IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
IN RE: ) CHAPTER 11
)
INTERMET CORPORATION, ET AL., ) CASE NO. 04-67597
) (JOINTLY ADMINISTERED)
DEBTORS. )
) HONORABLE MARCI B. MCIVOR
- --------------------------------------------------------------------------------
DISCLOSURE STATEMENT OF INTERMET CORPORATION
AND CERTAIN OF ITS DOMESTIC SUBSIDIARIES DATED JUNE 27, 2005
- --------------------------------------------------------------------------------
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS 4:00 P.M., NEW YORK CITY
TIME, ON _____ (THE "VOTING DEADLINE"), UNLESS EXTENDED BY INTERMET CORPORATION
("INTERMET") OR THE APPLICABLE DEBTOR. IN ORDER TO BE COUNTED, BALLOTS MUST BE
RECEIVED BY SUCH TIME.
- --------------------------------------------------------------------------------
FOLEY & LARDNER LLP
Judy A. O'Neill (P32142)
Daljit S. Doogal (P57181)
Frank W. DiCastri
500 Woodward Avenue
Detroit, Michigan 48226
(313) 234-7100
Counsel to the Debtors and
Debtors in Possession
DISCLAIMER
NO PERSON (AS DEFINED IN THE PLAN) IS AUTHORIZED IN CONNECTION WITH THE PLAN, OR
THE SOLICITATION OF BALLOTS WITH RESPECT TO THE PLAN, TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE
STATEMENT, ITS EXHIBITS AND ANY OTHER BANKRUPTCY COURT-APPROVED SOLICITATION
MATERIALS. IF ANY SUCH REPRESENTATIONS OR INFORMATION ARE GIVEN OR MADE, THEY
SHOULD NOT BE RELIED UPON. THE DELIVERY OF THIS DISCLOSURE STATEMENT WILL NOT
UNDER ANY CIRCUMSTANCES IMPLY THAT ALL THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THIS DISCLOSURE STATEMENT DESCRIBES VARIOUS TRANSACTIONS CONTEMPLATED UNDER THE
PLAN BUT IS NOT A SUBSTITUTE FOR THE PLAN. THE TERMS OF THE PLAN WILL GOVERN IN
CASE OF ANY INCONSISTENCY BETWEEN THE PLAN AND THIS DISCLOSURE STATEMENT. A COPY
OF THE PLAN ACCOMPANIES THIS DISCLOSURE STATEMENT. THE DEFINITIONS IN THE PLAN
ARE INCORPORATED BY REFERENCE IN THIS DISCLOSURE STATEMENT. CAPITALIZED TERMS
USED IN THIS DISCLOSURE STATEMENT, WITHOUT DEFINITION, HAVE THE RESPECTIVE
MEANINGS ASCRIBED TO SUCH TERMS IN THE PLAN.
THE DEBTORS RESERVE THE RIGHT TO FILE AN AMENDED PLAN AND AN AMENDED DISCLOSURE
STATEMENT AT ANY TIME SUBJECT TO THE LIMITATIONS IN THE PLAN AND THE BANKRUPTCY
CODE. YOU ARE URGED TO STUDY THE PLAN IN FULL AND TO CONSULT WITH YOUR LEGAL
COUNSEL AND TAX ADVISORS ABOUT THE PLAN AND ITS IMPACT UPON YOUR LEGAL RIGHTS,
INCLUDING POSSIBLE TAX CONSEQUENCES. PLEASE READ THIS DISCLOSURE STATEMENT AND
ITS EXHIBITS CAREFULLY AND CONSIDER FULLY THE "CERTAIN FACTORS TO BE CONSIDERED"
SECTION HEREOF BEFORE VOTING FOR OR AGAINST THE PLAN. SEE SECTION XI - "CERTAIN
FACTORS TO BE CONSIDERED."
THE PLAN AND THIS DISCLOSURE STATEMENT ARE NOT REQUIRED TO BE PREPARED IN
ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER APPLICABLE
NON-BANKRUPTCY LAW. THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE
BANKRUPTCY COURT AS CONTAINING "ADEQUATE INFORMATION"; HOWEVER, SUCH APPROVAL
DOES NOT CONSTITUTE ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR
DISCLOSURE STATEMENT AND NONE OF THE SECURITIES AND EXCHANGE COMMISSION ("SEC"),
ANY STATE SECURITIES COMMISSION OR ANY SIMILAR PUBLIC, GOVERNMENTAL OR
REGULATORY AUTHORITIES HAS APPROVED THIS DISCLOSURE STATEMENT, THE PLAN, THE NEW
COMMON STOCK (AS DEFINED IN THE
PLAN) OR THE RIGHTS (AS DEFINED IN THE PLAN) OFFERED UNDER THE PLAN, OR HAS
PASSED ON THE ACCURACY OR ADEQUACY OF THE STATEMENTS IN THIS DISCLOSURE
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PERSONS
TRADING IN OR OTHERWISE PURCHASING, SELLING OR TRANSFERRING SECURITIES OF THE
DEBTORS SHOULD EVALUATE THE PLAN IN LIGHT OF THE PURPOSES FOR WHICH IT WAS
PREPARED.
NO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES OR "BLUE SKY" LAWS
HAS BEEN FILED WITH THE SEC OR ANY OTHER AGENCY BY THE DEBTORS WITH RESPECT TO
THE RIGHTS OR THE NEW COMMON STOCK THAT WILL BE ISSUED ON THE EFFECTIVE DATE OF
THE PLAN AND THAT MAY BE DEEMED TO BE OFFERED BY VIRTUE OF THIS SOLICITATION.
THE DEBTORS ARE RELYING ON THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION
1145 OF THE BANKRUPTCY CODE TO EXEMPT FROM REGISTRATION UNDER THE SECURITIES
LAWS ANY OFFER OF THE NEW COMMON STOCK (EXCEPT ANY OFFER TO THE INITIAL
COMMITTED PURCHASERS (AS DEFINED IN THE PLAN)) THAT MAY BE DEEMED TO BE MADE
PURSUANT TO THE PLAN.
EXCEPT WITH RESPECT TO THE PROJECTIONS SHOWN IN EXHIBIT H TO THIS DISCLOSURE
STATEMENT (THE "PROJECTIONS"), AND EXCEPT AS OTHERWISE SPECIFICALLY AND
EXPRESSLY STATED HEREIN, THIS DISCLOSURE STATEMENT DOES NOT REFLECT ANY EVENTS
THAT MAY OCCUR SUBSEQUENT TO THE DATE HEREOF. SUCH EVENTS MAY HAVE A MATERIAL
IMPACT ON THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT. THE DEBTORS DO
NOT INTEND TO UPDATE THE PROJECTIONS. THE PROJECTIONS ARE QUALIFIED BY, AND ARE
SUBJECT TO, THE ASSUMPTIONS SET FORTH HEREIN AND THE OTHER INFORMATION CONTAINED
IN THIS DISCLOSURE STATEMENT. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW
TOWARD COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC, THE AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS OR ANY OTHER REGULATORY OR PROFESSIONAL AGENCY
OR BODY, GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") OR CONSISTENCY WITH
THE AUDITED FINANCIAL STATEMENTS INCLUDED IN THIS DISCLOSURE STATEMENT. IN
ADDITION, NONE OF THE AUDITORS OR OTHER ADVISORS FOR THE DEBTORS HAS COMPILED OR
EXAMINED THE PROJECTIONS AND, ACCORDINGLY, NONE OF SUCH PARTIES EXPRESSES ANY
OPINION OR PROVIDES ANY OTHER FORM OF ASSURANCE WITH RESPECT TO, OR ASSUMES ANY
RESPONSIBILITY FOR, AND EACH SUCH PARTY EXPRESSLY DISCLAIMS ANY RESPONSIBILITY
FOR, THE PROJECTIONS. THE PROJECTIONS SHOULD BE READ TOGETHER WITH THE
INFORMATION CONTAINED IN THE PLAN AND THIS DISCLOSURE STATEMENT INCLUDING UNDER
SECTION IV - "OPERATIONS OF THE
DEBTORS," SECTION VI - "CAUSES OF ACTION," AND SECTION XI - "CERTAIN FACTORS TO
BE CONSIDERED."
THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO
DETERMINE WHETHER TO VOTE IN FAVOR OF OR AGAINST THE PLAN. NOTHING CONTAINED
HEREIN WILL CONSTITUTE AN ADMISSION OF ANY FACT OR OF LIABILITY BY ANY PARTY
WITH REGARD TO ANY CLAIM OR LITIGATION. NO STATEMENT OF FACT WILL BE ADMISSIBLE
IN ANY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR IN ANY PROCEEDING
WITH RESPECT TO ANY LEGAL EFFECT OF THE REORGANIZATION OF THE DEBTORS OR THE
TRANSACTIONS CONTEMPLATED BY THE PLAN AND THIS DISCLOSURE STATEMENT.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, BY ITS
NATURE, IS IN THE MANNER OF PROJECTIONS, WHICH MAY PROVE TO BE DIFFERENT FROM
ACTUAL RESULTS AND MAY BE SUBJECT TO CHANGE FROM TIME TO TIME.
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN SUBMITTED BY
MANAGEMENT OF THE DEBTORS, EXCEPT WHERE OTHER SOURCES ARE IDENTIFIED. THE
DEBTORS AUTHORIZE NO REPRESENTATIONS CONCERNING THE DEBTORS OR THE PLAN OTHER
THAN THOSE IN THIS DISCLOSURE STATEMENT AND ACCOMPANYING DOCUMENTS. YOU SHOULD
NOT RELY ON ANY REPRESENTATIONS OR INDUCEMENTS MADE BY ANY PARTY TO SECURE YOUR
VOTE OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE STATEMENT. NO ONE IS
AUTHORIZED TO MAKE ANY REPRESENTATIONS ON BEHALF OF THE DEBTORS. THE DEBTORS
HAVE BEEN CAREFUL TO BE ACCURATE IN THIS DISCLOSURE STATEMENT IN ALL MATERIAL
RESPECTS, AND THEY BELIEVE THAT THE CONTENTS OF THIS DISCLOSURE STATEMENT ARE
COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS. HOWEVER, THE DEBTORS CANNOT AND
DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT
INACCURACY. IN PARTICULAR, EVENTS AND FORCES BEYOND THE CONTROL OF THE DEBTORS
MAY ALTER THE ASSUMPTIONS UPON WHICH THE FEASIBILITY OF THE PLAN ARE SUBJECT.
THIS DISCLOSURE STATEMENT MAY CONTAIN STATEMENTS THAT ARE, OR MAY BE DEEMED TO
BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD LOOKING STATEMENTS INCLUDE THOSE
REGARDING CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN. ALTHOUGH
THE DEBTORS BELIEVE THAT SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, NO
ASSURANCE CAN BE GIVEN THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND
OTHER FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE DISCUSSED IN SECTION XI,
"CERTAIN FACTORS TO BE CONSIDERED," THAT MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE DEBTORS TO BE DIFFERENT FROM ANY FUTURE
RESULTS, PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE STATEMENTS.
YOU SHOULD ALSO REVIEW PART II, ITEM 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONTAINED IN INTERMET'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005, FOR ADDITIONAL
INFORMATION REGARDING FACTORS THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS OF THE DEBTORS TO BE DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY ANY FORWARD-LOOKING
STATEMENTS.
TABLE OF CONTENTS
<Table>
I. INTRODUCTION..........................................................................................1
A. GENERAL...........................................................................................1
B. SUMMARY OF DEBTORS' CORPORATE STRUCTURE...........................................................2
C. JOINTLY PROPOSED PLANS OF REORGANIZATION..........................................................2
D. INTERCOMPANY CLAIMS..............................................................................16
E. PRESERVATION OF CERTAIN CAUSES OF ACTION.........................................................16
II. PLAN VOTING PROCEDURES; ACCEPTANCE; CONFIRMATION.....................................................16
A. VOTING PROCEDURES................................................................................16
B. ELECTIONS ON THE BALLOT TO RECEIVE NEW COMMON STOCK..............................................17
C. SPECIFIC INSTRUCTIONS FOR HOLDERS OF IMPAIRED CLAIMS OTHER THAN NOTEHOLDER CLAIMS................18
D. SPECIFIC INSTRUCTIONS FOR HOLDERS OF NOTEHOLDER CLAIMS...........................................18
E. INQUIRIES........................................................................................20
F. ACCEPTANCE.......................................................................................21
G. CONDITIONS TO CONFIRMATION OF THE PLAN AND EFFECTIVENESS OF THE PLAN.............................21
H. MODIFICATION OF THE PLAN AND AMENDMENTS..........................................................23
I. EFFECT OF CONFIRMATION...........................................................................23
J. REVOCATION OF THE PLAN...........................................................................23
III. BACKGROUND OF THE RESTRUCTURING AND EVENTS LEADING TO COMMENCEMENT OF BANKRUPTCY PROCEEDINGS.........23
IV. OPERATIONS OF THE DEBTORS............................................................................25
A. CORPORATE STRUCTURE..............................................................................25
B. INTERMET'S BUSINESS OPERATIONS...................................................................26
C. PROPERTIES.......................................................................................34
D. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEBTORS..................................................35
E. THE PRINCIPALS OF THE DEBTORS....................................................................38
F. ENVIRONMENTAL RELATED LIABILITIES................................................................43
</Table>
i
<Table>
V. THE DEBTORS' DEBT OBLIGATIONS........................................................................46
A. THE PRE-PETITION CREDIT FACILITY.................................................................46
B. LETTERS OF CREDIT AGREEMENT......................................................................46
C. SENIOR NOTES.....................................................................................47
D. INDUSTRIAL REVENUE BONDS.........................................................................47
E. TRADE DEBT.......................................................................................48
VI. CAUSES OF ACTION.....................................................................................49
A. CHAPTER 5 CLAIMS.................................................................................49
B. OTHER CLAIMS.....................................................................................50
C. PENDING LITIGATION...............................................................................50
VII. SIGNIFICANT POST-PETITION ACTIONS....................................................................50
A. FIRST DAY MOTIONS................................................................................50
B. RETENTION OF PROFESSIONALS.......................................................................51
C. CASE ADMINISTRATION..............................................................................51
D. OPERATIONAL DEVELOPMENTS.........................................................................52
E. DEBTOR-IN-POSSESSION FINANCING...................................................................59
F. FORMATION OF THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS...................................60
G. APPROVAL OF THE KEY EMPLOYEE RETENTION PLAN......................................................61
H. GOODWILL AND ASSET IMPAIRMENT....................................................................62
VIII.SUMMARY OF THE PLAN..................................................................................64
A. TREATMENT OF UNCLASSIFIED CLAIMS.................................................................65
B. TREATMENT OF CLASSES THAT ARE UNIMPAIRED UNDER THE PLAN..........................................69
C. TREATMENT OF CLASSES THAT ARE IMPAIRED UNDER THE PLAN............................................71
D. INTERCOMPANY CLAIMS..............................................................................77
IX. EFFECT OF CONFIRMATION AND IMPLEMENTATION OF THE PLAN................................................77
A. CONFIRMATION.....................................................................................77
B. EFFECTS OF PLAN CONFIRMATION.....................................................................78
C. EXIT FINANCING...................................................................................85
</Table>
ii
<Table>
D. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.........................................................86
E. DISTRIBUTIONS....................................................................................87
F. RETIREE BENEFITS.................................................................................90
G. CORPORATE GOVERNANCE.............................................................................91
H. REORGANIZED DEBTORS..............................................................................91
I. CORPORATE ACTION.................................................................................91
J. NON-DEBTOR AFFILIATES............................................................................93
K. STOCKHOLDERS' AGREEMENT..........................................................................93
L. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS...............................................93
M. REGISTRATION RIGHTS AGREEMENT....................................................................95
N. CANCELLATION OF EXISTING COMMON STOCK AND EXISTING PREFERRED STOCK...............................96
O. MANAGEMENT INCENTIVE PLAN........................................................................97
P. KEY EMPLOYEE RIGHTS OFFERING.....................................................................97
Q. CONTINUATION OF BUSINESS.........................................................................97
R. EMPLOYMENT AGREEMENTS............................................................................98
S. DISBANDMENT OF OFFICIAL COMMITTEES...............................................................98
T. DISBURSING AGENT.................................................................................98
U. POST-CONFIRMATION EFFECT OF INDENTURE............................................................98
V. PRESERVATION OF CERTAIN CAUSES OF ACTION.........................................................99
X. THE RESTRUCTURING COMMITMENT LETTER AND THE RIGHTS OFFERING..........................................99
A. INITIAL COMMITTED PURCHASERS.....................................................................99
B. TERMS AND CONDITIONS OF THE RESTRUCTURING COMMITMENT LETTER.....................................101
C. ABILITY TO PARTICIPATE IN THE RIGHTS OFFERING...................................................106
D. ISSUANCE OF RIGHTS..............................................................................107
E. SUBSCRIPTION PERIOD.............................................................................107
F. SUBSCRIPTION PRICE..............................................................................107
G. SUBSCRIPTION AGENT..............................................................................107
H. EXERCISE OF RIGHTS..............................................................................108
</Table>
iii
<Table>
I. TRANSFER RESTRICTION; REVOCATION................................................................108
J. DISTRIBUTION OF RIGHTS OFFERING SHARES..........................................................108
K. SUBSEQUENT ADJUSTMENTS TO THE RIGHTS PARTICIPATION CLAIM AMOUNT.................................109
L. NO INTEREST.....................................................................................109
M. VALIDITY OF EXERCISE OF RIGHTS..................................................................109
N. USE OF PROCEEDS.................................................................................109
O. JURISDICTION....................................................................................110
XI. VALUATION ANALYSIS..................................................................................110
A. VALUATION OF THE REORGANIZED DEBTORS............................................................110
XII. CERTAIN FACTORS TO BE CONSIDERED....................................................................118
A. CERTAIN BANKRUPTCY CONSIDERATIONS...............................................................118
B. RISKS RELATING TO THE NEW COMMON STOCK..........................................................119
C. RISKS ASSOCIATED WITH THE BUSINESSES............................................................121
XIII.UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IF THE PLAN IS CONFIRMED..............................121
A. U.S. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS.............................................122
B. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS...............................127
C. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF NEW COMMON STOCK.............................129
XIV. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS TEST....................................133
A. FEASIBILITY OF THE PLAN.........................................................................133
B. BEST INTERESTS TEST.............................................................................134
C. CHAPTER 7 LIQUIDATION ANALYSIS..................................................................136
XV. SOLICITATION OF THE PLAN............................................................................138
A. PARTIES IN INTEREST ENTITLED TO VOTE............................................................138
B. CLASSES IMPAIRED UNDER THE PLAN.................................................................139
C. WAIVERS OF DEFECTS, IRREGULARITIES, ETC.........................................................139
D. WITHDRAWAL OF BALLOTS; REVOCATION...............................................................139
E. FURTHER INFORMATION; ADDITIONAL COPIES..........................................................140
XVI. CONCLUSION..........................................................................................140
</Table>
v
List of Exhibits
Exhibit A - Debtors' Jointly Proposed Plans of Reorganization
Exhibit B - Corporate Structure Chart
Exhibit C - List Of Debtors' Properties
Exhibit D - List Of Preserved Causes Of Action
Exhibit E - List Of Pending Litigation
Exhibit F - List Of First Day Motions
Exhibit G - Liquidation Analysis
Exhibit H - Projected Financial Information For The Reorganized Debtors
Exhibit I - Selected Historical Financial Information
Exhibit J - Distribution Schedule
Exhibit K - Stockholders' Agreement
vi
I. INTRODUCTION
A. GENERAL
The purpose of this Disclosure Statement (the "Disclosure Statement") is to
provide Holders of all Claims and Interests in the Debtors with adequate
information, within the meaning of Section 1125(a) and 1126 of the Bankruptcy
Code, of a kind, and in sufficient detail, to make an informed judgment about
the jointly proposed plans of reorganization submitted to the Bankruptcy Court
on June 24, 2005 (collectively, the "Plan") by Intermet Corporation, a Georgia
corporation ("Intermet"), and certain of its domestic subsidiaries, Alexander
City Casting Company, Inc., Cast-Matic Corporation, Columbus Foundry, L.P.,
Diversified Diemakers, Inc., Ganton Technologies, Inc., Intermet Holding
Company, Intermet Illinois, Inc., Intermet International, Inc., Intermet U.S.
Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company, Northern Castings
Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc., Wagner Castings
Company, and Wagner Havana, Inc. (collectively, the "Domestic Subsidiaries")
(Intermet and the Domestic Subsidiaries are each individually referred to as a
"Debtor" and collectively, as the "Debtors"). A copy of the Plan is attached
hereto as Exhibit A.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A SEPARATE
PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED,
SUBSTANTIVELY OR OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE DEBTORS WILL BE
SATISFIED SOLELY FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY
SET FORTH IN THE PLAN, NOTHING IN THE PLAN OR THIS DISCLOSURE STATEMENT WILL
CONSTITUTE OR BE DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF THE DEBTORS IS
SUBJECT TO OR LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE CLAIMS OF
CREDITORS THAT HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS SEPARATE
CLAIMS WITH RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT
LIMITED TO, DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS
PROVIDED IN THE PLAN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED IN THE PLAN, THE
CLASSIFICATIONS OF CLAIMS AND INTERESTS SET FORTH IN THE PLAN WILL BE DEEMED TO
APPLY SEPARATELY WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
The Debtors are debtors and debtors-in-possession in jointly administered Cases
under Chapter 11 of the Bankruptcy Code. The Debtors are reorganizing and
continuing to conduct their businesses as debtors-in-possession pursuant to
Sections 1107 and 1108 of the Bankruptcy Code and are soliciting votes to accept
or reject the Plan. The Debtors [and the Creditors' Committee] believe that
acceptance of the Plan is in the best interests of any Person who holds a Claim
against the Debtors.
None of the Non-Debtor Affiliates incorporated outside of the United States have
commenced, or are subject to, a case under Chapter 11 of the Bankruptcy Code or
similar insolvency proceeding in any other jurisdiction. These foreign
Non-Debtor Affiliates,
1
which are identified in the corporate structure chart attached hereto as Exhibit
B, continue to operate their businesses in the ordinary course of business. In
addition, there are two domestic Non-Debtor Affiliates: Western Capital
Corporation and Transnational Indemnity Company. These subsidiaries have ceased
operations and will be dissolved pursuant to state law prior to, or soon after,
the Effective Date.
Debtors Alexander City Casting Company, Inc., Ironton Iron, Inc., Wagner Havana,
Inc. and Intermet Illinois, Inc. are non-operating entities which currently own
Assets. It is each such Debtor's intention to sell such Assets after the
Effective Date. The proceeds of such sales will be paid to the Exit Lenders.
HOLDERS OF CLAIMS AGAINST ANY OF THE DEBTORS SHOULD READ THIS DISCLOSURE
STATEMENT AND THE PLAN, TOGETHER WITH THE EXHIBITS, IN THEIR ENTIRETY BEFORE
VOTING ON THE PLAN.
B. SUMMARY OF DEBTORS' CORPORATE STRUCTURE
Attached as Exhibit B hereto is a chart illustrating the current corporate
structure of the Debtors and the Non-Debtor Affiliates.
C. JOINTLY PROPOSED PLANS OF REORGANIZATION
THE PLAN IS THE PRODUCT OF INTENSIVE NEGOTIATIONS AMONG THE DEBTORS, THE
CREDITORS' COMMITTEE, THE PRE-PETITION AGENT, AND THE INITIAL COMMITTED
PURCHASERS. THE DEBTORS [AND THE CREDITORS' COMMITTEE] BELIEVE THAT THE PLAN
PROVIDES THE BEST RECOVERIES POSSIBLE FOR HOLDERS OF CLAIMS AGAINST THE DEBTORS
AND THEY STRONGLY RECOMMEND THAT YOU VOTE TO ACCEPT THE PLAN.
The following is a brief summary of certain material provisions of the Plan. For
a more detailed description of the terms of the Plan, see SECTION VIII "SUMMARY
OF PLAN." The Plan was the result of a term sheet negotiated among the Debtors,
the Creditors' Committee, the Pre-Petition Agent, and the Initial Committed
Purchasers which is attached to the Restructuring Commitment Letter attached to
the Plan as Exhibit B. The following summary is qualified in its entirety by the
provisions of the Plan.
The Plan provides for the treatment of both classified and unclassified Claims
against and Interests in each of the Debtors. SEE SECTION VIII - "SUMMARY OF THE
PLAN" and Exhibit A to this Disclosure Statement for more details.
1. Unclassified Claims Against Each Debtor
In accordance with Section 1123(a)(1) of the Bankruptcy Code, the Plan provides
that Administrative Claims, Tax Claims, DIP Facility Claims, U.S. Trustee Fees,
Workers' Compensation Claims (to the extent such Workers' Compensation Claims
are not General Unsecured Claims as described in Article 3.06 of the Plan),
Pension Claims, and
2
Consignment Claims are not classified. The respective treatment of such
unclassified Claims is set forth below.
A. Administrative Claims Against Any Debtor
Except for Holders of DIP Facility Claims, each Holder of an Allowed
Administrative Claim against any Debtor will receive, in full satisfaction of
such Allowed Administrative Claim, Cash equal to the amount of such Claim on the
later of (i) the Effective Date and (ii) the date that is ten (10) days after
the Allowance Date, unless such Holder agrees to different treatment of such
Allowed Claim; provided, however, that Allowed Administrative Claims
representing obligations incurred in the ordinary course of business by a Debtor
will be paid or performed in accordance with the terms and conditions of the
particular transactions and any agreements relating thereto. Nothing in the Plan
will be deemed to accelerate a Debtor's obligation to make payment on account of
any Administrative Claim that is not due and owing as of the Confirmation Date,
is not Allowed, or is subject to ongoing objections in the Bankruptcy Court or
another court of competent jurisdiction.
B. Tax Claims Against Any Debtor
Each Holder of an Allowed Tax Claim against any Debtor will receive, in full
satisfaction of such Allowed Tax Claim, at the election of the relevant Debtor,
in its sole discretion, either (i) Cash equal to the amount of such Claim on the
later of (1) the Effective Date and (2) the date that is ten (10) days after the
Allowance Date, unless such Holder will have agreed to different treatment of
such Allowed Tax Claim, or (ii) in accordance with Section 1129(a)(9)(C) of the
Bankruptcy Code, Cash payments in equal monthly installments commencing on the
first Business Day of the month succeeding the month in which the Effective Date
occurs and continuing on the first Business Day of each month thereafter, until
the month which is six (6) years after the date of assessment of such Claim,
totaling the principal amount of such Claim plus interest on any outstanding
balance from the Effective Date calculated at the interest rate equal to the
applicable federal rate as determined in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "IRC"), and the regulations
promulgated thereunder, or (iii) such other treatment as to which the Holder of
such Allowed Tax Claim will have agreed in writing; provided that any Claim or
demand for payment of a penalty (other than a penalty of the type specified in
Section 507(a)(8)(G) of the Bankruptcy Code) will be disallowed pursuant to the
Plan and the Holder of an Allowed Tax Claim will not assess or attempt to
collect such penalty from the Debtors, their Estates, the Reorganized Debtors,
or their property.
C. DIP Facility Claims Against Any Debtor
On the Effective Date, in full satisfaction of the DIP Facility Claims against
each Debtor, the DIP Agents (for the benefit of the DIP Lenders, as applicable)
will receive Cash in an amount equal to the then outstanding amount of the DIP
Facility Claims (including, without limitation, all accrued and unpaid interest,
fees and expenses and any other amounts that may then be due and payable under
the DIP Facility) and any undrawn
3
letters of credit issued pursuant to the DIP Facility will be returned and
marked cancelled and will be replaced by letters of credit issued under the Exit
Financing Facility. On the Effective Date, the DIP Agents' and the DIP Lenders'
commitments and obligations under the DIP Facility will be irrevocably
terminated and the Debtors will be deemed to have unconditionally and
irrevocably released the DIP Lenders and the DIP Agents from all obligations,
claims and liabilities arising thereunder or relating thereto.
D. U.S. Trustee Fees Owed By Any Debtor
The U.S. Trustee's quarterly fees owed by any Debtor will be paid in full
without prior approval pursuant to 28 U.S.C. Section 1930 on or before the
Effective Date. All fees payable pursuant to 28 U.S.C. Section 1930 will be paid
by each of the Reorganized Debtors in accordance therewith until the closing of
its respective Case pursuant to Section 350(a) of the Bankruptcy Code.
E. Workers' Compensation Claims Against Any
Debtor
Upon the Effective Date of the Plan, with the exception of the Workers'
Compensation Program for the State of Ohio, which relates to Ironton Iron, Inc.
and Sudbury, Inc., the Reorganized Debtors will continue the Workers'
Compensation Programs for all states in which they operate. Nothing in the Plan
will be deemed to discharge, release, or relieve the Debtors or Reorganized
Debtors from any current or future liability with respect to any of its/their
obligations under the Workers' Compensation Programs, provided that in the case
of the Workers' Compensation Program for the State of Ohio, which relates to
Ironton Iron, Inc. and Sudbury, Inc., Claims arising thereunder will be General
Unsecured Claims. The Reorganized Debtors will be responsible for all valid
Claims for benefits and liabilities under the applicable Workers' Compensation
Programs, provided that, in the case of the Workers' Compensation Program for
the State of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., such
Claims arising thereunder will be General Unsecured Claims under the Plan,
regardless of when the applicable injuries occurred. All obligations under the
applicable Workers' Compensation Programs will be paid in accordance with the
terms and conditions of applicable Workers' Compensation Programs and all other
applicable laws other than the Workers' Compensation Program for the State of
Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., which Claims will
be General Unsecured Claims under the Plan, regardless of when the applicable
injuries occurred. For all states in which the Debtors currently operate or have
operated, with the exception of the State of Ohio, the Workers Compensation
Programs are either (i) self-insured, or (ii) insured with a third party
insurance carrier, and are in all cases secured by letters of credit.
Accordingly, Claims resulting from the Workers' Compensation Program for the
State of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., will be
Class 4 General Unsecured Claims or Class 5 Unsecured Convenience Claims as
applicable.
F. Pension Claims Against Any Debtor
Upon Confirmation and substantial consummation of the Plan, the Reorganized
Debtors will continue all Pension Plans in accordance with applicable law, and
the Debtors'
4
obligations under applicable law with respect to continued funding of the
Pension Plans will remain unaltered. Nothing in the Plan will be deemed to
discharge, release, or relieve the Debtors, the Reorganized Debtors, or their
control group of or from any current or future liability under applicable law
with respect to the Pension Plans. On the earlier of September 15, 2005 or the
Effective Date, the Debtors will pay into each Pension Plan the amount then due
for the 2004 Pension Plan years. On the Effective Date, the Debtors will pay
into each Pension Plan the remaining amounts then due under applicable minimum
funding standards and the PBGC will be deemed to have withdrawn its Claims with
respect to the Pension Plans. The PBGC will be enjoined from seeking relief
against the Reorganized Debtors under 29 U.S.C. Section 1362(e) as a consequence
of the closure of the Debtors' Racine, Wisconsin or Decatur, Illinois
facilities.
G. Consignment Claims Against Any Debtor
Notwithstanding Section 1141(c) or any other provision of the Bankruptcy Code,
all Liens, if any, of Persons who provided goods to the Debtors on consignment
(i) prior to the Petition Date and who hold valid, enforceable, and perfected
Liens in such goods (a) pursuant to a written agreement with the Debtors and (b)
in accordance with applicable law, or (ii) after the Petition Date pursuant to
any order of the Bankruptcy Court will, in each case, survive the Effective Date
and continue in accordance with the contractual terms of the underlying
agreements between the Debtors and such Persons and will remain enforceable as
of the Effective Date with the same extent, validity and priority as existed as
of the Petition Date or pursuant to such order, as the case may be. All other
Persons who provided goods to the Debtors on consignment will be deemed to hold
General Unsecured Claims under the Plan.
2. Classified Claims Against Each Debtor
Classes 1, 2, and 3 are Unimpaired for all Debtors. Holders of Unimpaired Equity
Interests in the Unimpaired Equity Debtors are Unimpaired. Therefore, pursuant
to Section 1126(f) of the Bankruptcy Code, the Holders of Allowed Claims or
Unimpaired Equity Interests in such Classes are conclusively presumed to have
accepted the Plan. Classes 3a, 3b, 4, 4a, 4b, 4c, 5 and Class 6b Impaired Equity
Interests are Impaired. Holders of Allowed Claims in Classes 3a, 3b, 4, 4a, 4b,
4c and 5 are, to the extent that such Claims are Allowed, not Disputed, or
Temporarily Allowed for voting purposes pursuant to Bankruptcy Rule 3018(a),
allowed to vote as a Class to accept or reject the Plan. Holders of Class 6b
Impaired Equity Interests in the Impaired Equity Debtors are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
The tables below provide summaries of the classification and treatment of
classified Claims and Equity Interests for each Debtor. The treatment of Claims
shown below is more fully explained in the distribution schedule attached as
Exhibit J to this Disclosure Statement.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A SEPARATE
PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED,
SUBSTANTIVELY OR
5
OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE DEBTORS WILL BE SATISFIED SOLELY
FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY SET FORTH IN THE
PLAN, NOTHING IN THE PLAN OR THIS DISCLOSURE STATEMENT WILL CONSTITUTE OR BE
DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF THE DEBTORS IS SUBJECT TO OR
LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE CLAIMS OF CREDITORS THAT
HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS SEPARATE CLAIMS WITH
RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT LIMITED TO,
DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS PROVIDED IN
THE PLAN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED IN THE PLAN, THE
CLASSIFICATIONS OF CLAIMS AND INTERESTS SET FORTH IN THE PLAN WILL BE DEEMED TO
APPLY SEPARATELY WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
Class 1 Unimpaired for each Debtor - Intermet 100%
(Priority Claims) deemed to have accepted the Corporation: ~ $1,337,882
Plan and not entitled to vote
on the Plan; each Holder paid Alexander City Casting 100%
in full in Cash from the Company, Inc.: $0
Assets of each particular
Debtor against whom the Cast-Matic 100%
Holder holds its Claim on Corporation: ~ $123,878
the latest of the (i)
Effective Date, (ii) the date Columbus 100%
that is 10 days after the Foundry, L.P.: ~ $95,175
Allowance Date of such Claim
and (iii) the date when such Diversified 100%
Claim becomes due and payable Diemakers, Inc.: ~ $33,135
according to its terms.
Ganton 100%
Technologies, Inc.: ~ $146,574
Intermet Holding Company: $0 100%
Intermet Illinois, Inc.: $0 100%
Intermet International, Inc.: $0 100%
Intermet U.S. 100%
Holding, Inc.: ~ $10,186
Ironton Iron, Inc.: $0 100%
Lynchburg Foundry 100%
Company: ~ $26,431
Northern Castings 100%
Corporation: ~ $27,871
Sudbury, Inc.: $0 100%
SUDM, Inc.: $0 100%
Tool Products, Inc.: ~ $70,048 100%
Wagner Castings 100%
Company: ~ $14,983
Wagner Havana, Inc.: $0 100%
</Table>
6
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
Class 2 (Pre- Unimpaired for each Debtor - Intermet 100%
Petition deemed to have accepted the Corporation: ~ $171 million
Lender Claims) Plan and not entitled to
vote on Plan; Pre-Petition Alexander City Casting 100%
Agent paid Cash in full Company, Inc.: ~ $171 million
amount of principal and
interest due, plus all Cast-Matic 100%
un-reimbursed fees and Corporation: ~ $171 million
expenses incurred by the
Pre-Petition Agent through Columbus 100%
the Effective Date, plus all Foundry, L.P.: ~ $171 million
interest and fees (if any)
to which the Pre-Petition Diversified 100%
Lenders are entitled under Diemakers, Inc.: ~ $171 million
Section 506(b) of the
Bankruptcy Code, and any Ganton 100%
other amounts owed by the Technologies, Inc.: ~ $171 million
Debtors under the DIP Order.
Intermet 100%
Holding Company: ~ $171 million
Intermet Illinois, Inc.: ~ $171 million 100%
Intermet 100%
International, Inc.: ~ $171 million
Intermet U.S. 100%
Holding, Inc.: ~ $171 million
Ironton Iron, Inc.: ~ $171 million 100%
Lynchburg Foundry 100%
Company: ~ $171 million
Northern Castings 100%
Corporation: ~ $171 million
Sudbury, Inc.: ~ $171 million 100%
SUDM, Inc.: ~ $171 million 100%
Tool Products, Inc.: ~ $171 million 100%
Wagner Castings 100%
Company: ~ $171 million
Wagner Havana, Inc.: ~ $171 million 100%
Class 3 (Secured Unimpaired - legal, equitable Intermet Corporation: ~ $322,248 100%
Claims Against and contractual rights
Any Debtor Except reinstated on the Effective Alexander City Casting 100%
Claims In Date, or otherwise satisfied Company, Inc.: $0
Class 3a As To in accordance with the Plan.
Wagner Castings Cast-Matic Corporation: ~ $6,983 100%
Company)
Columbus 100%
Foundry, L.P.: ~ 201,595
Diversified 100%
Diemakers, Inc.: ~ $50,787
Ganton 100%
Technologies, Inc.: ~ $2,841,476
Intermet Holding Company: $0 100%
Intermet Illinois, Inc.: $0 100%
Intermet International, Inc.: $0 100%
</Table>
7
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
Intermet U.S. 100%
Holding, Inc.: ~ $22,763
Ironton Iron, Inc.: $0 100%
Lynchburg Foundry 100%
Company: ~ $157,687
Northern Castings 100%
Corporation: ~ $798
Sudbury, Inc.: $0 100%
SUDM, Inc.: $0 100%
Tool Products, Inc.: ~ $617,655 100%
Wagner Castings 100%
Company: ~ $330,712
Wagner Havana, Inc.: $0 100%
Class 3a (Secured Impaired. On the Effective Wagner Castings 100%
Claims Held By Date, Dana Corporation will Company: ~ $5,300
Dana Corporation be allowed to setoff such
Against Wagner Claim from amounts owed to
Castings Company) Wagner Castings, Columbus
Foundry, L.P., Lynchburg
Foundry Company, and
Intermet, on the condition
that Dana provides the
amendments to its purchase
orders with the aforementioned
Debtors set forth in an
agreement by and among such
Debtors and Dana dated
April, 2005.
*Class 4 (General Impaired - each Holder paid: Intermet Cash-Out Amount: 13.0%
Unsecured Claims Corporation: ~ $189,197,093
Other Than Those (includes Noteholder Claims) If New Common Stock and
In Classes 4a, (a) the Cash-Out Amount; OR Rights elected: 13.0%
4b, or 4c)
(b) at the option of each If Inducement Cash
such Holder of a General elected: 14.0%, or Pro
Unsecured Claim and only Rata share of $1,297,219
to the extent that such
Holder of General Unsecured Alexander City Casting Cash-Out Amount: 0.5%
Claims so elects on the Ballot: Company, Inc.: ~ $179,931,240
(consists only of Noteholder Claims) If New Common Stock and
(i) a Pro Rata portion Rights elected: 0.5%
of shares of New Common
Stock allocated to the If Inducement Cash
applicable Debtor as elected: N/A
indicated in Exhibit C to
the Plan, and Cast-Matic Cash-Out Amount: 2.9%
Corporation: ~ $183,197,759
(ii) its Pro Rata share (includes Noteholder Claims) If New Common Stock and
of the Rights allocated to Rights elected: 2.9%
the applicable Debtor as
indicated on Exhibit C to If Inducement Cash
the Plan; OR elected: 5.0%, or Pro Rata
share of $163,326
(c) at the option of each
such Holder of a General Columbus Cash-Out Amount: 12.3%
Unsecured Claim and only Foundry, L.P.: ~ $189,397,046
to the extent that such (includes Noteholder Claims) If New Common Stock and
Rights elected: 12.3%
</Table>
8
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
Holder of General Unsecured
Claims so elects on the If Inducement Cash elected:
Ballot, the Inducement Cash 13.0%, or Pro Rata share
Amount. of $1,230,555
For the avoidance of doubt, Diversified Cash-Out Amount: 4.8%
in the event a Holder of a Diemakers, Inc.: ~ $183,291,005
General Unsecured Claim fails (includes Noteholder Claims) If New Common Stock and
to elect the options set Rights elected: 4.8%
forth in subsections (b) or
(c) above, such Holder will If Inducement Cash elected:
receive Cash equal to the 6.0%, or Pro Rata share of
Cash-Out Amount. $201,586
Ganton Technologies, Inc.: ~ $187,016,248 Cash-Out Amount: 0.9%
(includes Noteholder Claims)
If New Common Stock and
Rights elected: 0.9%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$354,250
Intermet Holding Company: $0 N/A
(not a guarantor of Senior Notes and
therefore, no Noteholder Claims)
Intermet Illinois, Inc.: ~ $181,331,240 Cash-Out Amount: 0.5%
(includes Noteholder Claims)
If New Common Stock and
Rights elected: 0.5%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$70,000
Intermet International, Inc.: ~ $14,000 Cash-Out Amount: 100%
(not a guarantor of Senior Notes, and
therefore, no Noteholder Claims) If New Common Stock and
Rights elected: N/A
If Inducement Cash elected:
100%
Intermet U.S. Holding, Inc.: ~ Cash-Out Amount: 1.6%
$185,889,247 (includes Noteholder Claims)
If New Common Stock and
Rights elected: 1.6%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$297,900
Ironton Iron, Inc.: ~ $182,736,103 Cash-Out Amount: 0.5%
(includes Noteholder Claims)
If New Common Stock and
Rights elected: 0.5%
</Table>
9
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
If Inducement Cash elected:
5.0%, or Pro Rata share of
$140,243
Lynchburg Foundry Company: ~ Cash-Out Amount: 0.6%
$189,342,671 (includes Noteholder Claims)
If New Common Stock and
Rights elected: 0.6%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$470,572
Northern Castings Corporation: ~ Cash-Out Amount: 3.2%
$181,482,233 (includes Noteholder Claims)
If New Common Stock and
Rights elected: 3.2%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$77,550
Sudbury, Inc.: ~ $182,804,825 Cash-Out Amount: 0.5%
(includes Noteholder Claims)
If New Common Stock and
Rights elected: 0.5%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$143,679
Tool Products, Inc.: ~ $186,138,827 Cash-Out Amount: 3.7%
(includes Noteholder Claims)
If New Common Stock and
Rights elected: 3.7%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$310,379
Wagner Castings Company: ~ Cash-Out Amount: 0.5%
$184,580,140 (includes Noteholder
Claims). If New Common Stock and
Rights elected: 0.5%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$232,445
Wagner Havana, Inc.: ~ $181,369,667 Cash-Out Amount: 0.5%
(includes Noteholder Claims).
If New Common Stock and
Rights elected: 0.5%
If Inducement Cash elected:
5.0%, or Pro Rata share of
$71,921
</Table>
10
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
Class 4a (General Impaired. If the Liquidating Plan Wagner Castings 0%
Unsecured Claims Condition is satisfied, each Holder Company: ~ $184,580,140
and Unsecured paid: General Unsecured Claims
Convenience (includes Noteholder Claims).
Claims Against
Wagner Castings On or as soon as reasonably
Company but only practicable after the Effective
if the Liquidating Date, in full satisfaction of the
Plan Condition is Allowed General Unsecured Claims
satisfied) in such Class, the Indenture
Trustee, on behalf of each of the
Noteholders, or each Holder of the
Allowed General Unsecured Claims,
respectively, will receive in full
satisfaction of their Claims
against Wagner Castings:
Cash equal to each Holder's Pro
Rata share of all proceeds
remaining after liquidation of
all assets of Wagner Castings
and the satisfaction of all Liens
thereon, including those arising
after the Effective Date, such as
the Liens arising under the Exit
Financing Facility.
Class 4b (General Impaired. On or as soon as SUDM, Inc.: ~ $179,931,240 Cash-Out Amount: 0.8%
Unsecured Claims reasonably practicable after (consists only of Noteholder Claims)
Against SUDM, Inc.) the Effective Date, in full If New Common Stock and
satisfaction of its Allowed Rights elected: 0.8%
General Unsecured Claims in such
Class, the Indenture Trustee, on If Inducement Cash elected:
behalf of each of the Noteholders, N/A
or each Holder of the Allowed
General Unsecured Claims,
respectively, will receive:
(a) the Indenture Trustee Fee
Amount, and
(b) the Cash-Out Amount allocated
to SUDM as indicated at right and
in Exhibit C to the Plan; OR
(c) at the option of each such
Holder of a General Unsecured
Claim and only to the extent
that such Holder of General
Unsecured Claims so elects on
the Ballot:
(i) a Pro Rata portion of
shares of New Common Stock
allocated to SUDM as indicated
in Exhibit C to the Plan, and
</Table>
11
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
(ii) its Pro Rata share of
the Rights allocated to SUDM and
indicated on Exhibit C to the
Plan if exercised; OR
(d) at the option of each such
Holder of a General Unsecured
Claim against SUDM and only to
the extent that such Holder so
elects on the Ballot, the
Inducement Cash Amount with
respect to SUDM.
For the avoidance of doubt, in
the event a Holder of a General
Unsecured Claim fails to elect
the options set forth in
subsections (c) or (d) above,
such Holder will receive Cash
equal to the Cash-Out Amount.
Class 4c (General Impaired. If the Liquidating Plan Wagner Havana, Inc.: ~ $181,369,667 Cash-Out Amount: 0.5%
Unsecured Claims Condition is satisfied: (includes Noteholder Claims)
And Unsecured If New Common Stock, Rights
Convenience Claims On the Effective Date, the and New Wagner Havana
Against Wagner Indenture Trustee, on behalf of Common Stock elected: 0.5%
Havana, Inc., but each of the Noteholders, or a
only if the Holder of Allowed General If Inducement Cash elected:
Liquidating Plan Unsecured Claims against Wagner 5.0%, or Pro Rata share
Condition is Havana, Inc., will receive in of $71,921
satisfied) full satisfaction of their Claims:
(a) the Cash-Out Amount allocated
to Wagner Havana as indicated in
Exhibit C to the Plan; OR
(b) at the option of each such
Holder of a General Unsecured Claim
and only to the extent that such
Holder of General Unsecured Claims
so elects on the Ballot:
(i) a Pro Rata portion of
shares of the New Common Stock
allocated to Wagner Havana as
indicated in Exhibit C to the Plan,
(ii) its Pro Rata share of
the Rights allocated to Wagner
Havana and indicated on Exhibit C
to the Plan; and
</Table>
12
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ -------------------------
(iii) its Pro Rata share of
the Reorganized Wagner Havana New
Common Stock which will be conveyed
immediately to Reorganized Intermet
upon the Effective Date; OR
(c) at the option of each such
Holder of a General Unsecured Claim
against Wagner Havana and only to
the extent that such Holder so
elects on the Ballot, the
Inducement Cash Amount with respect
to Wagner Havana as indicated in
Exhibit C to the Plan.
In the event a Holder of a General
Unsecured Claim fails to elect the
options set forth in subsections
(b) or (c) above, such Holder will
receive the Cash-Out Amount
allocated to Wagner Havana.
**Class 5 Impaired - each Holder paid as soon Intermet Corporation: ~ $3,014,877 21.0%
(Unsecured as practicable after the Effective
Convenience Date, the fixed percentage of each Alexander City Casting Company, Inc.: $0 N/A
Claims) Holder's Allowed Claim shown at
right and in Exhibit C to the Plan. Cast-Matic Corporation: ~ $1,169,873 7.5%
Columbus Foundry, L.P.: ~ $3,749,449 19.5%
Diversified Diemakers, Inc.: ~ $2,826,606 9.0%
Ganton Technologies, Inc.: ~ $4,438,257 7.5%
Intermet Holding Company: $0 N/A
Intermet Illinois, Inc.: ~ $348 7.5%
Intermet International, Inc.: $0 0.0%
Intermet U.S. Holding, Inc.: ~ $2,363,306 7.5%
Ironton Iron, Inc.: ~ $2,517 7.5%
Lynchburg Foundry Company: ~ $2,965,232 7.5%
Northern Castings Corporation: ~ 7.5%
$1,117,590
Sudbury, Inc.: ~ $6,853 7.5%
SUDM, Inc.: $0 N/A
Tool Products, Inc.: ~ $3,096,229 7.5%
Wagner Castings Company: ~ $2,950,382 7.5%
</Table>
13
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ---------------------------------------- --------------------------
Wagner Havana, Inc.: ~ $252,977 7.5%
Class 6a Unimpaired as to the Unimpaired Alexander City Casting 100%; Allowed and retained
(Unimpaired Equity Interests in the Unimpaired Company, Inc.: 500 shares by Reorganized Intermet
Equity Interests) Equity Debtors, in which cases the
Holders are deemed to have accepted Cast-Matic Corporation: 47,805 shares 100%; Allowed and retained
the Plan and are not entitled to by Reorganized Sudbury, Inc.
vote. As to such Unimpaired Equity
Debtors, the Class 6 Unimpaired Columbus Foundry, L.P.: 95% General 100%; Allowed and retained
Equity Interests will be Allowed Partner Interest, and 5% Limited by Reorganized Intermet U.S.
and retained by the applicable Partner Interest Holding, Inc. (95% General
Reorganized Debtor shown at right. Partner Interest) and SUDM,
Inc. (5% Limited Partner
Interest)
Diversified Diemakers, Inc.: 10,000 100%; Allowed and retained
shares by Reorganized Intermet
Ganton Technologies, Inc.: 1,000,000 100%; Allowed and retained
shares by Reorganized Intermet
Intermet Holding Company: 1,000 shares 100%; Allowed and retained
by Reorganized Intermet
International, Inc.
Intermet Illinois, Inc.: 1,000 shares 100%; Allowed and retained
by Reorganized Sudbury,
Inc.
Intermet International, Inc.: 500 shares 100%; Allowed and retained
by Reorganized Intermet
Intermet U.S. Holding, Inc.: 1,000 100%; Allowed and retained
shares by Intermet International,
Inc.
Ironton Iron, Inc., but only as to the Existing Common Stock:
Existing Common Stock: 23,000 shares. 100%; Allowed and retained
See Class 6b for treatment of the by Reorganized Intermet
Existing Preferred Stock.
Lynchburg Foundry Company: 100 shares 100%; Allowed and retained
by Reorganized Intermet
Northern Castings Corporation: 500 100%; Allowed and retained
shares by Reorganized Intermet
Sudbury, Inc.: 1,000 shares 100%; Allowed and retained
by Reorganized Intermet
</Table>
14
<Table>
<Caption>
CLASS AND TYPE ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY OF
OF CLAIM OR CLAIMS OR EQUITY INTERESTS BY ALLOWED CLAIMS
EQUITY INTEREST DEBTOR ON THE EFFECTIVE DATE, OR EQUITY INTERESTS
FOR EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS BY DEBTOR
- ------------------- ------------------------------------ ------------------------------------------ --------------------------
SUDM, Inc.: 1,000 shares 100%; Allowed and retained
by Intermet International,
Inc.
Tool Products, Inc.: 100 shares 100%; Allowed and retained
by Reorganized Intermet
***Wagner Castings Company: 296,550 If Liquidating Plan
shares if the Liquidating Plan Condition is not satisfied:
Condition is not satisfied. See Class 100%; Allowed and retained
6b if the Liquidating Plan Condition by Reorganized Sudbury,
is satisfied. Inc.
***Wagner Havana, Inc.: 100 shares if If Liquidating Plan
the Liquidating Plan Condition is not Condition is not satisfied:
satisfied. See Class 6b if the 100%; Allowed and retained
Liquidating Plan Condition is satisfied. by Reorganized Wagner
Castings Company
Class 6b Impaired as to the Impaired Intermet Corporation: 0 shares 0%; Cancelled.
(Impaired Equity Interests in the Impaired
Equity Interests) Equity Debtors, in which cases the ***Wagner Castings Company, but only If the Liquidating Plan
Holders are not entitled to vote if the Liquidating Plan Condition Condition is satisfied:
on the Plan and are deemed to have is satisfied: 0 shares For liquidation purposes
rejected it. On the Effective Date, only, 1 share of
all of the Class 6b Impaired Equity Reorganized Wagner Castings
Interests of such Impaired Equity Common Stock issued and
Debtors will be cancelled. transferred to a third-
party liquidating trustee.
***Wagner Havana, Inc., but only if If Liquidating Plan
the Liquidating Plan Condition is Condition is satisfied: 0%;
satisfied: 0 shares. Cancelled. 1000 shares of
New Wagner Havana Common
Stock issued to Holders of
General Unsecured Claims
and transferred to
Reorganized Intermet.
Ironton Iron, Inc., but only as to the Existing Preferred Stock:
Existing Preferred Stock: 0 shares. 0%; Cancelled.
</Table>
Note: The Claims estimates set forth above reflect current estimates of Claims
at each Debtor. Actual distributions may be higher or lower based on the
resolution of Disputed Claims and actual Allowed Claims at each Debtor.
* See "Explanation of Creditor Treatment in Class 4" in Section VIII.C.2.a,
below.
** Allowed unsecured Claims that are less than or equal to $125,000, or for
which the Holder makes a Convenience Class Election.
*** See "Explanation of Impaired Equity Interest Treatment in Class 6b for
Wagner Castings Company and Wagner Havana, Inc." in Section VIII.C.7.a, below.
15
For a more detailed description of the foregoing Classes of Claims and Equity
Interests and the proposed Distributions thereto, SEE SECTION VIII - "SUMMARY OF
THE PLAN."
D. INTERCOMPANY CLAIMS
All Intercompany Claims will be released, waived and discharged as of the
Effective Date. Claims held by Non-Debtor Affiliates against the Debtors will,
with the consent of the Initial Committed Purchasers, to the maximum extent
practicable, be (a) released, waived, and discharged as of the Effective Date,
(b) offset against claims held by Debtors against Non-Debtor Affiliates, or (c)
converted to equity with respect to the obligee Debtor.
E. PRESERVATION OF CERTAIN CAUSES OF ACTION
In accordance with Section 1123(b)(3) of the Bankruptcy Code, and except as
otherwise provided in the Plan and/or the Confirmation Order, the Reorganized
Debtors will retain and may (but are not required to) enforce all Retained
Actions, including Avoidance Actions and other similar claims arising under
applicable state laws, including, without limitation, fraudulent transfer
claims, if any, and all other Causes of Action of a trustee and debtor-in
possession under the Bankruptcy Code. The Debtors or the Reorganized Debtors, in
their sole discretion, will determine whether to bring, settle, release,
compromise, or enforce any rights (or decline to do any of the foregoing) with
respect to the Retained Actions, other than the Avoidance Actions. The
Reorganized Debtors or any successor may pursue such litigation claims in
accordance with the best interests of the Reorganized Debtors or any successors
holding such rights of action. The failure of the Debtors to specifically list
any Claim, Causes of Action, right of action, suit or proceeding in the
Schedules, on Exhibit D to the Disclosure Statement, or on Exhibit K to the Plan
does not, and will not be deemed to, constitute a waiver or release by the
Debtors of such Claim, Causes of Action, right of action, suit or proceedings,
and the Reorganized Debtors will retain the right to pursue such Claims, Causes
of Action, rights of action, suits or proceedings in their sole discretion and,
therefore, no preclusion doctrine, collateral estoppel, issue preclusion, claim
preclusion, estoppel (judicial, equitable or otherwise) or laches will apply to
such claim, right of action, suit or proceeding upon or after the Confirmation
or consummation of the Plan. Further, recovery of any proceeds of Causes of
Action will be deemed "for the benefit of the Estates" as set forth in Section
550(a) of the Bankruptcy Code.
II. PLAN VOTING PROCEDURES; ACCEPTANCE; CONFIRMATION
A. VOTING PROCEDURES
Under the Bankruptcy Code, the only Classes that are entitled to vote to accept
or reject the Plan are Classes of Claims that are Impaired under the Plan.
Accordingly, Classes of Claims or Interests that are Unimpaired under the Plan
as to all Debtors, Classes 1 (Priority Claims Against Any Debtor), 2
(Pre-Petition Lender Claims Against Any
16
Debtor), 3 (Class 3 Against Any Debtor Except As To Wagner Castings Company),
and 6a (Unimpaired Equity Interests) are presumed to have accepted the Plan as
to all Debtors and are not entitled to vote on the Plan. Holders of Secured
Claims held by Dana Corporation Against Wagner Castings Company (Class 3a),
General Unsecured Claims against any Debtor (Classes 4, 4a, 4b, and 4c), and
Unsecured Convenience Claims (Class 5), as to all Debtors, are Impaired and will
be entitled to vote to accept or reject the Plan. Holders of Impaired Equity
Interests (Class 6b) will not vote because such Impaired Equity Interests will
not receive any Distribution and, accordingly, such Holders are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
Creditors that hold Claims in more than one Impaired Class are entitled to vote
separately in each Class. To the extent that such multiple claims can be
identified by J.P. Morgan Trust Company N.A. ("JP Morgan" or the "Balloting
Agent"), such a Creditor will receive a separate Ballot for each of its Claims
in each Class (in accordance with the records of the Clerk of the Court) and
should complete and sign each Ballot separately.
Votes on the Plan will be counted only with respect to Claims: (a) that are
listed on the Schedules other than as disputed, contingent or unliquidated; or
(b) for which a Proof of Claim was filed on or before the applicable Claims
Filing Bar Date. Any vote by a Holder of a Claim will not be counted if such
Claim has been disallowed or is the subject of an unresolved objection, or is
otherwise not entitled to a vote pursuant to the Bankruptcy Code or Bankruptcy
Rules absent an order of the Bankruptcy Court allowing such Claim for voting
purposes pursuant to Section 502 of the Bankruptcy Code and Rule 3018 of the
Bankruptcy Rules.
Voting on the Plan by each Holder of a Claim in an Impaired Class entitled to
vote is important. After carefully reviewing the Plan and this Disclosure
Statement, each Holder of such a Claim should use the enclosed Ballot or Ballots
to vote to either accept or reject the Plan, and then return the Ballot or
Ballots by mail to the appropriate address.
B. ELECTIONS ON THE BALLOT TO RECEIVE NEW COMMON STOCK
The Ballots will give Creditors the option of electing to receive New Common
Stock together with the option of participating in the Rights Offering. All
holders of New Common Stock will be subject to the Stockholders' Agreement which
will, among other things, govern appointment of the Board of Directors of
Reorganized Intermet, each holder of New Common Stock's access to information
with respect to the Reorganized Debtors, and each holder's ability to transfer
such holder's New Common Stock. ACCORDINGLY, A PERSON'S ELECTION ON THE BALLOT
TO RECEIVE NEW COMMON STOCK WILL CONSTITUTE SUCH PERSON'S AGREEMENT TO BE BOUND
BY THE STOCKHOLDERS' AGREEMENT, WHICH IS ATTACHED TO THE PLAN AS EXHIBIT G AND
AS EXHIBIT K TO THIS DISCLOSURE STATEMENT.
17
C. SPECIFIC INSTRUCTIONS FOR HOLDERS OF IMPAIRED CLAIMS OTHER
THAN NOTEHOLDER CLAIMS
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AS
SET FORTH ABOVE AND IN ACCORDANCE WITH THE BALLOT AND THE VOTING INSTRUCTIONS ON
THE BALLOT AND RECEIVED BY THE BALLOTING AGENT NO LATER THAN THE VOTING
DEADLINE.
If a Ballot is damaged, lost, or missing, a replacement Ballot may be obtained
by sending a written request to the Balloting Agent. If you have any questions
about (1) the procedure for voting your Claim or with respect to the packet of
materials that you have received or (2) or if you wish to obtain an additional
copy of the Plan, this Disclosure Statement or any appendices or exhibits to
such documents, please contact the Balloting Agent at WWW.ADMINISTAR.NET or by
telephone at (904) 807-3023.
D. SPECIFIC INSTRUCTIONS FOR HOLDERS OF NOTEHOLDER CLAIMS
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AS
SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING INSTRUCTIONS ON THE BALLOT.
If a Ballot is damaged, lost, or missing, a replacement Ballot may be obtained
by sending a written request to the Balloting Agent. If you have any questions
about (1) the procedure for voting your Claim or with respect to the packet of
materials that you have received or (2) if you wish to obtain an additional copy
of the Plan, this Disclosure Statement or any appendices or exhibits to such
documents, please contact the Balloting Agent at WWW.ADMINISTAR.NET or by
telephone at (904) 807-3023.
The Record Date for determining which Holders of Noteholder Claims are entitled
to vote on the Plan is __________. THE INDENTURE TRUSTEE WILL NOT VOTE ON BEHALF
OF THE HOLDERS OF SUCH NOTEHOLDER CLAIMS. HOLDERS MUST SUBMIT THEIR OWN BALLOTS
IN ACCORDANCE WITH THE BALLOT AND THE INSTRUCTIONS ON THE BALLOT.
1. Beneficial Owners
A beneficial owner holding Senior Notes as record Holder in its own name should
vote on the Plan by completing and signing the enclosed Ballot and returning it
directly to the Balloting Agent on or before the Voting Deadline using the
enclosed self-addressed, postage-paid envelope.
A beneficial owner holding Senior Notes in "street name" through a designated
representative of such Holder (a "Nominee") may vote on the Plan by one of the
following two methods (as selected by such beneficial owner's Nominee):
18
(i) Complete and sign the enclosed beneficial owner Ballot.
Return the Ballot to your Nominee as promptly as possible and in sufficient time
to allow such Nominee to process the Ballot and return it to the Balloting Agent
by the Voting Deadline. If no self-addressed, postage-paid envelope was enclosed
for this purpose, contact the Balloting Agent or your Nominee for instructions;
or
(ii) Complete and sign the pre-validated Ballot (as described
below) provided to you by your Nominee. Return the pre-validated Ballot to the
Balloting Agent by the Voting Deadline using the return envelope provided.
Any Ballot returned to a Nominee by a beneficial owner will not be counted for
purposes of acceptance or rejection of the Plan until such Nominee properly
completes and timely delivers to the Balloting Agent that Ballot or a master
Ballot that reflects the vote of such beneficial owner.
If any beneficial owner owns Senior Notes through more than one Nominee, such
beneficial owner may receive multiple mailings containing the Ballots. The
beneficial owner should execute a separate Ballot for each block of Senior Notes
that it holds through any particular Nominee and return each Ballot to the
respective Nominee in the return envelope provided therewith. Beneficial owners
who execute multiple Ballots with respect to Senior Notes held through more than
one Nominee must indicate on each Ballot the names of ALL such other Nominees
and the additional amounts of such Senior Notes so held and voted. If a
beneficial owner holds a portion of the Senior Notes through a Nominee and
another portion as a record holder, the beneficial owner should follow the
procedures described in the first paragraph above to vote the portion held of
record and the procedures described in the second paragraph above to vote the
portion held through a Nominee or Nominees.
