Document:

exv10w39

 

Exhibit 10.39
EXECUTION
COPY

FORBEARANCE AGREEMENT

     This FORBEARANCE AGREEMENT (this “Agreement”) is entered into as of March 10, 2005 by
and among EAGLEPICHER INCORPORATED (formerly known as Eagle-Picher Industries, Inc.) (the
“Servicer”), EAGLEPICHER FUNDING CORPORATION (formerly known as Eagle-Picher Funding
Corporation) (“EPFC”), the entities listed on the signature pages hereof as “Originators”
(together with the Servicer and EPFC, the “EaglePicher Parties”) and GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation, in its separate capacities as a committed purchaser
(in such capacity, the “Committed Purchaser”), as administrative agent (in such capacity,
the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral
Agent”) under the “Purchase Agreement” referred to below. All capitalized terms used in this
Agreement and not otherwise defined herein will have the respective meanings set forth in the
Purchase Agreement.

RECITALS:

     WHEREAS, EPFC, the Servicer, the Committed Purchaser, the Collateral Agent and the
Administrative Agent are parties to a Receivables Purchase and Servicing Agreement dated as of
January 8, 2002 (as amended, restated, supplemented or otherwise modified from time to time prior
to the date hereof, the “Purchase Agreement”);

     WHEREAS, as of November 30, 2004, (i) the ratio of (a) Consolidated EBITDA to (b) Consolidated
Cash Interest Expense for the four consecutive fiscal quarters ended November 30, 2004 was less
than 2.35 to 1.00, (ii) the Leverage Ratio as of the fiscal quarter ended November 30, 2004 was
greater than 5.00 to 1.00 and (iii) the ratio of (a) Consolidated EBITDA minus Capital
Expenditures to (b) Consolidated Fixed Charges for the four consecutive fiscal quarters ended
November 30, 2004 was less than 1.00 to 1.00 (collectively, the “Specified Financial Test
Violations”);

     WHEREAS, each of Specified Financial Test Violations constitutes an Event of Servicer
Termination pursuant to Section 9.02(l) of the Purchase Agreement and a Termination Event pursuant
to Section 9.01(n) of the Purchase Agreement;

     WHEREAS, EPFC and the Servicer have failed to deliver the November 30, 2004 audited financial
statements, the December 31, 2004 and January 31, 2005 unaudited financial statements and various
other documents and certificates to be delivered in connection with the November 30, 2004 audited
financial statements and the December 31, 2004 and January 31, 2005 unaudited financial statements
at the times such financial statements, certificates and other documents are required to be
delivered under Section 5.02(a) and Annex 5.02(a) of the Purchase Agreement (collectively, the
“Specified Delivery Violations” and together with the Specified Financial Test Violations,
the “Specified Violations”);

     WHEREAS, each of Specified Delivery Violations constitutes an Incipient Termination Event
pursuant to Section 9.01(a)(iii) of the Purchase Agreement and, five Business

 

 

Days after the date of this Agreement, each of the Specified Delivery Violations will
constiute a Termination Event pursuant to Section 9.01(a)(iii) of the Purchase Agreement;

     WHEREAS, the Administrative Agent, the Collateral Agent and the Committed Purchaser are
not willing to waive any of the Specified Violations;

     WHEREAS, the EaglePicher Parties have requested that the Administrative Agent, the Collateral
Agent and the Committed Purchaser forbear from enforcing certain rights and remedies under the
Purchase Agreement as a result of the Specified Violations for a limited period of time (but not
waive such Specified Violations); and

     WHEREAS, in order to accommodate the EaglePicher Parties’ request, the Administrative Agent,
the Collateral Agent and the Committed Purchaser are willing to temporarily forbear from exercising
certain rights and remedies available solely by reason of the Specified Violations on the terms,
conditions, and provisions contained in this Agreement;

     NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each of the EaglePicher Parties, the Committed Purchaser, the Collateral
Agent and the Administrative Agent hereby agree as follows.

     1. Forbearance.

     1.1 Upon the satisfaction of the conditions precedent set forth in Section 3 of this
Agreement, the Administrative Agent, the Collateral Agent and the Committed Purchasers hereby agree
to forebear from taking any of the following actions as a result of the occurrence and continuation
of any of the Specified Violations during the period (such period being referred to herein as the
“Forbearance Period”) beginning on the first date that all of the conditions set forth in
Section 3 of this Agreement shall have been satisfied and ending immediately upon the
earliest to occur of (a) the occurrence or identification of any Termination Event, Incipient
Termination Event, Event of Servicer Termination or Incipient Servicer Termination Event other than
any, or solely with respect to any, of the Specified Violations, (b) June 10, 2005 and (c) the
occurrence (whether or not declared) of any “Standstill Termination” (as such term is defined in
the Bank Forbearance Agreement defined below): (1) commence judicial enforcement proceedings
against EPFC or the Servicer with respect to the payment of the Seller Secured Obligations or any
other obligations under the Purchase Agreement, (2) commence any foreclosure, enforcement or levy
against or seizure of all or any portion of the Seller Collateral, (3) declare any commitments to
make Capital Purchases or Reinvestment Purchases to be terminated or otherwise refuse, or assert
that it has no obligation, to make Capital Purchases or Reinvestment Purchases by reason of the
existence of any Specified Violation or (4) declare that the Facility Termination Date has
occurred. “Bank Forbearance Agreement” means that certain Amended and Restated Forbearance
Agreement dated as of February 28, 2005 among EaglePicher Holdings, Inc., EaglePicher Incorporated,
the lenders party thereto and Harris Trust and Savings Bank, as agent for such lenders.

     1.2 The Administrative Agent, the Collateral Agent and the Committed Purchaser expressly
reserve the right to exercise all remedies under the Related Documents and

2

 

applicable law with respect to the Specified Violations immediately upon the expiration of the
Forbearance Period, including, without limitation, the rights and remedies identified in clauses
(1) through (4) of Section 1.1 above, in respect of all Specified Violations. The
Administrative Agent, the Collateral Agent and the Committed Purchaser expressly reserve the right
to immediately exercise all remedies under the Related Documents and applicable law with respect to
all Termination Events, Incipient Termination Events, Events of Servicer Termination or Incipient
Servicer Termination Events now existing or hereafter arising other than the Specified Violations.

     1.3 Except for the forbearance to the extent expressly set forth above in Section 1.1,
the Administrative Agent, the Collateral Agent and the Committed Purchaser reserve each and every
right and remedy they have under the Related Documents and under applicable law with respect to the
Specified Violations, including, without limitation, the Administrative Agent’s and the Committed
Purchaser’s right to continue to charge and collect interest at the default rate (including,
without limitation, the Daily Default Margin) pursuant to the definition of “Committed Purchaser
Daily Yield” set forth in Annex X to the Purchase Agreement. Nothing in this Agreement shall be
deemed to constitute a waiver by the Administrative Agent or the Committed Purchaser of any
Termination Event, Incipient Termination Event, Event of Servicer Termination or Incipient Servicer
Termination Event, whether now existing or hereafter arising, or of any right or remedy the
Administrative Agent, the Collateral Agent and the Committed Purchaser may have under any of the
Related Documents or applicable law, except to the extent expressly forborne as set forth above in
Section 1.1.

     1.4 Any Capital Purchase or Reimbursement Purchase during the Forbearance Period shall be
subject to the satisfaction of the conditions precedent set forth in Section 3.02 of the Purchase
Agreement, except to the extent non-compliance with the conditions set forth therein relate solely
to an Specified Violation.

     2. Amendments to Purchase Agreement. Effective as of the date hereof and subject to
the satisfaction of the condition precedent set forth in Section 3 below, the Purchase
Agreement is hereby amended as follows:

     2.1 The definition of the term “Per Annum Daily Margin” set forth in Annex X to the
Purchase Agreement shall be amended and restated to read as follows:

     “Per Annum Daily Margin” shall mean (a) with respect to Capital Investment made
by the Conduit Purchaser, 0.90%, and (b) with respect to Capital Investment made by the
Committed Purchaser, 3.00%.

