owned by the
Trust, in connection with the Acquisition.
(F) Reflects issuance of new common stock to Parent.
(G) Reflects elimination of prior foreign currency translation adjustments.
(H) Reflects the effects on retained earnings of the reversal of the prior
retained deficit of $3,854 and the recognition of management compensation
expense, net of taxes, of $9,425. The components of this expense, on a
pre-tax basis, are: (i) $6,100, which includes $3,200 of the first year
earnings by certain members of senior management of the $10,000 that was
paid to the E-P Management Trust and $2,900 for the related tax obligations
and (ii) $8,400 for amounts under the STSP, of which $800 has not yet been
paid.
35
<PAGE>
<PAGE>
PARENT
The following table sets forth the consolidated capitalization of Parent
and its subsidiaries (including the Company) as of November 30, 1997 assuming
that Parent had been formed at such date and after giving pro forma effect to
the Acquisition. This table should be read in conjunction with the Company's
Consolidated Financial Statements, including the notes thereto, and the
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
----------------------
PARENT
PRO FORMA
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Long-term Debt, including Current Maturities
New Credit Agreement:
Term Loan A...................................................................... $100,000(A)
Term Loan B...................................................................... 50,000(A)
Term Loan C...................................................................... 75,000(A)
Revolving Credit Facility........................................................ 79,100(B)
9 3/8% Senior Subordinated Notes due 2008............................................. 220,000(C)
Industrial Revenue Bonds.............................................................. 18,400
Debt of Foreign Subsidiaries.......................................................... 4,997
-----------
Total Long-term Debt, including Current Maturities............................... 547,497
Cumulative Exchangeable Redeemable Preferred Stock......................................... 80,005(D)
Shareholders' Equity
Common Stock.......................................................................... 100,000
Retained Earnings (Deficit)........................................................... (9,425)
-----------
Total Shareholders' Equity....................................................... 90,575
-----------
Total Capitalization....................................................................... $718,077
-----------
-----------
</TABLE>
- ------------
NOTES TO CAPITALIZATION TABLE OF PARENT
(Dollars in thousands)
(A) Reflects senior secured term loans under the New Credit Agreement of
$100,000, $50,000 and $75,000 for Term Loans A, B and C, respectively.
(B) Reflects revolving credit loans under the New Credit Agreement of $160,000
of which $79,100 was drawn at Closing, $28,600 was used for credit support
in the form of letters of credit and $52,300 was undrawn at Closing. See
'Description of New Credit Agreement.'
(C) Reflects senior subordinated notes of $220,000.
(D) Reflects gross proceeds of approximately $80,005 from the offering of
cumulative redeemable exchangeable preferred stock offered in the Preferred
Stock Offering.
36
<PAGE>
<PAGE>
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth the historical condensed consolidated
financial data of the Company for the periods indicated. The historical selected
financial information is derived from the historical Consolidated Financial
Statements of Eagle-Picher. Effective November 29, 1996, the Company emerged
from bankruptcy and, accordingly, it adopted fresh-start reporting in accordance
with Statement of Position 90-7, 'Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.' As a result, the condensed
consolidated financial information for the periods subsequent to the adoption of
fresh-start reporting are presented on a different cost basis than that for
prior periods and, therefore, are not comparable. Accordingly, a vertical black
line is shown to separate post-emergence operations.
The unaudited condensed consolidated financial information presented for
the three months ended February 28, 1997 and 1998 and as of February 28, 1998
are derived from the unaudited consolidated financial statements of the Company
and include, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the financial
information for such periods. As a result of the Acquisition of the Company by
Granaria Industries from the Trust as of February 24, 1998, which was accounted
for as a purchase, the Company's results of operations and financial position
for periods after February 24, 1998 are not comparable to prior periods. See
Note (A) below. See 'Summary -- The Acquisition and Use of Proceeds'; 'The
Acquisition.'
The following selected historical consolidated financial information should
be read in conjunction with 'Management's Discussion and Analysis of Financial
Condition and Results of Operations,' the Pro Forma Consolidated Financial Data
and the Consolidated Financial Statements, related notes and other financial
information included herein.
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
FEBRUARY 28,
-------------------------------
(DOLLARS IN THOUSANDS) 1998(A) 1997
------------------- --------
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C> <C>
STATEMENT OF INCOME (LOSS):
Net sales(B).................... $205,842 $205,842 $223,607
Operating income................ 11,027 11,024 9,040
Adjustment for asbestos
litigation.................... -- -- --
Fresh-start revaluation......... -- -- --
Reorganization items and
claims(E)..................... -- -- --
Interest expense................ (6,940) (12,969) (8,927)
Other income (expense).......... 820 820 1,703
Income (loss) before taxes,
extraordinary items and
accounting changes............ 4,907 (1,125) 1,816
Income (loss) before
extraordinary items and
accounting changes............ 807 (1,675) (1,220)
Extraordinary items and
accounting changes............ -- -- --
Net income (loss)............... 807 (1,675) (1,220)
BALANCE SHEET DATA (END OF PERIOD):
Working capital................. $162,450 -- $208,373
Property, plant and equipment,
net........................... 239,337 -- 260,850
Total assets.................... 867,139 -- 831,943
Total debt...................... 546,996 -- 372,170
Shareholders' equity
(deficit)..................... 180,005 -- 338,642
OTHER DATA:
EBITDA(H)....................... $ 25,905 $ 25,905 $ 23,482
Depreciation and amortization... 12,822 13,221 14,442
Capital expenditures............ 5,692 5,692 15,857
Cash provided by (used in)
operating activities.......... (9,083) 176 17,914
Cash used in investing
activities.................... (6,734) (6,734) (17,040)
Cash used in financing
activities.................... (18,955) (2,860) (14,223)
SELECTED RATIOS:
EBITDA/interest expense......... 3.73x 1.97 x 2.63x
Total debt/EBITDA............... N/M N/M N/M
Total debt/capitalization....... 75.2% N/M 52.4%
Earnings/fixed charges(J)....... 1.69x N/M (K) 1.20x
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1997 1996 1995 1994 1993
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME (LOSS):
Net sales(B).................... $ 906,077 $ 891,287 $ 848,548 $ 756,741 $ 661,452
Operating income................ 45,558(C) 62,106 63,087 58,281 43,754
Adjustment for asbestos
litigation.................... -- 502,197 (1,005,511) -- (1,135,500)
Fresh-start revaluation......... -- 118,684(D) -- -- --
Reorganization items and
claims(E)..................... -- (6,593) (2,225) (3,426) (45,780)
Interest expense................ (31,261) (3,083) (1,926) (1,809) (2,070)
Other income (expense).......... (251) 1,345 11,704(F) 703 (174)
Income (loss) before taxes,
extraordinary items and
accounting changes............ 14,046 674,656 (934,871) 53,749 (1,139,770)
Income (loss) before
extraordinary items and
accounting changes............ (3,854) 622,086 (944,171) 48,749 (1,144,770)
Extraordinary items and
accounting changes............ -- 1,524,305(G) -- -- (12,598)(F)
Net income (loss)............... (3,854) 2,146,391 (944,171) 48,749 (1,157,368)
BALANCE SHEET DATA (END OF PERIOD):
Working capital................. $ 187,968 $ 211,808 $ 243,495 $ 210,298 $ 187,224
Property, plant and equipment,
net........................... 243,538 256,351 155,818 144,649 134,401
Total assets.................... 746,881 848,880 580,073 521,107 459,360
Total debt...................... 273,397 386,439 20,628 21,622 24,449
Shareholders' equity
(deficit)..................... 336,117 341,807 (2,211,308) (1,266,693) (1,317,206)
OTHER DATA:
EBITDA(H)....................... $ 103,958 $ 92,856 $ 91,795 $ 84,424 $ 68,709
Depreciation and amortization... 55,989 30,750 28,708 26,143 24,955
Capital expenditures............ 51,324(I) 44,957 40,558 35,887 28,512
Cash provided by (used in)
operating activities.......... 147,883 72,861 30,456 45,093 37,676
Cash used in investing
activities.................... (13,827) (41,770) (28,713) (34,087) (28,177)
Cash used in financing
activities.................... (113,042) (3,198) (1,019) (2,974) (3,041)
SELECTED RATIOS:
EBITDA/interest expense......... 3.33x 30.12x 47.66x 46.67x 33.19x
Total debt/EBITDA............... 2.63 4.16 0.22 0.26 0.36
Total debt/capitalization....... 44.9% 53.1% N/M N/M N/M
Earnings/fixed charges(J)....... 1.43x 173.50x(L) --(L) 24.28x --(L)
</TABLE>
(footnotes on next page)
37
<PAGE>
<PAGE>
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands)
(A) The unaudited condensed consolidated financial statements as of and for the
three months ended February 28, 1998 include the effects of the Acquisition
that resulted as of February 24, 1998, the Closing Date. Accordingly, the
historical condensed consolidated statement of income (loss) for the three
months ended February 28, 1998 include results of operations from (1)
December 1, 1997 through February 24, 1998 of the Predecessor Company and
(2) February 25 through February 28, 1998 of the Company.
(B) Includes net sales attributed to the Divested Divisions of $78,604 in 1997,
$138,116 in 1996, $145,339 in 1995, $127,229 in 1994, $115,008 in 1993 and
$29,254 for the three months ended February 28, 1997.
(C) Operating income in 1997 includes (i) amortization of reorganization value
in excess of amounts allocable to identifiable assets in the amount of
$16,284, (ii) depreciation of assets written-up to fair value in the amount
of $9,804 and (iii) loss on sale of divisions of $2,411. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Effects of Reorganization on Operations and Financial
Condition.'
(D) Fresh-start valuation gain of $118,684 reflects transactions related to
emergence from bankruptcy and reorganization in accordance with Statement
of Position 90-7, 'Financial Reporting by Entities in Reorganization under
the Bankruptcy Code.' See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Effects of Reorganization
on Operations and Financial Condition.'
(E) Reflects provision for claims of $4,244 in 1996 and $41,436 in 1993.
Remaining reorganization items are net expense resulting from the Company's
bankruptcy filing. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Effects of Reorganization on
Operations and Financial Condition.'
(F) Other income (expense) reflects a gain of $11,505 in 1995 relating to the
sale of an investment in a Canadian mining concern.
(G) Reflects (i) a gain of $1,525,540 in 1996 related to emergence from
bankruptcy and reorganization in accordance with Statement of Position
90-7, 'Financial Reporting by Entities in Reorganization under the
Bankruptcy Code;' (ii) a loss of $1,235 in 1996 due to an accounting change
of its method of computing LIFO inventories of boron, germanium and other
rare metals; and (iii) a loss of $12,598 in 1993 due to an accounting
change to reflect adoption of Statement of Financial Accounting Standards
No. 106 'Employers Accounting for Postretirement Benefits.'
(H) 'EBITDA' as used herein is defined in the Indenture and may not be
comparable to similarly titled measures reported by other companies. See
'Description of the Notes.' 'EBITDA' is presented because management
believes it is an indicator of a company's ability to service and incur
debt. EBITDA does not represent net income or cash flows from operations as
those terms are defined by generally accepted accounting principles and
does not necessarily indicate whether cash flows will be sufficient to fund
cash needs. Certain funds depicted by 'EBITDA' are not available for
management's discretionary use due to requirements to conserve funds for
debt service, interest and dividend payments and other commitments and
uncertainties. Under the Indenture, the definition of EBITDA excludes loss
on sale of divisions and any other non-cash items affecting Consolidated
Net Income (including, without limitation, charges for asbestos litigation
and reversal of asbestos litigation reserves). Includes EBITDA attributed
to the Divested Divisions of $361 in 1997, $3,615 in 1996, $7,695 in 1995,
$7,552 in 1994, $7,053 in 1993 and ($652) for the three months ended
February 28, 1997.
(I) Includes capital expenditures in 1997 of (i) $10,157 in connection with the
new facility in Manchester, Tennessee, (ii) $6,495 in connection with a
$13,054 diatomaceous earth processing facility in Vale, Oregon and (iii)
$4,651 in connection with a new automotive facility in Tamworth, England.
(J) For the purpose of determining the ratio of earnings to fixed charges,
'earnings' consist of income before provision (benefit) for income taxes
and fixed charges. 'Fixed charges' consist of interest expense (including
amortization of deferred financing costs) and approximately 30% of rental
expense, representing that portion of rental expense deemed representative
of the interest factor.
(K) Pro forma earnings were insufficient to cover fixed charges for the three
months ended February 28, 1998 by $1,125.
(L) Such ratio of earnings to fixed charges is not meaningful for 1995 and 1993
because of significant charges for asbestos litigation and is not
meaningful for 1996 because of significant reversal of asbestos litigation
reserves, fresh-start revaluation and extraordinary items. Earnings were
inadequate to cover fixed charges by $934,871 and $1,139,770 for the years
ended November 30, 1995 and 1993, respectively.
38
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited pro forma statements of operations (the 'Pro Forma
Statements of Operations') are based on the historical financial statements of
the Company included elsewhere in this Prospectus.
The unaudited pro forma statement of operations for the year ended November
30, 1997 and the unaudited pro forma statement of operations for the three
months ended February 28, 1998 give effect to the Acquisition as though it were
consummated on December 1, 1996. See 'Summary -- The Acquisition and Use of
Proceeds'; 'The Acquisition.' The pro forma adjustments are based upon available
information and certain assumptions that the Company believes are reasonable. A
pro forma balance sheet as of February 28, 1998 is not included herewith because
the effects of the Acquisition have already been reflected in the consolidated
balance sheet as of February 28, 1998 included elsewhere in this Prospectus.
The acquisition of Eagle-Picher was accounted for using the purchase method
of accounting. The preliminary allocation of the purchase price of the Company
has been determined based upon estimates of fair value and are subject to
change. Appraisals are currently being completed to value property, plant,
equipment and identifiable intangible assets. The excess of purchase price over
the assessed values of those assets will be allocated to goodwill. The Company
expects to finalize the purchase price allocation by November 30, 1998.
Adjustments are not expected to be material.
The Pro Forma Statements of Operations do not purport to be indicative of
the results that would have been obtained had such transactions described above
occurred as of the assumed dates. In addition, the Pro Forma Statements of
Operations do not purport to project the Company's results of operations for any
future period. The Pro Forma Statements of Operations should be read in
conjunction with the financial statements of the Company, and the notes thereto,
included elsewhere herein.
39
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ------------------------------------
-------- ACQUISITION AND COMPANY
COMPANY OFFERING ADJUSTMENTS PRO FORMA
-------- -------------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales...................................................... $906,077 $-- $906,077
Operating costs and expenses:
Cost of products sold..................................... 725,010 -- 725,010
Selling and administrative................................ 77,109 -- 77,109
Management compensation expense........................... -- 14,955(A) 14,955
Depreciation.............................................. 39,671 -- 39,671
Amortization of intangibles............................... 16,318 760(B) 17,078
Loss on sale of divisions................................. 2,411 -- 2,411
-------- ----------- ---------
860,519 15,715 876,234
Operating income (loss)........................................ 45,558 (15,715) 29,843
Interest expense.......................................... (31,261) (23,620)(C) (54,881)
Other..................................................... (251) -- (251)
-------- ----------- ---------
Income (loss) before taxes..................................... 14,046 (39,335) (25,289)
Income taxes (benefit)......................................... 17,900 (28,100)(D) (10,200)
-------- ----------- ---------
Net loss....................................................... $ (3,854) $(11,235) (15,089)
-------- ----------- ---------
-------- ----------- ---------
</TABLE>
- ------------
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands)
(A) To record management compensation expense as follows:
<TABLE>
<S> <C>
Compensation earned by certain members of senior management
representing the portion of the $10,000 contribution to the
E-P Management Trust for the stock that has been earned and
vested and the expected tax payments for the same stock............................ $ 6,100
Sales incentive bonus................................................................ 5,828
'Stay-put' bonus..................................................................... 3,027
-------
$14,955
-------
-------
</TABLE>
(B) To reflect the difference in the amortization of the reorganization value
in excess of amounts allocable to identifiable asset of $16,318 compared to
the excess of assets over cost of $17,078.
(C) Pro forma interest expense increased $23,620 as follows:
<TABLE>
<S> <C>
Interest expense associated with the redemption of 10% Debentures................... $(25,000)
Interest expense on New Credit Facilities and Senior Subordinated Notes............. 45,610
Amortization of debt transaction fees and expenses over weighted
average life of 8.18 years........................................................ 2,750
Amortization of Preferred Stock Offering fees and expenses over
10 years.......................................................................... 260
--------
Interest expense adjustment......................................................... $ 23,620
--------
--------
</TABLE>
The actual interest expense for the year ended November 30, 1997 included
interest expense of $4,417 relating to debt obligations that were paid off in
1997. Such debt obligations primarily consisted of the Divestiture Notes and Tax
Refund Notes. The pro forma adjustments do not give effect to the reduction in
this interest expense.
(D) To record incremental tax benefit.
40
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL -------------------------
-------- ACQUISITION COMPANY
COMPANY ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................................ $205,842 $ -- $205,842
Operating costs and expenses:
Cost of products sold............................................... 162,796 -- 162,796
Selling and administrative.......................................... 17,141 -- 17,141
Management compensation expense..................................... 2,056 (396)(A) 1,660
Depreciation........................................................ 8,983 -- 8,983
Amortization of intangibles......................................... 3,839 399(B) 4,238
-------- ----------- ---------
194,815 3 194,818
Operating income (loss).................................................. 11,027 (3) 11,024
Interest expense.................................................... (6,940) (6,029)(C) (12,969)
Other............................................................... 820 -- 820
-------- ----------- ---------
Income (loss) before taxes............................................... 4,907 (6,032) (1,125)
Income taxes (benefit)................................................... 4,100 (3,550)(D) 550
-------- ----------- ---------
Net income (loss)........................................................ $ 807 $ (2,482) $ (1,675)
-------- ----------- ---------
-------- ----------- ---------
</TABLE>
- ------------
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands)
(A) To record management compensation expense as follows:
<TABLE>
<S> <C>
Compensation earned by certain members of senior management
representing the portion of the $10,000 contribution to the
E-P Management Trust for the stock that has been earned and
vested and the expected tax payments for the same stock............................. $ 1,400
'Stay-put' bonus...................................................................... 260
Amounts recognized associated with the 'stay-put' bonus and sales
incentive bonus..................................................................... (2,056)
-------
$ (396)
-------
-------
</TABLE>
(B) To reflect the difference in the amortization of the reorganization value
in excess of amounts allocable to identifiable assets of $3,839 (4 year
amortization) compared to the excess of assets over cost of $4,238 (15 year
amortization).
(C) Pro forma interest expense increased $6,182 as follows:
<TABLE>
<S> <C>
Interest expense associated with the redemption of
10% Debentures..................................................................... $(5,903)
Interest expense on New Credit Facilities and Senior
Subordinated Notes................................................................. 11,250
Amortization of debt transaction fees and expenses
over weighted average life of the debt............................................. 617
Amortization of Preferred Stock Offering fees and
expenses over 10 years............................................................. 65
-------
Interest expense adjustment.......................................................... $ 6,029
-------
-------
</TABLE>
(D) To record incremental tax benefit.
41
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Unless otherwise stated, any reference to a year in this section refers to
the Company's fiscal year.
RESULTS OF OPERATIONS
The following table sets forth certain sales and operating data, net of all
inter-segment transactions, for the Company's businesses for the periods
indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30,
------------------------------------------------------------
1997 % 1996 % 1995 %
------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net sales and segment sales as percentage of
total:
Automotive................................... $435.2 48.0% $439.6 49.3% $433.2 51.1%
Machinery.................................... 270.8 29.9 257.6 28.9 254.7 30.0
Industrial................................... 200.1 22.1 194.1 21.8 160.6 18.9
------ ------ ------ ------ ------ ------
Total........................................ $906.1 100.0% $891.3 100.0% $848.5 100.0%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
EBITDA by segment:
Automotive................................... $ 60.1 $ 57.2 $ 59.7
Machinery.................................... 32.0 27.5 28.8
Industrial................................... 30.6 27.5 21.7
Corporate overhead........................... (18.7) (19.3) (18.4)
------ ------ ------
Total........................................ $104.0 $ 92.9 $ 91.8
------ ------ ------
------ ------ ------
</TABLE>
The Company's international net sales were $198.4 million, or 21.9% of net
sales, in 1997; $189.1 million, or 21.2% of net sales, in 1996; and $170.2
million, or 20.1% of net sales, in 1995. The Company's U.S. export sales, which
are included in the Company's international net sales, were $113.6 million,
$108.5 million and $92.5 million in 1997, 1996 and 1995, respectively. The
Company's non-U.S. operations are subject to the usual risks that may affect
such operations. Such operations, however, are located in countries where the
Company believes the risks to be minimal.
Current economic conditions in certain Asian markets have adversely
affected the Company's growth in those markets. Historically, sales to such
markets have been insignificant to the Company's total net sales and have not
had, nor are they expected to have, a material adverse effect on the Company's
operations. Despite the economic conditions in Asia, the Company believes the
Asia region continues to have solid long-term growth opportunities, and the
Company will continue to explore those opportunities.
The Company expects strong price pressure to continue across all product
lines, especially in the Automotive Group. The Company will continue to pursue
productivity improvements and material cost reductions to mitigate such price
pressure.
Since the 1980's, OEMs such as Ford, GM and Chrysler have been outsourcing
an increasing percentage of their production requirements. OEMs benefit from
outsourcing because outside suppliers generally have significantly lower cost
structures and can assist in shortening development periods for new products.
The Company expects to continue to benefit from the trend toward outsourcing.
EFFECTS OF REORGANIZATION ON OPERATIONS AND FINANCIAL CONDITION
Upon emergence from bankruptcy, the Company applied the 'fresh-start'
provisions of the American Institute of Certified Public Accountants Statement
of Position No. 90-7 ('SOP 90-7'). In accordance with SOP 90-7, the assets and
liabilities of the Company were restated at their fair value and a valuation of
equity was made based on the appraised reorganization value of the business. The
reorganization value in excess of amounts allocable to identifiable assets was
capitalized. Of the $268.8 million increase in total assets for the year ended
November 30, 1996 over those at November 30, 1995, $86.6 million and $65.1
million were due to the restatement of property, plant and equipment at their
42
<PAGE>
<PAGE>
fair value and the reorganization value in excess of amounts allocable to
identifiable assets, respectively, and $69.1 million was due to a federal income
tax refund receivable. Consequently, results of operations in 1996 and 1997 are
not comparable, primarily due to increased depreciation on the property, plant
and equipment and amortization of the reorganization value in excess of amounts
allocable to identifiable assets.
Adjusting the assets and liabilities to fair value resulted in the
fresh-start revaluation of $118.7 million in 1996. Other reorganization items in
1996 and 1995 were the costs of the reorganization process, net of the interest
income earned on accumulated cash balances.
The Plan included a settlement of the Eagle-Picher Group's aggregate
liability on account of present and future asbestos-related and lead-related
personal injury claims. An adjustment was made to the consolidated financial
statements in 1996 to reflect this settlement. The order confirming the Plan
contains a permanent injunction which precludes holders of present or future
asbestos-related or lead-related personal injury claims from pursuing their
claims against the reorganized Eagle-Picher Group. Those claims will be
channeled to the Trust, which is an independently administered qualified
settlement trust established to resolve and satisfy those claims.
The Company's emergence from bankruptcy on November 29, 1996 resulted in an
extraordinary gain of $1.5 billion on the discharge of pre-petition liabilities,
including the asbestos liability, because the value of consideration distributed
and expected to be distributed to the Trust and other unsecured creditors is
approximately 37% of the amount of the allowed claims. The Plan and the Order
confirming the Plan provide that the pre-petition unsecured claims, including
the asbestos-related claims, are thereby discharged and the Eagle-Picher Group
has no further liability in connection with such claims.
In 1997, the Company received federal tax refunds totaling $69.1 million
resulting from net operating losses ('NOLs') carried back to recover taxes paid
in prior years. The majority of the NOLs were created when the Company
contributed cash and securities to the Trust in the bankruptcy. Losses remaining
after the NOL carryback were carried forward to reduce taxable income in future
years. NOLs, which were carried forward, along with other items that are
deductible in the future, such as the repayment of the debt issued in
conjunction with the Company's emergence from bankruptcy, resulted in Deferred
Tax Assets of $128.5 million at November 30, 1996. Deductions for debt
previously contributed to the Trust are taken when the debt is repaid. The 10%
Debentures were repaid in connection with the Acquisition. For tax purposes, the
Acquisition was treated like a sale of assets. The gains on the sale of the
assets of the Company absorbed most of the NOL carryforwards that the Company
had available and any NOL carryforwards that were not absorbed were lost.
Interest expense increased by $28.2 million in 1997 primarily due to the
debt issued to the Trust and unsecured creditors upon the Company's emergence
from bankruptcy. In addition, interest expense was not recorded on unsecured
debt or undersecured debt during the duration of the bankruptcy proceedings,
which resulted in minimal interest expense in 1996 and 1995.
NET INCOME
Asbestos-related claims and items related to bankruptcy and emergence
therefrom ('Reorganization Items') have significantly affected the Company's net
income (loss) since 1995. Reorganization Items increased income by $2,139.8
million in 1996 and reduced income by $1,007.7 million in 1995. Other items
affecting the comparability of net income (loss) include interest expense, which
increased significantly in 1997 because of debt incurred in connection with the
Company's reorganization on November 29, 1996, amortization and depreciation
related to the Company's adoption of fresh-start reporting in accordance with
Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code' ('Fresh-Start Expenses'), effective November 29,
1996, and income tax expense, which is not comparable due to the effect on
income of interest expense, Reorganization Items and Fresh-Start Expenses.
Interest expense was $31.3 million, $3.1 million and $1.9 million for 1997, 1996
and 1995, respectively. Fresh-Start Expenses totaled $26.1 million in 1997.
Income tax expense totaled $17.9 million, $52.6 million and $9.3 million in
1997, 1996 and 1995, respectively. Net income before Reorganization Items,
interest expense, Fresh-Start Expenses and
43
<PAGE>
<PAGE>
income tax expense totaled $71.4 million, $63.5 million and $74.7 million for
1997, 1996 and 1995, respectively.
Three Months Ended February 28, 1998 Compared to Three Months Ended February 28,
1997
As a result of the Acquisition of the Company by Granaria Industries from
the Trust as of February 24, 1998, which was accounted for as a purchase, the
Company's results of operations and financial position for periods after
February 24, 1998 are not comparable to prior periods. The unaudited condensed
consolidated statement of income (loss) as of February 28, 1998 includes results
of operations from (1) December 1, 1997 through February 24, 1998 of the
Predecessor Company and (2) February 25 through February 28, 1998 of the
Company.
Net Sales. The Company's net sales decreased by approximately $17.8
million, or 8.0%, from $223.6 million in the three months ended February 28,
1997 to $205.8 million in the three months ended February 28, 1998. Included in
the results for the first three months of 1997 are $29.3 million of sales of the
Divested Divisions which, if excluded, would reflect an increase in the
Company's quarterly net sales of approximately 5.9%.
First quarter net sales for the Industrial Group, excluding net sales of
the Divested Divisions, decreased 8.8% from 1997 to 1998 due primarily to
decreased sales of germanium products. Germanium sales have been affected by
lower market prices, increased use of recycled germanium by the Company's
customers and the completion of a major satellite project. Germanium prices have
decreased by as much as half during the last year due to increased supplies. In
response to sharp increases in the cost of germanium during 1996, the Company's
customers have increasingly been recycling scrap germanium. As a result, its
customers supply a larger portion of the Company's raw materials. While the
Company has been able to maintain its margins, the sales volume is less as a
toll refiner than as a buyer and seller of germanium.
Net sales for the Machinery Group in the first three months of 1998,
excluding net sales of the Divested Divisions, increased 7.4% from the first
three months of 1997 on increased sales of special purpose batteries. Net sales
for the Automotive Group, excluding net sales of the Divested Divisions,
increased 11.5% on increased sales of precision machined components.
Cost of Products Sold. Cost of products sold, excluding depreciation
expense, decreased by $17.6 million, or 9.8% from $180.4 million in the three
months ended February 28, 1997 to $162.8 million in the three months ended
February 28, 1998. Excluding the results of Divested Divisions, as a percentage
of sales, cost of products sold remained stable at approximately 79.0%.
Selling and Administrative. Selling and administrative expenses decreased
by $2.6 million, or 13.1% from $19.7 million for the three months ended February
28, 1997 to $17.1 million for the three months ended February 28, 1998.
Excluding the results of Divested Divisions, selling and administrative expenses
for the first three months of 1998 decreased by $1.0 million from the first
three months of 1997.
Depreciation and Amortization. Depreciation and amortization decreased by
$1.6 million, or 11.1% from $14.4 million for the three months ended February
28, 1997 to $12.8 million for the three months ended February 28, 1998.
Excluding the results of Divested Divisions, depreciation and amortization was
$13.0 million for the first three months of 1997.
EBITDA. The Company's earnings before interest, taxes, depreciation and
amortization ('EBITDA') increased by approximately $2.4 million, or 10.3%, from
$23.5 million in 1997 to $25.9 million in 1998. Excluding the $.6 million
negative impact of the Divested Divisions on 1997 EBITDA, the EBITDA of the
Company increased $1.8 million, or 7.5%.
Despite decreased sales, EBITDA of the Industrial Group for the first three
months of 1998, exclusive of EBITDA of the Divested Divisions, increased by 1.3%
over the first three months of 1997. This increase was due to improved results
at the Company's Boron operations and the Company's ability to maintain its
margins despite decreased germanium sales. First quarter 1998 EBITDA of the
Machinery Group, exclusive of the results of Divested Divisions, was unchanged
from the first quarter of 1997. Increased profitability of special-purpose
batteries due to higher volumes was offset by startup
44
<PAGE>
<PAGE>
costs of new construction equipment products. EBITDA of the Automotive Group for
the first three months of 1998 increased by 9.6% from the first three months of
1997 due to higher volumes of precision machined components.
Interest Expense. Interest expense decreased by $2.0 million, or 22.5%,
from $8.9 million for the three months ended February 28, 1997 to $6.9 million
for the three months ended February 28, 1998. Most of this decrease was due to
the retirement of $125.9 million of debt during 1997, which included $50.0
million of divestiture notes, $69.1 million of tax refund notes and $6.8 million
of secured notes bearing interest at 9%, 6.5% and 10%, respectively. Of the
total debt that was retired during 1997, only $16.7 million was retired during
the first three months of 1997. The decrease in interest expense due to debt
retirements was partially offset by interest on an additional $8.0 million of
Industrial Revenue Bonds issued during the third quarter of 1997 and revolving
lines of credit, for which interest during the first three months of 1998 was
$.1 million.
Fiscal Year Ended 1997 Compared to Fiscal Year Ended 1996
In addition to the effects of reorganization, another factor affecting
comparability of operations is the sale of the Plastics, Transicoil and Fabricon
Products divisions in 1997. The Company's aggregate loss on these transactions
was $2.4 million. The Company also contributed the assets of its former
Suspension Systems division to Eagle-Picher-Boge, L.L.C., a joint venture formed
in 1997 in which the Company has a 45% interest.
Net Sales. The Company's net sales increased approximately $14.8 million,
or 1.7%, from $891.3 million in 1996 to $906.1 million in 1997. Included are net
sales of the Divested Divisions which, if excluded for both periods, would
reflect an increase in the Company's net sales of approximately 9.9%. In 1996
and 1997, the Divested Divisions contributed net sales of approximately $138.2
million and $78.6 million, respectively.
Net sales for the Industrial Group, excluding net sales of the Divested
Divisions, increased 10.2% primarily due to increased demand for germanium
products used in aerospace applications, such as solar cell substrates for
satellites. In the Machinery Group, net sales increased by 7.6% (excluding net
sales of the Divested Divisions), which increase was primarily attributable to
increased demand for batteries used in satellite applications. Net sales for the
Automotive Group (excluding net sales of the Divested Divisions) increased by
11.2% in 1997, which increase was attributable primarily to increased sales
volume of precision machined components and interior trim products. Many of the
precision machined components are used in light trucks, vans and sport utility
vehicles which have recently grown in popularity. Several new programs at the
automotive trim operation, which had been delayed by customers, are beginning to
reach anticipated production volumes. The Company has been notified by Ford that
it will no longer purchase certain product lines from the Automotive Group. The
first program was discontinued in December 1997, and other programs will be
discontinued at various times through March 1999. The total amount of 1997 net
sales contributed by these programs was $19.4 million. The Company anticipates
that this revenue will be replaced by new programs currently being implemented.
Cost of Products Sold. Cost of products sold (excluding depreciation
expense) increased by $8.1 million, or 1.1%, from $716.9 million in 1996 to
$725.0 million in 1997. As a percentage of net sales, cost of products sold
remained constant at 80.0% excluding the cost of products sold of the Divested
Divisions.
Selling and Administrative. Selling and administrative expenses decreased
by $4.4 million, or 5.4%, from $81.5 million in 1996 to $77.1 million in 1997.
Excluding expenses of the Divested Divisions, the selling and administrative
expenses remained constant from 1996 to 1997.
Depreciation and Amortization. See comments above regarding the effects of
reorganization.
Loss on Sale of Divisions. In 1997, the Company sold the Plastics,
Transicoil and Fabricon Products divisions for approximately $30.7 million, $8.3
million and $3.1 million, respectively. The aggregate loss on the sales of the
Divested Divisions (excluding Suspension Systems) in 1997 was $2.4 million.
45
<PAGE>
<PAGE>
EBITDA. Due to the increased depreciation and amortization in connection
with the Company's emergence from bankruptcy, a comparison of 1997 and 1996
operating income is not meaningful. The Company's EBITDA increased by $11.1
million, or 11.9%, from $92.9 million in 1996 to $104.0 million in 1997. In 1996
and 1997, the EBITDA of the Divested Divisions was $3.6 million and $0.4
million, respectively. The Company's EBITDA, excluding EBITDA of the Divested
Divisions, increased 17.7%. The Industrial Group's EBITDA, excluding EBITDA of
the Divested Divisions, increased by 13.5%, primarily as a result of increased
demand for germanium products. Also, the Industrial Group's diatomaceous earth
product processing operation contributed to the increase in EBITDA for 1997 due
to non-recurring charges taken in 1996.
The Machinery Group's EBITDA, excluding EBITDA of the Divested Divisions,
increased 18.9% as a result of increases in battery sales and an increase in the
margins of the operations that manufacture wheel tractor scrapers and heavy duty
forklift trucks. Despite flat sales in those product lines, EBITDA increased for
wheel tractor scrapers and heavy duty forklift trucks as a result of increased
efficiencies and lower costs associated primarily with expansion of the
Machinery Group's operations in Mexico. The Automotive Group's EBITDA, excluding
EBITDA of the Divested Divisions, increased 11.7% as a result of increased sales
and a better absorption of fixed costs. Currency exchange differences offset
volume gains in the European operations, and therefore, results of these
operations were relatively flat.
Interest Expense. Interest expense increased by $28.2 million, or 909.7%,
from $3.1 million in 1996 to $31.3 million in 1997, for reasons discussed above
related to the effects of reorganization on the Company's results.
Fiscal Year Ended 1996 Compared to Fiscal Year Ended 1995
Net Sales. The Company's net sales increased by approximately $42.8
million, or 5.0%, from $848.5 million in 1995 to $891.3 million in 1996. The
Industrial Group's net sales increased 20.9% due primarily to increased sales of
germanium products. Approximately one-third of the increase was due to increases
in the market price of germanium itself, which increased significantly during
the year.
In the Machinery Group, net sales were relatively flat. Increases in sales
of special-purpose batteries were offset by declines in volume of wheel tractor
scrapers and forklift trucks of 15.6% and 11.1%, respectively. The Machinery
Group's sales were unusually high in 1995 because a significant order backlog of
forklift trucks was worked off during 1995 and because demand for wheel tractor
scrapers was high. Net sales for the Automotive Group were relatively flat from
1995 to 1996. Two factors which offset increases in volumes in the Automotive
Group by approximately $14.5 million were the sale of an injection molding
business in the first quarter of 1996 and the loss of sales volume at the
Plastics Division, most of which resulted when GM discontinued production of its
all-purpose van during 1996.
Cost of Products Sold. Cost of products sold (excluding depreciation),
increased by $35.5 million, or 5.2%, from $681.4 million in 1995 to $716.9
million in 1996. As a percentage of net sales, cost of products sold remained
constant at 80.0%.
Selling and Administrative. Selling and administrative expenses increased
by $6.1 million, or 8.1%, from $75.4 million in 1995 to $81.5 million in 1996 in
part as a result of start-up costs associated with establishing European
administrative and sales offices for the Automotive Group.
EBITDA. The Company's EBITDA increased by $1.1 million, or 1.2%, from $91.8
million in 1995 to $92.9 million in 1996. The increase in sales of germanium
products contributed to a 26.7% increase in EBITDA in the Industrial Group. The
decline in back orders and demand in the Machinery Group, described above, as
well as start-up costs of certain satellite battery programs, resulted in a
decrease in the Machinery Group's EBITDA of 4.5% for 1996 as compared to 1995.
The decreased volume at the Plastics Division was also a primary reason for the
decrease in EBITDA from $59.7 million in 1995 to $57.2 million in 1996 in the
Automotive Group. Other contributing factors to this decrease include a new
plant in Brighton, Michigan that produces extruded nylon parts for fuel and
brake systems.
Adjustment for Asbestos Litigation and Provision for Other Claims. In
December 1995, the Bankruptcy Court estimated the Company's aggregate liability
for asbestos-related personal injury
46
<PAGE>
<PAGE>
claims to be $2.5 billion. The Company adjusted the 1995 consolidated financial
statements by $1.0 billion to increase the asbestos liability subject to
compromise to $2.5 billion. In 1996, the consolidated financial statements were
adjusted by $502.2 million to $2.0 billion to reflect the amount of the
settlement on which the Plan was based. A provision for other claims related to
the bankruptcy proceedings of $4.2 million was also made in Fiscal 1996.
Interest Expense. Interest expense increased by $1.2 million, or 63.2%,
from $1.9 million in 1995 to $3.1 million in 1996. The principal reason for the
increase was the settlement of certain secured tax claims in the bankruptcy for
which the claimants were entitled to interest.
Gain on Sale of Investment. In 1995, the Company sold an investment in
stock of a Canadian mining concern which resulted in a gain of $11.5 million.
OPERATING ACTIVITIES
Cash and cash equivalents were $53.7 million at November 30, 1997 compared
to $32.7 million and $93.3 million at November 30, 1996 and 1995, respectively.
Cash flows from operations in 1997, excluding a tax refund of $69.1 million,
were $78.8 million, despite the small net loss of $3.9 million, and in 1996 and
1995 were $72.9 million and $30.5 million, respectively. In 1997, the repayment
of the Divestiture Notes and the Tax Refund Notes resulted in deductions in
excess of income, so that the Company's current federal income tax liability was
minimal. Income taxes were paid primarily to foreign, state and local
jurisdictions in 1997 and amounted to, net of miscellaneous small refunds, $4.3
million. In 1996 and 1995, the Company paid income taxes, including federal
income taxes, of $17.3 million and $28.8 million, respectively.
Cash and cash equivalents were $19.0 million at February 28, 1998.
As previously discussed, depreciation and amortization increased
significantly in 1997 to $56.0 million as compared to $30.8 million in 1996 and
$28.7 million in 1995. The reorganization value in excess of amounts allocable
to identifiable assets is being amortized over four years.
Changes in working capital and other items provided approximately $6.9
million in cash in 1997. Certain divisions have been able to negotiate better
terms on their accounts payable following the Company's emergence from
bankruptcy. Decreases in certain working capital components have more than
offset increases in receivables and inventories which have resulted from
increased sales volumes. Working capital provided approximately $4.0 million in
1996, but $27.0 million was used for working capital items in 1995. In 1995 into
1996, the Company commenced several new programs in the Automotive Group that
required investment in customer tooling. It is common practice in the Automotive
Industry for suppliers such as the Company to accumulate customer tooling costs
while the tooling is under construction and to bill the customer upon its
completion. In 1995, an $11.5 million increase in the amount of tooling carried
on the Company's consolidated balance sheet brought the total of such amount to
$26.5 million at November 30, 1995. Tooling costs recorded on the Company's
consolidated balance sheet were $10.6 million and $11.5 million at November 30,
1997 and 1996, respectively. The accumulation of tooling costs was on top of
'normal' growth of working capital due to revenue growth. In 1996, as the new
programs were instituted, amounts for tooling were collected from customers;
however, revenue growth from these new programs resulted in 'normal' working
capital growth that partially offset the decrease in working capital resulting
from decreases in tooling activity. Another factor contributing to the less than
expected decrease in working capital in 1996 was the increase in the price of
germanium which resulted in increased inventories and receivables.
INVESTING ACTIVITIES
Capital expenditures were $51.3 million in 1997. Major additions included
two new plants to manufacture precision machined parts, one in Manchester,
Tennessee and the other in Tamworth, England. Construction on the new
diatomaceous earth processing unit in Vale, Oregon, which commenced in 1996, was
completed in 1997. Capital expenditures were $45.0 million and $40.6 million in
1996 and 1995, respectively. In addition to amounts spent on construction of the
facility in Vale, Oregon in 1996 and the addition of a new coating line for the
manufacture of rubber coated metal products in 1995, significant expenditures
were made to increase machine capacity at existing facilities
47
<PAGE>
<PAGE>
or improve processes, particularly in the Automotive Group. The Company does not
have any plans for major expansions in the near future. The Company anticipates
capital expenditures of $35.0 million for 1998. The Company believes that its
minimum capital expenditure level is approximately $15.0 million.
The Company sold the Plastics, Transicoil and Fabricon Products divisions
in 1997. The net cash proceeds of these transactions totaled $39.0 million. The
injection molding operations of the Orthane Division were sold in 1996 for $4.2
million. No other divestitures have been announced or committed to at this time;
however, the possibility of future divestitures of certain businesses exists,
particularly if the Company needs cash to fund future expansions.
In 1995, the Company sold an investment in stock of a Canadian mining
concern which had no book value for $11.5 million. The stock, which had been
received in settlement of certain indebtedness, was deemed by the Company to be
impaired and was written down to zero. The Company generally does not invest in
marketable securities of this nature. Any available cash is generally invested
in cash equivalent instruments.
FINANCING ACTIVITIES
The Company used the proceeds of tax refunds totaling $69.1 million
received in 1997 to redeem the $69.1 million Tax Refund Notes (the 'Tax Refund
Notes') which were issued by the Company to the Trust in conjunction with the
Company's emergence from bankruptcy. The Divestiture Notes were issued to the
Trust and other unsecured creditors on the Consummation Date (as defined
herein). A total of $45.3 million of the Divestiture Notes was prepaid in August
1997 with the proceeds of the divestiture of the Divested Divisions; the
remaining obligation of $4.7 million was reclassified to accrued liabilities as
a reserve for the final bankruptcy distribution. The Divestiture Notes bore
interest at 9% and had a maturity date of November 29, 1999. In addition,
secured notes totaling $6.8 million at November 30, 1996 were repaid in full in
1997 due, in certain cases, to the sale of the assets which secured the notes.
In 1997, the Company issued an $8.0 million Industrial Revenue Bond to finance
the new facility in Manchester, Tennessee. Debt totaling $5.0 million was
incurred in Europe to finance the expansion activities.
Following the Acquisition, the Company has a $160.0 million revolving
credit facility available to finance short-term borrowings and letters of
credit. In connection with the Acquisition, $79.1 million was drawn against the
revolving credit facility, approximately $52.3 million was available for
additional borrowings and $28.6 million was used for credit support in the form
of letters of credit. See 'Description of the New Credit Agreement.' The
Company's European operations also had several lines of credit totaling $20.2
million at November 30, 1997, of which, at the Closing Date, $5.0 million was
borrowed. At Closing, the Company had $15.7 million available under the European
operations' lines of credit. The European operations' lines of credit contain
financial covenants, with which the Company is in compliance. The Company
believes that the European operations should generate enough cash through
operations and borrowings on lines of credit to finance growth in the near-term.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are primarily for debt service and capital
maintenance. The Company believes that its cash flows from operations and
available borrowings under its bank credit facilities will be sufficient to fund
its anticipated liquidity requirements for the next twelve months. In the event
that the foregoing sources are not sufficient to fund the Company's expenditures
and service its indebtedness, the Company would be required to raise additional
funds. See 'Description of New Credit Agreement.'
Because the Company is highly leveraged and has significant debt service
requirements, the financial results of prior periods will not be indicative of
future results. On February 28, 1998, after giving effect to the Acquisition,
the Company had $547.0 million of long-term debt outstanding, $323.8 million of
which was secured. Under the New Credit Agreement, the Company has scheduled
principal payments aggregating $5.3 million, $10.4 million and $15.4 million for
the years 1998, 1999 and 2000, respectively, increasing to a maximum of $73.9
million in 2006. For the year ended November 30, 1997, after giving effect to
the Acquisition, pro forma interest expense would have been $54.9 million
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compared to the actual interest expense of $31.3 million, $3.1 million and $1.9
million for 1997, 1996 and 1995, respectively.
Future financial results will also differ from prior periods because of the
increased depreciation and amortization of assets that were restated to their
fair values upon the Company's emergence from bankruptcy and again at the date
of the Acquisition. See 'Effects of Reorganization on Operations and Financial
Condition.' For the year ended November 30, 1997, after giving effect to the
acquisition, the pro forma depreciation and amortization would have been $56.7
million compared to actual depreciation and amortization of $30.8 million and
$28.7 million for 1996 and 1995, respectively.
YEAR 2000
The Company is performing a comprehensive review to identify the systems
affected by the Year 2000 issue. A project committee meets regularly to review
the status of the investigation into and resolution of Year 2000 issues. As a
result of the committee's progress to date, the Company expects to modify or
upgrade existing systems and, in some cases, replace systems. The Company does
not expect to spend any significant incremental amounts with outside contractors
to complete any necessary modifications or conversions, but is redeploying
existing internal resources. The Company presently believes that through the
planned modification to existing systems and conversion to new systems, as well
as ongoing correspondence with suppliers and customers, the Year 2000 issue will
be resolved on a timely basis, and any related costs will not have a material
impact on the results of operations, cash flows or financial condition of the
Company.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997, the FASB issued Statement of Financial Accounting Standards No.
128, 'Earnings per share' ('SFAS 128'), Statement of Financial Accounting
Standards No. 130, 'Reporting Comprehensive Income' ('SFAS 130') and Statement
of Financial Accounting Standards No. 131, 'Disclosures About Segments of an
Enterprise and Related Information' ('SFAS 131'). SFAS 128 establishes standards
for computing and presenting earnings per share ('EPS') and applies to entities
with publicly held common stock or potential common stock. This statement
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. SFAS 130
establishes standards to measure all changes in equity that result from
transactions and other economic events other than transactions with owners.
Comprehensive income is the total of net income and all other nonowner changes
in equity. SFAS 131 introduces a new segment reporting model called the
'management approach.' The management approach is based on the manner in which
management organizes segments within a company for making operating decisions
and assessing performance. The management approach replaces the notion of
industry and geographic segments. The Company will adopt SFAS 128 in the fiscal
year ending November 30, 1998, including interim periods. The Company does not
expect to adopt SFAS 130 and SFAS 131 until the end of its fiscal year ending
November 30, 1999. The Company believes that the adoption of SFAS 128, SFAS 130
and SFAS 131 will not significantly affect the Company's financial condition,
results of operations or cash flows.
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BUSINESS
The Company operates in certain self-defined markets for which public
market share information is not readily available. The market share information
and description of the markets contained in this Prospectus are based on
management's good faith estimates. Management's estimates are based on, among
other things, the following factors: (i) management's knowledge of the market
based on its historical business and industry experience; (ii) discussions with
customers and competitors in the various niche markets in which the Company
competes; and (iii) the Company's product sales compared to management's
calculated estimates of the total product sales in each particular market. The
Company has not independently verified this market share data and makes no
representation as to its accuracy.
GENERAL
Founded in 1843, Eagle-Picher is a diversified manufacturer of industrial
products for the automotive, aerospace, defense, telecommunications, food and
beverage and construction industries. The Company's long history of innovation
in technology and engineering has helped it become a leader in certain niche
markets in which it competes. Eagle-Picher operates more than 50 plants in the
U.S., England, Germany, Spain and Mexico, and sells its products in over 60
countries worldwide. The Company has achieved significant internal growth in
both sales and EBITDA, with a compounded annual growth rate since 1993 of 8.2%
and 10.9%, respectively. For the 1997 Fiscal Year, the Company realized net
sales and EBITDA of $906.1 million and $104.0 million, respectively. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' for a discussion of the Company's net income (loss). The Company's
operations are organized under three major business groups: the Automotive
Group, the Machinery Group and the Industrial Group, which accounted for 48.0%,
29.9% and 22.1% of the Company's net sales and, after allocation of corporate
overhead, accounted for 49.2%, 27.0% and 23.8% of the Company's EBITDA,
respectively, for the 1997 Fiscal Year.
The Automotive Group. The Automotive Group designs, develops, and
manufactures precision machined and rubber coated metal components for the
global automotive industry. Its customers include OEMs such as Ford, GM,
Chrysler, Toyota, Nissan, Honda, Fiat, BMW and Rover, as well as Tier I
suppliers. The Company pioneered the development of materials and processes for
coating metal with elastomer (rubber) compounds, and the Company believes its
proprietary technologies in this area give it competitive advantages. The
Company's rubber coated metal products consist of highly specialized gaskets and
materials for high-temperature and high-pressure applications, including disc
brake noise insulators, air conditioning compressor gaskets, and gaskets and
coated materials for automotive powertrains. More than 150 precision machined
components are produced by the Automotive Group, including vibration dampening
devices for engine and drivetrain applications and automatic transmission pump
assemblies. The Company believes that it is the only non-OEM in North America
manufacturing high volumes of automatic transmission oil pumps and is one of the
top three companies worldwide that design and produce torsional crankshaft
dampers. The Automotive Group also produces fluid systems assemblies, molded
rubber products, aluminum castings, and interior trim products.
The Machinery Group. The Machinery Group designs and produces special
purpose batteries, construction equipment and can washing and coating machinery.
The Company has played a crucial role in the development of power systems for
U.S. space flight, and its batteries have powered missions from the back-up
system that safely brought Apollo 13 back to Earth 28 years ago, to last year's
Mars Pathfinder. The Company's batteries are also used in virtually every U.S.
missile system, including the Patriot and Tomahawk missiles. Recognized as one
of the world leaders in nickel-hydrogen technology since it powered the first
communication satellite launch in 1983, the Company believes it is a world
leader in providing power systems for communications and surveillance
satellites, including Motorola's Iridium'r' project. Construction equipment
produced by the Machinery Group includes elevating wheel tractor scrapers, which
are made under a sole-source contract with Caterpillar, and a premium line of
heavy duty forklift trucks, as well as related replacement parts. The Machinery
Group also designs, manufactures and installs specialized high volume can
washing and coating machinery primarily for the manufacturers of two-piece cans
primarily for the food and beverage industry.
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The Industrial Group. The Industrial Group is a leading producer of
specialty materials, filter aids and absorbents which are used in a wide range
of applications. The Company's specialty materials business, which has grown by
approximately 60%, as measured by net sales, in the past two years, develops,
manufactures and tests high-purity materials including germanium wafers (used in
solar cells for the satellite industry), germanium tetrachloride (used in fiber
optic cables for the telecommunications industry) and boron (used as a neutron
absorber in nuclear power plants and as a semiconductor dopant). With a 30-year
history of developing processing techniques, the Company produces the highest
purity boron and germanium available in the market. Recent innovations by the
Industrial Group have led to development stage production of a zinc selenide
crystal that adds blue and true-green to the existing red color spectrum of
LEDs, with potential use in flat panel displays and signage. The Industrial
Group is also one of the world's largest producers of diatomaceous earth and
perlite filter aids, which are used for high purity filtration by food and
beverage processors and by chemical and pharmaceutical companies.
