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ACuPowder International, LLC LBO CASE HISTORY SUCCESS DRIVERS WZCC 2006 AGM January 7, 2007

ACuPowder 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

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ACuPowder International, LLC LBO CASE HISTORY SUCCESS DRIVERS WZCC 2006 AGM January 7, 2007

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  1. ACuPowder International, LLC LBO CASE HISTORY SUCCESS DRIVERS WZCC 2006 AGM January 7, 2007

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

  3. 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

  4. 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

  5. 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 • ACuPowder’s CUSTOMERS FABRICATE POROUS SELF-LUBRICATING BEARINGS, FILTERS, FRICTION COMPONENTS, DIAMOND TOOLS, BRAZING PASTES, HEAT SINKS, ETC.

  6. 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 • ACuPowder’s CUSTOMERS FABRICATE POROUS SELF-LUBRICATING 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

  7. BIRTH OF ACuPowder • 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.

  8. 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 $12,000,000 AND I SAID “YES” • KEY CHALLENGES - Where was the financing coming from? - How would we improve the company’s performance?

  9. 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.

  10. 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 HIGHLY LEVERAGED BUY-OUT

  11. THE PRODUCTIVITY STRUCTURE • SAME COMPANY WITH A NEW NAME – ACuPowder 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 Perform- ance, readjusted for missed time. - JOB SECURITY. LAYOFFS ONLY IF SURVIVAL WAS AT STAKE Overall goal . . . few good employees

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

  13. 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

  14. 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 • ACuPowder MS IS OVER 50%, MAKING US THE DOMINANT #1 IN NORTH AMERICA • WE ARE CURRENTLY EXPORTING TO EUROPE, KOREA, TAIWAN, INDIA AND, YES, CHINA

  15. 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 ACuPowder. 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.

  16. 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.

  17. 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

  18. 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”

  19. 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.

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