2. Nominees
A Nominee that on the Record Date is the registered holder of Senior Notes for a
beneficial owner can obtain the votes of the beneficial owners of such Senior
Notes, consistent with customary practices for obtaining the votes of securities
held in "street name," in one of the following two ways:
(i) Pre-Validated Ballots. The Nominee may "pre-validate" a
Ballot by (1) signing the Ballot; (2) indicating on the Ballot the name of the
registered Holder, the amount of Senior Notes held by the Nominee for the
beneficial owner, and the account numbers for the accounts in which such Senior
Notes are held by the Nominee; and (3) forwarding such Ballot, together with the
Disclosure Statement, return envelope and other materials requested to be
forwarded, to the beneficial owner for voting. The beneficial owner must then
complete the information requested in the Ballot; review the certifications
contained in the Ballot, and return the Ballot directly to the Balloting Agent
in the pre-addressed, postage-paid envelope so that it is RECEIVED by the
Balloting Agent before the Voting Deadline. A list of the beneficial owners to
whom "pre-validated" Ballots were delivered should be maintained by Nominees for
inspection for at least one year from the Voting Deadline; or
19
(ii) Master Ballots. If the Nominee elects not to pre-validate
Ballots, the Nominee may obtain the votes of beneficial owners by forwarding to
the beneficial owners the unsigned Ballots, together with the Disclosure
Statement, a return envelope provided by, and addressed to, the Nominee, and
other materials requested to be forwarded, no later than five (5) business days
after receipt by such Nominee of such materials. Each such beneficial owner must
then indicate his/her or its vote on the Ballot, complete the information
requested in the Ballot, review the certifications contained in the Ballot,
execute the Ballot, and return the Ballot to the Nominee. After collecting the
Ballots, the Nominee will, in turn, complete a master Ballot compiling the votes
and other information from the Ballot, execute the master Ballot, and deliver
the master Ballot to the Balloting Agent so that it is RECEIVED by the Balloting
Agent before the Voting Deadline. All Ballots returned by beneficial owners
should either be forwarded to the Balloting Agent (along with the master ballot)
or retained by Nominees for inspection for at least one year from the Voting
Deadline. EACH NOMINEE SHOULD ADVISE ITS BENEFICIAL OWNERS TO RETURN THEIR
BALLOTS TO THE NOMINEE BY A DATE CALCULATED BY THE NOMINEE TO ALLOW IT TO
PREPARE AND RETURN THE MASTER BALLOT TO THE BALLOTING AGENT SO THAT IT IS
RECEIVED BY THE BALLOTING AGENT BEFORE THE VOTING DEADLINE.
3. Miscellaneous
For purposes of voting to accept or reject the Plan, the beneficial owners of
Senior Notes will be deemed to be the "Holders" of the Claims represented by
such Senior Notes. The Debtors, in their sole discretion, may request that the
Balloting Agent attempt to contact voters who have submitted defective Ballots
to cure any such defects in the Ballots or master Ballots.
Except as provided below, unless the Ballot or master Ballot is timely submitted
to the Balloting Agent before the Voting Deadline together with any other
documents required by such Ballot or master Ballot, the Debtors may, in their
sole discretion, reject such Ballot or master Ballot as invalid, and therefore
decline to utilize it in connection with seeking Confirmation of the Plan.
In the event that any Noteholder Claim is Disputed, any vote to accept or reject
the Plan cast with respect to such Disputed Claim will not be counted for
purposes of determining whether the Plan has been accepted or rejected, unless
the Bankruptcy Court orders otherwise.
E. INQUIRIES
If you have questions about the procedures for voting your Claim, or the packet
of materials that you received, please contact the Balloting Agent as set forth
above.
If you wish to obtain additional copies of the Plan, this Disclosure Statement,
or the Exhibits to those documents at your own expense, unless otherwise
specifically required by Bankruptcy Rule 3017(d), please contact the Balloting
Agent.
20
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT THE PLAN,
SEE SECTION XV OF THIS DISCLOSURE STATEMENT.
F. ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by an impaired class of claims
as acceptance by the holders of at least two-thirds (2/3) in dollar amount and
more than one-half (1/2) in number of the allowed claims of that class which
actually timely and properly cast ballots.
In the event that any of the Impaired Classes of Claims do not accept the Plan
with respect to any Debtor, the Debtors reserve the right to (a) modify the Plan
in accordance with its terms, and (b) request that the Court confirm the Plan in
accordance with Section 1129(b) of the Bankruptcy Code, notwithstanding such
lack of acceptance, by a finding that the Plan provides fair and equitable
treatment to any Impaired Class of Claims voting to reject the Plan.
G. CONDITIONS TO CONFIRMATION OF THE PLAN AND EFFECTIVENESS OF
THE PLAN
1. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN
The following must occur on or before Confirmation, unless and until each of the
following conditions has been satisfied or waived, in accordance with Article
9.04 of the Plan, in writing by the Debtors and each of the Initial Committed
Purchasers:
A. The Bankruptcy Court will have entered the
Confirmation Order;
B. The following documents will be executed and
delivered to the Initial Committed
Purchasers, each in form and substance
satisfactory to the Initial Committed
Purchasers:
(i) the Restructuring Commitment Letter;
(ii) a commitment letter related to the Exit
Financing Facility;
(iii) the Private Placement Purchase
Agreement; and
(iv) the Cash-Out Purchase Agreement.
C. The Restructuring Commitment Letter will
have been approved by the Bankruptcy Court
pursuant to a Final Order.
21
D. The Restructuring Commitment Letter will not
have been terminated, and all conditions
precedent thereunder will have been
satisfied or waived, unless such conditions
precedent relate to post-Confirmation
events.
E. The form of Stockholders' Agreement will
have been agreed to by the Debtors and the
Initial Committed Purchasers.
2. Conditions Precedent To Effectiveness Of The Plan
Notwithstanding any other provision of the Plan or the Confirmation Order, the
Effective Date of the Plan will not occur, and the Plan will not be binding on
any party, unless and until each of the following conditions has been satisfied
or waived, in accordance with Article 9.04 of the Plan, in writing by the
Debtors and each of the Initial Committed Purchasers:
(i) The Confirmation Order, in form and substance
reasonably satisfactory to the Initial Committed Purchasers, will have become a
Final Order;
(ii) The closing and an initial funding will have
occurred under the Exit Financing Facility and all conditions precedent to the
consummation thereof (other than the occurrence of the Effective Date of the
Plan) will have been waived or satisfied in accordance with the terms thereof;
(iii) The closing and funding will have occurred
under the Rights Offering and/or Private Placement Purchase Agreement and the
Cash-Out Purchase Agreement and all conditions precedent to the consummation
thereof (other than the occurrence of the Effective Date of the Plan) will have
been waived or satisfied in accordance with the terms thereof;
(iv) The certificate of incorporation for Reorganized
Intermet, and the bylaws of Reorganized Intermet (and similar corporate
governance documents), the Registration Rights Agreement, the Stockholders'
Agreement, and the Exit Financing Facility will each be in form and substance
acceptable to the Initial Committed Purchasers and will be effective on the
Effective Date.
(v) The New Common Stock will have been issued in
accordance with the Plan;
(vi) The Restructuring Commitment Letter will not
have been terminated and all conditions precedent thereunder will have been
satisfied or waived;
(vii) All other actions, documents and agreements
necessary to implement the Plan as of the Effective Date will have been
delivered and all conditions precedent thereto will have been satisfied or
waived; and
22
(viii) Reorganized Intermet and the Initial Committed
Purchasers will have approved the terms of the Employment Agreements.
H. MODIFICATION OF THE PLAN AND AMENDMENTS
The Debtors may alter, amend, or modify the Plan or any Exhibits thereto under
Section 1127(a) of the Bankruptcy Code at any time prior to the Confirmation
Hearing Date with the consent of the Initial Committed Purchasers which consent
will not be reasonably withheld. The Debtors may, under Section 1127(b) of the
Bankruptcy Code, institute proceedings in the Bankruptcy Court to remedy any
defect or omission or reconcile any inconsistencies in the Plan, the Disclosure
Statement or the Confirmation Order, and such matters as may be necessary to
carry out the purposes and effects of the Plan.
I. EFFECT OF CONFIRMATION
If the Plan is Confirmed by the Bankruptcy Court:
o The terms of the Plan will be binding on the Debtors, all Creditors,
Holders of Equity Interests, and other parties in interest, regardless
of whether they have accepted the Plan.
o Except as provided in the Plan, all Claims and Equity Interests will
be discharged; and Creditors and Holders of Equity Interests will be
prohibited from asserting their Claims against or Equity Interests in
the Debtors or their Assets, or against Reorganized Intermet or any of
the Reorganized Debtors.
J. REVOCATION OF THE PLAN
The Debtors reserve the right to revoke or withdraw the Plan prior to the
Confirmation Date. If the Debtors so revoke or withdraw the Plan, then the Plan
will be null and void and, in such event, nothing contained therein will be
deemed to constitute a waiver or release of any Claims by or against, or any
Equity Interests in, any Debtor or any other Person or to prejudice in any
manner the rights of any Debtor or any Person in any further proceedings
involving any Debtor.
III. BACKGROUND OF THE RESTRUCTURING AND EVENTS LEADING TO COMMENCEMENT OF
BANKRUPTCY PROCEEDINGS(1)
The Debtors' Cases were initiated primarily in response to substantial and
unprecedented increases in the cost of raw materials, especially scrap steel.
The price of scrap steel, which is the Debtors' primary raw material for ferrous
casting operations, increased from approximately $160 per net ton at the
beginning of 2003 to approximately $210 per net
- ----------
(1) This information is intended as a summary only. No single factor,
but rather a combination of the events described below, led to these Chapter 11
Cases.
23
ton at the end of 2003 and to approximately $400 per net ton by the end of 2004.
The price of scrap steel reached a peak of $440 per net ton in November, 2004.
Industry commentators attribute this unprecedented rise in scrap steel prices
to, among other things:
o An assessment of an export tariff by Russia and the Ukraine, which
decreased the supply available to countries such as China, South Korea
and Turkey.
o High oil prices and war which contributed to a worldwide rise in
freight prices.
o China's rapid macroeconomic and intensive manufacturing growth, which
fueled China's purchase of more than 3.3 million tons of U.S. scrap in
2003 alone (accounting for approximately 30% of all U.S. exported scrap
for the year).
o South Korea's increased purchases of scrap steel from the U.S.
(approximately 2.5 million tons in 2003).
o The economic rebound of the U.S. economy which resulted in increased
domestic demand for scrap.(2)
Because of pre-existing contractual pricing terms with most of the Debtors'
customers, the Debtors' were limited in their ability to pass these and other
raw material cost increases to customers. At the same time, some of the Debtors'
largest trade creditors began to tighten or eliminate credit terms, which
increased working capital requirements. The Debtors also experienced operational
difficulties at the Pulaski, Tennessee and Racine, Wisconsin light-metals
plants.
These financial and operational difficulties impaired the Debtors' ability to
continue to draw on the Pre-Petition Credit Facility. In an effort to avoid
anticipated defaults under loan covenants, which would have occurred as of
September 30, 2004, the Debtors entered into discussions with the Pre-Petition
Agent, seeking waivers of certain conditions contained in the Pre-Petition
Credit Facility. The Debtors were unable to obtain waivers on acceptable terms
and, consequently, the Cases were filed on September 29, 2004.
The Debtors have continued to operate their U.S. businesses as
debtors-in-possession under Bankruptcy Court protection from Creditors. The
Debtors continue to review all aspects of their business for opportunities to
improve performance, while seeking to restructure their secured and unsecured
debt, rationalize their facilities and cost structure, and effect a customer
strategy focused on scrap steel cost recovery and other commercial and financial
issues.
- ----------
(2) Spada, Alfred T., "Ferrous Scrap Pricing: A Case of Supply and
Demand," Modern Casting, April 2004 at 18.
24
IV. OPERATIONS OF THE DEBTORS
A. CORPORATE STRUCTURE
Intermet, a Georgia corporation, has been publicly held since 1985. Intermet
directly or indirectly owns all of the issued and outstanding ownership
interests of each of the Domestic Subsidiaries listed below. Each of the
Domestic Subsidiaries listed below is an entity organized under the laws of the
respective states identified below and each is a Debtor in the Cases:
<Table>
ALEXANDER CITY CASTING COMPANY, INC., a/k/a INTERMET U.S. HOLDING, INC., a/k/a Intermet New River Foundry, a/k/a
Intermet Alexander City Foundry, an Alabama corporation Intermet Columbus Machining, a Delaware corporation
CAST-MATIC CORPORATION, a/k/a Intermet Stevensville LYNCHBURG FOUNDRY COMPANY, a/k/a Intermet Archer Creek Foundry, a/k/a
Plant, a Michigan corporation Intermet Radford Foundry, a Virginia corporation
COLUMBUS FOUNDRY, L.P., a/k/a Intermet Columbus Foundry, NORTHERN CASTINGS CORPORATION, a/k/a Intermet Hibbing Foundry,
a Delaware limited partnership a Georgia corporation
DIVERSIFIED DIEMAKERS, INC., a/k/a Intermet Hannibal SUDBURY, INC., a Delaware corporation
Plant, a/k/a Intermet Palmyra Plant, a/k/a Intermet Monroe
City Plant, a Delaware corporation
GANTON TECHNOLOGIES, INC., a/k/a Intermet Racine Plant, SUDM, INC., a Michigan corporation
a/k/a Intermet Racine Machining, a/k/a Intermet Pulaski
Plant, an Illinois corporation
INTERMET HOLDING COMPANY, a Delaware corporation TOOL PRODUCTS, INC., a/k/a Intermet Minneapolis Plant, a/k/a
Intermet Jackson Plant, a Delaware corporation
INTERMET ILLINOIS, INC., f/k/a Frisby P.M.C., WAGNER CASTINGS COMPANY, a/k/a Intermet Decatur Foundry, a
Incorporated, an Illinois corporation Delaware corporation
INTERMET INTERNATIONAL, INC., f/k/a Intermet New River WAGNER HAVANA, INC., a/k/a Intermet Havana Foundry, a
Foundry, f/k/a Intermet Columbus Machining, a Georgia Delaware corporation
corporation
IRONTON IRON, INC., a/k/a Intermet Ironton Foundry, an
Ohio corporation
</Table>
25
Intermet also conducts business through its foreign Non-Debtor Affiliates, as
listed in the organizational chart attached as Exhibit B hereto. None of the
foreign Non-Debtor Affiliates have commenced, or is subject to, cases under
Chapter 11 of the Bankruptcy Code or similar insolvency proceedings in any other
jurisdiction. These foreign Non-Debtor Affiliates continue to operate their
businesses in the ordinary course of business outside of any insolvency
proceeding.
In addition, there are two domestic Non-Debtor Affiliates: Western Capital
Corporation and Transnational Indemnity Company. These domestic Non-Debtor
Affiliates have ceased operations and will be dissolved pursuant to state law
prior to or shortly after the Effective Date.
B. INTERMET'S BUSINESS OPERATIONS
Intermet is one of the largest independent producers of ductile iron, aluminum,
magnesium and zinc castings in the world. In addition, the Debtors provide
machining and tooling related to their casting business along with a range of
other products and services to the automotive and industrial markets. The
Debtors specialize in the design and manufacture of highly engineered, cast
automotive components for the global light truck, passenger car, light vehicle
and heavy-duty vehicle markets. These products are primarily structural and
safety components and are used in vehicle powertrain, chassis, brake and
body/interior parts.
The Debtors supply cast products to a broad array of automotive and industrial
customers. Original equipment manufacturers ("OEMs") and Tier 1 and Tier 2
suppliers of automotive components increasingly rely on their suppliers to
design and engineer parts based on specific design parameters, including weight,
size, cost and performance criteria. In addition, OEMs, Tier 1 and Tier 2
suppliers look to their suppliers to solve problems arising in the design and
manufacturing process. The Debtors provide a broad range of full-service
capabilities, including advanced design and engineering, casting, machining and
sub-assembly.
The Debtors' ferrous metal products include ductile iron castings and related
machining operations. These castings include crankshafts, brackets, bearing
caps, steering knuckles, wheel spindles, differential carriers and cases, brake
anchors and calipers and suspension control arms. The Debtors' light metals
products include aluminum, magnesium and zinc castings and related machining
operations. These castings include engine covers, brackets, instrument panel
frames, connector housings, steering knuckles, airbag controller enclosures,
heat sinks, steering column components and windshield wiper motor enclosures.
The Debtors provide cast products used by automotive OEMs including, but not
limited to, DaimlerChrysler, Ford, General Motors, PSA Peugeot Citroen,
Volkswagen, BMW,
26
Honda and Toyota, as well as their leading suppliers, such as Delphi, Visteon,
PBR Automotive, TRW, Continental Teves, Knorr, Denso, Metaldyne and Dana.
As of December 31, 2004, the Debtors' Ferrous Metals segment had a total average
straight time casting capacity of 625,000 net tons, a decrease of 18,000 net
tons as compared to 643,000 net tons in 2003. The decrease was due to the
closure of the Debtors' Havana, Illinois plant in 2004. The Debtors' Light
Metals segment had a total average straight time available casting capacity of
75,600 net tons as of December 31, 2004, an increase of 4,000 net tons as
compared to 71,600 net tons in 2003.
The Debtors' casting facilities, including their European facilities, operated
at an average annual capacity utilization of 74% in 2004, 68% in 2003 and 70% in
2002.
1. Acquisitions And Closures
A. Columbus Machining Closure
In October 2004, the Debtors announced the closure of their Columbus Machining
Plant, located in Midland, Georgia, which occurred during the first quarter of
2005. As a result of this decision the Debtors recorded a $0.3 million
restructuring and impairment charge that was primarily comprised of the
write-down of inventory. See additional discussion in Intermet's Annual Report
on Form 10-K, December 31, 2004, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in Note 5 to the Consolidated
Financial Statements, Restructuring and Impairment Charges, included therewith.
See also Section VII.D.4 of this Disclosure Statement, "Columbus Machining
Closure," for additional details.
B. Racine Closure
In December 2004, the Debtors announced the closure of their Racine
(die-casting) Plant and Racine Machining Plant, both of which are located in
Sturtevant, Wisconsin. The Debtors closed these plants during the second quarter
of 2005. As a result of this decision, the Debtors recorded a $10.3 million
restructuring and impairment charge in 2004. This charge consisted of a
write-down of fixed assets of $6.5 million, write-down of inventory of $2.4
million, a pension plan curtailment of $1.2 million and an additional $0.1
million each for severance pay and other contractual benefits included in the
collective bargaining agreement that was in place at the plant. See additional
discussion in Intermet's Annual Report on Form 10-K, December 31, 2004,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in Note 5 to the Consolidated Financial Statements,
Restructuring and Impairment Charges included therewith. See also Section
VII.D.3 of this Disclosure Statement, "Racine Plant Closure," for additional
details.
C. Decatur Closure
On March 29, 2005, the Debtors announced their plan to close their Decatur
Foundry located in Decatur, Illinois during the fourth quarter of 2005. The
Debtors recognized
27
asset impairment charges in 2004 of $10.9 million to reduce the capital assets
to their fair values. The Debtors are in the process of determining reserves
required for plant closing costs. See Section VII.D.5 of this Disclosure
Statement, "Decatur Plant Closure," for more details.
D. Porto, Portugal
Pursuant to the Debtors' agreement dated June 25, 2003 with Melfina - Estudos,
Servicos e Participacoes, S.A., the Debtors made a final payment in December
2004 to acquire 100% ownership of the shares of Fundicao Nodular, S.A. ("Porto
Foundry"), which is located in Porto, Portugal. Under the terms of the
agreement, the Debtors acquired the final 25% of the shares for a cash
investment of Euro 4.9 million (approximately $6.2 million). The Porto Foundry
is a caster of various ductile-iron automotive components.
2. Financial Information About Segments
Sales and operating loss for the Debtors' Ferrous Metals segment in 2004 were
$562.6 million and $16.9 million, respectively, compared with sales and
operating income of $493.4 million and $13.2 million, respectively, in 2003.
Sales and operating loss in the Debtors' Light Metals segment in 2004 were
$274.6 million and $124.6 million, respectively, compared to sales and operating
loss of $237.8 million and $44.2 million, respectively, in 2003. See additional
discussion in Intermet's Annual Report on Form 10-K, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in Note 14 to
the Consolidated Financial Statements, Reporting for Business Segments included
therewith.
3. Products, Markets And Sales
The Debtors focus on value-added cast metal products, which they supply mainly
to the automotive market. In 2004, 2003 and 2002, approximately 95.4%, 94.1% and
95.2% of the Debtors' sales, respectively, were attributable to the automotive
market. Within the automotive market, the Debtors' products generally fall into
four major categories:
- Chassis and suspension components such as steering knuckles, control
arms, steering gear housings, torsion bar adjusters, spindle carriers
and spring seats;
- Powertrain components such as electronic control module housings,
engine crankshafts, bearing caps, front covers and cam covers;
transmission housings, retainers and bodies; and differential cases,
carriers and bearing caps;
- Brake components such as light vehicle and heavy vehicle calipers,
anchors and brackets; and
- Interior/body components such as steering column and lock housings,
electronic enclosures, mirror supports and brackets.
28
The Debtors also manufacture a variety of products for the industrial and
appliance markets. In 2004, 2003 and 2002, approximately 4.6%, 5.9% and 4.8% of
the Debtors' sales, respectively, were attributable to the industrial and
appliance markets.
Reportable segment sales for continuing operations by market for 2004 were as
follows:
<Table>
<Caption>
MARKET
AUTOMOTIVE INDUSTRIAL AND OTHER TOTAL
-------------------- -------------------- --------------------
FERROUS METALS SEGMENT 65.8% 0.8% 66.6%
LIGHT METALS SEGMENT 29.6% 3.8% 33.4%
TOTAL 95.4% 4.6% 100.0%
</Table>
Reportable segment sales for continuing operations by market for 2003 were as
follows:
<Table>
<Caption>
MARKET
AUTOMOTIVE INDUSTRIAL AND OTHER TOTAL
-------------------- -------------------- --------------------
FERROUS METALS SEGMENT 66.5% 1.0% 67.5%
LIGHT METALS SEGMENT 27.6% 4.9% 32.5%
TOTAL 94.1% 5.9% 100.0%
</Table>
Reportable segment sales for continuing operations by market for 2002 were as
follows:
<Table>
<Caption>
MARKET
AUTOMOTIVE INDUSTRIAL AND OTHER TOTAL
-------------------- -------------------- --------------------
FERROUS METALS SEGMENT 63.3% 0.8% 64.1%
LIGHT METALS SEGMENT 31.9% 4.0% 35.9%
TOTAL 95.2% 4.8% 100.0%
</Table>
All of the Debtors' foundry facilities that supply the automotive industry have
QS-9000 and ISO-9001 or ISO-9002 certification. All of the Debtors' European and
many of their North American operations have been certified to the new TS-16949
quality standard.
The Debtors primarily market their products through their own sales and customer
service staff. To a limited degree, the Debtors use independent sales
representatives. The Debtors' principal sales offices are in Troy, Michigan and
Saarbrucken, Germany, but are also supported by a smaller sales office in Tokyo,
Japan. The Debtors primarily produce to customer orders and do not maintain any
significant inventory of finished goods not on order.
The Debtors' sales staff acts as a liaison between their customers and their
production personnel. Through the Debtors' applications and product engineering
groups, the Debtors offer engineering and design capabilities and customer
assistance at the design stage of customer programs. The Debtors utilize quality
assurance representatives and engineers to work with their customers'
manufacturing personnel to detect and avoid
29
potential problems as well as to evaluate new product opportunities. In addition
to working with their customers' design engineers and other technical staff, the
Debtors' product design engineers frequently work closely with customers'
purchasing personnel and the Debtors' own sales personnel to present their ideas
and secure production purchase orders.
The Debtors supply cast products to automotive OEMs directly and through Tier 1
and Tier 2 suppliers. During the past three years, net sales to significant
customers were as follows (as a percentage of consolidated net sales):
<Table>
<Caption>
CUSTOMER 2004 2003 2002
- --------------- ---------- ---------- ----------
DAIMLERCHRYSLER 11% 10% 18%
DELPHI 11% 11% 11%
FORD 9% 11% 12%
METALDYNE 10% 8% 1%
TRW 7% 6% 2%
VISTEON 6% 6% 5%
PBR AUTOMOTIVE 5% 6% 5%
GENERAL MOTORS 3% 5% 5%
</Table>
During the past three years, net sales by market were as follows (as a
percentage of consolidated net sales):
<Table>
<Caption>
2004 2003 2002
---------- ---------- ----------
NORTH AMERICAN LIGHT TRUCKS 46% 52% 53%
NORTH AMERICAN PASSENGER CARS 26% 25% 29%
NORTH AMERICAN HEAVY VEHICLES 2% 1% 1%
EUROPEAN LIGHT VEHICLES 17% 13% 9%
EUROPEAN HEAVY VEHICLES 4% 3% 3%
INDUSTRIAL AND OTHER 5% 6% 5%
Total 100% 100% 100%
</Table>
Sales of ferrous metals castings for continuing operations were 478,000, 455,000
and 429,000 net tons in 2004, 2003 and 2002, respectively. The increase in net
tons sold in 2004 compared to 2003 is primarily because of increased European
sales, the full effect of the consolidation of the Porto Foundry in July 2003,
and the use of the Debtors' products for a new DaimlerChrysler program in North
America. The increase in net tons sold in 2003 compared to 2002 is primarily
because of the Debtors' consolidation of the Porto Foundry's operating results
beginning in July 2003.
Sales of light metals castings were 41,000, 34,000 and 41,000 net tons in 2004,
2003 and 2002, respectively. The increase in net tons sold in 2004 compared to
2003 is primarily because the Debtors are supplying products for new programs
for DaimlerChrysler and Ford. The decrease in net tons sold in 2003 compared to
2002 was due primarily to lower market demand and the conversion of one
high-volume magnesium program to plastic.
30
4. Design, Manufacturing And Machining
The Debtors have a technical center located in Lynchburg, Virginia, and
engineering capability in Troy, Michigan, Saarbrucken, Germany and Tokyo, Japan,
that provide development, engineering and design services to the Debtors'
customers. In addition, the Debtors provide technical support to all of their
plants. The Debtors furnish their customers with design support using the
customers' native computer-aided design and engineering languages as well as the
Debtors' cast metal process simulation software. The Debtors' design and
engineering teams also assist their customers in the initial stages of product
creation and development.
The Debtors' capabilities include computer-aided engineering analysis, design
optimization, prototyping, modeling enhancements and testing. The Debtors use
three-dimensional solid modeling software in conjunction with rapid prototype
development, among other computer-aided design techniques, to support their
customers in the initial stages of product design and prototype creation. The
Debtors' goal is to continually improve product quality and performance. The
Debtors also strive to reduce costs by offering new product solutions that
optimize designs, reduce weight, consider the use of alternative materials or
incorporate more efficient manufacturing processes. The Debtors believe that
their design and engineering capabilities serve as a competitive advantage as
their customers continue to outsource these critical activities to their own
suppliers.
The Debtors' Ferrous Metals segment produces ductile iron castings. The Debtors'
ferrous metal castings range from small parts weighing only a few ounces each to
products weighing up to 75 pounds each. The ferrous metals cast production
process involves melting scrap steel and pig iron in a cupola melter or an
electric furnace, adding various alloys and pouring the molten metal into molds
made primarily of sand. The molten metal cools and solidifies in the molds. The
molds are then broken apart and the castings are removed.
The Debtors' Light Metals segment produces castings of aluminum, magnesium and
zinc. The Debtors' light metal castings range from small products weighing only
a few ounces each to products weighing up to 50 pounds each. To produce light
metal castings, the Debtors use a process called die-casting, in which molten
aluminum, magnesium or zinc is introduced into a metal die and solidified. The
Debtors also produce light metal castings using pressure-counter-pressure
casting (PCPC (TM)), which is a casting method in which molten metal, usually
aluminum, is introduced into a permanent die cavity with low-pressure gas
applied to the metal in a sealed furnace.
Customers usually specify the properties that are required in their castings,
such as strength, ductility and hardness, and the Debtors then determine how
best to meet those specifications. Constant testing and monitoring of the
casting process is necessary to maintain both the quality and performance
consistency of the castings. Electronic analysis and monitoring equipment,
including x-ray, real-time radioscopy, ultrasonic and magnetic-particle testing
and chemical spectroscopy is used extensively in grading scrap metal, analyzing
molten metal and testing castings.
31
Most castings require machining before they can be put to their ultimate use.
This machining may include drilling, boring, milling, threading or cutting
operations. Many customers provide their own machining for castings or have them
machined by third parties. Most of the Debtors' light metals casting plants have
some machining operations integral in the casting operation. The Debtors also
contract with other companies to machine castings that the Debtors produce,
before the castings are shipped to customers.
5. Raw Materials
Scrap steel is the primary raw material that the Debtors use to manufacture
ferrous metals castings. The Debtors purchase scrap steel from numerous sources,
using a combination of spot market purchases and short-term contract
commitments. The Debtors have no material long-term contractual commitments with
any scrap steel supplier, nor is it generally possible to secure long-term
commitments in this market. Sharp increases in scrap steel cost have had a
significant negative impact on the Debtors' financial results and were the major
factor in our initiation of the Cases. As part of the Cases, the Debtors have
negotiated revised surcharge policies related to the products in which scrap
steel is a major input. These agreements provide for price adjustments that are
linked to the change in value of certain steel indices, which the Debtors
believe are representative of their true scrap costs. These new policies became
effective with a majority of the Debtors' customers on January 1, 2005. In
addition, lag times between scrap steel price movements and the Debtors' ability
to adjust prices have been reduced from between one and six months to
approximately one month with most of the Debtors' major customers. The Debtors'
customers have also agreed in some cases to additional surcharges intended to
cover price increases in other materials and transportation.
In the Debtors' light metals business, the Debtors' primary raw materials are
primary and secondary aluminum alloy and primary magnesium ingots. The Debtors
purchase aluminum using spot market purchases and short-term contract
commitments. The Debtors have no material long-term contractual commitments with
any aluminum suppliers. The Debtors have contractual arrangements with many of
their major customers that allow the Debtors to adjust their castings prices to
reflect fluctuations in the cost of aluminum ingot. Adjustments are typically
made after a time period specified by the customers and always lag the market.
See Item 7A of Intermet's Annual Report on Form 10-K, December 31, 2004,
"Quantitative and Qualitative Disclosures about Market Risks" for further
discussion of raw materials purchases.
The Debtors had contractual arrangements with some of their suppliers, which
expired at various times through 2004, for the purchase of various materials,
other than scrap steel, primary and secondary aluminum ingot and primary
magnesium ingot, used in the manufacturing process. These contracts provided
limited protection against price increases of raw materials. Many of these
contracts were renewed in 2004. Other than as noted above, the Debtors do not
have specific arrangements in place to adjust casting prices for fluctuations in
the prices of alloy and other materials.
32
6. Cyclicality And Seasonality
Although most of the Debtors' products are generally not affected by
year-to-year automotive style changes, model changes may have an impact on
sales. In addition, the inherent cyclicality of the automotive industry has
affected the Debtors' sales and earnings during periods of slow economic growth
or recession. The Debtors' third and fourth quarter sales are usually lower than
first and second quarter sales due to plant closings by automakers for holidays,
vacations and model changeovers.
7. Backlog
Most of the Debtors' business involves supplying all or a portion of the
customer's requirements under blanket purchase orders that are issued on an
annual basis. Customers typically issue firm releases and shipping schedules on
a periodic basis, typically monthly or weekly. Many of the Debtors' customers'
purchase orders permit cancellation of the orders at any time at the convenience
of the customer. The Debtors' backlog at any time generally consists only of the
orders that have not been released for shipment.
8. Competition
The Debtors compete with many other foundries domestically and internationally.
Some of these foundries are owned by major users of castings. For example, many
automobile manufacturers in North America and Europe, which are among the
Debtors' customer base, operate their own foundries. However, they also purchase
a significant number of castings from INTERMET and other companies. The Debtors'
castings also compete, to some degree, with other types of metal castings,
plastics, and steel and aluminum forgings and stampings.
The machining industry is highly fragmented and competitive. As in the foundry
industry, major purchasers of machined components often have significant
in-house capabilities to perform their own machining work. The Debtors compete
primarily on the basis of product quality, engineering, service and price. The
Debtors emphasize their ability to produce complex products in order to compete
for value-added castings.
9. Research And Development
The Debtors conduct process, material and product development programs for both
their ferrous metals and light metals products, principally at a technical
center and a research foundry in Lynchburg, Virginia. In addition, the Debtors
established an engineering center at their European headquarters in Saarbrucken,
Germany in 2003. This facility complements the capabilities of the Lynchburg
Technical Center and the Debtors' engineering capability in Troy, Michigan to
facilitate a global network of engineering research and development operations.
Current research and testing projects encompass both new manufacturing processes
and materials and product development. The Debtors' research foundry has a
self-contained melting and molding facility with extensive metallurgical,
physical and chemical testing capabilities. The Debtors' work on new
manufacturing processes focuses on ways to
33
lower costs and improve quality. The Debtors' product development work includes
projects to extend the performance range for existing materials such as with
austempering of ductile iron and special alloying for creep-resistant magnesium
alloys. In addition, the Debtors are currently working to develop new materials,
improve manufacturing processes and improve material properties. The Debtors
directly expensed $1.5 million, $1.2 million and $1.3 million in 2004, 2003 and
2002, respectively, for basic research and development.
10. Employees
At April 30, 2005, the Debtors had 5,311 employees, comprised of 3,880 and 1,431
employees in North America and Europe, respectively. The Debtors' workforce
included 3,183 and 1,190 hourly manufacturing workers in North America and
Europe, respectively, on such date. The remaining employees on such date were
management, engineering, sales and clerical personnel.
11. Financial Information About Geographic Areas
Long-lived and deferred tax assets were located as follows for 2004, 2003 and
2002 (in thousands of dollars):
For the year ended December 31:
<Table>
<Caption>
2004 2003 2002
---------- ---------- ----------
IDENTIFIABLE ASSETS IN:
NORTH AMERICA $ 357,260 $ 560,117 $ 683,775
EUROPE $ 155,563 $ 126,567 $ 80,323
TOTAL $ 512,823 $ 686,684 $ 764,098
</Table>
Sales by geographic locations for external customers for 2004, 2003 and 2002
were as follows (in thousands of dollars):
For the year ended December 31:
<Table>
<Caption>
2004 2003 2002
---------- ---------- ----------
SALES TO EXTERNAL CUSTOMERS:
NORTH AMERICA $ 658,987 $ 604,218 $ 663,648
EUROPE $ 175,842 $ 117,096 $ 88,506
OTHER INTERNATIONAL $ 2,344 $ 9,853 $ 3,583
TOTAL $ 837,173 $ 731,167 $ 755,737
</Table>
C. PROPERTIES
Intermet's headquarters are located in Troy, Michigan, and Intermet operates 18
manufacturing facilities throughout the world. All of the Debtors' manufacturing
34
locations are owned, except the Jackson Plants and Columbus Foundry facilities,
which are leased pursuant to financing arrangements utilizing industrial revenue
bonds. All of the Debtors' U.S. owned properties are subject to liens securing
bank borrowings. For further information on debt, see Section V of this
Disclosure Statement, and the discussion in Intermet's Annual Report on Form
10-K, December 31, 2004, "Management's Discussion and Analysis of Financial
Condition and Results of Operation" and Note 8 to the Consolidated Financial
Statements, Debt, included therewith.
Intermet's operations in the United States occupy approximately 2,750,000 square
feet (approximately 419,000 square feet of which represents leased facilities)
in facilities located in Michigan, Virginia, Georgia, Illinois, Minnesota,
Missouri, Tennessee, Wisconsin. Its operations outside of the United States
occupy 596,000 square feet (8,000 square feet of which represents leased
facilities) in facilities located in Germany and Portugal. The utilization and
capacity of Intermet's facilities fluctuates based upon current economics,
customer demands and the mix of components it produces and the vehicle models
for which it is producing the components. Intermet believes that substantially
all of its property and equipment is in good condition and that it has
sufficient capacity to meet its current manufacturing needs.
A list of Intermet's facilities is set forth on Exhibit C attached hereto. On or
before October 31, 2005, Intermet will move its corporate headquarters to
another nearby location in the Troy, Michigan area. Intermet's current lease
will expire on October 31, 2005.
D. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEBTORS
The following table shows the current list of directors and executive officers
of each of the Debtors:
<Table>
<Caption>
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- ------------------------------------------------------------------------------------------------------------------------------------
INTERMET DR. GARY F. RUFF (53) DR. GARY F. RUFF (53) CHAIRMAN OF THE BOARD
CORPORATION AND CHIEF EXECUTIVE OFFICER
DR. JOHN P. CRECINE (65) DIRECTOR
JULIA D. DARLOW (63) DIRECTOR
NORMAN F. EHLERS (67) DIRECTOR
JOHN R. HORNE (67) DIRECTOR
THOMAS H. JEFFS II (66) DIRECTOR
CHARLES G. MCCLURE (51) DIRECTOR
RICHARD A. NAWROCKI (56) DIRECTOR
MITSUNOBU TAKEUCHI (63) DIRECTOR
PAMELA E. RODGERS (46) DIRECTOR
ROBERT E. BELTS (55) VICE PRESIDENT--FINANCE AND
CHIEF FINANCIAL OFFICER
TIMOTHY R. GILLILAND (54) VICE PRESIDENT - LIGHT METALS
TODD A. HEAVIN (43) VICE PRESIDENT--FERROUS METALS
</Table>
35
<Table>
<Caption>
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- ------------------------------------------------------------------------------------------------------------------------------------
MARY JO KARJALA (60) CORPORATE SECRETARY
ALAN J. MILLER (56) VICE PRESIDENT, GENERAL COUNSEL
AND ASSISTANT SECRETARY
BYTHA MILLS (49) VICE PRESIDENT, ADMINISTRATION
THOMAS E. PRUCHA (55) VICE PRESIDENT--TECHNICAL
SERVICES
JOHN D. RUTHERFORD (58) VICE PRESIDENT SALES AND
MARKETING
MICHAEL S. SKRZYPCZAK (48) CORPORATE TREASURER
LAURENCE VINE-CHATTERTON (55) VICE PRESIDENT INTERMET
CORPORATION AND PRESIDENT --
INTERMET EUROPE
ALEXANDER CITY ROBERT E. BELTS PRESIDENT
CASTING COMPANY, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
CAST-MATIC ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
CORPORATION ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
COLUMBUS INTERMET INTERNATIONAL, INC. GENERAL PARTNER
FOUNDRY, L.P. SUDM, INC. LIMITED PARTNER
DIVERSIFIED ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
DIEMAKERS, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
GANTON ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
TECHNOLOGIES, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
HOLDING COMPANY ALAN J. MILLER ALAN J. MILLER SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
ILLINOIS, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
INTERNATIONAL, INC. DR. GARY F. RUFF DIRECTOR
</Table>
36
<Table>
<Caption>
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- ------------------------------------------------------------------------------------------------------------------------------------
ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
GREGORY B. WAHOWIAK VICE PRESIDENT
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET U.S. ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
HOLDING, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
IRONTON ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
IRON, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
LYNCHBURG ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
FOUNDRY COMPANY ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
NORTHERN ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
CASTINGS CORPORATION ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
SUDBURY, INC. ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
SUDM, INC. ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
TOOL ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
PRODUCTS, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
WAGNER ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
CASTINGS COMPANY ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
WAGNER ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
HAVANA, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
</Table>
37
E. THE PRINCIPALS OF THE DEBTORS
1. Background Of Directors And Executive Officers
DIRECTORS
DR. RUFF became Chairman and Chief Executive Officer of Intermet in July 2004.
He served as President and Chief Executive Officer from July 2003 to July 2004
and as President and Chief Operating Officer from December 2002 to July 2003.
During July 2000, he was promoted to Executive Vice President -- Technical
Services. Before joining Intermet, Dr. Ruff served in a variety of positions at
CMI International and its successor company, Hayes Lemmerz International, Inc.,
automotive parts suppliers. He served as President of North American Aluminum
Wheels -- Hayes Lemmerz International and as Corporate Vice President of Hayes
Lemmerz International, Inc. from February 1999 to May 1999. He was Chief
Technical Officer, Executive Vice President and director of CMI International,
Inc. from February 1994 until Hayes-Lemmerz purchased CMI in January 1999.
DR. CRECINE has been a director of Intermet since 1993. He is Chief Executive
Officer of B.P.T., Inc. and Chief Financial Officer of Islandless Network, LLC,
and a private investor and consultant. He was president of the Georgia Institute
of Technology from 1987 to mid-1994. Previously he served as a professor at the
University of Michigan and founding director of the Institute of Public Policy
Studies from 1965 to 1975. He became dean of the College of Humanities and
Social Sciences at Carnegie Mellon University in 1975, a position he held until
1982 when he became the University's provost and senior vice president for
Academic Affairs. He held that position until his Georgia Tech appointment. He
is a director of Interland, Inc. and IT/IS Telecom, LLC.
MS. DARLOW has been a director of Intermet since 2001. Ms. Darlow became counsel
to the Grand Rapids based law firm of Varnum Riddering Schmidt & Howlett LLP in
January 2005. Ms. Darlow is a former partner of the Detroit-based law firm of
Dickinson Wright PLLC, having joined the firm in 1971, and most recently serving
as a consulting member and attorney from January 2002 until October 2004. Ms.
Darlow also serves on the Board of Trustees for Marygrove College and the
Michigan Opera Theatre. She is the past President of the State Bar of Michigan.
MR. EHLERS has been a director of Intermet since 1997. He served as Vice
President-Purchasing and Supply at Ford Motor Company from 1992 until his
retirement in 1996. Before 1992 he served as Vice President-Supply for Ford of
Europe, executive director of North American Automotive Operations production
purchasing and executive director of purchasing and transportation services.
MR. HORNE has been a director of Intermet since 1997. He retired as Chairman of
the Board of Navistar International Corporation in February 2004, a position he
held since February 2003. Prior to that he served as Chairman and CEO from April
2002. Mr. Horne served as Chairman, CEO and President of Navistar International
Corporation
38
from 1995 until 2002. He serves as a director for the Corrections Corporation of
America and is a director and member of the executive committee of Junior
Achievement of Chicago.
MR. JEFFS has been a director of Intermet since 1997. He retired as vice
chairman of First Chicago NBD Corporation and First National Bank of Chicago,
and president and chief operating officer of its Michigan subsidiary, NBD Bank,
effective October 31, 1998. He is a governor of the Stratford Festival of
Canada.
MR. MCCLURE has been a director of Intermet since 2002. He was elected to the
position of Chairman of the Board, Chief Executive Officer and President and a
director of ArvinMeritor in August 2004. Prior to joining ArvinMeritor, he
served Federal-Mogul Corporation as Chief Executive Officer and a member of the
Board of Directors from July 2003 to July 2004, and as President and Chief
Operating Officer and a member of the Board from January 2001 to July 2003. He
served Detroit Diesel Corporation as President, Chief Executive Officer and a
member of the Board from 1997 to December 2000, and held a number of management
positions with Johnson Controls, Inc. from 1983 to 1997, including President of
the Americas Region; Vice President and Managing Director of European
Operations; and Vice President and General Manager of Joint Ventures. From 1983
to 1985 Mr. McClure was employed at Hoover Universal, acquired by Johnson
Controls in 1985. He began his career with Ford Motor Company as a heavy-duty
truck sales engineer and field service engineer. Mr. McClure is a director of
R.L. Polk & Company, and serves on the boards of various business and civic
organizations.
MR. NAWROCKI has been a director of Intermet since 2003. He is currently the
President, Chief Executive Officer and member of the Board of Directors of CMI -
Management Services, Inc., part owner and President of R.W. Ventures, LLC, a
venture capital entity, President of R.W. Real Estate, LLC, and President of
Plan B Consultants, LLC. Prior positions include President and CEO and Director,
and Executive Vice President and Chief Financial Officer of CMI International,
Inc. from November 1986 to February 1999. Prior to joining CMI International,
Inc., Mr. Nawrocki was a partner with CPA firm Cuilla, Smith and Dale. He became
a Certified Public Accountant in Michigan in 1974. Mr. Nawrocki is a mentor with
the Northville, Michigan Youth Association.
MR. TAKEUCHI has been a director of Intermet since 2004. He serves as Chairman
Emeritus of DENSO International America, Inc., North American headquarters for
Japan-based DENSO Corporation, and honorary advisor to the Board of Directors of
DENSO Corporation since June 2004 after a 40-year career with the company.
Previously, Mr. Takeuchi served as a member of DENSO Corporation's Board of
Directors and as Chair and Chief Executive Officer of DENSO International
America since July 2002, having served as President and Chief Executive Officer
since June 1997. Mr. Takeuchi is a member and past president of the Japan
Business Society of Detroit and serves on boards of the National Association of
Manufacturers, Original Equipment Suppliers Association, Motor Equipment
Manufacturers Association, Economic Club of Detroit and the Greater Detroit
Chamber of Commerce.
39
MS. RODGERS has been a director of Intermet since 1999. She has been president
of Rodgers Chevrolet in Woodhaven, Michigan since November 1996. Previously, she
was president of Flat Rock Chevrolet-Oldsmobile from February 1993. Ms. Rodgers
serves on the boards of the Community Foundation for Southeastern Michigan, New
Detroit Inc., and the Detroit Black Chamber.
OFFICERS
DR. RUFF - see above.
MR. BELTS joined Intermet as Vice President - Finance and Chief Financial
Officer in August 2002 following 14 years with Detroit Diesel Corporation, most
recently serving as Senior Vice President and Chief Financial Officer. Prior to
this position, he was Vice President and Controller with Detroit Diesel
Corporation. He began his career in 1971 with General Motors Corporation, rising
to the position of Divisional Director of Budgets and General Accounting with
GM's Detroit-Diesel-Allison Division. Detroit-Diesel-Allison transitioned to an
independent company in 1988.
MR. GILLILAND joined Intermet in October 2003 as General Manager of the Intermet
Racine Operations. He was promoted in May 2004 to the position of Vice
President, Light Metals. Prior to joining Intermet, he was with J. L. French
Automotive Castings, Inc. where he served as Vice President of Quality, having
previously held various manufacturing positions with J.L. French. Before J.L.
French, Mr. Gilliland served as Vice President of Manufacturing for Nelson Metal
Products Corporation, acquired by J.L. French in October 1999. He has served as
Vice President and General Manager at various CMI International operations, was
a Plant Manager with Amcast Corporation, and began his career with General
Motors having held positions of increasing responsibility at the company's
casting operations.
MR. HEAVIN joined Intermet as a Group Vice President in June 2000. Prior to
joining Intermet, he held the position of Manufacturing Manager for Delphi's
energy and chassis division. Prior to Delphi, Mr. Heavin was with United
Technologies Automotive for six years as Plant Manager of the Holland, Michigan
plant and subsequently as a General Manager in the Interiors group.
MS. KARJALA joined Intermet as Executive Assistant to the Chairman and CEO in
September 1995. In December 2002 she was elected by the Board of Directors to
the position of Corporate Secretary, having served as Assistant Corporate
Secretary since January 1997. Prior to joining Intermet, Ms. Karjala was with
the Jervis B. Webb Company in the position of International Office Manager. She
began her career with the Ford Motor Company.
MR. MILLER joined Intermet in July 1998 as Corporate General Counsel and was
named Vice President and General Counsel in August 1999 and Secretary in 2000.
He served as Vice President, General Counsel and Secretary of Libbey-Owens-Ford
Co., an automotive parts supplier, from February 1987 to July 1998.
40
MS. MILLS joined Intermet in February 1997 as Manager of Investor Relations. In
December 2002, she was elected by the Board of Directors to the position of Vice
President of Administration, having been promoted from the Director of Corporate
Affairs, a position she held from March 1999. Prior to joining Intermet, Ms.
Mills served as Human Resources Manager, Accounting Supervisor and in other
positions with Dana Corporation.
MR. PRUCHA joined Intermet in October 1999 as Director, Process Research and
Development and was promoted to the position of Vice President, Technical
Services in December 2002. Prior to joining Intermet, Mr. Prucha served as Vice
President of Technology with CMI International for 10 years, having 30 years of
experience in the metal-casting industry, 20 of which at CMI.
MR. RUTHERFORD joined Intermet in June 2003 as Director of Sales responsible for
Light Metals sales and the activities of the company's independent
manufacturers' representatives. He was promoted to the position of Vice
President of Sales and Marketing in August 2004. Mr. Rutherford came to Intermet
from Eastern Alloys, Inc. located in New York, where he served as Vice President
Sales and Marketing. Prior to Eastern Alloys, he was Vice President of Business
Development at Dynacast /SPM, also of New York. Prior positions included Vice
President of Sales and Marketing at Magnesium Aluminum Corporation, and he began
his career in metals and casting at Aluminum Smelting and Refining Company, Inc.
ultimately becoming President and CEO.
MR. SKRZYPCZAK joined Intermet in 1995 as Director of Treasury Services. In
April 2000, the Board of Directors appointed Mr. Skrzypczak to the position of
Corporate Treasurer. Prior to joining Intermet, he was with the U.S. Department
of the Treasury, where he served as a national bank examiner for the Comptroller
of the Currency. Mr. Skrzypczak has also held treasury and financial positions
at Inacomp Computer Centers, Merrill Lynch and Wells Fargo Bank.
MR. VINE-CHATTERTON joined Intermet in January 1999 as a Vice President of
Intermet and President of Intermet Europe. Before coming to Intermet, he was a
divisional Finance Director of T&N PLC, UK, an automotive parts supplier, from
June 1996. Mr. Vine-Chatterton was a divisional Finance Director of Caradon PLC,
UK, an international supplier to building and home improvement industries, from
January 1994 until 1996.
2. Compensation Of The Principals Of The Debtors
A. ANNUAL COMPENSATION
The following chart sets forth the annual salaries for 2004 and 2005 of the
principals of the Debtors:
41
<Table>
<Caption>
NAME 2004 ANNUAL COMPENSATION 2005 ANNUAL COMPENSATION
- ---- ------------------------ ------------------------
DR. GARY F. RUFF $500,000 (7/2004) SAME AS 2004
DR. JOHN P. CRECINE SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
JULIA D. DARLOW SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
NORMAN F. EHLERS SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
JOHN R. HORNE SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
THOMAS H. JEFFS II SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
CHARLES G. MCCLURE SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
RICHARD A. NAWROCKI SEE "DIRECTOR COMPENSATION" BELOW. SEE "DIRECTOR COMPENSATION" BELOW.
PAMELA E. RODGERS SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
ROBERT E. BELTS $260,000 SAME AS 2004
TIMOTHY R. GILLILAND $200,000 SAME AS 2004
TODD A. HEAVIN $210,000 SAME AS 2004
MARY JO KARJALA $72,000 $75,600 (4/05)
ALAN J. MILLER $225,000 SAME AS 2004
BYTHA MILLS $150,000 SAME AS 2004
THOMAS E. PRUCHA $175,000 SAME AS 2004
JOHN D. RUTHERFORD $200,000 SAME AS 2004
MICHAEL S. SKRZYPCZAK $130,000 SAME AS 2004
$249,260 /E.206,000 (1E.=$1.21)
LAURENCE VINE-CHATTERTON $204,721 /E.186,110 (1E.= $1.1)
</Table>
In addition, officers received a 401(k) match, ESOP contribution, term life
insurance benefits, other medical and health benefits, and certain other
personal benefits. See also the discussion of the Key Employee Retention Plan in
Section VII.G. of this Disclosure Statement.
B. DIRECTOR COMPENSATION
The Debtors do not pay board fees to their employee directors. The Debtors pay
Dr. Crecine, Ms. Darlow, Mr. Ehlers, Mr. Horne, Mr. Jeffs, Mr. McClure, Mr.
Nawrocki, Ms.
42
Rodgers and Mr. Takeuchi, as non-employee directors, $8,500 quarterly, for
regularly scheduled board or committee meetings and telephone board and
committee meetings. In addition, non-employee directors receive a fee of $1,000
for special board or committee meetings other than the afternoon before or day
of a regularly scheduled board meeting. Committee chairpersons receive a fee of
$2,000 per year paid quarterly, and directors are reimbursed for out-of-pocket
expenses associated with attending meetings or conducting board business.
Effective July 2004, the Debtors increased the compensation of their lead
director, Mr. Nawrocki, $3,750 per quarter in addition to the fees described
above. Effective April 2005, the Debtors further increased Mr. Nawrocki's
compensation to an aggregate increase of $12,500 per quarter in addition to the
fees described above.
F. ENVIRONMENTAL RELATED LIABILITIES
1. Description Of Environmental Liabilities
Various of the Debtors conduct and have conducted industrial operations at
numerous facilities in the United States. As a result, they have been involved
in matters relating to the discharge of materials into the environment. The
Debtors have participated and are participating in a number of on-site
investigation, monitoring and/or remediation projects at various owned and
non-owned sites, some of which are being managed or overseen by federal, state
and/or local regulatory agencies. The Debtors' operations are also regulated by
state and local environmental agencies that issue various permits covering the
Debtors' operations with respect to discharges to air, water and solid or
hazardous waste disposal. Various of the Debtors have been involved in some
proceedings with state or federal regulators alleging noncompliance with permit
limitations or other matters. Further information with respect to these matters
is set forth at Item 17 of the various Debtors' Statements of Financial Affairs.
Due to the technical and legal nature of potential environmental related
liabilities, the Debtors have utilized and continue to utilize the services of
counsel and environmental consultants to obtain the technical advice and
expertise necessary to ensure that the Debtors are in compliance with federal,
state and local laws and regulations and to insure that the Debtors' rights are
protected.
2. Future Activities At Owned Sites
The Debtors intend to satisfy all environmental claims by continuing with all
compliance and remediation activities currently underway, or as may be required
in the future, in connection with owned sites (except as specifically noted
herein).
3. Continuation Of Remediation Activities At Certain
Non-Owned Sites
Debtor Lynchburg Foundry Company is the operator and permittee of the Falwell
Aviation landfill, which is located on property that is leased by Lynchburg
Foundry Company in Lynchburg, Virginia. The site has been used as an industrial
landfill for non-hazardous waste materials from foundry operations. Pursuant to
state and federal
43
requirements, Intermet has been required to issue a letter of credit in the
aggregate amount of $2.7 million order to provide financial assurance for the
operation and closure of three landfills in Virginia, including the Falwell
Aviation Landfill. The other two landfills are located on property owned by
Lynchburg Foundry Company in Campbell County, Virginia and Radford, Virginia.
Pursuant to federal and state requirement, Lynchburg Foundry Company is required
to undertake closure of the Falwell Aviation Landfill. If the closure work is
not undertaken in compliance with regulations, the Commonwealth of Virginia
would be entitled to draw on the letter of credit to perform such work. The
Debtors estimate that the work can be performed at a cost that is less than the
amount that could be drawn on the letter of credit. As a result, the Plan
provides that Lynchburg Foundry Company will continue to perform this work and
that the obligations of Lynchburg Foundry Company to perform closure and
post-closure work at the Falwell Aviation Landfill will not be discharged by the
Plan.
4. Discharge Of Environmental Claims Related To
Non-Owned Sites
The Debtors intend to discharge any and all obligations and claims relating to
the following matters, all of which involve non-owned sites:
A. Any liability associated with pre-filing
off-site exposure to contaminants migrating
from the property located at 227 Wagner
Avenue, Havana, Illinois, including but not
limited to, off-site drinking water wells
(Debtor: Wagner-Havana, Inc.).
B. Any and all liability for any off-site
contamination emanating from the properties
located at 1701 West Main Street and 1605
West Main Street, Radford, Virginia,
including potential contamination in the New
River (Debtors: Intermet International,
Inc., Intermet U.S. Holding, Inc., Lynchburg
Foundry Company).
C. Any and all liability associated with
pre-filing off-site exposure to contaminants
migrating from the property located at 825
N. Lowber Street, Decatur, Illinois (Debtor:
Wagner Castings Company).
D. Any and all liability associated with
pre-filing off-site exposure to contaminants
migrating from the property located on
Florida Avenue in Lynchburg, Virginia
(Debtor: Lynchburg Foundry Company).
E. Any and all liability for environmental
investigation or remediation activities at
any property formerly owned by any Debtor,
or for which any Debtor may be responsible
by contract or otherwise, including but not
limited to the matters listed on the
Schedules of any Debtor, and the
44
following: (i) General Products Corporation,
2400 East South Street, Jackson, Michigan
(Debtor: Sudbury, Inc., Intermet
Corporation); (ii) Property located at 506
Randolph Avenue, St. Paul, Minnesota
(Debtor: Intermet Corporation, Sudbury,
Inc.); (iii) Property located at 118-130
Reed Street, Philadelphia, Pennsylvania
(Debtor: Sudbury, Inc.); (iv) Iowa Mold
Tooling, 500 Highway 18 West, Garner, Iowa
(Debtor: Sudbury, Inc., Intermet
Corporation); (v) Frisby PMC, 1500 Chase
Avenue, Elk Grove Village, Illinois (Debtor:
Intermet Illinois, Inc., Intermet
Corporation); (vi) BWX Technologies, Inc.
property located at 1570 Mt. Athos Road,
Lynchburg, Virginia (Debtor: Lynchburg
Foundry Company); (vii) Property located
adjacent to 1500 Chase Avenue, Elk Grove
Village, Illinois (Debtor: Intermet
Illinois, Inc., Intermet Corporation)
F. Allegations of Pre-Petition Non-Compliance
at the Archer Creek Facility
As of the Petition Date, Lynchburg Foundry Company was involved in negotiations
with the Virginia Department of Environmental Quality regarding the resolution
of allegations that Lynchburg was not in compliance with the air emissions
permit issued to the Archer Creek facility. On July 19, 2004, the Virginia
Department of Environmental Quality issued a Notice of Violation to Lynchburg
alleging that the facility had violated air emissions limitations in the Title V
permit previously issued to the facility. Lynchburg has taken steps to remedy
the conditions that led to the alleged violations, including the replacement of
bags on the baghouse and installation of new gauges and valves. Lynchburg
believes that the facility is currently in compliance with the limitations in
the Title V permit.
Lynchburg has been negotiating a Consent Decree with the Virginia Department of
Environmental Quality that will also provide for (1) the implementation of a
Supplemental Environmental Project ("SEP") to install an additional baghouse at
a minimum cost of $11,377, and (2) the payment of $15,170 as a civil penalty for
the alleged violations. Although the alleged violations occurred prior to the
Petition Date, Lynchburg believes that the implementation of the SEP and payment
of the civil penalty will enhance the cooperation of the Virginia Department of
Environmental Quality with respect to Lynchburg's future operations which will
continue to be regulated closely by the Virginia Department of Environmental
Quality and therefore Lynchburg will seek permission from the Bankruptcy Court
to enter into the Consent Decree.
45
V. THE DEBTORS' DEBT OBLIGATIONS
A. THE PRE-PETITION CREDIT FACILITY
Prior to the Petition Date, the Debtors' operations were financed, in part, by
the Pre-Petition Credit Facility, in which approximately 20 Pre-Petition Lenders
participated (whether pursuant to direct agreements or instruments with the
Debtors, or through participation with the lenders in contractual privity with
the Debtors), and for which the Bank of Nova Scotia is the Pre-Petition Agent.
The Pre-Petition Credit Facility is memorialized by a January 8, 2004, credit
agreement (as amended by that First Amendment dated April 13, 2004) consisting
of a $90 million revolving credit facility and a $120 million term loan (the
"Pre-Petition Credit Agreement"). As of the Petition Date, the Debtors had
borrowed approximately $41 million, and had approximately $27 million of
outstanding standby letters of credits issued under the revolver. Intermet is
the principal obligor under the Pre-Petition Credit Facility, and the remaining
Debtors are joint and several guarantors of the obligations thereunder pursuant
to that certain Second Amended and Restated Guaranty Agreement dated as of
January 8, 2004.
Pursuant to a First Amended and Restated Borrower Pledge and Security Agreement
dated as of January 8, 2004, Intermet granted to the Pre-Petition Agent, for the
benefit of the Pre-Petition Lenders, valid and enforceable first priority liens
in substantially all of the personal and intangible properties of Intermet,
including all accounts, all the Debtors' United States domestic assets and
pledges of 65% of the stock of certain of the Debtors' foreign Non-Debtor
Affiliates.
The $90.0 million revolving credit portion has a maturity date of January 8,
2009, and the $120 million term loan has a maturity date of January 8, 2010.
During 2004, principal payments of $0.6 million had been made towards the term
loan before the filing of the Debtors' Cases. Due to the default created by the
filing of the Cases, effective September 30, 2004, pricing on the revolving loan
and term loan were modified to a floating rate. The annual interest rates as of
December 31, 2004 were 6.5% for the revolving credit line and 7.0% for the term
loan. Interest is payable monthly on both loans. In addition, and also effective
as of September 30, 2004, the Debtors are required to accrue additional interest
at an annual rate of 1.5%, which is added monthly to the outstanding loan
balances for both the revolver and term loan.
B. LETTERS OF CREDIT AGREEMENT
As of the Petition Date, the Debtors were also parties to a $35.6 million Letter
of Credit Facility Agreement dated January 8, 2004 (the "L/C Facility
Agreement"). In consideration for the L/C Facility Agreement, the Bank of Nova
Scotia issued a letter of credit in the amount of approximately $35.6 million
(the "Georgia Letter of Credit") to secure payment of the Georgia Revenue Bonds
(as defined below). The L/C Facility Agreement was secured solely by an account
(the "Cash Collateral Account") of the Debtors holding $35.6 million of the
Debtors' funds (the "L/C Cash Collateral").
46
C. SENIOR NOTES
The Debtors also used the capital markets to finance their operations and had
indebtedness under a series of unsecured Senior Notes issued on June 13, 2002,
in the aggregate outstanding principal amount of $175 million. The Senior Notes
bear a fixed rate of interest at 9.75%, and will mature on June 15, 2009.
Interest is due each June 15 and December 15.
U.S. Bank National Association is the Indenture Trustee for the Senior Notes.
The Debtors are obligated under the Senior Notes to pay the reasonable fees and
out-of-pocket expenses of the Indenture Trustee.
THE SENIOR NOTES ARE UNCONDITIONALLY GUARANTEED, JOINTLY AND SEVERALLY, BY ALL
OF THE DEBTORS EXCEPT INTERMET INTERNATIONAL, INC. AND INTERMET HOLDING COMPANY
(THE "SENIOR NOTE GUARANTORS"). THIS MEANS THAT HOLDERS OF THE SENIOR NOTES MAY
ASSERT THE ENTIRE AMOUNT OF THEIR CLAIMS AGAINST EACH AND EVERY SENIOR NOTE
GUARANTOR UNTIL THEIR CLAIMS ARE SATISFIED.