BUSINESS STRATEGY
The Company's strategy is to enhance its competitive position as a leading
global manufacturer for the automotive, aerospace, defense, telecommunications,
food and beverage, and construction industries. To achieve this objective, the
Company will continue to build upon the following strengths:
Leading Positions in Niche Markets. Eagle-Picher's long history of
innovation and reputation for quality have afforded it leading positions in
certain niche markets. The Company enjoys leading positions in, among others,
the market for rubber coated metal products, the North American non-OEM market
for transmission pumps, the market for nickel-hydrogen batteries and the market
for two-piece can washers. The Company believes that it has achieved significant
market share in these markets because of its customer relationships, engineering
excellence, high quality standards and industry reputation.
Strong Customer Relationships. The Company has established long-term
relationships with many of its customers. It has been supplying its products to
each of Ford, GM and Chrysler for more than 45 years; Lockheed Martin for more
than 40 years; and Motorola for more than 30 years. The Company believes it has
developed strong customer relationships by working closely with customers to
design products that meet the customers' specifications. Often, the Company
provides innovative and cost-efficient engineering solutions to customer
problems. For example, the Industrial Group continuously works with customers to
develop lighter and longer-lasting battery systems to complement the latest
generations of missiles and satellites. In addition, through the development of
a new camshaft damper, the Automotive Group recently solved a significant
powertrain vibration problem for certain OEMs.
Many of the Company's facilities are located near customer plants,
enhancing the Company's ability to respond to its customers' needs. The
Automotive Group recently built a new transmission pump production facility in
Manchester, Tennessee and a new manufacturing facility in San Luis Potosi,
Mexico, in each case to meet the increasing needs of OEMs located nearby. The
Company believes that its strong relationships with customers, particularly
automotive and capital equipment OEMs, give the Company a competitive advantage
and position the Company to capitalize on a growing trend toward outsourcing.
Diversified Product Lines; Global Presence. The Company manufactures
hundreds of products for the automotive, aerospace, defense, telecommunications,
food and beverage and construction industries. The Company sells its products to
customers located in over 60 countries through its extensive network, including
global manufacturing facilities throughout the U.S. and Europe. The Automotive
Group alone serves virtually all major automotive OEMs worldwide. The Company
believes that its product diversification and global sales reduce its exposure
to any one market segment or customer.
Superior Product Quality. The Company believes it has a reputation among
its customers for providing technologically advanced, high quality products. The
Company has been honored by many of its customers for its commitment to quality
and service, and, in the last two years, has earned Ford's 'Supplier of the Year
Award' (Ford's Sharonville facility), Hughes SC's 'Performance Excellence
Award,' MD's 'Preferred Supplier Award' and Lockheed Martin's 'Tradition of
Excellence Award.'
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Low Cost Structure. The Company is committed to controlling costs and
improving operating efficiencies. The Company believes that it is a low cost
producer in many of the markets in which it competes. The Company attributes its
low cost position to its leading positions in niche markets, relatively low
overhead costs due to the small town locations of many of its facilities, a
primarily non-union workforce, advanced proprietary technology and advanced
manufacturing processes, including the Toyota Production System at one of the
Automotive Group's facilities. Low cost is essential to the Company's ability to
continue to remain competitive.
INDUSTRY OVERVIEW
AUTOMOTIVE
The Automotive Group's performance, growth and strategic plan are directly
related to certain trends within the OEM and Tier I markets, including the OEMs'
increasing reliance on outsourcing, the expansion of OEM supplier
responsibilities and the shift by OEMs to the purchase of 'systems' (several
components assembled together) rather than individual components, all of which
have contributed to a consolidation of OEM suppliers.
Since the 1980's, OEMs such as Ford, GM and Chrysler have been outsourcing
an increasing percentage of their production requirements. OEMs benefit from
outsourcing because outside suppliers generally have significantly lower cost
structures and can assist in shortening development periods for new products.
Consistent with the trend toward outsourcing, OEMs have focused on developing
long-term, sole source relationships with suppliers that accept significant
responsibility for product management and meet increasingly strict standards for
product quality, on-time delivery and lower manufacturing costs. These suppliers
are expected to control all aspects of the production of system components,
including design, development, component sourcing, manufacturing, quality
assurance, testing and delivery to the customer's assembly plant. Many suppliers
do not have the resources to meet these requirements and the Company believes
that, as a result, the automotive OEM supplier market will be divided among a
smaller group of high quality key suppliers.
While the OEMs' focus today is on quality, cost and service, the Company
believes that their focus for the future will be on global capabilities,
innovation and ability to provide value-added products and systems. The OEMs
have been very successful in making high quality and low cost a minimum
requirement to remain in the industry, rather than a competitive advantage for
certain suppliers.
These evolving requirements can best be addressed by suppliers with
sufficient resources to meet such demands. For suppliers such as the Company,
this environment provides an opportunity to grow by obtaining business
previously provided by other suppliers who can no longer meet the current or
future requirements and expectations of the OEMs and by acquisitions that
further enhance product manufacturing and service capabilities.
INDUSTRIAL AND MACHINERY
Defense and Space Power Systems. The defense and space power systems
markets to which the Industrial and Machinery Groups sell their products design,
develop, produce and sell components or systems for use in a variety of military
applications (including missiles, smart weapons and aircraft) and space power
applications (including satellites, spacecraft and launch vehicles).
In recent years, the defense industry in the U.S. has been characterized by
steadily declining defense budgets primarily as a result of a change in the
nature of perceived threats to U.S. national security interests since the
dissolution of the Soviet Union in 1991 and growing political pressure to
balance the federal budget. Industry sales to the DOD declined for eight
consecutive years through 1995. As a result, many U.S. spacepower and
defense-related companies have focused on a strategy of downsizing and
consolidation.
Although the defense budget is shrinking, the U.S. government is still the
largest consumer of space power. However, propelled by rapid growth in
telecommunications, broadcast, aircraft navigation, and imaging applications,
worldwide non-governmental spending in the space power market is growing. If
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this trend continues, non-governmental space power spending could surpass
government space power spending within a decade.
Significant markets in the commercial space segment include satellites,
satellite launchers and supporting ground equipment. U.S.-based companies
manufacture of satellites worldwide, led by Hughes and other U.S. satellite
manufacturers including Lockheed Martin, Loral Space and Communication Ltd., TRW
Inc. and Ball Corporation.
Despite their lead in satellite technology and production, U.S. companies
command only about one-third of the worldwide satellite launch business. Market
participants include Paris-based Arianespace, an affiliate of The European Space
Union, as well as U.S.-based Lockheed Martin and The Boeing Company ('Boeing').
In addition, NASA's Space Shuttle is used to launch commercial as well as
government satellites, and U.S. companies are developing next-generation
reusable launch vehicles. Several other countries, including China, India,
Israel, Brazil and Japan, are also developing satellite launch capabilities, and
certain Russian and Ukrainian companies have entered into joint ventures with
U.S. companies. The rapid growth in satellite launch demand has been furthered
by the development of an array of satellite services companies and the
development of new services such as satellite broadcast cable television and
global mobile telephone services and high-volume data transfer.
In the military space power market, satellite reconnaissance and
communications capabilities are becoming more important. For example, the U.S.
Air Force has a number of important space programs including DSP (Defense
Support Program), Milstar satellite communications, and Navstar Global
Positioning System, and continues to provide funding for the production of
medium launch vehicles and Titan heavy launch vehicles. The primary Army space
program provides ground systems for the Defense Satellite Communications System,
while the Navy operates its Fleet Satellite Communications System.
Telecommunications. A number of trends within the telecommunications
industry have had and will continue to have a fundamental impact on the
satellite market. Advances in cellular and satellite technologies have made
possible mobile satellite systems that could link the entire world in a single,
seamless wireless communication system. Owners and operators of communication
satellites, which continually need space access, have fueled the growth in this
industry and now account for virtually all of the private sector market for
commercial launch services. Six new services planned for implementation between
1998 and 2000 will rely on large low earth orbiting ('LEO') satellite systems to
offer global mobile telephone, television, internet and other information
services. LEO satellites, with orbits of approximately 1,500 nautical miles, are
typically smaller and lighter than their geostationary ('GEO') counterparts,
which orbit at a distance of approximately 22,300 nautical miles, and mid-earth
orbit satellite systems, which orbit the Earth at distances between the orbits
of LEOs and GEOs. The demand for these services is expected to result in the
production and launch of hundreds of satellites between 1998 and 2000. The
Company believes that these satellite constellations will increase future demand
because the satellites are expected to be replaced every five years.
The primary customers of satellite components are the satellite
manufacturers such as Hughes and Lockheed Martin, and satellite owners such as
Iridium World Communications Ltd. (30% of which is owned by Motorola),
Globalstar Telecommunications Limited ('Globalstar') (which is owned by
Loral/Qualcomm Incorporated) and Orbital Sciences Corporation. The increased
demand for satellites has attracted several small companies and several larger
satellite manufacturers to become satellite owners.
Semiconductors. Semiconductors are the basic building blocks used to create
a variety of components and systems used in satellites, spacecraft and aircraft
as well as a broad array of other communications, computer and computer
peripheral and consumer electronics applications. Continual improvements in
semiconductor processes and design technologies have enabled the production of
complex, highly integrated circuits which provide faster execution, increased
functionality and greater reliability at lower cost. As a result, semiconductor
demand has grown substantially in its primary markets of computing and
communications, and has experienced increased growth in additional markets such
as consumer electronic devices, automotive products and industrial automation
and control systems.
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Construction Equipment. The construction equipment industry in which the
Machinery Group competes has a broad spectrum of participants that specialize in
various product lines. The principal factors affecting the market are
distribution strength, market share objectives, profit objectives, unique
product or service advantages and product support. The construction industry in
the Midwest and Northeast is highly seasonal. Construction activity slows down,
especially in these regions, beginning in November and continuing through the
first quarter. North American retail demand for construction equipment is
strongest in the second and fourth quarters. In the construction equipment
market, the Company is the sole producer of elevating wheel tractor scrapers for
Caterpillar. The other major participant in this market is Deere & Company. The
primary participants in the vertical mast rough-terrain forklift truck market,
in addition to the Company, are Case Corporation, JCB Inc. and Sellick Equipment
Limited.
The materials handling industry to which the Machinery Group supplies its
cushion-tire forklift trucks, which are primarily used in the paper, metals and
automotive markets, is a mature industry which historically has been cyclical.
Fluctuations in the rate of orders for forklift trucks reflect the capital
investment decisions of the customers, which in turn depend upon the general
level of economic activity in the various industries served by such customers.
In the most recent business cycle, the North American market for forklift trucks
reached its lowest level in 1991 and has increased in all but one year
thereafter.
Can Washing Equipment. The U.S. metal beverage container industry in which
the Machinery Group also competes has experienced slow demand growth at a
compounded annual rate of approximately 2% over the last decade, with much of
that growth in the soft drink market. As a result, capital spending on can
manufacturing equipment has been minimal and the Company has focused on
servicing and providing replacement parts for existing equipment. The demand for
can manufacturing equipment is primarily from emerging markets such as China,
Vietnam, Thailand, Poland, Russia, India and Brazil. The majority of the
Company's sales of new two-piece can washers is expected to be in these emerging
markets for the foreseeable future.
DESCRIPTION OF BUSINESSES
THE AUTOMOTIVE GROUP
The Automotive Group is a supplier in the global automotive market offering
a diverse range of products to three primary geographic markets -- North
America, Europe and Asia. The Automotive Group is primarily engaged in the
production and sale of mechanical and structural parts for passenger cars,
trucks, vans and recreational and utility vehicles. Their offerings include
state-of-the-art products based on proprietary technologies and staple products
within different markets. Manufacturing plants, largely in the U.S., but also in
England, Germany, Mexico and Spain, and sales and engineering offices in the
U.S., Japan and Europe serve automotive markets around the world. The operating
strategy of the Automotive Group is to identify and target niche markets and
then to create substantial market positions within these niche markets. The
Company believes that the Automotive Group is positioned to capitalize on the
recent trend by OEMs to outsource their products. The Automotive Group
distributes its products primarily to Ford, GM, Chrysler, Toyota, Nissan and
Honda, and to Tier I suppliers of those manufacturers, directly through its
internal sales personnel. With respect to the hundreds of products manufactured
by the Automotive Group, competition varies widely as to the number and type of
competitors, the methods of competition, and the Automotive Group's competitive
positions. Generally, competitive conditions for the Automotive Group are
characterized by a decrease in the number of competitors while at the same time
an increase in the size of existing competitors, increased foreign competition
(particularly from Asia), increased emphasis on quality and intense pricing
pressures from major customers.
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The Automotive Group is composed of two major product groups: Precision
Machined Components and Rubber Coated Metal Products. The following table sets
forth, for the last three fiscal years, the net sales and the percentage of the
Company's total net sales contributed by each product group.
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
% OF TOTAL % OF TOTAL % OF TOTAL
NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
--------- ---------- --------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Precision Machined Components................. $ 205.6 22.7% $ 182.1 20.4% $ 168.9 20.0%
Rubber Coated Metal Products.................. 80.8 8.9 83.9 9.4 77.9 9.2
Other Automotive Products..................... 112.5 12.5 92.8 10.4 92.1 10.8
Divested Automotive Products.................. 36.3 4.0 80.8 9.1 94.3 11.1
--------- ----- --------- ----- --------- -----
Total............................... $ 435.2 48.1% $ 439.6 49.3% $ 433.2 51.1%
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
Precision Machined Components. The Automotive Group's Hillsdale division
specializes in the design, manufacture and distribution of a full line of
precision machined aluminum and steel parts for the worldwide automotive market.
Precision machined components include vibration dampening devices and precision
machined castings and forgings which are designed and engineered for engine,
transmission and driveline applications.
The Automotive Group's transmission products include pump assemblies for
use in automatic transmissions. The Company believes that it is the only non-OEM
in North America manufacturing high volumes of automatic transmission oil pumps.
The Hillsdale division produces the entire pump assembly for Ford's electronic
four-speed overdrive transmission, which is used on pick-up trucks, vans and
sport utility vehicles. Each pump contains over 50 components which are
machined, assembled and tested by Hillsdale.
The Automotive Group also produces torsional vibration dampening devices
for use in engine and drivetrain applications. A damper is a vibration control
device which reduces the torsional stress vibrations caused by internal
combustion engine systems, thereby alleviating the stress on shafts and relaxing
the flex points. Dampers reduce fatigue and prevent cracking thereby enhancing
the durability of engines and their components. The Company believes it is one
of the top three companies worldwide which designs and produces torsional
crankshaft dampers. The Automotive Group recently expanded its international
operations by opening a new facility in Tamworth, England to service existing
and new customer needs.
The Automotive Group also produces nearly 150 different machined castings
and forgings for power steering, drivetrain and transmission applications from
numerous metals. Each part is specially designed to meet a customer's
specifications. Once a product is designed for a customer, the Company believes
it becomes the sole source provider of such products to that customer.
The Automotive Group also produces its own rubber compounds which enables
it to consistently maintain high quality and to manipulate the composition of
the rubber for its different products. By controlling the quality and
composition of its rubber, the Automotive Group is better able to manufacture
components to critical tolerances, giving it an advantage over its competitors.
Hillsdale continues to diversify its customer base, application and product
range, as well as its international presence, most notably in Mexico. Hillsdale
has experienced growth within the expanding Japanese plant operations in the
U.S. with such products as torsional vibration dampers and transmission pumps.
As a result of such business, and consistent with its strategy to remain close
to its customer base, Hillsdale recently completed a new manufacturing facility
in Manchester, Tennessee to supply the nearby Nissan assembly plant's
transmission pump needs, which were approximately 271,000 for the year ended
December 31, 1997. The Company believes that its Manchester facility will have
the capacity to produce 300,000 transmission pumps annually by the end of 1998.
The market for precision machined components tends to have a few strong and
well-positioned competitors including the OEMs, as well as Simpson Industries,
Inc. and Freudenberg-NOK General Partnership ('Freudenberg'). The Automotive
Group competes in this market primarily on the basis of price, delivery, quality
and service.
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Rubber Coated Metal Products. The Automotive Group's rubber coated metal
products, which are manufactured by its Wolverine Gasket division, consist of
highly specialized gaskets and materials for high-temperature and high-pressure
applications in the automotive industry using proprietary processes and
formulations. Generally, gaskets are compressible, lightweight material placed
between metal parts to act as a seal and prevent fluids and gases from leaking.
Rubber coated metal products are composed of three principal product lines: disc
brake noise insulators, compressor gaskets for air conditioning units and
gaskets and coated materials for powertrain applications (including head
gaskets).
Wolverine Gasket pioneered the development of materials to manufacture the
high-torque sealing products needed to withstand intense heat and pressure.
Wolverine Gasket also invented the process of coating materials with a thin
elastomer to render them impervious to fluid penetration and able to withstand
high-torque loads. This technology makes possible the coating of the wide range
of substrate materials necessary to operate a complex machine such as a car,
which generates intense heat and pressure. The Automotive Group's widely used
compounds include Wolverine Steel N'r', a steel base with an oil-resistant
specialty compounded rubber; Foamet'r', a temperature-resistant compound which
is bonded to steel or aluminum; Alum-N'r', an aluminum alloy-based product
coated with nitrile synthetic rubber which is particularly effective where
corrosion or weight is a factor; and Vulkol'r', a coated rubber-to-vulcanized
fiber sealing material. Wolverine Gasket, which is currently a supplier to OEMs
including Ford, Toyota and GM, plans to expand its sales to Tier I suppliers in
the future.
The trend in the auto industry toward high-temperature, high-compression
and longer-lasting engines requires that engine gaskets meet more stringent
specifications for durability and sealing. Wolverine Gasket's coated metal
products provide the most significant component of multilayer steel head
gaskets, which the Company believes will become the gasket of choice for future
engine designs. A multilayer steel head gasket is a sealing material which is
better able to withstand intense heat and pressure, such as those which are
common in diesel engines. In addition, Wolverine Gasket expects the brake
insulator market to grow as more cars are equipped with four-wheel disc brakes.
Wolverine Gasket's coating expertise, combined with its recent major investment
in a state-of-the-art coating line, gives the Company the opportunity to sell
its material to a new customer base throughout the world. The Automotive Group's
new 50,000 square foot facility in Blacksburg, Virginia contains a technically-
advanced liquid rubber-to-steel coil coating line which enables the Company to
produce rubber coated metal to closer tolerances.
The market for rubber coated metal products is highly fragmented. The
Automotive Group competes against a variety of different companies in the
geographical markets it supplies, and has no primary competitor. The Company
believes that it is the sole supplier to the U.S. automotive compressor gasket
market. The Company also believes that it has 70% of the U.S. market for disc
brake noise insulators.
THE MACHINERY GROUP
The Machinery Group is composed of two major product groups: special
purpose batteries and construction equipment. The following table sets forth,
for the last three fiscal years, the net sales and percentage of the Company's
total net sales contributed by each product group:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
% OF TOTAL % OF TOTAL % OF TOTAL
NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
--------- ---------- --------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Special Purpose Batteries..................... $ 131.0 14.4% $ 108.8 12.2% $ 99.3 11.7%
Construction Equipment........................ 96.8 10.7 95.1 10.7 108.4 12.8
Other Machinery Products...................... 30.2 3.3 35.7 4.0 32.2 3.8
Divested Machinery Products................... 12.8 1.4 18.0 2.0 14.8 1.7
--------- ----- --------- ----- --------- -----
Total............................... $ 270.8 29.8% $ 257.6 28.9% $ 254.7 30.0%
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
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Special Purpose Batteries
The Machinery Group, primarily through its Federal Systems, Power Systems
and Power Subsystems departments, designs, manufactures and tests special
purpose batteries for advanced value-added products for three markets:
telecommunications, aerospace and the U.S. government. The Company is the
leading supplier of special purpose batteries for aerospace and defense
applications. The Company's broad line of specialty batteries includes: (i)
thermal batteries (used primarily in missiles, smart weapons and other defense
systems); (ii) silver-zinc batteries (used primarily in military applications
and in launch vehicles); (iii) nickel-hydrogen cells and batteries (used in
military, scientific and commercial aerospace and telecommunications
satellites); (iv) lead acid batteries (used in emergency lighting,
uninterruptible power systems, telecommunications, handheld power tools and
ride-on toys); and (v) nickel-cadmium batteries (used in aircraft and aerospace
applications). The Company believes that its special purpose batteries have been
used in virtually every U.S. missile system, including the Patriot and Tomahawk
missiles used in the Persian Gulf war, and in all spacecrafts used in the
principal U.S. space missions, including the space shuttle and the Mercury,
Gemini and Apollo spacecrafts.
Thermal Batteries and Silver-Zinc Batteries. Thermal batteries, unlike most
other batteries, can remain dormant for long periods of time prior to their use.
The Company believes that it is the leading supplier of batteries for missiles,
submunitions, mines, sonobuoys, fuses and aerospace power backup. The Company
has supplied batteries for virtually every U.S. missile system and accounts for
70% of all thermal battery sales for U.S. military applications and 50% of all
such sales for military applications for the U.S. and its allies combined. It
was the Company's silver-zinc batteries that provided the essential back-up
power systems for the life support, guidance and communications that safely
brought the Apollo 13 spacecraft back to Earth 28 years ago, as well as the
batteries used to power the Mars Pathfinder in the exploration of Mars last
year. The Company believes that it is the market leader in thermal and
silver-zinc batteries on the basis of quality, customer satisfaction,
technological innovation and cost structure. The Machinery Group's primary
competitor for thermal batteries is (ASB) Aerospatiale Batteries, which has a
large share of the European market. The Machinery Group's primary competitor for
silver-zinc batteries is Yardney Technical Products, Inc. in the U.S. and SAFT
in Europe. The Company believes that its higher quality and lower cost have
enabled it to maintain its market share.
Nickel-Hydrogen Batteries. The Company believes that it is the world leader
in nickel-hydrogen technology as well as being the most diversified manufacturer
of special purpose NiH2 power systems. The nickel-hydrogen battery system,
which is the most widely-used power source for weather, communications and
military satellites, is recognized for its long-life (typically greater than 15
years), reliability and durability. The NiH2 power system, which is designed to
outlast most systems in which it is installed, powered the first communication
satellite launch in 1983 and is currently part of the Hubble Space Telescope.
The Company believes that more than 90% of the communications and surveillance
satellites manufactured in the U.S. are powered by Eagle-Picher nickel-hydrogen
batteries, including all major global telecommunications systems. The Company
believes that it is the primary or sole source supplier to such customers as
Lockheed Martin, SS/Loral, Hughes and Boeing. The Company has several contracts
for satellite components with several of these satellite projects including
Motorola's Iridium'r' system consisting of 66 LEO satellites and offering
digital communications (voice, data, fax and paging capability) to subscribers
and Globalstar's system consisting of 48 LEO satellites to provide fixed and
mobile telecommunication services by 1999.
Lead-Acid Batteries. The Machinery Group manufactures an extensive line of
rechargeable valve regulated lead-acid ('VRLA') batteries under the Carefree'r'
brand. Carefree'r' sealed lead-acid batteries are typically small rechargeable
batteries used in emergency lighting, uninterruptible power systems,
telecommunications, handheld power tools and ride-on toys. The Carefree'r' line
has approximately 6% of the $250 million market for less-than-60-ampere-hour
VRLA batteries. Major customers of the Carefree'r' line include Peg Perego,
Simplex, C.E.A. and Lithonia. The Company competes with companies that have a
significantly larger market share. The Company believes that it offers the
shortest lead times of any manufacturer, superior telecommunications product
performance and the ability to provide unique battery shapes and sizes to adapt
to a customer's needs.
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Nickel Cadmium Batteries. The Company supplies its nickel cadmium batteries
for space and satellite programs to NASA and U.S. satellite builders, such as
Hughes and TRW. They also sell to the DOD and aircraft manufacturers, such as
Lockheed Martin and Bell Helicopter, for use in airplanes and helicopters. The
Company competes primarily on the basis of quality, performance and cost.
Construction Equipment
The Machinery Group's Construction Equipment division manufactures
primarily two construction equipment products: elevating wheel tractor scrapers
and heavy-duty industrial forklift trucks. Wheel tractor scrapers are used for
removal of overburden in open-pit mining and site preparation on highway,
commercial, municipal and industrial projects. The Company is the exclusive
source of elevating wheel tractor scrapers to Caterpillar, which the Company
believes has 85% of the U.S. market for elevating wheel tractor scrapers. In
1996, the Company received Caterpillar's 'Certified Supplier' designation.
The Machinery Group manufactures several different models of heavy duty
forklifts. Through its Construction Equipment division, the Machinery Group
utilizes Caterpillar's dealer network to sell its own branded products,
including cushion-tire forklift trucks, which are sold primarily to paper, metal
and automotive manufacturers, and its R-Series, which are sold primarily to
independent rental fleets such as The Hertz Corporation and U.S. Rentals. The
division recently introduced a lower cost truckmounted forklift called
'TrailerMate' which is also sold to a variety of customers through the
Caterpillar dealer network. The industrial forklift market is highly fragmented
and many of the Company's competitors have a greater market share. However, in
the niche markets in which the Company competes, such as in the heavy duty rough
terrain market, the Company has a significant market share. The Company also
sells to the replacement parts market, which accounts for 12% of the sales of
the Company's Construction Equipment division. The Construction Equipment
division recently expanded its facility in Mexico, which now has more than 300
employees.
THE INDUSTRIAL GROUP
The Industrial Group is composed of two product groups: specialty materials
and filter aids and absorbent products. The following table sets forth, for the
periods indicated, the net sales and percentage of the Company's total net sales
contributed by each product line:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
% OF TOTAL % OF TOTAL % OF TOTAL
NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
--------- ---------- --------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Specialty Materials............................ $ 101.9 11.3% $ 88.4 9.9% $ 62.2 7.3%
Filter Aids/Absorbent Products................. 63.6 7.0 61.8 7.0 58.1 6.8
Other Industrial Products...................... 5.1 0.5 4.6 0.5 4.1 0.5
Divested Industrial Products................... 29.5 3.3 39.3 4.4 36.2 4.3
--------- ----- --------- ----- --------- -----
Total................................ $ 200.1 22.1% $ 194.1 21.8% $ 160.6 18.9%
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
Specialty Materials
The Industrial Group, primarily through its Environmental Science and
Technology ('ESAT'), Electro-Optic Materials ('EOM') and Boron departments,
develops, manufactures and tests high-purity specialty materials for a wide
range of services and products. The Industrial Group's significant specialty
materials products include germanium and boron.
Germanium. The Industrial Group is one of the world's leading manufacturers
of germanium products. With over 50% of the market, the Industrial Group is one
of the leading suppliers of thin polished germanium substrates (known as wafers)
for solar cells on space satellites. The wafers are used in the production of
solar cells which power satellites and recharge their batteries. The Industrial
Group's germanium wafers are used on the Hubble Space Telescope, satellite
systems including Panamsat, Indiasat, the Lockheed Martin A-2100 Buss and the
Iridium'r' network. The Industrial Group also produces germanium tetrachloride,
which is used as a dopant in the manufacture of fiber optic
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cable. Germanium tetrachloride, when added to glass fiber, changes the light
guiding properties of the fiber, enabling light signals to travel for over 60
miles. The Industrial Group also supplies germanium metal for use in infrared
optics (such as night vision lenses) and germanium dioxide, which is used as a
catalyst in the production of polyethylene terephthalate (PET) bottles in the
Asian market.
Boron. The Industrial Group's Boron department developed the sophisticated
manufacturing processes necessary to produce isotopically pure boron, which
involves the separation of boron into its isotopes, and to produce high purity
enriched boron compounds. One of its primary products is enriched boric acid,
which is used as a neutron absorber in nuclear power plants. The nuclear power
plants that use enriched boron are primarily those that use mixed oxide ('MOX')
fuels, which create a more intense reaction. Other plants that have not
converted to the use of MOX fuels can use non-enriched boron, which is not
manufactured by the Company, as a control material. Boron isotopes can also be
used in the manufacture of nuclear control rod pellets and in storage casks used
to transport and store spent nuclear fuel and other materials. The Industrial
Group supplies over 90% of the world's demand for 10B and 11B isotopes. Although
there are few competitors in the enriched boron markets, the Industrial Group's
primary competition is manufacturers of alternate materials made of non-enriched
boron compounds. The Industrial group competes in the boron market primarily on
the basis of a facility's overall operating cost.
Semiconductor Dopants and Crystal Growth. The Industrial Group, through its
ESAT, EOM and Boron departments, also manufactures semiconductor dopants.
Semiconductors which are the 'brains' of the modern computer, are tiny powerful
devices that control electrical currents. In recent years, the trend in the
semiconductor market has been toward producing smaller and more powerful chips
which are more sensitive to impurities in the production process. The Industrial
Group, through its patented 'Chromacut' purification process, purifies
semiconductor dopants beyond current standards. The Industrial Group has
pioneered certain development stage products including a zinc selenide crystal
that adds blue and green to the existing red color spectrum of light emitting
diodes (LEDs). This development provides increased brightness and definition for
a variety of applications including flat panel displays (personal computers),
signage (athletic facilities), aircraft cockpit display, traffic lights and
automotive instrumentation.
Filter Aids and Absorbent Products
The Industrial Group produces diatomaceous earth (diatomite) filter aids
and perlite filter aids which are used primarily by the food and beverage
industry and for general industrial applications. Diatomite is an odorless and
tasteless non-metallic mineral, derived from the skeletal remains of aquatic
plants, with a honeycomb structure that is ideal for filtration. Perlite is a
non-metallic mineral of volcanic origin that expands like popcorn when heated to
elevated temperatures. The diatomite and the expanded perlite are milled and
classified into appropriate particle size ranges, producing low density,
efficient filter aids. Examples of diatomite and perlite filtration applications
include corn sweeteners, vegetable oils, cane and beet sugar, fruit juices,
beer, wine, chemicals, pharmaceuticals, and water purification. The Industrial
Group also produces diatomite granular absorbents and functional fillers. These
products are used as industrial absorbents, soil amendments, fillers, catalyst
carriers, and for agricultural applications. The diatomite and perlite filter
aids are marketed worldwide under the brand name Celatom'r' and the absorbents
are marketed under the brand name Floor Dry'r'. The Industrial Group competes
globally in the market for diatomaceous earth and perlite filter aids and in
North America for industrial absorbents. The Company believes that it has the
second largest market share in the worldwide filter aids market. The largest
market share is held by World Minerals, a division of Alleghany Corporation. In
the North American market for industrial absorbents, the Industrial Group has a
variety of competitors, some of which have a larger market share.
RESEARCH AND DEVELOPMENT
In fiscal 1997, Eagle-Picher spent approximately $14.8 million for research
and development and related activities, primarily for the development of new
products or the improvement of existing products. Comparable costs were $18.0
million and $17.3 million for 1996 and 1995, respectively.
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RAW MATERIALS
The prices of raw materials are subject to volatility. The Company's
principal raw materials are rubber, steel, zinc, nickel, germanium, gallium and
boron. These raw materials are commodities that are widely available. Although
the Company has alternate sources for most of its raw materials, the Company's
policy is to establish arrangements with select vendors, based upon price,
quality, and delivery terms. By limiting the number of its suppliers, the
Company believes that it obtains materials of consistently high quality at
favorable prices.
BACKLOG
At November 30, 1997 and 1996, the Company's order backlog was
approximately $250.0 million. The Company expects the order backlog outstanding
at November 30, 1997 to be filled within the 1998 Fiscal Year. Approximately
$13.2 million of the Company's order backlog at November 30, 1996 was
attributable to sales of the Transicoil business, which was sold by the Company
in July 1997. As customary in the automotive industry, the Company enters into
blanket purchase orders with their customers with respect to specific product
orders. From time to time, the customer, depending on its needs, will provide
the Company with releases on a blanket purchase order for a specified amount of
products. As a result, the Automotive Group has virtually no order backlog.
The Company's Industrial and Machinery Groups have contracts with the U.S.
Government which have standard termination provisions. The U.S. Government
retains the right to terminate contracts at its convenience. However, if
contracts are terminated, the Company is entitled to be reimbursed for allowable
costs and profits to the date of termination relating to authorized work
performed to such date. U.S. Government contracts are also subject to reduction
or modification in the event of changes in Government requirements or budgetary
constraints.
INTELLECTUAL PROPERTY
The Company holds more than 50 patents, primarily in the United States and
Canada. Many of the Company's products incorporate a wide variety of
technological innovations, some of which are protected by individual patents.
Many of these innovations are treated as trade secrets with programs in place to
protect these trade secrets. Accordingly, no one patent or group of related
patents is material to the Company's business. The Company also has numerous
trademarks, including the Eagle-Picher name, and considers the Eagle-Picher name
to be material to its business.
PLAN OF REORGANIZATION AND RELATED INJUNCTION
In January 1991, the Eagle-Picher Group filed voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code. The filings were not
precipitated by any fundamental business problems. Rather, the filings were
caused by contingent liabilities, settlement costs and legal expenses resulting
from more than two decades of litigation arising out of tens of thousands of
claims asserted against the Eagle-Picher Group in connection with its
asbestos-related business operations, which ceased by 1974. In August 1996, the
Eagle-Picher Group, together with the Injury Claimants' Committee and the
Representative for Future Claimants who was appointed by the Bankruptcy Court,
proposed the Plan to the Bankruptcy Court. The Bankruptcy Court and the Ohio
District Court jointly issued the Order confirming the Plan in November 1996,
and the Plan was consummated on November 29, 1996 (the 'Consummation Date'). The
major component of the Plan was a settlement of the Eagle-Picher Group's
liability for present and future asbestos-related personal injury claims arising
out of business operations prior to the date of the bankruptcy petitions under
which it was agreed that these claims had a total value of $2 billion. Pursuant
to the Plan, (i) the Trust was established and the Company contributed assets to
the Trust valued at approximately $730 million in the aggregate (representing
the approximately 37% distribution upon the $2 billion allowed claim of the
asbestos claimants, as unsecured creditors), consisting of $51.3 million in
cash, $250 million in the 10% Debentures, $69.1 million in Tax Refund Notes,
$18.1 million in Divestiture Notes and 10,000,000 shares of Common Stock
(representing all outstanding shares of Common Stock), and (ii) the PD Trust is
to be established and funded with $3 million in cash (which is currently held in
escrow by the Company). Pursuant to the
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Plan, the asbestos-related claims are discharged and the Eagle-Picher Group has
no further liability in connection with such claims.
Pursuant to the Plan, the Eagle-Picher Group is discharged of the burden of
defending more than 150,000 asbestos-related, as well as any lead-related,
claims that had been, as well as any such claims that may in the future be,
filed against the Eagle-Picher Group. This relief has been accomplished through
the establishment of the independent trusts under the Plan to assume,
administer, settle and pay such claims. In addition, the Order includes the
Injunction, which prohibits claimants with asbestos-related or lead related
claims from bringing actions against the Eagle-Picher Group, and instead
requires these claimants to assert such claims only against the Trust or, as to
asbestos-related property damage claims, against the PD Trust, each of which
was, or in the case of the PD Trust, will be, funded by the Company pursuant to
the Plan. Under the Plan the Trust assumed all liability and responsibility for
asbestos-related and lead-related personal injury claims against the
Eagle-Picher Group, and the PD Trust assumed all liability and responsibility
for asbestos-related property damage claims. The Company believes that the Plan,
the Injunction and the Bankruptcy Code together will enjoin any claims against
the Company or the Eagle-Picher Group with respect to any past, present, or
future asbestos-related or lead-related liabilities arising from or based upon
business operations prior to the date of the bankruptcy petition.
Following confirmation of the Plan, notices of appeal of the Order were
filed by one general unsecured creditor (the 'Creditor Appellant') and the
Unofficial Committee of Co-Defendants (the 'Co-Defendants'), a group of former
manufacturers and distributors of asbestos-containing products that have been
named as co-defendants with one or more members of the Eagle-Picher Group in
asbestos personal injury lawsuits and have asserted claims against the
Eagle-Picher Group for contribution, indemnity and subrogation. The allowance of
contribution claims against the Eagle-Picher Group is subject to Section 502(e)
of the Bankruptcy Code which states that a claim for contribution asserted by an
entity that is liable with a Chapter 11 debtor shall be disallowed to the extent
such contribution claim is contingent as of the time of allowance or
disallowance of such claim. Neither the Creditor Appellant nor the Co-Defendants
requested that the Order be stayed pending appeal. The Creditor Appellant
withdrew its notice of appeal by a stipulation dated January 24, 1997.
The Co-Defendants appealed the Order directly to the Sixth Circuit (the
'Confirmation Order Appeal'), raising a variety of objections to the Plan and to
the Trust's procedures for processing, allowing and paying the Co-Defendants'
claims. The Co-Defendants also asserted, among other things, that Section 524(g)
of the Bankruptcy Code, which authorizes courts to issue injunctions to channel
asbestos claims away from a reorganized company to a personal injury trust
established by such company (as discussed below), is unconstitutional. The
Co-Defendants did not, however, contend that the Bankruptcy Court and Ohio
District Court lacked jurisdiction to enter the Injunction or that Section
524(g) of the Bankruptcy Code had not been satisfied. The Co-Defendants did not
raise their objections in the bankruptcy case until after the deadline for
filing objections to the Plan.
The Co-Defendants also appealed to the Ohio District Court the Bankruptcy
Court's denial of the Co-Defendants' motion for leave to file their late
objection to the Plan discussed above (the 'Objection Appeal'). The Ohio
District Court affirmed the Bankruptcy Court's denial of the Co-Defendants'
motion to file a late objection to the Plan and the Co-Defendants appealed that
judgment to the Sixth Circuit. The Objection Appeal, which was briefed in early
1998, was consolidated with the Confirmation Order Appeal by the Sixth Circuit.
The Company anticipates that oral argument will be held on the consolidated
appeals by the third quarter of 1998.
The Company has argued to the Sixth Circuit that the Confirmation Order
Appeal is moot in light of (i) the substantial consummation of the Plan, (ii)
the fact that the Co-Defendants did not seek a stay of the Order pending appeal
and (iii) the adverse effects that vacation of the Order would have on creditors
and non-creditor third parties who have acted in reliance on the Order.
Even if the Sixth Circuit were willing to consider the substance of the
Co-Defendants' objections to the confirmation of the Plan, the Co-Defendants
have represented in their court papers that they do not object to the amount of
money that was transferred to the Trust, and that their objections relate to the
internal Trust procedures and the identity of the trustees and members of the
advisory committee for the Trust.
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The Company believes that the Injunction is critical to its ability to
continue to operate its business. Indeed, the Bankruptcy Court and the Ohio
District Court found that the Injunction was 'essential' to the viability of the
business operations of the Company and to the successful implementation of the
Plan. Notwithstanding that the Bankruptcy Court and Ohio District Court
determined that they had authority to issue the Injunction, it is possible that
the Injunction could be dissolved in connection with the Co-Defendants' appeals
discussed above or a later challenge.
The Bankruptcy Court and Ohio District Court entered the Injunction
pursuant to Section 524(g) of the Bankruptcy Code. Section 524(g) of the
Bankruptcy Code was enacted by Congress in 1994 to provide a statutory
safe-harbor for asbestos manufacturing companies faced with numerous asbestos-
related personal injury claims. Section 524(g) grants bankruptcy courts express
statutory authority to issue injunctions that prohibit present and future
asbestos claimants from suing a reorganized debtor; provided that a trust is
established and funded to pay asbestos-related claims through procedures that
reasonably assure that claimants with similar injuries will receive similar
payments and other specific statutory requirements are satisfied.
Under Section 524(g), if the injunction is issued or affirmed by a district
court with jurisdiction over the reorganization, the injunction will be
permanent and not subject to modification by any court once the injunction
becomes final and nonappealable. In confirming the Plan and issuing the
Injunction, the Bankruptcy Court and Ohio District Court determined that the
Trust and the PD Trust each satisfied the requirements of Section 524(g) and
that they had jurisdiction to issue the Injunction under both Section 524(g) of
the Bankruptcy Code and their more general powers under the Bankruptcy Code to
issue orders that are necessary or appropriate in bankruptcy cases. The Order
has not yet become final, however, due to the Co-Defendants' appeal to the Sixth
Circuit discussed above.
While Section 524(g) specifically addresses trusts created to resolve
asbestos-related litigation and injunctions issued in connection therewith, it
does not specifically address whether an injunction directing claims to a trust
that will pay both asbestos-related and non-asbestos-related claims, as in this
case, is protected under Section 524(g). While there is a risk that the
Injunction would not apply to future lead-related claimants because lead-related
claims are not addressed in Section 524(g), the Company believes that the
Injunction would be upheld and enforced against lead-related claimants if
challenged. That belief is based on the fact that the Bankruptcy Court and Ohio
District Court, in confirming the Plan and entering the Injunction, specifically
ruled that Section 524(g) does not prohibit channeling of non-asbestos related
claims along with asbestos-related claims. In the event that Section 524(g) does
not operate to protect the Injunction's channeling of lead-related claims, such
channeling could be upheld as a necessary or appropriate order under Section
105(a) of the Bankruptcy Code. Although the filing of future lead-related
lawsuits cannot be predicted, the Company believes that this risk is limited
because to date, only approximately 125 lead-related claims have been asserted
against the Eagle-Picher Group (as compared to the tens of thousands of
asbestos-related claims asserted against the Eagle-Picher Group).
On and shortly after the Consummation Date, the Eagle-Picher Group made
distributions (the 'Initial Distribution') under the Plan totaling approximately
$800 million in cash, common stock and debt securities (including the
approximately $730 million contributed to the Trust, $3.0 million to the PD
Trust escrow and the remainder in connection with various other allowed claims
including the environmental claims described below). Final distributions under
the Plan will not be made until all remaining unresolved claims (other than
asbestos-related and lead-related claims) are resolved. Approximately twelve
unresolved claims remain (seven of which are subject to the Liberty Mutual
Settlement discussed below, three of which relate to environmental liability
claims discussed below and the others are product liability claims in connection
with products manufactured prior to the filing of the bankruptcy petitions). As
of February 28, 1998, the Company has recorded a reserve on the Company's
balance sheet in the amount of approximately $13.5 million for the payment of
such claims, as well as any other allowed or resolved claims that were not paid
in the Initial Distribution, and administrative expenses (the 'Final
Distribution Reserve'). Although there can be no assurance as to the amount
required to resolve the remaining claims, the Company expects those claims,
together with any other claims not paid in the Initial Distribution, and
administrative expenses, to be resolved for an amount not in excess of the Final
Distribution Reserve.
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On February 12, 1997, the Eagle-Picher Group commenced an adversary
proceeding in the Bankruptcy Court to obtain approval of a settlement agreement
between the Eagle-Picher Group and the Liberty Mutual Insurance Company and
certain of its affiliates (together, 'Liberty Mutual'), a provider of the
Eagle-Picher Group's primary insurance coverage, with respect to disputed
coverage claims that had been asserted by the Eagle-Picher Group against Liberty
Mutual and by Liberty Mutual against the Eagle-Picher Group (the 'Liberty Mutual
Settlement'). The Bankruptcy Court has not yet made any ruling in connection
with the Liberty Mutual Settlement. Pursuant to the Liberty Mutual Settlement,
upon an order of approval of the Bankruptcy Court becoming final, and subject to
certain conditions, including a permanent injunction against all other parties
that might claim an interest in specified Liberty Mutual policies from taking
any action or asserting any claim against such Liberty Mutual policies, Liberty
Mutual would be required to remit to the Company approximately $13.8 million.
The Company believes that the Liberty Mutual Settlement is fair and equitable,
and, together with the other members of the Eagle-Picher Group, intends to move
in the Bankruptcy Court for approval of the Liberty Mutual Settlement.
Although a bankruptcy plan of reorganization generally serves to resolve
all claims that arose prior to the bankruptcy proceedings, courts in a number of
cases have limited the types of environmental obligations that can be discharged
by bankruptcy (concluding, for example, that an order to conduct an
environmental clean-up of a site may not be a 'claim' or that an environmental
claim did not 'arise' before the bankruptcy). The Eagle-Picher Group has entered
into the Environmental Settlement, discussed below, which is intended to relieve
the Eagle-Picher Group of the burden of defending against certain claims
asserted under Environmental Laws relating to conditions occurring prior to the
date of the bankruptcy petition and governs certain environmentally related
claims that may be asserted against the Company or the Eagle-Picher Group after
the Consummation Date relating to conditions occurring prior to the date of the
bankruptcy petition. See ' -- Environmental Matters.' Nevertheless, due to the
limitations on the types of environmental obligations that can be discharged by
bankruptcy, the Eagle-Picher Group may have obligations relating to historical
noncompliance with environmental laws with respect to sites owned by the Company
as of the Confirmation Date that were not asserted in the bankruptcy
proceedings. See ' -- Environmental Matters.'
If, regardless of the settlements, decisions, proceedings and legislation
discussed herein, the Order were to be vacated, modified or restricted in
applicability in a way that permits a substantial number of claims to be
asserted against the Company, the successful assertion of such claims would
materially adversely effect the Company's financial condition, results of
operations or cash flows and could render the Company insolvent.
ENVIRONMENTAL MATTERS
Like companies involved in similar manufacturing businesses, the Company's
operations and properties are subject to extensive Environmental Laws. The Clean
Air Act and Clean Water Act, each as amended, impose stringent standards on air
emissions and water discharges, respectively. Under the Resource Conservation
and Recovery Act, as amended ('RCRA'), a facility that generates hazardous
wastes must manage those wastes in accordance with strict standards, and a
facility that treats, stores or disposes of hazardous waste on-site may be
liable for corrective action costs. A facility that holds a RCRA permit may have
to incur costs relating to the closure of certain 'hazardous' or 'solid' waste
management units. Under CERCLA and similar state laws, an owner or operator of
property at which releases of hazardous substances have occurred, or the
generator of hazardous substances disposed of offsite, may be jointly and
severally liable for costs of investigation and remediation of any resulting
contamination and related natural resource damages, regardless of fault. Failure
to comply with such Environmental Laws, which are frequently amended, can lead
to the imposition of civil or criminal penalties, injunctive relief and denial
or loss of, or imposition of significant restrictions on, environmental permits.
In addition, the Company could be subject to suit by third parties in connection
with violations of or liability under Environmental Laws.
The Company has established a number of programs to facilitate compliance
with Environmental Laws. In addition, from time to time, the Company has
undertaken remedial activities or incurred compliance costs at or around the
Company's operations or former operations, both voluntarily and as a
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result of federal and state agency orders, permit requirements or other notices.
Further, from time to time the Company receives notice of liability or potential
liability under CERCLA or analogous state laws in connection with the disposal
of materials from the Company's operations. It is also possible that there are
areas in which the Company's facilities have not been, are not currently, or may
in the future not be, in compliance with Environmental Laws.
For the last three fiscal years, the Company's average capital expenditures
and operating expenses (including expenses for remedial activities) for
environmental matters were $1.1 million and $7.3 million per year, respectively
(excluding depreciation). Such amounts do not include payments made by the
Company under the Plan to settle or otherwise resolve certain environmental
claims asserted in the bankruptcy proceedings. See ' -- Environmental
Settlement.' The Company estimates that capital expenditures and operating
expenses (including expenses for remedial activities) for environmental matters
will be approximately $1.9 million and $8.3 million, respectively, for fiscal
year 1998 and approximately $1.2 million and $9.2 million, respectively, for
fiscal year 1999. However, because Environmental Laws have historically become
more stringent, costs and expenses relating to environmental control and
compliance may increase in the future. In addition, the Company may have to
incur additional capital expenditures and compliance costs (which it is unable
to estimate at this time) in connection with the remedial activities discussed
below. Accordingly, there can be no assurance that costs of compliance with
existing and future Environmental Laws will not exceed current estimates and
will not have a material adverse effect on the Company's financial condition,
results of operations or cash flows.
The Merger Agreement provides for indemnification for costs and expenses
from certain environmental exposures in connection with the operations of the
Company in excess of agreed upon thresholds for specific properties, which
totals approximately $24 million in the aggregate. The indemnity applies only to
certain environmental claims arising out of the business or operations of the
Company prior to the Closing of which the Trust is notified within three years
after the Closing. The Trust's indemnity obligations are subject to a deductible
of $10.0 million and the Trust is only obligated to pay $50.0 million above the
deductible for all indemnity claims, including those relating to environmental
matters. In addition, indemnification is unavailable in connection with certain
sites specified in the Merger Agreement and, in connection with other sites, may
be asserted only for the amount by which such claim exceeds the Company's
projected remediation or compliance costs. The Company has recorded a reserve as
of November 30, 1997 of approximately $6.1 million in connection with
environmental matters, and believes such reserves to be adequate.
Certain Compliance and Remedial Activities
Joplin, Missouri and Colorado Springs, Colorado. The Company is undertaking
closure and corrective actions under RCRA at two of its permitted hazardous
waste facilities. At the Joplin, Missouri, facility, consistent with the
requirements of its RCRA permit, the Company is investigating the nature and
extent of contamination from two closed hazardous waste impoundments and over
100 former solid waste management units formerly in use during the 130-year
operating history of this property. The Company's investigation has identified
areas of soil and groundwater contamination or suspected contamination, certain
of which likely will require the Company to undertake remedial activities.
Following completion of its investigation, the Company, in conjunction with
federal and state regulators, will determine what, if any, corrective actions
are appropriate at this property. At the Colorado Springs, Colorado, facility,
the closure of four former hazardous waste impoundments is being completed.
Materials formerly stored in the impoundments have contaminated groundwater and
soil at and around the facility. A groundwater remediation system was placed in
service in 1995 and continues in operation. It is anticipated that corrective
actions for soils will be implemented in 1998. The Company does not believe that
it will be assessed any penalty in connection with the remediation of these
sites, although there can be no assurance that one will not be imposed.
Galena, Kansas. The Company owned and operated a lead and zinc smelting
facility, which was dismantled in 1982, on the Galena property. The Galena
property is located within the Tri-State mining district, formerly one of the
largest lead and zinc fields in the world. The Tri-State mining district was
actively worked from the mid-1800s until the 1960s and, as a result, soil,
groundwater and surface waters
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have been significantly and adversely impacted. In the 1980s and early 1990s,
the United States Environmental Protection Agency (the 'US EPA') addressed both
surface contamination (including residential soil contamination) and groundwater
contamination issues in the Tri-State mining district in the immediate vicinity
of the Galena property. Under the Environmental Settlement (as defined below),
while the Company resolved all of its other liability under CERCLA associated
with the Tri-State mining district, it specifically retained liability for the
Galena property. Environmental impacts are likely at the Galena property as a
result of the former smelter operation and from historic materials management
practices on the Galena property. US EPA has not required remediation of the
Galena property and the Company has no current expenses in connection with
remedial activities at this property. However, the Company anticipates that
certain investigations and remediation may be required at some point in the
future. The Company does not believe that it will be assessed any penalty in
connection with the remediation of this site, although there can be no assurance
that one will not be imposed.
The Company is undertaking other remedial actions at a number of its
facilities and properties. The Company does not anticipate that such expenses,
including expenses in connection with the specific sites discussed above, will
have a material adverse effect on the Company's financial condition, results of
operations or cash flows. However, there can be no assurance that, in the
future, the Company's expenditures in connection with remedial activities will
not exceed current expenditures and will not have a material adverse effect on
the Company's financial condition, results of operations or cash flows.
In addition, in connection with certain sales of its assets, including the
Plastics and Transicoil divisions sold in 1997, the Company has agreed to
undertake remedial actions and/or to indemnify the respective purchasers of
particular assets for certain liabilities under the Environmental Laws relating
to that asset's operations or activities prior to the sale. The Company believes
that claims under these indemnity provisions will not have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.
Environmental Settlement
During the pendency of the bankruptcy proceedings, the Eagle-Picher Group
entered into a settlement agreement (the 'Environmental Settlement') with the US
EPA, the United States Department of the Interior and the states of Arizona,
Michigan and Oklahoma (together, the 'Settling Parties'), addressing all known
and unknown environmentally-related claims that were or could have been asserted
by those entities against the Eagle-Picher Group in the bankruptcy proceeding.
The Environmental Settlement was approved by the Bankruptcy Court on June 6,
1996, affirmed by the Ohio District Court on July 14, 1997, and became final 30
days later. The Environmental Settlement resolved the majority of the
approximately 1,100 environmental liability-related claims filed against the
Eagle-Picher Group in the bankruptcy proceedings by allowing the Settling
Parties general unsecured claims totaling approximately $43.8 million (pursuant
to the Plan, general unsecured claims are paid at 37% of the allowed amount).