     2.2 The definition of the term “Purchase Discount Rate Cap” set forth in Annex X to
the Purchase Agreement shall be amended and restated to read as follows:

     “Purchase Discount Rate Cap” shall mean a rate equal to eighty percent (80%);
provided, that the Purchase Discount Rate Cap may be changed at any time by the
Administrative Agent, using its good faith and commercially reasonable credit judgment
following a detailed analysis of the Transferred Receivables (or upon receipt of

3

 

additional information with respect thereto); provided that, as long as no
Termination Event has occurred, the Administrative Agent shall give advance written notice
to the Seller with respect to such modification.

     2.3 Annex G of the Receivables Purchase and Servicing Agreement shall be amended and restated
in its entirety as Attachment 1 hereto.

     3. Conditions of Effectiveness of this Agreement. This Agreement shall become
effective as the date first written above (the “Effective Date”) upon the Administrative
Agent’s receipt of (a) counterparts of this Agreement duly executed each EaglePicher Party, the
Committed Purchaser, the Collateral Agent and the Administrative Agent and (b) an amendment fee in
an amount equal to $100,000 in immediately available funds (which shall be fully earned and
non-refundable as of the date paid).

     4. Covenants, Representations and Warranties.

     4.1 Upon the effectiveness of this Agreement, each EaglePicher Party (a) hereby reaffirms all
covenants, representations and warranties made by it in each Related Document as of the date hereof
the same expressly relates solely to an earlier date in which case such Person remakes such
representation and warranty as of such earlier date and (b) agrees that all such covenants,
representations and warranties shall be deemed to have been re-made as of the Effective Date.

     4.2 Each of the EaglePicher Parties represents and warrants that (a) this Agreement
constitutes a legal, valid and binding obligation of such Person and is enforceable against such
Person in accordance with its terms, (b) it is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of its jurisdiction of , in each
case as set forth opposite such EaglePicher Party’s name on Schedule 1 hereto (which is
such EaglePicher Party’s only state of organization) and (c) that the information set forth on
Schedule 1 is true, complete and correct for each of the EaglePicher Parties.

     4.3 Each of EPFC and the Servicer represents and warrants that (a) the Purchase Agreement, as
amended hereby, constitutes a legal, valid and binding obligation of such Person and is enforceable
against such Person in accordance with its terms and (b) as of the Effective Date and after giving
effect hereto, except for the Specified Violations, no Termination Event, Incipient Termination
Event, Event of Servicer Termination or Incipient Servicer Termination Event has occurred and is
continuing.

     4.4 EPFC and the Servicer represents and warrants that EPFC has not purchased Receivables from
any Person besides the Persons identified as “Originators” on the signature pages to this
Agreement.

     4.5 Within five Business Days of its receipt thereof, each EaglePicher Party hereby covenants
to deliver (or cause to be delivered) to the Administrative Agent a copy of (a) any final report
prepared by or on behalf of Giuliani Capital Advisors LLC related to EaglePicher Automotive, Inc.
or (b) any final offering memorandum or final preliminary offering memorandum distributed to
potential investors (or comparable documents) prepared by or on

4

 

behalf of any investment banking firm relating to the sale of the equity or substantially all
the assets of any EaglePicher Party or any Affiliate thereof.

     5. Reference to and Effect on Related Documents.

     5.1 Upon and after the Effective Date, each reference to the Purchase Agreement in any of the
Related Documents shall mean and be a reference to the Purchase Agreement as amended hereby.

     5.2 Except as specifically set forth above, the Purchase Agreement and all other documents,
instruments and agreements executed and/or delivered in connection therewith, shall remain in full
force and effect, and are hereby ratified and confirmed.

     5.3 Except to the extent expressly forborne as set forth above in Section 1.1, the
execution, delivery and effectiveness of this Agreement shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of EPFC, the Committed Purchaser, the
Collateral Agent or the Administrative Agent, nor constitute a waiver of any provision of any of
the Related Documents, or any other documents, instruments and agreements executed and/or delivered
in connection therewith.

     6. Headings. Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any other purpose.

     7. Counterparts. This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.

     8. Entire Agreement. This Agreement, taken together with the Purchase Agreement and
all of the other Related Documents, embodies the entire agreement and understanding of the parties
hereto and supersedes all prior agreements and understandings, written and oral, relating to the
subject matter hereof.

     9. Governing Law. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK BUT OTHERWISE
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES).

     10. No Course of Dealing. The Committed Purchaser, the Collateral Agent and the
Administrative Agent have entered into this Agreement on the express understanding with the
EaglePicher Parties that in entering into this Agreement the Committed Purchaser, the Collateral
Agent and the Administrative Agent are not establishing any course of dealing with any EaglePicher
Party. The rights of the Committed Purchaser, the Collateral Agent and the Administrative Agent to
require strict performance with all the terms and conditions of the Purchase Agreement as amended
by this Agreement and the other Related Documents shall not in any way be impaired by the execution
of this Agreement. None of the Collateral Agent, the

5

 

Committed Purchaser or the Administrative Agent shall be obligated in any manner to execute
any further Agreements or waivers, and if such waivers or Agreements are requested in the future,
assuming the terms and conditions thereof are acceptable to them, the Committed Purchaser, the
Collateral Agent and the Administrative Agent may require the payment of fees in connection
therewith.

     11. Waiver of Claims.

     11.1 Each EaglePicher Party hereby (a) ratifies and reaffirms all of its payment and
performance obligations, contingent or otherwise, and each grant of security interests and liens
granted under each Related Document to which it is a party, (b) agrees and acknowledges that such
ratification and reaffirmation is not a condition to the continued effectiveness of such Related
Documents, and (c) agrees that neither such ratification and reaffirmation, nor any Person’s
solicitation of such ratification and reaffirmation, constitutes a course of dealing giving rise to
any obligation or condition requiring a similar or any other ratification or reaffirmation from
each EaglePicher Party with respect to any subsequent modifications consent or waiver with respect
to the Purchase Agreement or other Related Documents. The Purchase Agreement and each other
Related Document is in all respects hereby ratified and confirmed and neither the execution,
delivery nor effectiveness of this Agreement shall operate as a waiver of any Termination Event,
Incipient Termination Event, Event of Servicer Termination or Incipient Servicer Termination Event
(whether or not known to the Administrative Agent, the Collateral Agent or the Committed Purchaser)
or any right, power or remedy of the Administrative Agent, the Collateral Agent or the Committed
Purchaser of any provision contained in the Purchase Agreement or any other Related Document,
whether as a result of any Termination Event, Incipient Termination Event, Event of Servicer
Termination or Incipient Servicer Termination Event or otherwise. This Agreement shall constitute
a “Related Document” for purposes of the Purchase Agreement.

     11.2 Each EaglePicher Party hereby acknowledges and confirms that (a) it does not have any
grounds, and hereby agrees not to challenge (or to allege or to pursue any matter, cause or claim
arising under or with respect to), in any case based upon acts or omissions of the Administrative
Agent, the Collateral Agent or the Committed Purchaser occurring prior to the date hereof or facts
otherwise known to it as of the date hereof, the effectiveness, genuineness, validity,
collectibility or enforceability of the Purchase Agreement or any of the other Related Documents,
the Seller Secured Obligations, the liens securing such Seller Secured Obligations, or any of the
terms or conditions of any Related Document (it being understood that such acknowledgement and
confirmation does not preclude any EaglePicher Party from challenging the Administrative Agent’s,
the Collateral Agent’s or the Committed Purchaser’s interpretation of any term or provision of the
Purchase Agreement or other Related Document) and (b) it does not possess (and hereby forever
waives, remises, releases, discharges and holds harmless the Committed Purchaser, the
Administrative Agent, the Collateral Agent and their respective affiliates, stockholders,
directors, officers, employees, attorneys, agents and representatives and each of their respective
heirs, executors, administrators, successors and assigns (collectively, the “Indemnified
Parties”) from and against, and agrees not to allege or pursue) any action, cause of action,
suit, debt, claim, counterclaim, cross-claim, demand, defense, offset, opposition, demand and other
right of action whatsoever, whether in law, equity or otherwise (which it, all those claiming by,
through or under it, or its successors or assigns, have or may have) against the

6

 

Indemnified Parties, or any of them, by reason of, any matter, cause or thing whatsoever, with
respect to events or omissions occurring or arising on or prior to the date hereof and relating to
the Purchase Agreement or any of the other Related Documents (including, without limitation, with
respect to the payment, performance, validity or enforceability of the Seller Secured Obligations,
the liens securing the Seller Secured Obligations or any or all of the terms or conditions of any
Related Document) or any transaction relating thereto.