Restrictions contained in the indenture covering the Senior Notes include, but
are not limited to, restrictions on incurring additional secured debt,
repurchasing of Intermet's capital stock, disposal of assets, affiliate
transactions, and transfer of assets.
D. INDUSTRIAL REVENUE BONDS
1. Columbus Foundry
One of the Debtors, Columbus Foundry, L.P., had obligations relating to
indebtedness under variable rate limited obligation revenue bonds in the
approximate outstanding principal amount of $35 million (the "Georgia Revenue
Bonds"), which was secured by the Georgia Letter of Credit issued by the
Pre-Petition Agent in favor of Harris Trust & Savings Bank. Pursuant to the
Georgia Revenue Bonds, Columbus Foundry, L.P. was required to make monthly
interest-only payments at a variable rate. The interest rate reset weekly and at
September 30, 2004, was approximately 2%. The principal was due December 1,
2019.
On October 29, 2004, in light of the default created by the filing of the Cases,
the beneficiary of the Georgia Letter of Credit drew the amount of $35,050,051,
causing a reimbursement obligation on the part of Intermet to the Bank of Nova
Scotia in the same amount including accrued interest.
In order to satisfy such reimbursement obligation, on November 8, 2004, pursuant
to the terms and conditions of the DIP Financing Order, Intermet released to the
Bank of Nova Scotia all of the L/C Cash Collateral then on deposit in the Cash
Collateral Account, which was applied by the Bank of Nova Scotia in permanent
reduction and discharge of Intermet's obligations under the L/C Facility
Agreement and the balance remaining after
47
such application (approximately $770,000) was returned by the Bank of Nova
Scotia to Intermet.
2. Lynchburg Foundry
Another of the Debtors, Lynchburg Foundry Company, had approximately $2 million
outstanding under industrial development revenue bonds in favor of SunTrust Bank
as trustee (the "Lynchburg Bond"). Lynchburg Foundry Company was required to
make partial redemption of its industrial development revenue bonds on an annual
basis through June 2006. The redemption amount was $350,000 per year, with a
final payment at maturity of $1,650,000. The bonds were subject to optional
redemption prior to maturity and bear an interest rate of 7.0%.
The Lynchburg Bond was unsecured but was guaranteed by Mead Corporation, a
former owner of the property. Since the default created by the commencement of
the Cases, Mead Corporation has made and continues to make payments that have
come due pursuant to the terms of its guaranty of the Lynchburg Bond.
3. Tool Products
As part of an asset purchase transaction, the Debtor now known as Tool Products,
Inc. assumed $4.5 million of industrial development revenue bond debt in favor
of U.S. Bank, National Association as trustee (the "Tool Products Bond"), of
which approximately $1.5 million in principal and interest was outstanding as of
the Petition Date, which amount was secured by a letter of credit issued
pursuant to the revolver under the Pre-Petition Credit Agreement. Tool Products,
Inc. was required to make annual principal payments of $500,000, with a final
maturity date of January 1, 2007. The interest rate reset weekly and at
September 30, 2004, was approximately 2%.
On November 1, 2004, in light of the default created by the commencement of the
Cases, the beneficiary of the Tool Products Bond drew the entire face amount
thereof causing a reimbursement obligation on the part of Intermet to the
Pre-Petition Lenders in the amount of $1,530,821, which amount is reflected as
part of the amount owed to the Pre-Petition Lenders under the revolver pursuant
to the Pre-Petition Credit Agreement.
E. TRADE DEBT
The Debtors estimate that there are approximately $83.3 million of General
Unsecured Claims which may be Allowed against the Debtors in the aggregate (not
including Noteholder Claims, and subject to objections). These General Unsecured
Claims are allocated between each Debtor as follows:
48
<Table>
<Caption>
Debtor Approximate Amount Of Non-Noteholder General Unsecured Claims
- ------------------------------------------------- -------------------------------------------------------------
Intermet Corporation, et al.* ~ $612,671
Alexander City Casting Company, Inc. $0
Cast-Matic Corporation ~ $3,436,392
Columbus Foundry, L.P. ~ $12,215,255
Diversified Diemakers, Inc. ~ $5,186,370
Ganton Technologies, Inc. ~ $10,523,266
Intermet Corporation ~ $11,280,731
Intermet Illinois, Inc. ~ $400,348
Intermet International, Inc. ~ $14,000
Intermet U.S. Holding, Inc. ~ $7,321,313
Ironton Iron, Inc. ~ $1,807,380
Lynchburg Foundry Company ~ $11,376,663
Northern Castings Corporation ~ $1,668,583
Sudbury, Inc. ~ $1,880,438
SUDM, Inc. $0
Tool Products, Inc. ~ $8,303,816
Wagner Castings Company ~ $6,599,283
Wagner Havana, Inc. ~ $691,404
TOTAL: ~ $83,317,913
</Table>
Note: The Claims estimates set forth above reflect current estimates of Claims
at each Debtor. Actual distributions may be higher or lower based on the
resolution of Disputed Claims and actual Allowed Claims at each Debtor.
* This entry represents Claims filed without identifying the particular Debtor
against which such Claim is asserted.
The Debtors anticipate that some of these General Unsecured Claims are subject
to disallowance or reduction.
VI. CAUSES OF ACTION
A. CHAPTER 5 CLAIMS
The Debtors are investigating whether they have Causes of Action against
Creditors or other Persons for preference liability and any other Causes of
Action contemplated by chapter 5 of the Bankruptcy Code, and reserve all of
their rights to bring any such Causes of Action. Payments to Creditors or other
Persons in the 90 days immediately preceding the Petition Date are listed in the
Debtors' Schedules and total $225,741,474. Payments to "insiders" (as that term
is defined in Section 101(31) of the Bankruptcy Code) in the one year
immediately preceding the Petition Date are also listed in the Debtors'
Schedules and total $2,438,966. A list of potential Avoidance Actions is
attached to the Plan as Exhibit J. The majority of these Causes of Actions are
against General Unsecured Creditors in Classes 4 and 5. These Causes of Action
are potential Causes of Action in that they have not been analyzed on the merits
and may be subject to valid defenses. All Causes of Action and Avoidance Actions
will be preserved and transferred to the Reorganized Debtors, and any recoveries
therefrom will inure to the benefit of the relevant Debtor and thereby enhance
the enterprise value of such Debtor.
49
B. OTHER CLAIMS
All other Causes of Action are preserved and will be transferred to the
Reorganized Debtors, including, but not limited to, Causes of Action arising
under commercial purchase orders, such as those relating to pricing issues,
rights of setoff, rights to recover wrongful setoffs and recoupments, and the
like. These Causes of Action include, but are not limited to, those listed on
Exhibit D to this Disclosure Statement and Exhibit K to the Plan. Neither
Exhibit D to this Disclosure Statement nor Exhibit K to the Plan is intended to
be an exhaustive list of the Causes of Action the Debtors and Reorganized
Debtors intend to preserve and bring following Confirmation.
C. PENDING LITIGATION
As of the Petition Date, the Debtors were not involved in any litigation that is
likely to have a material impact on the Debtors. Attached as Exhibit E is a list
of all pending litigation.
VII. SIGNIFICANT POST-PETITION ACTIONS
The Debtors commenced the Cases on the Petition Date, September 29, 2004, and
the following significant actions have been taken since the Petition Date.
A. FIRST DAY MOTIONS
Together with their petitions for relief, the Debtors filed a number of "first
day" motions on or near the Petition Date as listed on Exhibit F. The first day
motions and orders were intended to facilitate the transition between the
Debtors' pre-Petition Date and post-Petition Date business operations by
approving certain regular business practices that may not have been specifically
authorized under the Bankruptcy Code or as to which the Bankruptcy Code requires
prior approval by the Bankruptcy Court. The first day orders obtained in these
Cases are typical of orders entered in other substantial Chapter 11 cases around
the country. Among other things, such orders provided for:
o Joint administration of the Debtors' Cases;
o Interim use of cash collateral;
o Maintenance of the Debtors' bank accounts and operation of their cash
management systems substantially as such systems existed prior to the
Petition Date;
o Payment of certain pre-petition wages, salaries, payroll taxes, and
other compensation, employee benefits and reimburseable employee
expenses;
o A prohibition on utilities from altering, refusing or discontinuing
services on account of pre-petition Claims, deeming utilities
adequately assured of future performance, and establishing procedures
for determining requests for additional adequate assurance; and
50
o Payment of pre-petition use, employment, single business, property
and other taxes.
B. RETENTION OF PROFESSIONALS
Since the Petition Date, the Debtors have continued to operate their businesses
in the ordinary course as debtors-in-possession under Sections 1107 and 1108 of
the Bankruptcy Code.
Both before and after the Petition Date, the Debtors have taken actions to
stabilize their operations. The Debtors' management actively and regularly
contacts the Debtors' customers, vendors and other business partners to assure
them that the Cases will not adversely affect the Debtors' ability to operate
and honor trade terms. At the same time, management has addressed and will
continue to address the many emergencies and other matters that are incidental
to the commencement of complex chapter 11 cases, including responding to a
multitude of inquiries by employees, unsecured Creditors, the Creditors'
Committee, the Equity Committee, various Professionals and others.
To represent the Debtors in these Cases, the Debtors retained Professionals,
including, without limitation, (i) the law firm of Foley & Lardner LLP, Detroit,
Michigan, as general bankruptcy counsel; (ii) Carson Fischer, P.L.C.,
Birmingham, Michigan, as special counsel primarily to handle conflicts of
interest; (iii) Conway Mackenzie & Dunleavy ("CMD"), Birmingham, Michigan, as
their financial advisors and investment bankers; (iv) Ernst & Young LLP, in
Detroit, Michigan, as independent auditors; (v) KPMG LLP, in Detroit, Michigan,
as SOX 404 consultants; (vi) Stout Risius Ross as independent valuation
consultants ("SRR"); and (vii) Lazard Freres & Co. LLC, in New York City, as
investment bankers ("Lazard"). In addition, the Debtors have certain
Professionals to act as special counsel in limited matters, and numerous others
to assist the Debtors in the ordinary course of their businesses.
C. CASE ADMINISTRATION
1. Bar Date And Voting
By Local Rule of the Bankruptcy Court, February 7, 2005 was established as the
Claims Filing Bar Date, subject to certain exceptions described in the notice of
commencement of these Cases. By separate order, the Bankruptcy Court established
a Supplemental Bar Date of April 29, 2005 for certain Creditors under the
limited circumstances described therein.
Pursuant to Bankruptcy Rule 3003(c)(2), any Creditor: (a) whose Claim (i) was
not listed in the Schedules, or (ii) was listed in the Schedules as disputed,
contingent or unliquidated, and (b) who failed to file a Proof of Claim on or
before the Claims Filing Bar Date, or the Supplemental Bar Date, as applicable
(and except as otherwise ordered by the Bankruptcy Court), will not be treated
as a Creditor with respect to that Claim for purposes of voting on the Plan or
receiving a Distribution under the Plan. Further, unless
51
a Proof of Claim was filed on or before the Claims Filing Bar Date, or the
Supplemental Bar Date, as applicable (and except as otherwise ordered by the
Bankruptcy Court), the Claim amount listed in the Debtors' Schedules is
dispositive, subject to any amendments made thereto. Creditors are instructed to
read any Bankruptcy Court orders establishing or dealing with procedures with
respect to voting on the Plan, which are anticipated to be entered in
conjunction with the hearing on the approval of the Disclosure Statement. Any
such order will be provided to constituencies along with the approved Disclosure
Statement at the appropriate time.
If the Plan is confirmed, the Debtors will have up to 180 days from the
Effective Date to file any Claim objections, provided that such date may be
extended from time to time.
D. OPERATIONAL DEVELOPMENTS
Since the Petition Date, the Debtors have made substantial improvements to their
operations and administration which have resulted in significant cost savings
and increased revenues. Among other things, the Debtors have met all customer
requirements and schedules, and have renegotiated various customer agreements
to: (i) establish new scrap steel and magnesium alloy indices; (ii) secure new
surcharge agreements with ten (10) major customers (constituting approximately
78% of their total revenues and approximately 80% of their ferrous revenues) and
a significant portion of their other customers; (iii) obtain price increases on
some of their parts; (iv) obtain accelerated payment terms with 10 major
customers and the majority of their other customers for limited time periods;
and (v) recover various 2004 fourth quarter surcharges from certain customers.
The Debtors also announced the closure of: their (i) Columbus Machining, (ii)
Racine Machining, and (iii) Racine Casting plants, all of which were completed
in or before June 2005, and (iv) Decatur plant, which the Debtors anticipate
will be completed by December 31, 2005.
Further, the Debtors have increased employee contribution amounts to their
benefits plans, increased co-pays for medical benefits, made changes to their
life insurance plans, and renegotiated union agreements with their Hibbing,
Columbus, New River and Archer Creek plants. Several of these developments are
discussed in more detail below.
1. Negotiations With Major Customers
Intermet and the other Debtors directly and indirectly provides products and
services to every major North American OEM, several major European and Japanese
OEMs, and several leading suppliers to the OEMs (also known as "Tier 1" or "Tier
2" suppliers). These parties make up approximately 78% of the Debtors' North
American business (and approximately 80% of their ferrous business) and are
considered major customers (the "Customers"). As part of their business of
supplying their Customers, the Debtors were parties to numerous pre-Petition
Date contracts with their Customers (the "Contracts"). In connection with these
Cases, the Debtors began the lengthy process of reviewing all of their supply
contracts in order to analyze the benefits and burdens of each for various
52
periods during the Cases. Through this process, the Debtors originally
determined that, absent specific changes, certain of the Contracts were
burdensome to the Debtors' Estates because the terms did not permit the Debtors
to generate sufficient profit and cash flow from their main business source -
the manufacture and supply of component parts.
This determination was based, in large part, on the fact that (a) the price of
raw materials, including scrap steel, one of the Debtors' primary raw materials,
rose substantially since the Debtors began producing the component parts under
the existing Contracts, and such Contracts either did not allow, or were
inadequate or not timely in allowing, the Debtors to pass such cost increases
through to such Customer, (b) in some cases, pricing for certain of the
component parts under certain Contracts was well below market and/or the cost to
produce such parts did not provide adequate profit margin, (c) the timing of
payments under certain Contracts was too slow, in light of the cash flow needs
of the Debtors, and (d) certain Customers pursuant to certain of the Contracts
required pricing give-backs or reductions for 2005, which were onerous to the
Debtors under the circumstances.
Furthermore, given the Debtors' large losses, the DIP Lender was not willing to
provide debtor-in-possession financing absent a commitment by the Debtors to
obtain concessions from the Debtors' Customers on renegotiated contract terms
acceptable to the lenders. In fact, the failure to obtain agreements with the
Customers comprising at least 75% of the Debtors' gross sales by December 31,
2004 (the "Amended Contract Deadline"), in form and substance satisfactory to
the DIP Lenders, would have been a default under the Debtors' DIP Credit
Agreement, which default would have prohibited further borrowings and permitted
the acceleration of all indebtedness due.(3)
In light of the foregoing, the Debtors began negotiations with their Customers
to modify the terms of the Contracts and thereby relieve the burden on the
Estates. Because negotiations were not complete and the Amended Contract
Deadline was approaching, on November 17, 2004, the Debtors filed a motion for
authority to reject only those executory customer supply contracts with
Customers (to be subsequently identified) which could not be re-negotiated in a
manner acceptable to the Debtors and the respective Customers (the "Rejection
Motion").
Contracts with Ford at the Debtors' Racine plant were ultimately rejected by
agreement of the parties. As to the remaining Contracts, the Debtors and the
Customers agreed to amend the Contracts in a manner that was acceptable to the
Debtors, the Customers, and the DIP Lenders (the "Amended Contracts"). (The
Debtors and the DIP Lenders agreed to amend the DIP Credit Agreement and the
Amended Contract Deadline to allow sufficient time for Bankruptcy Court approval
of the Amended Contracts.) Substantially all of the Amended Contracts required
assumption under Section 365 of the Bankruptcy Code. On December 28, 2004, the
Debtors filed a motion to assume the Amended Contracts, which was granted by
order of the Bankruptcy Court dated January 13, 2005.
- ----------
(3) The Debtors have satisfied this condition pursuant to the DIP
Credit Agreement, as amended. See below.
53
The Debtors believe that performance under the Amended Contracts will enhance
the Debtors' profitability and generate positive cash flow. While each of the
Amended Contracts is different, many of Amended Contracts include terms such as:
(a) scrap steel surcharge adjustments that more accurately reflect the Debtors'
cost of scrap steel;(4) (b) accelerated payment terms for specified time
periods; (c) prompt payment of outstanding accounts receivable;(5) (d) waiver of
certain price reductions; and (e) adjustments of certain part pricing.
The steel surcharge adjustments contained in the Amended Contracts are designed
to allow the Debtors to more fully capture the rising cost of scrap steel for
the life of the Amended Contracts such that rising cost of scrap steel does not
erode the profitability of the Amended Contracts. The Amended Contracts were
critical to the Debtors' ability to continue producing under the Contracts with
the Customers which make up nearly 80% of the Debtors' business.
2. Secondary Customer Negotiations
The Debtors supply component parts to certain other customers who make up the
remaining business of the Debtors (the "Secondary Customers"). The Debtors were
parties to numerous pre-Petition Date contracts with these Secondary Customers
as well (the "Secondary Customer Contracts"). The Debtors reviewed their supply
contracts with Secondary Customers to analyze the benefits and burdens of each.
Like the Contracts with major Customers, as a result of this process, the
Debtors determined that, absent specific changes, certain of the Secondary
Customer Contracts were burdensome to the Debtors' Estates because the terms did
not permit the Debtors to generate sufficient profit and cash flow.
This determination was based, in large part, on (a) the substantial rise in the
cost of raw materials; (b) below market pricing for certain component parts; (c)
ineffective timing of payments in light of the cash flow needs of the Debtors;
and (d) the fact that certain Secondary Customer Contracts required pricing
give-backs or reductions for 2005, which were onerous to the Debtors under the
circumstances.
Accordingly, the Debtors engaged in extensive negotiations with their Secondary
Customers to modify the terms of the Secondary Customer Contracts and thereby
relieve the burden on the Estates. The Debtors and the Secondary Customers
ultimately agreed to amend the Secondary Customer Contracts in a manner that was
acceptable to the Debtors. In some instances, the amended Secondary Customer
Contracts required assumption. Thus, in such cases the Debtors have filed
motions as required by the
- ----------
(4) This term was included in all but one of the Amended Contracts,
which had an existing steel surcharge arrangement.
(5) Only one of the Amended Contracts holds the Customer to its
original payment terms and does not accelerate such terms.
54
Secondary Customer Contracts and have obtained the necessary Bankruptcy Court
approval.
The Debtors believe that performance under the amended Secondary Customer
Contracts will enhance the Debtors' profitability and generate positive cash
flow. Like the Contracts with the Debtors' Customers, while each of the amended
Secondary Customer Contracts is different, many of them include terms such as:
(a) scrap steel surcharge adjustments that more accurately reflect the Debtors'
cost of scrap steel; (b) accelerated payment terms for certain periods; (c)
prompt payment of outstanding accounts receivable; (d) waiver of certain price
reductions; and (e) adjustments of certain part pricing.
3. Racine Plant Closure
Ganton Technologies, Inc. manufactured, machined, and assembled high pressure
aluminum die castings for the automotive market at its Racine, Wisconsin plant
(the "Racine Plant"). On December 15, 2004, the Debtors announced their intent
to close the Racine Plant due to continued high costs and underutilized
machining and casting capacity. Since that date, Ganton Technologies, Inc. has
taken the steps necessary to ensure an orderly shutdown of the Racine
operations, which was completed in June 2005.
To ensure uninterrupted service to Ganton Technologies, Inc.'s customers, the
Racine Plant closing required movement of most of the work being performed at
Racine to other suppliers, or in some cases, to one of the Debtors' other
facilities. The transfer of work required accomplishment of three principal
objectives: (i) continued performance during the wind-down period; (ii) the sale
of certain assets needed by Ganton Technologies, Inc.'s customers; and (iii)
facilitation of negotiations with employees of the Racine Plant.
A. Wind-Down Performance
To ensure uninterrupted production at the Racine Plant during the wind-down,
Ganton Technologies, Inc. agreed to continue producing component parts pursuant
to purchase orders with Ford and DaimlerChrysler until such customers could
resource their requirements for production to other suppliers. In exchange for
the Debtors' cooperation, Ford and DaimlerChrysler agreed to pay the Debtors
$800,000 and $240,000, respectively, to cover expenses in excess of the Debtors'
budget directly attributable to the wind-down agreements with Ford and
DaimlerChrysler. Ganton Technologies, Inc. completed Ford and DaimlerChrysler
production at the Racine Plant in April 2005.
B. Asset Transfers
On March 7, 2005, the Bankruptcy Court approved Ganton Technologies, Inc.'s sale
of assets used to manufacture component parts at the Racine Plant to certain
other suppliers of Ganton Technologies, Inc.'s customers, including
International Truck and Engine Corporation, Amcan Consolidated Technologies
Corporation, and ICG Castings, Inc. Ganton Technologies, Inc. believes that it
received an amount equal to, if not more than, the total net book value of the
equipment from the sales. In addition, Ganton
55
Technologies, Inc. is currently in the process of selling certain assets located
at the Racine Plant which were not dedicated to production for any particular
customer. Ganton Technologies, Inc. has received an appraisal for all of the
assets located at the Racine Plant, and all of the asset sales contemplated will
deliver an amount within the appraisal range for such assets. Ganton
Technologies, Inc. plans to seek Bankruptcy Court approval of any such sales.
Ganton Technologies, Inc. is also in the process of analyzing various executory
contracts and unexpired equipment leases pertaining to the Racine Plant to
determine whether it has a continuing need for such contracts or leases at any
of the Debtors' other facilities. Where appropriate, Ganton Technologies, Inc.
is seeking Bankruptcy Court approval of its decision to reject such executory
contracts and unexpired leases.
C. Negotiations With Racine Employees
The Racine Plant closing required negotiations with the International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America,
U.A.W., Local 627, which represents employees of the Racine Plant (the "Racine
Union"), to ensure a smooth wind-down of operations and transfer of work. On
January 24, 2005, Ganton Technologies, Inc. entered into a closing agreement
with the Racine Union to induce hourly employees to remain employed through the
closing and to resolve the Racine Union's claim that a transfer of work would
violate the terms of their collective bargaining agreement (the "Racine Closing
Agreement").
The Racine Closing Agreement modified the terms of the collective bargaining
agreement, and, among other things, effected the following: (i) a severance fund
of $1.4 million for distribution to eligible employees, to be paid following
each employee's separation date; (ii) employees separated under the Racine
Closing Agreement are eligible for medical benefits as if they were laid off
under the collective bargaining agreement; (iii) all non-vested participants in
Intermet's Hourly Employee Retirement Plan (as defined therein) who are
separated as a result of the Racine Plant closing are 100% vested in their
accrued benefits regardless of their years of service; (iv) the collective
bargaining agreement remains in full force and effect until the last employee
covered is separated due to the closing; and (v) the Racine Union, on behalf of
itself and the employees it represents, released the Debtors from any and all
claims arising from the employment relationship, including claims that the
Racine Plant closing violated the collective bargaining agreement.
To induce certain key salaried employees to remain employed at the Racine Plant
during the wind-down, Ganton Technologies, Inc. further agreed to pay severance
benefits pursuant to the pre-Petition Date severance plan approved by the
Bankruptcy Court on October 1, 2004, plus additional payments aggregating
$250,000 based on the salaried employee's position and years of seniority. The
Bankruptcy Court approved the Racine Closing Agreement by Order dated March 9,
2005.
56
4. Columbus Machining Closure
Intermet U.S. Holding, Inc. formerly operated a machining facility (the
"Columbus Machining Facility") on property located in Columbus, Muscogee County,
Georgia, consisting of approximately 40.636 acres (the "Columbus Property"). At
the Columbus Machining Facility, Intermet U.S. Holding, Inc. manufactured cast
metal automotive components, utilizing inter alia, CNC machining equipment,
assembly machines, conveyors, and parts washers. The Columbus Machining Facility
was not core to the Debtors' business, and because of declining sales and the
need for costly upgrades to the equipment on site, the Debtors closed the
Columbus Machining Facility as of March 31, 2005.
A. Asset Transfers
Following the announcement of the closure of the Columbus Machining Facility,
Intermet U.S. Holding, Inc. entered into negotiations with Honda for the
transfer of the Honda business to another supplier. To facilitate such transfer,
and to ensure the continued supply of component parts to Honda (which remains an
important customer of the Debtors), the Debtors sold the S3V Steering Knuckle
Cell (the "Columbus Assets") to Honda for a purchase price of $970,000.
The fair market value of the assets sold based on an appraisal obtained by
Intermet U.S. Holding, Inc. was $1,090,700, and the liquidation value based on
the same was $892,500. The Bankruptcy Court approved the Honda sale on February
14, 2005.
At approximately the same time, Intermet U.S. Holding, Inc. entered into a
Commercial Real Estate Sales Agreement (the "Columbus Purchase Agreement") with
Jacoby Development, Inc. to sell the Columbus Property for a sale price of
$3,500,000 (the "Columbus Purchase Price").
Intermet U.S. Holding, Inc. had previously obtained an appraisal of the Columbus
Property dated May 13, 2003. The appraisal indicated that the value of the
Columbus Property was between $3,325,000 and $3,850,000. The Columbus Purchase
Price is within the appraisal's range of values for the Columbus Property.
The Bankruptcy Court approved the sale on June 7, 2005. Subject to satisfaction
of certain contingencies, the closing is scheduled to occur on or about
September 30, 2005.
5. Decatur Plant Closure
Wagner Castings Company manufactures ductile iron chassis, powertrain and brake
castings at its Decatur, Illinois plant (the "Wagner Plant"). On March 29, 2005,
the Debtors announced their plans to close the Wagner Plant on or before
December 31, 2005. The Wagner Plant has experienced declining sales volumes and
decreased profitability in recent years.
57
A. Wind-Down Performance
Wagner Castings plans to consolidate the majority of the Wagner Plant business
into other facilities of the Debtors located around the country, and thereby
improve the Debtors' capacity utilization for the Ferrous Metals Group as a
whole. By transferring the business to other Debtors' facilities, Wagner
Castings will avoid administrative expense claims resulting from non-performance
of certain purchase orders after the closure. Substantially all of these
purchase orders with the Customers have already been assumed in the Customer
negotiations. In addition, many of these purchase orders are terminable at will
by the Customers.
B. Asset Transfers
Over the next several months, and where possible, Wagner Castings will transfer
the Wagner Plant equipment to other Debtor locations around the country. In
addition, Wagner Castings will explore their options of selling the land and
building from which the Wagner Plant operates. It is anticipated that all of
these Assets will be subject to liens in favor of the Exit Lenders, pursuant to
the Exit Financing Facility, due to the fact that the proceeds of the Exit
Financing Facility will be used to pay the Distributions under the Plan,
including those to the Pre-Petition Lenders, whose liens currently attach to
these Assets.
C. Negotiations With Decatur Employees
As of the closure announcement, the Wagner Plant had 320 active employees, many
of which are parties to a collective bargaining agreement which expires on June
30, 2005 (the "Wagner CBA"). Wagner Castings also provides retiree medical
benefits to approximately 200 retired employees of Wagner Castings Company and
provides life insurance to approximately 400 retirees (collectively, the "Wagner
Retirees").
In light of the impending closing, Wagner Castings cannot continue to fund
retiree health and life insurance benefits which are currently estimated to have
an actuarial present value of about $20 million. The Bankruptcy Court appointed
a retiree committee pursuant to Section 1114 of the Bankruptcy Code on May 24,
2005 (the "Wagner Retiree Committee"), to represent the interests of the Wagner
Staff Retirees in connection with Wagner Casting's modification or termination
of retiree benefits. In the 1114 process, the Local 6-728 of the United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union (the "USW") represents the interests of the hourly
retirees. Wagner Castings has begun discussions with the Wagner Retiree
Committee and the USW to modify the benefits, and Wagner Castings hopes to reach
an agreement with the Wagner Retiree Committee and USW with respect to changes
in retiree health and life insurance obligations. To the extent that Wagner
Castings may hereafter be determined to be a member of a "controlled group" with
other Intermet affiliates, including Debtors, for certain purposes under the
federal "COBRA" statute, some or all members of the controlled group may be
determined to have ongoing liability to the Wagner Retirees for COBRA coverage.
In addition, given the June 30, 2005, expiration date of the Wagner CBA,
negotiations are being conducted with the USW to provide for a workforce for the
period prior to the plant
58
closing. Wagner Castings is also making contingency plans for the continuation
of production at the Wagner Plant in the event of a work stoppage, should Wagner
Castings be unable to reach an agreement with USW.
6. Hannibal Plant
Some customers of Diversified Diemakers, Inc.'s Hannibal facility have informed
Diversified Diemakers, Inc. that present product programs will end or that the
customers intend to move their magnesium die casting work from that facility to
other suppliers or transition to alternative processes. A portion of the work in
that facility will end on or about July 1, 2005. If the customers proceed with
plans to move the remaining work, Diversified Diemakers anticipates that this
would occur in late 2005 or early 2006. If Diversified Diemakers is unable to
secure new business for the Hannibal plant within that timeframe, such Debtor
anticipates that operations at the Hannibal plant would be suspended until
Diversified Diemakers is able to utilize that capacity, and all remaining work
would be transferred to the Palmyra facility, which also produces magnesium die
castings.
E. DEBTOR-IN-POSSESSION FINANCING
On October 22, 2004, the Debtors entered into the DIP Credit Agreement among the
Debtors, the DIP Lenders, and the DIP Agents. The DIP Facility matures on
October 21, 2005.
The DIP Facility provided for a $60 million commitment of debtor-in-possession
financing, and the ability to issue letters of credit up to a maximum amount of
$15 million, to fund the Debtors' working capital requirements and other
corporate purposes during the Cases. Advances have been and are currently being
made to the Debtors under the DIP Facility in accordance with a budget that has
been agreed upon by the Debtors and the DIP Agents, and are subject to a
borrowing base calculated as a percentage of the Debtors' accounts receivable,
inventory and fixed assets, less reserves and fees. Interest on borrowings under
the DIP Facility accrues at a base rate plus 2% per annum or at a Eurodollar
rate plus 3% per annum, as selected by the Debtors. Interest on borrowings made
under the base rate is payable on a monthly basis; for borrowings made under the
Eurodollar rate, interest is payable at the end of one, two or three months.
Obligations under the DIP Facility are secured by a super-priority lien over
substantially all of the Debtors' Assets in favor of the DIP Lenders.
The DIP Facility requires the Debtors to meet certain obligations, including the
delivery of weekly borrowing base certificates and cash flow statements, monthly
and yearly financial statements and periodic budget updates containing financial
forecasts. The Debtors are also subject to limitations on paying indebtedness,
creating liens against their property and making investments, and are prohibited
from paying dividends.
Amounts owed by the Debtors under the DIP Facility may be accelerated following
certain events of default, including: failure of the Debtors to make principal
or interest payments under the DIP Facility; failure to make principal or
interest payments on post-
59
petition liabilities; breaches of certain covenants, representations and
warranties set forth in the DIP Facility; the conversion of any of the Debtors'
Cases to cases under Chapter 7 of the Bankruptcy Code or the appointment of a
trustee pursuant to Chapter 11 of the Bankruptcy Code; and the occurrence of a
material adverse effect impacting the business or property of Intermet and its
subsidiaries, taken as a whole.
The DIP Facility received interim approval from the Bankruptcy Court on October
19, 2004, and received final approval on November 8, 2004. On November 19, 2004,
the Creditors' Committee filed a notice of appeal to the United States District
Court for the Eastern District of Michigan (the "District Court") the DIP
Financing Order and a Bankruptcy Court order denying the Creditors' Committee's
motion to conduct certain discovery and adjourn the final hearing on approval of
the DIP Facility.
The Creditors' Committee raised multiple issues on appeal in an effort to
demonstrate that the Bankruptcy Court erred in approving the DIP Facility. On
March 2, 2005, following several extensions to the briefing schedule on appeal,
the Creditors' Committee agreed to dismiss the appeal. The District Court
dismissed the appeal on March 4, 2005.
Initially, the Debtors were only able to access $20 million of the DIP Facility
until such time as the Debtors entered into agreements with Customers consisting
of 75% of their revenues that were satisfactory to the DIP Agents (see Section
VII.D.1. "Negotiations With Major Customers" above) along with certain other
conditions including the completion of certain remaining collateral documents.
Those conditions were met in January 2005 and the Debtors were granted access to
the full $60 million, subject to a budget.
Over the course of the past several months, the Debtors have entered into
various amendments to the DIP Facility which amendments were intended to clarify
certain terms in the DIP Facility, revise certain covenants, extend the time
period for certain deliverables, and/or approve certain asset purchases and
sales, and other transactions.
F. FORMATION OF THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS
In October 2004, the SEC asked the U.S. Trustee to appoint an official committee
of equity security holders in these Chapter 11 Cases. The Debtors and the
Creditors' Committee opposed the appointment of an official equity committee
because, among other reasons, they believed it was unlikely that Holders of
Equity Interests would be entitled to a Distribution following application of
the absolute priority rule contemplated by Section 1129(b)(2)(B)(ii) of the
Bankruptcy Code.
At some point in late November 2004, the U.S. Trustee declined to appoint an
official equity committee. As a result, on November 23, 2004, certain
shareholders of Intermet filed a motion seeking Bankruptcy Court appointment of
an official equity committee pursuant to Section 1102(a)(2) of the Bankruptcy
Code. The hearing was set for December 14, 2004.
60
On December 9, 2004, before the hearing could be held on the shareholders'
motion, the U.S. Trustee appointed the Equity Committee. The U.S. Trustee's
action prompted the Debtors, the Creditors' Committee, the Pre-Petition Agent
and the DIP Agents to file a joint motion seeking disbandment of the Equity
Committee (the "Disband Motion").
On February 11, 2005, the Bankruptcy Court denied the Disband Motion on the
basis that the U.S. Trustee had not abused his discretion in appointing the
Equity Committee. The Bankruptcy Court authorized the Equity Committee to retain
counsel, but authorized counsel to be paid only upon filing fee applications
every 120 days as contemplated by 11 U.S.C. Section 331. The Bankruptcy Court
further authorized the Equity Committee to retain Deloitte & Touche as its
financial advisors, but capped Deloitte's fees at $90,000 for the period
beginning January 10, 2005 through June 30, 2005.
G. APPROVAL OF THE KEY EMPLOYEE RETENTION PLAN
On September 20, 2004, the Board of Intermet adopted an employee retention plan
for certain key employees (the "Initial KERP") to create appropriate incentives
for key personnel of the Debtors to remain with them through a successful
reorganization or sale of the Debtors, to properly reward such key personnel,
and to enhance the value of the Debtors on behalf of all of their creditor
constituencies. The Initial KERP provided for the payment of bonuses to key
employees identified by the Board of Intermet, if the employees continued their
employment with Intermet through December 31, 2005. The amount of bonus a
participant in the Initial KERP might have received was calculated based on a
percentage of that person's annual salary as of September 20, 2004. In the event
that the participant's employment terminated prior to December 31, 2005, that
person might have been eligible for a pro rata bonus payment if certain
conditions set forth in the Initial KERP were met.
On December 8, 2004, the Board of Intermet approved the terms of the Key
Employee Retention Plan, or KERP, which replaced the Initial KERP and was
approved by the Bankruptcy Court on December 22, 2004. The Key Employee
Retention Plan preserves the basic payment provisions and criteria set forth in
the Initial KERP, but also links the timing of the payment of bonuses and the
calculation of the bonus amounts to the consummation of either a plan of
reorganization or a sale of any substantial portion of the Debtors' North
American assets or business of Intermet as a going concern. Under the Key
Employee Retention Plan, the maximum amount of stay bonuses payable is
approximately $5.1 million (payable in Cash). The timing and amount of stay
bonus payments will be calculated based on whether such plan of reorganization
or sale (i) is consummated after June 30, 2005, but on or before December 31,
2005, or (ii) is not consummated by December 31, 2005. One-third (1/3) of each
Key Employee Retention Plan participant's payment is due and payable upon the
Effective Date, and the remaining two-thirds (2/3) is due and payable between
January 1, 2006 and January 10, 2006.
The Key Employee Retention Plan also provides for severance benefits under
certain conditions set forth therein, based on a percentage of base salary for
certain participants. Other participants are entitled to severance benefits as
provided in Intermet's existing salaried employee severance plan. Currently,
approximately 100 Intermet employees
61
have been designated by the Board of Intermet as participants in the Key
Employee Retention Plan, including executive officers. The Board of Intermet, or
a committee thereof authorized to act in the circumstances, may designate
additional participants in the Key Employee Retention Plan.
1. Key Employee Rights Offering
Eligible Key Employees either: (i) may receive in cash any unpaid stay bonuses
to which they may be entitled in accordance with the terms and subject to the
conditions of the KERP, including, without limitation, the stay bonus payment
schedule set forth therein; or (ii) upon consummation of the Plan, may purchase
shares of New Common Stock in connection with the Key Employee Rights Offering
by authorizing Reorganized Intermet to apply, on their behalf, on a
dollar-for-dollar basis, any such stay bonuses toward the purchase of the shares
of New Common Stock covered by the Key Employee Rights Offering.
The Key Employee Rights Offering allows eligible Key Employees to purchase, on a
Pro Rata basis and based upon payments due under the KERP, 181,249 shares of New
Common Stock, in consideration for Cash in the amount of $10.00 per share.
Eligible Key Employees will have the right of over-subscription with respect to
the Key Employee Rights Offering, provided that, in no event will the total
shares in the Key Employee Rights Offering exceed 181,249 shares. Moreover, the
rights to purchase shares of New Common Stock in connection with the Key
Employee Rights Offering will be non-transferable. Other terms and conditions of
the Key Employee Rights Offering are to be determined by the Debtors and the
Initial Committed Purchasers, in consultation with the Creditors' Committee.
Any New Common Stock issued pursuant to the Key Employee Rights Offering will be
subject to the Stockholders' Agreement. In addition, the shares of New Common
Stock issued pursuant to the Key Employee Rights Offering will have the effect
of diluting the ownership interest of the other Persons who receive New Common
Stock pursuant to the Plan.
H. GOODWILL AND ASSET IMPAIRMENT
1. Goodwill Impairment
On January 1, 2002, Intermet adopted SFAS No. 142, "Goodwill and Other
Intangible Assets," under which goodwill is no longer amortized but is reviewed
for impairment at the reporting unit level annually, or more frequently if
certain events or changes in circumstances indicate that the carrying value may
not be recoverable. On or about November 17, 2004, Intermet retained SRR as an
"ordinary course professional" to determine whether the goodwill on Intermet's
balance sheet was impaired as of September 30, 2004.
SRR completed its goodwill report on March 21, 2005, concluding that the
goodwill of Intermet's Ferrous Metals and Light Metals manufacturing groups was
fully impaired.
62
Intermet recorded a pre-tax goodwill impairment charge of $165.9 million in its
statement of operations for 2004, of which amount approximately $59.7 million
was attributable to the Ferrous Metals unit and $106.2 million was attributable
to the Light Metals unit. As a result, the Debtors showed approximate
consolidated book equity of negative $50 million as of September 30, 2004.
2. Asset Impairment
The Debtors' decisions in 2003 and 2004 to close their Racine, Columbus
Machining, Decatur, and Radford facilities also made an impairment analysis of
the Debtors' fixed assets appropriate. On January 1, 2002, Intermet adopted SFAS
No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," under
which companies recognize impairment losses if the carrying amount of
"long-lived" assets is not recoverable because it exceeds the estimate of the
assets' undiscounted future cash flows. The amount of impairment, if any, is
equal to the difference between the carrying amount of the long-lived assets and
the fair value of those assets.
SRR completed its SFAS 144 report on March 9, 2005, estimating the approximate
amount of asset impairment with respect to total fixed assets (i.e. personal
property assets and real property assets), at each of these facilities as of
September 30, 2004, to be as follows:
o Racine: $6.4 million
o Columbus Machining: no impairment
o Decatur: $10.8 million
o Radford: no impairment
The impairment of the Debtors' fixed assets further reduced their consolidated
book equity position as of September 30, 2004, to approximately negative $67
million. SRR's conclusions about goodwill and asset impairment have been
reviewed by the Debtors' independent auditors, Ernst & Young, LLP.
In addition, the Debtors periodically evaluate "idle" equipment not in use at
their various facilities. As of September 30, 2004, the Debtors determined that
the value of such equipment at several plants was impaired--in particular
equipment owned by Wagner Havana, Inc. and Alexander City Casting Company, Inc.
The Debtors therefore recorded a fixed asset charge of approximately $9 million
for idle assets, which was recorded in addition to fixed asset impairment
charges indicated by the SRR reports. The Debtors' evaluation of equipment not
in use was based primarily on a change in expected future use of the now-idle
equipment, and also upon consideration of the risks and uncertainties created by
the Cases, closure of certain of the Debtors' manufacturing plants, and the
indefinite delay of projects for which such equipment would have been used. In
total, the Debtors recorded fixed asset impairment charges of approximately
$26.4 million as of September 30, 2004.
63
Finally, the Debtors recorded an additional $4 million asset impairment charge
related to Senior Note issuance costs, as required by applicable accounting
guidance for companies in Chapter 11 bankruptcy proceedings.
In sum, the Debtors' consolidated book equity position as of September 30, 2004,
was reduced to approximately negative $80.6 million. On June 24, 2005, Ernst &
Young issued their audit report for Intermet which concluded that the Debtors'
financial statements present fairly the consolidated financial position of
Intermet at December 31, 2004.
VIII. SUMMARY OF THE PLAN
The Debtors, [the Creditors' Committee], the Pre-Petition Agent, the DIP Agents,
and the Initial Committed Purchasers believe that (i) through the Plan, Holders
of Allowed Claims will obtain a recovery from the Estates of the Debtors that is
at least equal to, and likely greater than, the recovery they would receive if
the Assets of the Debtors were liquidated under Chapter 7 of the Bankruptcy
Code, and (ii) the Plan will afford the Debtors the opportunity and ability to
continue in business as viable going concerns for the benefit of all
constituents.
The Plan is annexed hereto as Exhibit A and forms a part of this Disclosure
Statement. The summary of the Plan set forth below is qualified in its entirety
by reference to the provisions of the Plan.
The Plan classifies Claims and Equity Interests separately and provides
different treatment for different Classes of Claims and Equity Interests in
accordance with the Bankruptcy Code for each Debtor.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A SEPARATE
PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED,
SUBSTANTIVELY OR OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE DEBTORS WILL BE
SATISFIED SOLELY FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY
SET FORTH IN THE PLAN, NOTHING IN THE PLAN OR THIS DISCLOSURE STATEMENT WILL
CONSTITUTE OR BE DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF THE DEBTORS IS
SUBJECT TO OR LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE CLAIMS OF
CREDITORS THAT HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS SEPARATE
CLAIMS WITH RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT
LIMITED TO, DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS
PROVIDED IN THE PLAN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED IN THE PLAN, THE
CLASSIFICATIONS OF CLAIMS AND INTERESTS SET FORTH IN THE PLAN WILL BE DEEMED TO
APPLY SEPARATELY WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
64
A. TREATMENT OF UNCLASSIFIED CLAIMS
In accordance with Section 1123(a)(1) of the Bankruptcy Code, Administrative
Claims, Tax Claims, DIP Facility Claims, U.S. Trustee Fees, Workers'
Compensation Claims (to the extent such Workers' Compensation Claims are not
General Unsecured Claims as described in Article 3.06 of the Plan), Pension
Claims, and Consignment Claims have not been classified, and the respective
treatment of such unclassified Claims is set forth below.
1. Administrative Claims Against Any Debtor
Administrative Claims are all post-Petition Date Claims or costs and expenses of
administration of the Cases with priority under Section 507(a)(1) of the
Bankruptcy Code, costs and expenses allowed under Section 503(b) of the
Bankruptcy Code, and any indebtedness or obligations entitled to such priority
under the Bankruptcy Code, including Professional Fees of the Debtors and any
official committee appointed in these Cases pursuant to Section 1102 of the
Bankruptcy Code, in each case to the extent allowed by a Final Order of the
Bankruptcy Court under Sections 330(a) or 331 of the Bankruptcy Code.
Except for Holders of DIP Facility Claims, each Holder of an Allowed
Administrative Claim will receive, in full satisfaction of such Allowed Claim,
Cash equal to the amount of such Claim on the later of (i) the Effective Date
and (ii) the date that is ten (10) days after the Allowance Date, unless such
Holder will have agreed to different treatment of such Allowed Claim; provided,
however, that Allowed Administrative Claims representing obligations incurred in
the ordinary course of business by a Debtor will be paid or performed in
accordance with the terms and conditions of the particular transactions and any
agreements relating thereto. Nothing in the Plan will be deemed to accelerate a
Debtor's obligation to make payment on account of any Administrative Claim that
is not due and owing as of the Confirmation Date, is not Allowed, or is subject
to ongoing objections in the Bankruptcy Court or other court of competent
jurisdiction.
The Debtors estimate that the aggregate amount of Allowed Administrative Claims
(not including required funding of the Pension Plans) that have not been paid in
the ordinary course of business is $240,889. Set forth below is a table which
shows the breakdown of the Debtors' estimates by each Debtor. The Debtors assert
rights of setoff with respect to certain Administrative Claims. In the event
such asserted setoff rights are not valid, the aggregate amount of Allowed
Administrative Claims may increase.
<Table>
<Caption>
DEBTOR ESTIMATED ALLOWED ADMINISTRATIVE CLAIMS NOT PAID IN ORDINARY COURSE OF BUSINESS
- --------------------------------------------- -------------------------------------------------------------------------------
Intermet Corporation ~ $54,977
Alexander City Casting Company, Inc. $0
Cast-Matic Corporation $0
Columbus Foundry, L.P. ~ $56,402
Diversified Diemakers, Inc. ~ $73
Ganton Technologies, Inc. ~ $52,652
</Table>
65
<Table>
<Caption>
DEBTOR ESTIMATED ALLOWED ADMINISTRATIVE CLAIMS NOT PAID IN ORDINARY COURSE OF BUSINESS
- --------------------------------------------- -------------------------------------------------------------------------------
Intermet Holding Company $0
Intermet Illinois, Inc. $0
Intermet International, Inc. $0
Intermet U.S. Holding, Inc. $0
Ironton Iron, Inc. $0
Lynchburg Foundry Company ~ $76,785
Northern Castings Corporation $0
Sudbury, Inc. $0
SUDM, Inc. $0
Tool Products, Inc. $0
Wagner Castings Company $0
Wagner Havana, Inc. $0
TOTAL: ~ $240,889
</Table>
2. Tax Claims Against Any Debtor
Each Holder of an Allowed Tax Claim against any Debtor will receive in full
satisfaction of such Allowed Tax Claim, at the election of the relevant Debtor,
in its sole discretion, either (i) Cash equal to the amount of such Claim on the
later of (1) the Effective Date, and (2) the date that is 10 days after the
Allowance Date, unless such Holder will have agreed to different treatment of
such Allowed Claim, or (ii) in accordance with Section 1129(a)(9)(C) of the
Bankruptcy Code, Cash payments in equal monthly installments commencing on the
first Business Day of the month succeeding the month in which the Effective Date
occurs and continuing on the first Business Day of each month thereafter, until
the month which is six (6) years after the date of assessment of such Claim
totaling the principal amount of such Claim plus interest on any outstanding
balance from the Effective Date calculated at the interest rate equal to the
applicable federal rate as determined in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder, or (iii) such other treatment as to which the Holder of such Allowed
Tax Claim will have agreed in writing; provided, however, that any Claim or
demand for payment of a penalty (other than a penalty of the type specified in
Section 507(a)(8)(G) of the Bankruptcy Code) will be disallowed pursuant to the
Plan and the Holder of an Allowed Tax Claim will not assess or attempt to
collect such penalty from the Debtors, their Estates, the Reorganized Debtors,
or their property.
The Debtors estimate that the amount of Allowed Tax Claims that have not
previously been paid pursuant to an order of the Bankruptcy Court will aggregate
approximately $2,378,876. Set forth below is a table showing the breakdown of
the Debtors' estimates by each Debtor:
66
<Table>
<Caption>
ESTIMATED ALLOWED TAX CLAIMS NOT PREVIOUSLY
DEBTOR PAID PURSUANT TO BANKRUPTCY COURT ORDER
- ---------------------------------------------------------- -------------------------------------------------
Intermet Corporation $149,161
Alexander City Casting Company, Inc. $94,868
Cast-Matic Corporation $0
Columbus Foundry, L.P. $272,052
Diversified Diemakers, Inc. $558,855
Ganton Technologies, Inc. $272,564
Intermet Holding Company $0
Intermet Illinois, Inc. $0
Intermet International, Inc. $0
Intermet U.S. Holding, Inc. $419,747
Ironton Iron, Inc. $8,893
Lynchburg Foundry Company $439,729
Northern Castings Corporation $12,000
Sudbury, Inc. $27,007
SUDM, Inc. $0
Tool Products, Inc. $124,000
Wagner Castings Company $0
Wagner Havana, Inc. $0
TOTAL: $2,378,876
</Table>
3. DIP Facility Claims Against Any Debtor
On the Effective Date, in full satisfaction of the DIP Facility Claims against
each Debtor, the DIP Agents (for the benefit of the DIP Lenders, as applicable)
will receive Cash in an amount equal to the then outstanding amount of the DIP
Facility Claims (including, without limitation, all accrued and unpaid interest,
fees and expenses and any other amounts that may then be due and payable under
the DIP Facility) and any undrawn letters of credit issued pursuant to the DIP
Facility will be returned and marked cancelled and will be replaced by letters
of credit issued under the Exit Financing Facility. On the Effective Date, the
DIP Agents' and the DIP Lenders' commitments and obligations under the DIP
Facility will be irrevocably terminated and the Debtors will be deemed to have
unconditionally and irrevocably released the DIP Lenders and the DIP Agents from
all obligations, claims and liabilities arising thereunder or relating thereto.
4. U.S. Trustee Fees Owed By Any Debtor
The U.S. Trustee's quarterly fees owed by any Debtor will be paid in full
without prior approval pursuant to 28 U.S.C. Section 1930 on or before the
Effective Date. All fees payable pursuant to 28 U.S.C. Section 1930 will be paid
by each of the Reorganized Debtors in accordance therewith until the closing of
its respective Case pursuant to Section 350(a) of the Bankruptcy Code.
5. Workers' Compensation Claims Against Any Debtor
Upon the Effective Date of the Plan, with the exception of the Workers'
Compensation Program for the State of Ohio, which relates to Ironton Iron, Inc.
and Sudbury, Inc., the Reorganized Debtors will continue the Workers'
Compensation Programs for all states in
67
which they operate. Nothing in the Plan will be deemed to discharge, release, or
relieve the Debtors or Reorganized Debtors from any current or future liability
with respect to any of its/their obligations under the Workers' Compensation
Programs, provided that in the case of the Workers' Compensation Program for the
State of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., Claims
arising thereunder will be General Unsecured Claims. The Reorganized Debtors
will be responsible for all valid Claims for benefits and liabilities under the
applicable Workers' Compensation Programs, provided that, in the case of the
Workers' Compensation Program for the State of Ohio, which relates to Ironton
Iron, Inc. and Sudbury, Inc., such Claims arising thereunder will be General
Unsecured Claims under the Plan, regardless of when the applicable injuries
occurred. All obligations under the applicable Workers' Compensation Programs
will be paid in accordance with the terms and conditions of applicable Workers'
Compensation Programs and all other applicable laws other than the Workers'
Compensation Program for the State of Ohio, which relates to Ironton Iron, Inc.
and Sudbury, Inc., which Claims will be General Unsecured Claims under the Plan,
regardless of when the applicable injuries occurred. For all states in which the
Debtors currently operate or have operated, with the exception of the State of
Ohio, the Workers Compensation Programs are either (i) self-insured, or (ii)
insured with a third party insurance carrier, and are in all cases secured by
letters of credit. Accordingly, Claims resulting from the Workers' Compensation
Program for the State of Ohio, which relates to Ironton Iron, Inc. and Sudbury,
Inc., will be Class 4 General Unsecured Claims or Class 5 Unsecured Convenience
Claims as applicable.
6. Pension Claims Against Any Debtor
The PBGC is the United States government agency that administers the mandatory
termination insurance program for defined benefit pension plans under Title IV
of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sections
1301-1461 (2000). A defined benefit pension plan is one that provides an
employee, upon retirement, a fixed, periodic payment as determined by the terms
of the plan. See 29 U.S.C. Section 1002(35). The PBGC guarantees the payment of
certain pension benefits upon termination of a defined benefit pension plan. See
29 U.S.C. Sections 1321, 1322.
Upon Confirmation and substantial consummation of the Plan, the Reorganized
Debtors will continue all Pension Plans in accordance with applicable law, and
the Debtors' obligations under applicable law with respect to continued funding
of the Pension Plans will remain unaltered. Nothing in the Plan will be deemed
to discharge, release, or relieve the Debtors, the Reorganized Debtors, or their
control group of or from any current or future liability under applicable law
with respect to the Pension Plans. On the earlier of September 15, 2005 or the
Effective Date, the Debtors will pay into each Pension Plan the amount then due
for the 2004 Pension Plan years. On the Effective Date, the Debtors will pay
into each Pension Plan the remaining amounts then due under applicable minimum
funding standards and the PBGC will be deemed to have withdrawn its Claims with
respect to the Pension Plans. The PBGC is enjoined from seeking relief against
the Reorganized Debtors under 29 U.S.C. Section 1362(e) as a consequence of the
closure of the Debtors' Racine, Wisconsin or Decatur, Illinois facilities.
68
The Debtors estimate that the minimum Pension Plan funding amounts due in 2005
will be approximately $8.1 million, broken down by Debtor as shown in the table
below.
<Table>
<Caption>
ESTIMATED PENSION PLAN
DEBTOR CONTRIBUTIONS REQUIRED IN 2005*
- ---------------------------------------------------------------- ------------------------------------------
Columbus Foundry, L.P. Approximately $1 million
Lynchburg Foundry Company Approximately $5.5 million
Wagner Castings Company $0
Ganton Technologies, Inc. - Racine Salaried Employees Approximately $300,000
Ganton Technologies, Inc. - Racine Hourly Employees Approximately $1 million
Ganton Technologies, Inc. - Pulaski Hourly Employees Approximately $200,000
TOTAL: APPROXIMATELY $8.1 MILLION
</Table>
* These estimates are based, in part, on estimated quarterly payments due in
2005 which are subject to change. Approximately $6.6 million of the total
payments required in 2005 must be paid on or before September 15, 2005. The
remainder must be paid on or before October 15, 2005.
7. Consignment Claims Against Any Debtor
Notwithstanding Section 1141(c) or any other provision of the Bankruptcy Code,
all Liens, if any, of Persons who provided goods to any of the Debtors on
consignment (i) prior to the Petition Date and who hold valid, enforceable, and
perfected Liens in such goods (a) pursuant to a written agreement with a Debtor
and (b) in accordance with applicable law, or (ii) after the Petition Date
pursuant to any order of the Bankruptcy Court will, in each case, survive the
Effective Date and continue in accordance with the contractual terms of the
underlying agreements between the relevant Debtor and such Persons and will
remain enforceable as of the Effective Date with the same extent, validity and
priority as existed as of the Petition Date or pursuant to such order, as the
case may be. All other Persons who provided goods to any of the Debtors on
consignment will be deemed to hold General Unsecured Claims under the Plan.
B. TREATMENT OF CLASSES THAT ARE UNIMPAIRED UNDER THE PLAN
Classes 1, 2, and 3 are Unimpaired for all Debtors. Holders of Unimpaired Equity
Interests in the Unimpaired Equity Debtors are Unimpaired. Therefore, pursuant
to Section 1126(f) of the Bankruptcy Code, the Holders of Allowed Claims or
Equity Interests in such Classes are conclusively presumed to have accepted the
Plan. Nothing in the Plan will be deemed to accelerate any Debtor's obligation
to make payment on account of any Claim in a Class which is Unimpaired under the
Plan or affect the timing of payment under applicable non-bankruptcy law.
Additionally, the Debtors will retain all rights to dispute or challenge any
Claim which will constitute a Claim in a Class that is Unimpaired under the
Plan.
1. Class 1 For All Debtors - Priority Claims Against Any
Debtor
Class 1 for all Debtors is comprised of Priority Claims that are entitled to
priority pursuant to Section 507(a) of the Bankruptcy Code and that are not
Administrative Claims or Tax Claims. Many of the Priority Claims in Class 1 for
all Debtors have been
69
paid pursuant to an order of the Bankruptcy Court entered in connection with
first day motions. The Debtors project that, at the time of Confirmation, there
will be approximately $2,458,860 of unpaid Priority Claims. See Section I.C.2,
above, for a breakdown by each Debtor.
Unless the Holder of a Priority Claim and the relevant Debtor agree to a
different treatment, each Holder of an Allowed Priority Claim against any Debtor
will receive, in full satisfaction of such Allowed Claim, Cash equal to the
amount of such Allowed Claim on the latest of (i) the Effective Date, (ii) the
date that is 10 days after the Allowance Date of such Claim, and (iii) the date
when such Allowed Claim becomes due and payable according to its terms and
conditions.
2. Class 2 For All Debtors - Pre-Petition Lender Claims
Against Any Debtor
Class 2 for all Debtors is comprised of Pre-Petition Lender Claims, which will
be Allowed against the relevant Debtor in an amount equal to the sum of (i) the
principal amount of the Pre-Petition Lender Claims as of the Petition Date, plus
all unpaid interest and fees accrued through the Petition Date, plus (ii) all
interest and fees (if any) to which the Pre-Petition Lenders are entitled under
Section 506(b) of the Bankruptcy Code, and (iii) any other amounts owed by the
Debtors under the DIP Order, to the extent not already paid to the Pre-Petition
Lenders as adequate protection pursuant to the DIP Financing Order. On the
Effective Date, in full satisfaction of all of the obligations of the Debtors in
respect of the Pre-Petition Lender Claims, the Disbursing Agent will distribute
to the Pre-Petition Agent (for the benefit of the Pre-Petition Lenders) and
without further notice, application or hearing, Cash in an amount equal to all
principal and interest accrued on the Pre-Petition Lender Claims through the
Effective Date plus all unreimbursed fees and expenses incurred by the
Pre-Petition Agent through the Effective Date (to the extent not already paid as
adequate protection pursuant to the DIP Financing Order and regardless of
whether such interest and fees are Allowed, or allowable, pursuant to Section
506(b) of the Bankruptcy Code). The Pre-Petition Lenders will be entitled to
retain all payments made to the Pre-Petition Lenders prior to the Effective
Date. In addition, as of the Effective Date, the Consenting Pre-Petition Lenders
will be deemed to have been unconditionally and irrevocably released from all
obligations, claims and liabilities arising under or related to the Pre-Petition
Credit Facility or its lending relationship to the Debtors, whether arising
before or after the Petition Date.
See Section I.C.2, above, for a breakdown by each Debtor.
3. Class 3- Secured Claims Against Any Debtor Except
Claims In Class 3a As To Wagner Castings Company
Class 3 for all Debtors is comprised of Secured Claims except those in Class 3a,
as to Wagner Castings. Unless the Holder of an Allowed Secured Claim and the
relevant Debtor agree to a different treatment, either (a) the legal, equitable,
and contractual rights of Holders of Secured Claims will be reinstated on the
Effective Date, or (b) the relevant Debtor will (i) Cure any pre-petition
default (other than defaults of the kind specified in
70
Section 365(b)(2) of the Bankruptcy Code), (ii) reinstate the maturity of such
Secured Claim, (iii) compensate the Holder of an Allowed Secured Claim for any
damage satisfying Section 1124(2)(c) of the Bankruptcy Code, and (iv) not
otherwise alter the legal, equitable or contractual rights to which such Secured
Claim entitles the Holder. The relevant Debtor's failure to object to such
Secured Claims in the Cases will be without prejudice to the Debtors' right to
contest or otherwise defend against such Claims in the Bankruptcy Court or other
appropriate non-bankruptcy forum (at the option of the Debtors) when and if such
Claims are sought to be enforced by the Holder of the Secured Claim. All
pre-Petition Date Liens on property of any Debtor held by or on behalf of the
Holder of Secured Claims with respect to such Claims will survive the Effective
Date and continue in accordance with the contractual terms of the underlying
agreements with such Holders until, as to each such Holder, the Allowed Claims
of such Holder of such Secured Claims are paid in full.
See Section I.C.2, above, for a breakdown by each Debtor.
4. Class 6a For The Unimpaired Equity Debtors -
Unimpaired Equity Interests In The Unimpaired Equity
Debtors
On the Effective Date, all of the Class 6a Unimpaired Equity Interests in the
Unimpaired Equity Debtors will be Allowed and retained by the applicable
Reorganized Debtor. Holders of Unimpaired Equity Interests in the Unimpaired
Equity Debtors will not be entitled to vote and are deemed to have accepted the
Plan. See Section I.C.2. "Classified Claims," above, for breakdown by each
Debtor.
C. TREATMENT OF CLASSES THAT ARE IMPAIRED UNDER THE PLAN
Classes 3a, 4, 4a, 4b, 4c, 5 and Class 6b Impaired Equity Interests are
Impaired. Holders of Allowed Claims in Classes 3a, 4, 4a, 4b, 4c, and 5 are
allowed to vote as a Class to accept or reject the Plan. Holders of Class 6b
Impaired Equity Interests in the Impaired Equity Debtors are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
1. Class 3a - Secured Claims Held By Dana Corporation
Against Wagner Castings Company
On the Effective Date, in full satisfaction of its Allowed Secured Claim for
setoff, Dana will be allowed to setoff such Claim from amounts owed to Wagner
Castings, Columbus Foundry, L.P., Lynchburg Foundry Company, and Intermet, on
the condition that Dana provides the amendments to its purchase orders with the
aforementioned Debtors, set forth in an agreement by and among such Debtors and
Dana, dated April 2005.
2. Class 4 - General Unsecured Claims Other Than Those
In Classes 4a, 4b, or 4c
On or as soon as reasonably practicable after the Effective Date, in full
satisfaction of its Allowed General Unsecured Claims in such Class, the
Indenture Trustee, on behalf of
71
each of the Noteholders, or each Holder of the Allowed General Unsecured Claims,
respectively, will receive in full satisfaction of its Claims against such
Debtor:
(a) the Cash-Out Amount; OR
(b) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured Claims so
elects on the Ballot:
(i) a Pro Rata portion of shares of New Common Stock
allocated to the applicable Debtor as indicated in Exhibit C to the Plan, and
(ii) its Pro Rata share of the Rights allocated to
the applicable Debtor as indicated on Exhibit C to the Plan; OR
(c) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured Claims so
elects on the Ballot, the Inducement Cash Amount.