All environmental claims filed in the bankruptcy proceedings not subject to the
Environmental Settlement were either disallowed by the Bankruptcy Court or
resolved as general unsecured claims, with the exception of three claims, none
of which the Company believes is material and all of which will be paid, if at
all, from the Final Distribution Reserve. In addition, the Environmental
Settlement provides that any additional claims by the Settling Parties against
the Eagle-Picher Group in connection with pre-petition activities at any site
not owned by the Company (the 'Additional Sites'), shall be resolved as if they
had been asserted during the bankruptcy proceedings. Accordingly, if any member
of the Eagle-Picher Group is found liable or settles any Additional Site claim,
such member's liability is limited to 37% of the liability or settlement amount.
The Environmental Settlement also provides that any liability, whether
alleged to arise before or after the Consummation Date, relating to a site owned
by the Eagle-Picher Group on or after the Consummation Date (the 'Owned Sites'),
or relating to post-petition conduct by the Eagle-Picher Group, is not
discharged in the bankruptcy proceedings, and will be resolved as if the
Eagle-Picher Group had never filed for reorganization. Accordingly, the
Eagle-Picher Group is responsible for 100% of any liability (including, if
required, the performance of remedial activities) or settlement amount in
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connection with Owned Sites or post-petition conduct. See ' -- Certain
Compliance and Remedial Activities.'
Additional Sites. The Company has received notice from one or more of the
Settling Parties that the Company may have liability in connection with 19
Additional Sites. The Company may be insured for a portion of these claims. The
Company believes that its potential liability at 16 of these Additional Sites is
not material to the Company's financial condition, results of operations or cash
flows. The remaining three Additional Sites may require significant expenditures
by the Company: the Henryetta Smelter Site at Henryetta, Oklahoma, the RSR
Smelter Site at Dallas, Texas, and the Witter Drum Site at Asbury, Missouri. Of
the $6.1 million total reserves recorded by the Company in connection with
environmental matters, $1.2 million is for its anticipated costs in resolving
these three claims:
Henryetta Smelter Site. The Company received a notice from the US EPA
in 1997, alleging liability for remediation expenses at the site of a
former zinc smelting facility owned and operated by the Company at
Henryetta, Oklahoma, and for the removal and disposal from surrounding
residential locations of contaminated soil and gravel that originated from
the facility and from other companies operating in the area. The Company
operated the facility for approximately 50 years, until it was shut down in
1968. The US EPA performed remedial activities at the site at a cost of
approximately $4 million to $5 million. The Company expects to settle this
claim with the US EPA for some portion of that amount.
RSR Smelter Site. The Company received a notice from the US EPA in
1996, alleging that it may be a Potentially Responsible Party ('PRP')
regarding liability for remediation expenses at a secondary lead smelting
facility in Dallas, Texas. The Company allegedly leased the facility, which
was in operation until in or about 1984, for a period of at least one year
in the early 1950s. The US EPA has conducted and continues to conduct
extensive remedial activities at this site, and the US EPA's total expenses
may amount to $60 million or more. The Company is one of more than 1,000
PRPs identified by the US EPA in connection with this site and is not
identified by the US EPA as one of the 14 significant PRPs. However, the
Company believes that it may be required to make some expenditure to
resolve its potential liability for remediation expenses in connection with
this site.
Witter Drum Site. The Company received a notice from the US EPA in
1997, alleging liability in connection with a third-party facility that had
provided drum reclamation services for the Company. The US EPA has
investigated the site and estimates that approximately $400,000 in remedial
activities will be undertaken at this site. The Company expects to settle
this claim with the US EPA for some portion of that amount.
The Company does not expect that its total costs associated with these
sites will have a material adverse effect on the Company's financial condition,
results of operations or cash flows. Because each site is an Additional Site
under the Environmental Settlement, the Company will be required to pay only 37%
of any amount for which it may be found liable or settle the claim.
While the Company does not believe, based on current information and taking
into account reserves established for environmental matters, that costs
associated with compliance with and remediation under Environmental Laws will
have a material adverse effect on its financial condition, results of operations
or cash flows, the Environmental Laws under which the Company's facilities
operate are numerous, complicated and often ambiguous and historically have
become increasingly more stringent. In addition, costs related to remediation of
Company-owned sites may exceed current estimates. Accordingly, there can be no
assurance that future events, such as changes in existing laws, the promulgation
of new laws or the development of new facts or conditions, will not cause the
Company to incur substantial additional expenditures or that any such additional
expenditures will not have a material adverse effect on the Company's financial
condition, results of operations, or cash flows.
LEGAL PROCEEDINGS
On January 25, 1996, Richard Darrell Peoples, a former employee of the
Company, filed a Qui Tam suit under seal in United States District Court for the
Western District of Missouri (the 'Missouri Court'). A Qui Tam suit is a lawsuit
brought by a private individual pursuant to federal statute,
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allegedly on behalf of the U.S. Government. The U.S. Government, which has the
opportunity to intervene in, and take control of, a Qui Tam suit, has declined
to intervene or take control of the Qui Tam suit filed against the Company. The
Company became aware of the suit on October 20, 1997, when it was served on the
Company, after it had been unsealed. The suit involves allegations of
irregularities in expense accounts and testing procedures in connection with
certain U.S. Government contracts. The allegations are substantially the same as
allegations made by the former employee, and investigated by outside counsel for
the Company, prior to the filing of the Qui Tam suit. Outside counsel's
investigation found no evidence to support any of the employee's allegations,
except for some inconsequential expense account mistakes. The Company, which
believes that the U.S. Government did not incur any expense as a result of the
mistakes, reported to the U.S. Government the employee's allegations and the
results of outside counsel's investigation. The employee also initiated a
different action against the Company in 1996 for wrongful termination, in which
he alleged many of the same acts complained of in the Qui Tam suit. That action
was dismissed with prejudice by the Missouri Court in October 1996. The Company
intends to contest this suit vigorously. The Company does not believe that
resolution of this suit will have a material adverse effect on the Company's
financial condition, results of operations or cash flows.
The Company is also involved in various other proceedings incidental to the
ordinary conduct of its business. The Company believes that none of these other
proceedings will have a material adverse effect on the Company's financial
condition, results of operations or cash flows.
EMPLOYEES AND EMPLOYEE RELATIONS
As of November 30, 1997, the Company employed 1,825 salaried employees and
4,871 hourly employees. Following is a breakdown of foreign and United States
employees:
<TABLE>
<CAPTION>
SALARIED NON-SALARIED TOTAL
-------- ------------ -----
<S> <C> <C> <C>
United States employees....................................... 1,581 4,175 5,756
Foreign employees............................................. 244 696 940
Total employees..................................... 1,825 4,871 6,696
</TABLE>
Approximately 20.5% of the Company's non-salaried employees (approximately
14.9% of the Company's total employees) are represented by six different labor
unions under seven separate labor contracts. The International Union of
Operating Engineers Local Union No. 351 represents the largest bargaining unit
with approximately 400 employees. Another significant affiliation is the United
Steelworkers of America, Local No. 812, representing approximately 335 employees
at two facilities. Labor negotiations are conducted on a plant-by-plant basis
with two to three of the outstanding contracts renegotiated in any one year.
In the last five years the Company has had no work stoppages due to
strikes. However, there can be no assurance that there will not be work
stoppages due to strikes in the future, or that the Company would be able to
continue operating at affected facilities in the event of any work stoppage or
union dispute in the future.
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PROPERTIES
The principal fixed assets of the Company consist of its manufacturing,
processing and storage facilities and its transportation and plant vehicles. As
of November 30, 1997, properties, facilities and equipment (net of depreciation)
represented approximately 33% of the Company's total assets, as reflected in its
consolidated balance sheet. The following chart sets forth selected information
regarding the Company's manufacturing and processing facilities:
<TABLE>
<CAPTION>
DESCRIPTION OF
BUSINESS GROUP LOCATION PROPERTY INTEREST
- --------------------------------------- ------------------------------------------------------ -----------------
<S> <C> <C>
AUTOMOTIVE
Domestic Ann Arbor, Michigan leased
Blacksburg, Virginia (2 properties) owned
Brighton, Michigan leased
Hillsdale, Michigan (6 properties)(1) owned
Hamilton, Indiana owned
Inkster, Michigan owned
Jonesville, Michigan owned
Kalkaska, Michigan leased(2)
Leesburg, Florida owned
Manchester, Tennessee leased(2)
Norwich, Connecticut owned
Paris, Illinois owned(3)
Pine Bluff, Arkansas owned
Sidney, Ohio (2 properties) owned
Stratford, Connecticut owned
Vassar, Michigan leased
International Market Harborough, England owned
Ohringen, Germany owned
San Luis Potosi, Mexico owned
Soria, Spain owned
Tamworth, England owned
MACHINERY
Domestic Colorado Springs, Colorado owned
Colorado Springs, Colorado (2 properties) leased
Galena, Kansas owned
Grove, Oklahoma owned
Hamilton, Ohio leased
Harrisonville, Missouri owned
Joplin, Missouri (6 properties) owned
Joplin, Missouri (2 properties) leased
Lenexa, Kansas owned
Lubbock, Texas owned
Seneca, Missouri owned
Sharonville, Ohio owned
Socorro, New Mexico(1) leased
Stella, Missouri owned
International Acuna, Coahuila, Mexico owned
Rothenbach, Germany leased(3)
INDUSTRIAL(4)
Domestic Clark Station, Nevada owned
Lovelock, Nevada owned
Miami, Oklahoma (2 properties) owned
Miami, Oklahoma (3 properties) leased
Quapaw, Oklahoma (2 properties) owned
Vale, Oregon leased(2)
International Kyoto, Japan leased(3)
</TABLE>
- ------------
(1) There is little, if any, activity at this time at the Socorro, New Mexico
property and two of the Hillsdale, Michigan properties.
(2) The Company will become owner of each property upon payment in full of all
existing obligations under the respective IRB Obligations (as defined
herein) in connection with such property. See 'Description of Industrial
Revenue Bonds.'
(3) These properties are owned or leased by certain of the Company's joint
ventures. Accordingly, the Company has a 45% interest in the Paris, Illinois
property through the Eagle-Picher-Boge, L.L.C. joint venture; a 35% interest
in the Kyoto, Japan property though the Yamanaka EP Corporation joint
venture and a 45% interest in the Rothenbach, Germany property through the
Diehl & Eagle-Picher GmbH joint venture.
(4) In addition, the Company's Minerals division has mining locations and
numerous claims in Nevada, Oregon and California (discussed below), leases
office space in Reno, Nevada and leases 14 warehouses in the United States
and Canada.
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The Company owns or leases additional office space, including sales offices
in Europe and Asia, and warehouse space for certain of its operations. The
Company's properties are adequate and suitable for the business of the Company,
and substantially all of its buildings have been well maintained and are in
sound operating condition and regular use.
The Company's corporate headquarters are located in approximately 19,420
square feet of leased office space in the Chiquita Center building in
Cincinnati, Ohio. The office space is leased from YCP Cincinnati, L.P. pursuant
to a six-year lease, with the initial term expiring February 29, 2004. The lease
provides renewal options for two additional periods of five years each. The
Company believes that its existing and planned facilities are adequate for its
current needs.
Mining. The Industrial Group's Minerals division owns and leases
diatomaceous earth and perlite mining locations as well as numerous claims in
Nevada, Oregon and California (collectively, 'mining properties'). The Company's
owned and leased mining properties, including those not currently being mined,
comprise a total of approximately 7,000 acres in Storey, Lyon, Pershing, and
Churchill Counties in Nevada and 3,600 acres in Malheur and Harney Counties in
Oregon, as well as rights on 1,040 acres not currently being mined in Siskiyou
County in California. The Company continually evaluates potential mining
properties, and additional mining properties may be acquired in the future. The
Minerals division extracts diatomaceous earth and perlite through open-pit
mining using bulldozers and wheel tractor scrapers. The extracted materials are
carried by truck to separate processing facilities. A total of approximately
506,000 tons of diatomaceous earth and perlite were extracted from the Company's
mining properties in Nevada and Oregon during Fiscal 1997. On average, the
Company has extracted a total of approximately 402,000 tons of diatomaceous
earth and perlite from its Nevada and Oregon properties each year for the past
three years. As ore deposits are depleted, the Company reclaims the land in
accordance with reclamation plans approved by the relevant federal, state and
local regulators. The following mining properties are of major significance to
the Company's mining operations:
Nevada. The Company's diatomaceous earth mining operations in Nevada
commenced more than 50 years ago in Storey County. The Company commenced
perlite mining operations in Churchill County in 1993. The Company
extracted a total of approximately 380,000 tons of diatomaceous earth and
perlite from its Nevada mining properties in Fiscal 1997 and, on average,
extracted a total of approximately 306,000 tons of diatomaceous earth and
perlite from its Nevada mining properties each year for the past three
years, or approximately 76% of the Company's total diatomaceous earth and
perlite production (and including 100% of its perlite production).
Approximately 265 acres in Storey, where active mining activities commenced
over 50 years ago, and approximately 62 acres in the Lyon/Churchill area
are actively being mined by the Company for diatomaceous earth.
Diatomaceous earth from the Storey, Churchill and Lyon mining properties is
processed at the Clark Station, Nevada facility. The Company believes its
diatomaceous earth reserves in Storey, Churchill and Lyon, including mining
properties not actively being mined, to be in excess of 40 years at current
levels of extraction based upon estimates prepared by its mining and
exploration personnel. Diatomaceous earth extractions from the Pershing
mining properties, which commenced more than 40 years ago, are processed at
the Lovelock, Nevada facility. Approximately 975 acres are actively being
mined for diatomaceous earth in Pershing. The Company believes its
diatomaceous earth reserves in Pershing, including mining properties not
actively being mined, to be in excess of 15 years at the current level of
extraction based upon estimates prepared by its mining and exploration
personnel. Beginning in 1993, the Company has actively mined approximately
25 acres in Churchill for perlite, which is processed at the Lovelock,
Nevada facility. The Company believes its perlite reserves in Churchill,
including mining properties not actively being mined, to be in excess of 50
years at the current level of extraction based upon estimates prepared by
its mining and exploration personnel.
Oregon. The Company commenced mining diatomaceous earth in Oregon
approximately 13 years ago at its mining properties in Harney and Malheur
Counties. Approximately 88 acres and 80 acres, respectively, are actively
being mined in Harney and Malheur; diatomaceous earth extracted from these
mines is processed at the Company's Vale, Oregon facility. The Company
extracted approximately 126,000 tons of diatomaceous earth from the Harney
and Malheur mining properties
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during Fiscal Year 1997 and, on average, has extracted approximately 96,000
tons of diatomaceous earth each year for the past three years from these
mining properties, or approximately 24% of the Company's total diatomaceous
earth production. The Company believes its diatomaceous earth reserves in
Harney and Malheur, including mining properties not actively being mined,
to be in excess of 75 years at the current level of extraction based upon
estimates prepared by its mining and exploration personnel.
Substantially all of the Company's owned properties and assets are pledged
as collateral under the New Credit Agreement. See 'Description of New Credit
Agreement.'
CHANGE IN INDEPENDENT AUDITORS
Following the Company's emergence from bankruptcy in November 1996, the
Company appointed Deloitte & Touche LLP to replace KPMG Peat Marwick LLP as the
independent auditors for the Company. The Company's Board of Directors approved
the dismissal of KPMG Peat Marwick LLP and their replacement with Deloitte &
Touche LLP as the new independent auditors upon recommendation of the Company's
Audit committee. The Company did not consult with Deloitte & Touche LLP
regarding matters of accounting principles, practices or financial statement
disclosure prior to the firm being engaged as auditors. In connection with the
audits of the Company's financial statements for each of the two fiscal years
preceding the change in accountants, there were no disagreements with KPMG Peat
Marwick LLP on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of KPMG Peat Marwick LLP, would have caused KPMG Peat Marwick
LLP to make reference to the matter in their report on the consolidated
financial statements for such years. KPMG Peat Marwick LLP's opinion was
qualified as of and for the year ended November 30, 1995, in that the
consolidated financial statements were prepared assuming the Company would
continue as a going concern. The filing under Chapter 11 of the Bankruptcy Code
and the uncertainty associated with the Company's sale of asbestos products and
certain other litigation, raised substantial doubt about the Company's ability
to continue as a going concern. KPMG Peat Marwick LLP's opinion was unqualified
as of and for the year ended November 30, 1996, except for consistency in the
application of accounting principles as a result of the Company's change in its
method of computing LIFO for certain inventories.
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MANAGEMENT
THE COMPANY
The following table sets forth the name, age and position with the Company
of the directors and executive officers of the Company as of the consummation of
the Acquisition. Directors will hold their positions until the annual meeting of
the stockholders at which their term expires or until their respective
successors are elected and qualified. Executive officers will hold their
positions until the annual meeting of the Board of Directors or until their
respective successors are elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ ---- ----------------------------------------------------------
<S> <C> <C>
Joel P. Wyler....................... 48 Chairman of the Board
Thomas E. Petry..................... 58 Director
Andries Ruijssenaars................ 55 Director, President and Chief Executive Officer
David N. Hall....................... 58 Senior Vice President - Finance
Wayne R. Wickens.................... 51 Senior Vice President - Automotive
</TABLE>
Mr. Wyler became a Director of the Company upon consummation of the
Acquisition. Mr. Wyler has been the Chairman of the Board of Directors of
Granaria Holdings since 1982.
Mr. Petry has been a Director of the Company since 1981. Following
consummation of the Acquisition, Mr. Petry resigned as Chairman of the Board of
Directors, a position he held since 1989, and as Chief Executive Officer, a
position he held since 1982. Mr. Petry was first employed by the Company in 1968
as assistant to the Treasurer and subsequently served as Assistant Treasurer;
Treasurer; Vice President and Treasurer; President of the Akron Standard
Division; and Group Vice President. Mr. Petry was elected a Director, President
and Chief Operating Officer of the Company in 1981, and President and Chief
Executive Officer in 1982. He served as President from 1981-89 and from 1992-94.
Mr. Petry is also a director of Cinergy Corp., Star Banc Corp., Union Central
Life Insurance Co., Insilco Corp. and The Wm. Powell Company.
Upon consummation of the Acquisition, Mr. Ruijssenaars became Chief
Executive Officer and continued as President and a Director of the Company,
positions he has held since 1994. Prior to the Acquisition, Mr. Ruijssenaars was
President and Chief Operating Officer of the Company from December 1994 until
1998 and Senior Vice President of the Company from 1989 until December 1994. Mr.
Ruijssenaars was first employed by the Company in 1980 as General Manager of
Eagle-Picher Industries GmbH in Ohringen, Germany, and has also served as
Executive Vice President and then President of the Company's Ohio Rubber Company
division.
Mr. Hall joined the Company as Treasurer in 1977 and became Vice President
and Treasurer in 1979. He has been Senior Vice President -- Finance since 1987.
Mr. Wickens has been Senior Vice President -- Automotive of the Company
since December 1994. From 1990 until December 1994, he was Division President of
the Company's Hillsdale Tool & Manufacturing Co. Mr. Wickens joined the Company
in 1976 as a management trainee with the Company's former Fabricon Automotive
division, and was promoted to Plant Manager, Vice President and then President
of Fabricon Automotive. Subsequently, Mr. Wickens served as President of the
Wolverine Gasket division and then as Vice President of the Automotive Group.
PARENT
The following table sets forth the name, age and position with Parent of
the directors and executive officers of Parent as of the consummation of the
Acquisition. Directors will hold their positions until the annual meeting of the
stockholders at which time their terms expire or until their respective
successors are elected and qualified. Executive officers will hold their
positions until the annual meeting of the Board of Directors or until their
respective successors are elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ ---- ----------------------------------------------------------
<S> <C> <C>
Joel P. Wyler....................... 48 Chairman of the Board
Thomas E. Petry..................... 58 Director
Andries Ruijssenaars................ 55 Director, President and Chief Executive Officer
David N. Hall....................... 58 Senior Vice President - Finance
Wayne R. Wickens.................... 51 Senior Vice President - Automotive
</TABLE>
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation for
services in all capacities to the Company for the years ended November 30, 1997,
1996 and 1995, of those persons who (i) served during the fiscal year ended
November 30, 1997, as the Chief Executive Officer of the Company and (ii) were,
at November 30, 1997, the other five most highly compensated officers of the
Company who earned more than $100,000 in salary and bonus in fiscal 1997
(collectively, the 'Named Executive Officers').
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
YEAR COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION ENDED SALARY ($) BONUS ($) ($)(1) ($)(2)
- ----------------------------------------------- --------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas E. Petry................................ 11/30/97 $ 625,000 $ 278,000 $232,737 $260,103
Chairman and Chief Executive 11/30/96 625,000 239,000 218,919 245,073
Officer 11/30/95 575,000 244,000 255,296 285,611
Andries Ruijssenaars........................... 11/30/97 525,000 205,000 179,244 206,206
President and Chief Operating 11/30/96 425,000 160,000 174,171 200,081
Officer 11/30/95 390,000 145,000 87,298 102,571
David N. Hall.................................. 11/30/97 375,000 126,000 166,629 188,163
Senior Vice President -- Finance 11/30/96 360,000 107,000 146,980 165,986
11/30/95 345,000 110,000 120,284 136,415
Wayne R. Wickens............................... 11/30/97 325,000 109,000 77,942 91,919
Senior Vice President -- Automotive 11/30/96 295,000 72,000 99,564 116,357
11/30/95 280,000 85,000 24,377 31,109
James A. Ralston............................... 11/30/97 240,000 67,000 41,069 49,762
Vice President, General 11/30/96 230,000 86,000 40,106 48,966
Counsel and Secretary 11/30/95 215,000 58,000 11,475 18,292
Carroll D. Curless............................. 11/30/97 240,000 67,000 116,456 132,211
Vice President and Controller 11/30/96 230,000 86,000 78,715 91,470
11/30/95 215,000 56,000 50,616 60,304
</TABLE>
- ------------
(1) This column includes nothing for perquisites since in no case did
perquisites exceed the reporting thresholds (the lesser of 10% of salary
plus bonuses or $50,000), but includes amounts for the payment of taxes on
purchases of annuities under the Supplemental Executive Retirement Plan (as
defined herein).
(2) All other compensation is made up entirely of the cost of annuity under the
Supplemental Executive Retirement Plan and the Company's contributions to
the Eagle-Picher Salaried 401(k) Plan. See ' -- Retirement Benefits.'
EXECUTIVE STOCK OPTIONS
On the Consummation Date, all stock option plans and any unexercised or
unexercisable stock options were terminated. The Company had no other benefit
plans calling for the issuance of stock by the Company. Accordingly, none of the
Named Executive Officers had any unexercised stock options or SARS as of
November 30, 1997. No options were issued by the Company and no options were
exercised by the Named Executive Officers during the fiscal year ended November
30, 1997.
RETIREMENT BENEFITS
The following table shows the Named Executive Officers' Fiscal 1997
compensation relating to the cost of the annuity under the Supplemental
Executive Retirement Plan and the Company's contributions to the Eagle-Picher
Salaried 401(k) Plan.
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<PAGE>
<TABLE>
<CAPTION>
COST OF
ANNUITY
UNDER COMPANY
SUPPLEMENTAL CONTRIBUTIONS
FISCAL EXECUTIVE TO EAGLE-PICHER
YEAR RETIREMENT SALARIED 401(K) TOTAL
ENDED PLAN ($) PLAN ($) ($)
--------- ------------ --------------- --------
<S> <C> <C> <C> <C>
Thomas E. Petry................................. 11/30/97 $255,353 $ 4,750 $260,103
11/30/96 240,323 4,750 245,073
11/30/95 280,991 4,620 285,611
Andries Ruijssenaars............................ 11/30/97 201,456 4,750 206,206
11/30/96 195,331 4,750 200,081
11/30/95 97,951 4,620 102,571
David N. Hall................................... 11/30/97 183,413 4,750 188,163
11/30/96 161,236 4,750 165,986
11/30/95 131,795 4,620 136,415
Wayne R. Wickens................................ 11/30/97 87,169 4,750 91,919
11/30/96 111,607 4,750 116,357
11/30/95 26,489 4,620 31,109
James A. Ralston................................ 11/30/97 45,012 4,750 49,762
11/30/96 44,216 4,750 48,966
11/30/95 13,672 4,620 18,292
Carroll D. Curless.............................. 11/30/97 127,461 4,750 132,211
11/30/96 86,720 4,750 91,470
11/30/95 55,684 4,620 60,304
</TABLE>
The following table shows the estimated total combined annual benefits to
the Named Executive Officers upon retirement at age 62 payable under Social
Security, the Salaried Plan (as defined herein), and the Supplemental Executive
Retirement Plan:
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
RENUMERATION 15 20 25 30 35
- ------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 250,000.................................. $ 90,000 $120,000 $150,000 $150,000 $150,000
300,000................................. 108,000 144,000 180,000 180,000 180,000
350,000................................. 126,000 168,000 210,000 210,000 210,000
400,000................................. 144,000 192,000 240,000 240,000 240,000
450,000................................. 162,000 216,000 270,000 270,000 270,000
500,000................................. 180,000 240,000 300,000 300,000 300,000
550,000................................. 198,000 264,000 330,000 330,000 330,000
600,000................................. 216,000 288,000 360,000 360,000 360,000
650,000................................. 234,000 312,000 390,000 390,000 390,000
700,000................................. 252,000 336,000 420,000 420,000 420,000
750,000................................. 270,000 360,000 450,000 450,000 450,000
800,000................................. 288,000 384,000 480,000 480,000 480,000
850,000................................. 306,000 408,000 510,000 510,000 510,000
900,000................................. 324,000 432,000 540,000 540,000 540,000
950,000................................. 342,000 456,000 570,000 570,000 570,000
1,000,000................................. 360,000 480,000 600,000 600,000 600,000
</TABLE>
The Eagle-Picher Salaried Plan (the 'Salaried Plan') is a non-contributory
defined benefit pension plan in which the Named Executive Officers are
participants. The Supplemental Executive Retirement Plan (the 'SERP' and,
together with the Salaried Plan, the 'Retirement Plans'), in which the Named
Executive Officers are also participants, provides retirement benefits in
addition to the benefits available under the Salaried Plan. The Retirement Plans
provide benefits after retirement based on the highest average monthly
compensation during five consecutive years of the last ten years preceding
retirement. For purposes of the Retirement Plans, compensation includes base
salary, bonuses, commissions, and severance payments; salary and bonus payments
that would be included in the Retirement Plans are as reported in the Summary
Compensation Table, and commissions or severance payments, if there had been
any, would have been included in that Table. The benefits shown by the
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<PAGE>
Pension Plan Table above include amounts payable under Social Security as well
as those payable under the Salaried Plan and the SERP. Benefits are computed on
the basis of straight-life annuity amounts.
The estimated credited years of service with the Company for the Named
Executive Officers at age 62 will be:
<TABLE>
<S> <C>
Thomas E. Petry................................................................ 33
David N. Hall.................................................................. 24
Andries Ruijssenaars........................................................... 24
Wayne R. Wickens............................................................... 32
James A. Ralston............................................................... 29
Carroll D. Curless............................................................. 36
</TABLE>
COMPENSATION OF DIRECTORS
The Company does not pay director retainers or attendance fees, or
committee retainers or attendance fees, to directors who are also employees of
the Company. During the 1997 Fiscal Year, until April 14, 1997, directors who
were not employees of the Company were paid an annual retainer of $24,000, a fee
of $1,000 for each Board meeting attended and a fee of $1,000 for each Board
committee meeting attended. In addition, Board committee members, other than
committee chairmen, were paid an annual retainer of $3,000 for each committee on
which they served; the chairman of each Board committee was paid an annual
retainer of $5,000. Effective April 14, 1997, directors who are not employees of
the Company are paid an annual retainer of $50,000, with no additional
attendance or committee membership fees. The Company intends to continue these
compensation policies for directors following the Acquisition.
Directors who were not also employees of the Company who retired with ten
or more years of service as members of the Board and who were elected or
appointed members of the Board prior to April 14, 1997, are paid an annual
advisory fee for life in the amount equal to the annual retainer paid to active
directors immediately prior to the time of their retirement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1997 Fiscal Year, until April 14, 1997, Daniel W. LeBlond
(Committee Chairman), Paul W. Christensen, V. Anderson Coombe and Roger L. Howe,
directors of the Company during that time, constituted the Stock
Option/Compensation Committee. Since May 28, 1997, Darius W. Gaskins (Committee
Chairman), Robert B. Steinberg and Will M. Storey, directors of the Company
until the Effective Date, constituted the Compensation Committee. None of the
members of the Compensation Committee or Stock Option/Compensation Committee
have ever been an employee of the Company or any of its subsidiaries.
During the 1997 Fiscal Year, Mr. Petry, Chairman and Chief Executive
Officer of the Company, served as a director and as a member of the compensation
committee of The Wm. Powell Company. During the 1997 Fiscal Year, Mr. Coombe, a
director of the Company until April 14, 1997, was Chairman of the Board of The
Wm. Powell Company.
INDEMNIFICATION PROVISIONS FOR OFFICERS AND DIRECTORS
Pursuant to Article 5 of the Company's Regulations, the Company will
indemnify its officers and directors to the fullest extent permitted by law
against all expenses, liability, loss or costs (including attorneys fees) in
connection with any action, lawsuit or other proceeding brought or threatened
against such officer or director by reason of the fact that he or she is or was
an officer or director of the Company. The Company has purchased directors and
officers liability insurance in favor of the Company and its officers and
directors covering up to $15.0 million in losses, including any indemnity
payment made by the Company to an officer or director, for a wrongful act of an
officer or director. In addition, under the Merger Agreement, Parent and the
Company have agreed to indemnify all pre-Effective Date officers and directors
of the Company, and to purchase directors and officers liability insurance in
their favor, for a period of six years after the Effective Date.
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<PAGE>
<PAGE>
EMPLOYMENT AGREEMENTS; SEVERANCE
The Company has entered into employment agreements (the 'Employment
Agreements') with each of the Named Executive Officers which became effective on
November 29, 1996 (the Consummation Date of the Company's Consolidated Plan of
Reorganization) and each of which was amended in August 1997. The purpose of the
employment agreements was to provide the Company with continuity of management
following its emergence from bankruptcy. Other than the description of the
duties of each Named Executive Officer, the Employment Agreements are
substantially identical in their terms. The Employment Agreements terminate on
the earlier of (i) the second anniversary of any change of control (as defined
in the Employment Agreements) occurring prior to December 31, 1998 or (ii) May
18, 1999. The consummation of the Acquisition constituted a change of control
under the Employment Agreements.
The Employment Agreements provide that each Named Executive Officer will
maintain his current duties and responsibilities and will not be relocated from
his current geographical location. The Employment Agreements provide for salary
continuation at the Named Executive Officer's then-current rate plus customary
annual increases and bonuses and discretionary bonuses, as determined by the
Board of Directors of the Company (as shown in the Summary Compensation Table,
above). In addition, the Employment Agreements provide that each Named Executive
Officer will participate in the Company's employee and executive benefit and
short-term and long-term incentive plans as may be in effect from time to time
(including retirement or pension plans, health plans, death or disability plans
and the STSP).
If the employment of a Named Executive Officer is terminated by the Company
for good Cause (defined as the Commission of (i) a felony or (ii) a fraud upon
the Company or willful failure to perform job duties in all material respects)
or by such Named Executive Officer without good reason (as defined below), the
Named Executive Officer will receive accrued and unpaid salary, payment in lieu
of unused vacation and accrued benefits, if any (including the right to receive
pension or retirement benefits in accordance with the Company's retirement and
pension benefit plans as set forth in ' -- Retirement Benefits') (all such
payments, including salary, the 'Accrued Benefits'). If the employment of a
Named Executive Officer is terminated due to death or long term disability, such
Named Executive Officer or his dependents or estate will receive, in addition to
the Accrued Benefits, certain continuing health care benefits for a period of 30
months. If the employment of a Named Executive Officer is terminated by the
Company other than for Cause, or by such officer for Good Reason (defined as
material diminution of duties, diminution of salary or benefits, relocation,
substantial increase in travel requirements or material breach by the Company of
such Named Executive Officer's Employment Agreement) such Named Executive
Officer is entitled to receive, in addition to the Accrued Benefits, a lump-sum
severance benefit equivalent to two years' current base salary. Mr. Petry, who
resigned as Chairman of the Board and Chief Executive Officer following
consummation of the Acquisition, received in connection with his resignation a
lump-sum severance benefit of $1,250,000. In addition, Mr. Petry received a
payment in cash pursuant to the SERP of $742,000 in lieu of the Company's
purchase of an annuity; the Company expects to make additional payments for the
benefit of Mr. Petry in the amount of approximately $676,000 for related tax
obligations.
SHORT TERM SALE PROGRAM
The Company adopted a Short Term Sale Program (the 'STSP') pursuant to the
terms of which the Company has made payments to certain members of senior
management (the 'eligible individuals'), in connection with a change in control
of the Company. The consummation of the Acquisition constituted such a change in
control. The STSP provides for (i) a 'stay-put' bonus equal to an eligible
individual's Fiscal 1997 base salary and (ii) a sales incentive bonus based on a
multiple (ranging from 50% to 200%) of an eligible individual's Fiscal 1997 base
salary ('Sales Incentive'). The stay-put bonus is payable in two equal parts,
the first ('First Stay-Put') payable shortly after the change in control, and
the second ('Second Stay-Put') payable on the second anniversary of such change
in control, provided that the individual has remained employed by the Company
or, if the individual was terminated by the Company other than for cause,
payable upon such termination. The Sales Incentive is
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<PAGE>
<PAGE>
payable only if the present value of the after-tax proceeds to the Trust in
connection with the change in control meets a threshold amount set forth in the
STSP. In the event that the Trust's after-tax proceeds exceed a specified target
amount, the multiple will increase on a straight line basis. Based upon
estimates of the present value of after-tax proceeds to the Trust in connection
with the Acquisition, the Company made payments under the STSP shortly after
consummation of the Acquisition in the aggregate amount of approximately $7.6
million. The Company expects to make an additional payment of approximately $2.1
million on the second anniversary of the Closing Date for the Second Stay-Put.
The Company may make additional payments under the STSP in connection with the
Sales Incentive depending on the final determination of the present value of the
after-tax proceeds to the Trust. The Company does not expect such payment, if
any, to exceed $1.3 million. See 'Certain Relationships and Related
Transactions.' Payments made pursuant to the STSP are not included in
compensation for purposes of the Salaried Plan and the SERP. In addition, the
STSP provides that any severance protection that an eligible individual may have
will continue for two years following a change in control.
Upon adoption of the STSP in August 1997, the Company began to accrue an
expense for the First Stay-Put, which, according to its terms, was earned from
the date of adoption of the STSP until the earlier of (i) 30 days after a change
in control of the Company, or (ii) June 30, 1998. The total expense recorded in
1997 was $.7 million. No accrual was made for the Sales Incentive in 1997
because, according to the terms of the STSP, the Sales Incentive was earned from
the date of the Acquisition through 30 days thereafter. As of February 28, 1998,
the Company had recorded (i) the pro rata portion of the First Stay-Put relating
to the period from adoption of the STSP through February 28, 1998, and (ii) the
pro rata portion (i.e. four days out of thirty) of the expense earned pursuant
to the Sales Incentive relating to the period from the date of the Acquisition
to February 28, 1998. The expense related to the Second Stay-Put and the
remainder of the First Stay-Put will be earned and recorded in the second
quarter of 1998. The remainder of the expense related to the Sales Incentive
will be recorded upon the final determination of the present value of the
after-tax proceeds to the Trust. The Company anticipates that it will revise its
estimate of the expense related to the Sales Incentive by recording a $.9
million charge in the second quarter of 1998.
The following table shows the payments to the Named Executive Officers
under the STSP shortly after consummation of the Acquisition:
<TABLE>
<CAPTION>
NAMED EXECUTIVE OFFICER SALES INCENTIVE FIRST STAY-PUT
- ---------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
Thomas E. Petry....................................................... $ 1,000,000 $625,000(A)
Andries Ruijssenaars.................................................. 840,000 262,500
David N. Hall......................................................... 600,000 187,500
Wayne R Wickens....................................................... 520,000 162,500
James A. Ralston...................................................... 192,000 120,000
Carroll D. Curless.................................................... 288,000 120,000
</TABLE>
- ------------
(A) This amount represents 100% of Mr. Petry's stay-put bonus, which he received
at the time of his resignation from the Company.
The Company expects to pay to each of the Named Executive Officers, other
than Mr. Petry, on the second anniversary of the Closing Date the Second
Stay-Put in an amount equal to the First Stay-Put indicated in the above table.
Mr. Petry received 100% of his stay-put bonus at the time of his resignation
from the Company and, accordingly, he will not receive any additional payment in
connection with the stay-put bonus.
COMPENSATION TO SENIOR MANAGEMENT
Shortly after the Acquisition, the Company paid approximately $10.0 million
to the E-P Management Trust for the benefit of certain members of senior
management of the Company. The $10.0 million payment was used by the E-P
Management Trust to satisfy a loan from Granaria Holdings, the proceeds of which
were used by E-P Management Trust to acquire 16% of the common stock of Granaria
Industries. Pursuant to the Incentive Stock Plan adopted by the Company, the
shares of Granaria Industries held by the E-P Management Trust were allocated to
certain members of senior
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<PAGE>
<PAGE>
management of the Company (including certain of the Named Executive Officers)
shortly after the Acquisition, which shares are subject to periods of vesting up
to four years. The receipt of such shares will be taxable to the holders as
income in an amount equal to the value of the shares at the time of vesting. The
Incentive Stock Plan requires the Company to reimburse the holders of the shares
for their tax obligations associated with the receipt of such shares. The
initial amount of such taxes, which the Company paid shortly after the
Acquisition, was approximately $2.9 million. The Company expects to make
additional tax payments over the four years following the Acquisition in
accordance with the applicable vesting periods. The payment by the Company of
the $10.0 million and the tax payments to the holders of the shares will result
in an income tax deduction to the Company.
77
<PAGE>
<PAGE>
SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF PARENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock after giving effect to the Offerings of (i) each
person known by the Company to own beneficially 5% or more of the voting Common
Stock, (ii) each anticipated director of the Company, (iii) each executive
officer of the Company and (iv) all current directors and executive officers as
a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------
NUMBER OF PERCENTAGE OF
NAME CLASS A SHARES CLASS A SHARES
- ----------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Granaria Holdings N.V. ................................................ 625,001 100%
Lange Voorhout 16
P.O. Box 233
2501 CE The Hague
The Netherlands(1)
Joel P. Wyler ......................................................... 625,001 100%
Lange Voorhout 16
P.O. Box 233
2501 CE The Hague
The Netherlands(2)
Daniel C. Wyler(1) .................................................... 625,001 100%
Lange Voorhout 16
P.O. Box 233
2501 CE The Hague
The Netherlands(2)
All directors and executive officers as a group ....................... 625,001 100%
(five persons)(3)
</TABLE>
- ------------
(1) Granaria Holdings N.V. is 100% owned by Wijler Holding N.V., a Dutch
Antilles company, 50.1% of which is owned by Joel P. Wyler and 49.9% of
which is owned by Daniel C. Wyler.
(2) Includes shares held by Granaria Holdings B.V.
(3) Shortly after the Acquisition, pursuant to the Incentive Stock Plan certain
members of senior management of the Company received interests in the E-P
Management Trust, which beneficially owns 10% of the equity of Parent. The
trustees of the E-P Management Trust are Andries Ruijssenaars, Thomas E.
Petry and Joel P. Wyler.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the arrangements made prior to the negotiation and execution of
the Merger Agreement, the Company will make bonus payments to certain of its
executive officers in connection
with the consummation of any merger, acquisition, recapitalization or other
transaction resulting in a change of control of the Company. The Acquisition
resulted in such a change of control. The Company made special bonus payments
shortly after consummation of the Acquisition in the aggregate amount of $7.6
million to certain members of senior management of the Company and expects to
make an additional special bonus payment of approximately $2.1 million on the
second anniversary of the Acquisition. Such payments were made pursuant to the
STSP. See 'Executive Compensation -- Short Term Sale Program.'
In connection with the Acquisition, the Company paid a transaction fee of
$7.3 million (approximately 1% of the transaction value) to Granaria Holdings in
consideration for advisory services related to the structuring and financing of
the Acquisition. The Company believes that such transaction fee is on terms no
less favorable to the Company than could have been obtained from an independent
third party.
The Company has entered into an advisory and consulting agreement with
Granaria Holdings pursuant to which the Company will pay an annual management
fee of $1.75 million to Granaria Holdings. The Company believes that such
management agreement is on terms no less favorable to the Company than could
have been obtained from an independent third party.
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<PAGE>
DESCRIPTION OF INDUSTRIAL REVENUE BONDS
The Company has incurred obligations under certain tax-exempt industrial
revenue bond financings (the 'IRB Obligations') totaling $18.4 million at
November 30, 1997 for development projects relating to the Company's facilities
at its Vale, Oregon, Manchester, Tennessee and Kalkaska, Michigan facilities.
The IRB Obligations for the Kalkaska, Michigan facility are collateralized by
real property and equipment and bears interest at 6.0%. The industrial revenue
bonds for the Vale, Oregon and Manchester, Tennessee facilities are floating
rate notes that are collateralized by letters of credit. The IRB Obligations
mature at various dates ranging from 2002 to 2012.
DESCRIPTION OF NEW CREDIT AGREEMENT
On the Closing Date, the Company entered into the New Credit Agreement with
ABN AMRO Bank, providing for the establishment of $385 million aggregate
principal amount of new credit facilities (the 'New Credit Facilities'). The
Company drew down approximately $304.1 million on the Closing Date in connection
with the Acquisition, including $225.0 million in term loan facilities and
approximately $79.1 million under the revolving credit facility. In addition,
$28.6 million of the revolving credit facility was used as credit support in the
form of letters of credit on the Closing Date. The New Credit Facilities have
been syndicated among several lenders who are parties thereto (collectively, the
'Lenders'), with ABN AMRO Bank, as Agent and Arranger, and PNC Bank, National
Association, as Documentation Agent (together, the 'Agents'). The following is a
summary description of the principal terms of the New Credit Agreement. The
description set forth below does not purport to be complete and is qualified in
its entirety by reference to the agreements setting forth the principal terms
and conditions of the New Credit Facilities, which have been filed as exhibits
to the Notes Exchange Offer Registration Statement of which this Prospectus
constitutes a part.
New Credit Facilities. The New Credit Agreement provides for (i) a senior
secured revolving credit facility (the 'Revolving Credit Facility') and (ii) a
senior secured term loan facility (the 'Term Loan Facility'). The Revolving
Credit Facility may be borrowed in the aggregate principal amount of up to
$160.0 million (of which up to $50.0 million may be utilized in the form of
commercial and standby letters of credit). In connection with the Revolving
Credit Facility, the Lenders will make available to the Company a swing-line
facility under which the Company may make short-term borrowings up to $10.0
million, each of which reduces the availability under the Revolving Credit
Facility on a dollar-for-dollar basis. The Term Loan Facility, in the aggregate
principal amount of $225.0 million, consists of: (i) Tranche A Term Loan in the
principal amount of $100.0 million (the 'Tranche A Term Loan'), (ii) Tranche B
Term Loan in the principal amount of $50.0 million (the 'Tranche B Term Loan'),
and (iii) Tranche C Term Loan in the principal amount of $75.0 million (the
'Tranche C Term Loan' and together with the Tranche A Term Loan and the Tranche
B Term Loan, the 'Term Loans').
Availability. The entire amount of the Term Loans was required to be drawn
in a single drawing at consummation of the Acquisition. Amounts borrowed under
the Term Loan Facility that are repaid may not be reborrowed. Loans under the
Revolving Credit Facility are available at any time on or after the Closing and
prior to the final maturity date of the Revolving Credit Facility, in principal
amounts to be agreed upon. Amounts repaid under the Revolving Credit Facility
during such availability period may be reborrowed provided no event of default
has occurred and is continuing and the other conditions to borrowing specified
therein have been satisfied.
Guarantees and Security. All obligations under the New Credit Facilities
are guaranteed by Parent and the Subsidiary Guarantors. The Company's
obligations under the New Credit Facilities, and Parent's and the Subsidiary
Guarantors' obligations under their respective Guarantees, are secured by (i)
with respect to the Company, substantially all of its U.S. property and assets
(tangible and intangible), a pledge of all capital stock of its U.S.
subsidiaries and up to 65% of the capital stock of its directly held non-U.S.
subsidiaries, (ii) with respect to Parent, all of the capital stock of the
Company (until the Company's leverage ratio falls below a certain level) and
(iii) with respect to the Subsidiary Guarantors, substantially all of its U.S.
property and assets (tangible and intangible) (collectively, the 'Collateral').
If at any time the Company can pledge more than 65% of the capital stock of a
non-U.S. subsidiary without creating adverse tax consequences to the Company,
the Company is required to pledge such stock.
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<PAGE>
Interest. The Senior Indebtedness Facility provides for interest rates, at
the Company's option, equal to the following: (i) Revolving Credit
Facility -- Adjusted LIBOR plus 2.25% or ABR plus 1.25%, (ii) Tranche A Term
Loan -- Adjusted LIBOR plus 2.25% or ABR plus 1.25%, (iii) Tranche B Term
Loan -- Adjusted LIBOR plus 2.625% or ABR plus 1.625%, and (iv) Tranche C Term
Loan -- Adjusted LIBOR plus 2.875% or ABR plus 1.875%. The default interest rate
shall be the applicable rate plus 2% per annum. 'ABR' is the higher of ABN AMRO
Bank's prime rate and the Federal Funds Effective Rate plus 0.5%. 'Adjusted
LIBOR' is the applicable London interbank offered rate adjusted for reserves (if
any).
Maturity, Amortization and Prepayments. The Revolving Credit Facility
matures and shall be due and payable on the last business day of February 2004.
The Term Loan Facility maturity dates are as follows: (i) the Tranche A Term
Loan matures nine months after the fifth anniversary of the Closing, (ii) the
Tranche B Term Loan matures six months after the seventh anniversary of the
Closing, and (iii) the Tranche C Term Loan matures six months after the eighth
anniversary of the Closing. Amortization of the Tranche A Term Loan commences on
the last business day in August 1998 in the following quarterly payment amounts:
in 1998 and 1999, $2.5 million; in 2000, $3.75 million; in 2001, $5.0 million;
in 2002 through maturity, $6.25 million. Amortization of the Tranche B Term Loan
commences on the last business day in November 1998 in the following annual
payment amounts: in 1998, $100,000, in 1999 through 2004, $150,000 and the
remaining amount due at maturity. Amortization of the Tranche C Term Loan
commences on the last business day in November 1998 in the following annual
payment amounts: in 1998, $100,000, in 1999 through 2005, $150,000 and the
remaining amount due at maturity. Borrowings may be prepaid, and voluntary
reductions of the unutilized portion of the Revolving Credit Facility made, at
any time, in certain agreed upon minimum amounts, without premium or penalty,
subject to LIBOR breakage costs. Any voluntary prepayments of the Term Loan
Facility will be applied pro rata to the remaining amortization payments under
the Term Loans. The Company will be required to make mandatory prepayments on
the New Credit Facilities equal to (a) 60% of annual excess cash flow, (b) 100%
of the net proceeds from the sale of assets (including insurance proceeds),
subject to certain reinvestment provisions, (c) 100% of the net proceeds from
the issuance of debt obligations, and (d) 50% of the net proceeds from the
issuance by the Company or its subsidiaries of equity securities. Any Lender of
Tranche B Term Loans or Tranche C Term Loans will have the right to decline to
have such loans prepaid with the amounts set forth above, in which case such
amounts shall instead be applied as a prepayment of the Tranche A Term Loan
(until paid in full), and then to permanently reduce the Revolving Credit
Facility to an amount not less than $100 million. For purposes of the mandatory
prepayments, the term 'excess cash flow' means cash flows from the Company's
operating activities as reduced by (i) certain capital expenditures, (ii)
amounts expended with respect to certain permitted acquisitions, (iii) permanent
principal payments and interest payments of indebtedness for borrowed money of
the Company and its subsidiaries subject to certain exceptions, and (iv) unusual
or non-recurring charges that decrease the Company's working capital.
Certain Covenants. The New Credit Agreement contains covenants restricting
the ability of the Company and its subsidiaries to, among other things, (i)
declare dividends or redeem or repurchase capital stock, (ii) issue stock of a
subsidiary, (iii) incur liens, (iv) make loans and investments, (v) issue
additional debt, (vi) amend or otherwise alter debt agreements, (vii) create
subsidiaries, (viii) engage in mergers, acquisitions and assets sales, (ix)
transact with affiliates and (x) alter the business it conducts. In addition,
the New Credit Agreement provides that the Company cannot make certain payments
including: (i) lending money to any person, (ii) purchasing any stock,
securities of or any other interest in, or making any capital contribution to,
any other person, and (iii) purchasing any futures contract or otherwise
becoming liable for the purchase or sale of currency or other commodities at a
future date; provided that the Company and its subsidiaries may (a) acquire and
hold accounts receivable acquired in the ordinary course of business, (b) hold
certain cash equivalents, (c) make inter-company loans and advances to
wholly-owned subsidiaries for working capital purposes and cash management, (d)
hold stock of its subsidiaries, (e) enter into certain interest rate protection
agreements, (f) own investments received in connection with the bankruptcy or
reorganization of suppliers and customers, and (g) make loans and advances to
employees for certain moving and travel expenses. The New Credit Agreement will
not permit the Company and its subsidiaries to make any capital expenditures
except for such expenditures which do not exceed $40.0 million in any fiscal
year. The Company will also be required to
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comply with the following financial covenants (i) a maximum leverage ratio, (ii)
a minimum interest coverage ratio and (iii) a minimum fixed charge coverage
ratio which ratios are set forth below:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum leverage..................................... 5.60 5.60 4.50 3.50 3.50 3.50 3.50
Interest coverage.................................... 1.85 1.85 2.25 2.50 3.00 3.00 3.00
Fixed charge coverage................................ 1.50 1.50 1.75 1.75 1.75 1.75 1.75
</TABLE>
DESCRIPTION OF THE NOTES
The New Notes will be issued pursuant to the Indenture among the Company,
the Guarantors and The Bank of New York, as trustee (the 'Trustee'), which has
been filed as an exhibit to the Notes Exchange Offer Registration Statement of
which this Prospectus constitutes a part. The following is a summary of the
material terms and provisions of the Notes. The terms of the New Notes include
those set forth in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the 'Trust Indenture
Act'). The Notes are subject to all such terms, and holders of the Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary does not purport to be a complete description of the Notes
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Indenture. Capitalized terms that are used but not otherwise
defined herein have the meanings assigned to them in the Indenture and such
definitions are incorporated herein by reference.
GENERAL
On February 24, 1998, the Issuer issued $220.0 million aggregate principal
amount of Old Notes under the Indenture. Pursuant to the merger of the Issuer
into the Company, the Company assumed all of the Issuer's obligations and
liabilities under the Old Notes and the Indenture. The terms of the New Notes
are identical in all material respects to the Old Notes, except for certain
transfer restrictions and registration and other rights relating to the exchange
of the Old Notes for New Notes. The Trustee will authenticate and deliver New
Notes for original issue only in exchange for a like principal amount of Old
Notes. Any Old Notes that remain outstanding after the consummation of the Notes
Exchange Offer, together with the New Notes, will be treated as a single class
of securities under the Indenture.
The Notes represent senior subordinated unsecured obligations of the
Company limited to an aggregate principal amount of $220 million, subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company (including the Company's obligations under the New Credit Agreement) as
described below under ' -- Subordination.' The Notes are unconditionally
guaranteed by each Guarantor on a senior subordinated basis, with each such
guarantee subordinated to the Guarantor's guarantee of the obligations of the
Company under the New Credit Agreement and to all other Senior Indebtedness of
such Guarantor.
The Notes bear interest at the rate shown on the cover page of this
Prospectus, payable on March 1 and September 1 of each year, commencing on March
1, 1998, to holders of record at the close of business on February 15 or August
15, as the case may be, immediately preceding the relevant interest payment
date. The Notes will mature on March 1, 2008 and will be issued in registered
form, without coupons, and in denominations of $1,000 and integral multiples
thereof. The Notes will be payable as to principal, premium, if any, and
interest at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, by wire
transfer of immediately available funds or, in the case of certificated
securities only, by mailing a check to the registered address of the holder. See
' -- Book Entry, Delivery and Form of Securities.' Until otherwise designated by
the Company, the Company's office or agency in New York will be the office of
the Trustee maintained for such purpose.