     11.3 The provisions of this Section 11 shall survive payment in full of the Seller
Secured Obligations, full performance of all of the terms of this Agreement, the Purchase Agreement
and the other Related Documents and/or any action by any EaglePicher Party to exercise any remedy
available under the Related Documents, applicable law or otherwise.

     12. Expenses. In consideration for the execution by the Committed Purchaser, the
Administrative Agent of this Agreement, each of the EaglePicher Parties jointly and severally
agrees to promptly reimburse each of the Committed Purchaser, the Collateral Agent and the
Administrative Agent or all of the reasonable out-of-pocket expenses, including, without
limitation, attorneys’ and paralegals’ fees and expenses, it has heretofore or hereafter incurred
or incurs in connection with the preparation, negotiation and execution of this Agreement.

     13. Successors and Assigns. This Agreement shall be binding upon each of

EaglePicher Parties, the Committed Purchaser, the Collateral Agent and the Administrative
Agent and their respective successors and assigns and shall inure to the benefit of each such
Person.

     14. Integration. This Agreement contains the entire understanding of the parties
hereto with regard to the subject matter contained herein. This Agreement supercedes all prior or
contemporaneous negotiations, promises, covenants, agreements and representations of every nature
whatsoever with respect to the matters contained in this Agreement, all of which have become merged
and finally integrated into this Agreement. Each of the parties hereto understands that in the
event of any subsequent litigation, controversy or dispute concerning any of the terms, conditions
or provisions of this Agreement, no party shall be entitled to offer or introduce into evidence any
oral promises or oral agreements among the parties relating to the subject matter of this Agreement
not included or referred to herein and not reflected by a writing included or referred to herein.

     15. Notice. Pursuant to Section 9.01(a)(iii) of the Purchase Agreement, the
Administrative Agent hereby gives notice to EPFC of its failure to deliver the November 30, 2004
audited financial statements, and the December 31, 2004, and January 31, 2005, unaudited financial
statements at the times such financial statements are required to be delivered under Section
5.02(a) and Annex 5.02(a) of the Purchase Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
by their duly authorized officers as of the date first above written.

	 	 	 	 	 
	 	EAGLEPICHER INCORPORATED, as the 

Servicer and as an Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EAGLEPICHER FUNDING CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CARPENTER ENTERPRISES LIMITED, as an 

Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EAGLEPICHER AUTOMOTIVE, INC., as an 

Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	DAISY PARTS, INC., as an Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EAGLEPICHER FILTRATION & MINERALS, 

INC., as an Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

FORBEARANCE AGREEMENT

 

 

	 	 	 	 	 
	 	EAGLEPICHER TECHNOLOGIES, LLC, as an 

Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EAGLEPICHER PHARMACEUTICAL 

SERVICES, LLC, as an Originator

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	GENERAL ELECTRIC CAPITAL 

CORPORATION, as Committed Purchaser

 	 
	 	By:  	 	 
	 	 	Name:  	Kelly Stotler 	 
	 	 	Title:  	Duly Authorized Signatory 	 
	 
	 	GENERAL ELECTRIC CAPITAL

CORPORATION, as Administrative Agent and as 

Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	Kelly Stotler 	 
	 	 	Title:  	Duly Authorized Signatory 	 
	 

FORBEARANCE AGREEMENT

 

 

Schedule 1

	 	 	 	 	 
	EaglePicher Party	 	Type of Entity	 	Jurisdiction of Organization
	EaglePicher Incorporated
	 	Corporation
	 	Ohio
	EaglePicher Funding

Corporation
	 	Corporation
	 	Delaware
	EaglePicher Filtration &

Minerals, Inc.
	 	Corporation
	 	Nevada
	EaglePicher Automotive, Inc.
	 	Corporation
	 	Michigan
	EaglePicher Technologies,

LLC
	 	Limited Liability Company
	 	Delaware
	EaglePicher Pharmaceutical

Services, LLC
	 	Limited Liability Company
	 	Delaware
	Carptenter Enterprises

Limited
	 	Corporation
	 	Michigan
	Daisy Parts, Inc.
	 	Corporation
	 	Michigan

 

 

Annex G to Purchase Agreement

FINANCIAL COVENANTS

     (a) Minimum Monthly Adjusted EBITDA. During the Forbearance Period, as of the last
day of each calendar month set forth below, Adjusted EBITDA for the month then ended shall not be
less than the ratio set forth below opposite such month:

	 	 	 	 	 
	Month Ended	 	Minimum Adjusted EBITDA	 
	 	 	shall
not be less than:	 
	03/31/05
	 	$	4,300,000	 
	04/30/05
	 	$	4,400,000	 
	05/31/05
	 	$	5,100,000	 

     (b) Capital Expenditures. No Capital Expenditures shall be made or incurred during the
period from and including February 28, 2005 through and including June 10, 2005 that would cause
the aggregate amount of Capital Expenditures made by EaglePicher Holdings, Inc., EaglePicher
Incorporated, and their Subsidiaries during such period to exceed $10,000,000.

     (c) Interest Expense Coverage Ratio. From and after the termination or expiration of
the Forbearance Period, the ratio of (a) Consolidated EBITDA to (b) Consolidated Cash Interest
Expense for any period of four consecutive fiscal quarters ending on any fiscal quarter end during
any period set forth below, shall not be less than the ratio set forth below opposite such period:

	 	 	 
	PERIOD	 	RATIO
	

	 	 
	December 1, 2004 to and including

	 	2.25 to 1.00
	February 28, 2005
	 	 
	

	 	 
	March 1, 2005 to and including

	 	1.95 to 1.00
	May 31, 2005
	 	 
	

	 	 
	June 1, 2005 to and including

	 	2.05 to 1.00
	August 31, 2005
	 	 
	

	 	 
	September 1, 2005 to and including

	 	2.05 to 1.00
	November 30, 2005
	 	 
	

	 	 
	December 1, 2005 to and including

	 	2.10 to 1.00
	February 28, 2006
	 	 

 

 

	 	 	 
	PERIOD	 	RATIO
	

	 	 
	March 1, 2006 to and including

	 	2.10 to 1.00
	May 31, 2006
	 	 
	

	 	 
	June 1, 2006 to and including

	 	2.15 to 1.00
	August 31, 2006
	 	 
	

	 	 
	September 1, 2006 to and

	 	2.20 to 1.00
	including November 30, 2006
	 	 
	

	 	 
	December 1, 2006 and thereafter

	 	2.25 to 1.00

     (d) Leverage Ratio. From and after the termination or expiration of the
Forbearance Period, the Leverage Ratio as of any fiscal quarter end during any period set forth
below shall not exceed the ratio set forth below opposite such period:

	 	 	 
	PERIOD	 	RATIO
	

	 	 
	December 1, 2004 to and including

	 	5.50 to 1.00
	February 28, 2005
	 	 
	

	 	 
	March 1, 2005 to and including

	 	6.25 to 1.00
	May 31, 2005
	 	 
	

	 	 
	June 1, 2005 to and including

	 	5.75 to 1.00
	August 31, 2005
	 	 
	

	 	 
	September 1, 2005 to and including

	 	5.50 to 1.00
	November 30, 2005
	 	 
	

	 	 
	December 1, 2005 to and including

	 	5.25 to 1.00
	February 28, 2006
	 	 
	

	 	 
	March 1, 2006 to and including

	 	5.25 to 1.00
	May 31, 2006
	 	 
	

	 	 
	June 1, 2006 to and including
	 	 
	August 31, 2006

	 	5.00 to 1.00
	

	 	 
	September 1, 2006 to and including

	 	4.75 to 1.00
	November 30, 2006
	 	 
	