For the avoidance of doubt, in the event a Holder of a General Unsecured Claim
fails to elect the options set forth in subsections (b) or (c) of this section,
such Holder will receive Cash equal to the Cash-Out Amount.
See Section I.C.2, above, for a breakdown by each Debtor, as well as Exhibit C
to the Plan.
A. Explanation Of Creditor Treatment In Class 4
Holders of General Unsecured Claims have two primary options of treatment under
the Plan. They will receive Cash, unless they elect to receive New Common Stock
of Reorganized Intermet. If Holders of General Unsecured Claims elect to receive
New Common Stock, they will receive, in exchange for their Claims, a Pro Rata
portion of 2.5 million shares in the aggregate, as allocated to each Debtor as
indicated in Exhibit C to the Plan, and Exhibit J hereto, based upon the value
of each Debtor. By electing to receive New Common Stock in lieu of Cash, Holders
of General Unsecured Claims will also have the option of purchasing additional
shares of New Common Stock in the Rights Offering (a Pro Rata portion of an
additional 7.5 million shares in the aggregate, as allocated to each Debtor as
indicated in Exhibit C to the Plan, and Exhibit J hereto, based upon the value
of each Debtor).
Should Holders of General Unsecured Claims not vote, or not make an election,
they will receive the Cash-Out Amount of $10.00 per share of New Common Stock
they would have otherwise received had they elected to receive New Common Stock
in lieu of Cash. In the event that they make an election, such Holders have two
options. They may either: (a) elect to receive their Pro Rata share of New
Common Stock allocated to the relevant Debtor and their Pro Rata share of the
Rights allocated to such Debtor, or (b) elect to receive the Inducement Cash.
72
The Inducement Cash option is designed to give Holders of General Unsecured
Claims a greater percentage recovery than they would have received by electing
the Cash-Out Amount, as an incentive to have such Holders: (x) agree to
prosecute their Claim(s) exclusively against the Debtor that is the primary
obligor according to the Debtors' books and records (as shown in the Schedules),
(y) agree to waive their rights to seek recovery from any other Debtor on
account of such Claim(s), and (z) vote in favor of the Plan. However, should the
Debtors' assumptions about which Creditors will exercise the Inducement Cash
Election prove inaccurate, it is possible that Creditors making the Inducement
Cash Election will receive less than the fixed percentage of Inducement Cash
Amount shown for each Debtor in Exhibit C to the Plan, and Exhibit J hereto, but
will instead receive their Pro Rata portion of the Inducement Cash Pool
allocated to each such Debtor. However, the Debtors reserve the right to
increase the Inducement Cash Pools to achieve the fixed percentage payout, with
the consent of the Initial Committed Purchasers. In no event, however, will a
Creditor's Pro Rata portion of the Inducement Cash Pool for any particular
Debtor ever be lower than the value of such Creditor's [recovery in the form of
New Common Stock and Rights per the Plan valuation for such Debtor].
The primary assumption the Debtors have made in allocating funds to the
Inducement Cash Pools at each Debtor is that Noteholders will not make the
Inducement Cash Election on their Ballots. The fact that the Senior Notes are
guaranteed by all Debtors except Intermet International, Inc. and Intermet
Holding Company would serve as a disincentive for the Noteholders to waive their
Claims against any other Debtors, which they would be required to do if they
made the Inducement Cash Election. Consequently, the dollar amounts allocated to
the Inducement Cash Pools for each Debtor were chosen by estimating (based on a
review of the Schedules and Proofs of Claims filed to date and discounting
duplicate Claims and Claims reasonably believed to be disallowable)(6) the total
Cash Distributions required if all Holders of General Unsecured Claims other
than the Noteholders actually made the Inducement Cash Election.
Therefore, if the Debtors' assumption about the Noteholders' reluctance to make
the Inducement Cash Election is accurate, and if the Debtors have properly
estimated the dollar number of General Unsecured Claims other than Noteholder
Claims at each particular Debtor, there should be sufficient funds in the
Inducement Cash Pools to meet the fixed percentage Inducement Cash payouts shown
in Exhibit C to the Plan, and Exhibit J hereto. If, however, some Noteholders
make the Inducement Cash Election, or if the Debtors underestimated the total
dollar number of General Unsecured Claims (other than Noteholder Claims) for any
particular Debtor, then Creditors making the Inducement Cash Election for Claims
against such Debtor may ultimately receive less than the fixed percentage of
Inducement Cash shown in Exhibit C to the Plan, and Exhibit J hereto, absent an
increase in the Inducement Cash Pools. In such event, the Holder of an Allowed
General Unsecured Claim will receive its Pro Rata portion of the Inducement
- ----------
(6) The Claims estimates set forth herein reflect current estimates of
Claims at each Debtor. Actual distributions may be higher or lower based on the
resolution of Disputed Claims and actual Allowed Claims at each Debtor.
73
Cash Pool for such Debtor, but, as mentioned above, in no event will a
Creditor's Pro Rata portion of the Inducement Cash Pool for any particular
Debtor ever be lower than such Creditor's [recovery in the form of New Common
Stock and Rights per the Plan valuation for such Debtor].
3. Class 4a - General Unsecured Claims Against Wagner
Castings Company
Class 4a is comprised of General Unsecured Claims against Wagner Castings
Company. However, Class 4a shall only exist in the event that the Liquidating
Plan Condition is satisfied. If the Liquidating Plan Condition is not satisfied,
there will be no Class 4a, and Creditors of Wagner Castings will be treated as
Class 4 Creditors.
On or as soon as reasonably practicable after the Effective Date, in full
satisfaction of the Allowed General Unsecured Claims in such Class, the
Indenture Trustee, on behalf of each of the Noteholders, or each Holder of the
Allowed General Unsecured Claims, respectively, will receive in full
satisfaction of their Claims against Wagner Castings:
Cash equal to each Holder's Pro Rata share of all proceeds
remaining after liquidation of all assets of Wagner Castings and the
satisfaction of all Liens thereon, including those arising after the Effective
Date, such as the Liens arising under the Exit Financing Facility.
4. Class 4b - General Unsecured Claims Against SUDM,
Inc.
Class 4b is comprised of General Unsecured Claims against SUDM, Inc. On or as
soon as reasonably practicable after the Effective Date, in full satisfaction of
its Allowed General Unsecured Claims in such Class, the Indenture Trustee, on
behalf of each of the Noteholders, or each Holder of the Allowed General
Unsecured Claims, respectively, will receive:
(a) the Indenture Trustee Fee Amount, which shall be paid to
the Indenture Trustee in satisfaction of the Indenture Trustee Fees, and
(b) the Cash-Out Amount with respect to SUDM as indicated in
Exhibit C to the Plan; OR
(c) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of a General Unsecured Claim so
elects on the Ballot:
(i) a Pro Rata portion of shares of New Common Stock
allocated to SUDM as indicated in Exhibit C to the Plan, and
(ii) its Pro Rata share of the Rights allocated to
SUDM and indicated on Exhibit C to the Plan; OR
74
(d) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of a General Unsecured Claim so
elects on the Ballot, the Inducement Cash Amount with respect to SUDM.
For the avoidance of doubt, in the event a Holder of a General Unsecured Claim
fails to elect the options set forth in subsections (c) or (d) of this Section,
such Holder will receive Cash equal to the Cash-Out Amount.
5. Class 4c - General Unsecured Claims Against Wagner
Havana, Inc.
Class 4c is comprised of General Unsecured Claims against Wagner Havana, Inc.,
but only in the event that the Liquidating Plan Condition is satisfied. If the
Liquidating Plan Condition is not satisfied, there will be no Class 4c, and
Creditors of Wagner Havana, Inc. will be treated as Class 4 Creditors.
On the Effective Date, the Indenture Trustee, on behalf of each of the
Noteholders, or a Holder of Allowed General Unsecured Claims against Wagner
Havana, Inc., will receive in full satisfaction of their Claims:
(a) the Cash-Out Amount with respect to Wagner Havana as
indicated in Exhibit C to the Plan; OR
(b) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured Claims so
elects on the Ballot:
(i) a Pro Rata portion of shares of the New Common
Stock allocated to Wagner Havana as indicated in Exhibit C to the Plan,
(ii) its Pro Rata share of the Rights allocated to
Wagner Havana and indicated on Exhibit C to the Plan; and
(iii) its Pro Rata share of the Reorganized Wagner
Havana New Common Stock which will be conveyed immediately to Reorganized
Intermet upon the Effective Date; OR
(c) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured Claims so
elects on the Ballot, the Inducement Cash Amount with respect to Wagner Havana
as indicated in Exhibit C to the Plan.
In the event a Holder of a General Unsecured Claim fails to elect the options
set forth in subsections (b) or (c) of this Section, such Holder will receive
the Cash-Out Amount.
6. Class 5 For All Debtors - Unsecured Convenience
Claims Against Any Debtor
75
Class 5 for all Debtors (except Wagner Castings in the event that the
Liquidating Plan Condition is satisfied and SUDM) is comprised of Unsecured
Convenience Claims. All Allowed Unsecured Convenience Claims against any Debtor
will be paid as soon as practicable after the Effective Date, in full
satisfaction of such Claims, the amount equal to the fixed percentage of each
Allowed Claim as indicated on Exhibit C to the Plan and Section I.C.2, above.
7. Class 6b For The Impaired Equity Debtors - Impaired
Equity Interests In Such Debtors
On the Effective Date, all of the Class 6b Impaired Equity Interests in the
Impaired Equity Debtors, will be cancelled without consideration therefor and
will be deemed to have rejected the Plan. See Section I.C.2. "Classified
Claims," above, for breakdown by each Debtor. Ironton Iron, Inc. is an Impaired
Equity Debtor but only with respect to its shares of Existing Preferred Stock.
Wagner Castings Company and Wagner Havana, Inc. are Unimpaired Equity Debtors,
unless the Liquidating Plan Condition is satisfied, when they both become
Impaired Equity Debtors and all Impaired Equity Interests in both entities will
be cancelled. If the Liquidating Plan Condition is satisfied, one (1) share of
Reorganized Wagner Castings New Common Stock will be issued and delivered to a
third-party liquidating trustee acceptable to the Reorganized Debtors, the
Initial Committed Purchasers, and the Creditors' Committee for the purpose of
liquidating Wagner Castings and making the Distributions set forth in Class 4a.
Further, if the Liquidating Plan Condition is satisfied, 1000 shares of the
Reorganized Wagner Havana New Common Stock will be issued to Holders of Claims
against Wagner Havana, which such Holders will immediately transfer to
Reorganized Intermet.
A. Explanation Of Impaired Equity Interest
Treatment In Class 6b For Wagner Castings
Company And Wagner Havana, Inc.
As demonstrated in the Liquidation Analysis attached hereto as Exhibit G, both
Wagner Castings and Wagner Havana, Inc. are insolvent. Consequently, none of the
Impaired Equity Interests in either entity have any value. Sudbury, Inc. is the
sole Holder of Equity Interests in Wagner Castings, while Wagner Castings is the
sole Holder of Equity Interests in Wagner Havana, Inc.
The Plan contemplates that both Wagner Castings and Wagner Havana, Inc. will be
reorganized as going concerns, and that all Impaired Classes of Claims against
each of these Debtors will accept the Plans proposed by each. In such event, the
Equity Interests in Wagner Castings and Wagner Havana, Inc. will, by consent of
the Impaired Classes eligible to vote on those Plans, be Allowed and retained by
Reorganized Sudbury, Inc. and Reorganized Wagner Castings Company, respectively.
76
If, however, the Liquidating Plan Condition is satisfied such that Classes 4 and
5 against Wagner Castings do not accept the Plan proposed by Wagner Castings,
and Wagner Castings is unable to Confirm its Plan under the cram-down provisions
set forth in Section 1129(b) of the Bankruptcy Code, then all Equity Interests
in Wagner Castings will be cancelled, and one (1) share of Reorganized Wagner
Castings Common Stock will be transferred to a third-party liquidating trustee
for the sole purpose of liquidating Wagner Castings Company. In such event, (i)
Equity Interests in Wagner Havana, Inc. will be cancelled in their entirety, and
(ii) on the Effective Date, Holders of Claims against Wagner Havana, Inc. will
receive a Distribution of 1000 shares of New Wagner Havana Stock, which such
Holders will immediately transfer to Reorganized Intermet, thereby retaining the
value, if any, of Wagner Havana in Reorganized Intermet. This value, if any,
will be preserved for the Holders of General Unsecured Claims by the
Distribution of New Common Stock and Rights under the Plan.
Equity Interests in Wagner Havana, Inc. (held exclusively by Wagner Castings
Company) will be cancelled because the Holder of such Equity Interests is not
entitled to any Distribution on account of its Equity Interests before Creditors
of Wagner Havana, Inc. are paid in full (which the Plan does not contemplate).
Consequently, Holders of Claims against (not Equity Interests in) Wagner Havana,
Inc. will receive a Distribution of 1000 shares of New Wagner Havana Stock.
By voting to accept the Wagner Havana Plan, Creditors of Wagner Havana will have
consented to transfer all of their shares of New Wagner Havana Stock to
Reorganized Intermet.
D. INTERCOMPANY CLAIMS
All Intercompany Claims will be released, waived and discharged as of the
Effective Date. Claims held by Non-Debtor Affiliates against the Debtors will,
with the consent of the Initial Committed Purchasers, to the maximum extent
practicable, be (a) released, waived, and discharged as of the Effective Date,
(b) offset against claims held by Debtors against Non-Debtor Affiliates, or (c)
converted to equity with respect to the obligee Debtor.
IX. EFFECT OF CONFIRMATION AND IMPLEMENTATION OF THE PLAN
The Plan provides for the treatment of Claims and Equity Interests as described
above as well as other provisions relating to acceptance or rejection of the
Plan, treatment of Executory Contracts, Distributions, procedures for resolving
disputed, contingent, and unliquidated Claims, retention of jurisdiction and
other miscellaneous provisions.
A. CONFIRMATION
Section 1129(a) of the Bankruptcy Code establishes conditions for the
confirmation of a plan. These conditions are too numerous and detailed to be
fully explained here. Parties
77
are encouraged to seek independent legal counsel to answer any questions
concerning the Chapter 11 process.
Among the several conditions for Confirmation of the Plan under Section 1129(a)
of the Bankruptcy Code are these:
1. Each Class of Impaired Claims must accept the Plan;
provided, however, that Section 1129(b) of the
Bankruptcy Code allows a plan to be confirmed if one
class of impaired claims accepts the plan and no
class junior to a rejecting class takes anything
under the plan.
2. Either each Holder of a Claim in a Class must accept
the Plan, or the Plan must provide at least as much
value as would be received upon liquidation under
Chapter 7 of the Bankruptcy Code. In this regard,
attached as Exhibit G is the Liquidation Analysis
showing the anticipated distribution to Creditors in
a Chapter 7 liquidation of the Debtors. Pursuant to
the Liquidation Analysis, Creditors would receive far
less in a Chapter 7 liquidation than they would under
the Plan, and, therefore this requirement is
satisfied.
3. Confirmation of the Plan is not likely to be followed
by the liquidation or the need for further financial
reorganization of the Debtors, unless such
liquidation is proposed in the Plan. Attached as
Exhibit H are the Projections of the Debtors, on a
consolidated basis. They demonstrate that
Confirmation of the Plan will not be followed by the
liquidation or the need for further financial
reorganization of the Debtors.
B. EFFECTS OF PLAN CONFIRMATION
1. Discharge of Claims; Related Injunction
Except as may otherwise be provided herein or in the Confirmation Order, the
rights afforded and the payments and Distributions to be made and the treatment
under the Plan will be in complete exchange for, and in full and unconditional
settlement, satisfaction, discharge, and release of any and all existing debts
and Claims and termination of all Equity Interests of any kind, nature, or
description whatsoever against the Debtors, the Reorganized Debtors, the Assets,
their property or their Estates, and will effect a full and complete release,
discharge, and termination of all Liens, security interests, or other claims,
interests, or encumbrances upon all of the Debtors' Assets and property.
Further, all Persons are precluded from asserting, against any of the Debtors or
the Reorganized Debtors or their respective successors, or any property that is
to be Distributed under the terms of the Plan, any Claims, obligations, rights,
causes of action, liabilities, or Equity Interests based upon any act, omission,
transaction, or other activity of any kind or nature that occurred prior to the
Effective Date, other than as expressly provided for in the Plan, or the
Confirmation Order, whether or not (a) a Proof of Claim based upon such debt is
78
filed or deemed filed under Section 501 of the Bankruptcy Code; (b) a Claim
based upon such debt is Allowed; or (c) the Holder of a Claim based upon such
debt has accepted the Plan.
Except as otherwise provided in the Plan or the Confirmation Order, all Holders
of Allowed Claims and Equity Interests arising prior to the Effective Date will
be permanently barred and enjoined from asserting against the Reorganized
Debtors or any of the Debtors, or their successors or property, or the Assets,
any of the following actions on account of such Allowed Claim or Equity
Interest:
o commencing or continuing in any manner any action or other proceeding
on account of such Claim or Equity Interest against the Reorganized
Debtors, any of the Debtors, or the property to be distributed under
the terms of the Plan, other than to enforce any right to Distribution
with respect to such property under the Plan;
o enforcing, attaching, collecting, or recovering in any manner any
judgment, award, decree, or order against the Reorganized Debtors, the
Debtors or any of the property to be distributed under the terms of the
Plan, other than as permitted under the first bullet-point listed
above;
o creating, perfecting, or enforcing any Lien or encumbrance against
property of the Reorganized Debtors, any of the Debtors, or any
property to be Distributed under the terms of the Plan;
o asserting any right of setoff, subrogation, or recoupment of any
kind, directly or indirectly, against any obligation due any Debtor,
the Reorganized Debtors, the Assets or any other property of the
Debtors, the Reorganized Debtors, or any direct or indirect transferee
of any property of, or successor in interest to, any of the foregoing
Persons; and
o acting or proceeding in any manner, in any place whatsoever, that
does not conform to, or comply with, the provisions of the Plan.
The foregoing discharge, release and injunction are an integral part of the Plan
and are essential to its implementation. Each of the Debtors and the Reorganized
Debtors will have the right to independently seek the enforcement of the
discharge, release and injunction set forth in Article 10.02 of the Plan.
Except as otherwise specifically provided in the Plan, nothing in the Plan will
be deemed to waive, limit, or restrict in any way the discharge granted to the
Debtors upon Confirmation of the Plan by Section 1141 of the Bankruptcy Code.
2. Vesting Of Property
Except as otherwise provided in the Plan or the Confirmation Order, upon the
Effective Date, (a) the Debtors (with the exceptions of Wagner Castings Company
and Ironton Iron, Inc.) will continue to exist as the Reorganized Debtors, with
all the powers of
79
corporations under applicable law and without prejudice to any right to alter or
terminate such existence (whether by merger or otherwise) under applicable state
law, and (b) all property of the Estates, wherever situated, will vest in the
relevant Reorganized Debtor, as appropriate, subject to the provisions of the
Plan and the Confirmation Order. Thereafter, the Reorganized Debtors may operate
their businesses and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code, the Bankruptcy Rules, and the Bankruptcy
Court.
After the Effective Date, all property retained by the Reorganized Debtors
pursuant hereto will be free and clear of all Claims, debts, Liens, security
interests, encumbrances, and interests, except as contemplated by the Plan and
except for the obligation to perform according to the Plan and the Confirmation
Order.
3. Retention Of Bankruptcy Court Jurisdiction
Following the Effective Date, the Bankruptcy Court will retain such jurisdiction
over these Cases as is legally permissible, including without limitation, such
jurisdiction as is necessary to ensure that the purposes and intent of the Plan
are carried out. The Bankruptcy Court will also expressly retain jurisdiction to
hear and determine all Claims against the Debtors, to hear, determine and
enforce all Causes of Action that may exist on behalf of any Debtor, and for all
purposes pertaining to the treatment, allowance or classification of Claims and
Equity Interests, including issues arising under Section 502(c) of the
Bankruptcy Code proceedings for estimation of Claims. The Bankruptcy Court will
further retain jurisdiction for the following additional purposes:
o to determine all questions and disputes regarding title to the Assets
of the Debtors, all Causes of Action, controversies, disputes, or
conflicts, whether or not subject to any pending action as of the
Effective Date, between any Debtor and any other party, including,
without limitation, the Causes of Actions, the Avoidance Actions, and
any other right to recover Assets pursuant to the provisions of the
Bankruptcy Code;
o to modify the Plan after the Confirmation Date in accordance with the
terms of the Plan and pursuant to the Bankruptcy Code and the
Bankruptcy Rules;
o to enforce and interpret the terms and conditions of the Plan;
o to enter such orders, including, but not limited to, such future
injunctions as are necessary to enforce the respective title, rights,
and powers of the Debtors, the terms of the Plan, and to impose such
limitations, restrictions, terms, and conditions on such title, rights,
and powers as the Bankruptcy Court may deem necessary;
o to enter an order closing these Cases;
o to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan or the Confirmation Order as may be necessary
to implement the purposes and intent of the Plan;
80
o to determine any and all applications for allowances of compensation
and reimbursement of expenses and the reasonableness of any fees and
expenses authorized to be paid or reimbursed under the Bankruptcy Code
or the Plan or resolve any disputes regarding fees to be paid pursuant
to the Plan;
o to determine any applications or motions pending on the Effective
Date or thereafter for the rejection of any Executory Contract and to
hear and determine, and, if need be, to liquidate any and all Claims
arising therefrom;
o to determine any and all motions, applications, adversary
proceedings, and contested matters that may be pending on the Effective
Date;
o to consider any modification of the Plan, whether or not the Plan has
been substantially consummated, and to remedy any defect or omission or
to reconcile any inconsistency in any order of the Bankruptcy Court, to
the extent authorized by the Plan or the Bankruptcy Court and all
matters pertinent to modification;
o to determine all controversies, suits, and disputes that may arise in
connection with the interpretation, enforcement, or consummation of the
Plan or the Reorganization Documents;
o to consider and act on the compromise and settlement of any Claim
against or Cause of Action by or against any Debtor or Reorganized
Debtor arising under or in connection with the Plan;
o to issue such orders in aid of execution of the Plan as may be
authorized by Section 1142 of the Bankruptcy Code;
o to determine such other matters or proceedings as may be provided for
under Title 28 or any other title of the United States Code, the
Bankruptcy Code, the Bankruptcy Rules, other applicable law, the Plan,
or in any order or orders of the Bankruptcy Court, including, but not
limited to, the Confirmation Order or any order that may arise in
connection with the Plan, the Cases, or the Confirmation Order; and
o to interpret and enforce, and determine all questions and disputes
regarding, the injunctions, releases, exculpations, and
indemnifications provided for or set forth in the Plan (including,
without limitation, Articles 10.02, 10.05, 10.06 and 13.08 of the Plan)
or the Confirmation Order.
4. Releases
A. On the Effective Date, effective as of the
Confirmation Date, and except as otherwise
provided in the Plan or in the Confirmation
Order, Intermet, Reorganized Intermet, the
Debtors, the Reorganized Debtors, each
Initial Committed Purchaser, the
Pre-Petition Agent, the Consenting
Pre-Petition Lenders, the DIP Agents on
their own behalf and on behalf of each of
the DIP Lenders, the Creditors' Committee
and its members in such capacity and only in
81
such capacity, and the Indenture Trustee
will have, and will be deemed to have,
conclusively, absolutely unconditionally,
irrevocably, forever and completely released
and discharged each of the current and
former directors and officers, employees,
agents, managers, advisors, attorneys or
representatives (in their capacity as such
and in no other capacity) of each of the
Debtors from any and all Released Actions
and Avoidance Actions based in whole or in
part upon any act, omission, transaction,
event or other occurrence taking place at
any time on or before the Effective Date,
with the sole exception of acts or omissions
resulting from intentional fraud or willful
misconduct as determined by a Final Order of
the Bankruptcy Court.
B. On the Effective Date, effective as of the
Confirmation Date, and except as otherwise
provided in the Plan or in the Confirmation
Order, Intermet, Reorganized Intermet, the
Debtors and the Reorganized Debtors as
Releasing Parties have and will be deemed to
have, conclusively, absolutely,
unconditionally, irrevocably, forever and
completely released and discharged each
Initial Committed Purchaser, the
Pre-Petition Agent, the Consenting
Pre-Petition Lenders, the DIP Agents on
their own behalf and on behalf of each of
the DIP Lenders, the Creditors' Committee,
and the Indenture Trustee, and each of their
respective current and former members,
officers, directors, agents, financial
advisors, attorneys, employees, equity
holders, partners, affiliates and
representatives (in their capacity as such
and in no other capacity) and their
respective properties, from any and all
Released Actions other than Avoidance
Actions based in whole or in part upon any
act, omission, transaction, event or other
occurrence taking place at any time after
the Petition Date through and including the
Effective Date, with the sole exception of
acts or omissions resulting from intentional
fraud or willful misconduct as determined by
a Final Order of the Bankruptcy Court.
C. On the Effective Date, effective as of the
Confirmation Date, and except as otherwise
provided in the Plan or in the Confirmation
Order, (i) each Person that votes to accept
the Plan, (ii) all Holders of Claims, in
consideration for the obligations of the
Debtors and the Reorganized Debtors under
the Plan and the Cash and other contracts,
instruments, releases, agreements or
documents to be delivered in connection with
the Plan, and the treatment under the Plan,
and (iii) each Person (other than the
82
Debtors) that has held, holds or may hold a
claim, as applicable, will have, and will be
deemed to have, conclusively, absolutely,
unconditionally, irrevocably, forever and
completely, released and discharged each
Released Party from any and all of Released
Actions based in whole or in part upon any
act, omission, transaction, event or other
occurrence taking place at any time on or
before the Effective Date, with the sole
exception of acts or omissions resulting
from intentional fraud or willful misconduct
as determined by a Final Order of the
Bankruptcy Court, and in all respects, each
Released Party will be entitled to rely upon
the advice of counsel with respect to their
duties and responsibilities, if any, under
the Plan; provided, however, that any party
in interest may enforce the terms of the
Plan. Nothing in the Plan will prejudice any
right, remedy, defense, claim, cross-claim,
counterclaim, or third party claim that any
Person may have against any Person other
than with respect to the Released Actions
against the Released Parties.
D. Notwithstanding any provision of the Plan to
the contrary, the foregoing releases in
subsections (b) and (c) will not apply to
(i) any indebtedness of any Person to the
Debtors for money borrowed by such Person,
(ii) any setoff or counterclaim that the
Debtors may have or assert against any
Person, provided that the aggregate amount
thereof will not exceed the aggregate amount
of any Claims held or asserted by such
Person against the Debtors, and (iii) any
garnishments. Notwithstanding any provision
in the Plan to the contrary, the releases
contained in Article 10.05 (b) of the Plan
will not be construed as or operate as a
release of any Retained Actions, including
Avoidance Actions.
E. On the Effective Date, effective as of the
Confirmation Date, and except as otherwise
provided herein or in the Confirmation
Order, all Persons that hold, have held, or
may hold a Released Action (or, to the
extent applicable an Avoidance Action) or
other action, proceeding, cause of action,
suit, account, controversy, promise to pay,
right to legal remedies, right to equitable
remedies, right to payment, claim,
obligation, litigation, judgment, damage,
right or liability of any nature whatsoever
(including, without limitation, those
arising under the Bankruptcy Code) that is
released pursuant to the provisions of the
Plan (including, without limitation,
Articles 10.05(a), (b) and (c) of the Plan)
are hereby and will be permanently enjoined
and barred from taking any of the following
actions on
83
account of, relating to or based upon any
such Released Action (or, to the extent
applicable, an Avoidance Action) or other
action, proceeding, cause of action, suit,
account, controversy, promise to pay, right
to legal remedies, right to equitable
remedies, right to payment, claim,
obligation, litigation, judgment, damage,
right or liability of any nature whatsoever
(including, without limitation, those
arising under the Bankruptcy Code): (i)
commencing or continuing in any manner any
action or other proceeding against any of
the Released Parties or its respective
property; (ii) enforcing, attaching,
collecting or recovering in any manner any
judgment, award, decree or order against any
of the Released Parties or its respective
property; (iii) creating, perfecting or
enforcing any Lien or encumbrance against
any of the Released Parties or its
respective property; (iv) asserting any
setoff, right of subrogation or recoupment
of any kind directly or indirectly against
any debt, liability or obligation due any of
the Released Parties or against its
respective property; and (v) acting or
proceeding in any manner, in any place
whatsoever, that does not conform to, or
comply with, the provisions of the Plan or
the Confirmation Order.
F. Each of the releases and the injunction
provided in Article 10.05 of the Plan is an
integral part of the Plan and is essential
to its implementation. Each of the Released
Parties and any other Persons being released
under, or protected by the injunction set
forth in Article 10.05 of the Plan will have
the right to independently seek the
enforcement of such release and injunction.
As to the Debtors' directors, officers and employees, the consideration for the
releases provided in Article 10.05 of the Plan is the service rendered by such
individuals during the pendency of the Chapter 11 Cases and the need for their
continued dedication to fully consummate a successful reorganization. The
Debtors will be hampered in their consummation efforts if their directors,
officers and employees are subject to claims and potential litigation that will
distract their attention from operational and other business matters. None of
such individuals are currently the target of any actual claim or litigation, and
the Debtors are not aware of any credible theory on which any claims or
litigation might be pursued against such individuals.
5. Insurance And Indemnification
Notwithstanding anything provided in the Plan to the contrary, the Plan will not
be deemed in any way to diminish or impair the enforceability of any insurance
policies that may cover claims against a Debtor or any other Person. Effective
as of the Effective Date, the Reorganized Debtors will obtain and maintain in
full force tail insurance
84
covering such risks as are presently covered for a period of not less than 5
years after the Effective Date in favor of the former and current officers and
directors of the Debtors on terms no less favorable to the officers and
directors than the terms of the existing insurance policies covering the
officers and directors and otherwise on terms and conditions acceptable to the
Debtors and the Initial Committed Purchasers; provided, however, that the
aggregate cost of such tail insurance will not exceed $1.5 million. Effective on
the Effective Date and at all relevant times thereafter, the Reorganized Debtors
will indemnify all officers and directors of the Debtors who served in such
capacity at any time prior to the Effective Date for any amounts such officers
and directors are required to pay as a result of any retentions or deductibles
applicable under policies of insurance in effect on the date hereof or as
contemplated by Article 10.06 of the Plan, which policies (or extensions thereof
having terms no less favorable to the officers and directors) will be (and are
hereby deemed to be) assumed by Reorganized Intermet in the Plan. The indemnity
described in Article 10.06 of the Plan will not include liability relating to
any action, omission, transaction, event, occurrence or other circumstance that
would constitute an exclusion under the applicable policies of insurance or
liability in excess of the limits of such policies. Furthermore, the amounts
payable by the Reorganized Debtors pursuant to Article 10.06 of the Plan will be
paid on a current basis on behalf of the officers and directors, without
requiring the officers and directors to first pay such amounts from their own
funds and then seek reimbursement from the Reorganized Debtors, so long as the
Reorganized Debtors have received a written undertaking by each such officer and
director to repay such amounts to the Reorganized Debtors if it is determined by
a court of competent jurisdiction pursuant to a final, non-appealable order that
such officer or director is not entitled to coverage under such policies of
insurance. Each of the provisions set forth in Article 10.06 of the Plan is an
integral part of the Plan and is essential to its implementation. Each Person
entitled to indemnification and insurance pursuant to Article 10.06 of the Plan
will have the right to independently seek the enforcement of each of the terms
of Article 10.06 of the Plan.
C. EXIT FINANCING
On the Effective Date, the Reorganized Debtors will enter into the Exit
Financing Facility in order to obtain the funds necessary to: (a) repay in full
the DIP Facility Claims and replace any letters of credit issued pursuant to the
DIP Facility, or in the alternative the Exit Lenders may issue letters of credit
to the DIP Lenders to secure payment of any undrawn letters of credit issued
pursuant to the DIP Facility which may remain outstanding after the Effective
Date ; (b) make other payments required to be made on the Effective Date,
including, but not limited to, the payment in full in Cash of the Pre-Petition
Lender Claims and any undrawn letters of credit issued pursuant to the
Pre-Petition Credit Facility will be returned and marked cancelled and will be
replaced by letters of credit issued under the Exit Financing Facility or in the
alternative the Exit Lenders may issue letters of credit to the Pre-Petition
Lender to secure payment of any undrawn letters of credit issued pursuant to the
Pre-Petition Credit Facility which may remain outstanding after the Effective
Date. In the Confirmation Order, the Bankruptcy Court will approve the Exit
Financing Facility in substantially the form filed with the Bankruptcy Court and
authorize the Reorganized Debtors to execute the same
85
together with such other documents as the Exit Lenders may reasonably require to
effectuate the treatment afforded to such parties under the Exit Financing
Facility.
D. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
1. Assumption And Rejection Of Executory Contracts And
Unexpired Leases.
As of the Confirmation Date, but subject to the occurrence of the Effective
Date, all Executory Contracts (and all insurance contracts and/or policies
providing coverage to the Debtors' current and former directors, officers,
shareholders, agents, employees, representatives, and others for conduct in
connection with the Debtors will be deemed assumed by the relevant Debtor and
retained by the applicable Reorganized Debtor, as appropriate, in accordance
with the provisions and requirements of Sections 365 and 1123 of the Bankruptcy
Code, except those Executory Contracts and unexpired leases that (i) have been
rejected by or pursuant to an order of the Bankruptcy Court, (ii) are the
subject of a motion to reject pending on the Confirmation Date which is later
granted by the Bankruptcy Court, (iii) which are identified on Exhibit M to the
Plan, which will be deemed rejected as of the Confirmation Date or as of the
date set forth in such Exhibit, or (iv) Executory Contracts which are identified
in any modifications made pursuant to Article 13.05 of the Plan. Entry of the
Confirmation Order by the Bankruptcy Court will constitute approval of such
assumptions pursuant to Sections 365(a) and 1123 of the Bankruptcy Code, subject
to the occurrence of the Effective Date. Each Executory Contract assumed
pursuant to Article 8 of the Plan will revest in and be fully enforceable by
Reorganized Intermet or the relevant Reorganized Debtor, as appropriate, in
accordance with its terms, except as may be modified by (i) the provisions of
the Plan, (ii) any order of the Bankruptcy Court approving and authorizing its
assumption, (iii) applicable law, or (iv) agreement of the parties to such
Executory Contracts.
2. Cure Of Defaults Of Assumed Executory Contracts And
Unexpired Leases.
Any monetary amounts by which each Executory Contract or unexpired lease to be
assumed pursuant to the Plan is in default will be Cured, pursuant to Section
365(b)(1) of the Bankruptcy Code, by the relevant Debtor, by payment of the Cure
amount (as such amount has been agreed upon by Reorganized Intermet, or in the
event of a dispute regarding such Cure amount, as such amount has been
determined by a Final Order of the Bankruptcy Court) in Cash on or before thirty
(30) days after the Effective Date or on such other terms as the parties to such
Executory Contracts may otherwise agree. Notice of the Cure amount is either set
forth in Exhibit N to the Plan. If no Cure amount is set forth in Exhibit N to
the Plan, the Debtors believe that no Cure amount is due. Notwithstanding the
foregoing, in the event of a dispute regarding: (1) the amount of any Cure
payments, (2) the ability of Reorganized Intermet, the relevant Reorganized
Debtor or any assignee to provide "adequate assurance of future performance"
(within the meaning of Section 365 of the Bankruptcy Code) under the Executory
Contract to be assumed, or (3) any other matter pertaining to assumption, the
Cure payments required by
86
Section 365(b)(1) of the Bankruptcy Code will be made following the entry of a
Final Order resolving the dispute and approving the assumption.
3. Cure Procedure.
The Plan will constitute notice to any non-Debtor party to any Executory
Contract to be assumed pursuant to the Plan of the amount of any Cure amount
owed, if any, under the applicable Executory Contract. Any non-Debtor party that
fails to respond or object on or before the deadline scheduled by the Bankruptcy
Court for objections to the Plan, will be deemed to have consented to such
proposed amount.
4. Rejection Claims.
Each Person who is a party to an Executory Contract rejected pursuant to Article
8 of the Plan will be entitled to file, not later than thirty (30) days after
the Confirmation Date, a Proof of Claim for alleged Rejection Claims. If no such
Proof of Claim for Rejection Claims is timely filed, any such Claim will be
forever barred and will not be enforceable against any Debtor, any Reorganized
Debtor, or any of the Estates. The Bankruptcy Court will retain jurisdiction to
determine any objections to Rejection Claims.
5. Classification Of Rejection Claims.
Except as otherwise provided under the Plan, Rejection Claims against any Debtor
will be treated as Allowed General Unsecured Claims against such Debtor to the
extent they are deemed to be Allowed Claims, and will be satisfied in accordance
with the Plan and the Confirmation Order.
E. DISTRIBUTIONS
1. Distributions
The Disbursing Agent will make all Distributions required under the Plan except
with respect to (i) the Claims of the Pre-Petition Lenders, such Distributions
will be made by the Disbursing Agent to the Pre-Petition Agent; and (ii) the
Claims of Noteholders, which Distributions will be made by the Disbursing Agent
to the Indenture Trustee which is directed to immediately distribute the
Distributions to the Noteholders as of the Distribution Record Date.
Distributions will be made at the times provided in the Plan or as otherwise
ordered by the Bankruptcy Court.
2. No Interest On Claims Or Equity Interests
Unless otherwise specifically provided for in the Plan, the Confirmation Order,
the DIP Financing Order, or the DIP Facility, post-Petition Date interest will
not accrue or be paid on Claims or Equity Interests, and no Holder of any Claim
or Equity Interest will be entitled to interest accruing on or after the
Petition Date.
87
3. Claims Administration Responsibility
The Reorganized Debtors will retain responsibility for administering, disputing,
objecting to, compromising or otherwise resolving, subject to Bankruptcy Court
approval, except as provided herein, with respect to all Claims against the
Debtors. The Reorganized Debtors will retain any counter-claims which the
Debtors may have to any Claims. Pursuant to Bankruptcy Rule 9019(a) and Section
363 of the Bankruptcy Code, the Debtors may, up to and including the Effective
Date, compromise and settle various (i) Claims against them, and (ii) Causes of
Action that they have against other Persons without Bankruptcy Court approval if
the amount in controversy is less than $300,000. After the Effective Date, such
rights will pass to the Reorganized Debtors as contemplated by Article 10.01 of
the Plan, without the need for further approval of the Bankruptcy Court, except
as otherwise set forth in the Plan. Unless otherwise extended by the Bankruptcy
Court, any objections to Claims will be served and filed on or before the Claims
Objection Deadline.
4. Delivery of Distributions
Other than Distributions made to the Pre-Petition Agent on behalf of the
Pre-Petition Lenders and the Indenture Trustee on behalf of the Noteholders,
Distributions to Holders of Allowed Claims will be made by the Disbursing Agent
(a) at the addresses set forth on the Proofs of Claim filed by such Holders (or
at the last known addresses of such Holders if no Proof of Claim is filed or if
the Debtors have been notified in writing of a change of address), (b) at the
addresses set forth in any written notices of address changes delivered to the
Disbursing Agent after the date of any related Proof of Claim, or (c) at the
addresses reflected in the Schedules if no Proof of Claim has been filed and the
Disbursing Agent has not received a written notice of a change of address. Other
than Distributions made to the Pre-Petition Agent on behalf of the Pre-Petition
Lenders and the Indenture Trustee on behalf of the Noteholders, (a) if any
Creditor's Distribution is returned as undeliverable, no further Distribution to
such Creditor will be made unless and until the Disbursing Agent is notified of
such Creditor's then-current address, at which time all missed Distributions
will be made to such Creditor without interest; (b) amounts in respect of
undeliverable Distributions will be returned to the Reorganized Debtors until
such Distributions are claimed; (c) all funds or other undeliverable
Distributions returned to the Reorganized Debtors and not claimed within three
(3) months of return will be Distributed to the other Creditors of the Class of
which the Creditor to whom the Distribution was originally made is a member in
accordance with the provisions of the Plan applicable to Distributions to that
Class; and (d) upon such reversion, the Claim of any Creditor or their
successors with respect to such property will be discharged and forever barred
notwithstanding any federal or state escheat laws to the contrary. Nothing
contained in the Plan will require the Disbursing Agent and the Indenture
Trustee to attempt to locate any Creditor holding an Allowed Claim, other than
as set forth above.
5. Procedures For Treating And Resolving Disputed Claims
Except as provided in this Article 7.05 of the Plan, no Distributions will be
made with respect to all or any portion of a Disputed Claim unless and until all
objections to such
88
Disputed Claim have been settled or withdrawn or have been determined by a Final
Order, and the Disputed Claim has become an Allowed Claim.
The Disbursing Agent, after consultation with Reorganized Intermet, will create
a reserve from the property to be distributed by the Disbursing Agent under the
Plan to Holders of Disputed Claims, other than Rights for which there will be no
reserve.
Payments and Distributions from any reserve created under the Plan to a Creditor
on account of a Disputed Claim, to the extent that it ultimately becomes an
Allowed Claim, will be made in accordance with provisions of the Plan that
govern Distributions to such Creditor.
6. Manner of Cash Distribution Under The Plan
Any Cash payment to be made by the Disbursing Agent as a Distribution pursuant
to the Plan may be made by a check or wire transfer on a United States bank
selected by the Disbursing Agent. Cash paid as the Subscription Purchase Price
for the Rights Offering Shares must be payable in immediately available funds,
such as a wire transfer, bank or cashier's check.
7. Direction To Parties
From and after the Effective Date, the Disbursing Agent, or Reorganized Intermet
may apply to the Bankruptcy Court for an order directing any necessary party to
execute or deliver or to join in the execution or delivery of any instrument
required to effect a transfer of property dealt with by the Plan, and to perform
any other act, including the satisfaction of any Lien, that is necessary for the
consummation of the Plan, pursuant to Section 1142(b) of the Bankruptcy Code.
8. Setoffs
The Reorganized Debtors may, pursuant to Section 553 of the Bankruptcy Code or
other applicable law, set off against any Allowed Claim and the Distributions to
be made pursuant to the Plan on account of such Allowed Claim, all claims,
rights, and Causes of Action of any nature that any such Debtor may hold against
the Holder of such Allowed Claim that are not otherwise waived, released, or
compromised in accordance with the Plan; provided, however, that neither the
failure to effect such a setoff nor the allowance of any Claim under the Plan
will constitute a waiver or release by such Debtor of any such claims, rights,
and Causes of Action that the Debtor may possess against such Holder,
notwithstanding any compulsory counterclaim rules or requirements to the
contrary.
9. Exemption From Certain Transfer Taxes
Pursuant to Section 1146(c) of the Bankruptcy Code and applicable non-bankruptcy
law, any transfers from the Debtors to Reorganized Intermet, or any other Person
or entity pursuant to the Plan in the United States will not be subject to any
document recording
89
tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real
estate transfer tax, mortgage recording tax or other similar tax or governmental
assessment. The Confirmation Order will direct the appropriate state or local
governmental officials or agents to forego the collection of any such tax or
governmental assessment and to accept for filing and recordation any of the
foregoing instruments or other documents without the payment of any such tax or
governmental assessment.
10. Withholding And Reporting Requirements
In connection with the Plan and all Distributions thereunder, the Disbursing
Agent will comply with all applicable tax withholding and reporting requirements
imposed by any federal, state, provincial, local or foreign taxing authority,
and all Distributions thereunder will be subject to any such withholding and
reporting requirements. The Disbursing Agent will be authorized to take any and
all actions that may be necessary or appropriate to comply with such withholding
and reporting requirements. Notwithstanding any other provision of the Plan,
each Holder of an Allowed Claim or Interest that is to receive a Distribution
pursuant to the Plan will have sole and exclusive responsibility for the
satisfaction and payment of any tax obligations imposed by any governmental
unit, including income, withholding and other tax obligations, on account of
such Distribution.
11. No Fractional Distributions
No fractional shares or amounts of the Plan Securities will be issued or
Distributed under the Plan. Each Person entitled to receive Plan Securities will
receive the total whole number of shares to which such Person is entitled.
Whenever any Distributions to a Person would otherwise call for Distribution of
a fraction of any Plan Security, the actual Distribution of such Plan Security
will be rounded to the next higher or lower whole number with fractions of less
than or equal to one-half (1/2) being rounded to the next lower whole number. No
consideration will be provided in lieu of fractional amounts of Plan Securities
that are rounded down. The total amount of Plan Securities to be Distributed to
each Class of Claims will be adjusted as necessary to account for the rounding
provided herein. Any other provision of the Plan notwithstanding, neither the
Debtors, nor the Disbursing Agent will be required to make Distributions or
payments of fractions of dollars. Whenever any payment of a fraction of one
dollar under the Plan would otherwise be called for, the actual payment made
will reflect a rounding of such fraction to the nearest whole dollar (up or
down), with one-half (1/2) dollars being rounded down.
F. RETIREE BENEFITS
All payments of Retiree Benefits will continue as they existed prior to the
Petition Date at the level established pursuant to subsection (e)(1)(B) or (g)
of Section 1114 of the Bankruptcy Code as such payments may be modified prior to
the Effective Date, for the duration of the period the applicable Debtor has
obligated itself to provide such benefits. After the Effective Date, the
Reorganized Debtors will retain their rights to amend, modify or terminate
Retiree Benefits in accordance with all relevant agreements and
90
applicable law. As indicated in Section VII.D.5.c. above, Wagner Castings has
begun negotiating with the Wagner Retiree Committee and the USW to modify
Retiree Benefits at Wagner Castings.
G. CORPORATE GOVERNANCE
On the Effective Date, the Board of Directors of Reorganized Intermet will be
composed of seven members. On the Effective Date, (i) five of such members will
be selected by the Initial Committed Purchasers, (ii) one of such members will
be the Chief Executive Officer of Reorganized Intermet, and (iii) one of such
members will be selected by the Creditors' Committee. The member selected by the
Creditors' Committee will be acceptable to the Initial Committed Purchasers. Two
of the five members selected by the Initial Committed Purchasers may not be
officers, directors or employees of either of the Initial Committed Purchasers.
Thereafter, the selection of the Board of Directors for Reorganized Intermet
will be governed by the Stockholders' Agreement.
The Effective Date Executive Officers will become employed by Reorganized
Intermet on the Effective Date pursuant to the Employment Agreements. The other
officers of the Debtors immediately prior to the Effective Date will serve as
the officers of the applicable Reorganized Debtor until their successors are
duly appointed in accordance with Reorganized Intermet's governance documents
and applicable law. Each officer will serve from and after the Effective Date
pursuant to the terms of Reorganized Intermet's governance documents and
applicable law. The Employment Agreements will be in form and substance
satisfactory to the Initial Committed Purchasers and will supercede such
officer's pre-Effective Date employment agreement.
H. REORGANIZED DEBTORS
Each of the Debtors will continue to exist after the Effective Date as a
separate entity, except as otherwise provided in the Plan, with all the powers
under applicable law in the jurisdiction in which each applicable Debtor is
incorporated or otherwise formed and pursuant to its certificate of
incorporation and bylaws or other organizational documents in effect on the
Effective Date, without prejudice to any right to terminate such existence
(whether by merger or otherwise) under applicable law after the Effective Date.
On the Effective Date, Reorganized Intermet will re-domesticate, by merger or
other appropriate means, as a new corporation under the laws of the State of
Delaware with a new Certificate of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws for all other Debtors continuing after the Effective
Date will be amended and restated but such Debtors will remain subject to the
laws of the jurisdictions in which such Debtors were incorporated or formed
prior to the Effective Date.
I. CORPORATE ACTION
o The Certificate of Incorporation and Bylaws of Reorganized Intermet,
will, among other things: (i) authorize the issuance of the New Common
Stock, (ii) prohibit the issuance of nonvoting equity securities, as
required by Section 1123(a)(6) of the Bankruptcy Code, subject to
amendment of such certificate of
91
incorporation and bylaws as permitted by applicable law, and (iii)
effectuate the provisions of the Plan, in each case without any further
action by the officers, stockholders or directors of the Debtors or the
Reorganized Debtors.
o The Certificate of Incorporation (or other similar document) and
Bylaws of all of the Debtors other than Reorganized Intermet, will,
among other things: (i) prohibit the issuance of nonvoting equity
securities, as required by Section 1123(a)(6) of the Bankruptcy Code,
subject to amendment of such certificate of incorporation and bylaws as
permitted by applicable law, and (ii) effectuate the provisions of the
Plan, in each case without any further action by the officers,
stockholders or directors of the Debtors or the Reorganized Debtors.
o On the Effective Date, the execution and delivery of each agreement
on the Effective Date and any other document necessary to effectuate
the transactions contemplated herein and therein, and all other actions
contemplated by the Plan, or such other documents will be authorized
and approved in all respects (subject to the provisions of the Plan).
All matters provided for in the Plan involving the corporate structure
of the Reorganized Debtors, and any corporate action required by the
Debtors or Reorganized Debtors in connection with the Plan, will be
deemed to have occurred and will be in effect, without any requirement
of further action by the security holders or directors of the Debtors
or Reorganized Debtors. On the Effective Date, the appropriate officers
of the Reorganized Debtors and members of the Boards of the Reorganized
Debtors are authorized and directed to issue, execute and deliver the
agreements, documents, securities and instruments contemplated by the
Plan in the name of, and on behalf of, the Reorganized Debtors.
o On or as soon as reasonably practicable after the Effective Date,
Reorganized Intermet will issue shares of the New Common Stock to those
Persons entitled to receive such pursuant to the Plan, which shares
will be subject to the Stockholders' Agreement.
o On or as soon as reasonably practicable after the Effective Date, if
the Liquidating Plan Condition is satisfied, then the Articles of
Incorporation and Bylaws of Wagner Castings will authorize the issuance
of one (1) share of Reorganized Wagner Castings New Common Stock and
such share will be issued and delivered to a third-party liquidating
trustee acceptable to the Reorganized Debtors, the Initial Committed
Purchasers, and the Creditors' Committee for the purpose of liquidating
Wagner Castings and making the Distributions set forth in Class 4a.
o On or as soon as reasonably practicable after the Effective Date, if
the Liquidating Plan Condition is satisfied, then the Articles of
Incorporation and Bylaws of Wagner Havana will authorize the issuance
of the Reorganized Wagner
92
Havana New Common Stock and Reorganized Wagner Havana will issue
Reorganized Wagner Havana New Common Stock to Holders of Claims against
Wagner Havana which such Holders will immediately transfer to
Reorganized Intermet.
J. NON-DEBTOR AFFILIATES
There are certain Non-Debtor Affiliates of the Debtors that are not Debtors in
these Chapter 11 Cases. The continued existence, operation and ownership of such
Non-Debtor Affiliates is a material component of the Debtors' businesses, and,
as set forth in Article 10.1 of the Plan, substantially all of the Debtors'
Equity Interests and other property interests in such Non-Debtor Affiliates will
revest in the applicable Reorganized Debtor or its successor on the Effective
Date.
K. STOCKHOLDERS' AGREEMENT
All recipients of New Common Stock will be subject to the Stockholders'
Agreement which will, among other things, govern appointment of the Board of
Directors of Reorganized Intermet, each recipient's access to information with
respect to the Reorganized Debtors, and ability to transfer such recipient's New
Common Stock. An election by a Person to receive New Common Stock on the Ballot
will constitute such Person's agreement to be bound by the Stockholders'
Agreement. Each certificate representing share(s) of New Common Stock will bear
a legend indicating that the New Common Stock is subject to the Stockholders'
Agreement. The Stockholders' Agreement will be effective as of the Effective
Date.
L. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
Holders of General Unsecured Claims will have the option of receiving New Common
Stock under the Plan. Section 1145 of the Bankruptcy Code creates certain
exemptions from the registration requirements of federal and state securities
laws with respect to the distribution of securities pursuant to a plan of
reorganization.
1. Issuance Of Securities Under The Plan
The Debtors intend to rely on Section 1145(a) of the Bankruptcy Code to exempt
from registration under the Securities Act, and any applicable state securities
laws, (i) the issuance of any New Common Stock pursuant to the Plan to Holders
of Claims in exchange for their Claims, (ii) the issuance of any Reorganized
Wagner Havana New Common Stock pursuant to the Plan to Holders of Claims in
exchange for their Claims, and (iii) the issuance of Rights Offering Shares in
connection with the Rights Offering, except that the issuance of New Common
Stock to the Initial Committed Purchasers is not expected to be eligible for the
Section 1145(a) exemption, and therefore will be issued pursuant to the private
placement exemption or another applicable exemption from registration under the
Securities Act.
93
Generally, Section 1145 of the Bankruptcy Code exempts the issuance of
securities under a plan of reorganization from registration under the Securities
Act and under state securities laws if three principal requirements are
satisfied: (i) the securities must be issued under a plan of reorganization by
the debtor or its successors under a plan or an affiliate participating in a
joint plan of reorganization with the debtor; (ii) the recipients of the
securities must hold a claim against the debtors, an interest in the debtor or a
claim for an administrative expense against the debtor; and (iii) the securities
must be issued entirely in exchange for the recipient's claim against or
interest in the debtor, or "principally" in such exchange and "partly" for cash
or property. Although the issuance of the New Common Stock and the Reorganized
Wagner Havana New Common Stock pursuant to the Plan satisfies the requirements
of Section 1145(a)(1) of the Bankruptcy Code and is, therefore, exempt from
registration under federal and state securities laws, under certain
circumstances subsequent transfer of such securities may be subject to
registration requirements under such securities laws.
2. Transfers Of New Common Stock
Subject to compliance with the Stockholders' Agreement, which imposes
significant restrictions with regard to the sale or transfer of the New Common
Stock, the New Common Stock to be issued pursuant to the Plan (other than the
New Common Stock issued to the Initial Committed Purchasers pursuant to the
Private Placement Purchase Agreement and the Cash-Out Purchase Agreement), and
all resales and subsequent transactions in such New Common Stock, are exempt
from registration under federal and state securities laws, unless the Holder is
an "underwriter" with respect to such securities. Section 1145(b) of the
Bankruptcy Code defines four types of "underwriters":
(i) persons who purchase a claim against, an interest in, or a
claim for an administrative expense against the debtor with a view to
distributing any security received or to be received in exchange for such a
claim or interest;
(ii) persons who offer to sell securities offered or sold
under a plan for the holders of such securities;
(iii) persons who offer to buy such securities from the
holders of such securities, if the offer to buy is (a) with a view to
distribution of such securities, and (b) under an agreement made in connection
with the Plan, with the consummation of the Plan, or with the offer or sale of
securities under the Plan; and
(iv) persons who are an "issuer" with respect to the
securities, as the term "issuer" is defined in Section 2(11) of the Securities
Act of 1933. Under Section 2(11) of the Securities Act of 1933, an "issuer"
includes any persons directly or indirectly controlling or controlled by the
issuer, or any person under direct or indirect common control with the issuer.
To the extent that Persons deemed to be "underwriters" receive securities
pursuant to the Plan, resales by such Persons would not be exempted by Section
1145 of the Bankruptcy Code from registration under the Securities Act or other
applicable law. Persons deemed
94
to be underwriters, however, may be able to sell such securities without
registration subject to the provisions of Rule 144 under the Securities Act
(which permits the public sale of securities received pursuant to the Plan by
"underwriters", subject to the availability to the public of current information
regarding the issuer and to volume limitations, method of sale restrictions, and
certain other conditions).
Whether or not any particular Person would be deemed to be an "underwriter" with
respect to any security to be issued pursuant to the Plan would depend upon
various facts and circumstances applicable to that Person. Accordingly, the
Debtors express no view as to whether any Person would be an "underwriter" with
respect to any security to be issued pursuant to the Plan.
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A PARTICULAR
PERSON MAY BE AN UNDERWRITER, THE DEBTORS MAKE NO REPRESENTATIONS CONCERNING THE
RIGHT OF ANY PERSON TO OFFER OR SELL IN THE NEW COMMON STOCK TO BE DISTRIBUTED
PURSUANT TO THE PLAN. THE DEBTORS RECOMMEND THAT POTENTIAL RECIPIENTS OF THE NEW
COMMON STOCK CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY OFFER
OR SELL SUCH SECURITIES.
3. Transfers Of Reorganized Wagner Havana New Common
Stock
The Plan provides that immediately after issuance on the Effective Date, the
shares of Reorganized Wagner Havana New Common Stock, if any, will be
transferred by the holders thereof to Reorganized Intermet. Therefore, any
Reorganized Wagner Havana Common Stock transferred pursuant to the Plan will not
be transferable except pursuant to the transfer discussed above.
M. REGISTRATION RIGHTS AGREEMENT
Reorganized Intermet will be obligated to register certain shares of New Common
Stock for resale under the Securities Act pursuant to the terms and conditions
of the Registration Rights Agreement. The Registration Rights Agreement must be
acceptable to the Initial Committed Purchasers, and will provide, among other
things:
o That within 60 days after the date on which Reorganized Intermet will
receive a written request, signed by either of the Initial Committed
Purchasers, pursuant to which such Initial Committed Purchaser will
request that Reorganized Intermet register the resale of the shares of
New Common Stock held by such Initial Committed Purchaser under the
Securities Act, Reorganized Intermet will prepare and file, and will
use its reasonable best efforts to have declared effective within 60
days thereafter, a registration statement under the Securities Act for
the offering on a continuous basis pursuant to Rule 415 of the
Securities Act, of the shares of New Common Stock held by such Initial
Committed Purchaser (the "Shelf Registration");
95
o That Reorganized Intermet will keep the Shelf Registration effective
for a period ending on the earlier of (a) the date that is the two-year
anniversary of the date upon which such registration statement is
declared effective by the SEC, (b) the date such Registrable Securities
have been disposed of pursuant to an effective registration statement,
(c) the date such Registrable Securities have been disposed of (1)
pursuant to and in accordance with SEC Rule 144 (or any similar
provision then in force) under the Securities Act, or (2) pursuant to
another exemption from the registration requirements of the Securities
Act pursuant to which the Registrable Securities are thereafter freely
tradeable without restriction under the Securities Act, (d) the date
such Registrable Securities may be disposed of pursuant to SEC Rule 144
(or any similar provision then in force) within the volume limitations
thereunder within a 90 day period or pursuant to SEC Rule 144(k) (or
any similar provision then in force) under the Securities Act, or (e)
such Registrable Securities cease to be outstanding;
o For indemnification and contribution and the payment by Reorganized
Intermet of the fees and expenses incurred by the Initial Committed
Purchasers, customarily included in registration rights agreements
entered into in connection with similar financings; and
o That any person holding more than 10% of the outstanding New Common
Stock on the Effective Date will be entitled to piggy-back registration
rights.
N. CANCELLATION OF EXISTING COMMON STOCK AND EXISTING PREFERRED
STOCK
On or as soon as reasonably practicable after the Effective Date, except as
otherwise specifically provided for in the Plan (a) the Existing Common Stock of
the Impaired Equity Debtors and any other note, bond, indenture, or other
instrument or document evidencing or creating any indebtedness or obligation of
or ownership interest in the Impaired Equity Debtors, except such notes or other
instruments evidencing indebtedness or obligations of the Impaired Equity
Debtors that are reinstated under the Plan, will be cancelled, and (b) the
Existing Preferred Stock will be cancelled; and (c) obligations of, Claims
against, and/or Equity Interests in the Impaired Equity Debtors under, relating,
or pertaining to any agreements, indentures, certificates of designation,
bylaws, or certificates or articles of incorporation or similar documents
evidencing or creating any indebtedness or obligation of the Impaired Equity
Debtors, except such notes, instruments, or other documents evidencing
indebtedness or obligations of the Impaired Equity Debtors that are reinstated
or otherwise expressly assumed or preserved under the Plan, and except for any
rights to dividends accrued with respect to the Existing Preferred Stock prior
to the Effective Date, which will be treated as General Unsecured Claims or
Unsecured Convenience Claims under the Plan, as the case may be, will be
released and discharged. The Unimpaired Equity Interests will be retained by the
applicable Reorganized Debtor.
96
O. MANAGEMENT INCENTIVE PLAN
On or as soon as reasonably practicable after the Effective Date, the Management
Incentive Plan will be implemented to reserve for designated members of senior
management of the Reorganized Debtors equity interests (including, without
limitation, restricted common stock and/or options) in Reorganized Intermet in
an amount up to 5.0% of the New Common Stock issued on the Effective Date. The
Management Incentive Plan will contain terms and conditions that will be
determined by the Board of Reorganized Intermet. The shares of New Common Stock
issued pursuant to the Management Incentive Plan will have the effect of
diluting the ownership interest of the other Persons who receive New Common
Stock pursuant to the Plan.
P. KEY EMPLOYEE RIGHTS OFFERING
The Reorganized Debtors will conduct the Key Employee Rights Offering in
connection with which Reorganized Intermet will offer to the eligible Key
Employees the right to purchase, on a Pro Rata basis (based upon payments due to
Key Employees under the KERP), 181,249 shares of New Common Stock, in
consideration for Cash in the amount of $10.00 per share. Eligible Key Employees
will have the right of over subscription with respect to the Key Employee Rights
Offering, provided that, in no event will the total shares in the Key Employee
Rights Offering exceed 181,249 shares. Moreover, the rights to purchase shares
of New Common Stock in connection with the Key Employee Rights Offering will be
non-transferable. Other terms and conditions of the Key Employee Rights Offering
are to be determined by the Debtors and the Initial Committed Purchasers, in
consultation with the Creditors' Committee. The eligible Key Employees either:
(i) may receive in cash any unpaid stay bonuses to which they may be entitled in
accordance with the terms and subject to the conditions of the KERP, including,
without limitation, the stay bonus payment schedule set forth therein; or (ii)
upon consummation of the Plan, may purchase shares of New Common Stock in
connection with the Key Employee Rights Offering by authorizing Reorganized
Intermet to apply, on their behalf, on a dollar-for-dollar basis, any such stay
bonuses toward the purchase of the shares of New Common Stock covered by the Key
Employee Rights Offering.
Any New Common Stock issued pursuant to the Key Employee Rights Offering will be
subject to the Stockholders' Agreement. In addition, the shares of New Common
Stock issued pursuant to the Key Employee Rights Offering will have the effect
of diluting the ownership interest of the other Persons who receive New Common
Stock pursuant to the Plan.
Q. CONTINUATION OF BUSINESS
Except as discussed herein, on and after the Effective Date, the Reorganized
Debtors will continue to engage in the Debtors' businesses, including, without
limitation, performing under all purchase orders existing as of the Effective
Date and assumed. Except as provided herein, the Reorganized Debtors retain all
claims, defenses, counterclaims and offsets with respect to such purchase orders
in existence as of the Effective Date.