SUBORDINATION
The payment by the Company of principal of, and premium (if any) and
interest (including Special Interest) on the Notes, and by each Guarantor of
such amounts under its Note Guarantee (collectively,
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the 'Note Indebtedness'), will be subordinated to the prior payment in full in
cash when due of the principal of, and premium, if any, and accrued and unpaid
interest on and all other amounts owing in respect of, all existing and future
Senior Indebtedness of the Company and of each Guarantor, as the case may be.
The Company has agreed in the Indenture that it will not incur, directly or
indirectly, any Indebtedness that is subordinate or junior in ranking in right
of payment to its Senior Indebtedness unless such Indebtedness is pari passu
with or is expressly subordinated in right of payment to the Notes. In addition,
each Guarantor has agreed that it will not incur, directly or indirectly, any
Indebtedness that is subordinate or junior in ranking in right of payment to its
Senior Indebtedness unless such Indebtedness is pari passu with or is expressly
subordinated in right of payment to the Notes. At February 28, 1998, the Company
and the Subsidiary Guarantors had approximately $327.0 million of Indebtedness
outstanding other than the Notes, of which approximately $323.8 million was
secured and $322.5 million of which was Senior Indebtedness. Subject to certain
limitations, the Company and its Subsidiaries (including the Subsidiary
Guarantors) may incur additional Indebtedness in the future. See ' -- Certain
Covenants -- Limitations on Additional Indebtedness.'
The Indenture provides that, upon any payment or distribution to creditors
of the Company or any Guarantor of the assets of the Company or the Guarantors
of any kind or character in a total or partial liquidation or dissolution of the
Company or the Guarantors or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or any Guarantor,
whether voluntary or involuntary (including any assignment for the benefit of
creditors and proceedings for marshaling of assets and liabilities of the
Company or any Guarantor), the holders of all Senior Indebtedness of the Company
or any Guarantor then outstanding will be entitled to payment in full in cash
(including interest accruing subsequent to the filing of petition of bankruptcy
or insolvency at the rate specified in the document relating to the applicable
Senior Indebtedness, whether or not such interest is an allowed claim
enforceable against the Company or any Guarantor under applicable law) before
the holders of Notes are entitled to receive any payment (other than payments
made from a trust previously established pursuant to provisions described under
' -- Satisfaction and Discharge of Indenture; Defeasance') on or with respect to
the Note Indebtedness and until all Senior Indebtedness receives payment in full
in cash, any distribution to which the holders of Notes would be entitled will
be made to holders of Senior Indebtedness.
Upon the occurrence of any default in the payment of any principal of or
interest on or other amounts due on any Designated Senior Indebtedness (as
defined below) of the Company or any Guarantor (a 'Payment Default'), no payment
of any kind or character shall be made by the Company or a Guarantor (or by any
other Person on its or their behalf) with respect to the Note Indebtedness
unless and until (i) such Payment Default shall have been cured or waived in
accordance with the instruments governing such Indebtedness or shall have ceased
to exist, (ii) such Designated Senior Indebtedness has been discharged or paid
in full in cash in accordance with the instruments governing such Indebtedness
or (iii) the benefits of this sentence have been waived by the holders of such
Designated Senior Indebtedness or their representative, including, if
applicable, the Agents, immediately after which the Company must resume making
any and all required payments, including missed payments, in respect of its
obligations under the Notes.
Upon (1) the occurrence and continuance of an event of default (other than
a Payment Default) relating to Designated Senior Indebtedness, as such event of
default is defined therein or in the instrument or agreement under which it is
outstanding, which event of default, pursuant to the instruments governing such
Designated Senior Indebtedness, entitles the holders (or a specified portion of
the holders) of such Designated Senior Indebtedness or their designated
representative to immediately accelerate without further notice (except such
notice as may be required to effect such acceleration) the maturity of such
Designated Senior Indebtedness (whether or not such acceleration has actually
occurred) (a 'Non-payment Default') and (2) the receipt by the Trustee and the
Company from the trustee or other representative of holders of such Designated
Senior Indebtedness of written notice (a 'Payment Blockage Notice') of such
occurrence, no payment is permitted to be made by the Company or any Guarantor
(or by any other Person on its or their behalf) in respect of the Note
Indebtedness for a period (a 'Payment Blockage Period') commencing on the date
of receipt by the Trustee of such notice and ending on the earliest to occur of
the following events (subject to any blockage of payments that may then be in
effect due to a Payment Default on Designated Senior
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Indebtedness): (w) such Non-payment Default has been cured or waived or has
ceased to exist; (x) a 179-consecutive-day period commencing on the date such
written notice is received by the Trustee has elapsed; (y) such Payment Blockage
Period has been terminated by written notice to the Trustee from the Trustee or
other representative of holders of such Designated Senior Indebtedness, whether
or not such Non-payment Default has been cured or waived or has ceased to exist;
and (z) such Designated Senior Indebtedness has been discharged or paid in full
in cash, immediately after which, in the case of clause (w), (x), (y) or (z),
the Company must resume making any and all required payments, including missed
payments, in respect of its obligations under the Notes. Notwithstanding the
foregoing, (a) not more than one Payment Blockage Period may be commenced in any
period of 365 consecutive days and (b) no default or event of default with
respect to the Designated Senior Indebtedness of the Company that was the
subject of a Payment Blockage Notice which existed or was continuing on the date
of the giving of any Payment Blockage Notice shall be or serve as the basis for
the giving of a subsequent Payment Blockage Notice whether or not within a
period of 365 consecutive days unless such default or event of default shall
have been cured or waived for a period of at least 90 consecutive days after
such date. Notwithstanding anything in the Indenture to the contrary, there must
be 180 consecutive days in any 365-day period in which no Payment Blockage
Period is in effect.
Notwithstanding the foregoing, holders of Notes may receive and retain
Permitted Junior Securities and payment from the money or the proceeds held in
any defeasance trust described under ' -- Satisfaction and Discharge of
Indenture; Defeasance' below, and no such receipt or retention will be
contractually subordinated in right of payment to any Senior Indebtedness or
subject to the restrictions described in this 'Subordination' section.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Guarantor, whether in cash,
property or securities, shall be received by the Trustee or the holders of Notes
at a time when such payment or distribution is prohibited by the foregoing
provisions, such payment or distribution shall be segregated from other funds or
assets and held in trust for the benefit of the holders of Senior Indebtedness
of the Company or such Guarantor, as the case may be, and shall be paid or
delivered by the Trustee or such holders, as the case may be, to the holders of
the Senior Indebtedness of the Company or such Guarantor, as the case may be,
remaining unpaid or unprovided for or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any of such Senior Indebtedness of the Company or such
Guarantor, as the case may be, may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness of the
Company or such Guarantor, as the case may be, held or represented by each, for
application to the payment of all Senior Indebtedness of the Company or such
Guarantor, as the case may be, remaining unpaid, to the extent necessary to pay
or to provide for the payment in full in cash of all such Senior Indebtedness
after giving effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not such failure is on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the holders of Notes to
accelerate the maturity of the Notes. See ' -- Events of Default.'
By reason of the subordination provisions contained in the Indenture, in
the event of bankruptcy, liquidation, insolvency or other similar proceedings,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and creditors of the Company who
are not holders of Senior Indebtedness may recover less, ratably, than holders
of Senior Indebtedness and may recover more, ratably, than the holders of the
Notes.
GUARANTEES
The Company's payment obligations under the Notes will fully and
unconditionally, jointly and severally guaranteed (the 'Note Guarantees') by
Parent and by each Subsidiary Guarantor. Each Note Guarantee will be an
unsecured senior subordinated obligation of the Guarantor providing it, and will
rank junior in right of payment to all existing and future Senior Indebtedness
of such Guarantor, including such Guarantor's guarantee of the Company's
obligations under the New Credit Agreement.
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The obligations of each Guarantor under its Note Guarantee will be limited so as
not to constitute a fraudulent conveyance under applicable law.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another Person whether or not affiliated with such Subsidiary Guarantor
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all of the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture, in form and substance
satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists;
and (iii) immediately after giving effect to such transaction, the Coverage
Ratio Incurrence Condition would be met.
OPTIONAL REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to March 1, 2003, but will be
redeemable at the option of the Company, in whole or in part, at any time on or
after March 1, 2003, at the following redemption prices (expressed as
percentages of principal amount), together with accrued and unpaid interest, if
any, thereon to the redemption date, if redeemed during the twelve-month period
beginning March 1:
<TABLE>
<CAPTION>
OPTIONAL
YEAR REDEMPTION PRICE
- --------------------------------------------------------------------------- ----------------
<S> <C>
2003....................................................................... 104.688%
2004....................................................................... 103.125%
2005....................................................................... 101.563%
2006 and thereafter........................................................ 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to March 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
outstanding on the Closing Date with the net cash proceeds of one or more Equity
Offerings at a redemption price equal to 109.375% of the principal amount
thereof, plus accrued and unpaid interest and Special Interest, if any, to the
redemption date; provided that (a) at least $100 million aggregate principal
amount of the Notes remains outstanding immediately after the occurrence of such
redemption and (b) such redemption occurs within 60 days of the date of the
closing of any such Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
the Notes to be redeemed will be made by the Trustee from among the outstanding
Notes on a pro rata basis, by lot or by any other method permitted in the
Indenture. Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder whose Notes are to be
redeemed at the registered address of such holder. On and after the redemption
date, interest will cease to accrue on the Notes or portions thereof called for
redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes will
have the right to require that the Company repurchase such holder's Notes for a
cash price (the 'Change of Control Purchase Price') equal to 101% of the
principal amount of the Notes, plus accrued and unpaid interest and Special
Interest, if any, to the date of repurchase, all in accordance with the
following paragraph.
Within 30 days following any Change of Control, the Company will mail to
the Trustee (who shall mail to each holder at the Company's expense) a notice
(i) describing the transaction or transactions that constitute the Change of
Control, (ii) offering to repurchase, pursuant to the procedures required by the
Indenture and described in such notice (a 'Change of Control Offer'), on a date
specified in such notice (which shall be a business day not earlier than 30 days
or later than 60 days from the date such notice is mailed) and for the Change of
Control Purchase Price, all Notes properly tendered by such holder pursuant to
such offer to purchase for the Change of Control Purchase Price and (iii)
describing the procedures that holders must follow to accept the Change of
Control Offer. The Change of Control Offer is required to remain open for at
least 20 business days or for such longer period as is required by law.
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The occurrence of the events constituting a Change of Control under the
Indenture may result in an event of default in respect of other Indebtedness
(including the Senior Indebtedness) of the Company and its Subsidiaries and,
consequently, the lenders thereof may have the right to require repayment of
such Indebtedness in full. If a Change of Control Offer is made, there can be no
assurance that the Company will have available funds sufficient to pay for all
or any of the Notes that might be delivered by holders of Notes seeking to
accept the Change of Control Offer. There can be no assurance that in the event
of a Change of Control the Company will be able to obtain the consents necessary
to consummate a Change of Control Offer from the lenders under agreements
governing outstanding Indebtedness which may prohibit such an offer. The
Company's obligation to make a Change of Control Offer will be satisfied if a
third party makes the Change of Control Offer in the manner and at the times and
otherwise in compliance with the requirements applicable to a Change of Control
Offer made by the Company and purchases all Notes properly tendered and not
withdrawn under such Change of Control Offer. The definition of Change of
Control includes the sale of 'all or substantially all' of the assets of the
Company or Parent and their Subsidiaries, in either case taken as a whole, the
determination of which depends upon the circumstances of any such sale and is
subject to interpretation under applicable legal precedent.
The Change of Control feature of the Notes, by requiring a Change of
Control Offer, may in certain circumstances make more difficult or discourage a
sale or takeover of the Company, and, thus, the removal of incumbent management.
The Change of Control feature, however, is not part of a plan by management to
adopt a series of antitakeover provisions. Instead, the Change of Control
feature is a result of negotiations between the Company and the Initial
Purchasers. Subject to the limitations discussed below, the Company could, in
the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of Indebtedness
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act and any other applicable
laws and regulations in connection with the purchase of Notes pursuant to a
Change of Control Offer.
CERTAIN COVENANTS
Limitations on Additional Indebtedness. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, incur any Indebtedness (including without limitation
Acquired Indebtedness); provided that (i) the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness and (ii) the Company may incur
additional Indebtedness if, after giving effect thereto, the Company's
Consolidated Interest Coverage Ratio on the date thereof would be at least 2.0
to 1, determined on a pro forma basis as if the incurrence of such additional
Indebtedness, and the application of the net proceeds therefrom, had occurred at
the beginning of the four-quarter period used to calculate the Company's
Consolidated Interest Coverage Ratio.
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries. The
Indenture provides that the Company will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of its Capital Stock
(including options, warrants or other rights to purchase shares of such Capital
Stock) except (i) to the Company or a Wholly-Owned Restricted Subsidiary, (ii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary or (iii) to the
extent such shares represent directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Wholly-Owned
Restricted Subsidiary. The proceeds of any sale of Capital Stock permitted
hereunder and referred to in clauses (ii) and (iii) above will be treated as Net
Available Proceeds and must be applied in a manner consistent with the
provisions of the covenant described under ' -- Limitations on Asset Sales.'
Limitations on Layering Debt. The Indenture provides that the Company will
not, and will not permit any Subsidiary Guarantor to, incur any Indebtedness
that is subordinate or junior in right of payment to any Senior Indebtedness of
the Company or such Subsidiary Guarantor unless such Indebtedness by its terms
is pari passu with, or subordinated to, the Notes or the Note Guarantee of such
Subsidiary Guarantor, as the case may be.
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Limitations on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any Restricted Payment (except as permitted below) if at the
time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(ii) the Company would be unable to meet the Coverage Ratio Incurrence
Condition; or
(iii) the amount of such Restricted Payment, when added to the
aggregate amount of all other Restricted Payments (except as expressly
provided in the second following paragraph) made after the Issue Date,
exceeds the sum of (A) 50% of the Company's Consolidated Net Income (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of the Company's most recently
ended fiscal quarter for which financial statements are available at the
time of such Restricted Payment (or, if such aggregate Consolidated Net
Income shall be a deficit, minus 100% of such aggregate deficit) plus (B)
the net cash proceeds from the issuance and sale (other than to a
Subsidiary of the Company) after the Issue Date of (1) the Company's
Capital Stock that is not Disqualified Capital Stock or (2) debt securities
of the Company that have been converted into the Company's Capital Stock
that is not Disqualified Capital Stock and that is not then held by a
Subsidiary of the Company, plus (C) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (x) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (y) the initial amount of such Restricted Investment plus (D)
the amount of Restricted Investment outstanding in an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary of the Company in accordance with the definition of
'Unrestricted Subsidiary.'
The foregoing provisions do not prohibit (1) the payment of any dividend by
the Company or any Restricted Subsidiary within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (2) the redemption, repurchase,
retirement or other acquisition of any Capital Stock of the Company in exchange
for, or out of the proceeds of, the substantially concurrent sale (other than to
a Subsidiary of the Company) of other Capital Stock of the Company (other than
any Disqualified Capital Stock); (3) the defeasance, redemption, repurchase or
other retirement of Subordinated Indebtedness in exchange for, or out of the
proceeds of, the substantially concurrent issue and sale of Capital Stock of the
Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a
Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of
loans from the Company or any of its Subsidiaries); (4) the making of a Related
Business Investment in joint ventures or Unrestricted Subsidiaries out of the
proceeds of the substantially concurrent issue and sale of Capital Stock of the
Company (other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a
Subsidiary of the Company and (z) Capital Stock purchased with the proceeds of
loans from the Company or any of its Subsidiaries); (5) Specified Transaction
Payments; (6) payments of up to $1.75 million to Granaria Holdings or any of its
Affiliates in the aggregate in any fiscal year pursuant to any Related Party
Agreement entered into between Granaria Holdings or any of its Affiliates and
the Company or its Subsidiaries to provide management and similar services to
any such Persons or to Parent; (7) the payments of dividends or distributions to
Parent solely in amounts and at the times necessary to permit Parent to
purchase, redeem, acquire, cancel or otherwise retire for value Capital Stock of
Parent, or permit payments of dividends or distributions by Parent to its
shareholders solely in amounts and at the times necessary to permit such
shareholders to (or permit subsequent distributions to permit their respective
shareholders to) purchase, redeem, acquire, cancel or otherwise retire for value
Capital Stock of such shareholders, in each case held by officers, directors or
employees or former officers, directors or employees (or their transferees,
estates or beneficiaries under their estates), or a trust established for the
benefit of any of the foregoing of Parent, the Company or its Subsidiaries, upon
death, disability, retirement, severance or termination of employment or service
or pursuant to any agreement under which such Capital Stock or related rights
were issued; provided that the amount of such payments under this clause (7)
after the Issue Date does not exceed in the aggregate $5.0 million; (8) the
payment of dividends or distributions of amounts to Parent in amounts and at
such times as are sufficient to pay the scheduled interest or dividends owed
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by Parent on the Parent Preferred Stock or Exchange Debentures so long as (x)
Parent is the direct Parent of the Company owning 100% of the Capital Stock of
the Company and (y) such Parent Preferred Stock or Exchange Debentures contains
no scheduled requirement for the payment of cash interest or dividends, as
applicable, until at least five years from the date of their original issuance,
provided that at the time of such Restricted Payment and after giving effect
thereto, either (A) the Company would be able to meet the Coverage Ratio
Incurrence Condition or (B) the amount of such Restricted Payment, when added to
the aggregate amount of all other Restricted Payments made after the Issue Date,
does not exceed the sum referred to in clause (iii) of the next preceding
paragraph; (9) Restricted Investments the amount of which, together with the
amount of all other Restricted Investments made pursuant to this clause (9)
after the Issue Date, does not exceed $10.0 million, provided that, in the case
of clauses (8) and (9), no Default or Event of Default shall have occurred and
be continuing or occur as a consequence of the actions or payments set forth
therein; or (10) during any period in which Parent files consolidated income tax
returns that include the Company, payments to Parent in amounts not in excess of
the amount that the Company would have paid if it had filed consolidated tax
returns on a separate-company basis, in each case solely in amounts and at the
times necessary to permit Parent to pay its consolidated income taxes.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payments referred to in clauses (2) through (5) or
(10) thereof, and, to the extent deducted in determining Consolidated Net Income
in any period, the Restricted Payments referred to in clauses (6) and (7)
thereof) shall be included once in calculating whether the conditions of clause
(iii) of the second preceding paragraph have been met with respect to any
subsequent Restricted Payments. For purposes of determining compliance with this
'Limitation on Restricted Payments' covenant, in the event that a transaction
meets the criteria of more than one of the types of Restricted Payments
described in the clauses of the immediately preceding paragraph or of the
clauses of the definition of 'Restricted Payment,' the Company, in its sole
discretion, shall classify such transaction and only be required to include the
amount and type of such transaction in one of such clauses. If an issuance of
Capital Stock of the Company is applied to make a Restricted Payment pursuant to
clause (2), (3) or (4) above, then, in calculating whether the conditions of
clause (iii) of the second preceding paragraph have been met with respect to any
subsequent Restricted Payments, the proceeds of any such issuance shall be
included under such clause (iii) only to the extent such proceeds are not
applied as so described in this sentence.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant 'Limitations on Restricted Payments' were computed,
which calculations shall be based upon the Company's latest available financial
statements.
Limitations on Restrictions on Distributions from Restricted Subsidiaries.
The Indenture provides that the Company will not, and will not permit any of its
Restricted Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual Payment Restriction with respect to any of its
Restricted Subsidiaries, except for (a) any such Payment Restriction in effect
on the Issue Date under the New Credit Agreement or the Parent Preferred Stock
or any similar Payment Restriction under any similar credit facility, or any
amendment, restatement, renewal, replacement or refinancing of any of the
foregoing, provided that such similar Payment Restrictions are not, taken as a
whole, materially more restrictive than the Payment Restrictions in effect on
the Issue Date under the New Credit Agreement or the Parent Preferred Stock, (b)
any such Payment Restriction in effect on the Issue Date consisting of customary
net worth or leverage tests in effect on the Issue Date under any credit
facility of any Foreign Subsidiary, or any amendment, restatement, renewal,
replacement or refinancing of any of the foregoing (including for purposes of
this clause (b), any increase in the principal amount available thereunder) (a
'Replacement Facility'), provided that such Payment Restrictions in any such
Replacement Facility are not, taken as a whole, materially more restrictive than
the Payment Restrictions in effect on the Issue Date under the facility amended,
restated, renewed, replaced or refinanced, (c) any such Payment Restriction
under any agreement evidencing any Acquired Indebtedness that was permitted to
be incurred pursuant to the Indenture in effect at the time of such incurrence
and not created in contemplation of such event, provided that such Payment
Restriction is not extended to apply to any of the assets of the entities not
previously subject thereto, (d) any such Payment Restriction arising in
connection with Refinancing Indebtedness; provided that any such
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Payment Restrictions that arise under such Refinancing Indebtedness are not,
taken as a whole, materially more restrictive than those under the agreement
creating or evidencing the Indebtedness being refunded or refinanced and (e) any
such restriction by reason of customary provisions restricting assignments,
subletting or other transfers contained in leases, licenses and similar
agreements entered into in the ordinary course of business.
Limitations on Transactions with Affiliates. The Indenture provides that
the Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, in one transaction or a series of related transactions,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an 'Affiliate Transaction'), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction (or series of related
transactions) involving aggregate payments in excess of $1.0 million, an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and a Secretary's Certificate which sets forth and
authenticates a resolution that has been adopted by a vote of a majority of the
Independent Directors approving such Affiliate Transaction or, if at the time
fewer than three Independent Directors are then in office, a Secretary's
Certificate which sets forth and authenticates a resolution that has been
adopted unanimously by the Company's Board of Directors and (b) with respect to
any Affiliate Transaction (or series of related transactions) involving
aggregate payments of $5.0 million or more, the certificates described in the
preceding clause (a) and an opinion as to the fairness to the Company or such
Subsidiary from a financial point of view issued by an Independent Financial
Advisor; provided, however, that the following shall not be deemed to be
Affiliate Transactions: (i) transactions exclusively between or among (1) the
Company and one or more Restricted Subsidiaries or (2) Restricted Subsidiaries,
provided, in each case, that no Affiliate of the Company (other than another
Restricted Subsidiary) owns Capital Stock of any such Restricted Subsidiary;
(ii) transactions between the Company or any Restricted Subsidiary and any
qualified employee stock ownership plan established for the benefit of the
Company's employees, or the establishment or maintenance of any such plan; (iii)
reasonable director, officer and employee compensation and other benefit, and
indemnification arrangements approved by a majority of the Independent Directors
on the Board of Directors; (iv) transactions permitted by the 'Limitations on
Restricted Payments' covenant; (v) the pledge of Capital Stock of Unrestricted
Subsidiaries to support the Indebtedness thereof; (vi) the entering into of any
Tax Sharing Agreement, and any payment pursuant thereto; (vii) the payment on
behalf of Parent of ministerial administrative and operating fees and expenses
in the ordinary course to Persons other than to Affiliates of Parent or the
Company, provided that the aggregate amount thereof in any fiscal year of the
Company does not exceed $750,000; (viii) arrangements with ABN AMRO Bank or any
of its Affiliates or their respective successors (x) under the New Credit
Agreement or the Notes or in connection therewith, (y) in connection with the
offering of the Notes or the Series A Senior Preferred Stock or (z) pursuant to
other banking, financing or underwriting activity entered into in the ordinary
course of business; (ix) transactions between the Company or any Restricted
Subsidiary and any Affiliate of the Company or such Restricted Subsidiary that
is a joint venture, provided that no direct or indirect holder of an equity
interest in such joint venture (other than the Company or a Restricted
Subsidiary) is an Affiliate of the Company or such Restricted Subsidiary; and
(x) Specified Transaction Payments.
Limitations on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, incur or permit to exist any
Lien of any nature whatsoever on any property of the Company or any Restricted
Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned
at the Issue Date or thereafter acquired, which secures Indebtedness that is not
Senior Indebtedness unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with (or if such Lien secures
Indebtedness that is subordinated to the Notes, prior to) such Indebtedness for
so long as such Indebtedness is secured by a Lien.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date securing Indebtedness outstanding on the Issue Date; (ii) Liens in
favor of the Company or a Subsidiary
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Guarantor; (iii) Liens to secure Indebtedness that is non-recourse to the
Company or any of its Subsidiaries or any of their respective assets other than
the assets acquired or improved with such Indebtedness; (iv) Liens securing
Acquired Indebtedness permitted to be incurred under the Indenture, provided
that the Liens do not extend to property or assets not subject to such Lien at
the time of acquisition (other than improvements thereon); (v) Liens on property
of a Person existing at the time such Person is acquired or merged with or into
or consolidated with the Company or any such Restricted Subsidiary (and not
created in anticipation or contemplation thereof); (vi) Liens to secure
Refinancing Indebtedness of Indebtedness secured by Liens referred to in the
foregoing clauses (iv) and (v), provided that in each case such Liens do not
extend to any additional property or assets (other than improvements thereon).
Limitations on Asset Sales. (a) The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, consummate
any Asset Sale unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets included in such Asset Sale (evidenced by the delivery by
the Company to the Trustee of an Officers' Certificate certifying that such
Asset Sale complies with this clause (i)), (ii) immediately before and
immediately giving effect to such Asset Sale, no Default or Event of Default
shall have occurred and be continuing, and (iii) at least 80% of the
consideration received by the Company or such Restricted Subsidiary therefor is
in the form of cash paid at the closing thereof. The amount (without
duplication) of any (x) Indebtedness (other than Subordinated Indebtedness) of
the Company or such Restricted Subsidiary that is expressly assumed by the
transferee in such Asset Sale and with respect to which the Company or such
Restricted Subsidiary, as the case may be, is unconditionally released by the
holder of such Indebtedness, and (y) any Cash Equivalents, or other notes,
securities or items of property received from such transferee that are promptly
(but in any event within 15 days) converted by the Company or such Restricted
Subsidiary to cash (to the extent of the cash actually so received), shall be
deemed to be cash for purposes of clause (ii) and, in the case of clause (x)
above, shall also be deemed to constitute a repayment of, and a permanent
reduction in, the amount of such Indebtedness for purposes of the following
paragraph (b). If at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then the date of such conversion or disposition shall be deemed to constitute
the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall
be applied in accordance with this covenant. A transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a
Restricted Subsidiary will not be deemed to be an Asset Sale and a transfer of
assets that constitutes a Restricted Investment and that is permitted under
' -- Limitations on Restricted Payments' will not be deemed to be an Asset Sale.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or any Restricted Subsidiary shall, no later than 360 days after
such Asset Sale (i) apply all or any of the Net Available Proceeds therefrom to
repay amounts outstanding under the New Credit Agreement or any other Senior
Indebtedness; provided, in each case, that the related loan commitment (if any)
of any Indebtedness constituting revolving credit debt is thereby permanently
reduced by the amount of such Indebtedness so repaid and/or (ii) invest all or
any part of the Net Available Proceeds thereof in the purchase of fixed assets
to be used by the Company and its Restricted Subsidiaries in a Related Business
(together with any short-term assets incidental thereto), or the making of a
Related Business Investment. The amount of such Net Available Proceeds not
applied or invested as provided in this paragraph will constitute 'Excess
Proceeds.'
(c) When the aggregate amount of Excess Proceeds equals or exceed $5.0
million, the Company will be required to make an offer to purchase, from all
holders of the Notes, an aggregate principal amount of Notes equal to the amount
of such Excess Proceeds as follows:
(i) The Company will make an offer to purchase (a 'Net Proceeds
Offer') from all holders of the Notes in accordance with the procedures set
forth in the Indenture the maximum principal amount (expressed as a
multiple of $10,000) of Notes that may be purchased out of the amount (the
'Payment Amount') of such Excess Proceeds.
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(ii) The offer price for the Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Notes tendered pursuant
to a Net Proceeds Offer, plus accrued and unpaid interest and Special
Interest, if any, to the date such Net Proceeds Offer is consummated (the
'Offered Price'), in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate Offered Price of Notes tendered
pursuant to a Net Proceeds Offer is less than the Payment Amount relating
thereto (such shortfall constituting a 'Net Proceeds Deficiency'), the
Company may use such Net Proceeds Deficiency, or a portion thereof, for
general corporate purposes, subject to the limitations of the 'Limitations
on Restricted Payments' covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis.
(iv) Upon completion of such Net Proceeds Offer in accordance with the
foregoing provisions, the amount of Excess Proceeds with respect to which
such Net Proceeds Offer was made shall be deemed to be zero.
The Company will not permit any Subsidiary to enter into or suffer to exist
any agreement that would place any restriction of any kind (other than pursuant
to law or regulation) on the ability of the Company to make a Net Proceeds Offer
following any Asset Sale. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder, if
applicable, in the event that an Asset Sale occurs and the Company is required
to purchase Notes as described above.
Limitations on Mergers and Certain Other Transactions. The Indenture
provides that the Company will not, in a single transaction or a series of
related transactions, (i) consolidate or merge with or into (other than a merger
with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Company's jurisdiction of incorporation to another State of the United States),
or sell, lease, transfer, convey or otherwise dispose of or assign all or
substantially all of the assets of the Company or the Company and its
Subsidiaries (taken as a whole), or assign any of its obligations under the
Notes and the Indenture, to any Person or (ii) adopt a Plan of Liquidation
unless, in either case: (a) the Person formed by or surviving such consolidation
or merger (if other than the Company) or to which such sale, lease, conveyance
or other disposition or assignment shall be made (or, in the case of a Plan of
Liquidation, any Person to which assets are transferred) (collectively, the
'Successor'), is a corporation organized and existing under the laws of any
State of the United States of America or the District of Columbia, and the
Successor assumes by supplemental indenture in a form satisfactory to the
Trustee all of the obligations of the Company under the Notes and the Indenture;
(b) immediately prior to and immediately after giving effect to such transaction
and the assumption of the obligations as set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing; and (c)
immediately after and giving effect to such transaction and the assumption of
the obligations set forth in clause (a) above and the incurrence of any
Indebtedness to be incurred in connection therewith, and the use of any net
proceeds therefrom on a pro forma basis, (1) the Consolidated Net Worth of the
Company or the Successor, as the case may be, would be at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) the Company or the Successor, as the case may be, could meet the Coverage
Ratio Incurrence Condition; and (d) each Subsidiary Guarantor, unless it is the
other party to the transactions described above, shall have by amendment to its
guarantee confirmed that its guarantee of the Notes shall apply to the
obligations of the Company or the Successor under the Notes and the Indenture.
For purposes of this covenant, any Indebtedness of the Successor which was not
Indebtedness of the Company immediately prior to the transaction shall be deemed
to have been incurred in connection with such transaction.
Additional Note Guarantees. The Indenture provides that if the Company or
any of its Subsidiaries shall acquire or create another Subsidiary (other than
(x) any Foreign Subsidiary or (y) a Subsidiary that has been designated as an
Unrestricted Subsidiary or (z) an Immaterial Subsidiary), then such newly
acquired or created Subsidiary will be required to execute a Note Guarantee, in
accordance with the terms of the Indenture.
Reports. Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the 'Commission'), so long as any Notes are
outstanding, the Company and the Guarantors will file with the Commission, to
the extent such filings are accepted by the Commission,
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and will furnish (within 15 days after such filing) to the Trustee and to the
holders of Notes all quarterly and annual reports and other information,
documents and reports that would be required to be filed with the Commission
pursuant to Section 13 of the Exchange Act if the Company and the Guarantors
were required to file under such section. In addition, the Company and the
Guarantors will make such information available to prospective purchasers of the
Notes, securities analysts and broker-dealers who request it in writing. The
Company and the Guarantors have agreed that, for so long as any Notes remain
outstanding, they will furnish to the holders and beneficial holders of Notes
and to prospective purchasers of Notes designated by the holders of Transfer
Restricted Securities and to broker dealers, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
An 'Event of Default' is defined in the Indenture as (i) failure by the
Company to pay interest on any of the Notes when it becomes due and payable and
the continuance of any such failure for 30 days; (ii) failure by the Company to
pay the principal or premium, if any, on any of the Notes when it becomes due
and payable, whether at stated maturity, upon redemption, upon acceleration or
otherwise; (iii) failure by the Company to comply with any of its agreements or
covenants described above under 'Certain Covenants -- Limitations on Mergers and
Certain Other Transactions', or in respect of its obligations to make a Change
of Control Offer or a Net Proceeds Offer described in 'Change of Control' and
'Certain Covenants -- Limitations on Asset Sales', respectively; (iv) failure by
the Company to comply with any other covenant in the Indenture and continuance
of such failure for 60 days after notice of such failure has been given to the
Company by the Trustee or by the holders of at least 25% of the aggregate
principal amount of the Notes then outstanding; (v) failure by either the
Company or any of its Restricted Subsidiaries to make any payment when due after
the expiration of any applicable grace period, in respect of any Indebtedness of
the Company or any of such Restricted Subsidiaries, or the acceleration of the
maturity of such Indebtedness by the holders thereof because of a default, with
an aggregate outstanding principal amount for all such Indebtedness under this
clause (v) of $10.0 million or more (but excluding in any event any such
Indebtedness that is paid when so due after expiration of any applicable grace
period, or upon acceleration of the maturity thereof, pursuant to any letter of
credit); (vi) one or more final, non-appealable judgments or orders that exceed
$10.0 million in the aggregate for the payment of money have been entered by a
court or courts of competent jurisdiction against the Company or any Subsidiary
of the Company and such judgment or judgments have not been satisfied, stayed,
annulled or rescinded within 60 days of being entered; (vii) certain events of
bankruptcy, insolvency or reorganization involving the Parent, the Company or
any Significant Subsidiary; and (viii) except as permitted by the Indenture, any
Note Guarantee ceases to be in full force and effect or any Guarantor repudiates
its obligations under any Note Guarantee.
In the case of an Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes, an equivalent
premium shall also become and be immediately due and payable, to the extent
permitted by law, upon the acceleration of the Notes. If an Event of Default
occurs prior to March 1, 2003 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to March 1, 2003,
then, upon acceleration of the Notes, an additional premium shall also become
and be immediately due and payable, to the extent permitted by law, in an amount
equal to 10.0%.
If an Event of Default (other than an Event of Default specified in clause
(vii) above with respect to the Company), shall have occurred and be continuing
under the Indenture, the Trustee, by written notice to the Company, or the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding by written notice to the Company and the Trustee may declare all
amounts owing under the Notes to be due and payable immediately. Upon such
declaration of acceleration, the aggregate principal of, premium, if any, and
interest on the outstanding Notes shall immediately become due and payable. If
an Event of Default results from bankruptcy, insolvency or reorganization with
respect to the Company, all outstanding Notes shall become due and payable
without any further action or notice.
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In certain cases, the holders of a majority in aggregate principal amount of the
Notes then outstanding may waive an existing Default or Event of Default and its
consequences, except a default in the payment of principal of, premium, if any,
and interest on the Notes.
The holders may not enforce the provisions of the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, holders of
a majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power; provided however, that such
direction does not conflict with the terms of the Indenture. The Trustee may
withhold from the holders notice of any continuing Default or Event of Default
(except any Default or Event of Default in payment of principal of, premium, if
any, or interest on the Notes) if the Trustee determines that withholding such
notice is in the holders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and, upon any Officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time
by delivering all outstanding Notes to the Trustee for cancellation and paying
all sums payable by it thereunder. The Company, at its option, (i) will be
discharged from any and all obligations with respect to the Notes (except for
certain obligations of the Company to register the transfer or exchange of such
Notes, replace stolen, lost or mutilated Notes, maintain paying agencies and
hold moneys for payment in trust) or (ii) need not comply with certain of the
restrictive covenants with respect to the Indenture, if the Company deposits
with the Trustee, in trust, U.S. Legal Tender or U.S. Government Obligations or
a combination thereof that, through the payment of interest and premium thereon
and principal amount at maturity in respect thereof in accordance with their
terms, will be sufficient to pay all the principal amount at maturity of and
interest and premium on the Notes on the dates such payments are due in
accordance with the terms of such Notes as well as the Trustee's fees and
expenses. To exercise either such option, the Company is required to deliver to
the Trustee (A) an Opinion of Counsel and, in connection with a discharge
pursuant to clause (i) above, confirmation of such counsel that (I) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling or (II) since the date of the Indenture there has been a change in the
applicable federal income tax law, in either case to the effect that the holders
of the Notes will not recognize income, gain or loss for federal income tax
purposes as a result of the deposit and related defeasance and will be subject
to federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such option had not been exercised, (B)
subject to certain qualifications, an Opinion of Counsel to the effect that
funds so deposited will not violate the Investment Company Act of 1940 and will
not be subject to the effect of Section 547 of the United States Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law and (C) an Officers'
Certificate and an Opinion of Counsel to the effect that the Company has
complied with all conditions precedent to the defeasance.
TRANSFER AND EXCHANGE
A holder will be able to register the transfer of or exchange Notes only in
accordance with the provisions of the Indenture. The Registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. Without the prior consent of the Company, the Registrar is not
required (i) to register the transfer of or exchange any Note selected for
redemption, (ii) to register the transfer of or exchange any Note for a period
of 15 days before the mailing of a notice of redemption and ending on the date
of such mailing or (iii) to register the transfer or exchange of a Note between
a record date and the next succeeding interest payment date. The registered
holder of a Note will be treated as the owner of such Note for all purposes.
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AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent (which may include consents obtained in connection
with a tender offer or exchange offer for Notes) of the holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
Default under, or compliance with any provision of, the Indenture may be waived
(other than any continuing Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes) with the consent (which
may include consents obtained in connection with a tender offer or exchange
offer for Notes) of the holders of a majority in principal amount of the Notes
then outstanding; provided that:
(A) no such modification or amendment may, without the consent of the
holders of 75% in aggregate principal amount of Notes then outstanding,
amend or modify the obligation of the Company under the caption 'Change of
Control' or the definitions related thereto that could adversely affect the
rights of any holder of the Notes; and
(B) without the consent of each holder affected, the Company and the
Trustee may not: (i) extend the maturity of any Note; (ii) affect the terms
of any scheduled payment of interest on or principal of the Notes
(including without limitation any redemption provisions); (iii) take any
action that would subordinate the Notes or the Note Guarantees to any other
Indebtedness of the Company or any of Guarantors, respectively (except as
provided under 'Subordination' above), or otherwise affect the ranking of
the Notes or the Note Guarantees; or (iv) reduce the percentage of holders
necessary to consent to an amendment, supplement or waiver to the
Indenture.
Without the consent of any holder, the Company and the Trustee may
amend or supplement the Indenture or the Notes to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to
or in place of certificated Notes, to provide for the assumption of the
Company's obligations to holders in the case of a merger or acquisition, or
to make any change that does not adversely affect the rights of any holder.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Indenture), it must eliminate such conflict or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
occurs and is not cured, the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in similar circumstances in
the conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any holder, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
Each of the Indenture, the Notes and the Note Guarantees provides that it
will be governed by, and construed in accordance with, the laws of the State of
New York.
BOOK-ENTRY, DELIVERY AND FORM OF SECURITIES
The Old Notes were initially issued in the form of one or more Global Notes
(collectively, the 'Old Global Note'). The New Notes will initially be issued in
the form of one or more Global Notes (collectively, the 'New Global Note'). The
Old Global Note was deposited on the date of closing of the sale of the Old
Notes, and the New Global Note will be deposited on the date of closing of the
Notes
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Exchange Offer, with or on behalf of the Depositary and registered in the name
of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the 'Global Note Holder').
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the 'Participants'
or the 'Depositary's Participants') and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
'Indirect Participants' or the 'Depositary's Indirect Participants') that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
Pursuant to procedures established by the Depositary (i) upon deposit of
the Global Note, the Depositary will credit the accounts of Participants in
connection with the Notes with portions of the principal amount of the Global
Note and (ii) ownership of the Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer the Notes will be limited to such extent.
So long as the Depositary or its nominee is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of outstanding Notes represented by such
Global Note for all purposes under the Indenture and the New Notes. Except as
provided below, owners of Notes will not be entitled to have Notes registered in
their names and will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. None of the
Company, the Guarantors or the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of Notes
by the Depositary, or for maintaining, supervising or reviewing any records of
the Depositary relating to such Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of a Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of such Global
Note Holder in its capacity as the registered holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names any Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, none of the Company or the Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of Notes (including principal, premium, if any, and interest).
The Company believes, however, that it is currently the policy of the Depositary
immediately to credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective beneficial interests in
the relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Subject to certain conditions, any person having a beneficial interest in
the Global Notes may, upon request to the Trustee, exchange such beneficial
interest for Notes in definitive form. Upon any such issuance, the Trustee is
required to register such Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). In
addition, if (i) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the relevant Global
Note Holder of its Global Note, Notes in such
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form will be issued to each person that such Global Note Holder and the
Depositary identifies as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
REGISTRATION RIGHTS
Holders of New Notes are not entitled to any registration rights with
respect to the New Notes. The Company has agreed for a period of 180 days from
the consummation of the Notes Exchange Offer to make available a prospectus
meeting the requirements of the Securities Act to any broker-dealer for use in
connection with any resale of any New Notes. The Registration Statement of which
this Prospectus is a part constitutes the registration statement for the Notes
Exchange Offer which is the subject of the Registration Rights Agreement. Upon
the closing of the Notes Exchange Offer, subject to certain limited exceptions,
Holders of untendered Old Notes will not retain any rights under the
Registration Rights Agreement.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by contacting the Company at 250 East Fifth Street, Suite 500,
Cincinnati, Ohio 45202 or by telephone at (513) 721-7010.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
'Acquired Indebtedness' means (a) with respect to any Person that becomes a
Restricted Subsidiary after the date of the Indenture, Indebtedness of such
Person and its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary that was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (b) with
respect to the Company or any of its Restricted Subsidiaries, any Indebtedness
of a Person (other than the Company or a Restricted Subsidiary) existing at the
time such Person is merged with or into the Company or a Restricted Subsidiary,
or Indebtedness assumed by the Company or any of its Restricted Subsidiaries in
connection with the acquisition of an asset or assets from another Person, which
Indebtedness was not, in any case, incurred by such other Person in connection
with, or in contemplation of, such merger or acquisition.
'Affiliate' of any Person means any Person (i) which directly or indirectly
controls or is controlled by, or is under direct or indirect common control
with, the referent Person, (ii) which beneficially owns or holds, directly or
indirectly, 10% or more of any class of the Voting Stock, or more than 20% of
all classes of Capital Stock (other than preferred stock) in the aggregate, of
the referent Person, (iii) of which 10% or more of the Voting Stock, or more
than 20% of all classes of Capital Stock (other than preferred stock) in the
aggregate, is beneficially owned or held, directly or indirectly, by the
referent Person or (iv) with respect to an individual, any immediate family
member of such Person. For purposes of this definition, control of a Person
shall mean the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
'Asset Sale' means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or any of
its Restricted Subsidiaries (including, without limitation, by means of a Sale
and Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a 'transfer'), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of any
Subsidiary or (b) any other properties or assets of the Company or any of its
Subsidiaries other than transfers of cash, Cash Equivalents, accounts
receivable,
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inventory or other properties or assets in the ordinary course of business. For
the purposes of this definition, the term 'Asset Sale' shall not include any of
the following: (i) any transfer of properties or assets (including Capital
Stock) that is governed by, and made in accordance with, the provisions
described under 'Covenants -- Limitations on Mergers and Certain Other
Transactions'; (ii) any transfer of properties or assets to an Unrestricted
Subsidiary, if permitted under the 'Limitations on Restricted Payments'
covenant; (iii) sales of damaged, worn-out or obsolete equipment or assets that,
in the Company's reasonable judgment, are either no longer used or useful in the
business of the Company or its Subsidiaries, provided that the proceeds thereof
are used to purchase replacement or similar assets for use in the business of
the Company and its Subsidiaries; and (iv) any transfers that, but for this
clause (iv), would be Asset Sales, if after giving effect to such transfers, the
aggregate Fair Market Value of the properties or assets transferred in such
transaction or any such series of related transactions does not exceed $500,000.
'Attributable Indebtedness,' when used with respect to any Sale and
Leaseback Transaction, means, as at the time of determination, property subject
to such Sale and Leaseback Transaction and the present value (discounted at a
rate equivalent to the Company's then-current weighted average cost of funds for
borrowed money as at the time of determination, compounded on a semi-annual
basis) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in any such Sale and Leaseback Transaction.
'Board Resolution' means a duly adopted resolution of the Board of
Directors of the Company.
'Capital Stock' of any Person means (i) any and all shares or other equity
interests (including without limitation common stock, preferred stock and
partnership interests) in such Person and (ii) all rights to purchase, warrants
or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) such shares or other
interests in such Person.
'Capitalized Lease Obligations' of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
'Cash Equivalents' means (i) marketable obligations with a maturity of 360
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof); (ii) U.S. dollar denominated time deposits and certificates of deposit
of any financial institution (a) that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than $500
million or (b) whose short-term commercial paper rating or that of its parent
company is at least A-1 or the equivalent thereof from S&P or P-1 or the
equivalent thereof from Moody's (any such bank, an 'Approved Bank'), in each
case with a maturity of 360 days or less from the date of acquisition; (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing no more than 360 days
from the date of acquisition; (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clause
(i) above entered into with any commercial bank meeting the specifications of
clause (ii)(a) above; (v) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types described in
clauses (i) through (iv) above; and (vi) time deposits and certificates of
deposit of any commercial bank of recognized standing having capital and surplus
in excess of the local currency equivalent of $100,000,000 incorporated in a
country where the Company has one or more locally operating Foreign
Subsidiaries, and that is, as of the Issue Date, providing banking services to
the Company or any of its Foreign Subsidiaries.
'Change of Control' means the occurrence of any of the following: (i) the
consummation of any transaction the result of which is (x) if such transaction
occurs prior to the first sale of Voting Stock of Parent or the Company pursuant
to a registration statement under the Securities Act that results in at
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least 20% of the then outstanding Voting Stock of Parent or the Company having
been sold to the public, that either (A) Control Group Members beneficially own,
directly or indirectly, less than 51% of the Voting Stock of the Company or
Parent (such percentage determined, for purposes of this definition, as a
percentage of the total voting power of all Voting Stock of the relevant Person)
or (B) any other Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
of the Exchange Act), directly or indirectly, of 51% of the Voting Stock of the
Company or Parent (including in any event through direct or indirect beneficial
ownership of Capital Stock of Control Group Members referred to in clause (ii)
of the definition thereof) and (y) if such transaction occured thereafter, that
any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) (other than Control Group Members), is or becomes the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of 40% of
the Voting Stock of the Company or Parent at any time at which Control Group
Members do not beneficially own, directly or indirectly, at least 51% of the
Voting Stock of the Company and Parent, (ii) the Company or Parent consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of the
assets of the Company or Parent and their Subsidiaries, in either case taken as
a whole, to any Person, or any Person consolidates with, or merges with or into,
the Company or Parent, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company or Parent, as the case may be, is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the outstanding Voting Stock of the Company or
Parent, as the case may be, is converted into or exchanged for Voting Stock
(other than Disqualified Capital Stock) of the surviving or transferee
corporation and the beneficial owners of the Voting Stock of the Company or
Parent, as the case may be, immediately prior to such transaction own, directly
or indirectly, not less than a majority of the Voting Stock of the surviving or
transferee corporation immediately after such transaction, or (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company or Parent (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company or Parent, as the case may be, was
approved by either (i) a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or (ii) a Control
Group Member) cease for any reason to constitute a majority of the Board of
Directors of the Company or Parent, as the case may be, then in office.
'Consolidated Amortization Expense' for any period means the amortization
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
'Consolidated Depreciation Expense' for any period means the depreciation
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
'Consolidated Income Tax Expense' for any period means the provision for
taxes based on income and profits of the Company and its Restricted Subsidiaries
to the extent such income or profits were included in computing Consolidated Net
Income for such period.
'Consolidated Interest Coverage Ratio' means, with respect to any
determination date, the ratio of (a) EBITDA for the four full fiscal quarters
immediately preceding the determination date (for any determination, the
'Reference Period'), to (b) Consolidated Interest Expense for such Reference
Period. In making such computations, (i) EBITDA and Consolidated Interest
Expense shall be calculated on a pro forma basis assuming that (A) the
Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and
all other Indebtedness incurred or Disqualified Capital Stock issued after the
first day of such Reference Period referred to in the covenant described under
' -- Certain Covenants Limitations on Additional Indebtedness' through and
including the date of determination), and (if applicable) the application of the
net proceeds therefrom (and from any other such Indebtedness or Disqualified
Capital Stock), including the refinancing of other Indebtedness, had been
incurred on the first day of such Reference Period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in such
pro
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forma calculation and (B) any acquisition or disposition by the Company or any
Restricted Subsidiary of any properties or assets outside the ordinary course of
business or any repayment of any principal amount of any Indebtedness of the
Company or any Restricted Subsidiary prior to the stated maturity thereof, in
either case since the first day of such Reference Period through and including
the date of determination, had been consummated on such first day of such
Reference Period; (ii) the Consolidated Interest Expense attributable to
interest on any Indebtedness required to be computed on a pro forma basis in
accordance with the covenant described under ' -- Certain
Covenants -- Limitations on Additional Indebtedness' and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of interest,
shall be computed by applying, at the option of the Company, either the fixed or
floating rate; (iii) the Consolidated Interest Expense attributable to interest
on any Indebtedness under a revolving credit facility required to be computed on
a pro forma basis in accordance with the covenant described under ' -- Certain
Covenants -- Limitations on Additional Indebtedness' shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period, provided that such average daily balance shall be reduced by the amount
of any repayment of Indebtedness under a revolving credit facility during the
applicable period, which repayment permanently reduced the commitments or
amounts available to be reborrowed under such facility; (iv) notwithstanding the
foregoing clauses (ii) and (iii), interest on Indebtedness determined on a
floating rate basis, to the extent such interest is covered by agreements
relating to Hedging Obligations, shall be deemed to have accrued at the rate per
annum resulting after giving effect to the operation of such agreements; and (v)
if after the first day of the applicable Reference Period and before the date of
determination, the Company has permanently retired any Indebtedness out of the
net proceeds of the issuance and sale of shares of Capital Stock (other than
Disqualified Capital Stock) of the Company within 60 days of such issuance and
sale, Consolidated Interest Expense shall be calculated on a pro forma basis as
if such Indebtedness had been retired on the first day of such period.
'Consolidated Interest Expense' for any period means the sum, without
duplication, of the total interest expense of the Company and its consolidated
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP and including, without limitation (i) imputed interest on
Capitalized Lease Obligations and Attributable Indebtedness, (ii) commissions,
discounts and other fees and charges owed with respect to letters of credit
securing financial obligations and bankers' acceptance financing, (iii) the net
costs associated with Hedging Obligations, (iv) amortization of other financing
fees and expenses, (v) the interest portion of any deferred payment obligations,
(vi) amortization of debt discount or premium, if any, (vii) all other non-cash
interest expense, (viii) capitalized interest, (ix) all cash dividend payments
(and non-cash dividend payments in the case of a Restricted Subsidiary) on any
series of preferred stock of the Company or any Restricted Subsidiary, (x) all
interest payable with respect to discontinued operations, and (xi) all interest
on any Indebtedness of any other Person guaranteed by the Company or any
Restricted Subsidiary.