	 	 
	December 1, 2006 to and including
	 	 
	August 31, 2007

	 	4.75 to 1.00
	

	 	 
	September 1, 2007 and thereafter

	 	4.25 to 1.00

     (e) Fixed Charge Coverage Ratio. From and after the termination or expiration of
the Forbearance Period, the ratio of (a) Consolidated EBITDA minus Capital

 

 

Expenditures to (b) Consolidated Fixed Charges for any period of four consecutive fiscal
quarters ending on any fiscal quarter end during any period set forth below, shall not be less than
the ratio set forth below opposite such period:

	 	 	 
	PERIOD	 	RATIO
	

	 	 
	December 1, 2004 to and including

	 	0.85 to 1.00
	February 28, 2005
	 	 
	

	 	 
	March 1, 2005 to and including
	 	 
	May 31, 2005

	 	0.65 to 1.00
	

	 	 
	June 1, 2005 to and including
	 	 
	August 31, 2005

	 	0.85 to 1.00
	

	 	 
	September 1, 2005 to and including

	 	0.85 to 1.00
	November 30, 2005
	 	 
	

	 	 
	December 1, 2005 to and including

	 	0.95 to 1.00
	February 28, 2006
	 	 
	

	 	 
	March 1, 2006 to and including
	 	 
	May 31, 2006

	 	1.00 to 1.00
	

	 	 
	June 1, 2006 to and including
	 	 
	August 31, 2006

	 	1.05 to 1.00
	

	 	 
	September 1, 2006 to and including

	 	1.10 to 1.00
	November 30, 2006
	 	 
	

	 	 
	December 1, 2006 to and including
	 	 
	August 31, 2007

	 	1.10 to 1.00
	

	 	 
	September 1, 2007 and thereafter

	 	1.25 to 1.00

     Capitalized terms used in this Annex G and not otherwise defined below shall have
the respective meanings ascribed to them in Annex X. The following terms shall have the
respective meanings set forth below:

     “Adjusted EBITDA” means Consolidated EBITDA plus, to the extent deducted in
arriving at such amount, (i) the forbearance fee payable under Section 14 of the Bank Forbearance
Agreement, (ii) attorneys’ fees and expenses incurred by counsel to EaglePicher Holdings, Inc.,
EaglePicher Incorporated and Harris Trust and Savings Bank in connection with the “Original
Forbearance Agreement” (as defined in the Bank Forbearance Agreement), the Bank Forbearance
Agreement and the “Participation Agreement” (as defined in the Bank Forbearance Agreement) (iii)
fees of the Lenders’ financial advisor referred to in Section 7(b) of the Bank Forbearance
Agreement, and (iv) retainer payments and fees to the Borrower’s investment banker(s) referred to
in Section 7(c) of the Bank Forbearance Agreement.

     “Bank Forbearance Agreement” means that certain Amended and Restated Forbearance
Agreement dated as of February 28, 2005 among EaglePicher Holdings, Inc.,

 

 

EaglePicher Incorporated, the lenders party thereto and Harris Trust and Savings Bank, as
agent for such lenders.

     “Capital Expenditures” means, for any period, (a) the additions to property, plant and
equipment and other capital expenditures of the Parent and its Subsidiaries, on a consolidated
basis, that are (or would be) set forth in a consolidated statement of cash flows of the Parent for
such period prepared in accordance with GAAP (including expenditures for maintenance and repairs
which should be capitalized in accordance with GAAP) and (b) Capital Lease Obligations incurred by
the Parent and its Subsidiaries, on a consolidated basis, during such period; provided that
Capital Expenditures shall not include (i) expenditures of proceeds of insurance settlements,
condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned
assets, equipment or other property to the extent such expenditures are made to replace or repair
such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to
acquire, maintain, develop, construct, improve or repair assets or properties useful in the
business of the Parent or (ii) any application of Net Proceeds pursuant to Section 2.11(c) of the
Credit Agreement.

     “Capital Lease Obligations” of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

     “Certificate of Designations” means the Certificate of Designation, Preferences and
Rights Relating to the Existing Preferred Stock, as filed with the Secretary of State of Delaware
on February 23, 1998, as amended, supplemented or modified from time to time in accordance with the
terms and conditions of the Credit Agreement.

     “Consolidated Cash Interest Expense” means, for any period, without duplication, (a)
the sum of (i) the interest expense (including imputed interest expense in respect of Capital Lease
Obligations) of the Parent and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, (ii) any interest accrued during such period in respect of Indebtedness of
the Parent or any Subsidiary of the Parent that is required to be capitalized rather than included
in consolidated interest expense for such period in accordance with GAAP and (iii) commissions,
discounts, yield and other fees and charges incurred in connection with this Agreement, the
Receivables Sale Agreement or any Related Document that are payable to any person other than the
Parent or an Originator, minus (b) the sum of (A) to the extent included in such
consolidated interest expense for such period, non-cash amounts attributable to amortization of
financing costs paid in a previous period and (B) to the extent included in such consolidated
interest expense for such period, deferred financing costs, whether or not paid in cash.

     “Consolidated EBITDA” means, for any period, (a) Consolidated Net Income for such
period plus (b) without duplication, and to the extent deducted in determining such
Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii)
consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and
amortization for such period, (iv) interest-equivalent costs associated with this Agreement, the
Receivables Sale Agreement or any Related Document, whether accounted for as interest expense or
loss on the sale of receivables, (v) any extraordinary non-cash charges for such period, (vi) any
expense relating to pension plans, (vii) any non-recurring non-cash charge (other than routine
non-cash charges that result in an accrual of a reserve for anticipated cash charges in the
following quarter) and (viii) any accruals for long-term bonus programs or plans and
share-appreciation plans, in each case to the extent not resulting in cash payments during such
period,

 

 

minus (c) without duplication, and to the extent included in determining such
Consolidated Net Income, any non-cash gains, non-cash pension income and any cash payment relating
to pension plans for such period, all determined on a consolidated basis in accordance with GAAP;
provided that for the purposes of subclauses (vi) and (vii) of clause (b) of this
definition, any non-cash charges or expenses added back pursuant to such subclauses (other than
non-cash charges and expenses, in each case occurring on or prior to the “Effective Date” (as such
term is defined in the Credit Agreement)) shall be deducted in any subsequent period to the extent
that cash disbursements attributable thereto are made during such period.

     “Consolidated Fixed Charges” means, for any period, without duplication, the sum of
(a) Consolidated Cash Interest Expense for such period, (b) the aggregate amount of scheduled
principal payments made during such period in respect of Long-Term Indebtedness of the Parent and
its Subsidiaries (other than payments made by the Parent or any Subsidiary of the Parent to the
Parent or a Subsidiary of the Parent), (c) the aggregate amount of scheduled principal payments in
respect of Long-Term Indebtedness that would have been due during such period but for their
voluntary prepayment within one year prior to the scheduled date of payment, (d) the aggregate
amount of income taxes paid in cash by the Parent and its Subsidiaries during such period and (e)
the amount of Preferred Dividends paid during such period.

     “Consolidated Net Income” means, for any period, the net income or loss of the Parent
and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP
(adjusted to reflect any charge, tax or expense incurred or accrued by EaglePicher Holdings Inc.
during such period as though such charge, tax or expense had been incurred by the Parent, to the
extent that the Parent has made or would be entitled under the “Loan Documents” (as such term is
defined in the Credit Agreement) to make any payment to or for the account of EaglePicher Holdings
Inc. in respect thereof); provided that there shall be excluded the income of any Person
(other than the Parent) in which any other Person (other than the Parent or any Subsidiary of the
Parent or any director holding qualifying shares in compliance with applicable law) owns an Equity
Interest, except to the extent of the amount of dividends or other distributions actually paid to
the Parent or any of its Subsidiaries during such period.

     “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person.

     “Existing Preferred Stock” means the 11.75% Series A Cumulative Redeemable
Exchangeable Preferred Stock and the 11.75% Series B Cumulative Redeemable Exchangeable Preferred
Stock of EaglePicher Holdings Inc. issued pursuant to the Certificate of Designations.