97
Debtors Alexander City Casting Company, Inc., Ironton Iron, Inc., Wagner Havana,
Inc. and Intermet Illinois, Inc., are non-operating entities which currently own
Assets. It is each such Debtor's intention to sell such Assets after the
Effective Date. The proceeds of such sales will be paid to the Exit Lenders. It
is anticipated that all of these Assets will be subject to liens in favor of the
Exit Lenders, pursuant to the Exit Financing Facility, due to the fact that the
proceeds of the Exit Financing Facility will be used to pay the Distributions
under the Plan, including those to the Pre-Petition Lenders, whose liens
currently attach to these Assets.
R. EMPLOYMENT AGREEMENTS
On or before the Effective Date, the Employment Agreements will be entered into
by Reorganized Intermet and deemed approved by the Bankruptcy Court.
S. DISBANDMENT OF OFFICIAL COMMITTEES
On the Effective Date, all committees, including the Creditors' Committee, the
Equity Committee, and the Retiree Committee, will be disbanded and their members
will be discharged from all further authority, duties, responsibilities and
obligations relating to the Cases, and the retention and employment of the
Professionals retained by such committees will also terminate as of the
Effective Date; provided, however, that the Creditors' Committee and the Equity
Committee and their Professionals will be maintained with respect to
applications filed pursuant to Sections 330 and 331 of the Bankruptcy Code and
will be compensated for reasonable fees and expenses incurred with respect to
such applications as approved by the Bankruptcy Court. The Reorganized Debtors
will not be responsible for fees or expenses of any committees, including the
Creditors' Committee, Equity Committee, or Retiree Committee or of their
Professionals and agents, incurred after the Effective Date unless otherwise
ordered by the Bankruptcy Court.
T. DISBURSING AGENT
As soon as practicable after the Effective Date, the Disbursing Agent will be
paid all of its fees and expenses incurred in connection with performing its
duties under the Plan.
U. POST-CONFIRMATION EFFECT OF INDENTURE
Anything in the Plan, the Confirmation Order, or any other document to the
contrary notwithstanding, and notwithstanding the Confirmation and effectiveness
of and Distributions under the Plan and the discharge of the Debtors, the
Indenture will remain in effect for the sole purpose of allowing the Indenture
Trustee to make distributions as provided in Article 7.01 of the Plan. However,
the liability of the Debtors under the Indenture will be discharged pursuant to
the Plan and Section 1141 of the Bankruptcy Code.
98
V. PRESERVATION OF CERTAIN CAUSES OF ACTION
In accordance with Section 1123(b)(3) of the Bankruptcy Code, and except as
otherwise provided in the Plan and/or the Confirmation Order, the Reorganized
Debtors will retain and may (but are not required to) enforce all Retained
Actions, including Avoidance Actions and other similar claims arising under
applicable state laws, including, without limitation, fraudulent transfer
claims, if any, and all other Causes of Action of a trustee and debtor-in
possession under the Bankruptcy Code. The Debtors or the Reorganized Debtors, in
their sole discretion, will determine whether to bring, settle, release,
compromise, or enforce any rights (or decline to do any of the foregoing) with
respect to the Retained Actions, other than the Avoidance Actions. The
Reorganized Debtors or any successor may pursue such litigation claims in
accordance with the best interests of the Reorganized Debtors or any successors
holding such rights of action. The failure of the Debtors to specifically list
any Claim, Causes of Action, right of action, suit or proceeding in the
Schedules, this Disclosure Statement, on Exhibit D to this Disclosure Statement,
or on Exhibit K to the Plan does not, and will not be deemed to, constitute a
waiver or release by the Debtors of such Claim, Causes of Action, right of
action, suit or proceedings, and the Reorganized Debtors will retain the right
to pursue such Claims, Causes of Action, rights of action, suits or proceedings
in their sole discretion and, therefore, no preclusion doctrine, collateral
estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable or
otherwise) or laches will apply to such claim, right of action, suit or
proceeding upon or after the confirmation or consummation of the Plan. Further,
recovery of any proceeds of Causes of Action will be deemed "for the benefit of
the Estates" as set forth in Section 550(a) of the Bankruptcy Code.
X. THE RESTRUCTURING COMMITMENT LETTER AND THE RIGHTS OFFERING
A. INITIAL COMMITTED PURCHASERS
Pursuant to the terms of the Restructuring Commitment Letter, which is attached
as Exhibit B to the Plan, and provided that all conditions precedent set forth
therein have been satisfied, including but not limited to the negotiation and
execution of the Private Placement Purchase Agreement and the Cash-Out Purchase
Agreement, the Initial Committed Purchasers will be obligated to purchase, on
the Effective Date, any and all of the Private Purchase Placement Shares. This
means that the Initial Committed Purchasers have agreed to guarantee that any
shares not purchased in the Rights Offering will be purchased by the Initial
Committed Purchasers. Through this mechanism: (i) the Debtors are ensured that
they will receive an aggregate capital infusion of $75 million in cash on the
Effective Date, regardless of the source of those funds; and (ii) the Debtors'
capital structure will be better than it would otherwise be, given the equity
nature of the investment prescribed in the Restructuring Commitment Letter,
because the Debtors will not be required to take on additional debt to obtain
the additional $75 million.
Accordingly, the Initial Committed Purchasers will pay to Reorganized Intermet,
by wire transfer in immediately available funds on or prior to the Effective
Date, cash in an
99
amount equal to the Subscription Purchase Price for the Private Purchase
Placement Shares.
1. Underwriting Fee
In consideration for the Restructuring Commitment Letter, the Initial Committed
Purchasers will receive an aggregate fee of $3 million, of which $1 million will
be payable no later than one business day after the Bankruptcy Court enters an
order approving the Restructuring Commitment Letter and of which the balance
will be paid upon the occurrence of certain events described therein.
Specifically, in the event that (i) Intermet consummates a financial
restructuring other than the restructuring described in the Restructuring
Commitment Letter prior to or within 12 months after termination of the
Restructuring Commitment Letter, (ii) there has not been a material breach of
the obligations of the Initial Committed Purchasers thereunder and (iii) the
financial restructuring that is consummated (a) pays the Pre-Petition Credit
Facility in full in cash and (b) delivers a dollar recovery to all Holders of
Unsecured Claims in excess of the implied dollar recovery to Holders of
Unsecured Claims according to the Rights Offering price, Intermet is required to
pay the $1 million underwriting fee, plus the remaining $2 million and an
additional $2 million for a total of $5 million. The additional $2 million
payment is akin to a "break-up fee" compensating the Initial Committed
Purchasers upon the occurrence of the events described above.
2. Reimburseable Expenses
Intermet is obligated to reimburse the Initial Committed Purchasers for the
reimburseable expenses incurred by the Initial Committed Purchasers and the fees
and expenses of their legal counsel on and after January 10, 2005, in connection
with the Restructuring (as defined therein), plus all of the reasonable and
documented fees and expenses incurred by the Initial Committed Purchasers and
their legal counsel in connection with the drafting, negotiation, prosecution or
defense of the Restructuring Commitment Letter, the Private Placement Purchase
Agreement, the Rights Offering, corporate governance documents, the Cash-Out
Purchase Agreement, the Plan, the Confirmation Order, the Disclosure Statement,
the Stockholders' Agreement, the Exit Financing Facility agreements and related
documents and any and all agreements and other documents ancillary thereto,
including any fees and expenses incurred by the Initial Committed Purchasers in
connection with obtaining all required regulatory approvals.
3. Indemnification Obligations
Subject to Bankruptcy Court approval, Intermet is required to indemnify and hold
harmless the Initial Committed Purchasers and their respective affiliates,
directors, officers, partners, members, employees, attorneys, agents and
assignees (including affiliates thereof) from and against any and all losses,
claims, damages, liabilities (or actions or other proceedings commenced or
threatened in respect thereof) or other expenses insofar as such losses, claims,
damages, liabilities (or actions or other proceedings commenced or threatened in
respect thereof) or other expenses arise out of
100
or in any way relate to or result from the Restructuring Commitment Letter or
the proceeds of the Initial Committed Purchasers' agreement to purchase shares
of New Common Stock under the Private Placement Purchase Agreement and the
Cash-Out Purchase Agreement.
Intermet is further required to reimburse (on an as-incurred monthly basis) each
party indemnified for any reasonable legal or other out-of-pocket expenses
incurred in connection with investigating, defending or participating in any
such loss, claim, damage, liability or action or other proceeding (whether or
not such indemnified party is a party to any action or proceeding out of which
such indemnified expenses arise), but excluding therefrom all losses, claims,
damages, liabilities and expenses that are finally determined in a
non-appealable decision of a court of competent jurisdiction to have resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party. In the event of any litigation or dispute involving the Restructuring
Commitment Letter, the Initial Committed Purchasers are not responsible or
liable to Intermet or any other person or entity for any special, indirect,
consequential, incidental or punitive damages.
The obligations of Intermet described above and set forth in the Restructuring
Commitment Letter will remain effective whether or not (i) any of the
transactions contemplated in the Restructuring Commitment Letter are
consummated, (ii) any Definitive Investment Documents (as defined in the
Restructuring Commitment Letter) with respect to the Initial Committed
Purchasers' obligation to purchase shares of New Common Stock under the Private
Placement Purchase Agreement and the Cash-Out Purchase Agreement are executed,
and notwithstanding any termination of the Restructuring Commitment Letter, and
(iii) will be binding upon Reorganized Intermet in the event that any plan of
reorganization of Intermet is consummated.
Notwithstanding the foregoing, any indemnity claim arising from an indemnified
party's breach of the Restructuring Commitment Letter or breach of any other
agreements between an Indemnified Party and Intermet, or among an indemnified
party and Reorganized Intermet, are excluded from Intermet's indemnity
obligations.
B. TERMS AND CONDITIONS OF THE RESTRUCTURING COMMITMENT LETTER(7)
The Initial Committed Purchasers' and the Debtors' performance under the
Restructuring Commitment Letter are subject to terms and conditions, including
termination rights, that are reasonable and customary for standby purchase
commitments generally. Additionally, the Initial Committed Purchasers'
performance under the Restructuring Commitment Letter is conditioned on, among
other things, the Debtors and the Reorganized Debtors realizing year-to-date
consolidated EBITDA for 2005, excluding administrative fees and expenses
associated with the Cases, through the latest calendar month ending at least 25
days prior to the Effective Date, in an amount that is no less than the amount
specified for such calendar month on Exhibit A to the Restructuring
- ----------
(7) The summary of terms and conditions contained herein is qualified
in its entirety by reference to the Restructuring Commitment Letter.
101
Commitment Letter (ranging from $15,230,000 in June 2005 to $27,459,000 in
December 2005).
[The Initial Committed Purchasers' performance is also conditioned on, among
other things, the Debtors and the Reorganized Debtors having cash and/or
availability under the Exit Financing Facility, after giving effect to the
proceeds of the Rights Offering, but taking into account Distributions under the
Plan, of at least the amount required pursuant to the Exit Financing Facility.]
Furthermore, the Initial Committed Purchasers may terminate the Restructuring
Commitment Letter if, among other things, (i) the Plan is not Confirmed by the
Bankruptcy Court within 100 days of the entry of a Bankruptcy Court order
approving the Restructuring Commitment Letter, (ii) the Effective Date does not
occur on or before the 20th day following Confirmation of the Plan, or (iii)
upon the occurrence of a "material adverse change," or "MAC," as that phrase is
used and defined in the Restructuring Commitment Letter.(8)
Set forth below is a table which summarizes the conditions precedent, the
termination events, and the resulting fees under the Restructuring Commitment
Letter:
<Table>
<Caption>
TERMINATION EVENT AMOUNT PAYABLE TIMING OF PAYMENT
----------------- -------------- -----------------
IF INTERMET TERMINATES THE RESTRUCTURING COMMITMENT LETTER $1,000,000 PLUS THE REMAINING WITHIN THREE BUSINESS DAYS OF
BECAUSE OF A FAILURE TO SATISFY INTERMET'S CONDITIONS ANY SUCH TERMINATION.
PRECEDENT(9) (iii) - (vii) ON OR BEFORE 120 DAYS OF THE $2,000,000, PLUS THE
ENTRY OF THE APPROVAL ORDER, WHICH CONDITIONS PRECEDENT ARE: REIMBURSABLE EXPENSES
o ENTRY OF A SATISFACTORY CONFIRMATION ORDER - (iii)
</Table>
- ----------
(8) A "material adverse change" means any change, effect, event,
occurrence, state of facts or development, either alone or in combination, and
either known or unknown by the debtors as of the date of the restructuring
commitment letter, that is materially adverse to the business, financial
condition or results of operation of the Debtors, taken as a whole; provided,
however, that in no event will any change, effect, event, occurrence, state of
facts or development that is disclosed in Intermet's Annual Report on Form 10-K
for the twelve month period ended December 31, 2003, or in Intermet's Quarterly
Reports on Form 10-Q for the three month periods ended March 31, 2004, June 30,
2004, and September 30, 2004, or on any filing on Form 8-K made by Intermet
prior to the date of the Restructuring Commitment Letter, each in the form first
filed by Intermet with the SEC, or any other information delivered in writing by
the Debtors to the Initial Committed Purchasers prior to the date of the
Restructuring Commitment Letter, be considered a "material adverse change"; and
provided further, that in no event will the prosecution of the Cases on terms
and conditions consistent with the terms and conditions set forth in the
Restructuring Commitment Letter be considered a "material adverse change."
(9) Capitalized terms not defined in this table have the meanings
ascribed to them in the Restructuring Commitment Letter.
102
<Table>
<Caption>
TERMINATION EVENT AMOUNT PAYABLE TIMING OF PAYMENT
----------------- -------------- -----------------
o EXECUTION AND DELIVERY OF LEGAL DOCUMENTATION
REGARDING THE RESTRUCTURING IN FORM AND SUBSTANCE
SATISFACTORY TO INTERMET - (iv)
o MATERIAL APPROVALS, WAIVERS AND/OR CONSENTS
BEING OBTAINED - (v)
o EXIT FACILITY CLOSING ON TERMS AND CONDITIONS
ACCEPTABLE TO INTERMET - (vi)
o OBTAINING REQUIRED D&O INSURANCE/INDEMNITY - (vii).
IF INTERMET TERMINATES THE RESTRUCTURING COMMITMENT LETTER AMOUNT PREVIOUSLY PAID WITHIN THREE BUSINESS DAYS OF
BASED UPON THE INITIAL COMMITTED PURCHASERS FAILURE TO ($1,000,000), PLUS THE ANY SUCH TERMINATION.
HOLD AT LEAST $58 MILLION OF THE NOTES. REIMBURSABLE EXPENSES
IF INTERMET TERMINATES THE RESTRUCTURING COMMITMENT LETTER
BECAUSE OF A FAILURE TO SATISFY INTERMET'S CONDITIONS
PRECEDENT (i)OR (ii) ON OR BEFORE 120 DAYS OF THE ENTRY OF
THE APPROVAL ORDER, WHICH CONDITIONS PRECEDENT ARE:
o ON EFFECTIVE DATE ALL REPRESENTATION AND WARRANTIES
MADE BY THE INITIAL COMMITTED PURCHASERS SHALL BE
TRUE, COMPLETE AND ACCURATE IN ALL MATERIAL
RESPECTS - (i);
o ON EFFECTIVE DATE, ALL COVENANTS MADE BY THE INITIAL
COMMITTED PURCHASERS SHALL HAVE BEEN COMPLIED WITH
IN ALL MATERIAL RESPECTS - (ii)
IF THE INITIAL COMMITTED PURCHASERS TERMINATE THE
RESTRUCTURING COMMITMENT LETTER BECAUSE OF
o BOARD NOT APPROVING THE RESTRUCTURING COMMITMENT
LETTER - TERMINATION EVENT (i)
o INTERMET NOT FILING MOTION FOR APPROVAL ORDER WITH
THE SPECIFIED TIME PERIOD - TERMINATION EVENT (ii)
o FAILURE OF THE BANKRUPTCY COURT TO ENTER THE APPROVAL
ORDER WITHIN THE SPECIFIED TIME PERIOD - TERMINATION
EVENT (iii)
o FAILURE TO AGREE UPON PRIVATE PLACEMENT AGREEMENT
AND CASH OUT AGREEMENT - TERMINATION EVENT (iv).
</Table>
103
<Table>
<Caption>
TERMINATION EVENT AMOUNT PAYABLE TIMING OF PAYMENT
----------------- -------------- -----------------
IN THE EVENT THAT EITHER PARTY TERMINATES THE RESTRUCTURING
COMMITMENT LETTER BECAUSE OF THE FAILURE TO RECEIVE APPROVALS
DUE TO THE OPERATIONS, BUSINESS OR IDENTITY OF THE INITIAL
COMMITTED PURCHASERS.
IF INITIAL COMMITTED PURCHASERS TERMINATE THE RESTRUCTURING $1,000,000 PREVIOUSLY WITHIN THREE BUSINESS DAYS OF
COMMITMENT LETTER BECAUSE OF: PAID PLUS $500,000, PLUS ANY SUCH TERMINATION
THE REIMBURSABLE EXPENSES
o A MAC;
IF THE INITIAL COMMITTED PURCHASERS TERMINATE THE
RESTRUCTURING COMMITMENT LETTER BECAUSE THE INITIAL
COMMITTED PURCHASERS CONDITIONS PRECEDENT (iii), (vi)
OR (xi) ARE NOT SATISFIED ON OR BEFORE 120 DAYS OF THE
ENTRY OF THE APPROVAL ORDER, WHICH CONDITIONS PRECEDENT ARE:
o MAC - (iii);
o EBITDA TARGETS - (vi);
o SATISFACTORY EXIT FINANCING - (xi).
IF INITIAL COMMITTED PURCHASERS TERMINATE THE RESTRUCTURING $1,000,000 PREVIOUSLY PAID WITHIN THREE BUSINESS DAYS OF ANY
COMMITMENT LETTER BASED UPON: PLUS $1,000,000, PLUS THE SUCH TERMINATION.
REIMBURSABLE EXPENSES.
o A FAILURE TO FILE THE PLAN AND THE RELATED
DISCLOSURE STATEMENT WITHIN THE TIME AGREED
- TERMINATION EVENT (v);
o THE DISCLOSURE STATEMENT NOT BEING APPROVED WITHIN
THE TIME AGREED - TERMINATION EVENT (vi);
o THE CONFIRMATION ORDER NOT BEING ENTERED WITHIN
THE TIME AGREED - TERMINATION EVENT (vii);
o THE PLAN NOT BECOMING EFFECTIVE ON OR BEFORE THE
TIME AGREED - TERMINATION EVENT (viii);
IF THE INITIAL COMMITTED PURCHASERS TERMINATE THE
RESTRUCTURING COMMITMENT LETTER BASED UPON: THE INITIAL
COMMITTED PURCHASERS CONDITIONS PRECEDENT (i), (ii), OR (iv)
HAVE NOT BEING SATISFIED ON OR BEFORE 120 DAYS OF THE ENTRY
OF THE APPROVAL ORDER, WHICH CONDITIONS PRECEDENT ARE:
</Table>
104
<Table>
<Caption>
TERMINATION EVENT AMOUNT PAYABLE TIMING OF PAYMENT
----------------- -------------- -----------------
o THE PLAN AND DISCLOSURE STATEMENT ARE NOT IN FORM
AND SUBSTANCE CONSISTENT WITH THE TERM OF THE
RESTRUCTURING COMMITMENT LETTER AND REASONABLY
SATISFACTORY TO THE INITIAL COMMITTED PURCHASERS -
(i);
o A FINAL, NON-APPEALABLE ORDER CONFIRMING THE PLAN IS
NOT ENTERED BY THE BANKRUPTCY COURT - (ii); OR
o FAILURE TO EXECUTE AND DELIVER LEGAL DOCUMENTATION
REGARDING THE RESTRUCTURING IN FORM AND SUBSTANCE
SATISFACTORY TO THE INITIAL COMMITTED PURCHASERS -
(iv)
IF THE INITIAL COMMITTED PURCHASERS TERMINATE THE $1,000,000 PREVIOUSLY PAID WITHIN THREE BUSINESS DAYS OF ANY
RESTRUCTURING COMMITMENT LETTER BASED UPON: PLUS $2,000,000, PLUS SUCH TERMINATION.
THE REIMBURSABLE EXPENSES.
o A MODIFICATION TO THE PLAN OR DISCLOSURE STATEMENT
WHICH IS INCONSISTENT WITH THE RESTRUCTURING
COMMITMENT LETTER - TERMINATION EVENT (ix);
o AN EVENT OR ORDER HAVING THE PRACTICAL EFFECT OF
PREVENTING CONFIRMATION OF THE PLAN - TERMINATION
EVENT (x);
o CONVERSION TO A CASE UNDER CHAPTER 7 - TERMINATION
EVENT (xi);
o THE APPOINTMENT OF A TRUSTEE, RECEIVER OR EXAMINER -
TERMINATION EVENT (xii);
o INTERMET'S FAILURE TO PERFORM IN ANY MATERIAL RESPECT
ANY OF ITS OBLIGATIONS UNDER THE RESTRUCTURING
COMMITMENT LETTER (SUBJECT TO NOTICE AND CURE PERIOD)
- TERMINATION EVENT (xiv)
THE INITIAL COMMITTED PURCHASERS TERMINATE THE RESTRUCTURING
COMMITMENT LETTER BASED UPON THE INITIAL COMMITTED PURCHASERS
CONDITIONS PRECEDENT (v), (vii) - (ix), (xii) OR (xiii) HAVE
NOT BEING SATISFIED ON OR BEFORE 120 DAYS OF THE ENTRY OF THE
APPROVAL ORDER, WHICH CONDITIONS PRECEDENT ARE:
o ALL APPROVALS SHALL HAVE BEEN MAINTAINED AND REMAIN
IN FULL FORCE AND EFFECT - (v);
o ISSUANCE OF NEW COMMON STOCK - (vii);
o AVAILABILITY PURSUANT TO EXIT FINANCING FACILITY -
(viii);
</Table>
105
<Table>
<Caption>
TERMINATION EVENT AMOUNT PAYABLE TIMING OF PAYMENT
----------------- -------------- -----------------
o PAYMENT OF COMMITMENT AMOUNT AND REIMBURSABLE
EXPENSES - (ix)
o ON EFFECTIVE DATE ALL REPRESENTATION AND WARRANTIES
BY INTERMET BEING TRUE, COMPLETE AND ACCURATE IN ALL
MATERIAL RESPECTS - (xii);
o ON EFFECTIVE DATE, ALL COVENANTS MADE BY INTERMET
HAVING BEEN COMPLIED WITH IN ALL MATERIAL RESPECTS -
(xiii)
IN THE EVENT THAT (i) INTERMET CONSUMMATES A FINANCIAL $1,000,000 PLUS THE ON THE DAY ON WHICH ANY SUCH
RESTRUCTURING OTHER THAN THE RESTRUCTURING DESCRIBED IN THE REMAINING $2,000,000 FINANCIAL RESTRUCTURING IS
RESTRUCTURING COMMITMENT LETTER PRIOR TO OR WITHIN 12 MONTHS PLUS AN ADDITIONAL CONSUMMATED.
AFTER TERMINATION OF THE RESTRUCTURING COMMITMENT LETTER, $2,000,000, PLUS THE
(ii) THERE HAS NOT BEEN A MATERIAL BREACH OF THE OBLIGATIONS REIMBURSABLE EXPENSES
OF THE INITIAL COMMITTED PURCHASERS HEREUNDER AND (iii) THE
FINANCIAL RESTRUCTURING THAT IS CONSUMMATED (a) PAYS THE
SENIOR CREDIT FACILITY LOANS IN FULL IN CASH AND (b) DELIVERS
A DOLLAR RECOVERY TO ALL UNSECURED HOLDERS IN EXCESS OF THE
IMPLIED DOLLAR RECOVERY TO UNSECURED HOLDERS ACCORDING TO
THE RIGHTS OFFERING PRICE.
</Table>
C. ABILITY TO PARTICIPATE IN THE RIGHTS OFFERING
Holders of General Unsecured Claims against any Debtor are entitled to
participate in the Rights Offering solely to the extent of their Rights
Participation Claim Amount set forth below. If a General Unsecured Claim is
Allowed, the Holder of such Claim will be entitled to participate to the extent
of the amount of such Allowed General Unsecured Claim. If a General Unsecured
Claim is Disputed, the Holder of such Claim will be entitled to participate in
the Rights Offering, in the amount of the Rights Participation Claim Amount, and
as illustrated below.
The chart below summarizes the right of each Holder of a General Unsecured Claim
to participate in the Rights Offering. Please see the Plan for the definition of
"Rights Participation Claim Amount."
<Table>
<Caption>
CHARACTERISTICS OF CLAIM RIGHTS PARTICIPATION CLAIM AMOUNT
- ------------------------ ---------------------------------
Objection to Claim has been filed The undisputed portion of the Claim, if any.
Holder has filed Proof of Claim, but no corresponding The amount of the Proof of Claim.
Claim listed on Debtors' Schedules and no objection filed
</Table>
106
<Table>
<Caption>
CHARACTERISTICS OF CLAIM RIGHTS PARTICIPATION CLAIM AMOUNT
- ------------------------ ---------------------------------
Holder has filed Proof of Claim but corresponding amount The lesser of the amount listed on the Schedules and
listed in Schedules is different and no objection has been the Proof of Claim amount.
filed, and the Claim has not been Temporarily Allowed.
Allowed Claim Amount of Allowed Claim
</Table>
D. ISSUANCE OF RIGHTS
The Rights will entitle the Holders of General Unsecured Claims the right to
purchase, on a Pro Rata basis using the Rights Offering Participation Claim
Amount, the Rights Offering Shares at a price of $10.00 per share pursuant to
the terms and conditions set forth in Article 6.12 of the Plan, provided that
the Holder executes a Subscription Form, which will be distributed to each
Holder of a General Unsecured Claim together with the Ballot. The number of
Rights Offering Shares will not exceed 7,500,000 shares.
Each Holder of a Rights Participation Claim Amount as of the Subscription Record
Date will be able to purchase its Pro Rata portion of the Rights Offering
Shares. A Subscription Form will be distributed to each Holder of a General
Unsecured Claim together with the Ballot.
E. SUBSCRIPTION PERIOD
The Rights Offering will commence on the Subscription Commencement Date and will
expire on the Subscription Expiration Date. After the Subscription Expiration
Date, unexercised Rights will terminate and any purported exercise of any such
unexercised Rights by any Person will be null and void and Reorganized Intermet
will not honor any such purported exercise received by the Subscription Agent
after the Subscription Expiration Date, regardless of when the documents
relating to such exercise were sent.
F. SUBSCRIPTION PRICE
The Subscription Price for Rights will be $10.00 per share of New Common Stock,
payable in Cash.
G. SUBSCRIPTION AGENT
The Subscription Agent is as follows:
[Name]
[Address]
[Address]
(Attn: [ ])
Phone: ______________
107
H. EXERCISE OF RIGHTS
In order to exercise the Rights, each such Holder thereof must: (i) return a
duly completed Subscription Form to the Subscription Agent so that such form is
received by the Subscription Agent on or before the Subscription Expiration Date
and make the appropriate election on its Ballot; and (ii) pay to the
Subscription Agent (on behalf of the Debtors) on or before the Subscription
Expiration Date immediately available funds in an amount equal to such Holder's
aggregated Subscription Purchase Price, such payment to be made either by wire
transfer to the Subscription Agent in accordance with the wire instructions set
forth on the Subscription Form, in the case of a wire. If, on or prior to the
Subscription Expiration Date, the Subscription Agent for any reason has not
received from a given Holder of Rights both a duly completed Subscription Form
and Cash, in an amount equal to such Holder's aggregate Subscription Purchase
Price, such Holder will be deemed to have not exercised its Rights and to have
relinquished and waived its ability to participate in the Rights Offering. By
completing and submitting the Subscription Form, a Holder will be agreeing to be
bound by the Stockholders' Agreement. A Subscription Form must also be
accompanied by sufficient indication of ownership of the Claim giving rise to
the Rights, as well as appropriate executed representations as to ownership. The
payments made in accordance with the Rights Offering will be deposited and held
by the Subscription Agent in a trust account, escrow account, or similar
segregated account or accounts which will be separate and apart from Reorganized
Intermet's general operating funds and any other funds subject to any cash
collateral arrangements, and which segregated account or accounts will be
maintained for the purpose of holding the money for administration of the Rights
Offering until the Effective Date, or such other later date, at the option of
the Reorganized Debtors, but not later than 20 days after the Effective Date.
I. TRANSFER RESTRICTION; REVOCATION
The Rights are not transferable. Additionally, once a Holder of Rights has
properly exercised its Rights such exercise cannot to be revoked for any reason.
J. DISTRIBUTION OF RIGHTS OFFERING SHARES
a. Distribution To Exercising Claimants
On the Effective Date, the Disbursing Agent will distribute to the exercising
claimants certificates representing the Rights Offering Shares.
108
b. Distribution to Initial Committed Purchasers With
Respect to Private Placement Purchase Agreement
On the Effective Date, Reorganized Intermet will distribute to the Initial
Committed Purchasers certificates representing the Rights Offering Shares
purchased by the Initial Committed Purchasers.
K. SUBSEQUENT ADJUSTMENTS TO THE RIGHTS PARTICIPATION CLAIM
AMOUNT
Holders of Disputed Claims will be entitled to participate in the Rights
Offering solely to the extent of their Rights Participation Claim Amounts. If
any Holder of such Claim has obtained an order of the Bankruptcy Court
estimating its General Unsecured Claim for the purpose of participating in the
Rights Offering prior to the Subscription Expiration Date, such Holder will be
entitled to participate in the Rights Offering. In the event that any such
estimation occurs, each exercising claimant will be cut back Pro Rata and the
difference between the price paid by such exercising claimant and the adjusted
Subscription Purchase Price will be refunded to such exercising claimant,
without interest, as soon as practicable after the Effective Date.
L. NO INTEREST
In the event any Subscription Purchase Price is repaid to any Person making such
payment, no interest will be paid thereon.
M. VALIDITY OF EXERCISE OF RIGHTS
All questions concerning the timeliness, viability, form and eligibility of any
exercise of Rights will be determined by Reorganized Intermet, with the consent
of the Initial Committed Purchasers, in consultation with the Creditors'
Committee. Such determinations will be final and binding. Reorganized Intermet,
with the consent of the Initial Committed Purchasers, may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
times as it may determine, or reject the purported exercise of any Rights.
Subscription Forms will be deemed not to have been received or accepted until
all irregularities have been waived or cured within such time as Reorganized
Intermet with the consent of the Initial Committed Purchasers determines.
Neither Reorganized Intermet nor the Subscription Agent will be under any duty
to give notification of any defect or irregularity in connection with the
submission of Subscription Forms or incur any liability for failure to give such
notification.
N. USE OF PROCEEDS
On the Effective Date, the proceeds received by Reorganized Intermet from the
Rights Offering will be used to fund the Cash payments required under the Plan
and for general corporate purposes.
109
O. JURISDICTION
Each Holder of Rights participating in the Rights Offering consents to the
exclusive jurisdiction and venue of the Bankruptcy Court for the resolution of
any dispute arising thereunder, including, without limitation, in respect of the
Subscription Purchase Price and in respect of the terms of the Rights Offering
set forth in the Plan and the manner of execution of the Rights Offering
pursuant to those terms.
XI. VALUATION ANALYSIS
A. VALUATION OF THE REORGANIZED DEBTORS
THE VALUATION INFORMATION CONTAINED IN THIS SECTION WITH REGARD TO THE
REORGANIZED DEBTORS IS NOT A PREDICTION OR GUARANTEE OF THE ACTUAL MARKET VALUE
THAT MAY BE REALIZED THROUGH THE SALE OF ANY SECURITIES TO BE ISSUED PURSUANT TO
THE PLAN.
1. Overview
The Debtors have been advised by Lazard, its financial advisor, with respect to
the consolidated Enterprise Value (as hereinafter defined) of the Reorganized
Debtors on a going-concern basis. Lazard undertook this valuation analysis for
the purpose of determining value available for Distribution to Holders of
Allowed Claims pursuant to the Plan and to analyze the relative recoveries to
such Holders thereunder. The estimated total value available for Distribution
(the "Distributable Value") to Holders of Allowed Claims is comprised of two
components: (a) an estimated value of the Reorganized Debtors' operations on a
going concern basis (the "Enterprise Value," as identified above), and (b) the
value of certain projected tax attributes such as net operating losses ("NOLs"),
with which the Debtors will emerge from bankruptcy.
Based in part on information provided by the Debtors, Lazard has concluded
solely for purposes of the Plan that the Distributable Value of the Reorganized
Debtors ranges from approximately $300.0 to $350.0 million, with a midpoint of
approximately $325.0 million as of an assumed Effective Date of August 31, 2005.
Based on an assumed August 31, 2005 debt balance, net of cash, of approximately
$165.0 million, Lazard's mid-point estimated Enterprise Value implies a value
for the New Common Stock of $160.0 million. Assuming approximately 9,900,000
shares of New Common Stock are Distributed to the Holders of Allowed Claims
pursuant to the Plan, the value of New Common Stock is equal to $16.15 per
share.(10) These values do not give effect to the
- ----------
(10) As previously described, under the Plan, creditors have the option of
electing an Inducement Cash Amount in lieu of a combination of stock
and rights to purchase stock in the Reorganized Intermet in
satisfaction of their claims against the Debtors. In making this
election, creditors must release all other Debtors with respect to
their claim. In the event all creditors other than Noteholders elect to
receive cash under the Inducement Cash Option, approximately 100,000 of
the 2,500,000 shares issuable to unsecured creditors will not be
issued. To the extent, however, all such creditors elect to receive
stock and rights to purchase stock in the Reorganized Intermet, in
satisfaction of their claims, the total number of outstanding common
shares of the Reorganized Intermet upon emergence from bankruptcy will
total
110
potentially dilutive impact of any shares issued upon exercise of any options
that may be granted under a long-term incentive plan which the Board of
Directors of Reorganized Intermet may authorize for management of Reorganized
Intermet. Lazard's estimate of Enterprise Value does not constitute an opinion
as to fairness from a financial point of view of the consideration to be
received under the Plan or of the terms and provisions of the Plan.
THE ASSUMED DISTRIBUTABLE VALUE RANGE, AS OF THE ASSUMED EFFECTIVE DATE OF
AUGUST 31, 2005, REFLECTS WORK PERFORMED BY LAZARD ON THE BASIS OF INFORMATION
AVAILABLE TO LAZARD CURRENT AS OF THE DATE OF THIS DISCLOSURE STATEMENT.
ALTHOUGH SUBSEQUENT DEVELOPMENTS MAY AFFECT LAZARD'S CONCLUSIONS, NEITHER LAZARD
NOR THE DEBTORS HAVE ANY OBLIGATION TO UPDATE, REVISE OR REAFFIRM ITS ESTIMATE.
With respect to the Projections prepared by the management of the Debtors and
included in this Disclosure Statement, Lazard assumed that such Projections were
reasonably prepared in good faith and on a basis reflecting the Debtors' most
accurate currently available estimates and judgments as to the future operating
and financial performance of the Reorganized Debtors. Lazard's Distributable
Value range assumes the Reorganized Debtors will achieve their Projections in
all material respects, including gross profit growth and improvements in
operating margins, earnings and cash flow. If the business performs at levels
below those set forth in the Projections, such performance may have a materially
negative impact on Enterprise Value.
In estimating the Enterprise Value and equity value of the Reorganized Debtors,
Lazard: (a) reviewed certain historical financial information of the Debtors for
recent years and interim periods; (b) reviewed certain internal financial and
operating data of the Debtors, including the Projections as described in this
Disclosure Statement, which data were prepared and provided to Lazard by the
management of the Debtors and which relate to the Reorganized Debtors' business
and its prospects; (c) met with members of senior management to discuss the
Debtors' operations and future prospects; (d) reviewed extensive publicly
available financial data for, and considered the market value of, public
companies that Lazard deemed generally comparable to the operating business of
the Debtors; (e) considered certain economic and industry information relevant
to the operating business; and (f) conducted such other studies, analyses,
inquiries and investigations as it deemed appropriate. Although Lazard conducted
a review and analysis of the Debtors' business, operating assets and liabilities
and the Reorganized Debtors' business plan, it assumed and relied on the
accuracy and completeness of all
- ----------
10,000,000. The equity value identified above as well as the total
shares outstanding (approximately 9,900,000) and value per each such
share ($16.15) assume all creditors, other than noteholders, elect to
receive the Inducement Cash Amount. As the actual, ultimate future
election by creditors to receive cash in lieu of common stock and
rights, or vice versa, cannot be known at the time of publication of
the Disclosure Statement, this analysis presents a simplifying
assumption.
111
financial and other information furnished to it by the Debtors, as well as
publicly available information.
In addition, Lazard did not independently verify management's Projections in
connection with preparing estimates of Enterprise Value, and no independent
valuations or appraisals of the Debtors were sought or obtained in connection
herewith. Such estimates were developed solely for purposes of the formulation
and negotiation of the Plan and the analysis of implied relative recoveries to
Holders of Allowed Claims thereunder.
Lazard's analysis addresses the estimated going concern Enterprise Value of the
Debtors and the value of certain expected tax attributes, including NOLs. It
does not address other aspects of the proposed reorganization, the Plan or any
other transactions, and it does not address the Debtors' underlying business
decision to effect the reorganization set forth in the Plan. Lazard's estimated
Enterprise Value of the Debtors does not constitute a recommendation to any
Holder of Allowed Claims as to how such person should vote or otherwise act with
respect to the Plan. Lazard has not been asked to nor did Lazard express any
view as to what the value of the Debtors' securities will be when issued
pursuant to the Plan or the prices at which they may trade in the future. The
estimated Enterprise Value of the Debtors set forth herein does not constitute
an opinion as to fairness from a financial point of view to any person of the
consideration to be received by such person under the Plan or of the terms and
provisions of the Plan.
Such estimates reflect the application of various valuation techniques and do
not purport to reflect or constitute appraisals, liquidation values or estimates
of the actual market value that may be realized through the sale of any
securities to be issued pursuant to the Plan, which may be significantly
different than the amounts set forth herein. The value of an operating business
is subject to numerous uncertainties and contingencies which are difficult to
predict and will fluctuate with changes in factors affecting the financial
condition and prospects of such a business. As a result, the estimated
Enterprise Value range of the Reorganized Debtors set forth herein is not
necessarily indicative of actual outcomes, which may be significantly more or
less favorable than those set forth herein. Neither the Debtors, Lazard, nor any
other person assumes responsibility for their accuracy. In addition, the
valuation of newly issued securities is subject to additional uncertainties and
contingencies, all of which are difficult to predict. Actual market prices of
such securities at issuance will depend upon, among other things, the operating
performance of the Debtors, prevailing interest rates, conditions in the
financial markets, the anticipated holding period of securities received by
pre-petition creditors (some of whom may prefer to liquidate their investment
rather than hold it on a long-term basis), and other factors which generally
influence the prices of securities.
2. Valuation Methodology
The following is a brief summary of certain financial analyses performed by
Lazard to arrive at its range of estimated Enterprise Values and Distributable
Values for the Reorganized Debtors. Lazard performed certain procedures,
including each of the financial analyses described below, and reviewed with the
management of the Debtors the assumptions on which such analyses were based.
Lazard's valuation analysis must be
112
considered as a whole and selecting just one methodology or portions of the
analysis could create a misleading or incomplete conclusion as to Enterprise
Value.
Under the valuation methodologies summarized below, Lazard derived a range of
Enterprise Values assuming the Reorganized Debtors are full taxpayers. Lazard
separately analyzed the value of the Debtors' tax attributes, including NOLs, as
of the assumed Effective Date. To the extent such attributes were valued
positively, they were added to the Enterprise Value range to calculate a
Distributable Value range. A discussion of Lazard's analysis of such tax
attributes, including the methodology used to value them, is presented below in
section (ii)(d).
a. Comparable Company Analysis
Comparable company analysis estimates the value of a company based on a relative
comparison with other publicly traded companies with similar operating and
financial characteristics. Under this methodology, observed Enterprise Values
and equity values for selected public companies are commonly expressed as
multiples of various measures of earnings, most commonly earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
interest and taxes ("EBIT") and net income. In addition, each company's
operational performance, operating margins, profitability, leverage and business
trends are examined. Based on these analyses, financial multiples and ratios are
calculated to measure each company's relative performance and valuation.
A key factor to this approach is the selection of companies with relatively
similar business and operational characteristics to the Debtors. Common criteria
for selecting comparable companies for the analysis include, among other
relevant characteristics, similar lines of businesses, business risks, growth
prospects, maturity of businesses, location, market presence and size and scale
of operations. The selection of truly comparable companies is often difficult
and subject to limitations due to sample size and the availability of meaningful
market-based information. However, the underlying concept is to develop a
premise for relative value, which, when coupled with other approaches, presents
a foundation for determining Enterprise Value.
Lazard selected the following publicly traded companies (the "Peer Group") on
the basis of general comparability to the Debtors in one or more of the factors
described above: American Axle & Manufacturing Holdings, Inc., ArvinMeritor,
Inc., Dana Corporation, Hayes Lemmerz International, Inc., Linamar Corporation,
Magna International Inc., Noble International Ltd., Shiloh Industries, Inc.,
Superior Industries International, Inc., Tenneco Automotive Inc., and TRW
Automotive Holdings Corp.
Lazard calculated multiples of Enterprise Value to 2005 and 2006 EBITDA for the
Peer Group by dividing the Enterprise Values of each comparable company as of
June 14, 2005, by their projected 2005 EBITDA and 2006 EBITDA, as estimated in
current equity and fixed income research. This analysis produced multiples of
Enterprise Value to estimated 2005 EBITDA ranging from a low of approximately
4.2x to a high of approximately 7.0x, with a mean of approximately 5.5x and a
mid-point or median of approximately 5.3x. Multiples of Enterprise Value as of
June 14, 2005 to estimated 2006
113
EBITDA ranged from a low of approximately 3.9x to a high of approximately 6.3x,
with a mean of approximately 5.1x and a mid-point or median of approximately
5.3x.
Having calculated these statistics, Lazard then applied a range of multiples to
the Debtors' forecasted Adjusted 2005 EBITDA and Adjusted 2006 EBITDA ($63.1
million and $75.3 million, respectively) to determine a range of Enterprise
Values. (To calculate Adjusted EBITDA, Lazard adjusted the Debtors' projected
2005 and 2006 earnings before interest, taxes, depreciation and amortization to
exclude forecasted non-recurring expenses/charges, restructuring fees, losses
from discontinued or inactive operations, plant closure costs, and KERP
payments. This calculation is presented in Exhibit H - "Projected Financial
Information For The Reorganized Debtors".)
In applying a range of multiples, Lazard based the range for both 2005 and 2006
EBITDA multiples on the 25th percentile and the mean, using the statistics
observed for the Peer Group. These multiples specifically ranged from 4.4x to
5.5x of 2005 Adjusted EBITDA and 4.3x to 5.1x of 2006 Adjusted EBITDA. In
applying these ranges, Lazard considered a variety of factors, including both
qualitative attributes and quantitative measures such as historical and
projected revenue and EBITDA results; historical Enterprise Value/EBITDA trading
multiples; EBITDA margins; capital efficiency; size; and projected long-term
earnings growth.
b. Precedent Transactions Analysis
Precedent transactions analysis estimates value by examining public merger and
acquisition transactions. An analysis of a company's transaction value as a
multiple of various operating statistics provides industry-wide valuation
multiples for companies in similar lines of business to the Debtors. Transaction
multiples are calculated based on the purchase price (including any debt
assumed) paid to acquire companies that are comparable to the Debtors. Lazard
specifically focused on prices paid as a multiple of Revenue, EBIT, and EBITDA
in determining a range of values for the Debtors. The derived multiples are then
applied to the Debtors' key operating statistics to determine the Enterprise
Value or value to a potential strategic buyer.
Unlike the comparable public company analysis, the valuation in this methodology
reflects a "control" premium, representing the purchase of a majority or
controlling position in a company's assets. Thus, this methodology generally
produces higher valuations than the comparable public company analysis. Other
aspects of value that are manifest in a precedent transaction analysis include
the following: (a) circumstances surrounding a merger transaction may introduce
"diffusive quantitative results" into the analysis (e.g., an additional premium
may be extracted from a buyer in a case of a competitive bidding contest); (b)
the market environment is not identical for transactions occurring at different
periods of time; and (c) circumstances pertaining to the financial position of
the company may have an impact on the resulting purchase price (e.g., a company
in financial distress may receive a lower price due to perceived weakness in its
bargaining leverage).
114
As with the comparable public company analysis, because no acquisition used in
any analysis is identical to a target transaction, valuation conclusions cannot
be based solely on quantitative results. The reasons for and circumstances
surrounding each acquisition transaction are specific to such transaction, and
there are inherent differences between the businesses, operations, and prospects
of each. Therefore, qualitative judgments must be made concerning the
differences between the characteristics of these transactions and other factors
and issues that could affect the price an acquirer is willing to pay in an
acquisition. The number of completed transactions for which public data is
available also limits this analysis. Because the precedent transaction analysis
explains other aspects of value besides the inherent value of a company, there
are limitations as to its use in the valuation of the Debtors.
In deriving a range of Enterprise Values for Intermet under this methodology,
Lazard calculated multiples of total transaction value ("Transaction Value") to
the latest twelve months ("LTM") EBITDA of the acquired companies and applied
these multiples to Intermet's Adjusted LTM EBITDA. The calculation of Intermet's
Adjusted LTM EBITDA, as defined in the preceding section, is shown in Exhibit H
- - "Projected Financial Information For The Reorganized Debtors."
Lazard evaluated various merger and acquisition transactions that have occurred
in the automotive supply industry between 2002 and 2005. Lazard calculated
multiples of Transaction Value to LTM EBITDA of the target companies by dividing
the disclosed purchase price of the target's equity, plus any debt assumed as
part of the transaction, by disclosed LTM EBITDA. This analysis produced
multiples of Transaction Value to LTM EBITDA ranging from a low of approximately
3.8x to a high of approximately 7.2x, with a mean of approximately 5.6x and a
mid-point or median of approximately 5.6x.
Lazard then applied a range of multiples to the Debtors' LTM Adjusted EBITDA to
determine a range of Enterprise Values. As it did in its comparable company
analysis, Lazard established a range between the 25th percentile and the mean
(4.9x to 5.6x) of the Transaction Value/EBITDA statistic for the observed
transactions. The use of this range implies Lazard's assumption that Intermet's
relative value among the target companies in this analysis is the same as was
determined for Intermet relative to the Peer Group.
c. Discounted Cash Flow Analysis
The Discounted Cash Flow ("DCF") analysis is a forward-looking enterprise
valuation methodology that relates the value of an asset or business to the
present value of expected future cash flows to be generated by that asset or
business. Under this methodology, projected future cash flows are discounted by
the business' weighted average cost of capital (the "Discount Rate"). The
Discount Rate reflects the estimated blended rate of return debt and equity
investors would require to invest in the business based on its capital
structure. The value of the firm (or Enterprise Value) is determined by
calculating the present value of the Reorganized Debtors' unlevered after-tax
free cash flows based on in its business plan (the Projections) plus an estimate
for the value of the firm beyond the period of 2005 to 2009 (the "Projection
Period") known as the terminal value. The
115
terminal value is derived by applying a multiple to the Reorganized Debtors'
projected EBITDA in the final year of the Projection Period, discounted back to
the assumed date of emergence by the Discount Rate.
To estimate the Discount Rate, Lazard used the cost of equity and the after-tax
cost of debt for the Reorganized Debtors, assuming a range of targeted long-term
capital structure of 30% to 40% debt to total capital. Lazard calculated the
cost of equity based on the Capital Asset Pricing Model, which assumes that the
required equity return is a function of the risk-free cost of capital and the
correlation of a publicly traded stock's performance to the return on the
broader market. To estimate the cost of debt, Lazard considered the debt
financing costs for comparable companies with leverage similar to the
Reorganized Debtors' target capital structure. In determining the terminal
multiple, Lazard considered the fact that the projections indicated a steady
rise in profitability and no cyclicality of earnings, as would commonly be
encountered in the automotive industry. Lazard therefore selected an exit
multiple range which reflected a peak earnings environment.
Although formulaic methods are used to derive the key estimates for the DCF
methodology, their application and interpretation still involve complex
considerations and judgments concerning potential variances in the projected
financial and operating characteristics of the Reorganized Debtors, which in
turn affect its cost of capital and terminal multiples. Lazard calculated its
DCF valuation on a range of Discount Rates between 13.5% and 14.5% and an EBITDA
multiple range used to derive a terminal value of 3.75x to 4.25x.
In applying the above methodology, Lazard utilized management's detailed
Projections for the period beginning September 1, 2005 and ending December 31,
2009 to derive unlevered after-tax free cash flows. Free cash flow includes
sources and uses of cash not reflected in the income statement, such as changes
in working capital and capital expenditures. For purposes of the DCF, the
Reorganized Debtors are assumed to be full taxpayers; the value of their tax
attributes, including NOLs, is calculated separately as described below. These
cash flows, along with the terminal value, are discounted back to the assumed
Effective Date using the range of Discount Rates described above to arrive at a
range of Enterprise Values.
d. Analysis Of Post-Emergence Tax Attributes
In developing Intermet's Plan, the Debtors, with the assistance of certain tax,
accounting and financial advisors conducted a detailed analysis of the impact of
various debt cancellation strategies. In particular, the Debtors' reviewed
alternatives for canceling certain inter-company notes owing from Intermet
Holding Co. (US) to Intermet Holding BV and from Intermet Corporation to
Intermet Europe KG. Tax consequences, which were identified for each such
inter-company note cancellation strategy were numerous, and included, but were
not limited to, the following: the impact of cancellation of indebtedness income
on the Debtors' tax attributes, specifically NOLs and tax basis in depreciable
assets; the creation of bad debt deductions in foreign jurisdictions; the
ability of Intermet and its foreign subsidiaries to continue to shelter
inter-company interest
116
income by interest expense; and the impact of various inter-company debt
cancellation strategies on deferred foreign currency gains.
Based on a detailed analysis of such tax consequences, the Debtors' management
has elected to pursue a strategy whereby the inter-company notes identified
above will either be cancelled through offsetting transactions or forgiven in
bankruptcy. The particular strategy the Debtors are pursuing is expected to
maximize the amount of NOLs at Intermet U.S. legal entities available to offset
expected future taxable income following the Debtors' emergence from bankruptcy.
Lazard has valued these NOLs by calculating the present value of the tax savings
they would provide relative to the taxes the Reorganized Debtors would otherwise
pay absent the application of such NOLs. With regard to pre-emergence NOLs with
which Intermet will emerge from bankruptcy, the NOL valuation analysis assumed
that the annual limitation of such NOL utilization, per Section 382 of the Tax
Code, would be approximately $7 million. The cash tax savings resulting from the
application of the NOLs were discounted at the Debtors' cost of equity.
In analyzing the expected tax consequences of the various debt cancellation
strategies, the Debtors' management and its advisors also studied the impact of
projected reductions in the tax basis of assets of certain Debtors. Forecasted
reductions to the tax basis of depreciable assets varied with different debt
cancellation alternatives, reflecting differing levels of cancellation of
indebtedness income. Management specifically analyzed the impact of such basis
reductions on projected taxable income that would result from decreases in
future expected depreciation and amortization deductions. (Reduced depreciation
and amortization deductions would result in lower future depreciation tax
shields, thereby increasing projected taxable income).
The debt cancellation strategy the Debtors' management will pursue, while
maximizing post-emergence NOLs, also significantly reduces projected future tax
depreciation. In analyzing the tax attributes of Reorganized Intermet, Lazard
separately valued the impact of both of these tax consequences based on the fact
that its calculation of the Reorganized Intermet's Enterprise Value would
consider or reflect neither of these impacts. Specifically, Lazard valued, as
described above, the present value of post-emergence NOLs subject to limitations
under Section 382 of the Tax Code. Similarly, Lazard valued the negative cash
tax impact of reductions to asset tax bases and the resulting declines in
projected future depreciation tax shields. Based on this analysis, Lazard
determined that both effects, one which increased cash tax savings, the other
which reduced it, were comparable and effectively offset each other. Based on
this conclusion, Lazard did not, in its valuation analysis, attribute
incremental value to Reorganized Intermet's Enterprise Value based on projected
post-emergence tax attributes.
3. Value Allocation
As described earlier, the Plan provides for the treatment of both classified and
unclassified Claims against and Equity Interests in each of the Debtors. Though
the Plan is proposed jointly by all of the Debtors, it constitutes a separate
Plan for each Debtor. The Estates of the Debtors have not been consolidated,
substantively or otherwise. Any Claims held against one of the Debtors will be
satisfied solely based on the value of the
117
Assets of such Debtor. As a result of the deconsolidated nature of the plan,
Lazard has allocated Enterprise Value for Reorganized Intermet across all of its
legal entities, including the Debtors. This allocation of value will generally
determine ultimate recoveries by Creditors at each of the Debtors.(11) In
deriving this allocation, Lazard conducted a detailed analysis of the following
factors: revenue forecasts / results of (or contribution by) each Intermet legal
entity for the years ending 2005, 2006, and 2007; projected EBITDA contribution
by each Intermet legal entity for the years ending 2005, 2006, and 2007;
projected EBIT contribution by each Intermet legal entity for the years ending
2005, 2006, and 2007; and the book value of total assets of each Intermet legal
entity at December 31, 2004. This data is presented in tabular format in
Exhibit H - "Projected Financial Information For The Reorganized Debtors." In
deriving an allocation of enterprise values based on this data, Lazard weighted
most heavily earnings measures for the Debtors, specifically EBITDA and EBIT.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE
ANALYSES PERFORMED BY LAZARD. THE PREPARATION OF A VALUATION ESTIMATE INVOLVES
VARIOUS DETERMINATIONS AS TO THE MOST APPROPRIATE AND RELEVANT METHODS OF
FINANCIAL ANALYSIS AND THE APPLICATION OF THESE METHODS IN THE PARTICULAR
CIRCUMSTANCES AND, THEREFORE, SUCH AN ESTIMATE IS NOT READILY SUITABLE TO
SUMMARY DESCRIPTION. IN PERFORMING THESE ANALYSES, LAZARD AND THE DEBTORS MADE
NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, BUSINESS AND ECONOMIC
CONDITIONS AND OTHER MATTERS. THE ANALYSES PERFORMED BY LAZARD ARE NOT
NECESSARILY INDICATIVE OF ACTUAL VALUES OR FUTURE RESULTS, WHICH MAY BE
SIGNIFICANTLY MORE OR LESS FAVORABLE THAN SUGGESTED BY SUCH ANALYSES.
XII. CERTAIN FACTORS TO BE CONSIDERED
A. CERTAIN BANKRUPTCY CONSIDERATIONS
Even if the requisite acceptances are received, there can be no assurance that
the Bankruptcy Court, which sits as a court of equity with substantial
discretion, will confirm the Plan. A non-accepting Creditor of the Debtors might
challenge the adequacy of the disclosure or the balloting procedures and results
as not being in compliance with the Bankruptcy Code. Even if the Bankruptcy
Court were to determine that the disclosure and the balloting procedures and
results were appropriate, the Bankruptcy Court could still decline to confirm
the Plan if it were to find that any statutory conditions to Confirmation had
not been met. Section 1129 of the Bankruptcy Code sets forth the requirements
for Confirmation and requires, among other things, a finding by the
- ----------
(11) The allocation of value to each Debtor is implicit in the
distribution schedule attached to the Disclosure Statement as Exhibit J, and
attached to the Plan as Exhibit C.
118
Bankruptcy Court that the Confirmation of the Plan is not likely to be followed
by a liquidation or a need for further financial reorganization (except as
contemplated in the Plan) and that the value of Distributions to non-accepting
Creditors will not be less than the value of Distributions such Creditors would
receive if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code.
SEE SECTION XIV - "FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS
TEST - Chapter 7 Liquidation Analysis." There can be no assurance that the
Bankruptcy Court will conclude that these requirements have been met, but the
Debtors believe that the Bankruptcy Court should find that the Plan will not be
followed by a need for further financial reorganization or liquidation (other
than as contemplated) and that non-accepting Creditors will receive
Distributions at least as great as would be received following a liquidation
pursuant to Chapter 7 of the Bankruptcy Code.
Additionally, even if the required acceptances of Classes are received, the
Bankruptcy Court might find that the solicitation did not comply with the
solicitation requirements made applicable by Section 1125(b) of the Bankruptcy
Code and Bankruptcy Rule 3018(a). In such an event, the Debtors may seek to
re-solicit acceptances, but Confirmation of the Plan could be substantially
delayed and possibly jeopardized. However, the Debtors believe that their
solicitation of acceptances of the Plan complies with the requirements of
Section 1125(b) of the Bankruptcy Code and Bankruptcy Rule 3018(a), that duly
executed Ballots will be in compliance with applicable provisions of the
Bankruptcy Code and the Bankruptcy Rules, and that, if sufficient acceptances
are received, the Plan should be confirmed by the Bankruptcy Court. SEE SECTION
XV -"SOLICITATION OF THE PLAN."
The consummation of the Plan also is subject to certain conditions. SEE SECTION
VIII - "SUMMARY OF THE PLAN." If the Plan were not to be confirmed, it is
unclear whether a reorganization could be implemented and what Holders of Claims
would ultimately receive with respect to their Claims. If an alternative
reorganization could not be effected, it is possible that the Debtors would have
to liquidate their assets, in which case Holders of Claims would very likely
receive less than they would have received pursuant to the Plan.
B. RISKS RELATING TO THE NEW COMMON STOCK
1. Variances From Projections
The assumptions and estimates underlying the Projections set forth in Exhibit H
attached to this Disclosure Statement are inherently uncertain and, though
considered reasonable by management as of the date hereof, are subject to a wide
variety of significant business, economic, competitive and political risks and
uncertainties. The Projections are not necessarily indicative of the future
financial position or results of operations of the Debtors, which may vary
significantly from those set forth in the Projections. Consequently, the
Projections contained herein should not be regarded as a representation by the
Debtors or any of their Affiliates, advisors or any other person that the
projected financial position or results of operations can or will be achieved.
The Projections are also "forward-looking statements" within the meaning of the
Private Securities Litigation
119
Reform Act of 1995. Factors that could cause actual results to differ materially
include, but are not limited to, those identified in the first paragraph of Part
II, Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," of Intermet's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, which are incorporated herein by reference.
2. Lack Of Trading Market
On the Effective Date, Reorganized Intermet will seek to terminate, or obtain an
exemption from, its reporting and filing obligations under the Securities Act.
Consequently, if permitted, from and after the Effective Date, Reorganized
Intermet will no longer be a public company. Pursuant to the Plan, the Existing
Common Stock will be cancelled and the New Common Stock will not be listed or
traded on any nationally recognized market or exchange. Moreover, the
Stockholders Agreement, which will become effective on the Effective Date,
imposes significant restrictions with regard to the sale or transfer of the New
Common Stock. Accordingly, from and after the Effective Date, the
transferability of the New Common Stock will be severely limited.
3. Dividend Policies
The Debtors do not anticipate that Reorganized Intermet will pay dividends on
the New Common Stock in the near future.
4. Restrictions On Transfer
The Stockholders' Agreement imposes significant restrictions with regard to the
sale or transfer of the New Common Stock. Therefore, from and after the
Effective Date, the transferability of the New Common Stock will be severely
limited.
In addition, holders of New Common Stock who are deemed to be "underwriters" as
defined in Section 1145(b) of the Bankruptcy Code, including Holders who are
deemed to be "affiliates" or "control persons" within the meaning of the
Securities Act, will be unable freely to transfer or to sell their securities
except pursuant to (i) "ordinary trading transactions" by a Holder that is not
an "issuer" within the meaning of Section 1145(b), (ii) an effective
registration of such securities under the Securities Act and under equivalent
state securities or "blue sky" laws, or (iii) pursuant to the provisions of Rule
144 under the Securities Act or other available exemption from registration
requirements.
5. Control By Initial Committed Purchasers
As a result of Confirmation and consummation of the Plan, the Initial Committed
Purchasers will together initially own [between ___% and ____%] [at least ____%]
of the shares of outstanding New Common Stock. In addition, the Initial
Committed Purchasers will have the right to appoint certain members of the Board
of Reorganized Intermet. Accordingly, the Initial Committed Purchasers will
exercise a controlling influence over the business and affairs of Reorganized
Intermet and the Reorganized Debtors and, although they may not have a majority
of the voting rights, they are likely to have
120
effective control over future shareholder elections of directors, and hence
Reorganized Intermet and the Reorganized Debtors. Additionally, if the Initial
Committed Purchasers are required to purchase Cash-Out Shares and Rights
Offering Shares, the Initial Committed Purchasers could own sufficient shares of
New Common Stock to have effective power to approve significant corporate
transactions such as amendments to the Articles of Incorporation and Bylaws,
mergers, and the sale of all or substantially all of the assets of Reorganized
Intermet. The Initial Committed Purchasers' voting power could have the effect
of deterring or preventing a change in control of Reorganized Intermet.
C. RISKS ASSOCIATED WITH THE BUSINESSES
A discussion of factors that could negatively impact the Debtors' businesses are
set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," to Intermet's Annual Report on Form 10-K
for the fiscal year ended December 31, 2004.
XIII. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IF THE PLAN IS CONFIRMED
The following is a summary of certain U.S. federal income tax consequences to
the Debtors and to certain Holders of Claims that are expected to result from
implementation of the Plan. This discussion does not address the federal income
tax consequences to Holders of Claims who are deemed to have rejected the Plan
in accordance with the provisions of Section 1126 of the Bankruptcy Code (i.e.,
Holders of Impaired Equity Interests in the Impaired Equity Debtors) or the
consequences of the Plan to Holders who are deemed to have accepted the Plan
(i.e., Holders of Priority Claims, Pre-Petition Lender Claims, Secured Claims
other than Secured Claims against Wagner Castings, and Unimpaired Equity
Interests in the Unimpaired Equity Debtors). Additionally, this summary does not
address the federal income tax consequences of the Rights Offering or the Key
Employee Rights Offering.
This discussion is based on the IRC, as amended, Treasury Regulations in effect
(or, in some cases, proposed) on the date of this Disclosure Statement, and
administrative and judicial interpretations thereof available on or before such
date. All of the foregoing are subject to change, including changes which could
apply retroactively and could affect the federal income tax consequences
described below. There can be no assurance that the IRS will not take a contrary
view with respect to one or more of the issues discussed below. No ruling has
been applied for or received from the IRS with respect to any of the tax aspects
of the Plan and no opinion of counsel has been requested or received by the
Debtors with respect thereto.