'Consolidated Net Income' for any period means the net income (or loss) of
the Company and its consolidated Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded from such net income (to the extent otherwise included
therein), without duplication (i) the net income (or loss) of any Person (other
than a Restricted Subsidiary) in which any Person other than the Company and its
Restricted Subsidiaries has an ownership interest, except to the extent that any
such income has actually been received by the Company and its Restricted
Subsidiaries in the form of cash dividends during such period; (ii) except to
the extent includible in the consolidated net income of the Company pursuant to
the foregoing clause (i), the net income (or loss) of any Person that accrued
prior to the date that (a) such Person becomes a Restricted Subsidiary or is
merged into or consolidated with the Company or any Restricted Subsidiary or (b)
the assets of such Person are acquired by the Company or any Restricted
Subsidiary; (iii) the net income of any Restricted Subsidiary during such period
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that income (a) is not permitted
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary during such period or (b) would be subject to
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any taxes payable on such dividend or distribution; (iv) any gain (or, only in
the case of a determination of Consolidated Net Income as used in EBITDA, any
loss), together with any related provisions for taxes on any such gain (or, if
applicable, the tax effects of such loss), realized during such period by the
Company or any Restricted Subsidiary upon (a) the acquisition of any securities,
or the extinguishment of any Indebtedness, of the Company or any Restricted
Subsidiary or (b) any Asset Sale by the Company or any of its Restricted
Subsidiary; (v) any extraordinary gain (or, only in the case of a determination
of Consolidated Net Income as used in EBITDA, any extraordinary loss), together
with any related provision for taxes on any such extraordinary gain (or, if
applicable, the tax effects of such extraordinary loss), realized by the Company
or any Restricted Subsidiary during such period; (vi) any non-cash loss during
Fiscal 1998 reflecting the decrease in deferred tax assets resulting from the
Acquisition and transactions consummated in connection therewith; and (vii) in
the case of a successor to the Company by consolidation, merger or transfer of
its assets, any earnings of the successor prior to such merger, consolidation or
transfer of assets; and provided, further, that (A) any gain referred to in
clauses (iv) and (v) above that relates to a Restricted Investment and which is
received in cash by the Company or a Restricted Subsidiary during such period
shall be included in the consolidated net income of the Company, (B) to the
extent deducted in determining consolidated net income for such period and not
otherwise added back pursuant to the foregoing clauses of this definition, the
amount of expenses in respect of Specified Transaction Payments attributable to
such period shall be added back in determining Consolidated Net Income for such
period, and (C) to the extent not otherwise deducted in determining such
consolidated net income for any period, all payments made to Parent pursuant to
any Tax Sharing Agreement or otherwise (including pursuant to the 'Certain
Covenants -- Limitations on Restricted Payments') in respect of taxes for such
period shall be deducted from the consolidated net income of the Company.
'Consolidated Net Worth' means, with respect to any Person as of any date,
the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries as of such date, less all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to the date of the Indenture in the
book value of any asset owned by such Person or a Subsidiary of such Person.
'Control Group Members' means (i) the natural person or persons who are the
ultimate beneficial owners of Granaria Holdings N.V. on the Issue Date, as
disclosed under 'Security Ownership and Certain Beneficial Owners and Management
of Parent' and members of their immediate families and any spouse, parent or
descendant of any such person, or a trust the beneficiaries of which include
only any of the foregoing, and any corporation or other entity all of the
Capital Stock of which (other than directors' qualifying shares) is owned by any
of the foregoing or (ii) any corporation or other entity at least 51% of the
Voting Stock of which is owned by any of the Persons referred to in clause (i).
'Coverage Ratio Incurrence Condition' would be met at any specified time
only if the Company (or its Successor, as the case may be) would be able to
incur $1.00 of additional Indebtedness at such specified time pursuant to the
Consolidated Interest Coverage Ratio test set forth in the covenant described
under ' -- Certain Covenants -- Limitations on Additional Indebtedness.'
'Default' means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
'Designated Senior Indebtedness' means (i) Indebtedness under the New
Credit Agreement (whether incurred pursuant to the definition of Permitted
Indebtedness or pursuant to the covenant described under ' -- Limitations on
Additional Indebtedness' covenant) and (ii) any other Indebtedness constituting
Senior Indebtedness that at the date of determination, has an aggregate
principal amount outstanding of at least $25.0 million and that is specifically
designated by the Company, in the instrument creating or evidencing such Senior
Indebtedness or in an Officer's Certificate delivered to the Trustee, as
'Designated Senior Indebtedness.'
'Disqualified Capital Stock' means any Capital Stock of such Person or any
of its Subsidiaries that, by its terms, by the terms of any agreement related
thereto or by the terms of any security into which it is convertible, putable or
exchangeable, is, or upon the happening of any event or the passage of time
would be, required to be redeemed or repurchased by such Person or any to its
Subsidiaries, whether or
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not at the option of the holder thereof, or matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in
part, on or prior to the final maturity date of the Notes; provided, however,
that any class of Capital Stock of such Person that, by its terms, authorizes
such Person to satisfy in full its obligations with respect to the payment of
dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise)
or repurchase thereof or otherwise by the delivery of Capital Stock that is not
Disqualified Capital Stock, and that is not convertible, puttable or
exchangeable for Disqualified Capital Stock or Indebtedness, shall not be deemed
to be Disqualified Capital Stock so long as such Person satisfies its
obligations with respect thereto solely by the delivery of Capital Stock that is
not Disqualified Capital Stock.
'EBITDA' for any period mean without duplication, the sum of the amounts
for such period of (i) Consolidated Net Income plus (ii) in each case to the
extent deducted in determining Consolidated Net Income for such period (and
without duplication), (A) Consolidated Income Tax Expense, (B) Consolidated
Amortization Expense (but only to the extent not included in Consolidated
Interest Expense), (C) Consolidated Depreciation Expense, (D) Consolidated
Interest Expense and (E) all other non-cash items reducing the Consolidated Net
Income (excluding any such non-cash charge that results in an accrual of a
reserve for cash charges in any future period) for such period, in each case
determined on a consolidated basis in accordance with GAAP and minus (iii) the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such Period.
'Eligible Junior Securities' means (a) the common stock of Parent and (b)
any preferred stock of Parent that (i) has a maturity date or mandatory
redemption date not earlier than March 1, 2009, (ii) has no remedies for missed
dividends other than accrual on a cumulative basis and appointment of not more
than two directors to the Board of Directors of Parent, (iii) is not
convertible, puttable or exchangeable into any other security of Parent other
than common stock and (iv) is not, by its terms, by the terms of any agreement
related thereto or by the terms of any security into which it is convertible,
puttable or exchangeable, and upon the happening of any event or the passage of
time would not be, required to be redeemed or repurchased by such Person or any
of its Subsidiaries, whether or not at the option of the holder thereof, or
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, in whole or in part, on or prior to March 1, 2009.
'Equity Offering' means an underwritten primary offering of Eligible Junior
Securities of Parent pursuant to a registration statement filed with the
Commission in accordance with the Securities Act, or pursuant to a private
placement pursuant to an available exemption from registration and, in the case
of any such private placement, a majority of such placement of which is sold to
Persons that are not then and were not at the Issue Date Affiliates of Granaria
Holdings.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Exchange Debentures' means the 11 3/4% Exchange Debentures due 2008 of
Parent.
'Existing Indebtedness' means all of the Indebtedness of the Company and
its Subsidiaries that is outstanding on the Issue Date.
'Fair Market Value' of any asset or items means the fair market value of
such asset or items as determined in good faith by the Board of Directors and
evidenced by a Board Resolution.
'Foreign Subsidiary' means any Subsidiary of the Company that is not
incorporated or organized in the United States or in any State thereof.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
'Granaria Holdings' means Granaria Holdings N.V., a Dutch corporation, and
its successors.
'Guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without
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limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness.
'Guarantors' means each of the Subsidiary Guarantors and Parent, and
'Guarantor' means any one of the foregoing.
'Hedging Obligations' of any Person means the obligations of such Person
pursuant to (i) any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect such Person
against fluctuations in interest rates, (ii) agreements or arrangements designed
to protect such Person against fluctuations in foreign currency exchange rates
in the conduct of its operations, or (iii) any forward contract, commodity swap
agreement, commodity option agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in commodity prices, in
each case, entered into in the ordinary course of business for bona fide hedging
purposes and not for the purpose of speculation.
'Immaterial Subsidiary' means (i) any Subsidiary of the Company which does
not own assets in excess of $50,000, (ii) any Name Holder Subsidiary, and (iii)
Eagle-Picher Inc., a Virgin Island foreign sales corporation.
'incur' means, with respect to any Indebtedness or Obligation, incur,
create, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to such Indebtedness or
Obligation; provided that (i) the Indebtedness of a Person existing at the time
such Person became a Restricted Subsidiary shall be deemed to have been incurred
by such Restricted Subsidiary and (ii) neither the accrual of interest nor the
accretion of accreted value shall be deemed to be an incurrence of Indebtedness.
'Indebtedness' of any Person at any date means, without duplication: (i)
all liabilities, contingent or otherwise, of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
person or only to a portion thereof); (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto); (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred by
such Person in the ordinary course of business in connection with obtaining
goods, materials or services, which payable is not overdue by more than 60 days
according to the original terms of sale unless such payable is being contested
in good faith; (v) the maximum fixed redemption or repurchase price of all
Disqualified Capital Stock of such Person; (vi) all Capitalized Lease
Obligations of such Person; (vii) all Indebtedness of others secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by such
Person; (viii) all Indebtedness of others guaranteed by such Person to the
extent of such guarantee; provided that Indebtedness of the Company or its
Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries
shall only be counted once in the calculation of the amount of Indebtedness of
the Company and its Subsidiaries on a consolidated basis; (ix) all Attributable
Indebtedness; and (x) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above, the maximum liability of such Person for any
such contingent obligations at such date and, in the case of clause (vii), the
lesser of (A) the Fair Market Value of any asset subject to a Lien securing the
Indebtedness of others on the date that the Lien attaches and (B) the amount of
the Indebtedness secured. For purposes of the preceding sentence, the 'maximum
fixed redemption or repurchase price' of any Disqualified Capital Stock that
does not have a fixed redemption or repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased or redeemed on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock (or any equity security for which it may be exchanged
or converted), such fair market value shall be determined in good faith by the
Board of Directors of such Person, which determination shall be evidenced by a
Board Resolution.
'Independent Director' means a director of the Company who has not and
whose Affiliates have not, at any time during the twelve months prior to the
taking of any action hereunder, directly or
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indirectly, received, or entered into any understanding or agreement to receive,
any compensation, payment or other benefit, of any type or form, from the
Company or any of its Affiliates, other than customary directors fees for
serving on the Board of Directors of the Company or any Affiliate and
reimbursement of out-of-pocket expenses for attendance at the Company's or
Affiliate's board and board committee meetings.
'Independent Financial Advisor' means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Company's Board of Directors, qualified to perform
the task for which it has been engaged and disinterested and independent with
respect to the Company and its Affiliates.
'Investments' of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business) or similar credit extensions constituting
Indebtedness of such Person, and any guarantee of Indebtedness of any other
Person, (ii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (iii) all other items that would be classified as investments (including
without limitation purchases of assets outside the ordinary course of business)
on a balance sheet of such Person prepared in accordance with GAAP.
'Issue Date' means the date the Notes are initially issued.
'Lien' means, with respect to any asset or property, any mortgage, deed of
trust, lien (statutory or other), pledge, lease, easement, restriction,
covenant, charge, security interest or other encumbrance of any kind or nature
in respect of such asset or property, whether or not filed, recorded or
otherwise perfected under applicable law, including without limitation any
conditional sale or other title retention agreement, and any lease in the nature
thereof, any option or other agreement to sell, and any filing of, or agreement
to give, any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction (other than cautionary filings in
respect of operating leases).
'Moody's' means Moody's Investors Service, Inc., and its successors.
'Name Holder Subsidiary' means any Subsidiary of the Company incorporated
and existing solely for the purpose of reserving the corporate name of such
Subsidiary and which does not conduct any business or hold any assets other than
shares of another Name Holder Subsidiary.
'Net Available Proceeds' means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in the
properties or assets subject to the Asset Sale or having a Lien therein and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pensions and other postemployment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee; provided, however, that any
amounts remaining after adjustments, revaluations or liquidations of such
reserves shall constitute Net Available Proceeds.
'New Credit Agreement' means the Credit Agreement dated as of February 24,
1998 by and among ABN AMRO Bank N.V., as agent, PNC Bank, National Association,
as documentation agent, the banks party thereto, the Company and the Guarantors,
together with any additional guarantees by the Guarantors and security
agreements, as any of the foregoing may be subsequently amended, restated,
refinanced, or replaced from time to time, and shall include agreements in
respect of Hedging
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Obligations designed to protect against fluctuations in interest rates and
entered into with respect to loans thereunder.
'Non-Recourse Purchase Money Indebtedness' means Indebtedness of the
Company or any of its Subsidiaries incurred (a) to finance the purchase of any
assets of the Company or any of its Subsidiaries within 90 days of such
purchase, (b) to the extent the amount of Indebtedness thereunder does not
exceed 100% of the purchase cost of such assets, (c) to the extent the purchase
cost of such assets is or should be included in 'additions to property, plant
and equipment' in accordance with GAAP, and (d) to the extent that such
Indebtedness is non-recourse to the Company or any of its Subsidiaries or any of
their respective assets other than the assets so purchased.
'Obligation' means any principal, interest (including, in the case of
Senior Indebtedness, interest accruing subsequent to the filing of a petition in
bankruptcy or insolvency at the rate specified in the document relating to such
Indebtedness, whether or not such interest is an allowed claim permitted to be
enforced against the obligor under applicable law), penalties, fees,
indemnification, reimbursements, costs, expenses, damages and other liabilities
payable under the documentation governing any Indebtedness.
'Officer' means any of the following of the Company: the Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer, the President,
any Vice President, the Treasurer or the Secretary.
'Officers' Certificate' means a certificate signed by any two Officers.
'Opinion of Counsel' means a written opinion from legal counsel (such
counsel may be an employee of or counsel to the Company or the Trustee) that
complies with the requirements of this Indenture.
'Parent' means Eagle-Picher Holdings, Inc., a Delaware corporation, and its
successors.
'Parent Preferred Stock' means collectively the Series A 11 3/4% Cumulative
Redeemable Exchangeable Preferred Stock of Parent and Series B 11 3/4%
Cumulative Redeemable Exchangeable Preferred Stock of Parent.
'Payment Restriction' with respect to a Subsidiary of any Person, means any
encumbrance, restriction of limitation, whether by operation of the terms of its
charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (b) make loans or advances to such Person or
any other Subsidiary or such Person, (c) guarantee any Indebtedness of the
Company or any Restricted Subsidiary or (d) transfer any of its properties or
assets to such Person or any other Subsidiary of such Person (other than
customary restrictions on transfers of property subject to a Lien permitted
under the Indenture) or (ii) such Person or any other Subsidiary of such Person
to receive or retain any such dividends, distributions or payments, loans or
advances, guarantee, or transfer of properties or assets.
'Permitted Indebtedness' means any of the following:
(i) Indebtedness of the Company and any Subsidiary Guarantor under the
New Credit Agreement in an aggregate principal amount at any time
outstanding not to exceed (a) under the Senior Secured Term Loan Facility,
$225 million, less the amount thereof that has been repaid under the
covenant described under ' -- Limitations on Asset Sales' and (b) under the
Revolving Loan Facility the greater of (x) $175 million and (y) the sum of
80% of the book value of the eligible accounts receivable and 50% of
inventory of the Company and its Subsidiaries, calculated on a consolidated
basis and in accordance with GAAP;
(ii) Indebtedness under the Notes, the Note Guarantees and the
Indenture;
(iii) Existing Indebtedness;
(iv) Indebtedness under Hedging Obligations, provided that (1) such
Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the 'Limitations on
Additional Indebtedness' covenant, and (2) the notional principal amount of
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such Hedging Obligations at the time incurred does not exceed the principal
amount of such Indebtedness to which such Hedging Obligations relate;
(v) Indebtedness of the Company to a Subsidiary Guarantor and
Indebtedness of any Subsidiary Guarantor to the Company or any other
Subsidiary Guarantor; provided, however, that upon either (1) the
subsequent issuance (other than directors' qualifying shares), sale,
transfer or other disposition of any Capital Stock or any other event which
results in any such Subsidiary Guarantor ceasing to be a Subsidiary
Guarantor or (2) the transfer or other disposition of any such Indebtedness
(except to the Company or a Subsidiary Guarantor), the provisions of this
clause (v) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed, in each case, to be incurred and shall be
treated as an incurrence for purposes of the 'Limitations on Additional
Indebtedness' covenant at the time the Subsidiary Guarantor in question
ceased to be a Subsidiary Guarantor or the time such transfer or other
disposition occurred;
(vi) Indebtedness in respect of bid, performance or surety bonds
issued for the account of the Company in the ordinary course of business,
including guarantees or obligations of the Company with respect to letters
of credit supporting such bid, performance or surety obligations (in each
case other than for an obligation for money borrowed);
(vii) Indebtedness in respect of Non-Recourse Purchase Money
Indebtedness incurred by the Company or any Restricted Subsidiary;
(viii) Refinancing Indebtedness; and
(ix) Indebtedness, in addition to Indebtedness incurred pursuant to
the foregoing clauses of this definition, with an aggregate principal face
or stated amount (as applicable) at any time outstanding for all such
Indebtedness incurred pursuant to this clause not in excess of $35.0
million; provided, however, that (A) Indebtedness under letters of credit
and performance bonds issued for the account of a Foreign Subsidiary
pursuant to this clause to finance trade activities or otherwise in the
ordinary course of business, and not to support borrowed money or the
obtaining of advances or credit, may not exceed $10.0 million in an
aggregate stated or face amount for all such letters of credit and
performance bonds and (B) the aggregate principal amount at any time
outstanding for all other Indebtedness incurred by all Foreign Subsidiaries
pursuant to this clause may not exceed $25.0 million.
'Permitted Junior Securities' means any securities of the Company provided
for by a plan of reorganization or readjustment that are subordinated in right
of payment to all Senior Indebtedness that may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Indebtedness.
'Person' means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof or other entity of any kind.
'Plan of Liquidation' with respect to any Person, means a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
'Refinancing Indebtedness' means Indebtedness of the Company or a
Restricted Subsidiary issued in exchange for, or the proceeds from the issuance
and sale or disbursement of which are used substantially concurrently to repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, 'repay'), or constituting an amendment, modification or
supplement to or a deferral or renewal of (collectively, an 'amendment'), any
Indebtedness of the Company or any Restricted Subsidiary (the 'Refinanced
Indebtedness') in a principal amount not in excess of the principal amount of
the Refinanced Indebtedness (or, if such Refinancing Indebtedness refinances
Indebtedness under a revolving credit facility or other agreement providing a
commitment for subsequent borrowings, with a maximum commitment not to exceed
the maximum commitment under
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such revolving credit facility or other agreement); provided that: (i) the
Refinancing Indebtedness is the obligation of the same Person as that of the
Refinanced Indebtedness, (ii) if the Refinanced Indebtedness was subordinated to
or pari passu with the Note Indebtedness, then such Refinancing Indebtedness, by
its terms, is expressly pari passu with (in the case of Refinanced Indebtedness
that was pari passu with) the Note Indebtedness, or subordinate in right of
payment to (in the case of Refinanced Indebtedness that was subordinated to) the
Note Indebtedness at least to the same extent as the Refinanced Indebtedness;
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a Weighted Average Life
to Maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the Weighted Average Life to Maturity of the portion of the
Refinanced Indebtedness being repaid that is scheduled to mature on or prior to
the maturity date of the Notes; and (iv) the Refinancing Indebtedness is secured
only to the extent, if at all, and by the assets (which may include
after-acquired assets), that the Refinanced Indebtedness is secured.
'Related Business' means any business in which the Company and its
Subsidiaries operate on the Issue Date, or that is closely related to or
complements the business of the Company and its Subsidiaries, as such business
exists on the Issue Date.
'Related Business Investment' means any Investment directly by the Company
or its Subsidiaries in any Related Business.
'Related Party Agreement' means any management or advisory agreements or
other arrangements with any Affiliate of the Company or with any other direct or
indirect holder of more than 10% of any class of the Company's or Parent's
capital stock (except, in any such case, Parent, the Company or any Restricted
Subsidiary), but excluding in any event arrangements with ABN AMRO Bank N.V. and
its Affiliates of their respective successors (i) under the New Credit Agreement
or in connection therewith, (ii) in connection with the offering of the Notes or
the Series A Senior Preferred Stock or (iii) pursuant to other banking,
financing or underwriting activity entered into in the ordinary course of
business.
'Restricted Debt Payment' means any purchase, redemption, defeasance
(including without limitation in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Restricted Subsidiary, prior to the scheduled maturity or prior to any scheduled
repayment of principal or sinking fund payment, as the case may be, in respect
of Subordinated Indebtedness.
'Restricted Investment' means any Investment by the Company or any
Restricted Subsidiary (other than investments in Cash Equivalents) in any Person
that is not the Company or a Restricted Subsidiary, including in any
Unrestricted Subsidiary.
'Restricted Payment' means with respect to any Person: (i) the declaration
or payment of any dividend (other than a dividend declared and paid (x) by a
Wholly-Owned Restricted Subsidiary to holders of its Capital Stock, or (y) by a
Subsidiary (other than a Wholly-Owned Restricted Subsidiary) to its shareholders
on a pro rata basis, but only to the extent of the dividends actually received
by the Company or a Restricted Subsidiary) or the making of any other payment or
distribution of cash, securities or other property or assets in respect of such
Person's Capital Stock (except that a dividend payable solely in Capital Stock
(other than Disqualified Capital Stock) of such Person shall not constitute a
Restricted Payment); (ii) any payment on account of the purchase, redemption,
retirement or other acquisition for value of (A) the Capital Stock of the
Company or (B) the Capital Stock of any Restricted Subsidiary, or any other
payment or distribution made in respect thereof, either directly or indirectly
(other than a payment solely in Capital Stock that is not Disqualified Capital
Stock, and excluding any such payment to the extent actually received by the
Company or a Restricted Subsidiary); (iii) any Restricted Investment; (iv) any
Restricted Debt Payment; or (v) payments by the Company or its Restricted
Subsidiaries in respect of any Related Party Agreement.
'Restricted Subsidiary' means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
'Revolving Loan Facility' means the revolving loan facility provided under
the New Credit Agreement.
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'S&P' means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
'Sale and Leaseback Transactions' means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person of any property or asset of such Person which has been or is being sold
or transferred by such Person to such lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset.
'Securities Act' means the U.S. Securities Act of 1933, as amended.
'Senior Indebtedness' means all Indebtedness and other Obligations
specified below payable directly or indirectly by the Company or any Guarantor,
as the case may be, whether outstanding on the Issue Date or thereafter created,
incurred or assumed by the Company or such Guarantor: (i) the principal of and
interest on and all other Indebtedness and Obligations related to the New Credit
Agreement (including, without limitation, all loans, letters of credit and
unpaid drawings with respect thereto and other extensions of credit under the
New Credit Agreement, and all expenses, fees, reimbursements, indemnities and
other amounts owing pursuant to the New Credit Agreement), (ii) amounts payable
in respect of any Hedging Obligations, (iii) in addition to the amounts
described in (i) and (ii), all Indebtedness not prohibited by the 'Limitations
on Additional Indebtedness' covenant that is not expressly pari passu with, or
subordinated to, the Notes or the Note Guarantees, as the case may be, (iv) all
Capital Lease Obligations outstanding on the Issue Date, and (v) all Refinancing
Indebtedness permitted under the Indenture. Notwithstanding anything to the
contrary in the foregoing Senior Indebtedness will not include (a) any
Indebtedness which by the express terms of the agreement or instrument creating,
evidencing or governing the same is junior or subordinate in right of payment to
any item of Senior Indebtedness, (b) any trade payable arising from the purchase
of goods or materials or for services obtained in the ordinary course of
business, (c) Indebtedness incurred (but only to the extent incurred) in
violation of the Indenture as in effect at the time of the respective
incurrence, (d) any Indebtedness of the Company that, when incurred, was without
recourse to the Company, (e) any Indebtedness to any employee of the Company or
any of its respective Subsidiaries or (f) any liability for taxes owned or owing
by the Company.
'Senior Preferred Stock' means, collectively, the Series A Senior Preferred
Stock and the Series B Senior Preferred Stock.
'Senior Secured Term Loan Facility' means the term loan facility providing
for the senior secured Tranche A, Tranche B and Tranche C term loans.
'Senior Subordinated Indebtedness' of the Company means the Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness. 'Senior Subordinated
Indebtedness' of any Guarantor has a correlative meaning.
'Series A Senior Preferred Stock' means the 11 3/4% Series A Cumulative
Redeemable Exchangeable Preferred Stock of Parent.
'Series B Senior Preferred Stock' means the 11 3/4% Series B Cumulative
Redeemable Exchangeable Preferred Stock of Parent.
'Significant Subsidiary' means any Subsidiary of the Company that would be
a 'Significant Subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issue Date, except all references to '10 percent' in such definition shall
be changed to '2 percent.'
'Specified Transaction Payments' means the following payments made to or
for the benefit of present or future officers and employees of the Company and
its Affiliates, or to Granaria Holdings and its Affiliates, in each case in
connection with the Acquisition and on terms (including without limitation the
amount thereof) substantially as described in the Prospectus, but only to the
extent that the aggregate amount thereof does not exceed $43.2 million for all
periods from and after the Issue Date: (i) payments to finance or refinance the
purchase by such officers and employees (or a trust for their
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benefit) of capital stock of Parent or its parent company, the grant or vesting
of any award of such capital stock and the payment by such officers and
employees of income taxes in respect thereof, (ii) stay put and other incentive
bonuses, (iii) severance payments and (iv) transaction fees paid to Granaria
Holdings.
'Subordinated Indebtedness' means Indebtedness of the Company or any
Restricted Subsidiary that is subordinated in right of payment to the Notes or
the Note Guarantee of such Restricted Subsidiary, respectively.
'Subsidiary' of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Voting Stock is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Voting Stock of such
entity entitling the holder thereof to vote or otherwise participate in the
selection of the governing body, partners, managers or others that control the
management and policies of such entity. Unless otherwise specified, 'Subsidiary'
means a Subsidiary of the Company.
'Subsidiary Guarantor' means each domestic Restricted Subsidiary of the
Company (other than an Immaterial Subsidiary) and each other person who is
required to become (or whom the Company otherwise causes to become) a Subsidiary
Guarantor by the terms of the Indenture.
'Tax Sharing Agreement' means any tax sharing agreement or arrangement
entered or to be entered into by Parent, the Company and its Subsidiaries,
providing for payments by or to Parent, the Company and its Subsidiaries that,
in each case, are not in excess of the tax liabilities that would have been
payable by such Person on a stand-alone basis.
'Unrestricted Subsidiary' means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Restricted Subsidiary to be an Unrestricted Subsidiary, and any such
designation shall be deemed to be a Restricted Investment at the time of and
immediately upon such designation by the Company and its Restricted Subsidiaries
in the amount of the Consolidated Net Worth of such designated Subsidiary and
its consolidated Subsidiaries at such time, provided that such designation shall
be permitted only if (A) the Company and its Restricted Subsidiaries would be
able to make the Restricted Investment deemed made pursuant to such designation
at such time, (B) no portion of the Indebtedness or any other obligation
(contingent or otherwise) of such Subsidiary (x) is Guaranteed by the Company or
any Restricted Subsidiary, (y) is recourse to the Company or any Restricted
Subsidiary or (z) subjects any property or asset of the Company or any
Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof and (C) no default or event of default with respect to any
Indebtedness of such Subsidiary would permit any holder of any Indebtedness of
the Company or any Restricted Subsidiary to declare such Indebtedness of the
Company or any restricted Subsidiary due and payable prior to its maturity. The
Board of Directors of the Company may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary, and any such designation shall be deemed to be an
incurrence by the Company and its Subsidiaries of the Indebtedness (if any) of
such Subsidiary so designated for purposes of the ' -- Limitations on Additional
Indebtedness' covenant as of the date of such designation, provided that such
designation shall be permitted only if immediately after giving effect to such
designation and the incurrence of any such additional Indebtedness deemed to
have been incurred thereby (x) the Company would meet the Coverage Ratio
Incurrence Condition and (y) no Default or Event of Default shall be continuing.
Any such designation by the Board of Directors described in the two preceding
sentences shall be evidenced to the Trustee by the filing with the Trustee of a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and setting forth the underlying calculations of such
certificate.
'Voting Stock' with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all times
or only so long as no senior class of stock or other relevant equity interest
has voting power by reason of any contingency) to vote in the election of
members of the board of directors of such Person.
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'Weighted Average Life to Maturity', when applied to any Indebtedness at
any date, means the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (ii) the then outstanding principal
amount of such Indebtedness.
'Wholly-Owned Restricted Subsidiary' means a Restricted Subsidiary of which
100% of the Capital Stock (except for directors' qualifying shares or certain
minority interests owned by other Persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose) is owned directly by the Company or through
one or more Wholly-Owned Restricted Subsidiaries.
DESCRIPTION OF PREFERRED STOCK
The Series A Preferred Stock was offered and sold by Parent pursuant to a
Certificate of Designation and the By-laws of Parent. The Series A Preferred
Stock was issued in a private transaction that was not subject to the
registration requirements of the Securities Act. Concurrently with the Notes
Exchange Offer, Parent is offering to exchange its Series B Preferred Stock for
Series A Preferred Stock in the Preferred Stock Exchange Offer.
GENERAL
The Certificate of Incorporation of Parent authorizes 50,000 shares of
preferred stock, of which 14,191 shares of Preferred Stock are outstanding, and
the same number will be outstanding after giving effect to the Preferred Stock
Exchange Offer. The liquidation preference of the Preferred Stock was initially
$5,637.7 per share and accretes from March 1, 1998 to March 1, 2003, on a daily
basis, at the rate of 11.75% per annum, compounded semi-annually, to a
liquidation preference of $10,000 per share on March 1, 2003. The accreted value
of the Preferred Stock, at any date of determination, will hereinafter be
referred to as the 'Liquidation Preference.'
RANK
The Preferred Stock, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of Parent, ranks
(i) senior to all classes of common stock of Parent and each other class of
capital stock or series of preferred stock established after February 20, 1998
(the date of the Offering Memorandum in connection with the offer of the Series
A Preferred Stock (the 'Preferred Stock Offering Memorandum')) by the Board of
Directors of Parent (the 'Board') the terms of which do not expressly provide
that it ranks on a parity with the Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of Parent
(collectively referred to as 'Junior Securities') and (ii) subject to certain
conditions, on a parity with any class of capital stock or series of preferred
stock established the Board of Directors of Parent, the terms of which expressly
provide that such class or series will rank on a parity with the Preferred Stock
as to dividend distributions and distributions upon the liquidation, winding-up
and dissolution of Parent (collectively referred to as 'Parity Securities').
Creditors of Parent will have priority over the Preferred Stock with respect to
claims on the assets of Parent. Parent has provided guarantees under the New
Credit Agreement and the Notes, and pledged the capital stock of the Company in
support of its guarantee under the New Credit Agreement. In addition, creditors
and stockholders of Parent's Subsidiaries will have priority over the holders of
Preferred Stock with respect to claims on the assets of such Subsidiaries.
DIVIDENDS
No dividends will accrue on the Preferred Stock prior to March 1, 2003.
After March 1, 2003, holders of Preferred Stock will be entitled to receive,
when, as and if declared by the Board, out of funds legally available therefor,
dividends on the Preferred Stock at a rate per annum equal to 11.75% of the
Liquidation Preference per share of Preferred Stock. All dividends will be
cumulative whether or
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not earned or declared on a daily basis from March 1, 2003 and will be payable
on March 1 and September 1 of each year, commencing on September 1, 2003. The
terms of certain debt instruments of Parent and the Company, including the New
Credit Agreement and the Indenture, restrict the payment of cash dividends by
Parent and the payment to Parent of cash dividends by the Company, and future
agreements may provide the same. See 'Description of New Credit Agreement' and
'Description of the Notes -- Certain Covenants.'
OPTIONAL REDEMPTION
The Preferred Stock is redeemable at the option of Parent, in whole or in
part, at any time (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor) on or after March 1,
2003, at certain redemption prices set forth in the Preferred Stock Exchange
Offer Prospectus, together with accrued and unpaid dividends, and Special
Accretion, if any.
Notwithstanding the foregoing, at any time prior to March 1, 2001, Parent
may redeem up to 35% of shares of Preferred Stock outstanding on the Issue Date
out of the proceeds of one or more Equity Offerings, at any time or from time to
time in part, at a redemption price equal to 111.75% of the Liquidation
Preference (excluding any Special Accretion) at the time of redemption, together
with the amount of any Special Accretion to the date of redemption; provided,
that (a) at least $50 million aggregate amount of Liquidation Preference remains
outstanding after each such redemption and (b) such redemption occurs within 60
days of the date of the closing of any such Equity Offering.
MANDATORY REDEMPTION
The Preferred Stock is mandatorily redeemable by Parent on the earlier of
March 1, 2008 and making of a Mandatory Redemption Demand upon the occurrence of
certain Mandatory Redemption Events at a price equal to the then effective
Liquidation Preference, together with all accrued and unpaid dividends, and
Special Interest, if any, to the redemption date.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Preferred Stock
will have the right to require that Parent repurchase such holder's shares of
Preferred Stock for a cash price equal to 101% of the aggregate Liquidation
Preference (excluding any Special Accretion) of the Preferred Stock at the time
of the occurrence of the Change of Control, plus all accumulated and unpaid
dividends and the amount of Special Accretion, if any, to the date of
repurchase.
VOTING RIGHTS
Holders of the Preferred Stock have no voting rights with respect to
general corporate matters except as provided by law or as set forth in the
Certificate. The Certificate provides that in certain circumstances, holders of
Preferred Stock will be entitled to elect a majority of Parent's Board of
Directors or to vote for certain mergers, consolidations or sales of all or
substantially all of the assets of Parent.
EARLY MANDATORY REDEMPTION EVENTS
It will be considered an Early Mandatory Redemption Event under the
Certificate if Parent does not comply with specific limitations on its ability:
(a) to incur additional indebtedness, issue capital stock, engage in any
activities other than the performance of its guarantees under the New Credit
Agreement and the Notes Indenture, or merge or consolidate with any other person
or (b) to permit the Company or its Restricted Subsidiaries to incur additional
indebtedness, issue capital stock, make restricted payments, pay dividends or
make other distributions, enter into certain transactions with affiliates, or
enter into certain mergers or consolidations or sell all or substantially all of
the assets of the Company and the Restricted Subsidiaries. These Early Mandatory
Redemption Events are subject to a number of significant exceptions and
qualifications. The Certificate also requires Parent to deliver certain reports
and information to holders of the Preferred Stock.
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EXCHANGE FEATURE
On March 1, 2003 or any subsequent dividend payment date, Parent may, at
its option, but subject to certain conditions, exchange all, but not less than
all of the shares of Preferred Stock then outstanding for the Exchange
Debentures.
REGISTRATION RIGHTS
Parent and the Initial Purchasers have entered into a Registration Rights
Agreement (the 'Preferred Stock Registration Rights Agreement'). Pursuant to the
Preferred Stock Registration Rights Agreement, Parent has agreed to file with
the Commission a registration statement on an appropriate form under the
Securities Act with respect to an offer to exchange the Series A Preferred Stock
for a new issue of Series B Preferred Stock of Parent registered under the
Securities Act, with terms identical in all material respects to those of the
Series A Preferred Stock (the 'Preferred Stock Exchange Offer'). Parent is
making the Preferred Stock Exchange Offer concurrently with the Company's Notes
Exchange Offer. In certain circumstances, Parent or an affiliate of Parent will
be required to file with the Commission a shelf registration statement to cover
resales of the shares of Preferred Stock by holders thereof. If Parent fails to
satisfy these registration obligations, the Preferred Stock will be subject to
Special Accretion until all such registration defaults are cured.
DESCRIPTION OF EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued pursuant to an indenture
(the 'Exchange Debentures Indenture') between Parent and a trustee to be
determined (the 'Trustee'). The Exchange Debentures will be general unsecured
obligations of Parent, subordinated in right of payment to all existing and
future Senior Indebtedness (as defined in the Exchange Debentures Indenture) of
Parent, including its guarantee of the Notes and borrowings under the New Credit
Agreement.
The Exchange Debentures will bear interest from the Exchange Date at a rate
of 11.75% per annum, payable in cash semiannually, commencing with the first
such date to occur after the Exchange Date. The Exchange Debentures will mature
on March 1, 2008.
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable at the option of Parent, in
whole or in part, at any time on or after March 1, 2003, at certain redemption
prices set forth in the Preferred Stock Exchange Offer Prospectus, together with
accrued and unpaid interest, if any, thereon to the redemption date.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange
Debentures will have the right to require Parent to repurchase all or any part
of such holder's Exchange Debentures at an offer price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest thereon
to the date of repurchase. There can be no assurance that Parent will have
financial resources necessary to repurchase the Exchange Debentures upon a
Change of Control.
CERTAIN COVENANTS
The Exchange Debentures Indenture will contain covenants that, among other
things, limit the ability of Parent, among other things: (a) to incur additional
indebtedness, issue capital stock, engage in activities other than the
performance of its guarantee under the New Credit Agreement and the Notes, or
merge or consolidate with any other Person and (b) to permit the Company and its
Restricted Subsidiaries (as defined in the Exchange Debenture Indenture) to:
incur additional indebtedness; issue capital stock, pay dividends or make
certain other distributions; enter into certain transactions with affiliates; or
merge or consolidate with any other Person or sell all or substantially all of
the assets of the Company and its Restricted Subsidiaries. These covenants are
subject to a number of significant exceptions and qualifications. The Exchange
Debentures Indenture will also require Parent to deliver certain reports and
information to holders of the Preferred Stock.
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PLAN OF DISTRIBUTION
Each Holder desiring to participate in the Notes Exchange Offer will be
required to represent, among other things, that (i) it is not an 'affiliate' (as
defined in Rule 405 of the Securities Act) of the Company or any Guarantor (ii)
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the New
Notes and (iii) it is acquiring the New Notes in the ordinary course of its
business (a Holder unable to make the foregoing representation is referred to as
a 'Restricted Holder'). A Restricted Holder will not be able to participate in
the Notes Exchange Offer and may only sell its Old Notes pursuant to a
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K under the Securities Act, or pursuant to
an exemption from the registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives New Notes
for its own account pursuant to the Notes Exchange Offer (a 'Participating
Broker-Dealer') must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such New Notes. Based upon
interpretations by the staff of the Commission, the Company believes that New
Notes issued pursuant to the Notes Exchange Offer to Participating
Broker-Dealers may be offered for resale, resold, and otherwise transferred by a
participating Broker-Dealer upon compliance with the prospectus delivery
requirements, but without compliance with the registration requirements, of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Broker-Dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. If the Company is not
so notified by any Participating Broker-Dealers that they may be subject to such
requirements or if it is later notified by all such Participating Broker-Dealers
that they are no longer subject to such requirements, the Company will not be
required to maintain the effectiveness of the Notes Exchange Offer Registration
Statement or to amend or supplement this Prospectus following the consummation
of the Notes Exchange Offer or following such date of notification, as the case
may be. The Company believes that during such period of time, delivery of this
Prospectus, as it may be amended or supplemented, will satisfy the prospectus
delivery requirements of a Participating Broker-Dealer engaged in market-making
or other trading activities.
Based on interpretations by the staff of the Commission, the Company
believes that New Notes issued pursuant to the Notes Exchange Offer may be
offered for resale, resold, and other transferred by a Holder thereof (other
than a Restricted Holder or a Participating Broker-Dealer) without compliance
with the registration and prospectus delivery requirements of the Securities
Act.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers (including Participating Broker-Dealers). New Notes received by
Participating Broker-Dealers for their own accounts pursuant to the Notes
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-Dealer
and/or the purchasers of any such New Notes. Any Participating Broker-Dealer
that resells New Notes may be deemed to be an 'underwriter' within the meaning
of the Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Notes Exchange
Offer other than commissions and concessions of any brokers or dealers and will
indemnify Holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
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By acceptance of the Notes Exchange Offer, each Participating Broker-Dealer
that receives New Notes pursuant to the Notes Exchange Offer hereby agrees to
notify the Company prior to using the Prospectus in connection with the sale or
transfer of New Notes, and acknowledges and agrees that, upon receipt of notice
from the Company of the happening of any event that makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
(which notice the Company agrees to deliver promptly to such Participating
Broker-Dealer), such Participating Broker-Dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such Participating Broker-Dealer.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences generally applicable to the exchange of Old Notes for New Notes
and the ownership and disposition of Notes. The federal income tax
considerations set forth below are based upon currently existing provisions of
the Code, applicable Treasury Regulations ('Treasury Regulations'), judicial
authority, and current administrative rulings and pronouncements of the Internal
Revenue Service (the 'IRS'). There can be no assurance that the IRS will not
take a contrary view, and no ruling from the IRS has been, or will be, sought on
the issues discussed herein. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences discussed below.
As used in this summary, 'Note' means either a New Note or an Old Note,
and, where the context so requires, 'the Note' or 'such Note' includes a Note
for which the relevant Note was exchanged pursuant to the Note Exchange Offer.
As used in this summary, the term 'U.S. Holder' means the beneficial owner
of a Note that is for U.S. federal income tax purposes (i) an individual citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject to
United States federal income tax regardless of its source, or (iv) a trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States persons who have the authority to
control all substantial decisions of the trust.
As used in this summary, the term 'Non-United States Holder' means an owner
of a Note that is, for United States federal income tax purposes, (i) a
nonresident alien individual, (ii) a foreign corporation or (iii) a foreign
estate or foreign trust.
The summary is not a complete analysis or description of all potential
federal tax considerations that may be relevant to, or of the actual tax effect
that any of the matters described herein will have on, particular U.S. Holders
and Non-U.S. Holders (collectively, 'Holders'), and does not address foreign,
state, local or other tax consequences. This summary does not address the
federal income tax consequences to (a) special classes of taxpayers (such as S
corporations, mutual funds, insurance companies, financial institutions, small
business investment companies, foreign companies, nonresident alien individuals,
regulated investment companies, real estate investment trusts, dealers in
securities or currencies, broker-dealers and tax-exempt organizations) who are
subject to special treatment under the federal income tax laws, (b) Holders that
hold Notes as part of a position in a 'straddle,' or as part of a 'hedging,'
'conversion,' or other integrated investment transaction for federal income tax
purposes, (c) Holders that do not hold the Notes as capital assets within the
meaning of section 1221 of the Code or (d) Holders whose functional currency is
not the U.S. dollar. Furthermore, estate and gift tax consequences are not
discussed herein.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH PROSPECTIVE PURCHASER OF
THE NEW NOTES IS STRONGLY URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH
RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND AS TO ANY FEDERAL, FOREIGN,
STATE, LOCAL OR OTHER TAX CONSIDERATIONS
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(INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, HOLDING AND
DISPOSITION OF THE NEW NOTES.
Note Exchange Offer
The exchange of Notes for the New Notes pursuant to the Note Exchange Offer
should not be a taxable event for U.S. federal income tax purposes. As a result,
there should be no U.S. federal income tax consequences to holders exchanging
the Notes for the New Notes pursuant to the Note Exchange Offer, and immediately
after the Expiration Date a holder should have the same tax basis and holding
period in the New Notes as in the Old Notes exchanged therefor.
TAX CONSEQUENCES TO U.S. HOLDERS
Interest
Generally, interest paid on the Notes will be taxable to a U.S. Holder as
ordinary income at the time it accrues or is received in accordance with such
U.S. Holder's method of accounting for U.S. federal income tax purposes.
Market Discount
If a Note is acquired at a 'market discount,' some or all of any gain
realized upon a subsequent sale, other disposition, or full or partial principal
payment, of such Note (including of a New Note received in exchange for an Old
Note that was acquired at a 'market discount') may be treated as ordinary
income, as described below. For this purpose, 'market discount' is the excess
(if any) of the principal amount of a Note over the purchase price thereof,
subject to a statutory de minimis exception. Unless a U.S. Holder has elected to
include the market discount in income as it accrues, gain, if any, realized on
any subsequent disposition (other than in connection with certain nonrecognition
transactions) or full or partial principal payment of such Note will be treated
as ordinary income to the extent of the market discount that is treated as
having accrued during the period such U.S. Holder held such Note.
The amount of market discount treated as having accrued will be determined
either (i) on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the Note was held by the
U.S. Holder and the denominator of which it is the total number of days after
the date such U.S. Holder acquired the Note up to and including the date of its
maturity or (ii) if the U.S. Holder so elects, on a constant interest rate
method. A U.S. Holder may make that election with respect to any Note but, once
made, such election is irrevocable.
A U.S. Holder of a Note acquired at a market discount may elect to include
market discount in income currently, through the use of either the straight-line
inclusion method or the elective constant interest method in lieu of
recharacterizing gain upon disposition as ordinary income to the extent of
accrued market discount at the time of disposition. Once made, this election
will apply to all notes and other obligations acquired by the electing U.S.
Holder at a market discount during the taxable year for which the election is
made, and all subsequent taxable years, unless the IRS consents to a revocation
of the election. If an election is made to include market discount in income
currently, the basis of the Note in the hands of the U.S. Holder will be
increased by the amount of the market discount that is included in income.
Unless a U.S. Holder who acquires a Note at a market discount elects to
include market discount in income currently, such U.S. Holder may be required to
defer deductions for a portion of the interest paid on indebtedness allocable to
such Note in an amount not exceeding the deferred market discount, until such
income is realized.
Bond Premium
Under the Code and regulations, including new regulations generally
effective for bonds acquired on or after March 2, 1998 (or certain others by
election), if a U.S. Holder purchases a Note and
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immediately after the purchase the adjusted basis of the Note exceeds the sum of
all amounts payable on the instrument after the purchase date (other than
payments of stated interest), the Note will be treated as having been acquired
with 'bond premium.' A U.S. Holder may elect to amortize such bond premium over
the remaining term of such Note (or, if it results in a smaller amount of
amortizable bond premium, until an earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an interest payment date
or at the stated maturity, as the case may be, will be reduced by the portion of
premium allocable to such period based on the U.S Holder's yield to maturity
with respect to the Note as determined under the bond premium rules. Under the
new regulations, if the amortizable bond premium allocable to an accrual period
exceeds the amount of stated interest allocable to such accrual period, such
excess would be allowed as a deduction for such accrual period, but only to the
extent of the U.S. Holder's prior interest inclusions on the Note; any excess is
generally carried forward and allocable to the next accrual period. A U.S.
Holder who elects to amortize bond premium must reduce his tax basis in the Note
as described below under 'Disposition of the Notes.' If such an election to
amortize bond premium is not made, a U.S. Holder must include the full amount of
each interest payment in income in accordance with his or her regular method of
accounting and may receive a tax benefit (in the form of capital loss or reduced
capital gain) from the premium only in computing such U.S. Holder's gain or loss
upon the sale or disposition or payment of the principal amount of the Note.
An election to amortize premium will apply to amortizable bond premium on
all notes and other bonds, the interest on which is includible in the U.S.
Holder's gross income, held at the beginning of the U.S. Holder's first taxable
year to which the election applies or that are thereafter acquired, and may be
revoked only with the consent of the IRS.
Disposition of the Notes
Upon the sale, exchange or retirement of a Note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (except to the extent attributable
to accrued interest that has not been included in income) and such U.S. Holder's
adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a Note
will generally equal the U.S. Holder's purchase price for such Note, increased
by any market discount previously included in income by the U.S. Holder and
decreased by any principal payments received by the U.S. Holders, any
amortizable bond premium used to offset stated interest and certain other
amortizable bond premium allowed as a deduction under the new regulations
described above under 'Bond Premium,' deducted over the term of the Note. Gain
or loss realized on the sale, exchange or retirement of a Note generally will be
capital gain or loss. Recently enacted legislation includes substantial changes
to the federal taxation of capital gains recognized by individuals, including a
20% maximum tax rate for certain gains from the sale of capital assets held for
more than 18 months. The deduction of capital losses is subject to certain
limitations. Prospective investors should consult their tax advisors regarding
the treatment of capital gains and losses.
The Company does not intend to treat the possibility of an optional
redemption or repurchase of the Notes as giving rise to any accrual of original
issue discount or recognition of ordinary income upon redemption, sale or
exchange of a Note. U.S. Holders may wish to consider that Treasury Regulations
regarding the treatment of certain contingencies were recently issued and may
wish to consult their tax advisers in this regard.
Backup Withholding
Under section 3406 of the Code and applicable Treasury Regulations, a
noncorporate U.S. Holder of the Notes may be subject to backup withholding at
the rate of 31 percent with respect to 'reportable payments,' which include
interest paid on or the proceeds of a sale, exchange or redemption of, the
Notes. The payor will be required to deduct and withhold the prescribed amounts
if (i) the payee fails to furnish a Taxpayer Identification Number ('TIN') to
the payor in the manner required, (ii) the IRS notifies the payor that the TIN
furnished by the payee is incorrect, (iii) there has been a 'notified payee
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underreporting' described in section 3406(c) of the Code or (iv) there has been
a failure of the payee to certify under penalty of perjury that the payee is not
subject to withholding under section 3406(a)(1)(C) of the Code. As a result, if
any one of the events listed above occurs, the payor will be required to
withhold an amount equal to 31 percent from any interest payment made with
respect to the Notes or any payment of proceeds of a redemption of the Notes to
a noncorporate U.S. Holder. Amounts paid as backup withholding do not constitute
an additional tax and will be credited against the U.S. Holder's federal income
tax liability, so long as the required information is provided to the IRS. The
payor generally will report to the U.S. Holders of the Notes and to the IRS the
amount of any 'reportable payments' for each calendar year and the amount of tax
withheld, if any, with respect to payment on those securities.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
Interest paid by the Company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States (or a permanent establishment therein, if a tax treaty applies) by
such Non-United States Holder and such Non-United States Holder (i) does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company; (ii) is not a controlled foreign
corporation with respect to which the Company is a 'related person'; (iii) is
not a bank whose receipt of interest on a Note is described in Section 881(c)
(3)(A) of the United States Internal Revenue Code of 1986, as amended, (the
'Code'); and (iv) certifies, under penalties of perjury, that such Holder is not
a United States person and provides the Company with such Holder's name and
address or a securities clearing organization, bank, or other financial
institution that holds customers' securities in the ordinary course of its trade
or business certifies, under penalties of perjury, that such certification and
information has been received by it or a qualifying intermediary from the
Non-United States Holder and furnishes the Company with a copy thereof.
If a Non-United States Holder of a Note is engaged in a trade or business
in the United States, and if interest (including market discount) on the Note
(or gain realized on its sale, exchange or other disposition) is effectively
connected with the conduct of such trade or business, the Non-United States
Holder, although exempt from the withholding tax discussed in the preceding
paragraph, will generally be subject to regular United States income tax on such
effectively connected income in the same manner as if it were a U.S. Holder. See
'U.S. Holders' above. Such Holder will be required to provide to the withholding
agent a properly executed IRS Form 4224 (or, after December 31, 1998, a Form
W-8) to claim an exemption from withholding tax. In addition, if such Non-United
States Holder is a foreign corporation, it may be subject to a 30% branch
profits tax (unless reduced or eliminated by an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments. For purposes of the branch profits tax, interest (including
market discount) on, and any gain recognized on the sale, exchange or other
disposition of, a Note will be included in the effectively connected earnings
and profits of such Non-United States Holder if such interest or gain, as the
case may be, is effectively connected with the conduct by the Non-United States
Holder of a trade or business in the United States.
Gain on Disposition
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other disposition
of a Note unless (i) the gain is effectively connected with the conduct of a
trade or business within the United States (or a permanent establishment
therein, if a tax treaty applies) by the Non-United States Holder, (ii) in the
case of a Non-United States Holder who is a nonresident alien individual and
holds the Note as a capital asset, such Holder is present in the United States
for 183 or more days in the taxable year and certain other requirements are met
or (iii) the Holder is subject to tax pursuant to the provisions of the Code
applicable to certain United States expatriates.
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Information Reporting and Backup Withholding
The Company will, where required, report to the Non-United States Holders
of Notes and the IRS the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, Treasury
regulations provide that the 31% backup withholding tax and certain information
reporting will not apply to such payments with respect to which either the
requisite certification, as described above, has been received or an exemption
has otherwise been established; provided that neither the Company nor its
payment agent has actual knowledge that the Non-United States Holder is a United
States person or that the conditions of any other exemption are not in fact
satisfied. Under Treasury regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-United States Holder on the disposition of the Notes by or through a United
States office of a United States or foreign broker, unless such Holder certifies
to the broker under penalties of perjury as to its name, address and status as a
foreign person or the Holder otherwise establishes an exemption. Information
reporting requirements, but not backup withholding, will also apply to a payment
of the proceeds of a disposition of the Notes by or through a foreign office of
a United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the Non-United States Holder of the Notes is not a United States person, and
such broker has no actual knowledge to the contrary, or the Non-United States
Holder establishes an exemption. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the Notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.
