EaglePicher and its subsidiaries will notably be precluded under the new senior credit agreement from paying dividends or distributions to EP Holdings to either pay cash preferred dividends or redeem the preferred stock at any time when the consolidated gross debt/EBITDA leverage ratio is 3.0x or more. A change of control will be redefined to include, among other things, the failure by Granaria Holdings B.V. or any of its affiliates ("Granaria") to possess voting control of more than 50% of the company's common equity and also more than 75% of the redeemable preferred stock. Granaria presently controls 62.5% of EP Holdings' common stock and approximately 78.6% of the redeemable preferred stock. The B3 rating of the proposed $220 million guaranteed senior unsecured notes reflects their effective subordination to the senior secured credit agreement and the accounts receivable securitization facility. The notes obligations will be guaranteed on a senior unsecured basis by substantially all of the domestic entities that guarantee the senior secured credit agreement. The notes will contain a five-year non-call provision and a change of control provision. EaglePicher and its subsidiaries will notably be precluded under the notes indenture from paying dividends or distributions to EP Holdings at any time when the consolidated leverage ratio is 3.5x or more. EaglePicher has already obtained consent from the required 75% consent from holders of the existing 9.375% guaranteed senior subordinated notes to eliminate all significant negative covenants and all change of control provisions within the existing indenture. At least 95% on the holders of these notes have already irrevocably agreed to consummate the exchange offer. An amendment to the certificate of designations governing the redeemable preferred stock of EP Holdings is a condition precedent to the consummation of the new guaranteed senior secured credit agreement. Most notably, the redeemable preferred stock documentation will contain a provision to look toward restrictions within the proposed senior secured credit agreement and then the senior unsecured notes (once the credit agreement has expired) requiring that consolidated leverage fall below 3.0x and 3.5x, respectively before EaglePicher would be expected to upstream dividends or distributions to EP Holdings to either pay cash dividends or redemptions of the preferred stock which are otherwise contractually due. EP Holdings' preferred stockholders do not have any capacity to trigger defaults under EaglePicher's debt agreements. In addition, Granaria already controls EP Holdings' board of directors by virtue of majority control of the common stock. The option of holders of at least 25% of the redeemable preferred stock to demand early redemption due to non-payment of cash preferred dividends is also ineffective due to Granaria's controlling interest, as well as the new agreement that upstream distributions from the company will not be required while consolidated leverage remains high. The company will therefore most likely be precluded from redeeming a material amount of the preferred stock principal and PIK dividends prior to the maturity of the proposed new guaranteed senior unsecured notes due 2013, despite the stated March 1, 2008 preferred stock redemption date. For the last-twelve months ended May 31, 2003, EaglePicher's EBIT coverage of cash interest was fair at about 1.2x. The company's EBIT return on assets was improved at about 7.1%. Leverage as measured by total debt/EBITDA was approximately 4.0x and 5.3x, respectively, before and after including the present value of operating leases and preferred stock as debt. Both leverage calculations capture off-balance sheet accounts receivable facility usage as debt. EBIT and EBITDA were adjusted for about $2.7 million of non-recurring charges. Pro forma results overlaying the new capital structure would be consistent with historical results, since existing debt obligations are just being refinanced. EaglePicher, headquartered in Phoenix, Arizona, is a diversified manufacturer of products for automotive, defense and aerospace applications, in addition to other industrial arenas. The company is organized into three strategic business units, or reportable business segments. These are the Automotive Segment, the Technologies Segment, and the Filtration and Minerals Segment. Annual revenues approximate $700 million.