ACu Powder International LLC LBO CASE HISTORY SUCCESS

ACu. Powder International, LLC LBO CASE HISTORY SUCCESS DRIVERS WZCC 2006 AGM January 7, 2007

A SNAPSHOT – PRODUCTS, PROCESSES, APPLICATIONS & MARKETS • MANUFACTURER OF COPPER, TIN, BRONZE, BRASS AND OTHER SPECIALTY METAL POWDERS

A SNAPSHOT – PRODUCTS, PROCESSES, APPLICATIONS & MARKETS • MANUFACTURER OF COPPER, TIN, BRONZE, BRASS AND OTHER SPECIALTY METAL POWDERS • MANUFACTURING PROCESS INCLUDES ATOMIZATION, METALLURGICAL REDUCTION AND COMMINUTION

A SNAPSHOT – PRODUCTS, PROCESSES, APPLICATIONS & MARKETS • MANUFACTURER OF COPPER, TIN, BRONZE, BRASS AND OTHER SPECIALTY METAL POWDERS • MANUFACTURING PROCESS INCLUDES ATOMIZATION, METALLURGICAL REDUCTION AND COMMINUTION • MAIN PLANT IS IN UNION, NJ – 75 EMPLOYEES SECOND PLANT IS IN GREENBACK, TN – 35 EMPLOYEES TOTAL ANNUAL SALES REVENUE IS $75 MILLION

A SNAPSHOT – PRODUCTS, PROCESSES, APPLICATIONS & MARKETS • MANUFACTURER OF COPPER, TIN, BRONZE, BRASS AND OTHER SPECIALTY METAL POWDERS • MANUFACTURING PROCESS INCLUDES ATOMIZATION, METALLURGICAL REDUCTION AND COMMINUTION • MAIN PLANT IS IN UNION, NJ – 75 EMPLOYEES SECOND PLANT IS IN GREENBACK, TN – 35 EMPLOYEES TOTAL ANNUAL SALES REVENUE IS $50 MILLION • ACu. Powder’s CUSTOMERS FABRICATE POROUS SELF-LUBRICATING BEARINGS, FILTERS, FRICTION COMPONENTS, DIAMOND TOOLS, BRAZING PASTES, HEAT SINKS, ETC.

A SNAPSHOT – PRODUCTS, PROCESSES, APPLICATIONS & MARKETS • MANUFACTURER OF COPPER, TIN, BRONZE, BRASS AND OTHER SPECIALTY METAL POWDERS • MANUFACTURING PROCESS INCLUDES ATOMIZATION, METALLURGICAL REDUCTION AND COMMINUTION • MAIN PLANT IS IN UNION, NJ – 75 EMPLOYEES SECOND PLANT IS IN GREENBACK, TN – 35 EMPLOYEES TOTAL ANNUAL SALES REVENUE IS $50 MILLION • ACu. Powder’s CUSTOMERS FABRICATE POROUS SELFLUBRICATING BEARINGS, FILTERS, FRICTION COMPONENTS, DIAMOND TOOLS, BRAZING PASTES, HEAT SINKS, ETC. • THESE COMPONENTS ARE USED IN AUTOMOBILES, AIRCRAFT, HOME APPLIANCES, LAWN & GARDEN, HAND TOOLS, AND COMPUTERS

BIRTH OF ACu. Powder • GOOD EDUCATION, GOOD JOB, COMFORTABLE LIFE. 1967 -1992 • PERIODIC URGES TO START MY OWN POWDER METALLURGY CO. “A GOOD EDUCATION AND JOB SUCCESS WERE ACTUALLY DETERRENTS TO REALIZING MY DREAM” • AN OPPORTUNITY CAME KNOCKING, AND MY LATENT ENTREPRENEURIAL JUICES WENT INTO HIGH GEAR. MY WIFE, NILOUFER, SUPPORTED ME. • IT WAS NOW OR NEVER! I ASKED ALCAN TO SELL THE ALCAN POWDER DIVISION TO ME.