The Treasury Department recently adopted regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and forms and
clarify reliance standards. These regulations will become effective for payments
made after December 31, 1998, subject to certain transition rules.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
LEGAL MATTERS
The legality of the New Notes will be passed upon on behalf of the Company
by Howard, Darby & Levin, New York, New York.
EXPERTS
The consolidated financial statements of Eagle-Picher Industries, Inc. as
of and for the year ended November 30, 1997, included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given on their authority as experts in auditing and accounting. The
consolidated financial statements of Eagle-Picher Industries, Inc. as of
November 30, 1996 and for each of the two years in the period ended November 30,
1996, included in this Prospectus, have been audited by KPMG Peat Marwick LLP,
independent auditors, as stated in their report appearing herein, and are given
upon the authority of said firm as experts in auditing and accounting. See
'Business -- Change in Independent Auditors.'
116
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Eagle-Picher Industries, Inc.
Condensed Consolidated Statements of Income (Loss) For the Three Months Ended February 28, 1998 and
1997 (Unaudited)..................................................................................... F-2
Condensed Consolidated Balance Sheets as of February 28, 1998 and 1997
(Unaudited)......................................................................................... F-3
Condensed Consolidated Statements of Cash Flows For the Three Months Ended February 28, 1998 and 1997
(Unaudited).......................................................................................... F-4
Notes to Condensed Consolidated Financial Statements (Unaudited)...................................... F-5
Independent Auditors' Reports......................................................................... F-14
Consolidated Statements of Income (Loss) For the Years Ended November 30, 1997, 1996 and 1995......... F-16
Consolidated Balance Sheets as of November 30, 1997 and 1996.......................................... F-17
Consolidated Statements of Cash Flows For the Years Ended November 30, 1997,
1996 and 1995....................................................................................... F-18
Consolidated Statements of Shareholders' Equity (Deficit) For the Years Ended November 30, 1997, 1996
and 1995............................................................................................. F-19
Notes to Consolidated Financial Statements............................................................ F-20
Eagle-Picher Holdings, Inc.
Condensed Consolidated Statements of Income For the Three Months Ended
February 28, 1998 and 1997 (Unaudited).............................................................. F-44
Condensed Consolidated Balance Sheets as of February 28, 1998 and 1997
(Unaudited)......................................................................................... F-45
Condensed Consolidated Statements of Cash Flows For the Three Months Ended February 28, 1998 and 1997
(Unaudited).......................................................................................... F-46
Notes to Condensed Consolidated Financial Statements (Unaudited)...................................... F-47
Independent Auditors' Report.......................................................................... F-50
Balance Sheet and Notes to Balance Sheet as of December 22, 1997...................................... F-51
</TABLE>
F-1
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 28,
--------------------
1998 1997
-------- --------
<S> <C> <C>
NET SALES................................................................................. $205,842 $223,607
OPERATING COSTS AND EXPENSES
Cost of products sold..................................................................... 162,796 180,401
Selling and administrative................................................................ 17,141 19,724
Management compensation expenses.......................................................... 2,056 --
Depreciation.............................................................................. 8,983 10,366
Amortization of intangibles............................................................... 3,839 4,076
-------- --------
194,815 214,567
Operating income.......................................................................... 11,027 9,040
OTHER INCOME (EXPENSE)
Interest expense.......................................................................... (6,940) (8,927)
Other income.............................................................................. 820 1,703
-------- --------
INCOME BEFORE TAXES....................................................................... 4,907 1,816
INCOME TAXES.............................................................................. 4,100 3,036
-------- --------
NET INCOME (LOSS)......................................................................... $ 807 $ (1,220)
-------- --------
-------- --------
INCOME (LOSS) PER COMMON SHARE............................................................ $ .08 $ (.12)
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------
1998 1997
-------- -----------
PREDECESSOR
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 18,967 $ 19,376
Receivables, less allowances........................................................ 135,632 144,805
Income tax refunds receivable....................................................... 2,001 56,814
Inventories:
Raw materials and supplies..................................................... 56,970 51,804
Work in process................................................................ 22,569 35,071
Finished goods................................................................. 15,509 19,245
-------- -----------
95,048 106,120
Prepaid expenses.................................................................... 9,499 9,729
Deferred income taxes............................................................... 19,535 20,575
-------- -----------
Total current assets...................................................... 280,682 357,419
Property, plant and equipment............................................................ 239,337 271,181
Less accumulated depreciation....................................................... -- 10,331
-------- -----------
Net property, plant and equipment.............................................. 239,337 260,850
Deferred income taxes.................................................................... -- 106,078
Excess of acquired net assets over cost.................................................. 255,495 --
Reorganization value in excess of amounts allocable to identifiable assets, net of
accumulated amortization of $4,071..................................................... -- 61,050
Other assets............................................................................. 91,625 46,546
-------- -----------
Total assets.............................................................. $867,139 $ 831,943
-------- -----------
-------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................................................... $ 50,899 $ 39,118
Accrued liabilities................................................................. 49,931 50,742
Income taxes........................................................................ 6,746 5,176
Current portion -- long-term debt................................................... 10,656 54,010
-------- -----------
Total current liabilities................................................. 118,232 149,046
Long-term debt -- less current portion................................................... 536,340 318,160
Deferred income taxes.................................................................... 7,634 --
Other liabilities........................................................................ 24,928 26,095
-------- -----------
Total liabilities......................................................... 687,134 493,301
-------- -----------
Shareholder's equity
Common shares -- authorized 20,000,000 shares, issued and outstanding 100 shares.... 180,005 --
Common shares -- authorized 20,000,000 shares, issued and outstanding 10,000,000
shares............................................................................. -- 341,807
Foreign currency translation........................................................ -- (1,945)
Accumulated deficit
Beginning balance.............................................................. -- --
Net loss year to date.......................................................... -- (1,220)
-------- -----------
Total shareholder's equity................................................ 180,005 338,642
-------- -----------
Total liabilities and shareholder's equity................................ $867,139 $ 831,943
-------- -----------
-------- -----------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-3
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 28,
---------------------
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................... $ 807 $ (1,220)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization....................................................... 12,822 14,442
Changes in assets and liabilities:
Receivables.................................................................... (4,705) (11,930)
Inventories.................................................................... (2,235) (3,219)
Accounts payable............................................................... (2,787) (1,917)
Accrued liabilities............................................................ (5,488) 2,176
Income tax refunds receivable.................................................. 1,024 16,906
Deferred taxes................................................................. 2,600 1,831
Other.......................................................................... (11,121) 845
--------- --------
Net cash provided by (used in) operating activities................................. (9,083) 17,914
Cash flows from investing activities:
Capital expenditures................................................................ (5,692) (15,857)
Other............................................................................... (1,042) (1,183)
--------- --------
Net cash used in investing activities............................................... (6,734) (17,040)
Cash flows from financing activities:
Issuance of long-term debt.......................................................... 524,100 --
Reduction of long-term debt......................................................... (250,000) (16,703)
Redemption of common stock.......................................................... (446,638) --
Issuance of common stock............................................................ 180,005 --
Debt issue cost..................................................................... (26,062) --
Other............................................................................... (360) 2,480
--------- --------
Net cash used in financing activities............................................... (18,955) (14,223)
Net decrease in cash and cash equivalents................................................ (34,772) (13,349)
--------- --------
Cash and cash equivalents, beginning of period........................................... 53,739 32,725
--------- --------
Cash and cash equivalents, end of period................................................. $ 18,967 $ 19,376
--------- --------
--------- --------
Supplemental cash flow information:
Cash paid during the three month period:
Interest paid.................................................................. $ 6,402 $ 475
Income tax refunds received net of payments.................................... $ (376) $(15,928)
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-4
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included elsewhere in this document for
the fiscal year ended November 30, 1997.
The financial statements presented herein reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for the
three months ended February 28, 1998 and 1997. Results of operations for interim
periods are not necessarily indicative of results to be expected for an entire
year.
See Note B.
B. ACQUISITION OF THE COMPANY
On February 24, 1998 ('Closing Date'), Eagle-Picher Industries, Inc.
('Company') was acquired by a subsidiary of Granaria Industries BV, Eagle-Picher
Holdings, Inc. ('Parent'), from the Eagle-Picher Industries, Inc. Personal
Injury Settlement Trust ('Trust'). The Trust was established pursuant to the
Company's Plan of Reorganization upon its emergence from bankruptcy.
These unaudited condensed consolidated financial statements as of and for
the three months ended February 28, 1998 include the effects of the Acquisition
that result as of February 24, 1998, the Closing Date. Accordingly, the
condensed consolidated statement of income (loss) for the three months ended
February 28, 1998 includes results of operations from (1) December 1, 1997
through February 24, 1998 of the Company prior to the consummation of the
Acquisition (for clarity, sometimes referred to herein as the 'Predecessor
Company') and (2) February 25 through February 28, 1998 of the Company. The
effects of the purchase accounting adjustments on the Company's results of
operations for the three months ended February 28, 1998 were immaterial.
Upon closing of the acquisition, the Parent received $100 million equity
investment from Granaria Industries BV and an equity partner. The Parent also
received proceeds approximating $80 million from its offering of preferred
stock. These proceeds were invested in the Company, which issued approximately
$180 million of common stock to the Parent. The Company also borrowed $225
million in term loans and $79.1 million in revolving credit loans under a
syndicated senior secured loan facility, and issued $220 million in senior
subordinated notes ('Subordinated Notes'), the proceeds of which were used to
redeem the Company's 10% Senior Unsecured Sinking Fund Debentures ('Debentures')
and common stock, both held by the Trust. The Company, a wholly-owned subsidiary
of the Parent, is the operating entity. The Parent's results of operations and
cash flows approximate those of the Company.
C. BASIC EARNINGS PER SHARE
The calculation of net income (loss) per share is based upon the net income
(loss) divided by the average number of common shares outstanding, which was
9,555,560 and 10,000,000 in the three months ended February 28, 1998 and 1997,
respectively.
D. LONG-TERM DEBT
On the Closing Date, the Company's existing $60 million unsecured committed
revolving credit facility was terminated. It was replaced by a syndicated senior
secured loan facility ('Credit Agreement') which provided $225 million in term
loans ('Term Loans') and a $160 million revolving credit facility ('Facility'),
of which $79.1 million was drawn at the time of closing. Immediately
F-5
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
following the closing, the Company borrowed approximately $28.6 million for
use as credit support in the form of letters of credit, leaving approximately
$52.3 million in available credit.
The Credit Agreement is secured by the capital stock of the Company, up to
65% of the capital stock of foreign subsidiaries and substantially all other
property in the United States. The Credit Agreement contains covenants which
restrict the Company's ability to, among others, declare dividends or redeem
capital stock, issue additional debt or alter existing debt agreements, make
loans, undergo a change in control and engage in mergers, acquisitions and asset
sales. These covenants also limit the annual amount of capital expenditures and
require the Company to meet minimum financial coverages. The Company was in
compliance with all covenants at February 28, 1998.
Long-term debt consisted of:
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------
1998 1997
------ ------
(IN MILLIONS OF
DOLLARS)
<S> <C> <C>
New Credit Agreement:
Revolving Credit Facility........................................................ $ 79.1 $ --
Term Loans....................................................................... 225.0 --
Senior Subordinated Notes............................................................. 220.0 --
Senior Unsecured Sinking Fund Debentures.............................................. -- 250.0
Divestiture Notes..................................................................... -- 50.0
Tax Refund Notes...................................................................... -- 52.6
Industrial Revenue Bonds.............................................................. 18.4 10.5
Secured Notes......................................................................... -- 6.7
Debt of Foreign Subsidiaries.......................................................... 4.5 2.4
------ ------
547.0 372.2
Less current portion.................................................................. 10.7 54.0
------ ------
Long-term debt, less current portion.................................................. $536.3 $318.2
------ ------
------ ------
</TABLE>
The Facility matures in 2004. It bears interest, at the Company's option,
of an adjusted LIBOR rate plus 2 1/4% or the bank's prime rate plus 1 1/4%.
There is a commitment fee equal to 1/2% per annum on the undrawn portion of the
Facility and fees for letters of credit are equal to 2 1/4% per annum.
The Term Loans mature in 2003, 2005 and 2006 and bear interest, at the
Company's option, of an adjusted LIBOR rate plus spreads varying from 2 1/4% to
2 7/8% or the bank's prime rate plus spreads varying from 1 1/4% to 1 7/8%. In
addition to regularly scheduled payments, the Company is required to make
mandatory prepayments to first the Term Loans then the Facility of 60% of annual
excess cash flow, the net proceeds from the sale of assets (subject to certain
conditions), the net proceeds of new debt issued and 50% of the net proceeds of
any equity securities issued.
To partially hedge its variable interest rate exposure on its Term Loans,
the Company has entered into a three year interest rate swap agreement ('Swap
Agreement'). The Swap Agreement requires the Company to pay a fixed LIBOR rate
(plus the appropriate spreads) on $150 million and receive the floating LIBOR
rate on that same amount, effectively fixing the interest rate on $150 million
of the Terms Loans at a weighted rate of 8.35%.
The Subordinated Notes, which are unsecured, bear interest of 9 3/8% and
mature in 2008, however, they are redeemable at the option of the Company, in
whole or in part, any time after February 28, 2003 at set redemption prices. The
Company may also redeem up to 35% of the aggregate principal amount of the
Subordinated Notes prior to March 1, 2001 at a set redemption price provided
certain conditions are met. The Company is also required to offer to purchase
the Subordinated Notes at a set redemption price should there be a change in
control of the Company.
Both the Credit Agreement and the Subordinated Notes are guaranteed on a
full, unconditional, and joint and several basis by certain of the Company's
wholly-owned domestic subsidiaries
F-6
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
('Guarantors'). Management has determined that full financial statements of
the Guarantors would not be material to investors and such financial statements
are not presented. The following supplemental condensed combining financial
statements present information regarding the Guarantors, the issuer of the
debt and the subsidiaries that did not guaranteee the debt.
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NON-GUARANTORS
FOREIGN
ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL
------- ---------- -------------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net sales
Customers................................ $61,071 $123,181 $ 21,590 $ -- $205,842
Intercompany............................. 3,381 2,421 1,451 (7,253) --
Operating costs and expenses
Cost of products sold.................... 48,329 102,771 18,772 (7,076) 162,796
Selling and administrative............... 9,673 5,167 2,301 -- 17,141
Management compensation expense.......... 2,056 -- -- -- 2,056
Intercompany charges..................... (2,172) 2,172 -- -- --
Depreciation............................. 2,823 5,220 940 -- 8,983
Amortization of intangibles.............. 765 3,064 10 -- 3,839
------- ---------- -------------- ------------ --------
Total............................... 61,474 118,394 22,023 (7,076) 194,815
Operating income (loss)....................... 2,978 7,208 1,018 (177) 11,027
Other income (expense)
Interest expense......................... (6,844) -- (96) -- (6,940)
Other income (expense)................... 812 333 (325) -- 820
------- ---------- -------------- ------------ --------
Income before taxes........................... (3,054) 7,541 597 (177) 4,907
Income taxes.................................. 1,083 2,486 531 -- 4,100
------- ---------- -------------- ------------ --------
Net income (loss)............................. $(4,137) $ 5,055 $ 66 $ (177) $ 807
------- ---------- -------------- ------------ --------
------- ---------- -------------- ------------ --------
</TABLE>
F-7
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NON-GUARANTORS
FOREIGN
ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL
--------- ---------- -------------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents..................... $ 12,115 $ 1,145 $ 5,513 $ 194 $ 18,967
Receivables................................... 38,724 78,745 18,163 -- 135,632
Intercompany accounts receivable.............. 3,081 4,012 -- (7,093) --
Income tax refunds receivable................. 2,001 -- -- -- 2,001
Inventories................................... 37,775 44,818 13,830 (1,375) 95,048
Prepaid expenses.............................. 5,527 3,490 482 -- 9,499
Deferred income taxes......................... 19,535 -- -- -- 19,535
--------- ---------- -------------- ------------ --------
Total current assets..................... 118,758 132,210 37,988 (8,274) 280,682
Property, plant and equipment................. 72,085 132,112 35,140 -- 239,337
Investment in subsidiaries.................... 60,908 5,185 -- (66,093) --
Excess of acquired net assets over cost....... 52,059 203,436 -- -- 255,495
Other assets.................................. 73,185 18,187 253 -- 91,625
--------- ---------- -------------- ------------ --------
Total assets............................. $ 376,995 $491,130 $ 73,381 $(74,367) $867,139
--------- ---------- -------------- ------------ --------
--------- ---------- -------------- ------------ --------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable.............................. $ 16,686 $ 25,241 $ 8,972 $ -- $ 50,899
Intercompany accounts payable................. 176 110 6,340 (6,626) --
Accrued liabilities........................... 27,614 19,782 2,535 -- 49,931
Income taxes.................................. 6,658 -- 88 -- 6,746
Long-term debt -- current portion............. 7,780 -- 2,876 -- 10,656
--------- ---------- -------------- ------------ --------
Current liabilities...................... 58,914 45,133 20,811 (6,626) 118,232
Long-term debt -- less current portion........ 534,720 -- 1,620 -- 536,340
Deferred income taxes......................... 7,634 -- -- -- 7,634
Other liabilities............................. 24,928 -- -- -- 24,928
--------- ---------- -------------- ------------ --------
Total liabilities........................ 626,196 45,133 22,431 (6,626) 687,134
Intercompany accounts......................... (429,206) 399,218 21,074 8,914 --
SHAREHOLDERS' EQUITY 180,005 46,779 29,876 (76,655) 180,005
--------- ---------- -------------- ------------ --------
Total liabilities and shareholders'
equity................................. $ 376,995 $491,130 $ 73,381 $(74,367) $867,139
--------- ---------- -------------- ------------ --------
--------- ---------- -------------- ------------ --------
</TABLE>
F-8
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NON-
GUARANTORS
FOREIGN
ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL
--------- ---------- ------------ ------------ ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ (4,137) $ 5,055 $ 66 $ (177) $ 807
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Depreciation and amortization............. 3,588 8,284 950 -- 12,822
Changes in assets and liabilities......... (16,059) (9,247) 2,019 575 (22,712)
--------- ---------- ------------ ------------ ---------
Net cash provided by (used in)
operating activities............... (16,608) 4,092 3,035 398 (9,083)
Cash flows from investing activities:
Capital expenditures...................... (2,300) (1,833) (1,559) -- (5,692)
Other..................................... (956) 65 (846) 695 (1,042)
--------- ---------- ------------ ------------ ---------
Net cash provided by (used in)
investing activities............... (3,256) (1,768) (2,405) 695 (6,734)
Cash flows from financing activities:
Issuance of long-term debt................ 524,100 -- -- -- 524,100
Reduction of long-term debt............... (250,000) -- -- -- (250,000)
Redemption of common stock................ (446,638) -- -- -- (446,638)
Issuance of common stock.................. 180,005 -- -- -- 180,005
Debt issue cost........................... (26,062) -- -- -- (26,062)
Other..................................... -- -- (360) -- (360)
--------- ---------- ------------ ------------ ---------
Net cash provided by (used in)
financing activities............... (18,595) -- (360) -- (18,955)
--------- ---------- ------------ ------------ ---------
Increase (decrease) in cash and cash
equivalents.................................. (38,459) 2,324 270 1,093 (34,772)
Intercompany accounts.......................... 1,740 (1,740) 899 (899) --
Cash and cash equivalents, beginning of
period....................................... 48,834 561 4,344 -- 53,739
--------- ---------- ------------ ------------ ---------
Cash and cash equivalents, end of period....... $ 12,115 $ 1,145 $ 5,513 $ 194 $ 18,967
--------- ---------- ------------ ------------ ---------
--------- ---------- ------------ ------------ ---------
</TABLE>
F-9
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
NON-GUARANTORS
--------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
------- ---------- ------------- --------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net sales
Customers...................... $60,310 $114,398 $19,645 $ 29,254 $ -- $223,607
Intercompany................... 3,465 2,599 1,141 37 (7,242) --
Operating costs and expenses
Cost of products sold.......... 47,577 95,817 16,853 27,299 (7,145) 180,401
Selling and administrative..... 11,222 4,843 2,021 1,638 -- 19,724
Intercompany charges........... (3,518) 2,512 -- 1,006 -- --
Depreciation................... 2,866 5,160 908 1,432 -- 10,366
Amortization of intangibles.... 813 3,258 5 -- -- 4,076
------- ---------- ------------- --------- ------------ --------
Total..................... 58,960 111,590 19,787 31,375 (7,145) 214,567
Operating income.................... 4,815 5,407 999 (2,084) (97) 9,040
Other income (expense)
Interest expense............... (8,899) -- (28) -- -- (8,927)
Other income (expense)......... 1,416 212 75 -- -- 1,703
------- ---------- ------------- --------- ------------ --------
Income before taxes................. (2,668) 5,619 1,046 (2,084) (97) 1,816
Income taxes........................ 113 2,040 814 69 -- 3,036
------- ---------- ------------- --------- ------------ --------
Net income (loss)................... $(2,781) $ 3,579 $ 232 $ (2,153) $ (97) $ (1,220)
------- ---------- ------------- --------- ------------ --------
------- ---------- ------------- --------- ------------ --------
</TABLE>
F-10
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
AS OF FEBRUARY 28, 1997
<TABLE>
<CAPTION>
NON-GUARANTORS
-------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
--------- ---------- ------------ --------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ 14,133 $ 443 $ 4,688 $ 112 $ -- $ 19,376
Receivables............................ 37,995 71,568 17,827 17,415 -- 144,805
Intercompany accounts receivable....... 3,538 3,313 -- -- (6,851) --
Income tax refunds receivable.......... 56,814 -- -- -- -- 56,814
Inventories............................ 28,330 52,557 10,551 14,682 -- 106,120
Prepaid expenses....................... 4,476 3,860 332 1,061 -- 9,729
Deferred income taxes.................. 20,575 -- -- -- -- 20,575
--------- ---------- ------------ --------- ------------ --------
Total current assets.............. 165,861 131,741 33,398 33,270 (6,851) 357,419
Property, plant and equipment.......... 74,790 129,929 31,136 24,995 -- 260,850
Investment in subsidiaries............. 58,656 5,132 -- -- (63,788) --
Deferred income taxes.................. 106,078 -- -- -- -- 106,078
Reorganization value in excess of
amounts allocable to identifiable
assets............................... 12,187 48,863 -- -- -- 61,050
Other assets........................... 23,711 14,000 1,154 7,681 -- 46,546
--------- ---------- ------------ --------- ------------ --------
Total assets...................... $ 441,283 $329,665 $ 65,688 $ 65,946 $(70,639) $831,943
--------- ---------- ------------ --------- ------------ --------
--------- ---------- ------------ --------- ------------ --------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable....................... $ 15,927 $ 13,360 $ 4,231 $ 5,600 -- $ 39,118
Intercompany accounts payable.......... -- -- 6,597 -- (6,597) --
Accrued liabilities.................... 30,322 12,479 4,889 3,052 -- 50,742
Income taxes........................... 3,244 -- 1,932 -- -- 5,176
Current portion -- long-term debt...... 54,010 -- -- -- -- 54,010
--------- ---------- ------------ --------- ------------ --------
Current liabilities............... 103,503 25,839 17,649 8,652 (6,597) 149,046
Long-term debt -- less current
portion.............................. 315,726 -- 2,434 -- -- 318,160
Other liabilities...................... 25,515 -- 580 -- -- 26,095
--------- ---------- ------------ --------- ------------ --------
Total liabilities................. 444,744 25,839 20,663 8,652 (6,597) 493,301
Intercompany accounts.................. (342,500) 273,584 15,790 39,360 13,766 --
SHAREHOLDER'S EQUITY 339,039 30,242 29,235 17,934 (77,808) 338,642
--------- ---------- ------------ --------- ------------ --------
Total liabilities and
shareholder's equity............ $ 441,283 $329,665 $ 65,688 $ 65,946 $(70,639) $831,943
--------- ---------- ------------ --------- ------------ --------
--------- ---------- ------------ --------- ------------ --------
</TABLE>
F-11
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
NON-GUARANTORS
-------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
-------- ---------- ------------ ---------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................... $ (2,781) $ 3,579 $ 232 $ (2,153) $ (97) $ (1,220)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Depreciation and amortization........... 3,679 8,418 913 1,432 -- 14,442
Changes in assets and liabilities:
Income tax refunds...................... 16,906 -- -- -- -- 16,906
Working capital and other............... 3,637 (16,185) (142) 250 226 (12,214)
-------- ---------- ------------ ---------- ------ --------
Net cash provided by (used in)
operating activities............. 21,441 (4,188) 1,003 (471) 129 17,914
Cash flows from investing activities:
Capital expenditures.................... (1,790) (9,630) (4,036) (401) -- (15,857)
Other................................... 98 (162) (704) (5) (410) (1,183)
-------- ---------- ------------ ---------- ------ --------
Net cash provided by (used in)
investing activities............. (1,692) (9,792) (4,740) (406) (410) (17,040)
Cash flows from financing activities:
Reduction of long-term debt............. (16,703) -- -- -- -- (16,703)
Other................................... -- -- 2,480 -- -- 2,480
-------- ---------- ------------ ---------- ------ --------
Net cash provided by (used in)
financing activities............. (16,703) -- 2,480 -- -- (14,223)
-------- ---------- ------------ ---------- ------ --------
Increase (decrease) in cash and cash
equivalents................................ 3,046 (13,980) (1,257) (877) (281) (13,349)
Intercompany accounts........................ (15,002) 13,870 (40) 891 281 --
Cash and cash equivalents, beginning of
period..................................... 26,089 553 5,985 98 -- 32,725
-------- ---------- ------------ ---------- ------ --------
Cash and cash equivalents,
end of period.............................. $ 14,133 $ 443 $ 4,688 $ 112 $-- $ 19,376
-------- ---------- ------------ ---------- ------ --------
-------- ---------- ------------ ---------- ------ --------
</TABLE>
F-12
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
E. INCOME TAXES
The acquisition of the Company has been treated as a sale of its assets for
purposes of income taxes. The deferred tax benefits relating to the Debentures,
which were repaid on the Closing Date, and most of the benefits relating to the
net operating loss carryforwards will be realized to shelter the gain on the
sale of the assets. Any remaining net operating loss carryforwards will be lost.
The Company, however, will be liable for approximately $2.0 in alternative
minimum taxes and $1.6 million in state and local income taxes as a result of
the transaction. These taxes are recognized as part of the Acquisition
adjustments.
F. LEGAL MATTERS
The Company is involved in routine litigation, environmental proceedings
and claims pending with respect to matters arising out of the normal course of
business. In management's opinion, the ultimate liability resulting from all
claims, individually or in the aggregate, will not materially affect the
Company's consolidated financial position, results of operations or cash flows.
G. INTANGIBLE ASSETS
Excess of acquired net assets over cost is being amortized on a
straight-line basis over fifteen years. The recoverability of these assets is
evaluated periodically based on current and estimated future cash flows of each
of the related business units over the remaining amortization period.
F-13
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Eagle-Picher Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Eagle-Picher
Industries, Inc. and subsidiaries as of November 30, 1997, and the related
consolidated statements of loss, shareholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of November 30,
1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
As discussed in Notes B and C to the consolidated financial statements,
effective November 29, 1996, the Company emerged from Chapter 11 of the United
States Bankruptcy Code and adopted 'fresh-start' reporting principles in
accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code.' As a result, the consolidated financial statements
for the period subsequent to the adoption of fresh-start reporting are presented
on a different cost basis than that for prior periods and, therefore, are not
comparable.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
January 15, 1998,
except for Notes G and M, as to which
the date is February 24, 1998
F-14
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Eagle-Picher Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Eagle-Picher
Industries, Inc. and subsidiaries as of November 30, 1996, and the related
consolidated statements of income (loss), shareholders' equity (deficit), and
cash flows for each of the years in the two-year period ended November 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Eagle-Picher
Industries, Inc. and subsidiaries as of November 30, 1996, and the results of
their operations and their cash flows for each of the years in the two-year
period ended November 30, 1996 in conformity with generally accepted accounting
principles.
As discussed in Notes B and C to the consolidated financial statements,
effective November 29, 1996, the Company emerged from chapter 11 of the United
States Bankruptcy Code and adopted 'fresh-start' reporting principles in
accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, 'Financial Reporting by Entities in Reorganization
under the Bankruptcy Code.'
As discussed in Note E to the consolidated financial statements, the
Company changed its method of computing LIFO for inventories of boron, germanium
and other rare metals in 1996.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
February 5, 1997
F-15
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------------
1997 1996 1995
-------- ---------- -----------
<S> <C> <C> <C>
Net sales................................................................ $906,077 $ 891,287 $ 848,548
Operating costs and expenses
Cost of products sold............................................... 725,010 716,926 681,373
Selling and administrative.......................................... 77,109 81,505 75,380
Depreciation........................................................ 39,671 30,338 28,296
Amortization of intangibles......................................... 16,318 412 412
Loss on sale of divisions........................................... 2,411 -- --
-------- ---------- -----------
860,519 829,181 785,461
-------- ---------- -----------
Operating income......................................................... 45,558 62,106 63,087
Adjustment for asbestos litigation....................................... -- 502,197 (1,005,511)
Provision for other claims............................................... -- (4,244) --
Interest expense (contractual interest of $9,889 in 1996 and $8,897 in
1995).................................................................. (31,261) (3,083) (1,926)
Gain on sale of investment............................................... -- -- 11,505
Other income (expense)................................................... (251) 1,345 199
-------- ---------- -----------
Income (loss) before reorganization items, taxes, extraordinary item and
cumulative effect of accounting change................................. 14,046 558,321 (932,646)
Fresh start revaluation.................................................. -- 118,684 --
Reorganization items..................................................... -- (2,349) (2,225)
-------- ---------- -----------
Income (loss) before taxes, extraordinary item and cumulative effect of
accounting change...................................................... 14,046 674,656 (934,871)
Income taxes............................................................. 17,900 52,570 9,300
-------- ---------- -----------
Income (loss) before extraordinary item and cumulative effect of
accounting change...................................................... (3,854) 622,086 (944,171)
Extraordinary item -- gain on discharge of pre-petition liabilities...... -- 1,525,540 --
Cumulative effect of change in accounting for inventories................ -- (1,235) --
-------- ---------- -----------
Net income (loss).............................................. $ (3,854) $2,146,391 $ (944,171)
-------- ---------- -----------
-------- ---------- -----------
Income (loss) per share:
Income (loss) before extraordinary item and cumulative effect of
accounting change................................................. $ (.39) $ 56.34 $ (85.51)
Extraordinary item -- gain on discharge of pre-petition
liabilities....................................................... -- 138.17 --
Cumulative effect of change in accounting for inventories........... -- (.11) --
-------- ---------- -----------
Net income (loss) per share.............................................. $ (.39) $ 194.40 $ (85.51)
-------- ---------- -----------
-------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 53,739 $ 32,725
Receivables, less allowances of $1,614 in 1997 and $2,233 in 1996.................... 130,927 132,875
Income tax refunds receivable........................................................ 3,025 73,720
Inventories.......................................................................... 92,196 102,901
Prepaid expenses..................................................................... 8,290 8,164
Deferred income taxes................................................................ 13,793 26,351
-------- --------
Total current assets............................................................ 301,970 376,736
-------- --------
Property, plant and equipment
Land and land improvements........................................................... 19,832 20,010
Buildings............................................................................ 65,289 67,836
Machinery and equipment.............................................................. 173,909 145,309
Construction in progress............................................................. 20,817 23,196
-------- --------
279,847 256,351
Less accumulated depreciation............................................................. 36,309 --
-------- --------
Net property, plant and equipment......................................................... 243,538 256,351
-------- --------
Deferred income taxes..................................................................... 98,991 102,133
Reorganization value in excess of amounts allocable to identifiable assets, net of
accumulated amortization of $16,284 in 1997............................................. 48,837 65,121
Other assets.............................................................................. 53,545 48,539
-------- --------
Total assets.................................................................... $746,881 $848,880
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................................... $ 52,886 $ 41,035
Compensation and employee benefits................................................... 22,630 18,127
Long-term debt -- current portion.................................................... 3,403 70,378
Income taxes......................................................................... 2,294 3,649
Reorganization items................................................................. 13,128 13,292
Other accrued liabilities............................................................ 19,661 18,447
-------- --------
Total current liabilities....................................................... 114,002 164,928
-------- --------
Long-term debt, less current portion...................................................... 269,994 316,061
Postretirement benefits other than pensions............................................... 21,681 21,675
Other long-term liabilities............................................................... 5,087 4,409
-------- --------
Total liabilities............................................................... 410,764 507,073
-------- --------
Shareholders' equity
Common stock -- no par value
Authorized 20,000,000 shares; issued and outstanding 10,000,000 shares............. 341,807 341,807
Retained deficit..................................................................... (3,854) --
Foreign currency translation......................................................... (1,836) --
-------- --------
Total shareholders' equity...................................................... 336,117 341,807
-------- --------
Total liabilities and shareholders' equity...................................... $746,881 $848,880
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------
1997 1996 1995
--------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................. $ (3,854) $ 2,146,391 $ (944,171)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Changes due to reorganization activities:
Extraordinary gain on discharge of pre-petition liabilities... -- (1,525,540) --
Fresh start revaluation....................................... -- (118,684) --
Adjustment for asbestos litigation................................. -- (502,197) 1,005,511
Provision for other claims......................................... -- 4,244 --
Cumulative effect of accounting change............................. -- 1,235 --
Depreciation and amortization...................................... 55,989 30,750 28,708
Loss on sale of divisions.......................................... 2,411 -- --
Gain on sale of investment......................................... -- -- (11,505)
Changes in assets and liabilities, net of effects of divestitures:
Receivables................................................... (14,562) (7,664) (17,914)
Income tax refunds receivable................................. 70,695 3,535 (2,156)
Inventories................................................... (3,393) (6,283) (1,665)
Deferred income taxes......................................... 15,700 29,170 (18,900)
Accounts payable.............................................. 16,351 657 (3,373)
Other......................................................... 8,546 17,247 (4,079)
--------- ----------- ----------
Net cash provided by operating activities.......................... 147,883 72,861 30,456
Cash flows from investing activities:
Proceeds from sale of divisions.................................... 39,007 4,248 --
Proceeds from sale of investment................................... -- -- 11,505
Capital expenditures............................................... (51,324) (44,957) (40,558)
Other.............................................................. (1,510) (1,061) 340
--------- ----------- ----------
Net cash used in investing activities......................... (13,827) (41,770) (28,713)
Cash flows from financing activities:
Issuance of long-term debt......................................... 12,997 -- 1,240
Reduction of long-term debt........................................ (126,039) (3,198) (2,259)
--------- ----------- ----------
Net cash used in financing activities......................... (113,042) (3,198) (1,019)
Cash payments on effective date of plan of reorganization............... -- (88,498) --
--------- ----------- ----------
Net increase (decrease) in cash and cash equivalents.................... 21,014 (60,605) 724
--------- ----------- ----------
Cash and cash equivalents, beginning of year............................ 32,725 93,330 92,606
--------- ----------- ----------
Cash and cash equivalents, end of year.................................. $ 53,739 $ 32,725 $ 93,330
--------- ----------- ----------
--------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
F-18
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL GAIN (LOSS)
COMMON PAID-IN RETAINED ON
STOCK CAPITAL DEFICIT INVESTMENTS
-------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance November 30, 1994............................................. $ 13,906 $ 36,378 $(1,317,118) $--
Cumulative effect of change in accounting for marketable
securities..................................................... -- -- -- 5,377
Net loss......................................................... -- -- (944,171) --
Realized gain on investment...................................... -- -- -- (5,044)
Foreign currency translation..................................... -- -- -- --
-------- ---------- ----------- -----------
Balance November 30, 1995............................................. 13,906 36,378 (2,261,289) 333
Net income....................................................... -- -- 2,146,391 --
Foreign currency translation..................................... -- -- -- --
Unrealized loss on investment.................................... -- -- -- (141)
Cancellation of the former common shares per the Plan of
Reorganization................................................. (13,906) (36,378) 48,371 --
Issuance of the new common shares per the Plan of
Reorganization................................................. 341,807 -- -- --
Fresh-start revaluation.......................................... -- -- 66,527 (192)
-------- ---------- ----------- -----------
Balance November 30, 1996............................................. 341,807 -- -- --
Net loss......................................................... -- -- (3,854) --
Foreign currency translation..................................... -- -- -- --
-------- ---------- ----------- -----------
Balance November 30, 1997............................................. $341,807 $ -- $ (3,854) $--
-------- ---------- ----------- -----------
-------- ---------- ----------- -----------
<CAPTION>
TOTAL
FOREIGN SHAREHOLDERS'
CURRENCY TREASURY EQUITY
TRANSLATION STOCK (DEFICIT)
----------- -------- -------------
<S> <C> <C> <C>
Balance November 30, 1994............................................. $ 2,054 $ (1,913) $ (1,266,693)
Cumulative effect of change in accounting for marketable
securities..................................................... -- -- 5,377
Net loss......................................................... -- -- (944,171)
Realized gain on investment...................................... -- -- (5,044)
Foreign currency translation..................................... (777) -- (777)
----------- -------- -------------
Balance November 30, 1995............................................. 1,277 (1,913) (2,211,308)
Net income....................................................... -- -- 2,146,391
Foreign currency translation..................................... 129 -- 129
Unrealized loss on investment.................................... -- -- (141)
Cancellation of the former common shares per the Plan of
Reorganization................................................. -- 1,913 --
Issuance of the new common shares per the Plan of
Reorganization................................................. -- -- 341,807
Fresh-start revaluation.......................................... (1,406) -- 64,929
----------- -------- -------------
Balance November 30, 1996............................................. -- -- 341,807
Net loss......................................................... -- -- (3,854)
Foreign currency translation..................................... (1,836) -- (1,836)
----------- -------- -------------
Balance November 30, 1997............................................. $(1,836) $ -- $ 336,117
----------- -------- -------------
----------- -------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company's
subsidiaries which are more than 50% owned and controlled. Intercompany accounts
and transactions have been eliminated. Investments in unconsolidated affiliates
which are at least 20% owned and over which the Company exercises significant
influence are accounted for using the equity method.
Revenue Recognition
Sales are recognized primarily upon shipment of products except for a
division of the Company that sells products under contracts and subcontracts
with various United States Government agencies and aerospace and defense
contractors. On cost-reimbursable contracts, sales are recognized as costs are
incurred and include a portion of the total estimated earnings to be realized in
the ratio that costs incurred relate to total estimated costs. On fixed-price
contracts, sales are recognized using the percentage of completion method, when
deliveries are made or upon completion of specified tasks. Contract losses are
provided for in their entirety in the period they become known, without regard
to the percentage-of-completion.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reporting for Reorganization
Eagle-Picher Industries, Inc. (the 'Company') has accounted for all
transactions related to its chapter 11 proceedings and reorganization in
accordance with Statement of Position 90-7 ('SOP 90-7'), 'Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code' (See Note B). The
adjustments to reflect the Company's emergence from bankruptcy have been
reflected in the accompanying consolidated financial statements. Accordingly, a
vertical black line is shown in the consolidated financial statements to
separate post-emergence operations from those prior to November 29, 1996 since
they have not been prepared on a comparable basis.
Cash and Cash Equivalents
Marketable securities with original maturities of three months or less are
considered to be cash equivalents.
Financial Instruments
The Company's financial instruments consist primarily of investments in
cash and cash equivalents, receivables and certain other assets as well as
obligations under accounts payable and long-term debt. The carrying values of
these financial instruments, with the exception of long-term debt, approximate
fair value (See Note G).
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company's customer base includes all significant automotive manufacturers
and their first tier suppliers in North America and Europe. Although the Company
is directly affected by the well-being of the automotive industry, management
does not believe significant credit risk existed at November 30, 1997.
F-20
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are valued at the lower of cost or market, which approximates
current replacement cost. A substantial portion of domestic inventories are
valued using the last-in first-out ('LIFO') method while the balance of the
Company's inventories are valued using the first-in first-out method.
Property, Plant and Equipment
The Company records investments in property, plant and equipment at cost.
The Company provides for depreciation of plant and equipment using the
straight-line method over the estimated lives of the assets which are generally
20 to 40 years for buildings and 3 to 10 years for machinery and equipment.
Improvements which extend the useful life of property are capitalized, while
repair and maintenance costs are charged to operations as incurred. In
accordance with fresh-start reporting, property, plant and equipment in service
at November 30, 1996 were stated at fair value, based on independent appraisals,
as of that date.
Intangible Assets
Reorganization value in excess of amounts allocable to identifiable assets
is being amortized on a straight-line basis over four years. The recoverability
of the assets is evaluated periodically based on current and estimated future
cash flows of the Company over the remaining amortization period. Prior to the
Company's emergence from chapter 11, the excess of cost over net assets acquired
was being amortized using the straight-line method primarily over 40 years.
Environmental Remediation Costs
The Company accrues for environmental expenses resulting from existing
conditions relating to past operations when the costs are probable and
reasonably estimable.
Income Taxes
Income taxes are provided based upon income for financial statement
purposes. Deferred tax assets and liabilities are established based on the
difference between the financial statement and income tax bases of assets and
liabilities using existing tax rates.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated at current
exchange rates, and income and expenses are translated using weighted average
exchange rates. Adjustments resulting from translation of financial statements
stated in local currencies generally are excluded from the results of operations
and accumulated in a separate component of Shareholders' Equity (Deficit). Gains
and losses from foreign currency transactions are included in the determination
of net income (loss) and were immaterial.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year consolidated financial statement presentation.
B. REORGANIZATION AND EMERGENCE FROM CHAPTER 11
On November 18, 1996, the U.S. Bankruptcy Court for the Southern District
of Ohio, Western Division (the 'Bankruptcy Court'), together with the U.S.
District Court for the Southern District of Ohio, Western Division (the
'District Court'), confirmed the Third Amended Consolidated Plan of
F-21
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reorganization (the 'Plan') of the Company and seven of its domestic
subsidiaries. The Company emerged from bankruptcy on November 29, 1996 (the
'Effective Date'). The Plan was filed jointly by the Company, the Injury
Claimants' Committee, which represented approximately 150,000 persons alleging
injury due to exposure to asbestos-containing products manufactured by the
Company from 1934 until 1971, and the Representative for Future Claimants, which
represented future personal injury claimants. The Plan was also supported by the
Unsecured Creditors' Committee. The Company's chapter 11 case commenced January
7, 1991 (the 'Petition Date').
The Plan was based on a settlement of $2.0 billion for the Company's
liability for present and future asbestos-related personal injury claims. As a
result of the settlement, which was reached in the third quarter of 1996, an
adjustment was made to the consolidated financial statements to reduce the
asbestos liability subject to compromise from $2.5 billion, the amount the
Bankruptcy Court had previously estimated as the Company's liability for
asbestos-related personal injury claims. The order confirming the Plan contains
a permanent injunction which precludes holders of present and future asbestos or
lead-related personal injury claims from pursuing their claims against the
reorganized Company. Those claims will be channeled to an independently
administered qualified settlement trust (the 'PI Trust') which has been
established to resolve and satisfy those claims. Asbestos-related property
damage claims will be channeled to and resolved by a separate trust (the 'PD
Trust').
The Plan provided for distributions of $6.5 million in cash to holders of
priority claims, convenience claims, certain secured claims, and administrative
expenses. The PD Trust received $3.0 million in cash under the Plan. At November
30, 1996, the Company retained $15.0 million in cash for operating purposes,
held $4.2 million in escrow from a division sale and set aside $13.5 million for
remaining administrative expenses and unresolved claims. The remaining
consideration was distributed to the holders of other general unsecured claims,
which totaled approximately $152 million, and the PI Trust. The PI Trust and
each holder of a general unsecured claim received a distribution that was
proportionate to the size of its claim to the aggregate amount of unsecured
claims of $2,152 million. Pursuant to the terms of the Plan, the general
unsecured creditors received half of their consideration in cash and half in
three-year notes of the reorganized Company. These notes were repaid in 1997.
The PI Trust received, in the initial distribution, $51.3 million in cash, $18.1
million in such three-year notes, $69.1 million in Tax Refund notes, which were
paid in 1997, $250.0 million in ten-year debentures and all of the outstanding
shares of common stock of the reorganized Company. The Company's then existing
shareholders received no distribution and their shares were canceled.
Following the confirmation of the Plan, one general unsecured creditor and
the Unofficial Asbestos Co-defendants' Committee each filed a notice indicating
its intention to appeal the confirmation order issued by the Bankruptcy Court
and the U.S. District Court. After the end of the Company's fiscal year, the
general unsecured creditor formally withdrew its notice of appeal. The Company
and the Unofficial Asbestos Co-defendants Committee have submitted appellate
briefs to the United States Court of Appeals for the Sixth Circuit with respect
to the appeal of the confirmation order. The Company expects a decision on the
appeal in fiscal 1998. Further, the Company expects that the order confirming
the Plan will be upheld by all appellate courts.
It is anticipated that a final distribution will be made to the PI Trust
and all unsecured claimants, other than those holding convenience claims, when
all claims asserted in the chapter 11 cases (other than those channeled to the
PI Trust and the PD Trust) are resolved. Based on certain assumptions, the
Company anticipates that holders of general unsecured claims will ultimately
receive consideration having a value equal to approximately 37% of their allowed
claims.
The Plan resulted in the discharge of pre-petition liabilities through the
distribution of cash and securities to the PI Trust and the other creditors. The
value of the consideration distributed and expected to be distributed to the PI
Trust and other unsecured creditors was less than the amount of the allowed
claims resulting in an extraordinary gain of approximately $1.5 billion.
F-22
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net expense resulting from the Company's chapter 11 filings was
segregated from expenses related to ordinary operations in the accompanying
Consolidated Statements of Income (Loss) and includes the following:
<TABLE>
<CAPTION>
1996 1995
------------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Professional fees............................................................ $ 5,298 $ 7,047
Debt financing costs......................................................... 700 --
Other expenses............................................................... 1,711 181
Interest income.............................................................. (5,360) (5,003)
------------- -----------
$ 2,349 $ 2,225
------------- -----------
------------- -----------
</TABLE>
Interest income was attributable to the accumulation of cash and cash
equivalents subsequent to the petition date.
C. FRESH-START REPORTING
The Company adopted fresh-start reporting on the Effective Date in
accordance with SOP 90-7. Fresh-start reporting requires valuation of assets and
liabilities at fair value and valuation of equity based on the appraised
reorganization value of the ongoing business.
The Company's reorganization value was based on consideration of many
factors and several valuation methods, including discounted cash flows and
selected comparable publicly traded company multiples. The discounted cash flow
approach was based on the Company's forecast of unleveraged, after-tax cash
flows calculated for each year over the five-year period from 1997 through 2001.
A growth rate of 3.5% was assumed to capitalize cash flows for years after 2001.
Amounts were discounted to present value at rates ranging from 11.5% to 15%,
which approximate the Company's projected weighted average cost of capital. The
present value of future tax benefits was also considered.
D. SUBSEQUENT EVENT
On December 23, 1997, the PI Trust entered into an agreement (the 'Merger
Agreement') to sell its 100% interest in the common equity of the Company to a
unit of Granaria Holdings BV of The Netherlands. The transaction, which is
subject to certain conditions, is expected to close in February 1998.
E. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
1997 1996
------------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and supplies................................................... $51,797 $ 50,026
Work-in-process.............................................................. 25,932 34,250
Finished goods............................................................... 14,840 18,625
------------- -----------
92,569 102,901
Adjustment to state inventory at LIFO value.................................. (373) --
------------- -----------
$92,196 $ 102,901
------------- -----------
------------- -----------
</TABLE>
The percentage of inventories valued using the LIFO method was 81% in 1997
and 74% in 1996. In connection with fresh-start reporting, a new LIFO base layer
was established based on inventory levels at November 30, 1996. The effects of
liquidations of LIFO inventory quantities carried at lower costs prevailing in
prior years were immaterial.
F-23
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective December 1, 1995, the Company changed its method of computing
LIFO inventories of boron, germanium and other rare metals from a
double-extension method to an index method. The Company believes that the index
method results in better matching of revenues and expenses. The cumulative
effect of the change on prior years was $1.2 million on an after tax basis. The
effect of this change was to increase net income $8.1 million in fiscal year
1996.
F. OTHER ASSETS
Other assets consisted of:
<TABLE>
<CAPTION>
1997 1996
------------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Prepaid pension cost -- Note J............................................... $36,621 $34,724
Investments in and receivables from unconsolidated affiliates................ 8,732 3,102
Notes receivable -- Note N................................................... 3,920 2,797
Other........................................................................ 4,272 7,916
------------- -----------
$53,545 $48,539
------------- -----------
------------- -----------
</TABLE>
On June 1, 1997, the Company contributed certain of the assets of the
former Suspension Systems Division totaling $5.1 million to a joint venture,
Eagle-Picher-Boge, L.L.C. ('E-P-Boge'). The Company retained a 45% interest in
E-P-Boge and recorded no gain on this transaction. The Company is accounting for
this investment in accordance with the equity method. The Company also received
a note from E-P-Boge in the amount of $2,827,000. This note is due June 1, 2000,
and bears interest of 7.5%. The note is secured by the accounts receivable of
E-P-Boge. Included in the Consolidated Statements of Income (Loss) are the
following results of the former Suspension Systems Division:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net sales............................................................ $10,577 $19,606 $18,681
------- ------- -------
------- ------- -------
Operating income (loss).............................................. $ 96 $ (998) $ (506)
------- ------- -------
------- ------- -------
</TABLE>
G. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Credit Agreements
On the Effective Date, the Company entered a financing agreement which
provides a three-year, $60,000,000 unsecured committed revolving credit facility
(the 'Facility'). The Facility expires November 29, 1999 and is available for
cash borrowings and issuance of letters of credit. The Facility replaced debtor
in possession financing (the 'Debtor in Possession Facility') which provided a
$40,000,000 committed revolving credit facility secured by accounts receivable
and inventories. There were no cash borrowings under either revolving credit
facility at any time during 1997 or 1996. Letters of credit totaling $27,700,000
and $32,200,000 were outstanding at November 30, 1997 and 1996, respectively,
leaving the Company with $32,300,000 and $27,800,000, respectively, of borrowing
capacity.
Fees for letters of credit have declined from 1.5% to 1.25% per annum and
commitment fees on the unused portion have declined from .4% to .3% per annum.
The Facility contains covenants which limit other debt and asset sales (other
than those funding the Divestiture Notes), prohibit dividends and the sale of
Company securities by the PI Trust, and require minimum financial coverages and
bank approval for certain changes in corporate management and control. The
Company was in compliance with the covenants of the Facility at November 30,
1997. It is anticipated, however, that the Facility would be replaced with
another financing agreement upon sale of the Company.
F-24
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Several of the Company's foreign subsidiaries have entered into agreements
with various banks which provide lines of credit totaling approximately
$20,200,000 at November 30, 1997 and $18,100,000 at November 30, 1996. At
November 30, 1997, $5,000,000 of borrowings were outstanding leaving $15,200,000
in borrowing capacity. There were no borrowings outstanding on any of these
agreements at November 30, 1996. These agreements, of which the substantial
majority is committed and unsecured, expire in 1998 and 2001. The annual rates
of interest on these lines of credit range from .75% to 1.5% over the banks'
base rates. Some have no commitment fees; the fees on the others range from .25%
to .65% per annum on the unused portion. These agreements also contain covenants
which include restrictions on dividends and minimum financial requirements. The
Company is in compliance with these covenants at November 30, 1997.
Long-term debt consisted of:
<TABLE>
<CAPTION>
1997 1996
------------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Senior unsecured sinking fund debentures..................................... $ 250,000 $ 250,000
Divestiture notes............................................................ -- 50,000
Tax refund notes............................................................. -- 69,146
Industrial revenue bonds..................................................... 18,400 10,475
Secured notes................................................................ -- 6,818
Debt of foreign subsidiaries................................................. 4,997 --
------------- -----------
273,397 386,439
Less:
Current portion.............................................................. 3,403 70,378
------------- -----------
Long-term debt, less current portion......................................... $ 269,994 $ 316,061
------------- -----------
------------- -----------
</TABLE>
Long-term debt had estimated fair value of approximately $287,000,000 at
November 30, 1997 and the estimated fair value approximated carrying value at
November 30, 1996. The estimated fair value of long-term debt was calculated
using discounted cash flow analysis based on current rates offered for similar
debt issues.