The following summary is for general information only and does not purport to
address all of the U.S. federal income tax consequences that may be applicable
to any particular Holder. The tax consequences to Holders may vary based upon
the individual circumstances of each Holder. This summary does not address the
special tax considerations that may apply to Holders that are subject to special
rules, such as foreign
121
companies, nonresident alien individuals, S corporations, banks, financial
institutions, broker-dealers, dealers or traders in securities who are subject
to mark-to-market taxation, mutual funds, small business investment companies,
regulated investment companies, insurance companies, tax-exempt organizations,
Persons holding Claims as part of a hedging or conversion transaction, straddle,
or other integrated transaction, Persons who have a "functional currency" other
than the U.S. dollar, Persons who acquired an Equity Interest in connection with
the performance of services, certain expatriates and former long-term residents
of the United States, pass-through entities, or investors in pass-through
entities. In addition, this discussion does not address any aspect of state,
local or foreign taxation, or any estate or gift tax consequences of the Plan.
The following discussion assumes that the Plan will be implemented as described
herein, and does not address the tax consequences if the Plan is not carried
out. This discussion further assumes that the various debt and other
arrangements to which the Debtors are parties and any Distributions and
allocations provided for under the Plan will be respected for federal income tax
purposes in accordance with their form or as described below.
THE TAX CONSEQUENCES OF THE PLAN ARE COMPLEX, AND SUBJECT TO SIGNIFICANT
UNCERTAINTIES DUE TO THE LACK OF APPLICABLE LEGAL PRECEDENT AND THE POSSIBILITY
OF CHANGES IN THE LAW. THIS DISCUSSION DOES NOT CONSTITUTE TAX ADVICE OR A TAX
OPINION CONCERNING THE MATTERS DESCRIBED. THERE CAN BE NO ASSURANCE THAT THE IRS
WILL NOT CHALLENGE ANY OR ALL OF THE TAX CONSEQUENCES DESCRIBED HEREIN, OR THAT
SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE SUSTAINED. EACH HOLDER OF A CLAIM OR
EQUITY INTEREST IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING
THE FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF HOLDING CLAIMS
OR EQUITY INTERESTS AND OF THE PLAN.
A. U.S. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS
Intermet, the other Debtors, and certain of their corporate subsidiaries are
members of an affiliated group of corporations (the "Intermet Tax Group") that
join in the filing of consolidated federal income tax returns. The Intermet Tax
Group has reported substantial consolidated net operating loss ("NOL")
carryforwards for federal income tax purposes as of December 31, 2003, and
expects to report tax losses for the taxable year that ended on December 31,
2004. Consequently, the Debtors expect the Intermet Tax Group to have NOL
carryforwards to the year ended December 31, 2005 and, to the extent not used or
eliminated in that year, to subsequent years. The amount of such NOLs and NOL
carryforwards remains subject to review and adjustment by the IRS and to
limitations imposed by Sections 108 and 382 of the IRC, as discussed below.
122
1. Cancellation Of Debt Income
Although the Debtors will realize cancellation of debt ("COD") income as a
result of the discharge of Allowed Claims under the Plan, they will qualify for
an exception (the "Bankruptcy COD Exception") under which the Debtors will be
permitted to exclude the COD income from taxable income because they are debtors
in cases under the Bankruptcy Code. However, the Debtors will be required to
reduce certain of their tax attributes by the amount of the COD income so
excluded. COD income is generally the amount by which the adjusted issue price
of indebtedness discharged exceeds the amount of cash, the issue price of any
debt instrument, and the fair market value of any other property given in
exchange for the debt instrument. However, certain statutory or judicial
exceptions can apply to limit the amount of COD (such as where the payment of
the cancelled debt would have given rise to a tax deduction or the cancellation
of the debt is treated as a purchase price adjustment).
Under the general rules of Section 108 of the IRC, the excluded COD income must
generally be applied to reduce the Debtors' current year's NOL and NOL
carryforwards, general business credits, minimum tax credits, capital loss
carryovers, and the tax basis of their property, in that order. However, the
Debtors can elect under Section 108(b)(5) of the IRC to apply the tax attribute
reduction first to reduce the tax basis of the Debtors' depreciable property and
then to reduce NOLs and certain other tax attributes. The Debtors have not yet
determined whether they will make this election. A reduction in tax attributes
under the foregoing rules does not occur until the end of the taxable year or,
in the case of an asset basis reduction, the first day of the taxable year
following the taxable year, in which the COD income is realized.
The IRS recently issued proposed and temporary regulations addressing the method
for applying tax attribute reduction to an affiliated group of corporations that
files consolidated returns (such as the Intermet Tax Group). Under these
regulations, the tax attributes of each group member that is excluding COD
income is first subject to reduction. These tax attributes include (1)
consolidated attributes attributable to the debtor member, (2) tax attributes
that arose in separate return limitation years of the debtor member, and (3) the
tax basis of property of the debtor member. To the extent the debtor member's
tax basis in stock of a lower-tier member of the affiliated group is reduced, a
"look through rule" requires that a corresponding reduction be made to the tax
attributes of the lower-tier member. To the extent that a debtor-member's
excluded COD income exceeds its tax attributes, the regulations require the
excess to be applied to the reduction of the remaining consolidated tax
attributes of the affiliated group, and tax attributes of members other than the
debtor members that arose or are treated as arising in certain separate return
limitation years.
In addition, if a member of the Intermet Tax Group (the "Parent Member") owns
stock in another member of the Intermet Tax Group (the "Subsidiary Member") in
which it has an "excess loss account" (generally, negative tax basis reflecting
the Intermet Tax Group's use of debt-financed losses of the Subsidiary Member in
excess of the Parent Member's investment in the stock of the Subsidiary Member),
the Parent Member is required to include the excess loss account in its taxable
income if it is considered to have disposed of the stock in the Subsidiary
Member. A disposition will be considered to occur if, among other things, the
Subsidiary Member excludes COD income which is not fully
123
matched by a reduction in tax attributes of the Subsidiary Member and the
Intermet Tax Group. Applicable Treasury regulations may limit the amount of
losses of the Subsidiary Member and the Intermet Tax Group that can be used to
offset such excess loss account income.
Under existing law, COD income arising out of the cancellation of a debt of a
member of an affiliated group (such as the Intermet Tax Group) by another member
of the affiliated group is not eligible for exclusion from income under the
bankruptcy exception described above. Thus, COD income resulting from the
discharge of Intercompany Claims will be recognized, but is expected to be
offset fully by the bad debt or other losses realized by Intermet Tax Group
members with respect to such Intercompany Claims. It is anticipated that Claims
against Debtors that are held by foreign Non-Debtor Affiliates will be satisfied
through transactions (including distributions of such Claims by the foreign
Non-Debtor Affiliates or offsets against claims against foreign Non-Debtor
Affiliates held by Debtors) that will not generate significant amounts of COD
income. Such transactions may, however, produce other types of reportable
income, including taxable foreign exchange gains.
2. Limitation On Net Operating Loss Carryforwards And
Other Tax Attributes
Under Section 382 of the IRC, if a corporation (or consolidated group) undergoes
an "ownership change," and the corporation does not qualify for (or elects out
of) a special bankruptcy exception described below, the amount of prechange
losses (NOL carryforwards from periods before the ownership change and certain
"built-in" losses and deductions that are economically accrued but unrecognized
as of the date of the ownership change) that may be utilized to offset future
taxable income is subject to an annual limitation (the "Annual Limitation").
Section 383 of the IRC extends and applies the Annual Limitation to
carryforwards of general business credits, minimum tax credits, capital losses,
and foreign tax credits, so that the total reduction in tax in a post-change
year from the carryover of such additional items, along with the NOLs and
recognized built-in losses, from pre-change periods is, in the aggregate,
limited by the Annual Limitation.
The issuance of New Common Stock to Holders of certain Claims pursuant to the
Plan, together with the Rights Offering, will constitute an ownership change of
the Intermet Tax Group for purposes of IRC Section 382. Moreover, the Debtors
are investigating whether an ownership change occurred in earlier years, which
could limit the availability of certain loss and credit carryforwards from
periods prior to any such earlier ownership change.
In general, the amount of the Annual Limitation to which a corporation (or
consolidated group) that has undergone an ownership change is subject under IRC
Sections 382 and 383 is equal to the product of (a) the fair market value of
stock of the corporation (or, in the case of a consolidated group, the common
parent) immediately before the ownership change (subject to various
adjustments), multiplied by (b) the highest of the adjusted
124
federal long-term tax-exempt rates in effect for any month in the 3-calendar
months ending with the month in which the ownership change occurs. Any unused
Annual Limitation may be carried forward, thereby increasing the Annual
Limitation in the subsequent taxable year. For any corporation (or consolidated
group) in bankruptcy that undergoes the ownership change pursuant to a confirmed
bankruptcy plan, the stock value is generally determined immediately after
(rather than before) the ownership change by taking into account the increase in
stock value from the surrender or cancellation of any creditors' claims, with
certain adjustments.
As noted, in addition to limiting the use of NOLs carried forward from periods
prior to the ownership change, IRC Section 382 limits the deductibility of
"built-in losses" recognized after the date of the ownership change. If a loss
corporation (or consolidated group) has a net unrealized built-in loss at the
time of an ownership change (taking into account most assets and items of
"built-in" income and deduction), then any built-in losses recognized during the
following five years (up to the amount of the original net unrealized built-in
loss) generally will be treated as pre-change losses and will be subject to the
Annual Limitation. Conversely, if the loss corporation (or consolidated group)
has a net unrealized built-in gain at the time of an ownership change, any
built-in gains recognized during the following five years (up to the amount of
the original net unrealized built-in gain) generally will increase the Annual
Limitation in the year recognized, thereby permitting the loss corporation (or
consolidated group) to use its pre-change losses and credits against such
built-in gains (or tax thereon) in addition to its regular annual allowance.
Although the rule applicable to net unrealized built-in losses generally applies
to consolidated groups on a consolidated basis, certain corporations that join
the consolidated group within the preceding five years may not be able to be
taken into account in the group computation of net unrealized built-in loss.
Such corporations would nevertheless still be taken into account in determining
whether the consolidated group has a net unrealized built-in gain. In general,
the loss corporation's or consolidated group's net unrealized built-in gain or
loss will be deemed to be zero unless it is greater than the lesser of (a) $10
million or (b) 15% of the fair market value of its assets (with certain
adjustments) before the ownership change.
Section 382(1)(5) of the IRC provides an exception (the "382 Bankruptcy
Exception") to the Annual Limitation where the stockholders and "historic"
creditors receive, in respect of their claims, at least 50% of the vote and
value of the stock of the reorganized debtor. Under this exception, a debtor's
pre-change losses are not limited on an annual basis but, instead, its NOL
carryforwards are required to be reduced by the amount of the debtor's interest
deductions during the three taxable years preceding the taxable year in which
the ownership change occurs and during the portion of the taxable year prior to
and including the reorganization. For purposes of this exception, an "historic
creditor" is generally a holder of a claim that (a) was held by such holder
since the date that is 18 months before the day in which the debtor's bankruptcy
petition was filed or (b) arose in the ordinary course of business and is held
by the person who at all times held the beneficial interest in such a claim. In
determining whether the 382 Bankruptcy Exception applies, certain holders of
claims that would own directly or indirectly less than 5% of the total fair
125
market value of common stock of the debtor are presumed to have held their
claims since the origination of such claims.
The ownership change of Intermet on the Effective Date that results from the
issuance of of New Common Stock to eligible Holders of Claims pursuant to the
Plan and pursuant to the Rights Offering may qualify for the 382 Bankruptcy
Exception. If the 382 Bankruptcy Exception applies, a subsequent ownership
change with respect to Reorganized Intermet occurring within two years after the
Effective Date will result in the loss of the 382 Bankruptcy Exception for the
Effective Date ownership change (and retroactive application of the Annual
Limitation with respect thereto), and the imposition of a zero Annual Limitation
with respect to the subsequent ownership change, effectively eliminating
subsequent use of loss and credit carryforwards. In order to prevent such a
subsequent ownership change, it would be necessary to have a mechanism that
would restrict any transfer of New Common Stock to a Person which, after such
transfer, would hold 5% or more of the total fair market value of New Common
Stock. Implementation of such a 5% ownership limitation could have the effect of
impeding an attempt to acquire a significant or controlling interest in Intermet
and, as a practical matter, making it impossible for a 5% Holder to pledge such
securities on margin.
Even if the requirements of the 382 Bankruptcy Exception are met, Reorganized
Intermet could elect out of the 382 Bankruptcy Exception, in which event the
Annual Limitation would apply. The Debtors have not yet determined whether, and
to what extent, the 382 Bankruptcy Exception will apply and be advantageous and
whether to elect out of the 382 Bankruptcy Exception. The Projections assume
that the Debtors' pre-change tax attributes will be subject to the Annual
Limitation, i.e., that the 382 Bankruptcy Exception requirements will not be met
or that Reorganized Intermet will elect out of the 382 Bankruptcy Exception. If
the Debtors determine that the requirements of the 382 Bankruptcy Exception are
met and that it provides significant tax savings as compared to the Annual
Limitation, the Debtors may choose to apply the 382 Bankruptcy Exception, in
which case they may seek appropriate restrictions on the transfer of New Common
Stock, as described above.
3. Alternative Minimum Tax
A federal alternative minimum tax ("AMT") is imposed on a corporation's
alternative minimum taxable income at a 20% tax rate to the extent such tax
exceeds the corporation's regular federal income tax. For purposes of computing
alternative minimum taxable income, certain tax deductions and other beneficial
allowances are modified or eliminated. In particular, even though for regular
tax purposes a corporation might otherwise be able to offset all of its taxable
income by NOL carryovers from prior years, it is generally not allowed to offset
more than 90% of its taxable income for federal AMT purposes by available NOL
carryforwards (as computed for AMT purposes).
If a corporation (or consolidated group) undergoes an "ownership change" within
the meaning of IRC Section 382, the Section 382 rules discussed above (i.e., the
Annual Limitation with 382 Bankruptcy Exception) also apply to its NOL
carryforwards for AMT purposes. In addition, if the corporation is in a net
unrealized built-in loss position
126
(as determined for AMT purposes) on the date of the ownership change, the
corporation's (or consolidated group's) tax basis in its assets must be reduced
for certain AMT purposes to reflect the fair market value of such assets as of
the change date. Although not entirely clear, it appears that the application of
this basis reduction to the Debtors would be unaffected by whether the Debtors
otherwise qualify for the 382 Bankruptcy Exception to the Annual Limitation.
Any AMT tax that a corporation pays is generally allowed as a nonrefundable
credit against its regular federal income tax liability in future taxable years
to the extent the corporation is no longer subject to AMT.
B. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CERTAIN
CLAIMS
The U.S. federal income tax consequences to Holders of Claims arising from the
Distributions to be made under the Plan may vary depending upon, among other
things, the type of consideration received by the Holder in exchange for the
indebtedness it holds, the nature of the indebtedness owing to it, whether the
Holder is a corporation, whether the Holder has previously claimed a bad debt or
worthless security deduction in respect of its Claim, whether such Claim
constitutes a "security" for purposes of the reorganization provisions or other
provisions of the IRC, whether the Holder is a resident of the United States for
tax purposes, whether the Holder reports income on the accrual or cash basis,
and whether the Holder receives Distributions under the Plan in more than one
taxable year. In some cases, the modification of a Claim may represent for tax
purposes an exchange of the Claim for a modified Claim, even though no actual
transfer takes place. In addition, the tax consequences will depend on the
actual implementation of the Plan as a taxable or tax-free reorganization.
1. Recognition Of Gain Or Loss
The receipt of New Common Stock in exchange for Claims against Intermet that
constitute "securities" (within the meaning of the reorganization provisions of
the IRC) pursuant to the Plan will constitute a recapitalization and a
reorganization within the meaning of Section 368(a)(1)(E) of the IRC. A Holder
who receives New Common Stock in an exchange qualifying as a reorganization will
not recognize gain or loss on such exchange, except that income or loss may be
reportable in respect of unpaid interest that accrued during such Holder's
holding period. See Section XIII.B.2., "Distributions in Discharge of Accrued
but Unpaid Interest," for more information. The aggregate tax basis of New
Common Stock that is received by a Holder in an exchange that is treated as a
reorganization for tax purposes will equal the Holder's tax basis in his Claim,
and the holding period of such New Common Stock will include the period for
which the Holder held the Claim surrendered in exchange therefor, provided such
Claim is held as a capital asset at the time of the exchange.
There is no precise definition under the tax law of what constitutes a
"security" for purposes of determining whether the receipt of New Common Stock
is a "reorganization", and all facts and circumstances pertaining to the origin
and character of
127
a Claim are relevant in determining its status. A prominent factor that courts
have relied upon in determining whether a debt instrument constitutes a
"security" is the term of the instrument, i.e., the longer the term of the debt
instrument, the more likely it is a "security." Each Holder of a Claim should
consult its own tax advisor to determine whether its claim constitutes a
"security" for federal income tax purposes and whether reorganization treatment
may be applicable to it.
Each Holder of a Claim who receives New Common Stock in an exchange not
qualifying as a reorganization (including any Person who receives New Common
Stock in exchange for a Claim against a subsidiary of Intermet), and each Holder
of a Claim who receives Cash with respect to such Claim, will recognize gain or
loss equal to the difference between (i) such Holder's amount realized in
respect of its Claim, which is the amount of Cash and the fair market value of
any property (including New Common Stock) received by the Holder in satisfaction
of its Claim (other than amounts that are in respect of any Claim for accrued
but unpaid interest) and (ii) the Holder's adjusted tax basis in its Claim
(other than basis attributable to any Claim for accrued but unpaid interest).
See Section XIII.B.2., "Distributions in Discharge of Accrued but Unpaid
Interest," for more information. The aggregate tax basis of New Common Stock
that is received by a Holder who is required to report gain or loss under these
rules will be the fair market value of such New Common Stock on the date of the
Distribution, and the holding period of the New Common Stock will commence the
day following the date of Distribution.
Where gain or loss is recognized by a Holder of a Claim in respect of its Claim,
the character of such gain or loss as long-term or short-term capital gain or
loss or as ordinary income or loss will be determined by a number of factors,
including the tax status of the Holder, whether the Claim constitutes a capital
asset in the hands of the Holder and how long it has been held, whether the
Claim was acquired at a market discount, and whether and to what extent the
Holder can claim a bad debt deduction.
Subject to certain limitations, IRC Section 166 and the regulations thereunder
allow a deduction for a debt which becomes worthless, or in some cases partially
worthless, during the year. The amount of the bad debt deduction is limited to
the Creditor's tax basis in the indebtedness underlying the Claim. No deduction
is allowed under IRC Section 166 for a debt evidenced by a "security" as defined
in IRC Section 165(g)(2)(C). Instead, IRC Section 165(g) provides that if a
security which is a capital asset becomes worthless during a year, the loss
resulting therefrom is treated as a loss from the sale or exchange, on the last
day of the taxable year, of a capital asset. For this purpose, the term
"security" is defined in IRC Section 165(g)(2)(C) as a bond, debenture, note, or
certificate, or other evidence of indebtedness, issued by a corporation, with
interest coupons or in registered form. Holders of Claims are urged to consult
their tax advisors with respect to their ability to take a bad debt deduction.
A Holder who purchased its Claim from a prior Holder at a market discount may be
subject to the market discount rules of the IRC, under which gain from the
disposition of the Claim may be characterized as ordinary income to the extent
of the market discount that is deemed to have accrued under those rules.
128
Holders of General Unsecured Claims are urged to consult their tax advisors to
determine the character of any gain or loss recognized in connection with the
implementation of the Plan.
2. Distributions In Discharge Of Accrued But Unpaid
Interest
In general, to the extent that money or property (including New Common Stock)
received by a Holder of a General Unsecured Claim is received in satisfaction of
interest accrued during its holding period, such amount will be taxable to the
Holder as interest income (if not previously included in the Holder's gross
income). Conversely, such a Holder will recognize a deductible loss to the
extent any accrued interest claimed or amortized OID was previously included in
its gross income and is not paid in full. It is unclear whether a Holder of a
Claim with previously included OID that is not paid in full would be required to
recognize a capital loss, rather than an ordinary loss. Holders of claims for
accrued interest including amortized OID should consult their own tax advisors.
Pursuant to the Plan, all Distributions in respect of any Claim will be
allocated first to the principal amount of such Claim and thereafter, to accrued
but unpaid interest, if any. However, there is no assurance that such allocation
will be respected by the IRS for federal income tax purposes.
Each Holder of a General Unsecured Claim is urged to consult its tax advisor
regarding the allocation of consideration and the deductibility of previously
included unpaid interest and OID for tax purposes.
C. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF NEW COMMON
STOCK
1. U.S. Holders
The following is a description of the principal U.S. federal income tax
consequences that may be relevant with respect to the ownership and disposition
of New Common Stock. This description addresses only the U.S. federal income tax
considerations of Holders that will receive New Common Stock under the Plan and
that will hold such New Common Stock as capital assets. For purposes of this
description, a "U.S. Holder" is a beneficial owner of New Common Stock that, for
U.S, federal income tax purposes, is:
o a citizen or resident of the United States, including an
alien individual who is a lawful permanent resident of the
United States under the "substantial presence" test set forth
in IRC Section 7701(b);
o a corporation (or other business entity treated as a
corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States or any
state thereof (including the District of Columbia);
129
o an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
o a trust if (1) the trust validly elects to be treated as a
United States person for U.S. federal income tax purposes or
(2) a U.S. court is able to exercise primary supervision over
its administration and one or more United States persons have
the authority to control all of the substantial decisions of
such trust.
A "Non-U.S. Holder" is a beneficial owner of New Common Stock that is not a U.S.
Holder.
If a partnership (or any other entity treated as a partnership for U.S. federal
income tax purposes) holds New Common Stock, the tax treatment of a partner in
such partnership will generally depend on the status of the partner and the
activities of the partnership. Such a partner should consult its tax advisor as
to its tax consequences.
2. Dividends And Other Distributions
The gross amount of any distribution by Reorganized Intermet of Cash or property
with respect to the New Common Stock, other than tax-free stock dividends,
spin-offs, and distributions in redemption of stock or in complete or partial
liquidation, will be includible in income by a U.S. Holder as dividend income
when received or accrued (in accordance with the holder's method of accounting)
to the extent such distributions are paid out of the current or accumulated
earnings and profits of Reorganized Intermet as determined under U.S. federal
income tax principles. To the extent, if any, that the amount of any
distribution by Reorganized Intermet exceeds Reorganized Intermet's current and
accumulated earnings and profits as determined under U.S. federal income tax
principles, it will be treated first as a tax-free return of the U.S. Holder's
adjusted tax basis in the New Common Stock and thereafter as gain from an
exchange of the stock (which is capital gain if the stock is held as a capital
asset).
Under current law, noncorporate U.S. Holders will be taxed on dividends paid by
Reorganized Intermet in taxable years beginning on or before December 31, 2008
at the lower rates applicable to long-term capital gains if such individuals
satisfy certain holding period and risk requirements. Holders should consult
their own tax advisors regarding the rate at which dividend income will be
taxed, based on their circumstances.
Subject to certain limitations, a corporate U.S. Holder will generally be
eligible for the dividends received deduction, but the benefit of such deduction
may be reduced by the AMT. Corporate U.S. Holders should consult their tax
advisor regarding the availability of, and limitations on, the dividends
received deduction.
Distributions made on New Common Stock held by a Non-U.S. Holder (other than
dividends that are effectively connected to a U.S. trade or business of the
Non-U.S. Holder) will generally be subject to withholding tax at a 30% rate,
subject to reduction under an applicable income tax treaty. In order to obtain a
reduced rate of withholding under a treaty or by virtue of the dividend's
connection with a U.S. trade or business, a
130
Non-U.S. Holder will be required to provide a properly executed IRS Form W-8BEN
certifying its entitlement to the benefits of the treaty, or W-8ECI certifying
its connection with a U.S. trade or business, which forms must be updated
periodically. A Non-U.S. Holder that is claiming the benefits of an income tax
treaty may be required in certain circumstances to provide a taxpayer
identification number or certain documentary evidence to prove residence in the
treaty country.
3. Sale Or Exchange Of Reorganized Intermet Common Stock
A U.S. Holder generally will recognize gain or loss on the sale or exchange of
New Common Stock equal to the difference between the amount realized on such
sale or exchange and the U.S. Holder's adjusted tax basis in the New Common
Stock. Such gain or loss will be capital gain or loss if the stock is held as a
capital asset. However, in any case where a Holder claims a bad debt deduction
under IRC Section 166 or other ordinary loss with respect to the Claim exchanged
for the New Common Stock, or uses the cash method of accounting and does not
include in taxable income the amount that would have been included had the Claim
been paid in full, gain from the subsequent sale or exchange of the New Common
Stock will be "recaptured" as ordinary income to the extent of the previously
allowed deduction or excluded income, reduced in each case by any income
recognized by the Holder on receipt of the New Common Stock in exchange for the
Claim.
Under current law, the maximum marginal U.S. federal income tax rate applicable
to long term capital gain of a noncorporate U.S. Holder is lower than the
maximum marginal U.S. federal income tax rate applicable to ordinary income
(other than certain dividends) if such U.S. Holder's holding period for such New
Common Stock exceeds one year.
Subject to the discussion in Section XIII.B.4., "Backup Withholding Tax and
Information Reporting Requirements," a Non-U.S. Holder of New Common Stock
generally will not be subject to U.S. federal income or withholding tax on any
gain realized on the sale or exchange of such New Common Stock unless (1) such
gain is effectively connected with the conduct by such Non-U.S. Holder of a
trade or business in the United States, (2) in the case of any gain realized by
an individual Non-U.S. Holder, such Non-U.S. Holder is present in the United
States for 183 days or more in the taxable year of such sale or exchange and
certain other conditions are met, (3) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to expatriates; or (4)
Reorganized Intermet is or has been a U.S. real property holding corporation
within the meaning of IRC Section 897 within the shorter of the five-year period
preceding the sale, exchange or other disposition of the New Common Stock or the
period the Non-U.S. Holder held the New Common Stock. It is not anticipated that
Reorganized Intermet will be treated as a U.S. real property holding corporation
for U.S. federal income tax purposes.
If a Non-U.S. Holder of New Common Stock is engaged in a trade or business in
the United States, and gain from the sale of New Common Stock is effectively
connected with the conduct of that trade or business, the Non-U.S. Holder may be
subject to tax on such gain in the same manner as a U.S. Holder. Non-U.S.
Holders should consult their tax advisors with regard to U.S. taxation of gain
from the sale of New Common Stock.
131
4. Backup Withholding Tax And Information Reporting
Requirements
United States backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate Holders of Intermet
common stock or Claims. Information reporting generally will apply to payments
under the Plan of interest, compensation and other reportable payments to
Holders of Claims, and payments of dividends on or proceeds from the sale or
redemption of, New Common Stock made within the United States to a Holder of New
Common Stock or a Holder of a Claim, other than an exempt recipient, such as a
corporation or non-United States Person that provides an appropriate
certification. A payor will be required to withhold backup withholding tax from
any such payment to a Holder, if the Holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with, or establish
an exemption from, such backup withholding tax requirements. The backup
withholding tax rate is 28% for years 2003 through 2010.
In the case of such payments made within the United States to a foreign simple
trust, a foreign grantor trust or a foreign partnership (other than payments to
a foreign simple trust, a foreign grantor trust or a foreign partnership that
qualifies as a "withholding foreign trust" or a "withholding foreign
partnership" within the meaning of certain U.S. Treasury Regulations) that are
not effectively connected with the conduct of a trade or business in the United
States, the beneficiaries of the foreign simple trust, the persons treated as
the owners of the foreign grantor trust, or the partners of the foreign
partnership, as the case may be, will be required to provide the certification
discussed above in order to establish an exemption from backup withholding tax
and information reporting requirements. Moreover, a payor may rely on a
certification provided by a payee that is not a United States Person only if
such payor does not have actual knowledge or a reason to know that any
information or certification stated in such certificate is incorrect.
5. Importance Of Obtaining Professional Tax Advice
THE FOREGOING WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE MATTERS
ADDRESSED HEREIN AND IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE
USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON
ANY TAXPAYER. THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF CERTAIN OF THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE FEDERAL, STATE,
AND LOCAL INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN ARE COMPLEX AND
UNCERTAIN AND MAY VARY BASED ON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A
CLAIM. ACCORDINGLY, EACH HOLDER OF A CLAIM OR EQUITY INTEREST IS STRONGLY URGED
TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE,
132
LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES UNDER THE PLAN BASED ON ITS
OWN PARTICULAR CIRCUMSTANCES.
XIV. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS TEST
A. FEASIBILITY OF THE PLAN
In connection with Confirmation of the Plan, Section 1129(a)(11) of the
Bankruptcy Code requires that the Bankruptcy Court find that Confirmation of the
Plan is not likely to be followed by the liquidation or the need for further
financial reorganization of the Debtors, unless proposed by the Plan. This is
the so-called "feasibility" test. The Debtors believe that with a de-leveraged
capital structure their businesses will return to viability. The decrease in the
amount of debt on Reorganized Intermet's balance sheet will significantly reduce
interest expense and principal requirements. Based on the terms of the Plan, at
emergence Reorganized Intermet will have approximately $190 million of debt,
including amounts funded under the Exit Financing Facility, in contrast to more
than $400 million of debt prior to the restructuring (before considering accrued
interest).
As described in detail in Section IX, "Effect Of Confirmation And Implementation
Of The Plan," the Reorganized Debtors will enter into, on the Effective Date,
the Exit Financing Facility in order to repay in full the DIP Facility Claims
and to make other payments required to be made on the Effective Date. The
Debtors initiated discussions with potential exit lenders in early 2005 and
received initial proposals for the financing by such exit lenders in March. As
of the date of publication of this Disclosure Statement, the Debtors have either
received or expect to receive shortly from one or more lenders final commitment
letters with regard to the Exit Financing Facility. The Debtors are seeking
commitments for approximately $260 million for the Exit Financing Facility, not
all of which they expect to be drawn on the Effective Date, as indicated in the
Projections.
To support their belief in the feasibility of the Plan, the Debtors have
prepared the Projections for the period from 2005 through 2009. The
Professionals have not performed an independent investigation of the accuracy or
completeness of such financial Projections and disclaim any responsibility for
or liability with respect to such Projections. SEE EXHIBIT H - "PROJECTED
FINANCIAL INFORMATION FOR THE REORGANIZED DEBTORS."
The Projections indicate that Reorganized Intermet should have sufficient cash
flow to make the payments required under the Plan on the Effective Date and to
repay and service its post-Confirmation debt obligations and to maintain its
operations during this period. Accordingly, the Debtors believe that the Plan
complies with the standard of Section 1129(a)(11) of the Bankruptcy Code. As
noted in the Projections, however, the Debtors caution that no representations
can be made as to the accuracy of the Projections or as to Reorganized
Intermet's ability to achieve the projected results. Many of the assumptions
upon which the Projections are based are subject to uncertainties outside of
133
the control of the Debtors. Some assumptions inevitably will not materialize,
and events and circumstances occurring after the date on which the Projections
were prepared may be different from those assumed or may be unanticipated, and
may adversely affect the Debtors' financial results. As discussed elsewhere in
this Disclosure Statement, there are numerous circumstances that may cause
actual results to vary from the projected results, and the variations may be
material and adverse. SEE SECTION XI - "CERTAIN FACTORS TO BE CONSIDERED" for a
discussion of certain risk factors that may affect financial feasibility of the
Plan.
THE PROJECTIONS ARE QUALIFIED BY AND SUBJECT TO THE ASSUMPTIONS SET FORTH HEREIN
AND THE OTHER INFORMATION CONTAINED HEREIN. THE PROJECTIONS WERE NOT PREPARED
WITH A VIEW TOWARD COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE SEC, AICPA
OR ANY OTHER REGULATORY OR PROFESSIONAL AGENCY OR BODY, GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES OR CONSISTENCY WITH THE AUDITED FINANCIAL STATEMENTS
REFERENCED IN THIS DISCLOSURE STATEMENT. FURTHERMORE, THE PROJECTIONS HAVE NOT
BEEN, AND WILL NOT BE, AUDITED BY THE DEBTORS' INDEPENDENT CERTIFIED
ACCOUNTANTS. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE
BASED ON A VARIETY OF ASSUMPTIONS, SOME OF WHICH HAVE NOT BEEN ACHIEVED TO DATE
AND MAY NOT BE REALIZED IN THE FUTURE, AND ARE SUBJECT TO SIGNIFICANT BUSINESS,
LITIGATION, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF
WHICH ARE BEYOND THE CONTROL OF THE DEBTORS. CONSEQUENTLY, THE PROJECTIONS
SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY BY THE DEBTORS, OR ANY
OTHER PERSON, THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE PRESENTED IN THE PROJECTIONS. THE PROJECTIONS SHOULD BE
READ TOGETHER WITH THE INFORMATION CONTAINED UNDER THE HEADINGS "OPERATIONS OF
THE DEBTORS," AND "CERTAIN FACTORS TO BE CONSIDERED," AND THE OTHER INFORMATION
CONTAINED IN EXHIBITS H & I -"PROJECTED FINANCIAL INFORMATION FOR THE
REORGANIZED DEBTORS" AND "SELECTED HISTORICAL FINANCIAL INFORMATION."
B. BEST INTERESTS TEST
Even if the Plan is accepted by each class of Claims, the Bankruptcy Code
requires that the Bankruptcy Court find that the Plan is in the best interests
of all Classes of Creditors and Equity Interest Holders. The "best interests"
test requires that the Bankruptcy Court find either that all members of an
Impaired Class of Claims or Equity Interests have accepted the Plan or that the
Plan will provide each member who has not accepted the Plan with a recovery of
property of a value, as of the Effective Date of the Plan, that is not less than
the amount that such Holder would receive or retain if the Debtors were
liquidated under Chapter 7 of the Bankruptcy Code.
134
To calculate the Distribution to members of each Impaired Class of Holders of
Claims and Interests if the Debtors were liquidated, the Bankruptcy Court must
first determine the aggregate dollar amount that would be generated from the
Debtors' assets if the Cases were converted to Chapter 7 cases under the
Bankruptcy Code. This "liquidation value" would consist primarily of the
proceeds from a sale of the Debtors' Assets by a Chapter 7 trustee and the cash
held by the Debtors at the time of the commencement of the Chapter 7 cases.
The amount of liquidation value generated from the liquidation of the Debtors'
Assets and properties would be reduced by the amount of any Claims secured by
such Assets and the costs and expenses of liquidation, as well as by other
administrative expenses and costs (including any break-up or termination fees
approved by the Bankruptcy Court) of both the Chapter 7 cases and the Chapter 11
Cases. Costs of liquidation under Chapter 7 of the Bankruptcy Code would include
the compensation of a trustee, as well as of counsel and other professionals
retained by the trustee, asset disposition expenses, all unpaid expenses
incurred by the Debtors in the Cases (such as compensation of attorneys,
financial advisors and accountants) that are allowed in the Chapter 7 cases and
litigation costs and claims arising from the operations of the Debtors during
the pendency of the Cases. The liquidation itself could trigger certain priority
payments that otherwise would be due in the ordinary course of business. The
priority claims which may arise in liquidation cases would be paid in full from
the liquidation proceeds before the balance would be made available to pay
pre-Chapter 11 priority and general Claims or to make any distribution in
respect of equity interests. The liquidation would also prompt the rejection of
any Executory Contracts and unexpired leases and thereby create higher amounts
of General Unsecured Claims.
In applying the "best interests" test, it is possible that Claims and Interests
in the Chapter 7 cases may not be classified according to the seniority of such
Claims and Interests as provided in the Plan. In the absence of a contrary
determination by the Bankruptcy Court, all pre-Chapter 11 unsecured Claims which
have the same rights upon liquidation would be treated as one Class for purposes
of determining the potential distributions of the liquidation proceeds resulting
from the Debtors' Chapter 7 cases. The distributions from the liquidation
proceeds would be calculated ratably according to the amount of the Claim held
by each Creditor. Therefore, Creditors who claim to be third-party beneficiaries
of any contractual subordination provisions might be required to seek to enforce
such contractual subordination provisions in the Bankruptcy Court or otherwise.
Section 510(a) of the Bankruptcy Code provides that subordination agreements are
enforceable in a bankruptcy case to the same extent that such subordination is
enforceable under applicable non-bankruptcy law. Therefore, no Class of Claims
that is contractually subordinated to another Class would receive any payment on
account of its Claims, unless and until such senior Class were paid in full.
Once the Bankruptcy Court ascertains the recoveries in liquidation of secured
Creditors and priority claimants, it must determine the probable distribution to
General Unsecured Creditors from the remaining available proceeds in
liquidation. If such probable distribution has a value greater than the
Distributions to be received by such Creditors
135
under the Plan, then the Plan is not in the best interests of Creditors and
cannot be confirmed by the Bankruptcy Court. As shown in the Liquidation
Analysis, the Debtors currently believe that each Holder of Claims in an
Impaired Class will likely receive at least as much under the Plan as they would
receive if the Debtors were liquidated, and that the Plan should therefore meet
the requirements of Section 1129(a)(7) of the Bankruptcy Code.
C. CHAPTER 7 LIQUIDATION ANALYSIS
As noted above, the Debtors believe that under the Plan all Claims against any
of the Debtors will receive property with a value not less than the value such
Holder would receive in a liquidation of the Debtors under Chapter 7 of the
Bankruptcy Code. The Debtors' belief is based primarily on:
(i) consideration of the effects that a Chapter 7 liquidation would have on the
ultimate proceeds available for Distribution to Holders of Claims and Equity
Interests, including:
o The increased costs and expenses of a liquidation under Chapter 7
arising from fees payable to a Chapter 7 trustee and professional
advisors to the trustee, all of which take priority over Chapter 11
expenses
o The erosion in value of assets in a Chapter 7 case in the context of
the rapid liquidation required under Chapter 7 and the "forced sale"
atmosphere that would prevail,
o The adverse effects on the Debtors' businesses as a result of the
likely departure of key employees and the probable loss of customers,
o The substantial increases in Claims, such as estimated contingent
Claims, which would be satisfied on a priority basis or on parity with
existing Claims against the Debtors, and
o The substantial delay in Distributions to the Holders of Claims and
Equity Interests that would likely ensue in a Chapter 7 liquidation;
and
(ii) the Liquidation Analysis prepared by the Debtors and described below, which
is attached hereto as Exhibit G.
The Liquidation Analysis is provided solely to discuss the effects of a
hypothetical Chapter 7 liquidation of the Debtors and is subject to the
assumptions set forth herein. The Liquidation Analysis has not been
independently audited or verified and there can be no assurance that such
assumptions would be accepted by the Bankruptcy Court.
The Liquidation Analysis reflects the estimated cash proceeds, net of
liquidation-related costs, that would be available to Creditors if the Debtors
were liquidated in Chapter 7 proceedings. Underlying the Liquidation Analysis
are a number of estimates and assumptions that, although developed and
considered reasonable by the Debtors' management and Lazard, are inherently
subject to significant business, economic and
136
competitive uncertainties and contingencies beyond the control the Debtors and
their management. Accordingly, while the Liquidation Analysis is necessarily
presented with numerical specificity, there can be no assurance that the values
assumed would be realized if the Debtors were in fact liquidated, nor can there
be any assurance that the Bankruptcy Court would accept this analysis or concur
with such assumptions in making its determinations under Section 1129(a) of the
Bankruptcy Code. Because the actual proceeds from the liquidation of the Debtors
could be materially lower or higher than the amounts set forth below, no
representation or warranty can be or is being made with respect to the actual
proceeds that could be received in a Chapter 7 liquidation of the Debtors. The
Liquidation Analysis was prepared solely for purposes of estimating proceeds
available in Chapter 7 liquidations of the Estates and does not represent values
that may be appropriate for any other purpose. Nothing contained in these
valuations is intended to or may constitute a concession or admission of the
Debtors for any other purpose. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
VALUES REFLECTED IN THE LIQUIDATION ANALYSIS WOULD BE REALIZED IF THE DEBTORS
WERE, IN FACT, TO UNDERGO SUCH A LIQUIDATION, AND ACTUAL RESULTS COULD VARY
MATERIALLY FROM THOSE SHOWN HERE.
The table in Exhibit G details the computation of the Debtors' liquidation value
and the estimated distributions to Holders of Impaired Claims in a Chapter 7
liquidation of the Debtors. The Liquidation Analysis was prepared by Lazard and
the Debtors' management based upon the Debtors' North American unaudited balance
sheets of each of the Debtors as of December 31, 2004. The Liquidation Analysis
assumes that the actual December 31, 2004, balance sheets, on which the analysis
is based, is a proxy for the balance sheets on the date on which a liquidation
would commence. The Liquidation Analysis also assumes that the liquidation of
the Debtors would be shepherded by a Bankruptcy Court-appointed trustee and
would continue for approximately six to nine months (the "Liquidation Period"),
during which time all of the Debtors' major Assets would either be sold or
conveyed to the respective Lien Holders and the cash proceeds, net of
liquidation-related costs, would be distributed to Creditors. Although some of
the Debtors' assets might be liquidated during a shorter period of time, other
assets may be more difficult to collect or sell, thus expanding the Liquidation
Period.
During the Liquidation Period, the Debtors' receivables would be collected and
other assets would be sold in a commercially reasonable manner. If the Debtors
failed to perform under existing contracts, massive setoffs would ensue. In the
Liquidation Analysis, the liquidation values of certain assets were determined
by general classes of assets by disposition. The Liquidation Analysis was
performed on the Debtors' North American operations, and assumes that
liquidation proceeds would be distributed in accordance with Bankruptcy Code
Sections 726 and 1129(b). The Liquidation Analysis does not assume proceeds from
recoveries of any Avoidance Actions or other Causes of Action. The Liquidation
Analysis does not assume proceeds from recoveries resulting from bank Liens on
assets held outside of the Debtors and its subsidiaries. Additionally, the
Liquidation Analysis does not assume proceeds from litigation which may provide
awards in favor of the Debtors. These claims could have substantial value.
137
In summary, subject to all of the assumptions, conditions, and limitations set
forth above, the Debtors believe that Chapter 7 liquidations of the Debtors
could result in a diminution in the value to be realized by the Holders of
Claims and, as set forth in the table found in Exhibit G, the Debtors'
management estimates that in a liquidation, the Holders of General Unsecured
Claims would not receive distributions on such claims.
XV. SOLICITATION OF THE PLAN
A. PARTIES IN INTEREST ENTITLED TO VOTE
Under Section 1124 of the Bankruptcy Code, a class of claims or interests is
deemed to be "impaired" under a plan unless (i) the plan leaves unaltered the
legal, equitable, and contractual rights to which such claim or interest
entitles the holder thereof or (ii) notwithstanding any contractual provision or
applicable law that entitles the holder of such claim or interest to demand or
receive accelerated payment of such claim or interest, the plan cures all
existing defaults (other than defaults resulting from the occurrence of the
bankruptcy); reinstates the maturity of such claim or interest as it existed
before the default; compensates the holder of such claim or interest for any
damages incurred as a result of any reasonable reliance by such holder on such
contractual provision or such applicable law; and does not otherwise alter the
legal, equitable, or contractual rights to which such claim or interest entitles
the holder of such claim or interest.
Generally, subject to other restrictions of the Bankruptcy Code and the
procedures approved by the court with respect to solicitation of confirmation of
the plan, a holder of a claim or equity interest may vote to accept or to reject
a plan if (i) the claim or interest is "allowed," which means generally that no
party in interest has objected to such claim or interest, and (ii) the claim or
interest is impaired by the plan. If, however, the holder of an impaired claim
or interest will not receive or retain any distribution under the plan on
account of such claim or interest, the Bankruptcy Code deems such holder to have
rejected the plan, and, accordingly, holders of such claims and interests do not
actually vote on the plan. If a claim or interest is not impaired by the plan,
the Bankruptcy Code deems the holder of such claim or interest to have accepted
the plan and, accordingly, holders of such claims and interests are not entitled
to vote on the plan.
By signing and returning the Ballot, each Holder of a Class 3a, 4, 4a, 4b, 4c or
5 Claim will also be confirming that (i) such Holder and/or legal and financial
advisors acting on its behalf has had the opportunity to ask questions of and
receive answers from the Debtors concerning the terms of the Plan, the
businesses of the Debtors and other related matters, (ii) the Debtors have made
available to such Holder or its agents all documents and information relating to
the Plan and related matters reasonably requested by or on behalf of such
Holder, (iii) except for information provided by the Debtors in writing, and by
its own agents, such Holder has not relied on any statements made or other
information received from any person with respect to the Plan; and (iv) if such
Creditor elects to receive New Common Stock, they agree to be bound by the
Stockholders' Agreement as described in Section II.B., above.
138
By signing and returning the Ballot each Holder of a Class 4, 4a, 4b, 4c or 5
Claim also acknowledges that the securities being offered pursuant to the Plan
are not being offered pursuant to a registration statement filed with the SEC
and represents that any such securities will be acquired for its own account and
not with a view to any distribution of such securities in violation of the
Securities Act. It is expected that when issued pursuant to the Plan such
securities will be exempt from the registration requirements of the Securities
Act by virtue of Section 1145 of the Bankruptcy Code and may be resold by the
holders thereof subject to the provisions of such Section 1145 and the
Stockholders' Agreement.
B. CLASSES IMPAIRED UNDER THE PLAN
Pursuant to Section 1126 of the Bankruptcy Code, Classes 3a, 4, 4a, 4b, 4c, and
5 are entitled to vote to accept or reject the Plan. Further, pursuant to
Section 1126 of the Bankruptcy Code, each Unimpaired Class of Claims (Classes 1,
2, 3 and 6a) is deemed to have accepted the Plan and, therefore, is not entitled
to vote to accept or reject the Plan. In addition, because Holders of Class 6b
Impaired Equity Interests will not receive or retain any property under the Plan
on account of their interests, Holders of Class 6b Claims are deemed to have
rejected the Plan and are not entitled to vote.
C. WAIVERS OF DEFECTS, IRREGULARITIES, ETC.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots will be determined by the Balloting Agent
and the Debtors in their sole discretion, which determination will be final and
binding. As indicated below under "Withdrawal of Ballots; Revocation," effective
withdrawals of Ballots must be delivered to the Balloting Agent prior to the
Voting Deadline. The Debtors reserve the absolute right to contest the validity
of any such withdrawal. The Debtors also reserve the right to reject any and all
Ballots not in proper form, the acceptance of which would, in the opinion of the
Debtors or their counsel, be unlawful. The Debtors further reserve the right to
waive any defects or irregularities or conditions of delivery as to any
particular Ballot. The interpretation (including the Ballot and the respective
instructions thereto) by the Debtors, unless otherwise directed by the
Bankruptcy Court, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with deliveries of Ballots must be cured
within such time as the Debtors (or the Bankruptcy Court) determine. Neither the
Debtors nor any other person will be under any duty to provide notification of
defects or irregularities with respect to deliveries of Ballots nor will any of
them incur any liabilities for failure to provide such notification. Unless
otherwise directed by the Bankruptcy Court, delivery of such Ballots will not be
deemed to have been made until such irregularities have been cured or waived.
Ballots previously furnished (and as to which any irregularities have not
theretofore been cured or waived) will be invalidated.
D. WITHDRAWAL OF BALLOTS; REVOCATION
Any party who has delivered a valid Ballot for the acceptance or rejection of
the Plan may withdraw such acceptance or rejection by delivering a written
notice of withdrawal
139
to the Balloting Agent at any time prior to the Voting Deadline. A notice of
withdrawal, to be valid, must (i) contain the description of the Claim(s) to
which it relates and the aggregate principal amount represented by such
Claim(s), (ii) be signed by the withdrawing party in the same manner as the
Ballot being withdrawn, (iii) contain a certification that the withdrawing party
owns the Claim(s) and possesses the right to withdraw the vote sought to be
withdrawn and (iv) be received by the Balloting Agent in a timely manner at the
address set forth below. The Debtors intend to consult with the Balloting Agent
to determine whether any withdrawals of Ballots were received and whether the
requisite acceptances of the Plan have been received. As stated above, the
Debtors expressly reserve the absolute right to contest the validity of any such
withdrawals of Ballots.
Unless otherwise directed by the Bankruptcy Court, a purported notice of
withdrawal of Ballots which is not received in a timely manner by the Balloting
Agent will not be effective to withdraw a previously cast Ballot.
Any party who has previously submitted to the Balloting Agent prior to the
Voting Deadline a properly completed Ballot may revoke such Ballot and change
his or its vote by submitting to the Balloting Agent prior to the Voting
Deadline a subsequent properly completed ballot for acceptance or rejection of
the Plan. In the case where more than one timely, properly completed Ballot is
received, only the Ballot which bears the latest date of receipt by the
Balloting Agent will he counted for purposes of determining whether the
requisite acceptances have been received.
E. FURTHER INFORMATION; ADDITIONAL COPIES
1. HOLDERS OF IMPAIRED CLAIMS
If you have any questions or require further information about the voting
procedure or voting your Claim or about the packet of material you received, or
if you wish to obtain an additional copy of the Plan, the Disclosure Statement,
or any exhibits or appendices to such documents (at your own expense, unless
otherwise specifically required by Bankruptcy Rule 3017(d)), please contact the
Balloting Agent at WWW.ADMINISTAR.NET or by telephone at (904) 807-3023.
XVI. CONCLUSION
THE DEBTORS [AND THE CREDITORS' COMMITTEE] BELIEVE THAT THE PLAN REPRESENTS THE
MOST VALUE TO THE DEBTORS' CREDITORS. THEY URGE EACH CREDITOR TO VOTE IN FAVOR
OF THE PLAN.
(signatures start on next page)
DATED: JUNE 27, 2005
140
Signature Pages For Disclosure Statement Of Intermet Corporation
And Ceratin Of Its Domestic Subsidiaries Dated June 27, 2005
INTERMET CORPORATION,
a Georgia corporation
By: /s/ GARY F. RUFF
------------------------------
Its: Chairman & CEO
------------------------------
ALEXANDER CITY CASTING COMPANY, INC.,
an Alabama corporation
By: /s/ ALAN J. MILLER
-------------------------------
Its: Vice President
-------------------------------
CAST-MATIC CORPORATION,
A Michigan corporation
By: /s/ ALAN J. MILLER
--------------------------------
Its: Vice President
---------------------------------
COLUMBUS FOUNDRY, L.P.,
a Delaware limited partnership
By: /s/ ALAN J. MILLER
-------------------------------
Its: Vice President, Intermet U.S.
Holding, Inc., General Partner
-------------------------------
DIVERSIFIED DIEMAKERS, INC.,
a Delaware corporation
By: /s/ ALAN J. MILLER
-------------------------------
Its: Vice President
-------------------------------
GANTON TECHNOLOGIES, INC.,
an Illinois corporation
By: /s/ ALAN J. MILLER
-------------------------------
Its: Vice President
-------------------------------
Signature Pages For Disclosure Statement Of Intermet Corporation
And Certain Of Its Domestic Subsidiaries Dated June 27, 2005
INTERMET HOLDING COMPANY,
a Delaware corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
INTERMET ILLINOIS, INC.,
an Illinois corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
INTERMET INTERNATIONAL INC.,
a Georgia corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
INTERMET U.S. HOLDING INC.,
a Delaware corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
IRONTON IRON, INC.,
an Ohio corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
LYNCHBERG FOUNDRY COMPANY,
a Virginia corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
Signature Pages For Disclosure Statement Of Intermet Corporation
And Certain Of Its Domestic Subsidiaries Dated June 27, 2005
NORTHERN CASTINGS CORPORATION,
a Georgia corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
SUDBURY, INC.,
an Delaware corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
SUDM INC.,
a Michigan corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
TOOL PRODUCTS INC.,
a Delaware corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
WAGNER CASTINGS COMPANY,
a Delaware corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
WAGNER HAVANA, INC.,
a Delaware corporation
By: /s/ ALAN J. MILLER
---------------------------------------
Its: Vice President
---------------------------------------
EXHIBIT A
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
In re: )
) Case No. 04-67597
INTERMET CORPORATION et al., ) Chapter 11
) (Jointly Administered)
)
Debtors. ) Honorable Marci B. McIvor
- --------------------------------------------------------------------------------
DEBTORS' PLANS OF REORGANIZATION
Foley & Lardner LLP
Judy A. O'Neill (P32142)
Daljit S. Doogal (P57181)
David G. Dragich (P63234)
500 Woodward Avenue; Suite 2700
Detroit, Michigan 48226
Dated: June 24, 2005
Counsel for Debtors and Debtors-in-Possession
INTRODUCTION TO PLAN
The above-captioned debtors and debtors-in-possession, Intermet
Corporation ("Intermet"), Alexander City Casting Company, Inc., Cast-Matic
Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton
Technologies, Inc., Intermet Holding Company, Intermet Illinois, Inc., Intermet
International, Inc., Intermet U.S. Holding, Inc., Ironton Iron, Inc., Lynchburg
Foundry Company, Northern Castings Corporation, Sudbury, Inc., SUDM, Inc., Tool
Products, Inc., Wagner Castings Company, and Wagner Havana, Inc. (each,
including Intermet, a "Debtor" and collectively, the "Debtors"), jointly propose
the following plans of reorganization, (each a separate plan for the applicable
Debtor and collectively, the "Plan") pursuant to Chapter 11 of the Bankruptcy
Code.(1)
Under Section 1125(b) of the Bankruptcy Code, a vote to accept or reject
this Plan cannot be solicited from a Holder of a Claim until such time as the
Disclosure Statement has been approved by the Bankruptcy Court and distributed
to Holders of Claims. ALL HOLDERS OF CLAIMS ARE ENCOURAGED TO READ THE PLAN AND
DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE
PLAN.
The Plan contemplates that each of the Debtors will be reorganized
entities after consummation of the Plan.(2) These reorganization Cases have been
consolidated for procedural purposes only and are jointly administered pursuant
to an order of the Bankruptcy Court. The Distributions to be made to Holders of
Claims, in each of the Classes of Claims and Equity Interests for each Debtor,
are set forth in Article 3 herein.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A
SEPARATE PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN
CONSOLIDATED, SUBSTANTIVELY OR OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE
DEBTORS WILL BE SATISFIED SOLELY FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT
AS SPECIFICALLY SET FORTH IN THE PLAN, NOTHING IN THE PLAN OR THE DISCLOSURE
STATEMENT SHALL CONSTITUTE OR BE DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF
THE DEBTORS IS SUBJECT TO OR LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE
CLAIMS OF CREDITORS THAT HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS
SEPARATE CLAIMS WITH RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES
(INCLUDING, BUT NOT LIMITED TO, DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL
BE ADMINISTERED AS PROVIDED HEREIN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED
HEREIN, THE CLASSIFICATIONS OF CLAIMS AND EQUITY INTERESTS SET FORTH BELOW SHALL
BE DEEMED TO APPLY SEPARATELY WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
_________________________________
(1) Capitalized terms used herein shall have the meaning ascribed to them
in Article I of the Plan.
(2) As noted in the Disclosure Statement, the liquidation of substantially
all of the Assets of certain of the Debtors after the Effective Date is
contemplated.
1
ARTICLE 1
DEFINITIONS
The following terms used in the Plan shall have the meanings specified
below, and such meanings shall be equally applicable to both the singular and
plural forms of such terms, unless the context otherwise requires. Any term used
in the Plan, whether or not capitalized, that is not defined in the Plan, but
that is defined in the Disclosure Statement, the Bankruptcy Code or the
Bankruptcy Rules, shall have the meaning set forth in the Disclosure Statement,
the Bankruptcy Code or the Bankruptcy Rules.
1.01 ADMINISTRATIVE CLAIMS. The collective reference to all Claims for
post-Petition Date costs and expenses of administration of these Cases with
priority under Section 507(a)(1), 503(b) or 1114(e)(2) of the Bankruptcy Code,
including: (a) the actual and necessary costs and expenses incurred after the
Petition Date of preserving the Estates and operating the businesses of the
Debtors, (b) any indebtedness or obligations entitled to such priority under the
Bankruptcy Code, including Professional Fees, in each case to the extent allowed
by a Final Order of the Bankruptcy Court under Sections 330(a) or 331 of the
Bankruptcy Code (unless such Claims are incurred in the ordinary course of the
Debtors' businesses), and (c) all fees and charges assessed against the Estates
under Section 1930, Chapter 123 of Title 28, United States Code.
1.02 ADMINISTRATIVE CLAIM BAR DATE. The date by which all applications for
treatment of a Claim as an Allowed Administrative Claim, other than Professional
Fees, must be filed with the Bankruptcy Court and which date shall be, unless
subject to an assumed Executory Contract which shall be afforded the treatment
under Article 8 of the Plan, the 60th day after the Effective Date for
Professional Fees and the 30th day after the Confirmation Date for all other
Administrative Claims other than for goods and services provided to the Debtors
during the Cases in the ordinary course of business.
1.03 AFFILIATE. This term shall have the meaning assigned to it in Section
101(2) of the Bankruptcy Code.
1.04 ALLOWANCE DATE. The date a Claim becomes an Allowed Claim.
1.05 ALLOWED. With respect to any Claim against a Debtor to the extent
that (i) such Claim has not been withdrawn, paid in full, or otherwise deemed
satisfied in full, (ii) a Proof of Claim or Interest was filed on or before the
Claims Filing Bar Date, Supplemental Bar Date or the Administrative Claim Bar
Date, as applicable (or, if not filed by such date, a Proof of Claim was filed
with leave of the Bankruptcy Court, after notice and a hearing and entry of a
Final Order) or was deemed timely filed or, if no Proof of Claim or Interests so
filed, which Claim Interest, as of the Confirmation Date, is listed by the
Debtors in their Schedules as liquidated in amount, not disputed, and not
contingent, and (iii) no objection to the allowance of such Claim or action to
subordinate, avoid, reclassify, classify, exchange, estimate, disallow or
otherwise limit recovery with respect thereto has been filed or interposed on or
before the Claims Objection Deadline or such an objection or action having been
so interposed, to the extent that such Claim is allowed by a Final Order;
provided, however, that notwithstanding anything to the contrary contained
herein, any Claim or Equity Interest specifically deemed allowed or disallowed
in the Plan shall be, or not be (as the case may be), an Allowed Claim or
Allowed Equity Interest to the
2
extent so specifically provided in the Plan. Unless otherwise ordered by the
Bankruptcy Court prior to Confirmation, or as specifically provided to the
contrary in the Plan with respect to any particular Claim, an "Allowed Claim" or
"Allowed Equity Interest" shall not include, except as provided in the Plan with
respect to any Allowed Secured Claim (i) any interest on such Claim to the
extent accruing or maturing on or after the Petition Date, (ii) punitive or
exemplary damages, or (iii) any fine, penalty, or forfeiture.
1.06 ALLOWED ADMINISTRATIVE CLAIM. Any Administrative Claim that is an
Allowed Claim; provided, however, that, unless an extension of time is granted
in writing by the appropriate Debtor, a Holder of any Administrative Claim
arising prior to the Confirmation Date, other than for goods or services
provided to the Debtors during the Cases in the ordinary course of business, and
unless subject to an assumed Executory Contract as described in Article 1.02,
must file a request for payment on or before the Administrative Claim Bar Date
in order to have such Administrative Claim eligible to be considered an Allowed
Administrative Claim.
1.07 ALLOWED PRIORITY CLAIM. Any Priority Claim that is an Allowed Claim.
1.08 ALLOWED REJECTION CLAIM. Any Rejection Claim that is an Allowed
Claim.
1.09 ALLOWED SECURED CLAIM. Any Secured Claim that is an Allowed Claim.
1.10 ALLOWED TAX CLAIM. Any Tax Claim that is an Allowed Claim.
1.11 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
and Bylaws (or other similar documents) of the Reorganized Debtors, which shall
be in substantially the forms attached hereto as Exhibit H, and in the event of
satisfaction of the Liquidating Plan Condition, in the form of Exhibit I as to
Wagner Castings. The Articles of Incorporation and Bylaws as to all other
Debtors shall be amended and restated, as provided in the Plan, but will remain
subject to the laws of the jurisdictions in which such Debtors were incorporated
or formed prior to the Effective Date, subject to the modifications otherwise
provided for in the Plan which Articles of Incorporation and Bylaws (or other
similar documents) and the Certificate of Incorporation described in Article
6.01 of this Plan, shall be in form and substance satisfactory to the Initial
Committed Purchasers and which shall be effective on the Effective Date.
1.12 ASSETS. All of the right, title, and interest of the Debtors in and
to any and all assets and property, whether tangible, intangible, real, or
personal, that constitute property of the Debtors' Estates within the purview of
Section 541 of the Bankruptcy Code, including without limitation, any and all
claims, Causes of Action, or rights of the Debtors under federal or state law.
1.13 AVOIDANCE ACTIONS. All Causes of Action the Debtors may assert under
Chapter 5 of the Bankruptcy Code, whether or not Causes of Action are commenced
to prosecute such Avoidance Actions. A non-exclusive list of potential Avoidance
Actions is attached as Exhibit J to the Plan.
1.14 BALLOT. Each of the ballot forms that are distributed with the
Disclosure Statement to Holders of Claims included in Classes that are Impaired
under the Plan and entitled to vote
3
under Article 5 of the Plan to accept or reject the Plan and make any other
applicable elections or agreements pursuant to the Plan.
1.15 BANKRUPTCY CODE. Title 11 of the United States Code, as amended from
time to time, and made applicable to these Cases.
1.16 BANKRUPTCY COURT. The United States Bankruptcy Court for the Eastern
District of Michigan, Southern Division, or any other court of competent
jurisdiction exercising jurisdiction over these Cases.
1.17 BANKRUPTCY RULES. The Federal Rules of Bankruptcy Procedure,
promulgated under Section 2075, Title 28, United States Code, as amended from
time to time, and made applicable to these Cases and the local rules of the
Bankruptcy Court as amended from time to time and made applicable to these
Cases.
1.18 BOARD OF INTERMET. The board of directors or other similar governing
body of Intermet and the other Debtors.
1.19 BOARD OF REORGANIZED INTERMET. The board of directors or similar
governing body of Reorganized Intermet and the other Reorganized Debtors.
1.20 BUSINESS DAY. A day other than a Saturday, Sunday, "legal holiday"
(as such term is defined in Bankruptcy Rule 9006(a)), or any other day on which
commercial banks in Detroit, Michigan are authorized or required by law to
close.
1.21 CASE OR CASES. Each of the Cases under Chapter 11 of the Bankruptcy
Code commenced by the Debtors on the Petition Date in the Bankruptcy Court,
styled and jointly administered under the case caption In re Intermet
Corporation, et al., and bearing case number 04-67597.