     “Forbearance Period” has the meaning assigned to such term in that certain Forbearance
Agreement dated as of February 28, 2005 by and among EaglePicher Funding Corporation, EaglePicher
Incorporated, the “Originators” party thereto and General Electric Capital Corporation in its
capacity as committed purchaser and as administrative agent.

     “Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such

 

 

Indebtedness or other obligation or (d) as an account party in respect of any letter of credit
or letter of guaranty issued to support such Indebtedness or obligation; provided that the
term Guarantee shall not include endorsements for collection or deposit in the ordinary course of
business.

     “Inactive Subsidiary” means a Subsidiary listed on Schedule 1.01(a) of the Credit
Agreement; provided that (a) the Parent intends to dissolve, liquidate, wind-up or take
other similar action in respect of such Subsidiary as promptly as reasonably practicable, (b) such
Subsidiary has no business or operations and conducts no activities other than those activities
reasonably necessary to the maintenance or dissolution of such Subsidiary, (c) such Subsidiary does
not incur any Indebtedness or other liabilities (other than reasonable fees of attorneys and
accountants and other de minimis fees in connection with such maintenance, dissolution,
liquidation, winding up or similar process) after the “Effective Date” (as such term is defined in
the Credit Agreement) and (d) the Inactive Subsidiaries as a group shall not have more than
$100,000 in assets.

     “Indebtedness” of any Person means, without duplication, (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest charges are
customarily paid (other than current trade accounts payable incurred in the ordinary course), (d)
all obligations of such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (e) to the extent determinable, all obligations of such Person
in respect of the deferred purchase price of property or services (excluding current accounts
payable and expense accruals incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of letters of credit and
letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances, and (k) the aggregate Capital Investment. The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the extent the terms of
such Indebtedness provide that such Person is not liable therefor.

     “Joint Venture” means any corporation, partnership or other entity or arrangement in
which the Parent or any Subsidiary owns or controls any, but not more than 70%, of the Equity
Interests.

     “Leverage Ratio” means, on any date, the ratio of (a) Total Indebtedness as of such
date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Parent
ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day
of the fiscal quarter of the Parent most recently ended prior to such date).

     “Loan” means any loan made by a lender party to the Credit Agreement to the Parent
pursuant to the Credit Agreement.

     “Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP,
constitutes (or, when incurred, constituted) a long-term liability.

     “Net Proceeds” means, with respect to any event (a) the cash proceeds received in
respect of such event including (i) any cash received in respect of any non-cash proceeds, but only
as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case

 

 

of a condemnation or similar event, condemnation awards and similar payments, net of (b) the
sum of (i) all reasonable fees and out-of-pocket expenses paid by EaglePicher Holdings Inc., the
Parent and its Subsidiaries to third parties (other than Affiliates) in connection with such event,
(ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale
and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all
payments required to be made by EaglePicher Holdings Inc., the Parent and its Subsidiaries as a
result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise
subject to mandatory prepayment as a result of such event, and (iii) the amount of all taxes paid
(or reasonably estimated to be payable) by EaglePicher Holdings Inc., the Parent and its
Subsidiaries, and the amount of any reserve established by EaglePicher Holdings Inc., the Parent
and its Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each
case that are directly attributable to such event (as determined reasonably and in good faith by
the chief financial officer of the Parent), provided that upon the date on which any such reserve
is no longer required to be maintained, the remaining amount of such reserve shall then be deemed
to be Net Proceeds. Notwithstanding anything to the contrary set forth above, the proceeds of any
sale, transfer or other disposition of receivables (or any interest therein) pursuant to this
Agreement, the Receivables Purchase and Servicing Agreement or any Related Document shall not be
deemed to constitute Net Proceeds.

     “Preferred Dividends” means any cash dividend payments made in respect of the Existing
Preferred Stock.

     “Subsidiary” means any subsidiary of the Parent other than (a) the Seller, (b) any
Joint Venture or (c) any Inactive Subsidiary.

     “Total Indebtedness” means, as of any date, the sum, without duplication, of (a) the
aggregate principal amount of Indebtedness of the Parent and its Subsidiaries outstanding as of
such date, in the amount that would be reflected on a balance sheet prepared as of such date on a
consolidated basis in accordance with GAAP, (b) the aggregate Capital Investment and (c) the
aggregate principal amount of Indebtedness of the Parent and its Subsidiaries (including the
Seller) outstanding as of such date that is not required to be reflected on a balance sheet in
accordance with GAAP, determined on a consolidated basis; provided that, for purposes of
clause (c) above, the term “Indebtedness” shall not include contingent obligations of the Parent
and its Subsidiary as an account party in respect of any letter of credit or letter of guaranty
unless such letter of credit or letter of guaranty supports an obligation that constitutes
Indebtedness.Exhibit 10.1

           SETTLEMENT AND RELEASE AGREEMENT and PLAN OR REORGANIZATION

     This Settlement and Release Agreement ("Agreement") is entered into and
effective this 10th day of March 2005, by and between Lifeline Therapeutics,
Inc., a Colorado corporation ("LT") and Lifeline Nutraceuticals Corp., a
Colorado corporation ("LN") and Michael Barber, an individual residing at 2880
S. Locust Street, North Tower - 406, Denver, CO 80222 ("Barber") (each a "Party"
and collectively the "Parties").

         In consideration of the (i) recitals, representations and warranties,
     which are expressly incorporated as a part of this Agreement and (ii) the
promises and obligations of the Parties as set out in this Agreement, the
Parties agree as follows:

                                   I. RECITALS

          A. LN is a privately-held company that is involved in the dietary
     supplement industry, sometimes referred to as the nutraceutical industry.

          B. LT is a publicly traded company that is the parent company of LN,
     and is or intends to be involved in the nutraceutical, cosmeceutical and
     pharmaceutical industries.

          C. Barber is a former employee, Officer and Director of LN. On July
     15, 2003, Barber entered into an Employment Agreement with LN.

          D. On August 15, 2003, Barber was issued 4,500,000 shares of common
     stock in LN (the "LN Common Stock"). Barber contends that the LN Common
     Stock was properly and validly issued and Barber paid all sums due and
     owing for it.

          E. On April 7, 2004, Barber executed a written Resignation, resigning
     as an officer and director of LN. Barber terminated his Employment
     Agreement as well.

          F. A dispute has arisen between Barber, LN and LT regarding the
     circumstances under which Barber obtained the LN Common Stock and the
     disposition of that stock.

                                       1

<PAGE>

          G. The Parties desire to avoid the uncertainty, time, and expense of
     litigating their dispute.

          H. The Parties have reached a settlement of this dispute, and through
     this Agreement, desire to memorialize their settlement.

               II. REPRESENTATIONS AND WARRANTIES OF THE PARTIES:

     The following are not all of the representations and warranties of the
Parties; these relate directly to the ownership of the shares that will be
exchanged pursuant to this Agreement:

          (A) Barber represents and warrants that:

               (1) He is the sole owner of and has full power and authority to
     convey good and marketable title to the LN Common Stock, free and clear of
     any mortgages, liens, restrictions, security interests, claims, rights of
     another or encumbrances. He has not assigned, sold, conveyed, hypothecated,
     licensed, leased, partitioned, pledged, granted, exchanged or otherwise
     transferred (voluntarily or involuntarily), any of the LN Common Stock. Any
     such transfer will not be recognized by LN or LT.

               (2) The 4,500,000 shares of LN Common Stock are the only shares
     of LN stock that Barber has ever owned or held and that Barber has no other
     stock, options, warrants or any other interests in LN or LT, or right to
     purchase any other interests in LN or LT, except as set forth in this
     Agreement.

          (B) LN and LT represent and warrant that:

               (1) LN and LT are corporations duly organized, validly existing
     and in good standing under the laws of the State of Colorado.

               (2) LN and LT have full corporate power and authority to enter
     into and perform this Agreement. This Agreement has been, and any ancillary
     documents will be, duly executed and delivered by duly authorized officers
     of LN or LT.