THE DEAL – 1995 • MY INITIATIVE AND PRO-ACTIVE SUGGESTION PAID OFF - Alcan agreed to value our Alcan Powders Division and Edul Daver would have first option to say Yes or No. - It had to be a cash deal. Alcan would not take a note. - I had 6 months to come up with the financing and close the transaction. • VALUATION WAS $12, 000 AND I SAID “YES” • KEY CHALLENGES - Where was the financing coming from? - How would we improve the company’s performance?

A. FINANCING • • BUSINESS PLAN BROKERS & DEAL MAKERS – “THANKS BUT NO THANKS” BANKS & FINANCIAL INSTITUTIONS (30). KEPT LEARNING AS EACH SAID NO. FINALLY, EUREKA! AN ASSET BASED FINANCING STRUCTURE LOOKED DOABLE.

THE FINANCING STRUCTURE • ASSET BASED LOAN FORMULA - EQUITY. . . $200, 000 - LAND & BUILDINGS. . . 80% OF MARKET VALUE - EQUIPMENT. . . 80% OF LIQUIDATION VALUE - RECEIVABLES. . . 85% OF ELIGIBLE A/R - INVENTORY. . . 60% OF ELIGIBLE INVENTORY - AIR BALL. . . CONFIDENCE IN MGMT/PERSONAL GUARANTEE • SELECTED IBJ-SCHROEDER, NYC - TWO TERM LOANS - WORKING CAPITAL REVOLVER - RETAINED 100% OF EQUITY - REASONABLE INTEREST RATES - NO BROKER FEES • HHLBO - DEBT TO EQUITY RATIO. . . 60: 1 PERFECT EXAMPLE OF A HIGHLY LEVERAGED BUY-OUT

B. • • THE PRODUCTIVITY STRUCTURE SAME COMPANY WITH A NEW NAME – ACu. Powder International, LLC. Only change – high debt load and increased concern/ worry OFFERED AND GOT SEVEN KEY EMPLOYEES TO BECOME EQUITY PARTNERS CHANGE GEARS FROM CORPORATE MANAGERS TO ENTREPRENEURIAL LEADERS MOTIVATE EMPLOYEES - EIA. 20% of pre-tax profits to all employees. 25% equal, 25% SB, 25% LOS, 25% Group Performance, readjusted for missed time. - JOB SECURITY. LAYOFFS ONLY IF SURVIVAL WAS AT STAKE Overall goal. . . few good employees

• OPERATING PHILOSOPHY ENTREPRENEURIAL SAFETY & QUALITY & ENVIRONMENTAL SERVICE OBM CCNCO-EQUAL PRIORITIESO-CO-0 PRODUCTIVITY ENTREPRENEURSHIP PROFIT SHARING = EIA THE PURSUIT OF OPPORTUNITY BEYOND RESOURCES CURRENTLY AVAILABLE PRODUCTIVITY = (ABILITY) X (MOTIVATION) ± ENVIRONMENT = [APTITUDE X TRAINING] X [NEED X INCENTIVE] ± ENVIRONMENT

• WE EXPLAINED BUSINESS AS A FUN GAME - INDIVIDUAL POSITIONS AND RESPONSIBILITIES - GUIDELINES, RULES, FLEXIBILITY, PINCH-HIT - TEAMWORK CRITICAL - TERMINOLOGY MEETING. . HUDDLES SMALL SUCCESSES. . HITS MAJOR SUCCESSES. . HOME RUNS/GRAND SLAMS FAILURES. . STRIKE OUTS EIA. . EXTRA REWARD/SHOW ME THE MONEY WINNING IS CONTINUOUS IMPROVEMENT AND BEATING THE COMPETITION. “DO LUNCH, OR BE LUNCH” - PROFITS WOULD FOLLOW -

IT WAS MAGIC • RESULTS WERE UNBELIEVABLE AND EVEN SURPRISED US • MARKET SHARE INCREASED FROM 19% TO 40% TODAY (NJ PLANT) • PROFITS INCREASED DRAMATICALLY AND EMPLOYEES HAVE RECEIVED EIA’S IN EXCESS OF $10, 000/YR. /EMP. • IN 2000 WE HAD SUFFICIENT RETAINED EARNINGS TO BUY-OUT A SMALLER COMPETITOR IN TN • ACu. Powder MS IS OVER 50%, MAKING US THE DOMINANT #1 IN NORTH AMERICA • WE ARE CURRENTLY EXPORTING TO EUROPE, KOREA, TAIWAN, INDIA AND, YES, CHINA