1.22 CASH. Legal tender of the United States of America payable, in the
case of a Distribution, as set forth in Article 7.06, or payable in immediately
available funds, such as a wire transfer, bank or cashier's check.
1.23 CASH-OUT AMOUNT. With respect to a Holder of a General Unsecured
Claim, Cash equal to such Holder's Pro Rata portion of the New Common Stock
allocated to a particular Debtor multiplied by $10.00 per share.
1.24 CASH-OUT PURCHASE AGREEMENT. The agreement attached hereto as Exhibit
E by and among the Debtors and the Initial Committed Purchasers pursuant to
which the Initial Committed Purchasers shall purchase the Cash-Out Shares.
1.25 CASH-OUT SHARES. The shares of New Common Stock that otherwise would
have been distributed to Holders of General Unsecured Claims that receive the
Cash-Out Amount in exchange for their Claims.
1.26 CAUSES OF ACTION. Any and all actions, proceedings, causes of action,
suits, accounts, controversies, promises to pay, rights to legal remedies,
rights to equitable remedies,
4
rights to payment and claims, whether known, unknown, reduced to judgment, not
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured and whether asserted or
assertable directly or derivatively, in law, equity or otherwise by, on behalf
of or in the name of any of the Debtors against any Person which exists on or
before the Effective Date, including, without limitation, the Avoidance Actions.
Causes of Action shall include, but shall not be limited to, all claims and
causes of action described in the Disclosure Statement, the Schedules, and
Exhibit K to the Plan.
1.27 CLAIM. A claim means a claim against any one of the Debtors as
defined in section 101(5) of the Bankruptcy Code.
1.28 CLAIMS FILING BAR DATE. February 7, 2005, the deadline by which
certain Creditors were obligated to file Proofs of Claim.
1.29 CLAIMS OBJECTION DEADLINE. The date which is 180 days after the
Effective Date, as the same may be from time to time extended by the Bankruptcy
Court.
1.30 CLASS. A category as to each Debtor, designated herein, of Claims or
Equity Interests as specified in Article 2 of the Plan.
1.31 CONFIRMATION. The entry of the Confirmation Order by the Bankruptcy
Court on the docket of the Bankruptcy Court.
1.32 CONFIRMATION DATE. The date upon which the Confirmation Order is
entered on the docket of the Bankruptcy Court.
1.33 CONFIRMATION HEARING DATE. The date or dates of the hearing on
Confirmation of the Plan, as may be continued from time to time.
1.34 CONFIRMATION ORDER. The order of the Bankruptcy Court confirming the
Plan under Section 1129 of the Bankruptcy Code, the proposed form of which is
attached hereto as Exhibit A.
1.35 CONSENTING PRE-PETITION LENDERS. Any of the Pre-Petition Lenders who
fail to object to the releases set forth in Article 10.05 of the Plan on or
before the deadline set for objections to the Plan, to the extent such release
is binding on it.
1.36 CONSENTING DIP LENDERS. Any of the DIP Lenders who fail to object to
the releases set forth in Article 10.05 of the Plan on or before the deadline
set for objections to the Plan, to the extent such release is binding on it.
1.37 CONSIGNMENT CLAIMS. The Claims described in Article 3.08 of the Plan.
1.38 CONVENIENCE CLASS ELECTION. An election by a Holder of a General
Unsecured Claim in an amount greater than $125,000 to reduce the aggregate
amount of its General Unsecured Claim to such amount, on its Ballot to (i) be
treated as an Unsecured Convenience Claim; (ii) agree to seek recovery
exclusively from the Debtor that is the primary obligor with respect to its
General Unsecured Claim; (iii) waive its right to seek recovery from any
additional
5
Debtor against whom it has a Claim as an obligor for such Claim; and (iv) vote
in favor of the Plan.
1.39 CREDITOR. With respect to any Debtor, a Person defined as a
"creditor" in Section 101(10) of the Bankruptcy Code.
1.40 CREDITORS' COMMITTEE. The official committee of unsecured Creditors
appointed in these Cases pursuant to Section 1102(a) of the Bankruptcy Code.
1.41 CURE. With respect to the assumption of an Executory Contract
pursuant to Section 365(b) of the Bankruptcy Code: (a) the Distribution of Cash,
or the Distribution of such other property as may be agreed upon by the parties
or ordered by the Bankruptcy Court, in an amount equal to all unpaid monetary
obligations, without interest or penalty, or such other amount as may be agreed
upon by the parties under an Executory Contract or unexpired lease, to the
extent such obligations are enforceable under the Bankruptcy Code and applicable
non-bankruptcy law, or (b) the taking of such other actions as may be agreed
upon by the parties or ordered by the Bankruptcy Court.
1.42 DEBTOR(S). Any, or a collective reference to all, of Intermet
Corporation, Alexander City Casting Company, Inc., Cast-Matic Corporation,
Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton Technologies, Inc.,
Intermet Holding Company, Intermet Illinois, Inc., Intermet International, Inc.,
Intermet U.S. Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company,
Northern Castings Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc.,
Wagner Castings Company, and Wagner Havana, Inc.
1.43 DIP AGENTS. The Bank Of Nova Scotia, as administrative agent for the
DIP Lenders and as a lead DIP Lender, and Deutsche Bank Trust Company Americas,
as collateral agent and co-agent for the DIP Lenders, and as a lead DIP Lender.
1.44 DIP FACILITY. That certain Debtor-In-Possession Revolving Credit
Agreement dated as of October 22, 2004, as amended, restated, supplemented or
otherwise modified from time to time, and all documents executed in connection
therewith, among the Debtors, the DIP Agents, and the DIP Lenders.
1.45 DIP FACILITY CLAIM. All Claims of the DIP Agents and the DIP Lenders
arising under or pursuant to the DIP Facility, including, without limitation,
principal and interest on the DIP Facility, plus all reasonable fees and
expenses (including Professional Fees) arising under the DIP Facility.
1.46 DIP FINANCING ORDER. The Final Order entered by the Bankruptcy Court
on November 5, 2004, Pursuant To Bankruptcy Code Sections 105, 361, 363, 364,
503 And 507: (A) Authorizing Debtors-In-Possession To (i) Obtain Senior And
Junior Secured Post-Petition Financing And (ii) Utilize Cash Collateral, (B)
Granting Superpriority Claims To Post-Petition Lenders And (C) Granting Adequate
Protection To Pre-Petition Lenders.
1.47 DIP LENDERS. The lenders who are parties to the DIP Credit Agreement.
6
1.48 DISBURSING AGENT. The Reorganized Debtors or any Person designated by
the Reorganized Debtors to serve as a disbursing agent under Article 7 of the
Plan.
1.49 DISCLOSURE STATEMENT. The Disclosure Statement of the Debtors filed
with the Bankruptcy Court on June ____, 2005 that relates to and accompanies the
Plan, as it may be supplemented, amended, or modified from time to time and that
was prepared and distributed, and was approved by the Bankruptcy Court, in
accordance with Section 1125 of the Bankruptcy Code. The Restructuring
Commitment Letter requires such amendments to be made with the consent of the
Initial Committed Purchasers, which consent shall not be unreasonably withheld.
1.50 DISPUTED CLAIM. A Claim as to which a Proof of Claim has been filed,
or deemed filed under applicable law, as to which an objection has been or may
be timely filed and which objection, if timely filed, has not been withdrawn or
has not been overruled, denied or resolved by a Final Order. A Claim shall not
be considered a Disputed Claim for purposes of voting, as applicable, to the
extent it has been Temporarily Allowed for such purpose.
1.51 DISTRIBUTIONS. The distributions to be made in accordance with the
Plan, as the case may be: (a) Cash, (b) shares of New Common Stock, (c) Rights,
and (d) any other distributions to Holders of Claims under the terms and
provisions of the Plan.
1.52 DISTRIBUTION RECORD DATE. The date specified in the Confirmation
Order as the Distribution Record Date. If no such date is specified in the
Confirmation Order, then the Distribution Record Date shall be the Confirmation
Date.
1.53 EFFECTIVE DATE. The first Business Day: (a) on which no stay of the
Confirmation Order is in effect; and (b) on which all conditions in Article 9 of
the Plan have been satisfied or have been waived in accordance with the Plan.
1.54 EFFECTIVE DATE EXECUTIVE OFFICERS. The executive officers of Intermet
that have entered into Employment Agreements.
1.55 EMPLOYMENT AGREEMENTS. The employment agreements proposed to be
entered into by the Effective Date Officers.
1.56 EQUITY COMMITTEE. The official committee of equity security holders
of the Debtors appointed in these Cases pursuant to Section 1102(a) of the
Bankruptcy Code.
1.57 EQUITY INTEREST. Any equity security, as that term is defined in
section 101(16) of the Bankruptcy Code, of a Debtor as such equity security
exists immediately prior to the Effective Date, only to the extent that such
equity security is an Equity Interest and the Equity Interest has not been paid,
released, or otherwise settled prior to the Effective Date, including any rights
to any dividends or distributions as a result of such ownership, and any option,
warrant, or right to acquire any such ownership interest.
1.58 ESTATE. The estate of each Debtor in these Cases, created pursuant to
Section 541 of the Bankruptcy Code.
7
1.59 EXECUTORY CONTRACT. Any executory contract or unexpired lease as of
the Petition Date, subject to Section 365 of the Bankruptcy Code, between a
Debtor and any other Person or Persons, specifically excluding contracts and
agreements entered into pursuant to the Plan.
1.60 EXHIBIT. An exhibit annexed to either this Plan or to the Disclosure
Statement.
1.61 EXHIBIT FILING DATE. The date on which certain Exhibits to the Plan
shall be filed with the Bankruptcy Court, which date shall be at least ten (10)
days prior to the Voting Deadline or such later date as may be approved by the
Bankruptcy Court.
1.62 EXISTING COMMON STOCK. Shares of common stock of Intermet or any of
the Debtors that are authorized, issued and outstanding prior to the Effective
Date.
1.63 EXISTING PREFERRED STOCK. Shares of preferred stock of Ironton,
authorized, issued, and outstanding prior to the Effective Date, excluding any
right to dividends accrued prior to the Effective Date, which shall be treated
as General Unsecured Claims or Convenience Claims, as applicable.
1.64 EXIT FINANCING FACILITY. The exit financing facility obtained by the
Reorganized Debtors, and described in Article 6.11 of the Plan.
1.65 EXIT LENDERS. The lenders under the Exit Financing Facility.
1.66 FINAL ORDER. An order or judgment entered by the Bankruptcy Court,
which has not been reversed, vacated, or stayed, that may no longer be appealed
from or otherwise reviewed or reconsidered, as a result of which such order or
judgment shall have become final and non-appealable in accordance with
Bankruptcy Rule 8002.
1.67 GENERAL UNSECURED CLAIMS. To the extent that such Claim has not been
paid, released, or otherwise settled prior to the Effective Date, all Claims
which are not Priority Claims, Pre-Petition Lender Claims, Secured Claims,
Unsecured Convenience Claims, Equity Interests, Administrative Claims, Tax
Claims, DIP Facility Claims, Workers' Compensation Claims (except as specified
in Article 3.06 of the Plan), Pension Claims, Consignment Claims, and are not
otherwise entitled to priority under the Bankruptcy Code or an order of the
Bankruptcy Court, including but not limited to the Noteholder Claims.
1.68 GENERAL UNSECURED CREDITORS. Creditors holding General Unsecured
Claims.
1.69 HOLDER. A holder of a Claim against or Equity Interest in a Debtor.
1.70 IMPAIRED. With respect to any Claim or Equity Interest, such Claim or
Equity Interest that is impaired within the meaning of Section 1124 of the
Bankruptcy Code.
1.71 IMPAIRED EQUITY DEBTORS. Intermet Corporation and, in the event of
satisfaction of the Liquidating Plan Condition, Wagner Castings and Wagner
Havana shall also be Impaired Equity Debtors. Ironton is an Impaired Equity
Debtor but only as to the Existing Preferred Stock of Ironton.
8
1.72 IMPAIRED EQUITY INTERESTS. Holders of Equity Interests in the
Impaired Equity Debtors.
1.73 INDENTURE. That certain Indenture, dated as of June 13, 2002, by and
among Intermet Corporation, as issuer, Lynchburg Foundry Company, Northern
Castings Corporation, Ironton Iron, Inc., Intermet U.S. Holding, Inc., Columbus
Foundry, L.P., SUDM, Inc., Alexander City Casting Company, Inc., Tool Products,
Inc., Sudbury, Inc., Cast-Matic Corporation, Intermet Illinois, Inc. (formerly
known as Frisby P.M.C., Incorporated), Wagner Castings Company, Wagner Havana,
Inc., Diversified Diemakers, Inc., and Ganton Technologies, Inc., as guarantors,
and the Indenture Trustee, as trustee.
1.74 INDENTURE TRUSTEE. The U.S. Bank National Association as the trustee
under the Indenture, the entity currently serving as indenture trustee under the
Senior Notes, or any successor trustee appointed thereunder from time to time.
1.75 INDENTURE TRUSTEE FEES. Reasonable fees and out-of-pocket expenses of
the Indenture Trustee and its attorneys in connection with these Cases in an
amount up to $500,000 in Cash.
1.76 INDENTURE TRUSTEE FEE AMOUNT. The amount of the Indenture Trustee
Fees, as of the Effective Date, as indicated by a fee statement provided by the
Indenture Trustee to the Debtors, the Initial Committed Purchasers, and the
Creditors Committee, no later than 3 days before the Effective Date and which is
acceptable to the Debtors, the Initial Committed Purchasers, and the Creditors'
Committee.
1.77 INDUCEMENT CASH AMOUNT. Cash in the amount equal to the lesser of (i)
a fixed percentage of a General Unsecured Creditor's Allowed Claim as set forth
for each Debtor in Exhibit C to the Plan, or (ii) a Pro Rata share of the
Inducement Cash Pool for such Debtor in Exhibit C to the Plan, provided that,
the Inducement Cash Pool may be increased to ensure a fixed percentage at least
equal to the applicable recovery to which such Holder is entitled to under the
treatment specified in Article 5.04(b) with respect to each applicable Debtor
indicated in Exhibit C to the Plan.
1.78 INDUCEMENT CASH ELECTION. An election by a Holder of a General
Unsecured Claim to take the Inducement Cash Amount in lieu of the Plan
Securities or the Cash-Out Amount pursuant to Articles 5.04, 5.06, and 5.07 of
the Plan, and by which election a Holder of a General Unsecured Claim (i) agrees
to prosecute its Claim(s) exclusively against the Debtor that is the primary
obligor according to the Debtors' books and records, (ii) agrees to waive its
rights to seek recovery from any other Debtor on account of such Claim(s), and
(iii) votes in favor of the Plan.
1.79 INDUCEMENT CASH POOL. A fixed amount of Cash allocated under the
Plan, as set forth for each Debtor in Exhibit C to the Plan, to pay all
Inducement Cash Amounts.
1.80 INITIAL COMMITTED PURCHASERS. R2 Investments, LDC and/or one or more
of its related or associated entities and Stanfield Capital Partners LLC and/or
one or more of its related or associated entities.
9
1.81 INTERCOMPANY CLAIMS. Claims of a Debtor against another Debtor.
1.82 IRONTON. Ironton Iron, Inc.
1.83 KEY EMPLOYEES. Those persons who: (i) shall be employed by the
Reorganized Debtors on the Effective Date; (ii) upon consummation of the Plan,
shall be entitled to receive stay bonuses under the Key Employee Retention Plan;
and (iii) are identified in Exhibit L to the Plan.
1.84 KEY EMPLOYEE RETENTION PLAN (KERP). The Amended and Restated Employee
Retention Plan effective September 20, 2004, and as amended and restated on
December 8, 2004, and as approved by a Final Order of the Bankruptcy Court on
December 22, 2004.
1.85 KEY EMPLOYEE RIGHTS OFFERING. A rights offering in connection with
which Reorganized Intermet shall offer to the Key Employees the right to
purchase, on a Pro Rata basis (based upon any payments that may be due to Key
Employees under the KERP), 181,249 shares of New Common Stock, in consideration
of $10.00 per share, with the right to overscribe for the shares, but in no
event shall the total number of shares exceed 181,249.
1.86 LIEN. A charge against or interest in property to secure payment of a
debt or performance of an obligation; provided, however, that a charge or
interest that has been or may be avoided pursuant to an Avoidance Action shall
not constitute a Lien.
1.87 LIQUIDATING PLAN CONDITION. The failure of Classes 4 and 5 to accept
the Plan for Wagner Castings, and confirmation of the Plan for Wagner Casting
under Section 1129(b) of the Bankruptcy Code is not obtained, with respect to
the treatment set forth in Articles 5.05 and 5.07 of the Plan.
1.88 MANAGEMENT INCENTIVE PLAN. A management plan that shall be
implemented to reserve for designated members of senior management of the
Reorganized Debtors Equity Interests (including, without limitation, restricted
New Common Stock and/or options) in an amount up to 5.0% of the New Common Stock
issued on the Effective Date. The Management Incentive Plan will contain terms
and conditions that shall be determined by the Board of Reorganized Intermet.
1.89 NEW COMMON STOCK. The new shares of common stock of Reorganized
Intermet issued pursuant to Article 6.04 of this Plan.
1.90 NOTEHOLDERS. Holders of the Senior Notes.
1.91 NOTEHOLDER CLAIMS. The Claims held by the Noteholders (inclusive of
principal, interest, and other fees and expenses under the Indenture, accrued as
of the Petition Date) arising from the Indenture or the Senior Notes.
1.92 PBGC. The Pension Benefit Guaranty Corporation.
1.93 PENSION CLAIMS. All Claims of the PBGC and/or the Debtors' Pension
Plans against any of the Debtors or Reorganized Debtors.
10
1.94 PENSION PLANS. All defined benefit pension plans covered by the
PBGC's termination insurance program and sponsored by a Debtor.
1.95 PERSON. An individual, a corporation, a partnership, a limited
liability company, an association, a joint stock company, an estate, a trust, an
unincorporated organization, a government or any political subdivision thereof,
or any other entity.
1.96 PETITION DATE. September 29, 2004, the date on which the Debtors
commenced these Cases.
1.97 PLAN. The Plans of Reorganization for each Debtor and all supplements
and Exhibits hereto, as the same may be amended or modified by the Debtors from
time to time pursuant to and in accordance with the Plan, the Bankruptcy Code,
and the Bankruptcy Rules.
1.98 PLAN SECURITIES. The New Common Stock, the Rights, and the New Wagner
Castings Common Stock, and the New Wagner Havana Common Stock, if issued.
1.99 PRE-PETITION AGENT. The Bank of Nova Scotia, in its capacity as
administrative agent under the Pre-Petition Credit Facility, or any successor
administrative agent.
1.100 PRE-PETITION CREDIT FACILITY. The credit agreement dated as of
January 8, 2004, as amended, restated, supplemented or otherwise modified from
time to time, and all documents executed in connection therewith, among the
Debtors, the Pre-Petition Agent, and the Pre-Petition Lenders.
1.101 PRE-PETITION LENDERS. The Lenders, as such term is defined in the
Pre-Petition Credit Facility.
1.102 PRE-PETITION LENDER CLAIMS. All Claims of the Pre-Petition Lenders
against any of the Debtors, only to the extent that such Claims have not been
paid, released, or otherwise settled prior to the Effective Date.
1.103 PRIORITY CLAIMS. All Claims that are entitled to priority pursuant
to Section 507(a) of the Bankruptcy Code and that are not Administrative Claims
or Tax Claims, only to the extent that such Claims have not been paid, released,
or otherwise settled prior to the Effective Date.
1.104 PRIVATE PLACEMENT PURCHASE AGREEMENT. The agreement attached hereto
as Exhibit D by and among the Debtors and the Initial Committed Purchasers.
1.105 PRIVATE PLACEMENT PURCHASE SHARES. The Rights Offering Shares that
are not purchased by General Unsecured Creditors in the Rights Offering and
which the Initial Committed Purchasers are obligated to purchase pursuant to the
Private Placement Purchase Agreement, at a purchase price of $10.00 per share.
1.106 PROFESSIONAL[S]. Any professional(s) employed in these Cases
pursuant to Sections 327, 328, 1103, or 1114 of the Bankruptcy Code, and any
professional(s) seeking
11
compensation or reimbursement of expenses in connection with these Cases
pursuant to Sections 330, 331, and/or 503(b)(4) of the Bankruptcy Code.
1.107 PROFESSIONAL FEES. All fees due and owing to any Professional for
compensation or reimbursement of costs and expenses relating to services
rendered after the Petition Date and prior to and including the Effective Date.
1.108 PROOF OF CLAIM. Any written statement filed under oath in these
Cases by or on behalf of a Creditor, in conformance with the Bankruptcy Code and
Bankruptcy Rules, which sets forth sufficient detail to identify the basis for a
Claim, and the amount owed.
1.109 PRO RATA. Proportionately, so that for example, a pro rata
Distribution with respect to an Allowed Claim of a particular Class for a
particular Debtor bears the same ratio to all Distributions on account of a
particular Class or Classes for a particular Debtor, as the dollar amount of
such Allowed Claim bears to the dollar amount of all Allowed Claims in such
Class or Classes.
1.110 RECORD DATE. The deadline set by the Bankruptcy Court for
determining the Holders of Claims entitled to vote on the Plan which shall be,
in any case, not later than the date of entry of an order approving the
Disclosure Statement.
1.111 REGISTRATION RIGHTS AGREEMENT. A registration rights agreement,
attached hereto as Exhibit F, whereby Reorganized Intermet will be obligated to
register certain shares of New Common Stock for resale under the Securities Act
pursuant to the terms and conditions of such agreement, which must be acceptable
to the Initial Committed Purchasers pursuant to the Restructuring Commitment
Letter.
1.112 RELEASED ACTIONS. Any actions, proceedings, causes of action, suits,
accounts, controversies, promises to pay, rights to legal remedies, rights to
equitable remedies, rights to payment, claims, obligations, litigations,
judgments, damages, rights and liabilities of any nature whatsoever, whether
known or unknown, reduced to judgment or not reduced to judgment, liquidated or
unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed,
secured or unsecured, foreseen or unforeseen, assertable directly or assertable
derivatively, existing or hereafter arising, in law, equity, or otherwise, based
in whole or in part upon any act, omission, transaction, event or other
occurrence relating to or in connection with any of the Debtors or their
respective property. Notwithstanding anything herein to the contrary, the
Released Actions shall not include the Avoidance Actions.
1.113 RELEASED PARTIES. Intermet, the Debtors, Reorganized Intermet, the
Reorganized Debtors, each Initial Committed Purchaser, the Creditors' Committee
in such capacity and only in such capacity, the Pre-Petition Agent, the
Consenting Pre-Petition Lenders, the DIP Agents, the Consenting DIP Lenders, and
the Indenture Trustee, and each of their respective current and former members,
officers, directors, agents, financial advisors, attorneys, employees, equity
holders, partners, affiliates and representatives and their respective
properties.
1.114 RELEASING PARTIES. Intermet, Reorganized Intermet, the Debtors and
the Reorganized Debtors.
12
1.115 REJECTION CLAIMS. All Claims arising as a result of a Debtor's
rejection of Executory Contracts pursuant to the Bankruptcy Code, subject to the
limitations provided in Section 502(b) of the Bankruptcy Code. To the extent a
Rejection Claim is secured, it will be considered a Secured Claim for purposes
of treatment in this Plan, but solely to the extent of the value of the
collateral securing such Secured Claim.
1.116 REORGANIZATION DOCUMENTS. The agreements and other documents set
forth in Article 9 of the Plan.
1.117 REORGANIZED DEBTOR(S). Any new operating entity, or any Debtor, in
each case from and after the Effective Date, giving effect to the transactions
contemplated by the Plan.
1.118 REORGANIZED INTERMET. Intermet from and after the Effective Date,
giving effect to the transactions contemplated by the Plan.
1.119 REORGANIZED WAGNER CASTINGS NEW COMMON STOCK. The new shares of
common stock of Reorganized Wagner Castings issued pursuant to Article 6.04 of
this Plan.
1.120 REORGANIZED WAGNER HAVANA NEW COMMON STOCK. The new shares of common
stock of Reorganized Wagner Havana issued pursuant to Article 6.04 of this Plan.
1.121 RESTRUCTURING COMMITMENT LETTER. The Agreement by and among the
Initial Committed Purchasers and the Debtors and filed with the Bankruptcy Court
as an exhibit to the "Motion of the Debtors Pursuant to Section 363(b)(1) of the
Bankruptcy Code for Authority to (i) Enter into Restructuring Commitment Letter,
(ii) Pay Associated Fees and Expenses, and (iii) Furnish Related Indemnities,"
filed on June 24, 2005 and approved by the Bankruptcy Court on July ___, 2005,
including the exhibits thereto. The Restructuring Commitment Letter is attached
hereto as Exhibit B to the Plan.
1.122 RETAINED ACTIONS. Means any Cause of Action, including but not
limited to (a) all claims, rights of action, setoffs, recoupments, suits and
proceedings, whether in law or in equity, whether known or unknown, which any
Debtor may hold against any Person, including, without limitation, any Avoidance
Actions and any Causes of Action brought by any Debtor prior to the Petition
Date, and actions against any Persons for failure to pay for products or
services provided or rendered by the Debtors, (b) all claims, Causes of Action,
suits and proceedings relating to strict enforcement of the Debtors'
intellectual property rights, including patents, copyrights and trademarks, (c)
all warranty and indemnification claims under any contract or agreement with any
Debtor for goods and services, (d) all claims or Causes of Action seeking the
recovery of the Debtors' accounts receivable or other receivables or rights to
payment created or arising in the ordinary course of the Debtors' businesses,
and such other claims or Causes of Action, as are identified in the Debtors'
Schedules, the Disclosure Statement, or Exhibit K to the Plan, but excludes the
Released Actions (and to the extent applicable, Avoidance Actions) released
under Article 10.05 of the Plan.
1.123 RETIREE BENEFITS. The term shall have the meaning assigned to it in
Section 1114 of the Bankruptcy Code.
13
1.124 RETIREE COMMITTEE. The committee of staff retirees appointed by the
Bankruptcy Court pursuant to Section 1114 of the Bankruptcy Code on May 24,
2005.
1.125 RIGHTS. The rights of General Unsecured Creditors to purchase their
Pro Rata portion of New Common Stock in the Rights Offering.
1.126 RIGHTS OFFERING. The offering by the Debtors to Holders of Allowed
General Unsecured Claims, including the Initial Committed Purchasers, pursuant
to an election made in conjunction with voting on the Plan, to purchase on a Pro
Rata basis, the Rights Offering Shares, the terms and conditions of which are
set forth in Article 6.12 hereof.
1.127 RIGHTS OFFERING SHARES. 7,500,000 shares of New Common Stock, to be
offered in the Rights Offering for purchase, on a Pro Rata basis, by General
Unsecured Creditors, at a purchase price of $10.00 per share.
1.128 RIGHTS OFFERING PARTICIPATION CLAIM AMOUNT. The amount set forth in
the chart stated in Article 6.12 of the Plan.
1.129 SCHEDULES. The schedules of assets and liabilities and the
statements of financial affairs filed in the Bankruptcy Court by the Debtors, if
any, as such schedules or statements may be amended or supplemented from time to
time in accordance with Bankruptcy Rule 1009 or orders of the Bankruptcy Court.
1.130 SECURED CLAIMS. To the extent that such Claims have not been paid,
released, or otherwise settled prior to the Effective Date, all Claims (other
than Pre-Petition Lender Claims) that are secured by a valid, perfected,
enforceable, and non-avoidable Lien on any of the Assets of a Debtor or that are
subject to setoff under applicable non-bankruptcy law or Section 553 of the
Bankruptcy Code, to the extent of the value of the interest of each Holder of
such Claim in such Debtor's interest in the Assets subject to a Lien or to the
extent of the amount of the setoff, as applicable; provided, however, that if
the Holder of a Secured Claim elects application of Section 1111(b)(2) of the
Bankruptcy Code, then such Holder's Claim shall be a Secured Claim to the extent
such Claim is Allowed.
1.131 SECURITIES ACT. The Securities Act of 1933, as now in effect or
hereafter amended.
1.132 SECURITY. The term shall have the meaning assigned to it in Section
101(49) of the Bankruptcy Code.
1.133 SENIOR NOTES. The 9.75% interest-bearing notes issued by Intermet
that will mature on June 15, 2009, with interest due each June 15 and December
15 and which are unconditionally guaranteed, jointly and severally, by all of
the other Debtors except Intermet International, Inc. and Intermet Holding
Company.
1.134 STOCKHOLDERS' AGREEMENT. The agreement attached to the Disclosure
Statement as Exhibit G, which sets forth the rights of holders of New Common
Stock. The Stockholders' Agreement shall be effective as of the Effective Date
and binding on all holders of New
14
Common Stock. The Stockholders' Agreement shall be in form and substance
satisfactory to the Initial Committed Purchasers.
1.135 SUBSCRIPTION AGENT. The entity engaged by the Debtors to
administer the Rights Offering, whose address and phone is as follows:
[Name]
[Address]
[Address]
(Attn: [ ])
Phone: ______________
1.136 SUBSCRIPTION COMMENCEMENT DATE. The date Ballots and Subscription
Forms are mailed to Holders of Claims.
1.137 SUBSCRIPTION EXPIRATION DATE. The Voting Deadline, unless
extended by the Debtors and the Initial Committed Purchasers in their
discretion.
1.138 SUBSCRIPTION FORM. The subscription form to be used by
participants in the Rights Offering to exercise the Rights.
1.139 SUBSCRIPTION PURCHASE PRICE. The purchase price of $10.00 per
share that a Holder must pay in Cash in order to exercise its Rights and
purchase the New Common Stock pursuant to the Rights Offering.
1.140 SUBSCRIPTION RECORD DATE. The Subscription Record Date shall be
the Voting Deadline.
1.141 SUDBURY. Sudbury, Inc.
1.142 SUDM. SUDM, Inc.
1.143 SUPPLEMENTAL BAR DATE. April 29, 2005, or such other date as
established by order of the Bankruptcy Court, the deadline by which certain
Creditors were obligated to file Proofs of Claims.
1.144 TAX CLAIMS. All Claims that are entitled to priority under
Section 507(a)(8) of the Bankruptcy Code.
1.145 TEMPORARILY ALLOWED CLAIM. A claim temporarily allowed pursuant
to Bankruptcy Rule 3018 and by an order of the Bankruptcy Court.
15
1.146 UNIMPAIRED. The term shall mean, with respect to any Claim or
Equity Interest, that such Claim or Equity Interest is not Impaired within the
meaning of Section 1124 of the Bankruptcy Code.
1.147 UNIMPAIRED EQUITY DEBTORS. All Debtors except Intermet
Corporation, provided, however, that in the event that the Liquidating Plan
Condition is satisfied, Wagner Castings and Wagner Havana shall not be
Unimpaired Equity Debtors. Ironton is an Unimpaired Equity Debtor but only with
respect to the Existing Common Stock of Ironton.
1.148 UNIMPAIRED EQUITY INTERESTS. Holders of Equity Interests of all
Debtors except Intermet Corporation, provided, however, that in the event that
the Liquidating Plan Condition is satisfied, Holders of Equity Interests in
Wagner Castings and Wagner Havana shall not hold Unimpaired Equity Interests.
1.149 UNSECURED CONVENIENCE CLAIM. An unsecured claim: (i) that is less
than or equal to $125,000, or (ii) for which the Holder makes a Convenience
Class Election.
1.150 U.S. TRUSTEE. The Office of the United States Trustee for the
Eastern District of Michigan.
1.151 U.S. TRUSTEE FEES. The U.S. Trustee's quarterly fees payable
pursuant to 28 U.S.C.Section1930.
1.152 VOTING DEADLINE. The deadline established by the Bankruptcy Court
as the last date by which Creditors are required to submit Ballots in favor of
or against the Plan, as such deadline may be extended from time to time.
1.153 WAGNER CASTINGS. Wagner Castings Company
1.154 WAGNER HAVANA. Wagner Havana, Inc.
1.155 WORKERS' COMPENSATION CLAIMS. Claims arising under the Workers'
Compensation Programs.
1.156 WORKERS' COMPENSATION PROGRAMS. Collectively, the Debtors'
workers' compensation programs in all states in which they operate pursuant to
which the Debtors provide their employees with workers' compensation coverage
for claims arising from or related to their employment with the Debtors.
Terms not expressly defined in the Plan shall have the meaning ascribed
to them as set forth in the Bankruptcy Code, other federal or state statutes,
rules, regulations, or the Disclosure Statement, as applicable. Terms not
expressly defined in the Exhibits to the Plan shall have the meaning ascribed to
them as set forth in the Plan.
16
ARTICLE 2
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
Pursuant to Section 1122 of the Bankruptcy Code, set forth below is a
designation of Classes of Claims against and Equity Interests in the Debtors. A
Claim or Equity Interest is placed in a particular Class for purposes of voting
on the Plan and of receiving Distributions pursuant to the Plan. In accordance
with Section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, Tax
Claims, DIP Facility Claims, U.S. Trustee Fees, Workers' Compensation Claims,
Pension Claims, and Consignment Claims have not been classified.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A
SEPARATE PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN
CONSOLIDATED, SUBSTANTIVELY OR OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE
DEBTORS WILL BE SATISFIED SOLELY FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT
AS SPECIFICALLY SET FORTH IN THE PLAN, NOTHING IN THE PLAN OR THE DISCLOSURE
STATEMENT SHALL CONSTITUTE OR BE DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF
THE DEBTORS IS SUBJECT TO OR LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE
CLAIMS OF CREDITORS THAT HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS
SEPARATE CLAIMS WITH RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES
(INCLUDING, BUT NOT LIMITED TO, DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL
BE ADMINISTERED AS PROVIDED HEREIN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED
HEREIN, THE CLASSIFICATIONS SET FORTH BELOW SHALL BE DEEMED TO APPLY SEPARATELY
WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
For the purposes of the Plan, Claims against, or Equity Interests in
the Debtors are grouped as follows in accordance with Section 1122(a) of the
Bankruptcy Code:
2.01 CLASS 1. PRIORITY CLAIMS AGAINST ANY DEBTOR. Class 1 for each
Debtor consists of all Priority Claims. Class 1 is Unimpaired.
2.02 CLASS 2. PRE-PETITION LENDER CLAIMS AGAINST ANY DEBTOR. Class 2
for each Debtor consists of all Pre-Petition Lender Claims. Class 2 is
Unimpaired.
2.03 CLASS 3. SECURED CLAIMS AGAINST ANY DEBTOR EXCEPT CLAIMS IN CLASS
3A AS TO WAGNER CASTINGS COMPANY. Class 3 consists of all Secured Claims for
each Debtor except those against Wagner Castings which are in Class 3a. Class 3
is Unimpaired.
2.04 CLASS 3A. SECURED CLAIMS HELD BY DANA CORPORATION AGAINST WAGNER
CASTINGS COMPANY. Class 3a consists of all Secured Claims held by Dana
Corporation against Wagner Castings. Class 3a is Impaired.
2.05 CLASS 4. GENERAL UNSECURED CLAIMS. Class 4 consists of all General
Unsecured Claims except those in Class 4a and 4b. Class 4 is Impaired.
17
2.06 CLASS 4A. GENERAL UNSECURED CLAIMS AGAINST WAGNER CASTINGS
COMPANY. Class 4a shall only exist in the event that the Liquidating Plan
Condition is satisfied and, in such event, shall consist of all General
Unsecured Claims and Unsecured Convenience Claims against Wagner Castings. Class
4a is Impaired.
2.07 CLASS 4B. GENERAL UNSECURED CLAIMS AGAINST SUDM, INC. Class 4b
consists of all General Unsecured Claims and Unsecured Convenience Claims
against SUDM, Inc. Class 4b is Impaired.
2.08 CLASS 4C. GENERAL UNSECURED CLAIMS AGAINST WAGNER HAVANA, INC.
Class 4c shall only exist in the event that the Liquidating Plan Condition is
satisfied and, in such event, shall consist of all General Unsecured Claims
against Wagner Havana, Inc. Class 4c is Impaired.
2.09 CLASS 5. UNSECURED CONVENIENCE CLAIMS. Class 5 consists of all
Unsecured Convenience Claims against each Debtor, provided, however, that in the
event that the Liquidating Plan Condition is satisfied, such Debtors shall not
include Wagner Castings or SUDM. Class 5 is Impaired.
2.10 CLASS 6A. UNIMPAIRED EQUITY INTERESTS. Class 6a consists of all
Unimpaired Equity Interests. Class 6a is Unimpaired.
2.11 CLASS 6B. IMPAIRED EQUITY INTERESTS. Class 6b consists of all
Impaired Equity Interests. Class 6b is Impaired.
ARTICLE 3
TREATMENT OF UNCLASSIFIED CLAIMS
3.01 INTRODUCTION. In accordance with Section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims, Tax Claims, DIP Facility Claims, U.S.
Trustee Fees, Workers' Compensation Claims (to the extent such Workers'
Compensation Claims are not General Unsecured Claims as described in Article
3.06 of the Plan), Pension Claims, and Consignment Claims have not been
classified, and the respective treatment of such unclassified Claims is set
forth below.
3.02 ADMINISTRATIVE CLAIMS AGAINST ANY DEBTOR. Except for Holders of
DIP Facility Claims, each Holder of an Allowed Administrative Claim, shall
receive, in full satisfaction of such Allowed Claim, Cash equal to the amount of
such Claim on the later of (i) the Effective Date and (ii) the date that is ten
(10) days after the Allowance Date, unless such Holder shall have agreed to
different treatment of such Allowed Claim; provided, however, that Allowed
Administrative Claims representing obligations incurred in the ordinary course
of business by a Debtor shall be paid or performed in accordance with the terms
and conditions of the particular transactions and any agreements relating
thereto. Nothing herein shall be deemed to accelerate a Debtor's obligation to
make payment on account of any Administrative Claim that is not due and owing as
of the Confirmation Date, is not Allowed, or is subject to ongoing objections in
the Bankruptcy Court or other court of competent jurisdiction.
18
3.03 TAX CLAIMS AGAINST ANY DEBTOR. Each Holder of an Allowed Tax Claim
against any Debtor shall receive in full satisfaction of such Allowed Tax Claim,
at the election of the relevant Debtor, in its sole discretion, either (i) Cash
equal to the amount of such Claim on the later of (1) the Effective Date, and
(2) the date that is 10 days after the Allowance Date, unless such Holder shall
have agreed to different treatment of such Allowed Claim, or (ii) in accordance
with Section 1129(a)(9)(C) of the Bankruptcy Code, Cash payments in equal
monthly installments commencing on the first Business Day of the month
succeeding the month in which the Effective Date occurs and continuing on the
first Business Day of each month thereafter, until the month which is six (6)
years after the date of assessment of such Claim totaling the principal amount
of such Claim plus interest on any outstanding balance from the Effective Date
calculated at the interest rate equal to the applicable federal rate as
determined in accordance with Section 1274(d) of the Internal Revenue Code of
1986, as amended and the regulations promulgated thereunder, or (iii) such other
treatment as to which the Holder of such Allowed Tax Claim shall have agreed in
writing; provided, however, that any Claim or demand for payment of a penalty
(other than a penalty of the type specified in Section 507(a)(8)(G) of the
Bankruptcy Code) shall be disallowed pursuant to this Plan and the Holder of an
Allowed Tax Claim shall not assess or attempt to collect such penalty from the
Debtors, their Estates, the Reorganized Debtors, or their property.
3.04 DIP FACILITY CLAIMS AGAINST ANY DEBTOR. On the Effective Date, in
full satisfaction of the DIP Facility Claims against each Debtor, the DIP Agents
(for the benefit of the DIP Lenders, as applicable) shall receive Cash in an
amount equal to the then outstanding amount of the DIP Facility Claims
(including, without limitation, all accrued and unpaid interest, fees and
expenses and any other amounts that may then be due and payable under the DIP
Facility) and any undrawn letters of credit issued pursuant to the DIP Facility
shall be returned and marked cancelled and shall be replaced by letters of
credit issued under the Exit Financing Facility. On the Effective Date, the DIP
Agents' and the DIP Lenders' commitments and obligations under the DIP Facility
shall be irrevocably terminated and the Debtors shall be deemed to have
unconditionally and irrevocably released the DIP Lenders and the DIP Agents from
all obligations, claims and liabilities arising thereunder or relating thereto.
3.05 U.S. TRUSTEE FEES OWED BY ANY DEBTOR. The U.S. Trustee's quarterly
fees owed by any Debtor shall be paid in full without prior approval pursuant to
28 U.S.C.Section1930 on or before the Effective Date. All fees payable pursuant
to 28 U.S.C.Section1930 will be paid by each of the Reorganized Debtors in
accordance therewith until the closing of its respective Case pursuant to
Section 350(a) of the Bankruptcy Code.
3.06 WORKERS' COMPENSATION CLAIMS AGAINST ANY DEBTOR. Upon the
Effective Date of the Plan, with the exception of the Workers' Compensation
Program for the State of Ohio, which relates to Ironton and Sudbury, the
Reorganized Debtors shall continue the Workers' Compensation Programs for all
states in which they operate. Nothing in the Plan shall be deemed to discharge,
release, or relieve the Debtors or Reorganized Debtors from any current or
future liability with respect to any of its/their obligations under the Workers'
Compensation Programs provided that in the case of the Workers' Compensation
Program for the State of Ohio, which relates to Ironton and Sudbury, Claims
arising thereunder shall be General Unsecured Claims. The Reorganized Debtors
shall be responsible for all valid Claims for benefits and liabilities under the
applicable Workers' Compensation Programs, provided that, in the case of
19
the Workers' Compensation Program for the State of Ohio, which relates to
Ironton and Sudbury, such Claims arising thereunder shall be General Unsecured
Claims under the Plan, regardless of when the applicable injuries occurred. All
obligations under the applicable Workers' Compensation Programs shall be paid in
accordance with the terms and conditions of applicable Workers' Compensation
Programs and all other applicable laws other than the Workers' Compensation
Program for the State of Ohio, which relates to Ironton and Sudbury, which
Claims shall be General Unsecured Claims under the Plan, regardless of when the
applicable injuries occurred. For all states in which the Debtors currently
operate or have operated, with the exception of the State of Ohio, the Workers
Compensation Programs are either (i) self-insured, or (ii) insured with a third
party insurance carrier, and are in all cases secured by letters of credit.
Accordingly, Claims resulting from the Workers' Compensation Program for the
State of Ohio, which relates to Ironton and Sudbury, shall be Class 4 General
Unsecured Claims or Class 5 Unsecured Convenience Claims as applicable.
3.07 PENSION CLAIMS AGAINST ANY DEBTOR. Upon Confirmation and
substantial consummation of the Plan, the Reorganized Debtors will continue all
Pension Plans in accordance with applicable law, and the Debtors' obligations
under applicable law with respect to continued funding of the Pension Plans will
remain unaltered. Nothing in the Plan shall be deemed to discharge, release, or
relieve the Debtors, the Reorganized Debtors, or their control group of or from
any current or future liability under applicable law with respect to the Pension
Plans. On the earlier of September 15, 2005 or the Effective Date, the Debtors
will pay into each Pension Plan the amount then due for the 2004 Pension Plan
years. On the Effective Date, the Debtors will pay into each Pension Plan the
remaining amounts then due under applicable minimum funding standards and the
PBGC will be deemed to have withdrawn its Claims with respect to the Pension
Plans. The PBGC is enjoined from seeking relief against the Reorganized Debtors
under 29 U.S.C. Section 1362(e) as a consequence of the closure of the Debtors'
Racine, Wisconsin or Decatur, Illinois facilities.
3.08 CONSIGNMENT CLAIMS AGAINST ANY DEBTOR. Notwithstanding section
1141(c) or any other provision of the Bankruptcy Code, all Liens, if any, of
Persons who provided goods to the Debtors on consignment (i) prior to the
Petition Date and who hold valid, enforceable, and perfected Liens in such goods
(a) pursuant to a written agreement with the Debtors and (b) in accordance with
applicable law, or (ii) after the Petition Date pursuant to any order of the
Bankruptcy Court shall, in each case, survive the Effective Date and continue in
accordance with the contractual terms of the underlying agreements between the
Debtors and such Persons and shall remain enforceable as of the Effective Date
with the same extent, validity and priority as existed as of the Petition Date
or pursuant to such order, as the case may be. All other Persons who provided
goods to the Debtors on consignment shall be deemed to hold General Unsecured
Claims under this Plan. No request for payment of an Administrative Claim need
be filed with respect to any Claim contemplated by this Article 3.08, which
Claim shall be payable by the Debtors in the ordinary course of business.
ARTICLE 4
TREATMENT OF CLASSES THAT ARE UNIMPAIRED UNDER THE PLAN
4.01 CLASSES THAT ARE UNIMPAIRED. Classes 1, 2, and 3 are Unimpaired
for all Debtors. Holders of Equity Interests in the Unimpaired Equity Debtors
are Unimpaired.
20
Therefore, pursuant to Section 1126(f) of the Bankruptcy Code, the Holders of
Allowed Claims and Interests in such Classes are conclusively presumed to have
accepted the Plan. Nothing herein shall be deemed to accelerate any Debtor's
obligation to make payment on account of any Claim in a Class which is
Unimpaired under the Plan or affect the timing of payment under applicable
non-bankruptcy law. Additionally, the Debtors shall retain all rights to dispute
or challenge any Claim or Interest asserted hereunder which shall constitute a
Claim or Interest in a Class that is Unimpaired under the Plan.
4.02 CLASS 1 FOR ALL DEBTORS - PRIORITY CLAIMS AGAINST ANY DEBTOR.
Unless the Holder of a Priority Claim and the Debtors agree to a different
treatment, each Holder of an Allowed Priority Claim against any Debtor, shall
receive, in full satisfaction of such Allowed Claim, Cash equal to the amount of
such Allowed Claim on the latest of (i) the Effective Date, (ii) the date that
is 10 days after the Allowance Date of such Claim, and (iii) the date when such
Allowed Claim becomes due and payable according to its terms and conditions.
4.03 CLASS 2 FOR ALL DEBTORS - PRE-PETITION LENDER CLAIMS AGAINST ANY
DEBTOR. The Pre-Petition Lender Claims shall be Allowed in an amount equal to
the sum of (i) the principal amount of the Pre-Petition Lender Claims as of the
Petition Date, plus all unpaid interest and fees which have accrued and are
unpaid through the Petition Date, plus (ii) all interest and fees (if any) to
which the Pre-Petition Lenders are entitled under Section 506(b) of the
Bankruptcy Code, and (iii) any other amounts owed by the Debtors under the DIP
Order, to the extent not already paid to the Pre-Petition Lenders pursuant to
the DIP Financing Order. On the Effective Date, in full satisfaction of all of
the obligations of the Debtors in respect of the Pre-Petition Lender Claims, the
Disbursing Agent shall distribute to the Pre-Petition Agent (for the benefit of
the Pre-Petition Lenders) and without further notice, application or hearing,
Cash in an amount equal to the principal and all interest accrued on the
Pre-Petition Lender Claims through the Effective Date plus all unreimbursed fees
and expenses incurred by the Pre-Petition Agent through the Effective Date. The
Pre-Petition Lenders shall be entitled to retain all payments made to the
Pre-Petition Lenders prior to the Effective Date. In addition, as of the
Effective Date, the Consenting Pre-Petition Lenders will be deemed to have been
unconditionally and irrevocably released from all obligations, claims and
liabilities arising under or related to the Pre-Petition Credit Facility or its
lending relationship to the Debtors, whether arising before or after the
Petition Date.
4.04 CLASS 3 FOR ALL DEBTORS EXCEPT AS TO CLASS 3A CLAIMS AGAINST
WAGNER CASTINGS COMPANY. Unless the Holder of an Allowed Secured Claim and the
Debtors agree to a different treatment, either (a) the legal, equitable, and
contractual rights of Holders of Secured Claims shall be reinstated on the
Effective Date, or (b) the relevant Debtor shall (i) Cure any pre-petition
default (other than defaults of the kind specified in Section 365(b)(2) of the
Bankruptcy Code), (ii) reinstate the maturity of such Secured Claim, (iii)
compensate the Holder of such Allowed Secured Claim to the extent required by
Section 1124(2)(c) of the Bankruptcy Code, and (iv) not otherwise alter the
legal, equitable or contractual rights to which such Secured Claim entitles the
Holder. The Debtors' failure to object to such Secured Claims in the Case shall
be without prejudice to the Debtors' right to contest or otherwise defend
against such Claims in the Bankruptcy Court or other appropriate non-bankruptcy
forum (at the option of the Debtors) when and if such Claims are sought to be
enforced by the Holder of the Secured Claim. All pre-Petition Date Liens on
property of the Debtors held by or on behalf of the Holder of Secured
21
Claims with respect to such Claims shall survive the Effective Date and continue
in accordance with the contractual terms of the underlying agreements with such
Holders until, as to each such Holder, the Allowed Claims of such Holder of such
Secured Claims are paid in full.
4.05 CLASS 6A. UNIMPAIRED EQUITY INTERESTS IN UNIMPAIRED EQUITY
DEBTORS. On the Effective Date, Equity Interests in the Unimpaired Equity
Debtors will be Allowed and retained by the applicable Reorganized Debtor.
Holders of Equity Interests in the Unimpaired Equity Debtors will not be
entitled to vote and are deemed to have accepted the Plan.
ARTICLE 5
TREATMENT OF CLASSES THAT ARE IMPAIRED UNDER THE PLAN
5.01 IMPAIRED CLASSES. Classes 3a, 4, 4a, 4b, 4c, 5 and Class 6b
Impaired Equity Interests are Impaired. Holders of Allowed Claims in Classes 3a,
4, 4a, 4b, 4c, and 5 are, to the extent that such Claims are Allowed, not
Disputed, or Temporarily Allowed, allowed to vote to accept or reject the Plan.
Holders of Equity Interests in the Impaired Equity Debtors are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
5.02 ACCEPTANCE BY AN IMPAIRED CLASS. In accordance with Section
1126(c) of the Bankruptcy Code, and except as provided in Section 1126(e) of the
Bankruptcy Code, an Impaired Class of Claims shall have accepted the Plan if the
Plan is accepted by the Holders of at least two-thirds (2/3) in dollar amount
and more than one-half (1/2) in number of the Allowed Claims of such Class that
have timely and properly voted to accept or reject the Plan.
5.03 CLASS 3A. SECURED CLAIMS HELD BY DANA CORPORATION AGAINST WAGNER
CASTINGS COMPANY. On the Effective Date, in full satisfaction of its Allowed
Secured Claim for setoff, Dana shall be allowed to setoff such Claim from
amounts owed to Wagner Castings, Columbus Foundry, L.P., Lynchburg Foundry
Company, and Intermet, on the condition that Dana provides the amendments to its
purchase orders with the aforementioned Debtors, set forth in an agreement by
and among such Debtors and Dana, dated April, 2005.
5.04 CLASS 4. GENERAL UNSECURED CLAIMS OTHER THAN THOSE IN CLASSES 4A,
4B, OR 4C. On or as soon as reasonably practicable after the Effective Date, in
full satisfaction of its Allowed General Unsecured Claims in such Class, the
Indenture Trustee, on behalf of each of the Noteholders, or each Holder of the
Allowed General Unsecured Claims, respectively, shall receive in full
satisfaction of its Claims against such Debtor:
(a) the Cash-Out Amount; OR
(b) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured
Claims so elects on the Ballot:
(i) a Pro Rata portion of shares of New Common Stock
allocated to the applicable Debtor as indicated in Exhibit C
to the Plan, and
(ii) its Pro Rata share of the Rights allocated to
the applicable Debtor as indicated on Exhibit C to the Plan;
OR
22
(c) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured
Claims so elects on the Ballot, the Inducement Cash Amount.
For the avoidance of doubt, in the event a Holder of a General
Unsecured Claim fails to elect the options set forth in Article 5.04(b) and (c),
such Holder shall receive Cash equal to the Cash-Out Amount.
5.05 CLASS 4A. GENERAL UNSECURED CLAIMS AGAINST WAGNER CASTINGS
COMPANY. On or as soon as reasonably practicable after the Effective Date, in
full satisfaction of the Allowed General Unsecured Claims in such Class, the
Indenture Trustee, on behalf of each of the Noteholders, or each Holder of the
Allowed General Unsecured Claims, respectively, shall receive in full
satisfaction of their Claims against Wagner Castings:
Cash equal to each Holder's Pro Rata share of all proceeds
remaining after liquidation of all assets of Wagner Castings and the
satisfaction of all Liens thereon, including those arising after the Effective
Date, such as the Liens arising under the Exit Financing Facility.
5.06 CLASS 4B. GENERAL UNSECURED CLAIMS AGAINST SUDM, INC. On or as
soon as reasonably practicable after the Effective Date, in full satisfaction of
its Allowed General Unsecured Claims in such Class, the Indenture Trustee, on
behalf of each of the Noteholders, or each Holder of the Allowed General
Unsecured Claims, respectively, shall receive:
(a) the Indenture Trustee Fee Amount which shall be paid to
the Indenture Trustee in satisfaction of the Indenture Trustee Fees,
and
(b) the Cash-Out Amount with respect to SUDM as indicated in
Exhibit C to the Plan; OR
(c) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured
Claims so elects on the Ballot:
(i) a Pro Rata portion of shares of New Common Stock
allocated to SUDM as indicated in Exhibit C to the Plan, and
(ii) its Pro Rata share of the Rights allocated to
SUDM and indicated on Exhibit C to the Plan; OR
(d) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured
Claims so elects on the Ballot, the Inducement Cash Amount with respect
to SUDM.
For the avoidance of doubt, in the event a Holder of a General
Unsecured Claim fails to elect the options set forth in Article 5.06(c) and (d),
such Holder shall receive Cash equal to the Cash-Out Amount.
5.07 CLASS 4C. GENERAL UNSECURED CLAIMS AGAINST WAGNER HAVANA, INC. On
the Effective Date, the Indenture Trustee, on behalf of each of the Noteholders,
or a Holder of
23
Allowed General Unsecured Claims against Wagner Havana, Inc., shall receive in
full satisfaction of their Claims:
(a) the Cash-Out Amount with respect to Wagner Havana as
indicated in Exhibit C to the Plan; OR
(b) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured
Claims so elects on the Ballot:
(i) a Pro Rata portion of shares of the New Common
Stock allocated to Wagner Havana as indicated in Exhibit C to
the Plan,
(ii) its Pro Rata share of the Rights allocated to
Wagner Havana and indicated on Exhibit C to the Plan; and
(iii) its Pro Rata share of the Reorganized Wagner
Havana New Common Stock which shall be conveyed immediately to
Reorganized Intermet upon the Effective Date; OR
(c) at the option of each such Holder of a General Unsecured
Claim and only to the extent that such Holder of General Unsecured
Claims so elects on the Ballot, the Inducement Cash Amount.
In the event a Holder of a General Unsecured Claim fails to elect the
options set forth in Article 5.07(b) or (c), such Holder shall receive the
Cash-Out Amount.
5.08 CLASS 5. UNSECURED CONVENIENCE CLAIMS. All Allowed Unsecured
Convenience Claims shall be paid as soon as practicable after the Effective
Date, in full satisfaction of such Claims, according to Exhibit C to the Plan.
5.09 CLASS 6B. IMPAIRED EQUITY INTERESTS. On the Effective Date,
Impaired Equity Interests in the Impaired Equity Debtors shall be cancelled.
Holders of Equity Interests in the Impaired Equity Debtors shall be deemed to
have rejected the Plan.
5.10 INTERCOMPANY CLAIMS. All Intercompany Claims will be released,
waived and discharged as of the Effective Date. Claims held by Non-Debtor
Affiliates against the Debtors will, to the maximum extent practicable, be (a)
released, waived, and discharged as of the Effective Date, (b) offset against
claims held by Debtors against Non-Debtor Affiliates, or (c) converted to equity
with respect to the obligee Debtor.
5.11 NON-CONSENSUAL CONFIRMATION. In the event that any Classes
entitled to vote on the Plan, fail to accept the Plan, the Debtors reserve the
right (i) to modify the Plan in accordance with Article 11 of the Plan, and (ii)
to request that the Bankruptcy Court confirm the Plan in accordance with Section
1129(b) of the Bankruptcy Code notwithstanding such lack of acceptance by
finding that the Plan does not discriminate unfairly and is fair and equitable
with respect to the treatment to any Impaired Class of Claims voting to reject
the Plan.
24
ARTICLE 6
MEANS FOR IMPLEMENTATION OF THE PLAN
6.01 REORGANIZED INTERMET AND REORGANIZED DEBTORS. Each of the Debtors
will continue to exist after the Effective Date as a separate entity, except as
otherwise provided herein, with all the powers under applicable law in the
jurisdiction in which each applicable Debtor is incorporated or otherwise formed
and pursuant to its certificate of incorporation and bylaws or other
organizational documents in effect on the Effective Date, without prejudice to
any right to terminate such existence (whether by merger or otherwise) under
applicable law after the Effective Date. On the Effective Date, Reorganized
Intermet shall re-domesticate, by merger or other appropriate means, as a new
corporation under the laws of the State of Delaware with a new Certificate of
Incorporation and Bylaws. The Articles of Incorporation and Bylaws for all other
Debtors continuing after the Effective Date shall be amended and restated but
such Debtors shall remain subject to the laws of the jurisdictions in which such
Debtors were incorporated or formed prior to the Effective Date.
6.02 NON-DEBTORS. There are certain Affiliates of the Debtors that are
not Debtors in these Chapter 11 Cases. The continued existence, operation and
ownership of such non-Debtor Affiliates is a material component of the Debtors'
businesses, and, as set forth in Article 10.01 of this Plan, all of the Debtors'
Equity Interests and other property interests in such non-Debtor Affiliates
shall revest in the applicable Reorganized Debtor or its successor on the
Effective Date.
6.03 AGREEMENTS ON THE EFFECTIVE DATE. In order to implement the Plan,
the Debtors anticipate that the following agreements, among others, will be
executed or implemented, on or prior to the Effective Date:
(a) the Exit Financing Facility;
(b) the Employment Agreements;
(c) the certificate of incorporation or Articles of Incorporation,
as applicable, and Bylaws or other corporate governance documents;
(d) the Registration Rights Agreement;
(e) the Cash-Out Purchase Agreement;
(f) the Private Placement Purchase Agreement;
(g) the Stockholders' Agreement; and
(h) all other documents necessary to effectuate the Plan.
All of the above documents shall be (a) filed by the Debtors with the
Bankruptcy Court not later than the Exhibit Filing Date unless otherwise
specified herein, and (b) satisfactory to the Initial Committed Purchasers and
the Debtors.
25
6.04 CORPORATE ACTION.
(a) The Certificate of Incorporation and Bylaws of Reorganized
Intermet, shall, among other things: (i) authorize the issuance of the New
Common Stock, (ii) prohibit the issuance of nonvoting equity securities, as
required by Section 1123(a)(6) of the Bankruptcy Code, subject to amendment of
such certificate of incorporation and bylaws as permitted by applicable law, and
(iii) effectuate the provisions of the Plan, in each case without any further
action by the officers, stockholders or directors of the Debtors or the
Reorganized Debtors.
(b) The Certificate of Incorporation (or other similar document) and
Bylaws of all of the Debtors other than Reorganized Intermet, shall, among other
things: (i) prohibit the issuance of nonvoting equity securities, as required by
Section 1123(a)(6) of the Bankruptcy Code, subject to amendment of such
certificate of incorporation and bylaws as permitted by applicable law, and (ii)
effectuate the provisions of the Plan, in each case without any further action
by the officers, stockholders or directors of the Debtors or the Reorganized
Debtors.
(c) On the Effective Date, the execution and delivery of each agreement
on the Effective Date and any other document necessary to effectuate the
transactions contemplated herein and therein, and all other actions contemplated
by the Plan, or such other documents shall be authorized and approved in all
respects (subject to the provisions of the Plan). All matters provided for in
the Plan involving the corporate structure of the Reorganized Debtors, and any
corporate action required by the Debtors or Reorganized Debtors in connection
with the Plan, shall be deemed to have occurred and shall be in effect, without
any requirement of further action by the security holders or directors of the
Debtors or Reorganized Debtors. On the Effective Date, the appropriate officers
of the Reorganized Debtors and members of the Boards of the Reorganized Debtors
are authorized and directed to issue, execute and deliver the agreements,
documents, securities and instruments contemplated by the Plan in the name of,
and on behalf of, the Reorganized Debtors.
(d) On or as soon as reasonably practicable after the Effective Date,
Reorganized Intermet, shall issue shares of the New Common Stock to those
Persons entitled to receive such pursuant to the Plan.
(e) On or as soon as reasonably practicable after the Effective Date,
if the Liquidating Plan Condition is satisfied, then the Articles of
Incorporation and Bylaws of Wagner Castings shall authorize the issuance of one
(1) share of Reorganized Wagner Castings New Common Stock and such share will be
issued and delivered to a third-party liquidating trustee acceptable to the
Reorganized Debtors, the Initial Committed Purchasers, and the Creditors'
Committee for the purpose of liquidating Wagner Castings and making the
Distributions set forth in Class 4a.
(f) On or as soon as reasonably practicable after the Effective Date,
if the Liquidating Plan Condition is satisfied, then the Articles of
Incorporation and Bylaws of Wagner Havana shall authorize the issuance of the
Reorganized Wagner Havana New
26
Common Stock and Reorganized Wagner Havana shall issue Reorganized
Wagner Havana New Common Stock to Holders of Claims against Wagner
Havana which such Holders will immediately transfer to Reorganized
Intermet.
6.05 STOCKHOLDERS' AGREEMENT. All holders of New Common Stock will be
subject to the Stockholders' Agreement which will, among other things, govern
appointment of the Board of Directors of Reorganized Intermet, each holder of
New Common Stock's access to information with respect to the Reorganized
Debtors, and ability to transfer such holder's New Common Stock. An election by
a Person to receive New Common Stock on the Ballot shall constitute such
Person's agreement to be bound by the Stockholders' Agreement. Each certificate
representing share(s) of New Common Stock shall bear a legend indicating that
the New Common Stock is subject to the Stockholders' Agreement. The
Stockholders' Agreement will be effective as of the Effective Date.