                                       2

<PAGE>

                      III. TERMS, COVENANTS AND CONDITIONS

          A. Share Exchange. LT agrees to deliver to Barber 1,000,000 shares of
     restricted voting common stock of LT (the "Restricted Stock")in exchange
     for Barber's assignment and delivery of all of the LN Common Stock held by
     him, directly or indirectly (the "Exchange"). The parties shall cooperate,
     use their respective best efforts and take such actions and execute such
     documents (including a Plan of Reorganization, resolutions and consents,
     stock powers, and record-keeping and tax reporting requirements) as
     reasonably necessary to structure the Exchange as a tax-free reorganization
     within the meaning of section 368(a)(1)(B) of the Internal Revenue Code. It
     is understood that neither LT nor LN shall be responsible for any taxes,
     interest or penalties payable by Barber if the Exchange does not qualify as
     a tax-free reorganization and this Agreement is in no way contingent on the
     same.

     (1) At the time this Agreement is executed (the "Closing"), Barber will
     deliver to LT the original certificate(s) representing the LN Common Stock
     to be delivered by him pursuant to the Paragraph A. immediately above (the
     "LN Stock Certificates") and LT will deliver, at the same time, to Barber
     the original certificates representing the Restricted Stock. The LN Stock
     Certificate(s) shall be accompanied by original stock powers (in the form
     attached hereto as Exhibit A)duly endorsed in blank or accompanied by duly
     executed assignment documents in form and substance satisfactory to LT.
     (2) LT agrees to grant to Barber registration rights for the Restricted
     Stock on a pari passu basis with the registration rights to be granted to
     the investors in connection with the financing described below. LT agrees
     to use its best efforts to register the Restricted Stock for resale by
     Barber at the time it undertakes its first registration of shares
     subsequent to the possible financing that LT is currently discussing with
     Keating & Co. LT further agrees to use its best efforts to keep such
     registration statement current and effective until the earlier of (i) the

                                       3

<PAGE>

     date by which all of the Restricted Shares have been sold or (ii) the date
     by which all of the Restricted Shares may be sold pursuant to Rule 144(k).
     All of Barber's shares shall be subject to volume limitations on the amount
     that may be sold under the registration statement in accordance with the
     following: immediately after the effective date of the registration
     statement, but not prior to such date, Barber may sell up to 150,000 of the
     Restricted Shares. Thereafter Barber may sell increments of up to 150,000
     of the Restricted Shares in each subsequent ninety (90) day period.
     Notwithstanding the limitations on the number of shares that may be sold by
     Barber set forth in the immediately preceding sentence, (i) Barber may sell
     the Restricted Shares in private placements immediately following the date
     hereof and (ii) in the event the registration statement on which the
     Restricted Shares were registered is not current or effective and Barber is
     not able to sell his shares, then Barber shall be permitted to sell such
     shares that he would have otherwise been able to sell if the registration
     statement was current and effective without affecting and in addition to
     the volume limitations set forth above. Subject to the approval of LT, such
     approval not to be unreasonably withheld or delayed, Barber may transfer
     his shares in a private sale to any person (i) if such person agrees to be
     bound by the volume limitations set forth above or (ii) if Barber's sale is
     within the volume limitations set forth above. Notwithstanding anything
     else in this paragraph, Barber agrees to comply with all state and federal
     securities laws and regulations with respect to the disposition of the
     shares of LT that Barber receives pursuant to this Agreement. LT further
     agrees to use its best efforts to remove all legends from the stock
     certificates representing such securities upon the request of Barber if
     such legends are no longer applicable, including if such shares are
     eligible for resale pursuant to Rule 144(k) of the Securities Act of 1933,
     as amended. Notwithstanding anything to the contrary contained herein, LT
     agrees to use its best efforts to file for registration of Barber's

                                       4

<PAGE>

     securities no later than the earlier of (i) the date LT registers its first
     registration statement following the date hereof or (ii) within 45 days
     after the closing of the financing that LT is currently discussing with
     Keating & Co.

          B. Compensation Payment to Barber. In consideration of Barber's
     covenant not to compete as provided in this Agreement, LN shall deliver to
     Barber or Barber's counsel the sum of Two Hundred Fifty Thousand Dollars
     ($250,000), payable as follows:

               (1) One Hundred Twenty-Five Thousand Dollars ($125,000) at the
     Closing; and

               (2) One Hundred Twenty-Five Thousand Dollars ($125,000)on April
     15, 2005.

     The payments shall be delivered in the form of a cashier's check or wire
     transfer of immediately available funds to the bank account(s) nominated by
     Barber. As to the payment due on April 15, 2005, LN shall deliver to Barber
     an unconditional Promissory Note in favor of Barber and as to which LN is
     the Maker in the amount of $125,000 due and payable on April 15, 2005, with
     interest accruing from that date forward, if unpaid, at a rate of 8% per
     annum. The Promissory Note shall be in a form reasonably acceptable to
     Barber and LN and shall be attached hereto as Exhibit B. If LN makes
     payment to Barber of this April 15, 2005 payment of $125,000 by that date,
     Barber shall cancel the Promissory Note and return it to LN.

          C. Amounts Owed to Barber; Withholding Liabilities. Any and all
     amounts that may be owed to Barber for services rendered, costs, expenses
     and any other matters through the date of this Agreement, and expressly not
     including those amounts set forth in paragraph III.B. above, are fully and
     permanently cancelled. Barber permanently waives his rights to claim any
     amounts owed for services rendered, costs, expenses, and any other amounts
     advanced or claimed as owed by LN or LT through the date of this Agreement,
     and expressly not including those amounts set forth in paragraph III.B.
     above. In addition, Barber agrees to pay all federal and state income, FICA

                                       5

<PAGE>

     and Medicare taxes due in connection with cancellation of the advances
     described in paragraph III.D. below.

          D. Prior Compensation. Barber received payment from LN for services
     that may have involved various fund raising activities on behalf of LN. The
     Parties acknowledge that any monies or other compensation paid to Barber
     was not payment of commission(s), but constituted an advance to Barber as
     an employee of LN. LN and LT acknowledge and agree that Barber has no
     obligation to pay or repay to LN or LT any monies, including any monies or
     other compensation previously paid to him by LN.

          E. No Admission of Liability. The Parties are entering into this
     Agreement as a method of resolving and compromising their dispute and,
     therefore, LN and LT, by entering this Agreement, are not admitting any
     liability to Barber or any entity or individual associated with Barber. LN
     and LT expressly deny any such liability. Further, by entering into this
     Agreement, Barber is not admitting any liability to LN and LT. Barber
     expressly denies any such liability.

          F. No Rights to Additional Interests. Barber represents and warrants
     to LN and LT that, except as set forth in this Agreement, he waives any and
     all claims to any stock, membership units and other possible ownership or
     other interests and rights in LT or LN .

          G. Association with LN or LT. Barber agrees that he will never in his
     own name or through any individual or entity with whom he is associated in
     any capacity ever voluntarily advertise, publicize or publicly disclose,
     any former or present association with LN or LT. However, LN and LT agree
     that Barber shall be entitled to and have the right to disclose his entire
     employment history. In addition, Barber agree that he will not be involved
     with any type of communication intended for public viewing that compare the
     benefits of any LT or LN product with any product with which Barber has any
     involvement. Further, Barber agrees that he will not refer to or cite or
     cause others to refer or cite to Dr. Joe McCord, including, but not limited
     to, (i) any comment or other communication of any kind that directly or
     ultimately emanated from Dr. Mc Cord or that describes Dr. Mc Cord and any
     of his scientific work and (ii) any test or study in which Dr. McCord has
     had some role, including any report of such test or study.