OPEN BOOK MANAGEMENT • • • CAME ACROSS A BOOK CALLED “OPEN BOOK MANAGEMENT” BY JOHN CASE. COVER STATEMENT “COMPANIES THAT PRACTICE OBM SEEM TO HAVE CAPTURED SOME SORT OF LIGHTNING IN A BOTTLE” SO WE READ THE BOOK, AND GUESS WHAT? WITHOUT KNOWING IT, WE WERE PRACTICING OBM HOWEVER, ONE CRITICAL ITEM WAS MISSING AT ACu. Powder. WE HAD NOT PROVIDED FORMAL BUSINESS LITERACY EDUCATION TO OUR EMPLOYEES. A LOCAL COLLEGE PROVIDED A BUSINESS 101 COURSE TO ALL EMPLOYEES – FINANCIAL TERMS, INCOME STATEMENT, ETC. MOTIVATION & RESULTS IMPROVED FURTHER. IT HELPED EMPLOYEES SEE A RELATIONSHIP BETWEEN WHAT THEY DID, THE HOME RUNS, THE STRIKE OUTS, AND THE BOTTOM LINE.

OBM SUMMARY WHAT IS IT? • WAY OF RUNNING A COMPANY THAT GETS EVERY EMPLOYEE FOCUSED ON HELPING THE BUSINESS MAKE MONEY. • EVERY EMPLOYEE MUST DEVELOP BUSINESS LITERACY AND UNDERSTAND COMPANY’S CRITICAL NUMBERS. • EMPLOYEES ACCEPT RESPONSIBILITY AND ARE EMPOWERED TO MOVE THESE NUMBERS IN THE RIGHT DIRECTION. • EMPLOYEES SHOULD SEE THEMSELVES AS PARTNERS IN THE BUSINESS WITH A DIRECT STAKE IN THE COMPANY’S FORTUNES.

OBM STRATEGY HOW TO IMPLEMENT IT? • • INFORMATION & COMMUNICATION - VISION, STRATEGY, TACTICS - OBJECTIVES, MEASURE, CHART - RESULTS & FINANCIALS BUSINESS LITERACY - BUSINESS BASICS - FINANCIAL CONSTRAINTS - BETTER DECISIONS, LESS WASTE EMPOWERMENT - SAY IN ONE’S OWN WORK - HUDDLES, TEAMS, EXPERIMENT - CONTINUOUS IMPROVEMENTS STAKE IN SUCCESS - CELEBRATE SUCCESSES - PROFIT SHARE AND/OR EQUITY - ENTHUSIASM AND PEER MOTIVATION

OBM SUMMARY WHY DOES IT WORK? • COMMON GOALS OUTWEIGH PAROCHIAL ONES • FOCUSES ATTENTION, LIKE A LASER, ON OBJECTIVES • FACILITATES INNOVATION AND CONTINUOUS IMPROVEMENT • HELPS MANAGERS LEAD RATHER THAN MANAGE • FINANCIAL & PEER MOTIVATION • SOURCES OF MISTRUST AND RESENTMENT VANISH • “NOTHING BREEDS SUCCESS MORE THAN SUCCESS ITSELF”

CONCLUSION • YESTERDAY HAS BEEN VERY SUCCESSFUL. HOWEVER PAST PERFORMANCE IS NO GUARANTEE OF FUTURE SUCCESS. HUBRIS IS DANGEROUS AND CAN BE LETHAL. • TODAY. WE HAVE TO ACCEPT TODAY’S CHALLENGES AND EARN OUR WINGS EVERY DAY. • TOMORROW. WE HAVE TO PURSUE OPPORTUNITIES BEYOND THE RESOURCES CURRENTLY AVAILABLE.