Senior Unsecured Sinking Fund Debentures
The Company issued Senior Sinking Fund Debentures ('Debentures') to the PI
Trust on the Effective Date in the amount of $250 million. The Debentures bear
interest of 10% per annum, payable semi-annually, and mature in ten years. The
Debentures will have a mandatory sinking fund of $20 million annually in the
third through ninth years, with a final payment of $110 million at maturity.
Beginning in the third year, the Company has the option to retire additional
amounts of principal; however, a premium will be due on the amount in excess of
twice the scheduled sinking fund amount. It is anticipated that the Debentures
will be retired in conjunction with the Purchase Agreement and the premium for
pre-payment will be waived.
Divestiture Notes
The Divestiture Notes, which were issued to the PI Trust and other
unsecured creditors on the Effective Date, were unsecured, bore interest of 9%
and were to mature November 29, 1999. These notes were repaid on August 25,
1997, without a penalty.
Tax Refund Notes
The Company issued Tax Refund Notes in the aggregate principal amount of
the expected Federal income tax refund (see Note H), to the PI Trust on the
Effective Date. These notes were repaid in 1997 when the Federal income tax
refund was received.
F-25
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Industrial Revenue Bonds
Certain secured industrial revenue bonds, due in 2002 and 2004, were
reinstated at their original terms during the chapter 11 process. The Company
issued an additional industrial revenue bond in 1997 in the amount of $8 million
which matures in 2012. Generally, the industrial revenue bonds bear interest at
variable rates based on the market for similar issues and are secured by letters
of credit.
Secured Notes
Certain secured notes, which were reissued on the effective date at 10% per
annum, were repaid in 1997.
The Company paid interest of $31,044,000, $2,767,000 and $1,966,000 during
1997, 1996 and 1995, respectively.
Long-term debt is scheduled to mature over the next five years as follows:
$3,403,000 in 1998, $20,080,000 in 1999, $20,080,000 in 2000, $21,754,000 in
2001 and $20,080,000 in 2002.
Lease Commitments
Future minimum rental commitments over the next five years as of November
30, 1997 under noncancellable operating leases, which expire at various dates,
are as follows: $3,450,000 in 1998, $2,930,000 in 1999, $2,460,000 in 2000,
$1,200,000 in 2001 and $530,000 in 2002. Rental expense in 1997, 1996, 1995 was
approximately $4,900,000, $5,000,000 and $4,600,000, respectively.
Acquisition by Granaria
On February 24, 1998 ('Closing Date'), the Company was acquired by a
subsidiary of Granaria Industries BV ('Granaria'), Eagle-Picher Holdings, Inc.
('Parent'), from the PI Trust. Upon closing of the acquisition, the Parent
received a $100 million equity investment from Granaria and an equity partner.
Parent also received proceeds approximating $80 million from a preferred stock
issue. All proceeds were invested in the Company, which issued approximately
$180 million of common stock to the Parent. The Company also borrowed $225
million in term loans and $79.1 million in revolving credit loans under a
syndicated senior loan facility ('New Facility'), and issued $220 million in
senior subordinated notes ('Subordinated Notes'). The Facility was terminated.
The proceeds from the common stock, borrowings under the New Facility and
Subordinated Notes were used to redeem the Debentures and the common stock held
by the Trust.
Both the New Facility and the Subordinated Notes are guaranteed on a full,
unconditional, and joint and several basis by certain of the Company's
wholly-owned domestic subsidiaries ('Guarantors'). Management has determined
that full financial statements of the Guarantors would not be material, and such
financial statements are not presented. The following supplemental condensed
combining financial statements present information regarding the Guarantors, the
issuer of the debt and the subsidiaries that did not guarantee the debt.
F-26
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME (LOSS) (UNAUDITED)
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NON-GUARANTORS
------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
-------- ---------- ------------ --------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net sales
Customers............................. $255,330 $489,304 $ 82,839 $ 78,604 $ -- $906,077
Intercompany.......................... 12,345 9,512 5,775 29 (27,661) --
Operating costs and expenses
Cost of products sold................. 202,259 407,006 71,144 71,688 (27,087) 725,010
Selling and administrative............ 42,766 22,280 7,756 4,624 (317) 77,109
Intercompany charges.................. (11,015) 9,055 -- 1,960 -- --
Depreciation.......................... 11,523 21,001 3,609 3,538 -- 39,671
Amortization of intangibles........... 3,254 13,030 34 -- -- 16,318
Loss on sale of divisions............. 699 1,712 -- -- -- 2,411
-------- ---------- ------------ --------- ------------ --------
Total............................ 249,486 474,084 82,543 81,810 (27,404) 860,519
Operating income (loss).................... 18,189 24,732 6,071 (3,177) (257) 45,558
Other income (expense)
Interest expense...................... (30,932) (131) (202) -- 4 (31,261)
Other income (expense)................ 1,105 147 (231) 113 (1,385) (251)
-------- ---------- ------------ --------- ------------ --------
Income (loss) before taxes................. (11,638) 24,748 5,638 (3,064) (1,638) 14,046
Income taxes............................... 9,659 8,719 (636) 158 -- 17,900
-------- ---------- ------------ --------- ------------ --------
Net income (loss).......................... $(21,297) $ 16,029 $ 6,274 $ (3,222) $ (1,638) $ (3,854)
-------- ---------- ------------ --------- ------------ --------
-------- ---------- ------------ --------- ------------ --------
</TABLE>
F-27
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NON-GUARANTORS
FOREIGN
ISSUER GUARANTORS SUBSIDIARIES ELIMINATIONS TOTAL
-------- ---------- -------------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.................... $ 48,834 $ 561 $ 4,344 $ -- $ 53,739
Receivables.................................. 36,541 72,992 21,394 -- 130,927
Intercompany accounts receivable............. 2,982 3,295 -- (6,277) --
Income tax refunds receivable................ 3,025 -- -- -- 3,025
Inventories.................................. 32,309 48,830 12,432 (1,375) 92,196
Prepaid expenses............................. 5,618 2,401 271 -- 8,290
Deferred income taxes........................ 13,793 -- -- -- 13,793
-------- ---------- -------------- ------------ --------
Total current assets.................... 143,102 128,079 38,441 (7,652) 301,970
Property, plant and equipment................ 72,630 135,560 35,348 -- 243,538
Investment in subsidiaries................... 59,981 5,186 -- (65,167) --
Deferred income taxes........................ 98,991 -- -- -- 98,991
Reorganization value in excess of amounts
allocable to indentifiable assets.......... 9,746 39,091 -- -- 48,837
Other assets................................. 36,395 16,462 688 -- 53,545
-------- ---------- -------------- ------------ --------
Total assets............................ $420,845 $324,378 $ 74,477 $(72,819) $746,881
-------- ---------- -------------- ------------ --------
-------- ---------- -------------- ------------ --------
LIABILITIES AND
SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable........................ $ 16,974 $ 28,257 $ 7,655 $ -- $ 52,886
Intercompany accounts payable........... -- -- 6,247 (6,247) --
Accrued liabilities..................... 29,404 22,440 3,713 (138) 55,419
Income taxes............................ 2,284 -- 10 -- 2,294
Long-term debt -- current portion....... 80 -- 3,323 -- 3,403
-------- ---------- -------------- ------------ --------
Current liabilities................ 48,742 50,697 20,948 (6,385) 114,002
Long-term debt -- less current portion....... 268,320 -- 1,674 -- 269,994
Other liabilities............................ 26,768 -- -- -- 26,768
-------- ---------- -------------- ------------ --------
Total liabilities.................. 343,830 50,697 22,622 (6,385) 410,764
Intercompany accounts........................ (240,324) 210,930 16,895 12,499 --
Shareholder's Equity......................... 317,339 62,751 34,960 (78,933) 336,117
-------- ---------- -------------- ------------ --------
Total liabilities and shareholder's
equity........................... $420,845 $324,378 $ 74,477 $(72,819) $746,881
-------- ---------- -------------- ------------ --------
-------- ---------- -------------- ------------ --------
</TABLE>
F-28
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NON-GUARANTORS
------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
--------- ---------- ------------ --------- ------------ ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss)...................... $ (21,297) $ 16,029 $ 6,274 $(3,222) $ (1,638) $ (3,854)
Adjustments to reconcile net income loss to
cash provided by (used in) operating
activities:
Depreciation and amortization.......... 14,777 34,031 3,643 3,538 -- 55,989
Loss on sale of divisions.............. 699 1,712 -- -- -- 2,411
Change in assets and liabilities:
Income tax refunds receivable.......... 70,695 -- -- -- -- 70,695
Deferred income taxes.................. 15,700 -- -- -- -- 15,700
Working capital and other items........ (1,684) 9,991 (5,655) 3,051 1,239 6,942
--------- ---------- ------------ --------- ------------ ---------
Net cash provided by (used in)
operating activities............ 78,890 61,763 4,262 3,367 (399) 147,883
Cash Flows From Investing Activities:
Proceeds from sale of divisions........ 30,735 8,272 -- -- -- 39,007
Capital expenditures................... (8,454) (31,396) (10,694) (780) -- (51,324)
Other.................................. (1,670) 50 (1,271) (4) 1,385 (1,510)
--------- ---------- ------------ --------- ------------ ---------
Net cash provided by (used in)
investing activities............ 20,611 (23,074) (11,965) (784) 1,385 (13,827)
Cash Flows From Financing Activities:
Issuance of long-term debt............. 8,000 -- 4,997 -- -- 12,997
Reduction of long-term debt............ (126,039) -- -- -- -- (126,039)
--------- ---------- ------------ --------- ------------ ---------
Net cash provided by (used in)
financing activities............ (118,039) -- 4,997 -- -- (113,042)
--------- ---------- ------------ --------- ------------ ---------
Increase (decrease) in cash and cash
equivalents............................... (18,538) 38,689 (2,706) 2,583 986 21,014
Intercompany accounts....................... 41,283 (38,681) 1,065 (2,681) (986) --
Cash and cash equivalents, beginning of
year...................................... 26,089 553 5,985 98 -- 32,725
--------- ---------- ------------ --------- ------------ ---------
Cash and cash equivalents,
end of year............................... $ 48,834 $ 561 $ 4,344 $ -- $ -- $ 53,739
--------- ---------- ------------ --------- ------------ ---------
--------- ---------- ------------ --------- ------------ ---------
</TABLE>
F-29
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME (LOSS) (UNAUDITED)
YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
NON-GUARANTORS
-----------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
---------- ---------- ------------ --------- ------------ ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net sales
Customers............................ $ 242,537 $432,194 $ 78,440 $ 138,116 $ -- $ 891,287
Intercompany......................... 11,944 6,990 5,551 80 (24,565) --
Operating costs and expenses
Cost of products sold................ 196,102 357,062 64,314 122,367 (22,919) 716,926
Selling and administrative........... 42,262 22,616 8,834 9,166 (1,373) 81,505
Intercompany charges................. (10,010) 7,281 -- 2,729 -- --
Depreciation......................... 7,534 14,432 2,603 5,769 -- 30,338
Amortization of intangibles.......... 325 74 -- 13 -- 412
---------- ---------- ------------ --------- ------------ ----------
Total........................... 236,213 401,465 75,751 140,044 (24,292) 829,181
Operating income (loss)................... 18,268 37,719 8,240 (1,848) (273) 62,106
Other income (expense)
Interest expense..................... (2,914) -- (157) -- (12) (3,083)
Other income (expense)............... 574 (206) 939 26 12 1,345
Asbestos litigation and other
claims............................. 497,953 -- -- -- -- 497,953
---------- ---------- ------------ --------- ------------ ----------
Income (loss) before reorganization items,
taxes, extraordinary item and cumulative
effect of accounting change............. 513,881 37,513 9,022 (1,822) (273) 558,321
Reorganization items...................... 116,335 -- -- -- -- 116,335
Income taxes.............................. (46,090) (1,999) (4,326) (155) -- (52,570)
---------- ---------- ------------ --------- ------------ ----------
Income (loss) before extraordinary item
and cumulative effect of accounting
change.................................. 584,126 35,514 4,696 (1,977) (273) 622,086
Extraordinary item -- gain on discharge
of pre-petition liabilities............. 1,525,540 -- -- -- -- 1,525,540
Cumulative effect of change in accounting
for inventories......................... (1,235) -- -- -- -- (1,235)
---------- ---------- ------------ --------- ------------ ----------
Net income (loss)......................... $2,108,431 $ 35,514 $ 4,696 $ (1,977) $ (273) $2,146,391
---------- ---------- ------------ --------- ------------ ----------
---------- ---------- ------------ --------- ------------ ----------
</TABLE>
F-30
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
NON-GUARANTORS
------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
--------- ---------- ------------ --------- ------------ --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.................... $ 26,089 $ 553 $ 5,985 $ 98 $ -- $ 32,725
Receivables.................................. 34,258 64,400 17,436 16,781 -- 132,875
Intercompany accounts receivable............. 2,721 2,915 -- -- (5,636) --
Income tax refunds receivable................ 73,720 -- -- -- -- 73,720
Inventories.................................. 28,139 49,874 10,408 14,480 -- 102,901
Prepaid expenses............................. 3,067 3,449 505 1,143 -- 8,164
Deferred income taxes........................ 26,351 -- -- -- -- 26,351
--------- ---------- ------------ --------- ------------ --------
Total current assets.................... 194,345 121,191 34,334 32,502 (5,636) 376,736
Property, plant and equipment................ 75,865 125,586 28,879 26,021 -- 256,351
Investment in subsidiaries................... 58,743 24,960 -- -- (83,703) --
Deferred income taxes........................ 102,133 -- -- -- -- 102,133
Reorganization value in excess of amounts
allocable to identifiable assets........... 13,000 52,121 -- -- -- 65,121
Other assets................................. 25,561 14,045 630 8,303 -- 48,539
--------- ---------- ------------ --------- ------------ --------
Total assets............................ $ 469,647 $337,903 $ 63,843 $ 66,826 $(89,339) $848,880
--------- ---------- ------------ --------- ------------ --------
--------- ---------- ------------ --------- ------------ --------
LIABLITIES AND
SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable........................ $ 14,844 $ 16,210 $ 4,959 $ 5,022 $ -- $ 41,035
Intercompany accounts payable........... -- -- 5,608 -- (5,608) --
Accrued liabilities..................... 25,522 15,199 5,897 3,248 -- 49,866
Income taxes............................ 3,038 -- 611 -- -- 3,649
Long-term debt -- current portion....... 70,378 -- -- -- -- 70,378
--------- ---------- ------------ --------- ------------ --------
Current liabilities................ 113,782 31,409 17,075 8,270 (5,608) 164,928
Long-term debt -- less current portion....... 316,061 -- -- -- -- 316,061
Other liabilities............................ 25,495 -- 589 -- -- 26,084
--------- ---------- ------------ --------- ------------ --------
Total liabilities.................. 455,338 31,409 17,664 8,270 (5,608) 507,073
Intercompany accounts........................ (327,498) 259,714 15,830 38,469 13,485 --
Shareholder's Equity......................... 341,807 46,780 30,349 20,087 (97,216) 341,807
--------- ---------- ------------ --------- ------------ --------
Total Liabilities and Shareholder's
Equity........................... $ 469,647 $337,903 $ 63,843 $ 66,826 $(89,339) $848,880
--------- ---------- ------------ --------- ------------ --------
--------- ---------- ------------ --------- ------------ --------
</TABLE>
F-31
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<CAPTION>
NON-GUARANTORS
-----------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
---------- ---------- ------------ --------- ------------ -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................... $2,108,431 $ 35,514 $ 4,696 $ (1,977) $ (273) $ 2,146,391
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Non-cash adjustments relating to non-
operating income items..................... (2,140,942) -- -- -- -- (2,140,942)
Depreciation and amortization................ 7,859 14,506 2,603 5,782 -- 30,750
Change in assets and liabilities:
Deferred income taxes................... 29,170 -- -- -- -- 29,170
Working capital and other items......... 17,044 (15,532) 636 6,505 (1,161) 7,492
---------- ---------- ------------ --------- ------------ -----------
Net cash provided by (used in)
operating acitivities............ 21,562 34,488 7,935 10,310 (1,434) 72,861
Cash flows from investing activities:
Proceeds from sale of divisions......... 4,248 -- -- -- -- 4,248
Capital expenditures.................... (9,417) (25,074) (5,602) (4,864) -- (44,957)
Other................................... (661) (1,246) 108 44 694 (1,061)
---------- ---------- ------------ --------- ------------ -----------
Net cash provided by (used in)
investing activities............. (5,830) (26,320) (5,494) (4,820) 694 (41,770)
Cash flows from financing activities......... -- --
Reduction of long-term debt............. (1,520) -- (1,678) -- -- (3,198)
Cash payments on effective date of plan of
reorganization............................. (88,498) -- -- -- -- (88,498)
---------- ---------- ------------ --------- ------------ -----------
Increase (decrease) in cash and cash
equivalents................................ (74,286) 8,168 763 5,490 (740) (60,605)
Intercompany accounts........................ 13,409 (8,676) 196 (5,669) 740 --
Cash and cash equivalents, beginning of
year....................................... 86,966 1,061 5,026 277 -- 93,330
---------- ---------- ------------ --------- ------------ -----------
Cash and cash equivalents,
end of year................................ $ 26,089 $ 553 $ 5,985 $ 98 $ -- $ 32,725
---------- ---------- ------------ --------- ------------ -----------
---------- ---------- ------------ --------- ------------ -----------
</TABLE>
F-32
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF INCOME (LOSS) (UNAUDITED)
YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
NON-GUARANTORS
------------------------
FOREIGN DIVESTED
ISSUER GUARANTOR SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
----------- --------- ------------ --------- ------------ -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net sales
Customers........................... $ 246,377 $ 381,297 $ 75,141 $ 145,733 $ -- $ 848,548
Intercompany........................ 11,028 6,394 3,143 51 (20,616) --
Operating costs and expenses
Cost of products sold............... 198,632 314,195 62,020 126,450 (19,924) 681,373
Selling and administrative.......... 40,812 20,027 6,657 8,531 (647) 75,380
Intercompany charges................ (9,846) 6,140 -- 3,706 -- --
Depreciation........................ 6,716 13,436 2,391 5,753 -- 28,296
Amortization of intangibles......... 325 74 -- 13 -- 412
----------- --------- ------------ --------- ------------ -----------
Total.......................... 236,639 353,872 71,068 144,453 (20,571) 785,461
Operating income (loss).................. 20,766 33,819 7,216 1,331 (45) 63,087
Other income (expense)
Interest expense.................... (1,770) -- (189) -- 33 (1,926)
Other income (expense).............. 11,379 377 210 (137) (125) 11,704
Adjustment for asbestos
litigation........................ (1,005,511) -- -- -- -- (1,005,511)
----------- --------- ------------ --------- ------------ -----------
Income (loss) before taxes and
reorganization items................... (975,136) 34,196 7,237 1,194 (137) (932,646)
Reorganization items..................... (2,225) -- -- -- -- (2,225)
Income taxes............................. (3,824) (2,011) (3,377) (88) -- (9,300)
----------- --------- ------------ --------- ------------ -----------
Net income (loss)........................ $ (981,185) $ 32,185 $ 3,860 $ 1,106 $ (137) $ (944,171)
----------- --------- ------------ --------- ------------ -----------
----------- --------- ------------ --------- ------------ -----------
</TABLE>
F-33
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
NON-GUARANTORS
-------------------------
FOREIGN DIVESTED
ISSUER GUARANTORS SUBSIDIARIES DIVISIONS ELIMINATIONS TOTAL
--------- ---------- ------------ --------- ------------ ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).............. $(981,185) $ 32,185 $ 3,860 $ 1,106 $ (137) $(944,171)
Adjustments to reconcile net income
(loss) to cash provided by (used
in) operating activities:
Non-cash adjustments relating
to non-operating income
items........................ 994,006 -- -- -- -- 994,006
Depreciation and
amortization................. 7,041 13,510 2,391 5,766 -- 28,708
Change in assets and liabilities:
Deferred income taxes.......... (18,900) -- -- -- -- (18,900)
Working capital and other
items........................ (9,738) (9,137) (4,302) (6,095) 85 (29,187)
--------- ---------- ------------ --------- ------ ---------
Net cash provided by (used
in) operating
activities.............. (8,776) 36,558 1,949 777 (52) 30,456
Cash flows from investing
activities:
Proceeds from sale of
investment................... 11,505 -- -- -- -- 11,505
Capital expenditures........... (17,582) (11,051) (5,620) (6,305) -- (40,558)
Other.......................... (1,337) (1,518) 2,414 (176) 957 340
--------- ---------- ------------ --------- ------ ---------
Net cash provided by (used
in) investing
activities.............. (7,414) (12,569) (3,206) (6,481) 957 (28,713)
Cash flows from financing
activities:
Issuance of long-term debt..... -- -- 1,240 -- -- 1,240
Reduction of long-term debt.... (1,597) (42) (620) -- -- (2,259)
--------- ---------- ------------ --------- ------ ---------
Net cash provided by (used
in) investing
activities.............. (1,597) (42) 620 -- -- (1,019)
--------- ---------- ------------ --------- ------ ---------
Increase (decrease) in cash and cash
equivalents....................... (17,787) 23,947 (637) (5,704) 905 724
Intercompany accounts............... 17,462 (23,300) 1,006 5,737 (905) --
Cash and cash equivalents, beginning
of year........................... 87,291 414 4,657 244 -- 92,606
--------- ---------- ------------ --------- ------ ---------
Cash and cash equivalents, end of
year.............................. $ 86,966 $ 1,061 $ 5,026 $ 277 $-- $ 93,330
--------- ---------- ------------ --------- ------ ---------
--------- ---------- ------------ --------- ------ ---------
</TABLE>
F-34
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. INCOME TAXES
The following is a summary of the components of income taxes (benefit) from
operations and fresh start revaluation in 1996:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal......................................................... $ 1,000 $17,200 $20,900
Foreign......................................................... (600) 4,350 3,400
State and local................................................. 1,800 1,850 3,900
------- ------- -------
2,200 23,400 28,200
Deferred:
Federal......................................................... 11,300 29,170 (18,900)
State and local................................................. 4,400 -- --
------- ------- -------
15,700 29,170 (18,900)
------- ------- -------
$17,900 $52,570 $ 9,300
------- ------- -------
------- ------- -------
</TABLE>
Total income tax benefit for the year ended November 30, 1996 of
$117,880,000 consisted of $52,570,000 expense from operations and the
fresh-start revaluation, $169,785,000 tax benefit from the extraordinary gain on
the discharge of pre-petition liabilities, and $665,000 tax benefit from the
cumulative effect of the change in accounting for inventories.
The sources of income (loss) before income tax expense (benefit),
extraordinary gain on discharge of pre-petition liabilities and cumulative
effect of accounting change are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
United States..................................................... $ 7,873 $665,907 $(941,971)
Foreign........................................................... 6,173 8,749 7,100
------- -------- ---------
$14,046 $674,656 $(934,871)
------- -------- ---------
------- -------- ---------
</TABLE>
The differences between the total income tax expense from operations and
fresh start revaluation in 1996 and the income tax expense computed using the
Federal income tax rate were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Income tax expense (benefit) at Federal statutory rate............. $ 4,900 $ 236,130 $(327,200)
Change in valuation allowance...................................... 1,200 (187,950) 332,900
Foreign taxes rate differential.................................... (3,800) 900 600
State and local taxes, net of Federal benefit...................... 3,600 1,200 2,500
Non-deductible amortization of reorganization value in excess of
amounts allocable to identifiable assets......................... 5,700 -- --
Non-deductible fresh start items................................... -- 4,100 --
Expired tax credits................................................ 5,900 -- --
Other.............................................................. 400 (1,810) 500
------- --------- ---------
Total income tax expense................................. $17,900 $ 52,570 $ 9,300
------- --------- ---------
------- --------- ---------
</TABLE>
F-35
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of deferred tax balances as of November 30 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment.............................................. $(46,761) $(58,885)
Prepaid pension............................................................ (12,817) (12,154)
Other...................................................................... (5,735) (6,461)
-------- --------
Total deferred tax liabilities........................................ (65,313) (77,500)
-------- --------
Deferred tax assets:
Notes to former creditors.................................................. 87,500 122,787
Net operating loss carryforwards........................................... 74,142 64,328
Credit carryforwards....................................................... 14,686 20,653
Accrued liabilities........................................................ 14,356 9,851
Postretirement benefit liability........................................... 7,588 7,586
Other...................................................................... 8,067 7,851
-------- --------
Total deferred tax assets............................................. 206,339 233,056
-------- --------
Valuation allowance........................................................ (28,242) (27,072)
-------- --------
Net deferred tax assets............................................... $112,784 $128,484
-------- --------
-------- --------
</TABLE>
At November 30, 1997, undistributed earnings of foreign subsidiaries
totaled $30 million. Deferred tax liabilities have not been recognized for these
undistributed earnings because it is management's intention to reinvest such
undistributed earnings outside the United States. If all undistributed earnings
were remitted to the United States, the amount of incremental United States
Federal and foreign income taxes payable, net of foreign tax credits, would be
approximately $10.5 million.
On the Effective Date, the Company contributed cash, notes and stock to the
PI Trust and distributed cash and notes to other unsecured creditors. The
distribution of cash and stock resulted in a net operating loss for tax purposes
for the fiscal year ended November 30, 1996. A portion of this operating loss
was applied to prior years' taxable income according to carryback rules to
generate a Federal tax refund of $69,146,000 which was received in 1997. The
remainder is carried forward to offset taxable income in future years.
Deductions for the notes distributed are taken as the notes are repaid. Net
operating loss carryforwards of approximately $161 million and $34 million will
expire in 2011 and 2012, respectively.
As a result of the net operating loss carried back to obtain a refund, tax
credits totaling $9,708,000, which had been previously used to reduce tax
liability in the carryback years, were restored and are available to offset tax
liability in future years. These credits are scheduled to expire in the years
1998 through 2012, but are expected to expire unutilized. Therefore, a provision
for these items is included in the valuation allowance. The Company also has
available minimum tax credits of approximately $5,000,000 which may be used
indefinitely to reduce Federal income tax liability.
While the Company was in chapter 11, significant uncertainties existed
relating to the amounts of deferred tax benefits that would be realized.
Accordingly, the valuation allowance reflected these uncertainties. The Company
reversed a significant portion of the valuation allowance upon emergence from
chapter 11 when the Company was able to determine more accurately the amounts of
the deferred tax benefits. Based on its history of prior years' operations and
its expectations for the future, the Company has determined that it is more
likely than not that the results of future operations will generate sufficient
taxable income to realize the deferred tax benefits before they expire,
excluding the tax credits referred to above. Although the Automotive Segment is
susceptible to economic cycles and recessions, the Industrial and Machinery
Segments of the Company consist of certain businesses which are not impacted as
significantly by economic downturns.
F-36
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company paid income taxes, net of refunds received, of $4,300,000 in
1997 (with the exception of the Federal tax refund received of $69,146,000),
$17,300,000 in 1996 and $28,800,000 in 1995.
I. INCOME (LOSS) PER SHARE
The calculation of net income (loss) per share is based upon the average
number of shares outstanding. The average number of shares used in the
computation of net income (loss) per share was 10,000,000 in 1997 and 11,040,932
in 1996 and 1995.
J. RETIREMENT BENEFIT PLANS
Substantially all employees of the Company and its subsidiaries are covered
by various pension or profit sharing retirement plans. The cost of providing
retirement benefits was $1,900,000 in 1997, $2,300,000 in 1996 and $1,900,000 in
1995. Amounts for a supplemental executive retirement plan to provide senior
management with benefits in excess of normal pension benefits are included in
the cost of providing retirement benefits. Under the plan, annuities are
purchased by the Company and distributed to participants on an annual basis. The
cost of these annuities was $1,058,000 in 1997, $1,279,000 in 1996 and $964,000
in 1995.
The Company's funding policy for defined benefit plans is to fund amounts
on an actuarial basis to provide for current and future benefits in accordance
with the funding guidelines of ERISA.
Plan benefits for salaried employees are based primarily on employees'
highest five consecutive years' earnings during the last ten years of
employment. Plan benefits for hourly employees typically are based on a dollar
unit multiplied by the number of service years.
Net periodic pension expense for the Company's defined benefit plans
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost-benefits earned during the period...................... $ 4,848 $ 5,497 $ 4,001
Interest cost on projected benefit obligation....................... 14,276 13,701 12,972
Actual gain on plan assets.......................................... (36,544) (29,296) (40,975)
Net amortization and deferral....................................... 16,669 10,000 24,336
-------- -------- --------
Net periodic pension cost (income).................................. $ (751) $ (98) $ 334
-------- -------- --------
-------- -------- --------
</TABLE>
In addition, in 1997, the Company recognized a curtailment gain of
$1,662,000 due to the reduction in active participants in the Company's
retirement plans that resulted primarily from the divestiture of divisions.
The plans' assets consist primarily of listed equity securities and
publicly traded notes and bonds. The actual net return on plan assets was 15.3%
in 1997, 13.5% in 1996 and 21.2% in 1995, and generally reflects the performance
of the equity and bond markets.
F-37
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheets at November 30:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation................................................ $(184,123) $(168,896)
--------- ---------
--------- ---------
Accumulated benefit obligation........................................... $(191,148) $(175,191)
--------- ---------
--------- ---------
Projected benefit obligation............................................. $(209,701) $(191,667)
Plan assets at fair value..................................................... 250,036 226,391
--------- ---------
Projected benefit obligation less than plan assets............................ 40,335 34,724
Unrecognized net gain......................................................... (3,761) --
Unrecognized prior service cost............................................... 47 --
--------- ---------
Prepaid pension cost recognized............................................... $ 36,621 $ 34,724
--------- ---------
--------- ---------
</TABLE>
The discount rate and weighted average rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.0% and 4.2%, and 7.5% and 4.2%,
respectively, at November 30, 1997 and 1996, respectively. The expected
long-term rate of return on assets was 9.0% in 1997 and in 1996.
Upon the adoption of fresh start reporting, all unrecognized items as of
November 30, 1996 were recognized and recorded on the Company's Consolidated
Balance Sheet.
K. EMPLOYEE BENEFITS OTHER THAN PENSIONS
In addition to providing pension retirement benefits, the Company makes
health care and life insurance benefits available to certain retired employees
on a limited basis. Generally, the medical plans pay a stated percentage of
medical expenses reduced by deductibles and other coverages. Eligible employees
may elect to be covered by these health and life insurance benefits if they
reach early or normal retirement age while working for the Company. In most
cases, a retiree contribution for health insurance coverage is required. The
Company funds these benefit costs primarily on a pay-as-you-go basis. The net
amounts funded approximate $1,000,000 on an annual basis.
The components of net periodic postretirement benefit cost were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost -- benefits earned during the period.......................... $ 554 $ 710 $ 396
Interest cost on accumulated postretirement benefit obligation............. 1,241 1,424 1,202
Amortization of unrecognized net gain...................................... (93) -- (179)
------ ------ ------
Net periodic postretirement benefit cost................................... $1,702 $2,134 $1,419
------ ------ ------
------ ------ ------
</TABLE>
In addition, in 1997, the Company recognized a curtailment gain of $564,000
due to the reduction in eligible employees that resulted primarily from the
divestiture of divisions.
F-38
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accumulated postretirement benefit obligation at November 30 consisted
of the following components:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Retirees and dependents........................................................... $10,670 $12,561
Eligible active participants...................................................... 2,074 2,021
Other active participants......................................................... 6,993 7,093
------- -------
Accumulated postretirement benefit obligation..................................... 19,737 21,675
Unrecognized net gain............................................................. 1,944 --
------- -------
Accrued postretirement benefit costs.............................................. $21,681 $21,675
------- -------
------- -------
</TABLE>
Benefit costs were estimated assuming retiree health care costs would
initially increase at an 9% annual rate which decreases to an ultimate rate of
6% in 4 years. If this annual trend rate would increase by 1%, the accumulated
postretirement obligation as of November 30, 1997 would increase by $2,460,000
with a corresponding increase of $323,000 in the postretirement benefit expense
in 1997. The discount rates used in determining the accumulated postretirement
obligation at November 30, 1997 and 1996 were 6.5% and 7.0%, respectively. The
unrecognized net gain as of November 30, 1996 was recognized and recorded in the
Consolidated Balance Sheet per the provisions of fresh-start reporting.
L. ASBESTOS LITIGATION AND CLAIMS
As discussed in Note B, above, the Plan provides that all present and
future asbestos-related personal injury claims will be channeled to and resolved
by the PI Trust. Such claims result from exposure to asbestos-containing
industrial insulation products that the Company manufactured from 1934 to 1971.
The Company expects that the approximately 150,000 such claims that were filed
pursuant to the bar date for such claims, and the tens of thousands of such
claims that will arise for several decades into the future, will be administered
and resolved by such trust. In fact, the Company has learned that the PI Trust
began resolving and paying such claims in fiscal 1997.
Further, the Company expects that the channeling injunction provided by
section 524 of the Bankruptcy Code will prevent any such claimants from
prosecuting such claims against the reorganized Company. The Company is not
aware of any attempt by any asbestos-related personal injury claimant to nullify
the channeling injunction provided by section 524 of the Bankruptcy Code
subsequent to the entry of that injunction by the Bankruptcy Court and the
District Court in November, 1996.
In addition, the Plan also resolved and discharged all asbestos property
damage claims against the Company. The class of holders of such claims voted to
accept a settlement for such claims that was contained in the Plan. Pursuant to
the settlement, the Company has set aside $3 million in cash to fund the PD
Trust to resolve such claims. Certain of the holders of such claims will appoint
trustees to establish and administer such trust. The Company expects that such
trust will be established in due course. Further, the Company expects that an
injunction provided by the Plan, which orders all holders of asbestos property
claims to pursue such claims solely against the PD Trust, will prevent any such
claimants from prosecuting such claims against the reorganized Company.
M. ENVIRONMENTAL AND OTHER LITIGATION CLAIMS
Most of the pre-petition claims against the Company alleging a right to
payment due to environmental and litigation matters were resolved prior to the
Effective Date. The holders of those claims which were allowed have received a
proportionate distribution of the assets of the estate based on the amount of
their claims to the total liabilities of the Company.
In addition to the items discussed below, the Company is also involved in
routine litigation, environmental proceedings and claims pending with respect to
matters arising out of the normal course
F-39
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of business. As of November 30, 1997, the Company has reserved $6.1 million
associated with environmental remediation activities at some of its current and
former sites. In management's opinion, the ultimate liability resulting from all
claims, individually or in the aggregate, will not materially affect the
Company's consolidated financial position, results of operations or cash flows.
Environmental
The settlement among the Company, the United States Environmental
Protection Agency, and the United States Department of Interior which resolved
the majority of the 1,102 proofs of claim timely filed alleging a right to
payment because of environmental matters, was approved by the Bankruptcy Court
in June, 1996. Certain parties that may be liable at certain of the sites
resolved by the settlement appealed such approval. In August 1997, the District
Court affirmed the Bankruptcy Court's approval of the settlement. The time
within which such affirmance may be appealed has expired without any further
appeal having been taken. Thus, the settlement has become final and binding on
all parties.
One of the significant features of the settlement is the agreement with
respect to 'Additional Sites.' Additional Sites are those superfund sites for
which the Company's liability allegedly arises as a result of pre-petition waste
disposal or recycling. The Company retains all of its defenses, legal or
factual, at such sites. However, if the Company is found liable at any
Additional Sites or settles any claims for any Additional Sites, the Company is
required to pay as if such claims had been resolved in the reorganization under
chapter 11. Thus, the Company's liability at Additional Sites will be paid at
approximately 37% of any amount due.
In fiscal 1997, the Company received notice that it may have liability
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 at sixteen Additional Sites. The Company believes, after an
investigation of these claims, that it has only de minimis liability at thirteen
of these sites. Three of the sixteen sites may require expenditures above the de
minimis level. The Company has valid legal and factual defenses at these sites
and intends to contest vigorously its liability.
Lead Chemicals
The Plan that was consummated on November 29, 1996 provides that all
lead-related personal injury claims that were pending on the Plan's Effective
Date and all future lead-related personal injury claims, will be channeled to
and resolved by the PI Trust discussed in Notes B and L, above. The Company
expects that the channeling injunction provided by section 524 of the Bankruptcy
Code will prevent any such claimants from prosecuting such claims against the
reorganized Company. The Company is not aware of any attempt by any lead-related
personal injury claimant to nullify the channeling injunction provided by
section 524 of the Bankruptcy Code subsequent to the entry of that injunction by
the Bankruptcy Court and the District Court in November 1996. All claims
asserting liability against the Company based on property damage from lead
chemicals allegedly manufactured and sold by the Company were disallowed during
the reorganization.
Other Litigation Claims
In May 1997, Caradon Doors and Windows, Inc. ('Caradon') filed a suit
against the Company in the U.S. District Court in Atlanta, Georgia alleging
breach of contract and asserting contribution rights against the Company. Prior
to this suit, Caradon had been found liable to Therma-Tru Corporation
('Therma-Tru') in the amount of approximately $8.8 million for infringing a
Therma-Tru patent for plastic door components manufactured by the Company's now
divested Plastics Division. Caradon settled the litigation with Therma-Tru and
was seeking to recover some or all of its liability from the Company. In May
1997, Therma-Tru also attempted to hold the Company liable for patent
infringement for plastic door components that the Plastics Division manufactured
and sold to Pease Industries, Inc. ('Pease'). Further, after the Company
divested its Plastics Division in July 1997, Therma-Tru attempted to hold the
purchaser of the Plastics Division, Cambridge Industries, Inc. ('Cambridge'),
liable for infringement for Cambridge's manufacture of door components for Pease
after the divestiture, but using
F-40
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the prior technology. The Company had agreed to indemnify Cambridge for those
sales. Thus, Therma-Tru's suit against Cambridge might also be a liability of
the Company. The Company estimates that the total damages that Therma-Tru is
seeking to recover, jointly and severally, from the Company and Pease in these
two suits is approximately $11.4 million. The Company asserted, in a motion
filed to dismiss these claims, that all of Caradon's and Therma-Tru's claims had
been discharged in the Company's reorganization under chapter 11. On December
24, 1997, the Bankruptcy Court decided that all of Caradon's claim and
approximately $9.8 million of Therma-Tru's claim were discharged and could not
be asserted against the Company. The Company believes that these decisions will
be upheld on appeal. Further, the Company believes that it has valid legal and
factual defenses and intends to contest vigorously all such claims, either on
appeal or in any proceeding on the approximately $1.6 million of Therma-Tru's
claim that was not held to be discharged by the Bankruptcy Court's decision.
In December 1997, two distributors of forklift trucks manufactured by the
Company's Construction Equipment Division filed suit against the Company and two
co-defendants in the Superior Court of Maricopa County, Arizona after such
distributors were notified that they would be terminated as distributors. The
suit alleged three causes of action, only two of which were against the Company.
The suit alleged that the Company violated the Arizona Equipment Dealer
Protection Law and breached its implied covenant of good faith and fair dealing.
The suit sought not less than $10 million in damages on each count pled against
the Company and not less than $30 million in punitive damages against all three
defendants. On February 17, 1998, this suit was dismissed after the Company
reversed its decision to terminate the distributors.
N. DIVESTITURES
Pursuant to the Plan, the Company sold its Plastics, Transicoil and
Fabricon Divisions to fund the repayment of the Divestiture Notes. The Company
received net cash proceeds of $39,007,000. The aggregate loss on these
transactions was $2,411,000.
The Company received a note for $3,719,000 from the buyer of the Fabricon
Division, which is included in Other Assets. The note bears interest of 8% per
annum and is secured by accounts receivable and inventory. Payments of $300,000
are required on the first and second anniversaries of the note with the balance
due on October 31, 2000.
The Company remains as guarantor on the lease of the building in which the
former Transicoil Division is located, and is liable should the buyer not
perform on the lease. The remaining lease payments total approximately
$10,100,000 over the lease term which expires in 2005. The Company believes the
likelihood of being liable for the lease to be remote.
Included in the Consolidated Statements of Income (Loss) are the following
results of these divested divisions (excluding net loss on sale of divisions):
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net sales............................................................ $68,028 $118,508 $126,658
------- -------- --------
------- -------- --------
Operating income (loss).............................................. $(1,313) $ 1,732 $ 6,141
------- -------- --------
------- -------- --------
</TABLE>
O. OTHER INCOME
The Company held certain equity investments related to shares of stock in a
Canadian mining concern that the Company received in 1990 in settlement of
certain indebtedness. The Company had previously deemed the investments to be
permanently impaired and had recorded a loss on the investments in the amount of
its full book value. Subsequently, the value of the stock increased
significantly. These investments were sold in June 1995, resulting in realized
gain of $11.5 million.
F-41
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
P. INDUSTRY SEGMENT INFORMATION
The Company is a diversified manufacturer serving global markets and many
industries. A general description of the products manufactured and the markets
served by the Company's three industry segments is:
Industrial
Diatomaceous earth products, rubber products, rare metals, fiberglass
reinforced plastic parts and industrial chemicals are produced by the Industrial
Segment operations serving the food and beverage, recreation, nuclear,
telecommunications, electronics, and other industrial markets globally. Sales
and operating income (excluding net loss on sale of divisions), respectively, of
divested operations included in this Segment were $29,534,000 and $1,500,000 in
1997, $39,344,000 and $1,008,000 in 1996 and $36,236,000 and $1,000,000 in 1995.
Machinery
The Machinery Segment serves the commercial aerospace, construction, food
and beverage and other industrial markets. Its products include earth moving
machines, heavy-duty forklift trucks, aerospace and defense batteries and
components, metal cleaning and finishing systems and other industrial machinery.
Divested operations included in this segment had sales and operating income
(excluding net loss on sale of divisions), respectively, of $12,788,000 and
$834,000 in 1997, $18,023,000 and $934,000 in 1996 and $14,766,000 and $715,000
in 1995.
Automotive
The operations in the Automotive Segment provide mechanical, structural,
and trim parts for passenger cars, trucks, vans and sport utility vehicles for
the original equipment manufacturers and replacement markets. Resources are
concentrated in serving the North American, European and Pacific Rim markets.
Sales and operating income (loss) (excluding net loss on sale of
divisions), respectively, of divested operations and operations contributed to
the E-P-Boge joint venture, which are included in the Automotive Segment were
$36,284,000 and $(3,551,000) in 1997, $80,747,000 and $(1,208,000) in 1996 and
$94,337,000 and $3,920,000 in 1995.
Consolidated sales to Ford Motor Company amounted to $170,500,000 in 1997,
$167,700,000 in 1996 and $166,800,000 in 1995. No other customer accounted for
10% or more of consolidated sales.
Other Information
Sales between segments were not material.
Research and development costs are expensed as incurred. In fiscal 1997,
the Company spent approximately $14,800,000 for research and development and
related activities, primarily for the development of new products or the
improvement of existing products. Comparable costs were $18,000,000 and
$17,300,000 for 1996 and 1995, respectively.
United States net sales include export sales to non-affiliated customers of
$113,600,000 in 1997, $108,500,000 in 1996 and $92,500,000 in 1995.
The Company does not derive more than 10% of its revenues from, nor do 10%
of its assets reside in, its foreign operations, which are located primarily in
Europe and Mexico. Intercompany transactions with foreign operations are made at
established transfer prices.
F-42
<PAGE>
<PAGE>
EAGLE-PICHER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INDUSTRY SEGMENT INFORMATION
FOR THE YEARS ENDED NOVEMBER 30
<TABLE>
<CAPTION>
INDUSTRIAL MACHINERY
-------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Sales.............................................................. $200.1 $194.1 $160.6 $270.8 $257.6 $ 254.7
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Operating Income................................................... 15.0 20.6 15.6 20.0 22.5 24.1
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Depreciation and amortization...................................... 14.4 6.9 6.1 10.3 5.0 4.7
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Capital expenditures............................................... 10.6 10.8 4.4 5.9 4.5 7.6
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Identifiable assets................................................ 138.1 146.3 80.6 122.3 136.0 112.0
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
<CAPTION>
AUTOMOTIVE
------------------------------
1997 1996 1995
------ ------ ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Sales.............................................................. $435.2 $439.6 $ 433.2
------ ------ ---------
------ ------ ---------
Operating Income................................................... 29.7 38.5 42.1
------ ------ ---------
------ ------ ---------
Depreciation and amortization...................................... 30.9 18.7 17.6
------ ------ ---------
------ ------ ---------
Capital expenditures............................................... 34.6 29.5 28.3
------ ------ ---------
------ ------ ---------
Identifiable assets................................................ 274.0 292.8 217.1
------ ------ ---------
------ ------ ---------
</TABLE>
<TABLE>
<CAPTION>
SEGMENT TOTAL CORPORATE
-------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Sales.............................................................. $906.1 $891.3 $848.5 $ -- $ -- $ --
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Operating income (loss)............................................ 64.7 81.6 81.8 (19.1) (19.5) (18.7)
------ ------ ------
------ ------ ------
Adjustment for asbestos litigation................................. -- 502.2 (1,005.5)
Interest expenses.................................................. (31.3) (3.1) (1.9)
Other income (expense)............................................. (0.3) (2.9) 11.6
Reorganization items............................................... -- 116.3 (2.2)
------ ------ ---------
------ ------ ---------
Income (loss) before taxes.........................................
Depreciation and amortization...................................... 55.6 30.6 28.4 0.4 0.2 0.3
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Capital expenditures............................................... 51.1 44.8 40.3 0.2 0.2 0.3
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
Indentifiable assets............................................... 534.4 575.1 409.7 212.5 273.8 170.4
------ ------ ------ ------ ------ ---------
------ ------ ------ ------ ------ ---------
<CAPTION>
TOTAL
------------------------------
1997 1996 1995
------ ------ ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Sales.............................................................. $906.1 $891.3 $ 848.5
------ ------ ---------
------ ------ ---------
Operating income (loss)............................................ 45.6 62.1 63.1
Adjustment for asbestos litigation................................. -- 502.2 (1,005.5)
Interest expenses.................................................. (31.3) (3.1) (1.9)
Other income (expense)............................................. (0.3) (2.9) 11.6
Reorganization items............................................... -- 116.3 (2.2)
------ ------ ---------
Income (loss) before taxes......................................... 14.0 674.6(1) (934.9)
------ ------ ---------
------ ------ ---------
Depreciation and amortization...................................... 56.0 30.8 28.7
------ ------ ---------
------ ------ ---------
Capital expenditures............................................... 51.3 45.0 40.6
------ ------ ---------
------ ------ ---------
Indentifiable assets............................................... 746.9 848.9 580.1
------ ------ ---------
------ ------ ---------
</TABLE>
- ------------
(1) Before extraordinary gain and cumulative effect of accounting change.
F-43
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 28,
--------------------
1998 1997
-------- --------
<S> <C> <C>
NET SALES................................................................................. $205,842 $223,607
OPERATING COSTS AND EXPENSES
Cost of products sold..................................................................... 162,796 180,401
Selling and administrative................................................................ 17,141 19,724
Management compensation expenses.......................................................... 2,056 --
Depreciation.............................................................................. 8,983 10,366
Amortization of intangibles............................................................... 3,839 4,076
-------- --------
194,815 214,567
Operating income.......................................................................... 11,027 9,040
OTHER INCOME (EXPENSE)
Interest expense.......................................................................... (6,940) (8,927)
Other income.............................................................................. 820 1,703
-------- --------
INCOME BEFORE TAXES....................................................................... 4,907 1,816
INCOME TAXES.............................................................................. 4,100 3,036
-------- --------
NET INCOME................................................................................ $ 807 $ (1,220)
-------- --------
-------- --------
Income (loss) per common share............................................................ $.08 $(.12)
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-44
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------
1998 1997
-------- -----------
PREDECESSOR
-----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 18,968 $ 19,376
Receivables, less allowances........................................................ 135,632 144,805
Income tax refund receivable........................................................ 2,001 56,814
Inventories:
Raw materials and supplies..................................................... 56,970 51,804
Work in process................................................................ 22,569 35,071
Finished goods................................................................. 15,509 19,245
-------- -----------
95,048 106,120
Prepaid expenses.................................................................... 9,499 9,729
Deferred income taxes............................................................... 19,535 20,575
-------- -----------
Total current assets........................................................... 280,683 357,419
Property, plant and equipment............................................................ 239,337 271,181
Less accumulated depreciation....................................................... 10,331
-------- -----------
Net property, plant and equipment.............................................. 239,337 260,850
Excess of acquired net assets over cost.................................................. 255,495 --
Other assets............................................................................. 91,625 107,596
-------- -----------
Total assets................................................................... $867,140 $ 831,943
-------- -----------
-------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 50,899 $ 39,118
Other accrued liabilities........................................................... 49,931 50,742
Long-term debt -- current portion................................................... 10,656 54,010
Income taxes........................................................................ 6,746 5,176
-------- -----------
Total current liabilities...................................................... 118,232 149,046
Long-term debt -- less current portion................................................... 536,340 318,160
Deferred income taxes.................................................................... 7,634 --
Other liabilities........................................................................ 24,928 26,095
-------- -----------
Series A 11 3/4% Cumulative Exchangeable Preferred Stock; authorized 50,000 shares;
issued and outstanding 14,191 shares................................................... 80,005 --
Shareholders' equity
Class A Common stock, authorized 625,001 shares; issued and outstanding 625,001
shares............................................................................. 55,001 --
Class B Common stock, authorized 374,999 shares; issued and outstanding 374,999
shares............................................................................. 45,000 --
Common shares -- authorized 20,000,000 shares, issued and outstanding 10,000,000
shares............................................................................. 341,807
Foreign currency translation........................................................ (1,945)
Accumulated deficit -- net loss year to date........................................ (1,220)
-------- -----------
Total shareholders' equity..................................................... 100,001 338,642
-------- -----------
Total liabilities and shareholders' equity..................................... $867,140 $ 831,943
-------- -----------
-------- -----------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-45
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 28,
---------------------
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................................... $ 807 $ (1,220)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization....................................................... 12,822 14,442
Changes in assets and liabilities:
Receivables.................................................................... (4,705) (11,930)
Inventories.................................................................... (2,235) (3,219)
Accounts payable............................................................... (2,787) (1,917)
Accrued liabilities............................................................ (5,488) 2,176
Income tax refund receivable................................................... 1,024 16,906
Deferred taxes................................................................. 2,600 1,831
Other.......................................................................... (11,121) 845
--------- --------
Net cash used in operating activities............................................... (9,083) 17,914
Cash flows from investing activities:
Capital expenditures................................................................ (5,692) (15,857)
Other............................................................................... (1,042) (1,183)
--------- --------
Net cash used in investing activities............................................... (6,734) (17,040)
Cash flows from financing activities:
Issuance of long-term debt.......................................................... 524,100 --
Reduction of long-term debt......................................................... (250,000) (16,703)
Redemption of common stock.......................................................... (446,638) --
Issuance of common stock............................................................ 100,001 --
Issuance of preferred stock......................................................... 80,005 --
Debt issue cost..................................................................... (26,062) --
Other............................................................................... (360) 2,480
--------- --------
Net cash used in financing activities.......................................... (18,954) (14,223)
Net decrease in cash and cash equivalents................................................ (34,771) (13,349)
--------- --------
Cash and cash equivalents, beginning of period........................................... 53,739 32,725
--------- --------
Cash and cash equivalents, end of period................................................. $ 18,968 $ 19,376
--------- --------
--------- --------
Supplemental cash flow information:
Cash paid during the three month period:
Interest paid.................................................................. $ 6,402 $ 475
Income tax refunds received net of payments.................................... $ (376) $(15,928)
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-46
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF REPORTING FOR INTERIM FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included elsewhere in this document for
the fiscal year ended November 30, 1997.
The financial statements presented herein reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary to fairly state the results of operations for the
three month periods ended February 28, 1998 and 1997. Results of operations for
interim periods are not necessarily indicative of results to be expected for an
entire year.
See Note B.
B. ACQUISITION OF THE COMPANY
On February 24, 1998 ('Closing Date'), Eagle-Picher Industries, Inc.