                                       6
<PAGE>

          H. Restrictions on Competition.

          (1) Barber agrees that for one year from the date of this Agreement
          that he will and shall not knowingly (a) apply for or be employed by
          or contract with, and (b) acquire, either directly or indirectly, any
          ownership or other interest in, any individual or entity, throughout
          the world, that at that time markets, sells, distributes or
          manufactures any dietary or food supplement product that competes or
          is intended to compete with Protandim or CMX-1152 or both of them,
          including knockoffs or derivatives of either Protandim or CMX-1152. A
          product will be conclusively deemed to compete or intended to compete
          with Protandim or CMX-1152 if:

               a. That product contains two or more of the following ingredients
          or extracts of those ingredients, all of which are in or intended to
          be in Protandim: (i) Ashwagandha, (ii) Bacopa, (iii) Green Tea, (iv)
          Milk Thistle, (v) Tumeric, (vi) Gotu Kola, (vii) Ginkgo Biloba, (viii)
          Aloe Vera; or if

               b. That product is promoted, in any way, as being able to provide
          or deliver a health benefit to a human being by affecting, in any way,
          one or more of the following substances or the production by the human
          body of one or more of those substances: (i) SOD, which is superoxide
          dismutases and (ii) CAT, which is catalase; or if

               c. That product is promoted, designed or formulated to affect the
          human body in any way that is similar to the way in which CMX-1152 or
          Protandim is now or may be promoted, designed or formulated, as
          described on Protandim.com and lifelinenutraceuticals.com or any other
          website owned or controlled by LN, LT or CereMedix. Subject to the
          provisions of subparagraphs a., b. immediately above and the first

                                       7

<PAGE>

          sentence of this subparagraph c. , LN and LT acknowledge and agree
          that Barber shall have and retains the right to market products which
          may claim to promote (i) general health and well being, including,
          without limitation, reduction of inflammation, improvement of heart
          health, improvement of digestive problems, improvement of or benefits
          to brain function, increased sexual function, improved oxygen
          absorption, and reduction of plaque or (ii) anti-aging benefits.
          Subject to the provisions of subparagraphs a., b. and the first
          sentence of this subparagraph, LN and LT further acknowledge and agree
          that Barber shall have and retains the right to market and distribute
          krill products. .

          (2) Barber acknowledges and agrees that (a) the non-competition
          agreements and covenants set forth above are (i) reasonable and valid
          in time and geographical scope and (ii) essential to protect the value
          of the business and assets of LN and LT and (b) through his ownership
          of a substantial portion of the LN Common Stock and his relationship
          and employment with LN or LT or both, Barber has obtained valuable
          knowledge, contacts, know-how, training and experience and there is a
          substantial probability that such knowledge, know-how, contacts,
          training and experience could be used to the substantial advantage of
          a competitor of LN and LT and to the substantial detriment of LN and
          LT.

          I. No Dissemination of Information or Documents. Barber represents and
     warrants that he shall not send, deliver or otherwise disseminate any
     information about LN or LT, including but not limited to their products,
     marketing plans, schedules, agreements, contacts, business relationships,
     business plans, employees, internal-decisions and decision-making,
     contracts, company structure, members, investors, finances, and financial
     plans, or anything that would constitute a trade secret under the Colorado
     Trade Secrets Act, to any third-party, including but not limited to
     competitors of LN and LT, the FDA, FTC or SEC, and any other governmental
     entity or agency, other than as required by other and other than to his

                                       8

<PAGE>

     certified public accountants, tax advisors or preparers, attorneys and
     insurers for purposes of obtaining professional advice.

          J. No Delivery of Documents. By signing below, Barber represents and
     warrants to LN and LT that:

          (1) he will deliver to their legal counsel, at Closing, all records,
          documents, notes, and other written materials of any nature whatsoever
          that are in his possession or over which he has control regarding LN
          or LT (the "Lifeline Documents"), other than those records, documents,
          notes, or other written materials of any nature whatsoever necessary
          for tax purposes which he may retain, and legal counsel for Barber may
          retain one copy of all such materials and may keep those in his
          possession for a period of four years after the date of the execution
          of this Agreement; after the expiration of that four year period, all
          such documents will be destroyed by his legal counsel, except Barber
          and his legal counsel may retain a copy of this Agreement and legal
          counsel may retain legal counsel's notes, memoranda and other
          communications with (i) legal counsel for LN and LT and (ii) with LN
          and LT;

          (2) he has not given copies of any of the Lifeline Documents to any
          third-party except to his legal counsel and tax advisor or preparer;
          and

          (3) he does not have nor has he given to any third-party any
          documents, records or other items in any form that in any way contain
          the information that was in the Lifeline Documents, except to his
          legal counsel and tax advisor or preparer.

          K. Nondisclosure. Each Party represents and warrants that neither this
     Agreement nor the contents of this Agreement have been disclosed by him or
     it to any person other than the Parties and their respective legal counsel
     and will not be disclosed to any other persons except as set forth herein
     or pursuant to an order of Court or written mutual consent of the Parties.
     Each Party agrees that he or it will not disclose or disseminate to any
     individual or entity a copy of this Agreement nor any information related
     to this Agreement except as follows:

                                       9

<PAGE>

          (1) this Agreement can be provided to the Parties' certified public
          accountants, tax advisors or preparers, attorneys and insurers
          provided that each of these recipients agrees not disclose or
          disseminate the Agreement without the express consent of both Barber
          and LT (or legal counsel to LT);

          (2) Barber will notify LT in the event that he receives a subpoena,
          court order, or request from a governmental agency (collectively
          referred to as a "Formal Request") for a copy of the Agreement or
          information contained in the Agreement. LT, at its sole expense, shall
          have the right to file and pursue any objection it desires to attempt
          to limit or prevent the delivery by Barber of the Agreement or the
          information contained in this Agreement ("Lifeline's Objections"). LT
          shall immediately provide Barber copies of all documents filed in this
          regard. Barber shall fully and timely comply with any Formal Request,
          unless that Formal Request is modified or quashed as a result of LT's
          Objections, and then Barber shall fully and timely comply with that
          Formal Request as it is modified or quashed as a result of a legally
          binding ruling on LT's Objections. Barber has no obligation on his own
          to file any objection to any Formal Request.

          L. Non-Disparagement. Each Party agrees that he or it will not provide
     information, issue statements, or take any action, directly or indirectly,
     that disparages the other Parties or their respective officers, directors,
     employees or agents.

          M. Mutual Statement. Any Party may make the following statement if
     asked about any dispute or issue between them or about the resolution of
     that dispute: "We have satisfactorily resolved the differences between us,
     and are unable to provide any additional information about this matter."

                                       10

<PAGE>

          N. Release by Barber. Barber, on his own behalf and on behalf of his
     present and prior subrogors and subrogees, successors and/or assigns,
     hereby absolutely and forever releases, acquits, satisfies and discharges
     LN and LT and any and all of their respective directors, spouses, officers,
     employees, shareholders, attorneys, accountants, predecessors, successors
     and affiliates (the "LN/LT Released Parties"), of and from any and all
     rights, claims, demands, damages, debts, liabilities, accounts, covenants,
     rights to indemnification, liens, attorneys' fees, costs, expenses, actions
     and causes of action of every kind and nature whatsoever, now known or
     unknown, suspected or unsuspected, in law or in equity, which Barber owns
     or holds, or at any time heretofore has ever had, owned or held, or may
     hereafter have, own or hold, based upon, related to or arising out of (i)
     the prior business relationship between Barber and LN or LT, and (ii) any
     other matter, act, failure to act, fact, event, happening, occurrence or
     omission existing or occurring prior to the date hereof. Barber further
     irrevocably covenants and agrees to refrain from, directly or indirectly,
     asserting any claim or demand, or commencing, instituting or causing to be
     commenced, any proceeding of any kind against the LN/LT Released Parties,
     based upon any matter purported to be released hereby.

          O. Indemnification. Each party agrees to indemnify and hold the other
     harmless from all liability, including costs and attorneys fees, associated
     with any misrepresentations or breach of the covenants and agreements
     contained herein by such party.

          P. Release by LN and LT. LN and LT, on behalf of their members,
     affiliates, successors, assigns, heirs, employees, representatives, agents,
     managers, members, officers, directors, shareholders, attorneys,
     accountants, advisors, and insurers hereby absolutely and forever release,
     acquit, satisfy and discharge Barber and his present and prior subrogors
     and subrogees, successors and/or assigns, attorneys and accountants (the
     "Barber Released Parties") from any and all rights, claims, demands,
     damages, debts, liabilities, accounts, covenants, rights to
     indemnification, liens, attorneys' fees, costs, expenses, actions and
     causes of action of every kind and nature whatsoever, now known or unknown,

                                       11
<PAGE>

     suspected or unsuspected, in law or in equity, which LN or LT or both own
     or hold, or at any time heretofore have ever had, owned or held, or may
     hereafter have, own or hold, based upon, related to or arising out of (i)
     the prior business relationship between Barber and LN or LT, (ii) the
     Exchange that will occur upon or after the execution of this Agreement,
     including, without limitation, (a) any claims relating to or arising from
     any problems, difficulty, delay or increased costs in raising money or
     inability to raise money or to list on a public exchange as a result of or
     in any part due to Barber being an LT shareholder or (b) any scrutiny,
     evaluation or investigation of LT by the National Association of Securities
     Dealers, Inc., the Securities and Exchange Commission, a state securities
     agency, or any stock exchange as a result of or in any part due to Barber
     being an LT shareholder, and (iii) any other matter, act, failure to act,
     fact, event, happening, occurrence or omission existing or occurring prior
     to the date hereof. LN and LT further irrevocably covenant and agree to
     refrain from, directly or indirectly, asserting any claim or demand, or
     commencing, instituting or causing to be commenced, any proceeding of any
     kind against the Barber Released Parties, based upon any matter purported
     to be released hereby.

          Q. Advice of Counsel. Barber, LN and LT each represent, acknowledge
     and agree that:

          (1) They have each had the opportunity to seek independent legal
          counsel prior to their execution of this Agreement;

          (2) The legal nature and effect of this Agreement has been fully
          explained to them by such independent counsel;

          (3) They fully understand the terms, provisions and ramifications of
          this Agreement;

          (4) They are relying solely upon their own judgment and the advice of
          their own independent and independently chosen counsel in executing
          this Agreement;

                                       12

<PAGE>

          (5) Except for the representations and warranties of a Party as set
          forth in this Agreement, they have not relied upon any representation
          or statement of any other Party to this Agreement, any employee or
          agent of any such Party, or counsel for any other Party in executing
          this Agreement; and

          (6) Subject to the representations and warranties that are in this
          Agreement, each Party is aware that his or its attorneys or advisors
          may, after this Agreement is signed, discover facts different from or
          in addition to the facts that he or it or that Party's attorneys or
          advisors now know or believe to be true with respect to the subject
          matter of this Agreement; that the intention of each Party is to fully
          and finally release each other person or entity released by them, as
          set forth in this Agreement, from any and all liabilities and claims
          which have arisen, are now arising, or may in the future arise in
          connection with or in any way related to the matters referred to in
          this Agreement.

          R. No Assignment. Each Party represents and warrants to the other
     Parties that he or it has not sold, transferred or assigned any of part or
     all of any claim that he or it may have against another Party.

          S. Governing Law. This Agreement shall be governed by and interpreted
     in accordance with the laws of the State of Colorado. Venue for any lawsuit
     regarding this Agreement shall be the Denver County, Colorado, state
     district court and the U.S. District Court for the District of Colorado.

          T. Counterparts. This Agreement may be executed in counterparts, with
     each counterpart being an original document, and all counterparts together
     constituting a single agreement.

          U. Merger. This Agreement states the entire agreement and the full
     understanding between the Parties, and supersedes all prior discussions or
     negotiations, and there are no further understandings or agreements, oral
     or written, relating to the subject matter of this Agreement.

                                       13

<PAGE>

          V. Legal Fees and Expenses. Each Party agrees to bear his or its own
     costs, including attorneys' fees, in connection with the negotiation,
     preparation and execution of this Agreement, and any other matters which
     are the subject of this Agreement. The prevailing party in any lawsuit
     arising from this Agreement shall be entitled to an award of its reasonable
     attorneys' fees, court costs and other reasonable out-of-pocket expenses as
     well as any other legal or equitable relief to which that party may be
     entitled.

          W. Severability. If any provision of this Agreement shall be deemed
     void, invalid, illegal, or unenforceable, the validity, legality and
     enforceability of the remaining provisions of this Agreement shall not be
     affected or impaired.

          X. Rules of Construction. The Parties agree that each of them has
     reviewed and/or revised this Agreement so that the normal rules of
     construction to the effect that any ambiguities in the Agreement are to be
     resolved against the drafting Party shall not be employed in interpreting
     or construing this Agreement.

          Y. Modifications. No modification of this Agreement shall be effective
     unless in writing and signed by the Party against whom it is sought to be
     enforced.

          Z. Successors in Interest. This Agreement is and shall be binding upon
     and inure to the benefit of the heirs and successors of each Party.

          AA. Paragraph Headings. Paragraph headings are for reference purposes
     only and do not affect the interpretation of this Agreement.

          BB. Fax Signatures. Fax signatures are fully binding on the Parties.
     If the Agreement is signed via fax, duplicate originals will promptly be
     signed by the Parties so that each Party will have a fully signed original
     Agreement for his records.

          CC. Notices. All notices which are given pursuant this Agreement shall
     be either hand-delivered or sent by a combination of e-mail and regular
     U.S. Mail or a recognized overnight delivery service. Such notices shall be

                                       14

<PAGE>

     sent to the Parties at the addresses set forth below or to such other
     address designated by the Party to whom notice is to be given.

           To Barber:                          2880 South Locust Street
                                               North Tower - 406
                                               Denver, CO  80222

           With a copy to:                     Martin D. Litt, Esq.
                                               Holme Roberts & Owen LLP
                                               1700 Lincoln, Ste. 4100
                                               Denver, Colorado 80203

           To LN:Lifeline Nutraceuticals Corp.
                                               Attention: Bill Driscoll
                                               President and CEO
                                               6400 S. Fiddler's Green Circle
                                               Suite 1750
                                               Englewood, CO 80111

           To LT:Lifeline Therapeutics, Inc.
                                               Attention: Bill Driscoll
                                               President and CEO
                                               6400 S. Fiddler's Green Circle
                                               Suite 1750
                                               Englewood, CO 80111

           With a copy to:                     James R. Prochnow
                                               Greenberg Traurig, LLP
                                               1200 17th Street, Suite 2400
                                               Denver, CO 80202

          Each Party may change its address for notices by providing notice as
     provided in this Paragraph.

                                       15
<PAGE>

                                         LIFELINE NUTRACEUTICALS CORP.

                                         By:
                                            -----------------------------------
                                               William Driscoll, President

STATE OF COLORADO      )
                       )ss.
COUNTY OF Denver       )

     The foregoing instrument was acknowledged before me this day of , 2005, by
William Driscoll, President of Lifeline Nutraceuticals Corp.

     Witness my hand and seal.

                                                     Notary Public
         [SEAL]                                      My commission expires:

                                       AND

                                         LIFELINE THERAPEUTICS, INC.

                                         By:
                                            -----------------------------------
                                               William Driscoll, President

STATE OF COLORADO       )
                        )ss.
COUNTY OF DENVER        )

     The foregoing instrument was acknowledged before me this day of , 2005, by
William Driscoll, President of Lifeline Therapeutics, Inc.

     Witness my hand and seal.

                                                     Notary Public
               [SEAL]                                My commission expires:

                                       16

<PAGE>

                                                     MICHAEL BARBER

                                                     ---------------------------
                                                      Michael Barber

STATE OF COLORADO     )
                      )ss.
COUNTY OF             )

     The foregoing instrument was acknowledged before me this of , --------
-------------- 2005, by Michael Barber, an individual residing at
------------------------------------------------------------------------------.

     Witness my hand and seal.

                                                     Notary Public
                 [SEAL]                              My commission expires:

                                       17

<PAGE>

APPROVED AS TO FORM:

By: Martin D. Litt, #23716
Attorney(s)for Michael Barber
         Holme Roberts & Owen LLP
1700 Lincoln, Ste. 4100
(303)- 861-7000

GREENBERG TRAURIG

By: James R. Prochnow, #6195
Attorneys for Lifeline Nutraceuticals Corp. and Lifeline
Therapeutics, Inc.
1200 17th Street, Suite 2400
Denver, CO 80202
303-572-6500

                                       18

<PAGE>

                                    Exhibit A
                              Form of Stock Powers

                                       19

<PAGE>

                                    Exhibit B
                             Form of Promissory Note

                                       20

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