('Company') was acquired by a subsidiary of Granaria Industries BV, Eagle-Picher
Holdings, Inc. ('Parent'), from the Eagle-Picher Industries, Inc. Personal
Injury Settlement Trust ('Trust'). The Trust was established pursuant to the
Company's Plan of Reorganization upon its emergence from bankruptcy.
These unaudited condensed consolidated financial statements as of and for
the three months ended February 28, 1998 include the effects of the Acquisition
that result as of February 24, 1998, the Closing Date. Accordingly, the
condensed consolidated statement of income (loss) for the three months ended
February 28, 1998 includes results of operations from (1) December 1, 1997
through February 24, 1998 of the Company prior to the consummation of the
Acquisition (for clarity, sometimes referred to herein as the 'Predecessor
Company') and (2) February 25 through February 28, 1998 of the Company. The
effects of the purchase accounting adjustments on the Company's results of
operations for the three months ended February 28, 1998 were immaterial.
Upon closing of the acquisition, the Parent received $100 million equity
investment from Granaria Industries BV and an equity partner. The Parent also
received proceeds approximating $80 million from its offering of preferred
stock. These proceeds were invested in the Company, which issued approximately
$180 million of common stock to the Parent. The Company also borrowed $225
million in term loans and $79.1 million in revolving credit loans under a
syndicated senior secured loan facility, and issued $220 million in senior
subordinated notes ('Subordinated Notes'), the proceeds of which were used to
redeem the Company's 10% Senior Unsecured Sinking Fund Debentures ('Debentures')
and common stock, both held by the Trust. The Company, which is the operating
entity, is a wholly-owned subsidiary of the Parent. The Parent's results of
operations and cash flows approximate those of the Company.
C. EARNINGS PER SHARE
The calculation of net income (loss) per share is based upon the net income
(loss) divided by the average number of common shares outstanding, which was
9,600,071 and 10,000,000 in the three months ended February 28, 1998 and 1997,
respectively.
D. LONG-TERM DEBT
On the Closing Date, the Company's existing $60 million unsecured committed
revolving credit facility was terminated. It was replaced by a syndicated senior
secured loan facility ('Credit Agreement') which provided $225 million in term
loans ('Term Loans') and a $160 million revolving
F-47
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
credit facility ('Facility'), of which $79.1 million was drawn at the time of
closing. Immediately following the closing, the Company borrowed approximately
$28.6 million for use as credit support in the form of letters of credit,
leaving approximately $52.3 million in available credit.
The Credit Agreement is secured by the capital stock of the Company, up to
65% of the capital stock of foreign subsidiaries and substantially all other
property in the United States. The Credit Agreement contains covenants which
restrict the Company's ability to, among others, declare dividends or redeem
capital stock, issue additional debt or alter existing debt agreements, make
loans, undergo a change in control and engage in mergers, acquisitions and asset
sales. These covenants also limit the annual amount of capital expenditures and
require the Company to meet minimum financial coverages. The Company was in
compliance with all covenants at February 28, 1998.
Long-term debt consisted of:
<TABLE>
<CAPTION>
FEBRUARY 28,
------------------
1998 1997
------ ------
(IN MILLIONS OF
DOLLARS)
<S> <C> <C>
New Credit Agreement:
Revolving Credit Facility.............................................................. $ 79.1 $ --
Term Loans............................................................................. 225.0 --
Senior Subordinated Notes................................................................... 220.0 --
Senior Unsecured Sinking Fund Debentures.................................................... -- 250.0
Divestiture Notes........................................................................... -- 50.0
Tax Refund Notes............................................................................ -- 52.6
Industrial Revenue Bonds.................................................................... 18.4 10.5
Secured Notes............................................................................... -- 6.7
Debt of Foreign Subsidiaries................................................................ 4.5 2.4
------ ------
547.0 372.2
Less current portion........................................................................ 10.7 54.0
------ ------
Long-term debt, less current portion........................................................ $536.3 $318.2
------ ------
------ ------
</TABLE>
The Facility matures in 2004. It bears interest, at the Company's option,
of an adjusted LIBOR rate plus 2 1/4% or the bank's prime rate plus 1 1/4%.
There is a commitment fee equal to 1/2% per annum on the undrawn portion of the
Facility and fees for letters of credit are equal to 2 1/4% per annum.
The Term Loans mature in 2003, 2005 and 2006 and bear interest, at the
Company's option, of an adjusted LIBOR rate plus spreads varying from 2 1/4% to
2 7/8% or the bank's prime rate plus spreads varying from 1 1/4% to 1 7/8%. In
addition to regularly scheduled payments, the Company is required to make
mandatory prepayments to first the Term Loans then the Facility of 60% of annual
excess cash flow, the net proceeds from the sale of assets (subject to certain
conditions), the net proceeds of new debt issued and 50% of the net proceeds of
any equity securities issued.
To partially hedge its variable interest rate exposure on its Term Loans,
the Company has entered into a three year interest rate swap agreement ('Swap
Agreement'). The Swap Agreement requires the Company to pay a fixed LIBOR rate
(plus the appropriate spreads) on $150 million and receive the floating LIBOR
rate on that same amount, effectively fixing the interest rate on $150 million
of the Term Loans at a weighted rate of 8.35%.
The Subordinated Notes, which are unsecured, bear interest of 9 3/8% and
mature in 2008, however, they are redeemable at the option of the Company, in
whole or in part, any time after February 28, 2003 at set redemption prices. The
Company may also redeem up to 35% of the aggregate principal amount of the
Subordinated Notes prior to March 1, 2001 at a set redemption price provided
certain conditions are met. The Company is also required to offer to purchase
the Subordinated Notes at a set redemption price should there be a change in
control of the Company.
F-48
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Both the Credit Agreement and the Subordinated Notes are guaranteed on a
full, unconditional, and joint and several basis by certain of the Company's
wholly-owned domestic subsidiaries ('Guarantors').
E. PREFERRED STOCK
The liquidation preference of the 14,191 shares of 11 3/4% Cumulative
Redeemable Exchangeable Preferred Stock ('Preferred Stock') will initially be
$5,637.70 per share and will accrete from the Closing Date until March 1, 2003,
at the rate of 11 3/4% per annum, compounded semi-annually, to $10,000.00. No
dividends will accrue on the Preferred Stock prior to March 1, 2003; however,
holders of the Preferred Stock will be entitled to cumulative dividends
subsequent to that date.
The Preferred Stock is mandatorily redeemable by Parent on the earlier of
March 1, 2008 or upon occurrence of a defined mandatory redemption event. The
Preferred Stock is also redeemable at the option of the Parent, in whole or in
part, any time after February 28, 2003 at set redemption prices. Parent may also
redeem up to 35% of the outstanding shares prior to March 1, 2001 at a set
redemption price provided certain conditions are met. Each holder of the
Preferred Stock would have the right to require that Parent repurchase the
Preferred Stock at a set redemption price should there be a change in control of
the Company.
F. INCOME TAXES
The acquisition of the Company has been treated as a sale of its assets for
purposes of income taxes. The deferred tax benefits relating to the Debentures,
which were repaid on the Closing Date, and most of the benefits relating to the
net operating loss carryforwards will be realized to shelter the gain on the
sale of the assets. Any remaining net operating loss carryforwards will be lost.
The Company, however, will be liable for approximately $2.0 in alternative
minimum taxes and $1.6 million in state and local income taxes as a result of
the transaction. These taxes are recognized as part of the Acquisition
adjustments.
G. LEGAL MATTERS
The Company is involved in routine litigation, environmental proceedings
and claims pending with respect to matters arising out of the normal course of
business. In management's opinion, the ultimate liability resulting from all
claims, individually or in the aggregate, will not materially affect the
Company's consolidated financial position, results of operations or cash flows.
H. INTANGIBLE ASSETS
Excess of acquired net assets over cost is being amortized on a
straight-line basis over fifteen years. The recoverability of these assets is
evaluated periodically based on current and estimated future cash flows of each
of the related business units over the remaining amortization period.
F-49
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Eagle-Picher Holdings, Inc.:
We have audited the accompanying balance sheet of Eagle-Picher Holdings,
Inc. as of December 22, 1997. This financial statement is the responsibility of
Eagle-Picher Holdings, Inc. management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Company at December 22, 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
January 15, 1998
F-50
<PAGE>
<PAGE>
EAGLE-PICHER HOLDINGS, INC.
BALANCE SHEET
DECEMBER 22, 1997
<TABLE>
<S> <C>
ASSETS
Cash..................................................................................................... $1,000
------
------
SHAREHOLDERS' EQUITY
Common stock -- authorized 1,000 shares of $.01 par value each; 100 shares
issued and outstanding................................................................................. 1
Additional Paid-in-Capital............................................................................... 999
------
Total............................................................................................... $1,000
------
------
</TABLE>
- ------------
NOTES TO BALANCE SHEET
(1) Eagle-Picher Holdings, Inc. ('Holdings'), a Delaware corporation, was
organized on December 22, 1997, and had no operations prior to that date.
(2) On December 23, 1997, Holdings and its wholly-owned subsidiary, E-P
Acquisition, Inc. ('Acquisition'), approved the merger of Acquisition with
and into Eagle-Picher Industries, Inc. In connection with the merger,
Holdings will offer $80,000,000 of cumulative redeemable exchangeable
preferred stock.
F-51
<PAGE>
<PAGE>
_____________________________ _____________________________
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF A TIME SUBSEQUENT TO THE DATE HEREOF OR THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................................................................................................... 3
Summary..................................................................................................................... 4
Risk Factors................................................................................................................ 16
Company History............................................................................................................. 24
The Acquisition............................................................................................................. 24
Use of Proceeds............................................................................................................. 25
The Notes Exchange Offer.................................................................................................... 26
Capitalization.............................................................................................................. 35
Selected Historical Condensed Consolidated Financial Information............................................................ 37
Unaudited Pro Forma Consolidated Statements of Operations................................................................... 39
Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 42
Business.................................................................................................................... 50
Industry Overview........................................................................................................... 52
Description of Businesses................................................................................................... 54
Management.................................................................................................................. 71
Executive Compensation...................................................................................................... 72
Security Ownership and Certain Beneficial Owners and Management of Parent................................................... 78
Certain Relationships and Related Transactions.............................................................................. 78
Description of Industrial Revenue Bonds..................................................................................... 79
Description of New Credit Agreement......................................................................................... 79
Description of the Notes.................................................................................................... 81
Description of Preferred Stock.............................................................................................. 108
Description of Exchange Debentures.......................................................................................... 110
Plan of Distribution........................................................................................................ 111
Certain U.S. Federal Income Tax Considerations.............................................................................. 112
Legal Matters............................................................................................................... 116
Experts..................................................................................................................... 116
Index to Financial Statements............................................................................................... F-1
</TABLE>
UNTIL SEPTEMBER 8, 1998 (90 DAYS AFTER THE COMMENCEMENT OF THE NOTES EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN SELLING NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES HELD FOR
THEIR OWN ACCOUNT. SEE "PLAN OF DISTRIBUTION."
EAGLE-PICHER
INDUSTRIES, INC.
OFFER TO EXCHANGE ITS
9 3/8% SENIOR SUBORDINATED
NOTES DUE 2008
FOR ANY AND ALL OF ITS
OUTSTANDING
9 3/8% SENIOR SUBORDINATED
NOTES DUE 2008
----------------------
PROSPECTUS
----------------------
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 1701.13 of the Ohio General Corporation Law permits an Ohio
corporation to indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending, or completed civil, criminal,
administrative, or investigative action, suit or proceeding by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving as such with respect to another corporation or
entity at the request of the corporation, provided that such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the company and, with respect to any criminal
action or proceeding, without reasonable cause to believe the conduct was
unlawful. Where the action or suit is by or in the right of the corporation, the
corporation may not indemnify such person for liability in connection with
unlawful loans, dividends or distributions; nor may the corporation indemnify
such person for any act of negligence or misconduct except as otherwise approved
by the Ohio court of common pleas or the court in which the action or suit was
brought. The Registrant has provided in its Regulations that its directors and
officers will be indemnified and held harmless against all expenses, liability
and loss (including attorneys' fees, and, in respect of claims not made by or in
the right of the Company, judgments, fines ERISA excise taxes or penalties and
amounts paid in settlement) to the fullest extent provided by the law as it
exists or may hereafter be amended.
Section 1701.13 of the Ohio General Corporation Law and the Regulations of
the Registrant also permit the Registrant to purchase insurance for the benefit
of any person who is or was a director, officer, employee, or agent of the
corporation against any liability incurred by such person, whether or not the
corporation would have the power to indemnify such person against such
liability.
The Registrant has purchased insurance on behalf of its directors and
officers, in such amounts as it deems reasonable, against certain liabilities
that may be asserted against, or incurred by, such persons in their capacities
as directors or officers of Registrant, including liabilities under the federal
and state securities laws.
Each individual Employment Agreement entered into by Registrant with each
Named Executive Officer contains provisions for the indemnification of such
Named Executive Officer to the fullest extent permitted or required by the laws
of the State of Ohio and for the procurement by Registrant of such insurance as
Registrant deems necessary or appropriate to protect Registrant's interest.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<S> <C>
2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. (the 'Company')*
2.2 -- Exhibits to Third Amended Plan of Reorganization of the Company*
3.1 -- Articles of Incorporation of the Company, as amended*
3.2 -- Regulations of the Company*
3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc.*
3.4 -- Bylaws of Eagle-Picher Holdings, Inc.*
3.5 -- Articles of Incorporation of Daisy Parts, Inc.*
3.6 -- Bylaws of Daisy Parts, Inc.*
3.7 -- Certificate of Incorporation of Eagle-Picher Development Company, Inc.*
3.8 -- Bylaws of Eagle-Picher Development Company, Inc.*
3.9 -- Certificate of Incorporation of Eagle-Picher Far East, Inc.*
3.10 -- Bylaws of Eagle-Picher Far East, Inc.*
3.11 -- Articles of Incorporation of Eagle-Picher Fluid Systems, Inc.*
3.12 -- Bylaws of Eagle-Picher Fluid Systems, Inc.*
3.13 -- Articles of Incorporation of Eagle-Picher Minerals, Inc.*
3.14 -- Bylaws of Eagle-Picher Minerals, Inc.*
</TABLE>
II-1
<PAGE>
<PAGE>
<TABLE>
<S> <C>
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'D'
3.17 -- Articles of Incorporation of Hillsdale Tool & Manufacturing Co.*
3.18 -- Bylaws of Hillsdale Tool & Manufacturing Co.*
3.19 -- Articles of Incorporation of Michigan Automotive Research Corporation*
3.20 -- Bylaws of Michigan Automotive Research Corporation*
4.1 -- Indenture, dated as of February 24, 1998, between E-P Acquisition, Inc., Eagle-Picher Holdings, Inc.
as a Guarantor, the Subsidiary Guarantors (Daisy Parts, Inc. Eagle-Picher Development Company, Inc.,
Eagle-Picher Far East, Inc., Eagle-Picher Fluid Systems, Inc., Eagle-Picher Minerals, Inc.,
Eagle-Picher Technologies, LLC, Hillsdale Tool & Manufacturing Co., Michigan Automotive Research
Corporation (together, the 'Subsidiary Guarantors' or the 'Domestic Subsidiaries'), and The Bank of
New York as Trustee (the 'Trustee')*
4.2 -- Cross Reference Table showing the location in the Indenture of the provisions of Sections 310
through 318(a), inclusive, of the Trust Indenture Act of 1939.*
4.3 -- First Supplemental Indenture dated as of February 24, 1998, between the Company and the Trustee*
4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1 to the Registration
Statement)*
5.1 -- Opinion of Howard, Darby & Levin as to the Legality of the New Notes*
10.1 -- Merger Agreement, dated as of December 23, 1997, among the Company, the Eagle-Picher Industries,
Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and E-P Acquisition, Inc.*
10.2 -- Amendment No. 1 to the Merger Agreement, dated as of February 23, 1998, among the Company, the
Eagle-Picher Industries, Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and E-P
Acquisition, Inc.*
10.3 -- Supplemental Executive Retirement Plan of the Company*
10.4 -- Notes Purchase Agreement, dated February 19, 1998, among E-P Acquisition, Inc. the Company,
Eagle-Picher Holdings, SBC Warburg Dillon Read and ABN AMRO Incorporated*
10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24, 1998, between the
Company and the Subsidiary Guarantors*
10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P Acquisition, SBC Warburg
Dillon Read and ABN AMRO Incorporated*
10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24, 1998, of the
Company*
10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (to be merged with and
into the Company), Various Lenders from time to time party thereto, ABN AMRO Bank N.V., as Agent (the
'Agent'), PNC Bank, National Association, as Documentation Agent and DLJ Capital Funding, Inc., as
Syndication Agent*
10.9 -- Assumption Agreement dated as of February 24, 1998, between the Company and the Agent*
10.10 -- Security Agreement, dated as of February 24, 1998, among the Company, the Agent and the Domestic
Subsidiaries*
10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between Eagle-Picher Holdings, Inc. and
the Agent*
10.12 -- Borrower and Subsidiary Pledge Agreement, dated as of February 24, 1998, among the Company, E-P
Development, E-P Minerals and the Agent*
10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by Eagle-Picher Holdings, Inc., accepted
and agreed by the Agent*
10.14 -- Subsidiary Guaranty Agreement, dated as of February 24, 1998, by the Domestic Subsidiaries, accepted
and agreed by the Agent*
10.15 -- Trademark Collateral Agreement, dated February 24, 1998, between the Company and the Agent*
10.16 -- Patent Collateral Agreement, dated February 24, 1998, between the Company and the Agent*
10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between the Company and the Agent*
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<S> <C>
10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc., the Company and
the Domestic Subsidiaries*
10.19 -- Management Agreement dated as of February 24, 1998 between the Company and Granaria Holdings B.V.*
10.20 -- Eagle-Picher Management Trust made February 17, 1998, among Granaria Industries B.V. and Thomas E.
Petry, Andries Ruijssenaars and Joel Wyler as trustees (the 'E-P Management Trust')*
10.21 -- Incentive Stock Plan of Eagle-Picher Industries, Inc., effective as of February 25, 1998*
10.22 -- Employment Agreements dated November 29, 1996 between Registrant and each Named Executive Officer*
10.23 -- Amendments dated August 5, 1997 to Employment Agreements between the Company and each Named
Executive Officer*
10.24 -- Sales Incentive Program of the Company*
10.25 -- Letter Agreements dated August 5, 1997 between the Company and each Named Executive Officer
regarding Short Term Sale Program*
10.26 -- Letter Agreement dated September 12, 1997 between the Company and Carroll D. Curless regarding Sale
Incentive Bonus*
10.27 -- Letter Agreements dated February 18, 1998 between the Company and each Named Executive Officer
regarding Short Term Sale Program*
10.28 -- Side Letter, dated February 23, 1998, regarding Amendments to the Short Term Sale Program*
12.1 -- Statement re: Computation of Ratios*
16.1 -- Letter of KPMG Peat Marwick LLP re: Change in Certifying Accountant*
21.1 -- Chart of Subsidiaries of the Company*
23.1 -- Consent of Deloitte & Touche LLP*
23.2 -- Consent of KPMG Peat Marwick LLP*
23.3 -- Consent of Howard, Darby & Levin (included in Exhibit 5.1)*
24.1 -- Power of Attorney of Directors and Officers (set forth on the signature pages of this Registration
Statement)*
25.1 -- Statement of Eligibility of Trustee on Form T-1 related to the Notes*
27.1 -- Financial Data Schedule*
99.1 -- Form of Letter of Transmittal for the Notes*
99.2 -- Form of Notice of Guaranteed Delivery*
(b) Financial Statement Schedules (filed as Exhibit 27.1)*
</TABLE>
- ------------
'D' Filed herewith.
* Previously filed.
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
II-3
<PAGE>
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the 'Securities Act') may be permitted to
directors, officers and controlling persons of the registrants
pursuant to the provisions described under Item 20 or otherwise, the
registrants have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrants of expenses incurred or
paid by a director, officer or controlling person of the registrants
in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion
of their counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue;
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request; and
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement
when it became effective.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER INDUSTRIES, INC.
By /s/ ANDRIES RUIJSSENAARS
..................................
NAME: ANDRIES RUIJSSENAARS
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ ANDRIES RUIJSSENAARS Director, President and Chief Executive June 5, 1998
......................................... Officer
ANDRIES RUIJSSENAARS
* Senior Vice President - Finance June 5, 1998
.........................................
DAVID N. HALL
* Vice President and Controller June 5, 1998
.........................................
CARROLL D. CURLESS
* Director June 5, 1998
.........................................
JOEL P. WYLER
* Director June 5, 1998
.........................................
THOMAS E. PETRY
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER HOLDINGS, INC.
By /s/ ANDRIES RUIJSSENAARS
..................................
NAME: ANDRIES RUIJSSENAARS
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------------- ---------------
<S> <C> <C>
/s/ ANDRIES RUIJSSENAARS Director, President and Chief Executive Officer June 5, 1998
.........................................
ANDRIES RUIJSSENAARS
* Senior Vice President - Finance June 5, 1998
.........................................
DAVID N. HALL
* Vice President and Controller June 5, 1998
.........................................
CARROLL D. CURLESS
* Chairman of the Board June 5, 1998
.........................................
JOEL P. WYLER
* Director June 5, 1998
.........................................
THOMAS E. PETRY
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
DAISY PARTS, INC.
By /s/ DAVID G. KRALL
..................................
NAME: DAVID G. KRALL
TITLE: SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------------- ---------------
<S> <C> <C>
* President June 5, 1998
.........................................
MICHAEL E. ASLANIAN
/s/ GARY M. FREYTAG Treasurer June 5, 1998
.........................................
GARY M. FREYTAG
* Controller June 5, 1998
.........................................
DAVID P. KELLEY
* Director June 5, 1998
.........................................
WAYNE R. WICKENS
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
* Director June 5, 1998
.........................................
DAVID N. EVANS
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER DEVELOPMENT COMPANY, INC.
By /s/ ANDRIES RUIJSSENAARS
..................................
NAME: ANDRIES RUIJSSENAARS
TITLE: PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------------- ---------------
<S> <C> <C>
/s/ ANDRIES RUIJSSENAARS President and Director June 5, 1998
.........................................
ANDRIES RUIJSSENAARS
/s/ GARY M. FREYTAG Treasurer June 5, 1998
.........................................
GARY M. FREYTAG
* Controller June 5, 1998
.........................................
CARROLL D. CURLESS
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
* Director June 5, 1998
.........................................
WAYNE R. WICKENS
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER FAR EAST, INC.
By /s/ DAVID G. KRALL
..................................
NAME: DAVID G. KRALL
TITLE: SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------ ---------------
<S> <C> <C>
* President June 5, 1998
.........................................
SADAO TAKAHASHI
/s/ GARY M. FREYTAG Treasurer June 5, 1998
.........................................
GARY M. FREYTAG
* Controller June 5, 1998
.........................................
CARROLL D. CURLESS
/s/ ANDRIES RUIJSSENAARS Director June 5, 1998
.........................................
ANDRIES RUIJSSENAARS
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
Director June 5, 1998
.........................................
DAVID N. EVANS
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER FLUID SYSTEMS, INC.
By /s/ DAVID G. KRALL
..................................
NAME: DAVID G. KRALL
TITLE: SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------ ---------------
<S> <C> <C>
* President June 5, 1998
.........................................
SCOTT F. MALY
/s/ GARY M. FREYTAG Treasurer June 5, 1998
.........................................
GARY M. FREYTAG
* Controller June 5, 1998
.........................................
DANIEL T. HOAG
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER MINERALS, INC.
By /s/ DAVID G. KRALL
..................................
NAME: DAVID G. KRALL
TITLE: SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------ ---------------
<S> <C> <C>
* President June 5, 1998
.........................................
WESLEY D. LEE
/s/ GARY M. FREYTAG Treasurer June 5, 1998
.........................................
GARY M. FREYTAG
* Controller June 5, 1998
.........................................
NANCY C. REED
/s/ ANDRIES RUIJSSENAARS Director June 5, 1998
.........................................
ANDRIES RUIJSSENAARS
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
* Director June 5, 1998
.........................................
DAVID N. EVANS
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
EAGLE-PICHER TECHNOLOGIES, LLC
By /s/ WILLIAM E. LONG
..................................
NAME: WILLIAM E. LONG
TITLE: PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------ ---------------
<S> <C> <C>
/s/ WILLIAM E. LONG President and Director June 5, 1998
.........................................
WILLIAM E. LONG
* Treasurer, Chief Financial Officer June 5, 1998
......................................... and Controller
J.D. SELLER
* Director June 5, 1998
.........................................
DR. PAUL KAMINSKI
* Director June 5, 1998
.........................................
NEIL A. ARMSTRONG
/s/ ANDRIES RUIJSSENAARS Director June 5, 1998
.........................................
ANDRIES RUIJSSENAARS
* Director June 5, 1998
.........................................
JOEL P. WYLER
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-12
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
HILLSDALE TOOL & MANUFACTURING CO.
By /s/ DAVID G. KRALL
..................................
NAME: DAVID G. KRALL
TITLE: SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------------- ---------------
<S> <C> <C>
* President June 5, 1998
.........................................
MICHAEL E. ASLANIAN
/s/ GARY M. FREYTAG Treasurer June 5, 1998
.........................................
GARY M. FREYTAG
* Controller June 5, 1998
.........................................
DAVID P. KELLEY
* Director June 5, 1998
.........................................
WAYNE R. WICKENS
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-13
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 5, 1998.
MICHIGAN AUTOMOTIVE RESEARCH
CORPORATION
By /s/ DAVID G. KRALL
..................................
NAME: DAVID G. KRALL
TITLE: ASSISTANT SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------------- ---------------
<S> <C> <C>
* President and Director June 5, 1998
.........................................
MICHAEL J. BOERMA
* Treasurer and Controller June 5, 1998
.........................................
TERENCE J. RHOADES
* Director June 5, 1998
.........................................
WAYNE R. WICKENS
/s/ DAVID G. KRALL Director June 5, 1998
.........................................
DAVID G. KRALL
*By: /s/ ANDRIES RUIJSSENAARS June 5, 1998
......................................
ANDRIES RUIJSSENAARS
ATTORNEY-IN-FACT
</TABLE>
II-14
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------ --------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
2.1 -- Third Amended Plan of Reorganization of Eagle-Picher Industries, Inc. (the
'Company')*
2.2 -- Exhibits to Third Amended Plan of Reorganization of the Company*
3.1 -- Articles of Incorporation of the Company, as amended*
3.2 -- Regulations of the Company*
3.3 -- Amended and Restated Certificate of Incorporation of Eagle-Picher Holdings, Inc.*
3.4 -- Bylaws of Eagle-Picher Holdings, Inc.*
3.5 -- Articles of Incorporation of Daisy Parts, Inc.*
3.6 -- Bylaws of Daisy Parts, Inc.*
3.7 -- Certificate of Incorporation of Eagle-Picher Development Company, Inc.*
3.8 -- Bylaws of Eagle-Picher Development Company, Inc.*
3.9 -- Certificate of Incorporation of Eagle-Picher Far East, Inc.*
3.10 -- Bylaws of Eagle-Picher Far East, Inc.*
3.11 -- Articles of Incorporation of Eagle-Picher Fluid Systems, Inc.*
3.12 -- Bylaws of Eagle-Picher Fluid Systems, Inc.*
3.13 -- Articles of Incorporation of Eagle-Picher Minerals, Inc.*
3.14 -- Bylaws of Eagle-Picher Minerals, Inc.*
3.15 -- Certificate of Formation of Eagle-Picher Technologies, LLC*
3.16 -- Operating Agreement of Eagle-Picher Technologies, LLC*
3.16a -- Amended and Restated Limited Liability Company Agreement of
Eagle-Picher Technologies, LLC'D'
3.17 -- Articles of Incorporation of Hillsdale Tool & Manufacturing Co.*
3.18 -- Bylaws of Hillsdale Tool & Manufacturing Co.*
3.19 -- Articles of Incorporation of Michigan Automotive Research Corporation*
3.20 -- Bylaws of Michigan Automotive Research Corporation*
4.1 -- Indenture, dated as of February 24, 1998, between E-P Acquisition, Inc.,
Eagle-Picher Holdings, Inc. as a Guarantor, the Subsidiary Guarantors (Daisy Parts,
Inc. Eagle-Picher Development Company, Inc., Eagle-Picher Far East, Inc.,
Eagle-Picher Fluid Systems, Inc., Eagle-Picher Minerals, Inc., Eagle-Picher
Technologies, LLC, Hillsdale Tool & Manufacturing Co., Michigan Automotive Research
Corporation (together, the 'Subsidiary Guarantors' or the 'Domestic Subsidiaries'),
and The Bank of New York as Trustee (the 'Trustee')*
4.2 -- Cross Reference Table showing the location in the Indenture of the provisions of
Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939.*
4.3 -- First Supplemental Indenture dated as of February 24, 1998, between the Company and
the Trustee*
4.4 -- Form of Global Note (attached as Exhibit A to the Indenture filed as Exhibit 4.1 to
the Registration Statement)*
5.1 -- Opinion of Howard, Darby & Levin as to the Legality of the New Notes*
10.1 -- Merger Agreement, dated as of December 23, 1997, among the Company, the Eagle-Picher
Industries, Inc. Personal Injury Settlement Trust, Eagle-Picher Holdings, Inc. and
E-P Acquisition, Inc.*
10.2 -- Amendment No. 1 to the Merger Agreement, dated as of February 23, 1998, among the
Company, the Eagle-Picher Industries, Inc. Personal Injury Settlement Trust,
Eagle-Picher Holdings, Inc. and E-P Acquisition, Inc.*
10.3 -- Supplemental Executive Retirement Plan of the Company*
10.4 -- Notes Purchase Agreement, dated February 19, 1998, among E-P Acquisition, Inc. the
Company, Eagle-Picher Holdings, SBC Warburg Dillon Read and ABN AMRO Incorporated*
10.5 -- Assumption Agreement for the Notes Purchase Agreement, dated as of February 24,
1998, between the Company and the Subsidiary Guarantors*
10.6 -- Registration Rights Agreement, dated as of February 24, 1998, between E-P
Acquisition, SBC Warburg Dillon Read and ABN AMRO Incorporated*
10.7 -- Assumption Agreement for the Registration Rights Agreement, dated as of February 24,
1998, of the Company*
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
10.8 -- Credit Agreement, dated as of February 19, 1998, among E-P Acquisition, Inc. (to be
merged with and into the Company), Various Lenders from time to time party thereto,
ABN AMRO Bank N.V., as Agent (the 'Agent'), PNC Bank, National Association, as
Documentation Agent and DLJ Capital Funding, Inc., as Syndication Agent*
10.9 -- Assumption Agreement dated as of February 24, 1998, between the Company and the
Agent*
10.10 -- Security Agreement, dated as of February 24, 1998, among the Company, the Agent and
the Domestic Subsidiaries*
10.11 -- Holdings Pledge Agreement, dated as of February 24, 1998, between Eagle-Picher
Holdings, Inc. and the Agent*
10.12 -- Borrower and Subsidiary Pledge Agreement, dated as of February 24, 1998, among the
Company, E-P Development, E-P Minerals and the Agent*
10.13 -- Holdings Guaranty Agreement, dated as of February 24, 1998, by Eagle-Picher
Holdings, Inc., accepted and agreed by the Agent*
10.14 -- Subsidiary Guaranty Agreement, dated as of February 24, 1998, by the Domestic
Subsidiaries, accepted and agreed by the Agent*
10.15 -- Trademark Collateral Agreement, dated February 24, 1998, between the Company and the
Agent*
10.16 -- Patent Collateral Agreement, dated February 24, 1998, between the Company and the
Agent*
10.17 -- Copyright Collateral Agreement, dated February 24, 1998, between the Company and the
Agent*
10.18 -- Subordination Agreement, dated as of February 24, 1998, among E-P Acquisition, Inc.,
the Company and the Domestic Subsidiaries*
10.19 -- Management Agreement dated as of February 24, 1998 between the Company and Granaria
Holdings B.V.*
10.20 -- Eagle-Picher Management Trust made February 17, 1998, among Granaria Industries B.V.
and Thomas E. Petry, Andries Ruijssenaars and Joel Wyler as trustees (the 'E-P
Management Trust')*
10.21 -- Incentive Stock Plan of Eagle-Picher Industries, Inc., effective as of February 25,
1998*
10.22 -- Employment Agreements dated November 29, 1996 between Registrant and each Named
Executive Officer*
10.23 -- Amendments dated August 5, 1997 to Employment Agreements between the Company and
each Named Executive Officer*
10.24 -- Sales Incentive Program of the Company*
10.25 -- Letter Agreements dated August 5, 1997 between the Company and each Named Executive
Officer regarding Short Term Sale Program*
10.26 -- Letter Agreement dated September 12, 1997 between the Company and Carroll D. Curless
regarding Sale Incentive Bonus*
10.27 -- Letter Agreements dated February 18, 1998 between the Company and each Named
Executive Officer regarding Short Term Sale Program*
10.28 -- Side Letter, dated February 23, 1998, regarding Amendments to the Short Term Sale
Program*
12.1 -- Statement re: Computation of Ratios*
16.1 -- Letter of KPMG Peat Marwick LLP re: Change in Certifying Accountant*
21.1 -- Chart of Subsidiaries of the Company*
23.1 -- Consent of Deloitte & Touche LLP*
23.2 -- Consent of KPMG Peat Marwick LLP*
23.3 -- Consent of Howard, Darby & Levin (included in Exhibit 5.1)*
24.1 -- Power of Attorney of Directors and Officers (set forth on the signature pages of
this Registration Statement)*
25.1 -- Statement of Eligibility of Trustee on Form T-1 related to the Notes*
27.1 -- Financial Data Schedule*
99.1 -- Form of Letter of Transmittal for the Notes*
99.2 -- Form of Notice of Guaranteed Delivery*
(b) Financial Statement Schedules (filed as Exhibit 27.1)*
</TABLE>
- ------------
'D' Filed herewith.
* Previously filed.
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as............................... 'D'
<PAGE>
<PAGE>
AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT of EAGLE-PICHER TECHNOLOGIES, LLC
(the "Agreement"), dated as of April 27, 1998, by
Eagle-Picher Industries, Inc., an Ohio corporation.
---------------------------------------------------
Eagle-Picher Industries, Inc. organized on February 19, 1998 a
limited liability company, and now amends and restates the limited liability
company agreement to include the following terms and conditions.
It is agreed as follows:
1. Organization. Eagle-Picher Industries, Inc. hereby organizes a
limited liability company pursuant to the Delaware Limited Liability Company Act
(the "Act") and the provisions of this Agreement and, for that purpose, has
caused a Certificate of Formation (the "Certificate") to be prepared, executed
and filed with the Secretary of State of the State of Delaware ("Secretary of
State") on February 19, 1998. The Company and the Member each hereby approves,
authorizes and ratifies the actions of Scott H. Rosenblatt, Esq. of Howard,
Darby & Levin, in filing the Certificate with the Secretary of State.
2. Name. The name of the limited liability company shall be
Eagle-Picher Technologies, LLC (the "Company").
3. Purpose. The purpose of the Company is to engage in any lawful
act or activity for which limited liability companies may be formed under the
Act and to engage in any and all activities necessary or incidental thereto.
4. Principal Office. The Company's principal place of business
shall be located at "C" and Porter Streets, Joplin, Missouri 64801. The Company
may have such other business offices within or without the State of Delaware as
determined from time to time.
5. Term. The term of the Company shall begin upon the filing of
the Certificate with the Secretary of State and shall continue until dissolved
in accordance with this Agreement.
6. Member. The sole member of the Company is Eagle-Picher
Industries, Inc., an Ohio corporation (the "Member").
7. Capital Contributions; Capital Accounts. (a) Initial Capital
Contributions. Upon the execution of this Agreement, the Member shall contribute
to the Company all property and assets of its Technologies Division pursuant to
a Bill of Sale in substantially the form attached hereto as Exhibit A and an
Assignment and Assumption Agreement in substantially the form attached hereto as
Exhibit B.
<PAGE>
<PAGE>
(b) Additional Capital Contributions. The Member may from time to
time make additional capital contributions in amounts determined in the sole
discretion of the Member, including capital contributions in accordance with the
Member's cash management system.
(c) All capital, whenever contributed, shall be subject in all
respects to the risks of the business and subordinate in right of payment to the
claims of present or future creditors of the Company and of any successor firm
in accordance with this Agreement.
(d) No interest shall be allowed to the Member by reason of the
amount of its capital contribution or Capital Account except as provided in
Section 21.
8. Allocations. Except as provided in Section 20, each item of
income, gain, loss or expense of the Company for any period shall be allocated
to the Member.
9. Distributions. The Company shall distribute to the Member,
each business day, all cash received by the Company since the last such
distribution.
10. Management; Director Voting and Meetings. (a) The Member
hereby delegates the management of the property, business and affairs of the
Company to its Board of Directors (the "Board"). The Board shall have the
authority and responsibility of a Board of Directors under the General
Corporation Law of the State of Delaware, including the authority to appoint
officers of the Company and to define the scope of duties for such officers.
(b) The Board shall be composed of (i) at least two individuals
who have no prior relationship with the Company or its Affiliates (the "Outside
Directors"), except as otherwise allowed by the United States Department of
Defense (the "DoD"), (ii) at least one individual who shall be designated by,
and represent, the Member (the "Inside Director"), and (iii) one or more
officers of the Company having DoD personnel security clearance at the level of
security clearance of the Company's facility at which such officer is employed
(the "Officer Director"). The number of Inside Directors shall not exceed the
combined total of Outside Directors and Officer Directors.
(c) The initial Board shall consist of the following persons each
of which shall be the type of Director set forth beside such Director's name:
<TABLE>
<CAPTION>
Director Type of Director
-------- ----------------
<S> <C>
Dr. Paul G. Kaminski Outside
Neil A. Armstrong Outside
Andries Ruijssenaars Inside
Joel P. Wyler Inside
William E. Long Officer
</TABLE>
<PAGE>
<PAGE>
The term "Affiliates" shall mean, with respect to any person, all entities which
such person controls, or by which such person is controlled.
(d) The Board hereby creates the following officers and delegates
the following duties to each such officer:
(i) Chairman of the Board of Directors. The Chairman of
the Board, if any, shall preside at all meetings of the Board of
Directors at which he shall be present. He shall have and may exercise
such powers as are, from time to time, assigned to him by the Board and
as may be provided by law. The Chairman of the Board must comply with the
requirement of Section 1.01 of the Special Security Agreement.
(ii) President and Chief Executive Officer. The President
shall be the chief executive officer and shall have general charge and
supervision of the business of the Company; and, in general, he shall
perform all duties incident to the office of the president of a company,
and such other duties as, from time to time, may be assigned to him by
the Board or as may be provided by law.
(iii) Vice President. The Vice-President or
Vice-Presidents, at the request of the President or in his absence or
during his inability to act, shall perform the duties of the President,
and when so acting shall have the powers of the President. If there be
more than one Vice-President, the Board of Directors may determine which
one or more of the Vice-Presidents shall perform any of such duties; or
if such determination is not made by the Board, the President may make
such determination; otherwise any of the Vice-Presidents may perform any
of such duties. The Vice-President or Vice-Presidents shall have such
other powers and perform such other duties as may be assigned to him or
them by the Board or the President or as may be provided by law.
(iv) Secretary. The Secretary shall record all the
proceedings of the meetings of the Board of Directors and its committees,
if any, in a book to be kept for that purpose; he shall see that all
notices are duly given in accordance with the provisions of this
Agreement or as required by law; he shall be custodian of the records of
the Company; [he may affix the company seal to any document the execution
of which, on behalf of the Company, is duly authorized, and when so
affixed may attest the same;] and, in general, he shall perform all
duties incident to the office of secretary of a company, and such other
duties as, from time to time, may be assigned to him by the Board or the
President or as may be provided by law.
(v) Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Company, and shall deposit or cause to be deposited, in the name of the
Company, all monies or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected
by or under authority of the Board of Directors; if required by the
Board, he shall give a bond for the faithful discharge of his duties,
with such surety or sureties as the Board may determine; he shall keep or
cause to be kept full and accurate records of all receipts and
disbursements in
<PAGE>
<PAGE>
books of the Company and shall render to the President and to the Board,
whenever requested, an account of the financial condition of the
Company, and such other duties as may be assigned to him the Board or
the President or as may be provided by law.
The Board may create such other officers from time to time and delegate such
duties as it deems appropriate. The Board shall elect directors to hold office
for one year or until such officers' successors are elected.
(e) Except where (i) the Member's or the Board's approval is
expressly required by this Agreement or by the Act or (ii) authority has been
expressly vested in the GS Committee (as defined below) by this Agreement or the
Department of Defense Special Security Agreement (DD Form 4411), as may be
amended (the "Special Security Agreement"), the Board shall have full authority,
power and discretion to make all decisions with respect to the Company's
business and to perform such other services and activities as set forth in this
Agreement.
(f) Except as otherwise expressly provided in this Agreement or
the Act, the Member, solely by reason of being a member of the Company, shall
not have the right to control or manage, or take any part in the control or
management of, the property, business or affairs of the Company.
(g) The Board may hold meetings either within or without the
State of Delaware. Meetings of the Board may be held without notice at such time
and at such place as may from time to time be determined by the Board. A quorum
must be present at each meeting of the Board. A majority in number of the Board
shall be necessary to constitute a quorum; provided, however, that at least one
Outside Director and one Inside Director must be in attendance in order for
there to be a quorum present at any meeting of the Board. The Directors shall
approve actions to be taken by the Board by a vote of a majority in number of
Directors at a meeting at which a quorum is present; provided that any matter
involving the Special Securities Agreement or any contract or other arrangement
intended to be covered by the protections set forth in the Special Security
Agreement that comes before the Board shall require at least one Outside
Director's favorable vote as part of a majority.
(h) Notwithstanding anything set forth in this Agreement, in
addition to the affirmative vote of the Board, the prior written consent of the
Member shall be required to approve each of the following:
(i) the sale, exchange, lease, mortgage, pledge or other
transfer or disposition of any property or assets of the Company, other
than in the ordinary course of business;
(ii) the entry into any agreement to borrow money or to
grant a mortgage on, a security interest in, a pledge or otherwise
encumbers, any asset of the Company, other than in the ordinary course
of business;
<PAGE>
<PAGE>
(iii) the merger or consolidation of the Company with or
into another limited liability company, foreign limited liability
company or other entity;
(iv) the authorization for a confession of judgment
against the Company;
(v) the assignment for the benefit of creditors of the
Company, filing of a voluntary bankruptcy petition, or consent to an
involuntary petition, under Title 11 of the United States Code or the
reorganization, dissolution or liquidation of the Company;
(vi) the amendment of the Certificate; or
(vii) the initiation of action to terminate the Company or
the Special Security Agreement (except as provided in Section 13.02 of
the Special Security Agreement).
(i) Notwithstanding anything set forth in this Agreement, the
Member is hereby authorized, without the consent of the Board, to adopt the
resolutions set forth in Exhibit C hereto.
(j) In lieu of holding a meeting, the Directors may vote or
otherwise take action by a written instrument indicating the consent of the
requisite number and type (as provided in Section 10(g) above) of the Directors
as would be required for the Directors to take action under this Agreement. If
such consent is not unanimous, prompt notice shall be given to those Directors
who have not consented in writing but who would have been entitled to vote
thereon had such action been taken at a meeting.
(k) Directors may participate in a meeting by conference
telephone or similar communications equipment, by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting (as provided in Section 10(g)
above).
(l) The removal of any Director or the President and the
appointment of new or replacement Directors (other than Insider Directors) or a
new or replacement President shall be in compliance with Section 1.01 of the
Special Security Agreement.
11. Committees. (a) Government Security Committee. (i) There is
hereby established a permanent committee of the Board to be known as the
Government Security Committee (the "GS Committee"). The Committee shall consist
of all Outside Directors and Officer Directors. The purpose of the GS Committee
is to assure that (x) the Company maintains policies and practices to safeguard
classified information and controlled unclassified information in the possession
of the Company consistent with the terms of the Special Security Agreement and
(y) the protective measures contained in the Special Security Agreement are
implemented effectively and maintained throughout the duration of such
agreement. Each Director that is a member of the GS Committee shall be cleared
to the level of the facility security clearance of the Company and shall be
specifically approved for this function by the United States Defense Security
Service ("DSS"). One Outside Director shall be designated as Chairman of the GS
Committee.
<PAGE>
<PAGE>
(ii) The GS Committee may hold meetings either within or
without the State of Delaware. Meetings of the GS Committee may be held
without notice at such time and at such place as may from time to time
be determined by the GS Committee. A quorum must be present at each
meeting of the GS Committee. A majority in number of the members of GS
Committee shall be necessary to constitute a quorum. In lieu of holding
a meeting, the members of the GS Committee may vote or otherwise take
action by a written instrument indicating the consent of the requisite
number of the Directors as would be required for the GS Committee to
take action under this Agreement or the Special Security Agreement, as
applicable. If such consent is not unanimous, prompt notice shall be
given to those Directors on the GS Committee who have not consented in
writing but who would have been entitled to vote thereon had such action
been taken at a meeting. The members of the GS Committee may participate
in a meeting by conference telephone or similar communications
equipment, by means of which all persons participating in the meeting
can hear each other, and such participation shall constitute presence in
person at such meeting.
(iii) One Officer Director that is a member of the GS
Committee shall be designated by the GS Committee to assure that all
records, journals and minutes of the GS Committee are maintained and
readily available for inspection by the DSS.
(b) Compensation Committee. The Board shall establish a permanent
committee of the Board, consisting of at least one Outside Director and one
Inside Director, to be known as the Compensation Committee. The Compensation
Committee shall be responsible for reviewing and approving recommendations for
the annual compensation of the Company's principal officers, pursuant to the
Special Security Agreement.
(c) Other Committees. The Board may designate other standing
committees of the Board; provided, that all such additional committees shall be
created and shall operate in compliance with the terms of the Special Security
Agreement.
12. Compliance with Special Security Agreement. THE COMPANY, THE
MEMBER, AND THE DIRECTORS AND THE OFFICERS SHALL COMPLY IN ALL RESPECTS WITH THE
TERMS, RESTRICTIONS, LIMITATIONS AND PROVISIONS OF, AND IN NO WAY VIOLATE, THE
SPECIAL SECURITY AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT D. In
the case of any conflict, as to the management of the Company, between the terms
of this Agreement and the terms of the Special Security Agreement, the terms of
the Special Security Agreement shall govern. All notices to be provided and
consents to be obtained by the Company, the Member, any Director or the
President pursuant to the Special Security Agreement shall be provided or
obtained, as the case may be, in accordance with the Special Security Agreement.
13. Assignments. The Member may not sell, assign or otherwise
transfer in whole or in part its membership interest in the Company without the
affirmative vote or written consent of the GS Committee, which vote or consent
may be withheld in its sole discretion. Any sale, assignment or other transfer
that is not in compliance with this Section shall be null and void.
<PAGE>
<PAGE>
14. Withdrawal. The Member may not withdraw from the Company
without the affirmative vote or written consent of the GS Committee, which vote
or consent may be withheld in their sole discretion. Until such withdrawal
becomes effective, the Member shall in all respects continue to be a member
hereunder.
15. Admission of an Additional Member. One or more additional
members of the Company may be admitted to the Company at any time or from time
to time with the affirmative vote of (x) the Member and (y) all members of the
GS Committee. Upon the admission of an additional member, this Agreement shall
be amended and restated as agreed by the Member, such additional member and the
Board. Each new member will be required to execute an agreement pursuant to
which such member becomes bound by the terms of this Agreement and the Special
Security Agreement.
16. Events of Dissolution. (a) The Company shall be dissolved
upon the happening of any of the following events:
(i) the written consent of the Member;
(ii) at any time there are no members; or
(iii) the entry of a decree of judicial dissolution under
Section 802 of the Delaware Act.
(b) The resignation or bankruptcy of any member or the occurrence
of any other event that terminates the continued membership of any member shall
not cause the Company to be dissolved or its affairs to be wound up, and upon
the occurrence of any such event, the Company shall be continued without
dissolution, unless such event results in the Company having no members.
17. Liability of Member. The Member shall not have any liability
(personal or otherwise) for the obligations or liabilities of the Company except
to the extent provided in the Act.
18. Exculpation of the Directors and Officers. None of the
Directors or the officers shall have liability (personal or otherwise) to the
Company or the Member for damages for any breach of duty in such capacity;
provided that nothing in this Section shall eliminate or limit the liability of
the Directors or the officers if a judgment or other final adjudication adverse
to any such Director or officer establishes that his acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that he personally gained in fact a financial profit or other advantage to which
such Director or officer was not legally entitled or that with respect to a
distribution to the Member the acts of such Director or officer were not
performed in accordance with the Act.
19. Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Directors, the officers and the
Member and their respective directors, trustees, shareholders, officers,
employees and agents (collectively, the "Indemnitees"), from and against any and
all costs, liabilities, claims, expenses, including reasonable attorneys' fees,
<PAGE>
<PAGE>
and damages (collectively, "Losses") paid or incurred by any such Indemnitee in
connection with the conduct of the Company's business in accordance with this
Agreement and the Act, except that no Indemnitee shall be entitled to
indemnification in respect of any Loss incurred by such Indemnitee by reason of
such Indemnitee's gross negligence or willful misconduct. Any indemnity under
this Section shall be provided out of and to the extent of Company assets only
and the Member shall not have any personal liability on account thereof. All
rights of an Indemnitee under this Section shall survive the dissolution of the
Company and the withdrawal of the Indemnitee from membership in the Company and
shall inure to the benefit of such Indemnitee's heirs, personal representatives,
successors and assigns.
20. Liquidation. (a) Upon dissolution of the Company, a person
selected by the Member shall be the liquidator of the Company (the
"Liquidator"). The Liquidator shall liquidate the assets of the Company and
apply and distribute the proceeds of such liquidation in the following order of
priority, unless otherwise required by mandatory provisions of applicable law:
(i) to creditors of the Company (other than the Member);
and
(ii) the balance to the Member;
provided, however, that the Liquidator may place in escrow a reserve of cash or
other assets of the Company for contingent liabilities in an amount determined
by the Liquidator to be appropriate for such purposes.
21. Tax Matters. The Member and the Company intend that the
Company be treated as an entity with a single owner electing to be disregarded
as a separate entity for United States federal income tax purposes, and all
applicable state and local income tax purposes, and will file such necessary and
appropriate forms in furtherance thereof. The Company's fiscal and taxable year
will end on November 30 of each year; provided, however, if either the fiscal or
taxable year of the Member is changed such that it shall end on a date other
than November 30, the fiscal or taxable year, as the case may be, of the Company
shall be changed so as to be consistent with the fiscal or taxable year of the
Member. The Member, or its authorized agent, shall be the only person authorized
to prepare, execute and file tax returns and tax reports on behalf of the
Company and to represent the Company before the Internal Revenue Service and any
state or local taxing authority.
22. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (other than the
conflicts of law rules), all rights and remedies being governed by said laws.
23. Amendments. Except as otherwise provided by this Agreement or
the Act, this Agreement may be amended by the Member; provided, however, that no
provision of Sections 10, 11, 12, 13, 14 or 15 shall be amended without the
consent of all members of the GS Committee.
24. Power of Attorney. The Member hereby constitutes and appoints
the President or, if a Liquidator shall have been selected pursuant to Section
20, the Liquidator, as the Member's true and lawful agent and attorney in fact
("Agent"), with full power of substitution, with
<PAGE>
<PAGE>
full power and authority in the Member's name, place and stead to execute,
acknowledge, deliver and file all such documents which the Agent deems necessary
or appropriate (i) to continue the existence or qualification of the Company as
a limited liability company under the laws of any state or jurisdiction, (ii) to
reflect amendments to this Agreement or the Certificate made pursuant hereto,
(iii) to reflect the dissolution or liquidation of the Company pursuant to the
terms hereof, or (iv) to reflect the admission, withdrawal or expulsion of any
member pursuant to the terms hereof. The foregoing power of attorney is hereby
declared irrevocable and a power coupled with an interest and shall extend to
each Member's successors and assigns, heirs or representatives.
25. Headings. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Member has executed this Agreement.
EAGLE-PICHER INDUSTRIES, INC.
By: /s/ ANDRIES RUIJSSENAARS
___________________________________
Andries Ruijssenaars, President and
Chief Executive Officer