6.06 CANCELLATION OF EXISTING STOCK AND EXISTING PREFERRED STOCK. On or
as soon as reasonably practicable after the Effective Date, except as otherwise
specifically provided for herein (a) the Existing Common Stock of the Impaired
Equity Debtors and any other note, bond, indenture, or other instrument or
document evidencing or creating any indebtedness or obligation of or ownership
interest in the Impaired Equity Debtors, except such notes or other instruments
evidencing indebtedness or obligations of the Impaired Equity Debtors that are
reinstated under this Plan, will be cancelled, and (b) the Existing Preferred
Stock will be cancelled; and (c) obligations of, Claims against, and/or Equity
Interests in the Impaired Equity Debtors under, relating, or pertaining to any
agreements, indentures, certificates of designation, bylaws, or certificates or
articles of incorporation or similar documents evidencing or creating any
indebtedness or obligation of the Impaired Equity Debtors, except such notes,
instruments, or other documents evidencing indebtedness or obligations of the
Impaired Equity Debtors that are reinstated or otherwise expressly assumed or
preserved under this Plan, as the case may be, will be released and discharged.
The Unimpaired Equity Interests will be retained by the applicable Reorganized
Debtor.
6.07 MANAGEMENT INCENTIVE PLAN. On or as soon as reasonably practicable
after the Effective Date, the Management Incentive Plan shall be implemented to
reserve for designated members of senior management of the Reorganized Debtors
Equity interests (including, without limitation, restricted common stock and/or
options) in Reorganized Intermet in an amount up to 5.0% of the New Common Stock
issued on the Effective Date. The Management Incentive Plan will contain terms
and conditions that shall be determined by the Board of Reorganized Intermet.
6.08 THE KEY EMPLOYEE RIGHTS OFFERING. The Reorganized Debtors will
conduct the Key Employee Rights Offering in connection with which Reorganized
Intermet shall offer to the Key Employees the right to purchase, on a Pro Rata
basis (based upon payments due to Key Employees under the KERP), 181,249 shares
of New Common Stock, in consideration for Cash in the amount of $10.00 per
share. Key Employees shall have the right of over subscription with respect to
the Key Employee Rights Offering, provided that, in no event shall the total
shares in the Key Employee Rights Offering exceed 181,249 shares. Moreover, the
rights to purchase shares of New Common Stock in connection with the Key
Employee Rights Offering shall be non-transferable. Other terms and conditions
of the Key Employee Rights Offering are to be determined by the Debtors and the
Initial Committed Purchasers, in consultation with the
27
Creditors' Committee. The Key Employees either: (i) may receive in cash any
unpaid stay bonuses to which they may be entitled in accordance with the terms
and subject to the conditions of the KERP, including, without limitation, the
stay bonus payment schedule set forth therein; or (ii) upon consummation of the
Plan, may purchase shares of New Common Stock in connection with the Key
Employee Rights Offering by authorizing Reorganized Intermet to apply, on their
behalf, on a dollar-for-dollar basis, any such stay bonuses toward the purchase
of the shares of New Common Stock covered by the Key Employee Rights Offering.
Any New Common Stock issued pursuant to the Key Employee Rights Offering shall
be subject to the Stockholders' Agreement.
6.09 BOARD OF REORGANIZED INTERMET. On the Effective Date, the Board of
Directors of Reorganized Intermet shall be composed of seven members. On the
Effective Date, (i) five of such members shall be selected by the Initial
Committed Purchasers, (ii) one of such members shall be the Chief Executive
Officer of Reorganized Intermet, and (iii) one of such members shall be selected
by the Creditors' Committee. The member selected by the Creditors' Committee
shall be acceptable to the Initial Committed Purchasers. Two of the five members
selected by the Initial Committed Purchasers may not be officers, directors or
employees of either of the Initial Committed Purchasers.
6.10 OFFICERS. The Effective Date Executive Officers shall become
employed by Reorganized Intermet on the Effective Date pursuant to the
Employment Agreements. The other officers of the Debtors immediately prior to
the Effective Date shall serve as the officers of the applicable Reorganized
Debtor until their successors are duly appointed in accordance with Reorganized
Intermet's governance documents and applicable law. Each officer shall serve
from and after the Effective Date pursuant to the terms of Reorganized
Intermet's governance documents and applicable law. The Employment Agreements
shall be in form and substance satisfactory to the Initial Committed Purchasers
and shall supercede such officer's pre-Effective Date employment agreement.
6.11 EXIT FINANCING. On the Effective Date, the Reorganized Debtors
shall enter into the Exit Financing Facility in order to obtain the funds
necessary to: (a) repay in full the DIP Facility Claims and replace any letters
of credit issued pursuant to the DIP Facility, or in the alternative the Exit
Lenders may issue letters of credits to the DIP Lenders to secure payment of any
undrawn letters of credit issued pursuant to the DIP Facility which may remain
outstanding after the Effective Date; (b) make other payments required to be
made on the Effective Date, including, but not limited to, the payment in full
in Cash of the Pre-Petition Lender Claims and any undrawn letters of credit
issued pursuant to the Pre-Petition Credit Facility shall be returned and marked
cancelled and shall be replaced by letters of credit issued under the Exit
Financing Facility or in the alternative the Exit Lenders may issue letters of
credit to the Pre-Petition Lender to secure payment off any undrawn letters of
credit issued pursuant to the Pre-Petition Credit Facility which may remain
outstanding after the Effective Date. In the Confirmation Order, the Bankruptcy
Court shall approve the Exit Financing Facility in substantially the form filed
with the Bankruptcy Court and authorize the Reorganized Debtors to execute the
same together with such other documents as the Exit Lenders may reasonably
require to effectuate the treatment afforded to such parties under the Exit
Financing Facility.
28
6.12 RIGHTS OFFERING.
(a) Ability to Participate in Rights Offering
Holders of General Unsecured Claims against any Debtor are entitled to
participate in the Rights Offering solely to the extent of their Rights
Participation Claim Amount set forth below. If a General Unsecured Claim is
Allowed, the Holder of such Claim shall be entitled to participate to the extent
of the amount of such Allowed General Unsecured Claim. If a General Unsecured
Claim is Disputed, the Holder of such Claim shall be entitled to participate in
the Rights Offering, in the amount of the Rights Participation Claim Amount, and
as illustrated below:
CHARACTERISTICS OF CLAIM RIGHTS PARTICIPATION CLAIM AMOUNT
Objection to Claim has been filed The undisputed portion of the claim, if any.
Holder has filed Proof of Claim, but The amount of the Proof of Claim.
no corresponding Claim listed on Debtors' Schedules and
no objection filed
Holder has filed Proof of Claim but The lesser of the amount listed on the Schedules
corresponding amount listed in Schedules is different and the Proof of Claim amount.
and no objection has been filed, and the Claim has not
been Temporarily Allowed.
Allowed Claim Amount of Allowed Claim
Holders of Disputed Claims shall be entitled to participate in the
Rights Offering solely to the extent of their Rights Offering Participation
Claim Amounts. If any Holder of a Disputed General Unsecured Claim has obtained
an order of the Bankruptcy Court estimating its General Unsecured Claim for the
purpose of participating in the Rights Offering prior to the Subscription
Expiration Date, such Holder shall be entitled to participate in the Rights
Offering as set forth in this Article 6.12. In the event that any such
estimation shall occur, each exercising claimant shall be cut back Pro Rata and
the difference between the price paid by such exercising claimant and the
adjusted Subscription Purchase Price shall be refunded to such exercising
claimant, without interest, as soon as practicable after the Effective Date.
(b) Issuance of Rights
The Rights shall entitle the Holders of General Unsecured Claims the
right to purchase, on a Pro Rata basis using the Rights Offering Participation
Claim Amount, the Rights Offering Shares at a price of $10.00 per share pursuant
to the terms and conditions set forth in Article 6.12 of the Plan, provided that
the Holder executes a Subscription Form, which will be distributed to
29
each Holder of a General Unsecured Claim together with the Ballot. The number of
Rights Offering Shares shall not exceed 7,500,000 shares.
(c) Subscription Period
The Rights Offering shall commence on the Subscription Commencement
Date and shall expire on the Subscription Expiration Date. After the
Subscription Expiration Date, unexercised Rights shall terminate and any
purported exercise of any such unexercised Rights by any Person shall be null
and void and Reorganized Intermet shall not honor any such purported exercise
received by the Subscription Agent after the Subscription Expiration Date,
regardless of when the documents relating to such exercise were sent.
(d) Exercise of Rights
In order to exercise the Rights, each such Holder thereof must: (i)
return a duly completed Subscription Form to the Subscription Agent so that such
form is received by the Subscription Agent on or before the Subscription
Expiration Date and make the appropriate election on its Ballot; and (ii) pay to
the Subscription Agent (on behalf of the Debtors) on or before the Subscription
Expiration Date immediately available funds in an amount equal to such Holder's
aggregated Subscription Purchase Price, such payment to be made either by wire
transfer to the Subscription Agent in accordance with the wire instructions set
forth on the Subscription Form, in the case of a wire. If, on or prior to the
Subscription Expiration Date, the Subscription Agent for any reason has not
received from a given Holder of Rights both a duly completed Subscription Form
and Cash, in an amount equal to such Holder's aggregate Subscription Purchase
Price, such Holder shall be deemed to have not exercised its Rights and to have
relinquished and waived its ability to participate in the Rights Offering. By
completing the Subscription Form, a Holder will be agreeing to be bound by the
Stockholders' Agreement. A Subscription Form must also be accompanied by
sufficient indication of ownership of the Claim giving rise to the Rights, as
well as appropriate executed representations as to ownership. The payments made
in accordance with the Rights Offering shall be deposited and held by the
Subscription Agent in a trust account, escrow account, or similar segregated
account or accounts which shall be separate and apart from Reorganized
Intermet's general operating funds and any other funds subject to any cash
collateral arrangements, and which segregated account or accounts will be
maintained for the purpose of holding the money for administration of the Rights
Offering until the Effective Date, or such other later date, at the option of
the Reorganized Debtors, but not later than 20 days after the Effective Date.
(e) Transfer Restriction; Revocation
The Rights are not transferable. Additionally, once a Holder of Rights
has properly exercised its Rights such exercise cannot to be revoked for any
reason.
(f) Initial Committed Purchasers
Pursuant to the terms of the Restructuring Commitment Letter and
provided that all conditions precedent set forth therein have been satisfied,
including but not limited to the negotiation and execution of the Private
Placement Purchase Agreement, the Initial Committed Purchasers will be obligated
to purchase, on a Pro Rata basis on the Effective Date, any and all
30
of the Private Placement Purchase Shares. The Initial Committed Purchasers shall
pay to Reorganized Intermet, Cash on or prior to the Effective Date, in an
amount equal to the Subscription Purchase Price for the Private Placement
Purchase Shares.
(g) Distribution of Rights Offering Shares
(i) Distribution To Exercising Claimants
On, the Effective Date, the Disbursing Agent will distribute to the
exercising claimants certificates representing the Cash-Out Shares and the
Rights Offering Shares.
(ii) Distribution to Initial Committed Purchasers With Respect to
Private Placement Purchase Agreement
On the Effective Date, Reorganized Intermet will distribute to the
Initial Committed Purchasers certificates representing the Rights Offering
Shares purchased by the Initial Committed Purchasers.
(h) No Interest
In the event any Subscription Purchase Price is repaid to any Person
making such payment, no interest shall be paid thereon.
(i) Validity Of Exercise Of Rights
All questions concerning the timeliness, viability, form and
eligibility of any exercise of Rights shall be determined by Reorganized
Intermet, with the consent of the Initial Committed Purchasers, in consultation
with the Creditors' Committee. Such determinations shall be final and binding.
Reorganized Intermet, with the consent of the Initial Committed Purchasers, may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such times as it may determine, or reject the purported
exercise of any Rights. Subscription Forms shall be deemed not to have been
received or accepted until all irregularities have been waived or cured within
such time as Reorganized Intermet with the consent of the Initial Committed
Purchasers determines. Neither Reorganized Intermet nor the Subscription Agent
shall be under any duty to give notification of any defect or irregularity in
connection with the submission of Subscription Forms or incur any liability for
failure to give such notification.
(j) Use of Proceeds
On the Effective Date, the proceeds received by Reorganized Intermet
from the Rights Offering shall be used to fund the Cash payments required under
the Plan and for general corporate purposes.
6.13 ADMINISTRATION OF THE PLAN.
(a) After the Effective Date, the Reorganized Debtors shall
perform those responsibilities, duties, and obligations set forth in
this Plan, including, without
31
limitation, to prosecute any litigation pertaining thereto and to
oversee and govern the continuing affairs and operations of the
Reorganized Debtors on a going forward basis.
(b) After the Effective Date, the Reorganized Debtors may
retain such management, law firms, accounting firms, experts, advisors,
agents, consultants, investigators, appraisers, auctioneers, or other
Professionals, including the Subscription Agent, as it may deem
necessary, including, without limitation, the Disbursing Agent, to aid
it in the performance of its responsibilities pursuant to the terms of
the Plan. It shall not be a requirement that any such parties retained
by the Reorganized Debtors be a "disinterested person" (as such term is
defined in Section 101(14) of the Bankruptcy Code), and such retained
parties may include Professionals or other Persons who had previously
been active in these Cases on behalf of the Debtors, any Creditor or
other party-in-interest. The Debtors may retain and pay these
Professionals without Bankruptcy Court approval including without
limitation any approval of any of their post-Effective Date fees and
expenses, and such Professionals shall not be required to file any
statements with respect to the receipt of payment by the Reorganized
Debtors.
(c) The Board and the management of the Reorganized Debtors
shall perform the duties and obligations imposed on them by the Plan
with reasonable diligence and care under the circumstances.
(d) Reorganized Intermet shall be responsible for filing any
federal, state, and local tax returns for the Reorganized Debtors.
(e) To the extent the manner of performance is not specified,
the Reorganized Debtors will have the discretion to carry out and
perform all other obligations or duties imposed on them by the Plan or
by law in any manner its respective Board so chooses, as long as such
performance is not inconsistent with the intents and purposes of the
Plan.
6.14 PRESERVATION OF CAUSES OF ACTION. In accordance with Section
1123(b)(3) of the Bankruptcy Code, and except as otherwise provided in the Plan
and/or the Confirmation Order, including, without limitation, as provided in
Article 10.05 of the Plan, the Reorganized Debtors shall retain and may (but are
not required to) enforce all Retained Actions, including Avoidance Actions and
other similar claims arising under applicable state laws, including, without
limitation, fraudulent transfer claims, if any, and all other Causes of Action
of a trustee and debtor-in possession under the Bankruptcy Code. The Debtors or
the Reorganized Debtors, in their sole discretion, will determine whether to
bring, settle, release, compromise, or enforce any rights (or decline to do any
of the foregoing) with respect to the Retained Actions and the Avoidance
Actions. The Reorganized Debtors or any successor may pursue such litigation
claims in accordance with the best interests of the Reorganized Debtors or any
successors holding such rights of action. The failure of the Debtors to
specifically list any Claim, Causes of Action, right of action, suit or
proceeding in the Schedules, the Disclosure Statement, or on Exhibits J and K of
the Plan does not, and will not be deemed to, constitute a waiver or release by
the Debtors of such Claim, Causes of Action, right of action, suit or
proceedings, and the Reorganized Debtors will retain the right to pursue such
Claims, Causes of Action, rights of action, suits or proceedings in their sole
discretion and, therefore, no preclusion doctrine, collateral estoppel, issue
preclusion, claim preclusion, estoppel (judicial, equitable or otherwise)
32
or laches will apply to such claim, right of action, suit or proceeding upon or
after the Confirmation or consummation of the Plan. Further, recovery of any
proceeds of Causes of Action shall be deemed "for the benefit of the Estates" as
set forth in section 550(a) of the Bankruptcy Code.
6.15 CONTINUATION OF RETIREE BENEFITS. All payments of Retiree Benefits
shall continue as they existed prior to the Petition Date at the level
established pursuant to subsection (e)(1)(B) or (g) of Section 1114 of the
Bankruptcy Code as such payments may be modified prior to the Effective Date,
for the duration of the period the applicable Debtor has obligated itself to
provide such benefits. After the Effective Date, the Reorganized Debtors will
retain their rights to amend, modify or terminate Retiree Benefits in accordance
with all relevant agreements and applicable law.
6.16 EMPLOYMENT AGREEMENTS. On or before the Effective Date, the
Employment Agreements shall be entered into by Reorganized Intermet and deemed
approved by the Bankruptcy Court.
6.17 CONTINUATION OF BUSINESS. On and after the Effective Date, the
Reorganized Debtors shall continue to engage in the Debtors' businesses,
including, without limitation, performing under all purchase orders existing as
of the Effective Date and assumed. Certain Reorganized Debtors may liquidate
Assets as described in the Disclosure Statement. Except as provided herein, the
Reorganized Debtors retain all claims, defenses, counterclaims and offsets with
respect to such purchase orders in existence as of the Effective Date.
6.18 DISBANDING OF COMMITTEES. On the Effective Date, all committees,
including the Creditors' Committee, the Equity Committee, and the Retiree
Committee, will be disbanded and their members shall be discharged from all
further authority, duties, responsibilities and obligations relating to the
Cases, and the retention and employment of the Professionals retained by such
committees shall also terminate as of the Effective Date; provided, however,
that the Creditors' Committee and the Equity Committee and their Professionals
shall be maintained solely with respect to applications filed pursuant to
sections 330 and 331 of the Bankruptcy Code and shall be compensated for
reasonable fees and expenses incurred with respect to such applications as
approved by the Bankruptcy Court. The Reorganized Debtors will not be
responsible for fees or expenses of any committees, including the Creditors'
Committee, Equity Committee, or Retiree Committee or of their Professionals and
agents, incurred after the Effective Date unless otherwise ordered by the
Bankruptcy Court.
6.19 DISBURSING AGENT. As soon as practicable after the Effective Date,
the Disbursing Agent shall be paid all of its fees and expenses incurred in
connection with performing its duties under this Plan.
6.20 POST-CONFIRMATION EFFECT OF INDENTURE. Anything in the Plan, the
Confirmation Order, or any other document to the contrary notwithstanding, and
notwithstanding the confirmation and effectiveness of and distributions under
the Plan and the discharge of the Debtors, the Indenture shall remain in effect
for the sole purpose of allowing the Indenture Trustee to make distributions as
provided in Section 7.01 of this Plan. However, the liability of
33
the Debtors under the Indenture shall be discharged pursuant to the Plan and
Section 1141 of the Bankruptcy Code.
ARTICLE 7
PROVISIONS GOVERNING DISTRIBUTIONS
7.01 DISTRIBUTIONS. The Disbursing Agent will make all Distributions
required under this Plan except with respect to (i) the Claims of the
Pre-Petition Lenders, such Distributions shall be made by the Disbursing Agent
to the Pre-Petition Agent; and (ii) the Claims of Noteholders, which
Distributions shall be made by the Disbursing Agent to the Indenture Trustee
which is directed to immediately distribute the Distributions to the Noteholders
as of the Distribution Record Date. Distributions shall be made at the times
provided herein or as otherwise ordered by the Bankruptcy Court.
7.02 NO INTEREST ON CLAIMS OR EQUITY INTERESTS. Unless otherwise
specifically provided for in this Plan, the Confirmation Order, the DIP
Financing Order, or the DIP Facility, post-Petition Date interest shall not
accrue or be paid on Claims or Equity Interests, and no Holder of any Claim or
Equity Interest shall be entitled to interest accruing on or after the Petition
Date.
7.03 CLAIMS ADMINISTRATION RESPONSIBILITY.
(a) REORGANIZED DEBTORS. The Reorganized Debtors will retain
responsibility for administering, disputing, objecting to, compromising or
otherwise resolving, subject to Bankruptcy Court approval, except as
provided herein, with respect to all Claims against the Debtors. The
Reorganized Debtors shall retain any counter-claims which the Debtors may
have to any Claims. Pursuant to Bankruptcy Rule 9019(a) and Section 363 of
the Bankruptcy Code, the Debtors may, up to and including the Effective
Date, compromise and settle various (i) Claims against them, and (ii)
Causes of Action that they have against other Persons without Bankruptcy
Court approval if the amount in controversy is less than $300,000. After
the Effective Date, such rights shall pass to the Reorganized Debtors as
contemplated by Article 10.01 of the Plan, without the need for further
approval of the Bankruptcy Court, except as otherwise set forth in the
Plan.
(b) FILING OF OBJECTIONS. Unless otherwise extended by the
Bankruptcy Court, any objections to Claims shall be served and filed on or
before the Claims Objection Deadline.
7.04 DELIVERY OF DISTRIBUTIONS. Other than Distributions made to the
Pre-Petition Agent on behalf of the Pre-Petition Lenders and the Indenture
Trustee on behalf of the Noteholders, Distributions to Holders of Allowed Claims
shall be made by the Disbursing Agent (a) at the addresses set forth on the
Proofs of Claim filed by such Holders (or at the last known addresses of such
Holders if no Proof of Claim is filed or if the Debtors have been notified in
writing of a change of address), (b) at the addresses set forth in any written
notices of address changes delivered to the Disbursing Agent after the date of
any related Proof of Claim, or (c) at the addresses reflected in the Schedules
if no Proof of Claim has been filed and the Disbursing
34
Agent has not received a written notice of a change of address. Other than
Distributions made to the Pre-Petition Agent on behalf of the Pre-Petition
Lenders and the Indenture Trustee on behalf of the Noteholders, (a) if any
Creditor's Distribution is returned as undeliverable, no further Distribution to
such Creditor shall be made unless and until the Disbursing Agent is notified of
such Creditor's then-current address, at which time all missed Distributions
shall be made to such Creditor without interest; (b) amounts in respect of
undeliverable Distributions shall be returned to the Reorganized Debtors until
such Distributions are claimed; (c) all funds or other undeliverable
Distributions returned to the Reorganized Debtors and not claimed within three
(3) months of return shall be Distributed to the other Creditors of the Class of
which the Creditor to whom the Distribution was originally made is a member in
accordance with the provisions of the Plan applicable to Distributions to that
Class; and (d) upon such reversion, the Claim of any Creditor or their
successors with respect to such property shall be discharged and forever barred
notwithstanding any federal or state escheat laws to the contrary. Nothing
contained in the Plan shall require the Disbursing Agent and the Indenture
Trustee to attempt to locate any Creditor holding an Allowed Claim, other than
as set forth above.
7.05 PROCEDURES FOR TREATING AND RESOLVING DISPUTED CLAIMS.
(a) NO DISTRIBUTION PENDING ALLOWANCE. Except as provided in this
Article 7.05 of this Plan, no Distributions will be made with respect to
all or any portion of a Disputed Claim unless and until all objections to
such Disputed Claim have been settled or withdrawn or have been determined
by a Final Order, and the Disputed Claim has become an Allowed Claim.
(b) DISTRIBUTION RESERVE. The Disbursing Agent, after consultation
with Reorganized Intermet, will create a reserve from the property to be
distributed by the Disbursing Agent under the Plan to Holders of Disputed
Claims, other than Rights for which there will be no reserve.
(c) DISTRIBUTION AFTER ALLOWANCE. Payments and Distributions from
any reserve created under Section 7.05(b) of the Plan to a Creditor on
account of a Disputed Claim, to the extent that it ultimately becomes an
Allowed Claim, will be made in accordance with provisions of this Plan
that govern Distributions to such Creditor.
7.06 MANNER OF CASH DISTRIBUTION UNDER THE PLAN. Any Cash payment to be
made by the Disbursing Agent as a Distribution pursuant to the Plan may be made
by a check or wire transfer on a United States bank selected by the Disbursing
Agent.
7.07 DIRECTION TO PARTIES. From and after the Effective Date, the
Disbursing Agent, or Reorganized Intermet may apply to the Bankruptcy Court for
an order directing any necessary party to execute or deliver or to join in the
execution or delivery of any instrument required to effect a transfer of
property dealt with by the Plan, and to perform any other act, including the
satisfaction of any Lien, that is necessary for the consummation of the Plan,
pursuant to Section 1142(b) of the Bankruptcy Code.
7.08 SETOFFS. The Reorganized Debtors may, pursuant to Section 553 of the
Bankruptcy Code or other applicable law, set off against any Allowed Claim and
the
35
Distributions to be made pursuant to the Plan on account of such Allowed Claim,
all claims, rights, and Causes of Action of any nature that any such Debtor may
hold against the Holder of such Allowed Claim that are not otherwise waived,
released, or compromised in accordance with the Plan; provided, however, that
neither the failure to effect such a setoff nor the allowance of any Claim
hereunder shall constitute a waiver or release by such Debtor of any such
claims, rights, and Causes of Action that the Debtor may possess against such
Holder, notwithstanding any compulsory counterclaim rules or requirements to the
contrary.
7.09 EXEMPTION FROM CERTAIN TRANSFER TAXES. Pursuant to Section 1146(c) of
the Bankruptcy Code and applicable non-bankruptcy law, any transfers from the
Debtors to Reorganized Intermet, or any other Person or entity pursuant to this
Plan in the United States shall not be subject to any document recording tax,
stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real estate
transfer tax, mortgage recording tax or other similar tax or governmental
assessment. The Confirmation Order shall direct the appropriate state or local
governmental officials or agents to forego the collection of any such tax or
governmental assessment and to accept for filing and recordation any of the
foregoing instruments or other documents without the payment of any such tax or
governmental assessment.
7.10 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with this Plan
and all Distributions hereunder, the Disbursing Agent shall comply with all
applicable tax withholding and reporting requirements imposed by any federal,
state, provincial, local or foreign taxing authority, and all Distributions
hereunder shall be subject to any such withholding and reporting requirements.
The Disbursing Agent shall be authorized to take any and all actions that may be
necessary or appropriate to comply with such withholding and reporting
requirements. Notwithstanding any other provision of this Plan, each Holder of
an Allowed Claim or Interest that is to receive a Distribution pursuant to this
Plan shall have sole and exclusive responsibility for the satisfaction and
payment of any tax obligations imposed by any governmental unit, including
income, withholding and other tax obligations, on account of such Distribution.
7.11 NO FRACTIONAL DISTRIBUTIONS. No fractional shares or amounts of the
Plan Securities will be issued or Distributed under the Plan. Each Person
entitled to receive Plan Securities will receive the total whole number of
shares to which such Person is entitled. Whenever any Distributions to a Person
would otherwise call for Distribution of a fraction of any Plan Security, the
actual Distribution of such Plan Security will be rounded to the next higher or
lower whole number with fractions of less than or equal to one-half (1/2) being
rounded to the next lower whole number. No consideration will be provided in
lieu of fractional amounts of Plan Securities that are rounded down. The total
amount of Plan Securities to be Distributed to each Class of Claims will be
adjusted as necessary to account for the rounding provided herein. Any other
provision of the Plan notwithstanding, neither the Debtors, nor the Disbursing
Agent will be required to make Distributions or payments of fractions of
dollars. Whenever any payment of a fraction of one dollar under the Plan would
otherwise be called for, the actual payment made will reflect a rounding of such
fraction to the nearest whole dollar (up or down), with one-half (1/2) dollars
being rounded down.
36
ARTICLE 8
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.01 ASSUMPTION AND REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
As of the Confirmation Date, but subject to the occurrence of the Effective
Date, all Executory Contracts (and all insurance contracts and/or policies
providing coverage to the Debtors' current and former directors, officers,
shareholders, agents, employees, representatives, and others for conduct in
connection with the Debtors) will be deemed assumed by the relevant Debtor and
retained by the applicable Reorganized Debtor, as appropriate, in accordance
with the provisions and requirements of Sections 365 and 1123 of the Bankruptcy
Code, except those Executory Contracts and unexpired leases that (i) have been
rejected by or pursuant to an order of the Bankruptcy Court, (ii) are the
subject of a motion to reject pending on the Confirmation Date which is later
granted by the Bankruptcy Court, (iii) which are identified on Exhibit M
attached hereto, which shall be deemed rejected as of the Confirmation Date or
the date set forth in Exhibit M, or (iv) Executory Contracts which are
identified in any modifications made pursuant to Article 13.05 of the Plan.
Entry of the Confirmation Order by the Bankruptcy Court shall constitute
approval of such assumptions pursuant to Sections 365(a) and 1123 of the
Bankruptcy Code, subject to the occurrence of the Effective Date. Each Executory
Contract assumed pursuant to this Article 8 shall revest in and be fully
enforceable by Reorganized Intermet or the relevant Reorganized Debtor, as
appropriate, in accordance with its terms, except as may be modified by (i) the
provisions of the Plan, (ii) any order of the Bankruptcy Court approving and
authorizing its assumption, (iii) applicable law, or (iv) agreement of the
parties to such Executory Contracts.
8.02 CURE OF DEFAULTS OF ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Any monetary amounts by which each Executory Contract or unexpired lease to be
assumed pursuant to the Plan is in default shall be Cured, pursuant to Section
365(b)(1) of the Bankruptcy Code, by the relevant Debtor, by payment of the Cure
amount (as such amount has been agreed upon by Reorganized Intermet, or in the
event of a dispute regarding such Cure amount, as such amount has been
determined by a Final Order of the Bankruptcy Court) in Cash on or before thirty
(30) days after the Effective Date or on such other terms as the parties to such
Executory Contracts may otherwise agree. Notice of the Cure amount is set forth
in Exhibit N to the Plan. If no Cure amount is set forth in Exhibit N to the
Plan, the Debtors believe no Cure amount is due. Notwithstanding the foregoing,
in the event of a dispute regarding: (1) the amount of any Cure payments, (2)
the ability of Reorganized Intermet, the relevant Reorganized Debtor or any
assignee to provide "adequate assurance of future performance" (within the
meaning of Section 365 of the Bankruptcy Code) under the Executory Contract to
be assumed, or (3) any other matter pertaining to assumption, the Cure payments
required by Section 365(b)(1) of the Bankruptcy Code shall be made following the
entry of a Final Order resolving the dispute and approving the assumption.
8.03 CURE PROCEDURE. The Plan shall constitute notice to any non-Debtor
party to any Executory Contract to be assumed pursuant to the Plan of the amount
of any Cure amount owed, if any, under the applicable Executory Contract. Any
non-Debtor party that fails to respond or object on or before the deadline
scheduled by the Bankruptcy Court for objections to the Plan, shall be deemed to
have consented to such proposed amount.
37
8.04 REJECTION CLAIMS. Each Person who is a party to an Executory Contract
rejected pursuant to this Article 8 shall be entitled to file, not later than
thirty (30) days after the Confirmation Date, a Proof of Claim for alleged
Rejection Claims. If no such Proof of Claim for Rejection Claims is timely
filed, any such Claim shall be forever barred and shall not be enforceable
against any Debtor, any Reorganized Debtor, or any of the Estates. The
Bankruptcy Court shall retain jurisdiction to determine any objections to
Rejection Claims.
8.05 CLASSIFICATION OF REJECTION CLAIMS. Except as otherwise provided
under the Plan, Rejection Claims against any Debtor shall be treated as Allowed
General Unsecured Claims against such Debtor to the extent they are deemed to be
Allowed Claims, and shall be satisfied in accordance with the Plan and the
Confirmation Order.
ARTICLE 9
CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS
9.01 CONDITIONS PRECEDENT TO CONFIRMATION. The following are conditions
precedent to the Confirmation of the Plan, unless and until each of the
following conditions has been satisfied or waived, in accordance with Section
9.04, in writing by the Debtors and each of the Initial Committed Purchasers:
(a) The Bankruptcy Court shall have entered the Confirmation Order.
(b) The following documents shall be executed and delivered to the
Initial Committed Purchasers in form and substance satisfactory to the
Initial Committed Purchasers:
(i) the Restructuring Commitment Letter;
(ii) a commitment letter relating to the Exit Financing
Facility;
(iii) the Private Placement Purchase Agreement;
(iv) the Cash-Out Purchase Agreement, and
(c) The Restructuring Commitment Letter shall have been approved by
the Bankruptcy Court pursuant to a Final Order.
(d) The Restructuring Commitment Letter shall not have been
terminated and all conditions precedent thereunder shall have been
satisfied or waived, unless such conditions precedent relate to
post-Confirmation events.
(e) The form of Stockholders' Agreement shall have been agreed to by
the Debtors and the Initial Committed Purchasers.
9.02 CONDITIONS PRECEDENT TO EFFECTIVENESS. Notwithstanding any other
provision of the Plan or the Confirmation Order, the Effective Date of the Plan
shall not occur, and the Plan shall not be binding on any party, unless and
until each of the following conditions has been
38
satisfied or waived, in accordance with Section 9.04, in writing by the Debtors
and each of the Initial Committed Purchasers:
(a) The Confirmation Order in form and substance reasonably
satisfactory to the Initial Committed Purchasers, shall have become a
Final Order.
(b) The closing and an initial funding shall have occurred under the
Exit Financing Facility and all conditions precedent to the consummation
thereof (other than the occurrence of the Effective Date of the Plan)
shall have been waived or satisfied in accordance with the terms thereof.
(c) The closing and funding shall have occurred under the Rights
Offering and/or Private Placement Purchase Agreement and the Cash-Out
Purchase Agreement and all conditions precedent to the consummation
thereof (other than the occurrence of the Effective Date of the Plan)
shall have been waived or satisfied in accordance with the terms thereof.
(d) The certificate of incorporation for Reorganized Intermet, and
the bylaws of Reorganized Intermet (and similar corporate governance
documents), the Registration Rights Agreement, the Stockholders'
Agreement, and the Exit Financing Facility shall each be in form and
substance acceptable to the Initial Committed Purchasers and shall be
effective on the Effective Date.
(e) The New Common Stock shall have been issued in accordance with
the Plan;
(f) The Restructuring Commitment Letter shall not have been
terminated and all conditions precedent thereunder shall have been
satisfied or waived.
(g) All other actions, documents and agreements necessary to
implement the Plan as of the Effective Date shall have been delivered and
all conditions precedent thereto shall have been satisfied or waived; and
(h) Reorganized Intermet and the Initial Committed Purchasers shall
have approved the terms of the Employment Agreements.
9.03 EFFECT OF FAILURE OF CONDITIONS TO EFFECTIVE DATE. In the event that
one or more of the conditions set forth in Section 9.02 has not occurred or duly
been waived by the Debtors and each of the Initial Committed Purchasers pursuant
to Section 9.04 of the Plan on or before One Hundred Twenty (120) days after the
Confirmation Date, upon notification submitted by the Debtors to the Bankruptcy
Court, (a) the Confirmation Order shall be vacated, (b) no Distributions under
the Plan shall be made, (c) the Debtors and all Holders of Claims and Equity
Interests shall be restored to the status quo ante as of the day immediately
preceding the Confirmation Date as though Confirmation never occurred, and (d)
the parties' respective obligations with respect to the Claims and Equity
Interests shall remain unchanged and nothing contained herein shall constitute
or be deemed a waiver or release of any Claims or Equity Interests by or against
the Debtors or any other Person in any further proceeding involving any Debtor.
39
9.04 WAIVER OF CONDITIONS. The Debtors and each Initial Committed
Purchaser, may but shall have no obligation to, waive any conditions set forth
in Articles 9.01 and 9.02, without notice and without leave of or a Final Order
of the Bankruptcy Court. To be effective, any such waiver shall be in writing
and signed by the Debtors and each Initial Committed Purchaser, or shall be a
stipulation on the record in these Cases agreed to by the Debtors and each
Initial Committed Purchaser.
ARTICLE 10
TITLE TO PROPERTY AND RELEASES
10.01 VESTING OF PROPERTY. Except as otherwise provided in the Plan or the
Confirmation Order, upon the Effective Date, (a) the Debtors shall continue to
exist as the Reorganized Debtors, with all the powers of corporations under
applicable law and without prejudice to any right to alter or terminate such
existence (whether by merger or otherwise) under applicable state law, and (b)
all property of the Estates, wherever situated, shall vest in the relevant
Reorganized Debtor, as appropriate, subject to the provisions of the Plan and
the Confirmation Order. Thereafter, the Reorganized Debtors may operate their
businesses and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code, the Bankruptcy Rules, and the Bankruptcy
Court. After the Effective Date, all property retained by the Reorganized
Debtors pursuant hereto shall be free and clear of all Claims, debts, Liens,
security interests, encumbrances, and interests, except as contemplated hereby
and except for the obligation to perform according to the Plan and the
Confirmation Order.
10.02 DISCHARGE, RELEASE, AND INJUNCTION. Except as may otherwise be
provided herein or in the Confirmation Order, the rights afforded and the
payments and Distributions to be made and the treatment under the Plan shall be
in complete exchange for, and in full and unconditional settlement,
satisfaction, discharge, and release of any and all existing debts and Claims
and termination of all Equity Interests of any kind, nature, or description
whatsoever against the Debtors, the Reorganized Debtors, the Assets, their
property or their Estates, and shall effect a full and complete release,
discharge, and termination of all Liens, security interests, or other claims,
interests, or encumbrances upon all of the Debtors' Assets and property.
Further, all Persons are precluded from asserting, against any of the Debtors or
the Reorganized Debtors or their respective successors, or any property that is
to be Distributed under the terms of the Plan, any Claims, obligations, rights,
causes of action, liabilities, or Equity Interests based upon any act, omission,
transaction, or other activity of any kind or nature that occurred prior to the
Effective Date, other than as expressly provided for in the Plan, or the
Confirmation Order, whether or not (a) a Proof of Claim based upon such debt is
filed or deemed filed under Section 501 of the Bankruptcy Code; (b) a Claim
based upon such debt is Allowed; or (c) the Holder of a Claim based upon such
debt has accepted the Plan. Except as otherwise provided in the Plan or the
Confirmation Order, all Holders of Allowed Claims and Equity Interests arising
prior to the Effective Date shall be permanently barred and enjoined from
asserting against the Reorganized Debtors or any of the Debtors, or their
successors or property, or the Assets, any of the following actions on account
of such Allowed Claim or Equity Interest: (i) commencing or continuing in any
manner any action or other proceeding on account of such Claim or Equity
Interest against the Reorganized Debtors, any of the Debtors, or the property to
be distributed under the terms of the Plan, other than to enforce any right to
Distribution with respect to such property under the
40
Plan; (ii) enforcing, attaching, collecting, or recovering in any manner any
judgment, award, decree, or order against the Reorganized Debtors, the Debtors
or any of the property to be distributed under the terms of the Plan, other than
as permitted under sub-paragraph (i) above; (iii) creating, perfecting, or
enforcing any Lien or encumbrance against property of the Reorganized Debtors,
any of the Debtors, or any property to be Distributed under the terms of the
Plan; (iv) asserting any right of setoff, subrogation, or recoupment of any
kind, directly or indirectly, against any obligation due any Debtor, the
Reorganized Debtors, the Assets or any other property of the Debtors, the
Reorganized Debtors, or any direct or indirect transferee of any property of, or
successor in interest to, any of the foregoing Persons; and (v) acting or
proceeding in any manner, in any place whatsoever, that does not conform to, or
comply with, the provisions of the Plan. The foregoing discharge, release and
injunction are an integral part of the Plan and are essential to its
implementation. Each of the Debtors and the Reorganized Debtors shall have the
right to independently seek the enforcement of the discharge, release and
injunction set forth in this Article 10.02.
10.03 NO WAIVER OF DISCHARGE. Except as otherwise specifically provided
herein, nothing in the Plan shall be deemed to waive, limit, or restrict in any
way the discharge granted to the Debtors upon Confirmation of the Plan by
Section 1141 of the Bankruptcy Code.
10.04 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided in the Plan,
all injunctions or stays provided for in these Cases pursuant to Sections 105 or
362 of the Bankruptcy Code, or otherwise, and in effect on the Confirmation
Date, shall remain in full force and effect until the Effective Date, at which
time they are replaced with the injunction set forth in Article 10.02 herein.
10.05 RELEASE.
(a) On the Effective Date, effective as of the Confirmation Date,
and except as otherwise provided herein or in the Confirmation Order,
Intermet, Reorganized Intermet, the Debtors, the Reorganized Debtors, each
Initial Committed Purchaser, the Pre-Petition Agent, the Consenting
Pre-Petition Lenders, the DIP Agents on their own behalf and on behalf of
each of the DIP Lenders, the Creditors' Committee and its members in such
capacity and only in such capacity, and the Indenture Trustee shall have,
and shall be deemed to have, conclusively, absolutely unconditionally,
irrevocably, forever and completely released and discharged each of the
current and former directors and officers, employees, agents, managers,
advisors, attorneys or representatives (in their capacity as such and in
no other capacity) of each of the Debtors from any and all Released
Actions and Avoidance Actions based in whole or in part upon any act,
omission, transaction, event or other occurrence taking place at any time
on or before the Effective Date, with the sole exception of acts or
omissions resulting from intentional fraud or willful misconduct as
determined by a Final Order of the Bankruptcy Court.
(b) On the Effective Date, effective as of the Confirmation Date,
and except as otherwise provided herein or in the Confirmation Order,
Intermet, Reorganized Intermet, the Debtors and the Reorganized Debtors as
Releasing Parties have and shall be deemed to have, conclusively,
absolutely, unconditionally, irrevocably, forever and completely released
and discharged each Initial Committed Purchaser, the Pre-Petition
41
Agent, the Consenting Pre-Petition Lenders, the DIP Agents on their own
behalf and on behalf of each of the DIP Lenders, the Creditors' Committee,
and the Indenture Trustee, and each of their respective current and former
members, officers, directors, agents, financial advisors, attorneys,
employees, equity holders, partners, affiliates and representatives (in
their capacity as such and in no other capacity) and their respective
properties, from any and all Released Actions other than Avoidance Actions
based in whole or in part upon any act, omission, transaction, event or
other occurrence taking place at any time after the Petition Date through
and including the Effective Date, with the sole exception of acts or
omissions resulting from intentional fraud or willful misconduct as
determined by a Final Order of the Bankruptcy Court.
(c) On the Effective Date, effective as of the Confirmation Date,
and except as otherwise provided herein or in the Confirmation Order, (i)
each Person that votes to accept the Plan, (ii) all Holders of Claims, in
consideration for the obligations of the Debtors and the Reorganized
Debtors under the Plan and the Cash and other contracts, instruments,
releases, agreements or documents to be delivered in connection with the
Plan, and the treatment under the Plan, and (iii) each Person (other than
the Debtors) that has held, holds or may hold a claim, as applicable,
shall have, and shall be deemed to have, conclusively, absolutely,
unconditionally, irrevocably, forever and completely, released and
discharged each Released Party from any and all of Released Actions based
in whole or in part upon any act, omission, transaction, event or other
occurrence taking place at any time on or before the Effective Date, with
the sole exception of acts or omissions resulting from intentional fraud
or willful misconduct as determined by a Final Order of the Bankruptcy
Court, and in all respects, each Released Party shall be entitled to rely
upon the advice of counsel with respect to their duties and
responsibilities, if any, under the Plan; provided, however, that any
party in interest may enforce the terms of the Plan. Nothing in the Plan
shall prejudice any right, remedy, defense, claim, cross-claim,
counterclaim, or third party claim that any Person may have against any
Person other than with respect to the Released Actions against the
Released Parties.
(d) Notwithstanding any provision of the Plan to the contrary, the
foregoing releases in Articles 10.05 (b) and (c) shall not apply to (i)
any indebtedness of any Person to the Debtors for money borrowed by such
Person, (ii) any setoff or counterclaim that the Debtors may have or
assert against any Person, provided that the aggregate amount thereof
shall not exceed the aggregate amount of any Claims held or asserted by
such Person against the Debtors, and (iii) any garnishments.
Notwithstanding any provision in the Plan to the contrary, the releases
contained in Article 10.05 (b) of this Plan shall not be construed as or
operate as a release of any Retained Actions, including Avoidance Actions.
(e) On the Effective Date, effective as of the Confirmation Date,
and except as otherwise provided herein or in the Confirmation Order, all
Persons that hold, have held, or may hold a Released Action (or, to the
extent applicable, an Avoidance Action or other action), proceeding, cause
of action, suit, account, controversy, promise to pay, right to legal
remedies, right to equitable remedies, right to payment, claim,
obligation, litigation, judgment, damage, right or liability of any nature
whatsoever (including, without limitation, those arising under the
Bankruptcy Code) that is released pursuant to
42
the provisions of this Plan (including, without limitation, Articles
10.05(a), (b) and (c) of the Plan) are hereby and shall be permanently
enjoined and barred from taking any of the following actions on account
of, relating to or based upon any such Released Action (or, to the extent
applicable, an Avoidance Action) or other action, proceeding, cause of
action, suit, account, controversy, promise to pay, right to legal
remedies, right to equitable remedies, right to payment, claim,
obligation, litigation, judgment, damage, right or liability of any nature
whatsoever (including, without limitation, those arising under the
Bankruptcy Code): (i) commencing or continuing in any manner any action or
other proceeding against any of the Released Parties or its respective
property; (ii) enforcing, attaching, collecting or recovering in any
manner any judgment, award, decree or order against any of the Released
Parties or its respective property; (iii) creating, perfecting or
enforcing any Lien or encumbrance against any of the Released Parties or
its respective property; (iv) asserting any setoff, right of subrogation
or recoupment of any kind directly or indirectly against any debt,
liability or obligation due any of the Released Parties or against its
respective property; and (v) acting or proceeding in any manner, in any
place whatsoever, that does not conform to, or comply with, the provisions
of the Plan or the Confirmation Order.
(f) Each of the releases and injunction provided in this Article
10.05 is an integral part of the Plan and is essential to its
implementation. Each of the Released Parties and any other Persons being
released under, or protected by the injunction set forth in, this Article
10.05 shall have the right to independently seek the enforcement of such
release and injunction.
10.06 INSURANCE AND INDEMNIFICATION. Notwithstanding anything provided
herein to the contrary, the Plan shall not be deemed in any way to diminish or
impair the enforceability of any insurance policies that may cover claims
against a Debtor or any other Person. Effective as of the Effective Date, the
Reorganized Debtors shall obtain and maintain in full force tail insurance
covering such risks as are presently covered for a period of not less than 5
years after the Effective Date in favor of the former and current officers and
directors of the Debtors on terms no less favorable to the officers and
directors than the terms of the existing insurance policies covering the
officers and directors and otherwise on terms and conditions acceptable to the
Debtors and the Initial Committed Purchasers; provided, however, that the
aggregate cost of such tail insurance shall not exceed $1.5 million. Effective
on the Effective Date and at all relevant times thereafter, the Reorganized
Debtors shall indemnify all officers and directors of the Debtors who served in
such capacity at any time prior to the Effective Date for any amounts such
officers and directors are required to pay as a result of any retentions or
deductibles applicable under policies of insurance in effect on the date hereof
or as contemplated by this Article 10.06, which policies (or extensions thereof
having terms no less favorable to the officers and directors) shall be (and are
hereby deemed to be) assumed by Reorganized Intermet in the Plan. The indemnity
described herein shall not include liability relating to any action, omission,
transaction, event, occurrence or other circumstance that would constitute an
exclusion under the applicable policies of insurance or liability in excess of
the limits of such policies. Furthermore, the amounts payable by the Reorganized
Debtors pursuant to this Article 10.06 shall be paid on a current basis on
behalf of the officers and directors, without requiring the officers and
directors to first pay such amounts from their own funds and then seek
reimbursement from the Reorganized Debtors, so long as the Reorganized Debtors
shall have received a written
43
undertaking by each such officer and director to repay such amounts to the
Reorganized Debtors if it shall be determined by a court of competent
jurisdiction pursuant to a final, non-appealable order that such officer or
director is not entitled to coverage under such policies of insurance. Each of
the provisions set forth in this Article 10.06 is an integral part of the Plan
and is essential to its implementation. Each Person entitled to indemnification
and insurance pursuant to this Article 10.06 shall have the right to
independently seek the enforcement of each of the terms of this Article 10.06.
ARTICLE 11
MODIFICATION AND RESERVATION OF RIGHTS
IN THE EVENT OF NONACCEPTANCE OF THE PLAN
Each Debtor hereby reserves the right to request that the Bankruptcy Court
confirm the Plan over the objection of any Impaired Class in accordance with the
applicable provisions of Section 1129(b) of the Bankruptcy Code. In addition, in
the event that any Impaired Class or Classes of Allowed Claims shall not accept
the Plan, upon the written request of the Debtors filed with the Bankruptcy
Court, the Plan shall be modified, revised, and amended, with the consent of the
Initial Committed Purchasers, which consent shall not be unreasonably withheld
to provide such treatment as set forth in such request, to assure that the Plan
does not discriminate unfairly, and is fair and equitable, with respect to the
Classes rejecting the Plan, and, in particular, to provide the treatment
necessary to meet the requirements of Sections 1129(a) and (b) of the Bankruptcy
Code with respect to (i) the rejecting Classes and (ii) any other Classes
adversely affected by the modifications caused by this Article.
ARTICLE 12
RETENTION OF JURISDICTION
12.01 RETENTION OF JURISDICTION. Following the Effective Date, the
Bankruptcy Court shall retain such jurisdiction over these Cases as is legally
permissible, including without limitation, such jurisdiction as is necessary to
ensure that the purposes and intent of the Plan are carried out. The Bankruptcy
Court shall also expressly retain jurisdiction: (a) to hear and determine all
Claims against the Debtors; (b) to hear, determine and enforce all Causes of
Action that may exist on behalf of any Debtor; and (c) for all purposes
pertaining to the treatment, allowance or classification of Claims and Equity
Interests, including issues arising under Section 502(c) of the Bankruptcy Code
proceedings for estimation of Claims. The Bankruptcy Court shall further retain
jurisdiction for the following additional purposes:
(a) to determine all questions and disputes regarding title to the
Assets of the Debtors, all Causes of Action, controversies, disputes, or
conflicts, whether or not subject to any pending action as of the
Effective Date, between any Debtor and any other party, including, without
limitation, the Causes of Actions, the Avoidance Actions, and any other
right to recover Assets pursuant to the provisions of the Bankruptcy Code;
(b) to modify the Plan after the Confirmation Date in accordance
with the terms of the Plan and pursuant to the Bankruptcy Code and the
Bankruptcy Rules;
(c) to enforce and interpret the terms and conditions of the Plan;
44
(d) to enter such orders, including, but not limited to, such future
injunctions as are necessary to enforce the respective title, rights, and
powers of the Debtors, the terms of the Plan, and to impose such
limitations, restrictions, terms, and conditions on such title, rights,
and powers as the Bankruptcy Court may deem necessary;
(e) to enter an order closing these Cases;
(f) to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan or the Confirmation Order as may be necessary to
implement the purposes and intent of the Plan;
(g) to determine any and all applications for allowances of
compensation and reimbursement of expenses and the reasonableness of any
fees and expenses authorized to be paid or reimbursed under the Bankruptcy
Code or the Plan or resolve any disputes regarding fees to be paid
pursuant to the Plan;
(h) to determine any applications or motions pending on the
Effective Date or thereafter for the rejection of any Executory Contract
and to hear and determine, and, if need be, to liquidate any and all
Claims arising therefrom;
(i) to determine any and all motions, applications, adversary
proceedings, and contested matters that may be pending on the Effective
Date;
(j) to consider any modification of the Plan, whether or not the
Plan has been substantially consummated, and to remedy any defect or
omission or to reconcile any inconsistency in any order of the Bankruptcy
Court, to the extent authorized by the Plan or the Bankruptcy Court and
all matters pertinent to modification;
(k) to determine all controversies, suits, and disputes that may
arise in connection with the interpretation, enforcement, or consummation
of the Plan or the Reorganization Documents;
(l) to consider and act on the compromise and settlement of any
Claim against or Cause of Action by or against any Debtor or Reorganized
Debtor arising under or in connection with the Plan;
(m) to issue such orders in aid of execution of the Plan as may be
authorized by Section 1142 of the Bankruptcy Code;
(n) to determine such other matters or proceedings as may be
provided for under Title 28 or any other title of the United States Code,
the Bankruptcy Code, the Bankruptcy Rules, other applicable law, the Plan,
or in any order or orders of the Bankruptcy Court, including, but not
limited to, the Confirmation Order or any order that may arise in
connection with the Plan, the Cases, or the Confirmation Order; and
(o) to interpret and enforce, and determine all questions and
disputes regarding, the injunctions, releases, exculpations, and
indemnifications provided for or
45
set forth in the Plan (including, without limitation, Articles 10.02,
10.05, 10.06 and 13.08 of the Plan) or the Confirmation Order.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.01 GOVERNING LAW. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, and subject to the provisions of the
Reorganization Documents and any other contract, instrument, release, indenture,
or other agreement or document entered into in connection with the Plan, the
rights and obligations arising under the Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan,
without giving effect to the principles of conflicts of law thereof.
13.02 REVOCATION OR WITHDRAWAL OF THE PLAN. The Debtors reserve the right
to revoke or withdraw the Plan prior to the Confirmation Date. If the Debtors so
revoke or withdraw the Plan, then the Plan shall be null and void and, in such
event, nothing contained herein shall be deemed to constitute a waiver or
release of any Claims by or against, or any Equity Interests in, any Debtor or
any other Person or to prejudice in any manner the rights of any Debtor or any
Person in any further proceedings involving any Debtor.
13.03 SUCCESSORS AND ASSIGNS. The rights, benefits, and obligations of any
Person named or referred to in the Plan shall be binding upon, and shall inure
to the benefit of, the heirs, executors, administrators, successors, or assigns
of such Person.
13.04 TIME. In computing any period of time prescribed or allowed by the
Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
13.05 MODIFICATION OF THE PLAN AND AMENDMENTS. The Debtors may alter,
amend, or modify the Plan or any Exhibits thereto under Section 1127(a) of the
Bankruptcy Code at any time prior to the Confirmation Hearing Date with the
consent of the Initial Committed Purchasers which consent shall not be
unreasonably withheld. The Debtors may, under Section 1127(b) of the Bankruptcy
Code, institute proceedings in the Bankruptcy Court to remedy any defect or
omission or reconcile any inconsistencies in the Plan, the Disclosure Statement
or the Confirmation Order, and such matters as may be necessary to carry out the
purposes and effects of the Plan.
13.06 PROFESSIONAL FEES. All final applications for Professional Fees for
services rendered in connection with these Cases prior to the Confirmation Date
shall be filed with the Bankruptcy Court not later than sixty (60) days after
the Effective Date.
13.07 SUBSTANTIAL CONTRIBUTION COMPENSATION. No Person shall be entitled
to request compensation or expense reimbursement for making a substantial
contribution in the Cases pursuant to sections 503(b)(3), (4), and (5) of the
Bankruptcy Code.
13.08 EXCULPATION. The Debtors, Reorganized Intermet, the Indenture
Trustee, each Initial Committed Purchaser, the Pre-Petition Lenders, the
Pre-Petition Agent, the DIP Agents, the Creditors' Committee, and their
respective current and former members, shareholders,
46
officers, directors, employees and agents (including any attorneys, financial
advisors, investment bankers and other Professionals retained by such Persons)
and any other Released Party shall have no, and shall not incur any, liability
or obligation to any Person for any act or omission made in connection with, or
arising out of the Cases, the Plan (and the Confirmation Order and any other
Bankruptcy Court orders related thereto), the solicitation of votes for the
pursuit of Confirmation of the Plan, the consummation of the Plan, or the
administration of the Plan or the property to be distributed under the Plan,
with the sole exception of acts or omissions resulting from intentional fraud or
willful misconduct as determined by a Final Order and, in all respects, such
Persons shall be entitled to rely upon the advice of counsel with respect to
their duties and responsibilities, if any, under the Plan. The foregoing
exculpation is an integral part of the Plan and is essential to its
implementation. Each Person being exculpated pursuant to this Article 13.08
shall have the right to independently seek the enforcement of the terms of such
exculpation.
13.09 SECURITIES LAW MATTERS. It is an integral and essential element of
the Plan that the issuance of the Plan Securities pursuant to the Plan shall be
exempt from registration under the Securities Act, pursuant to Section 1145 of
the Bankruptcy Code and from registration under state securities laws. Any Plan
Securities issued to an "affiliate" of the Debtors within the meaning of the
Securities Act or any Person the Debtors reasonably determine to be an
"underwriter," and which does not agree to resell such securities only in
"ordinary trading transactions," within the meaning of Section 1145(b)(1) of the
Bankruptcy Code shall be subject to such transfer restrictions and bear such
legends as shall be appropriate to ensure compliance with the Securities Act.
Nothing in the Plan is intended to preclude the Securities and Exchange
Commission from exercising its police and regulatory powers relating to the
Debtors or any other entity.
13.10 RULES OF INTERPRETATION. For purposes of the Plan: (i) whenever from
the context it is appropriate, each term, whether stated in the singular or the
plural, shall include both the singular and the plural, and pronouns stated in
the masculine, feminine, or neuter gender shall include the masculine, feminine,
and the neuter gender; (ii) any reference in the Plan to a contract, instrument,
release, indenture, or other agreement or document being in a particular form or
on particular terms and conditions means that such document shall be
substantially in such form or substantially on such terms and conditions; (iii)
any reference in the Plan to an existing document or Exhibit filed, or to be
filed, shall mean such document or Exhibit, as it may have been or may be
amended, modified, or supplemented in accordance with its terms; (iv) unless
otherwise specified, all references in the Plan to Sections, Articles, and
Exhibits are references to Sections, Articles, and Exhibits of or to the Plan;
(v) the words "herein" and "hereto" refer to the Plan in its entirety rather
than to a particular portion of the Plan; (vi) captions and headings to Articles
and Sections are inserted for convenience of reference only and are not intended
to be a part of or to affect the interpretation of the Plan; and (vii) the rules
of construction set forth in Section 102 of the Bankruptcy Code shall apply.
13.11 IMPLEMENTATION. The Debtors shall take all steps, and execute all
documents including appropriate releases, necessary to effectuate the provisions
contained in the Plan.
13.12 INCONSISTENCY. In the event of any inconsistency between the Plan
and the Disclosure Statement, the provisions of the Plan shall govern, and in
the event of any
47
inconsistency between the Plan and any Reorganization Document, the provisions
of the Plan shall govern.
13.13 NO ADMISSIONS. Notwithstanding anything herein to the contrary,
nothing contained in the Plan shall be deemed as an admission by any Person with
respect to any matter set forth herein.
13.14 FILING OF ADDITIONAL DOCUMENTS. On or before the Effective Date, the
Debtors may file with the Bankruptcy Court such agreements and other documents
as may be necessary or appropriate to effectuate and further evidence the terms
and conditions of the Plan.
13.15 SUBSTANTIAL CONSUMMATION. Substantial consummation of the Plan under
Section 1101(2) of the Bankruptcy Code shall not be deemed to occur, the Cases
shall remain open and not be deemed fully administered, and no final decree
closing these Cases shall be entered pursuant to Section 350(a) of the
Bankruptcy Code and Bankruptcy Rule 3022, until the Effective Date, at the
earliest.
48
INTERMET CORPORATION
a Georgia corporation
By: /s/ Gary F. Ruff
------------------------
Its: Chairman and CEO
------------------------
ALEXANDER CITY CASTING COMPANY INC.
an Alabama corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
CAST-MATIC CORPORATION,
a Michigan corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
COLUMBUS FOUNDRY, L.P.,
a Delaware limited partnership
By: /s/ Alan J. Miller
------------------------
Its: Vice President, Intermet
U.S. Holding, Inc.,
General Partner
------------------------
DIVERSIFIED DIEMAKERS, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
GANTON TECHNOLOGIES, INC.,
an Illinois corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
49
INTERMET HOLDING COMPANY,
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
INTERMET ILLINOIS, INC.,
an Illinois corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
INTERMET INTERNATIONAL, INC.,
a Georgia corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
INTERMET U.S. HOLDING, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
IRONTON IRON, INC.,
an Ohio corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
50
LYNCHBURG FOUNDRY COMPANY
a Virginia corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
NORTHERN CASTINGS CORPORATION
a Georgia corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
SUDBURY, INC.
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
SUDM, INC.
a Michigan corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
TOOL PRODUCTS, INC.
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
WAGNER CASTINGS COMPANY
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
51
WAGNER HAVANA, INC.
a Delaware corporation
By: /s/ Alan J. Miller
------------------------
Its: Vice President
------------------------
Foley & Lardner LLP
Judy A. O'Neill (P32142)
Daljit S. Doogal (P57181)
David G. Dragich (P63234)
500 Woodward Avenue, Suite 2700
Detroit, Michigan 48226
Telephone: (313) 234-7100
Attorneys for the Debtors
52
EXHIBIT A
CONFIRMATION ORDER
EXHIBIT B
RESTRUCTURING COMMITMENT LETTER
EXECUTION COPY
R2 INVESTMENTS, LDC STANFIELD CAPITAL PARTNERS LLC
June 21,2005
INTERMET Corporation
5445 Corporate Drive, Suite 200
Troy, Michigan 48098
Attention: Gary F. Ruff
President and Chief Executive Officer
Ladies and Gentlemen:
The undersigned, on behalf of one or more of their related or associated
entities to be designated by them (collectively, the "Initial Committed
Purchasers"), in accordance with the terms and subject to the conditions set
forth in this commitment letter and the restructuring term sheet attached hereto
as Annex "A" (the "Term Sheet"), the terms and conditions of which are
incorporated by reference herein (collectively, the "Commitment Letter"), are
pleased to provide, on a standby basis:
(a) a commitment to INTERMET Corporation ("Intermet") to purchase
7,500,000 shares of the common stock (the "New Common Stock") of Reorganized
Intermet, at a purchase price of $10.00 per share, in accordance with the terms
and subject to the conditions set forth in the Term Sheet opposite the caption
"Private Placement Purchase Agreement" (the "Private Placement Backstop
Investment"); and
(b) a commitment to Intermet to purchase the Cash-Out Shares, at a
purchase price of $10.00 per share, in accordance with the terms and subject to
the conditions set forth in the Term Sheet opposite the captions
"Cash-Out Purchase Agreement" and "Unsecured Claims" (the "Cash-Out Backstop
Investment" and, together with the Private Placement Backstop Investment, the
"Backstop Investment").
Capitalized terms used in this Commitment Letter and not defined herein
shall have the meanings assigned to such terms in the Term Sheet.
The proceeds of the Backstop Investment are to be used by the
Reorganized Company for general working capital and corporate purposes and to
make certain specified payments in connection with and to facilitate the
consummation of a plan of reorganization (the "Plan") that shall be filed by the
Company with the United States Bankruptcy Court for the Eastern District of
Michigan, Southern Division (the "Bankruptcy Court"), in connection with the
Company's chapter 11 proceedings (the "Chapter 11 Cases") initiated pursuant to
chapter 11 of title 11 of the United States Code, 11 U.S.C. Sections 101-1330,
as amended (the "Bankruptcy Code"). The Plan shall be in form and substance
consistent with the terms and conditions of this Commitment Letter.
The Initial Committed Purchasers are willing to provide the Backstop
Investment, on a several but not joint basis, to Reorganized Intermet,
substantially on the terms and conditions set forth in this Commitment Letter.
Intermet Corporation
June 21, 2005
Page 2
The aggregate purchase price (the "Purchase Price") for the foregoing
shares of New Common Stock will be payable in cash, by wire transfer of
immediately available funds, to Reorganized Intermet on the Effective Date.
In accordance with the terms and subject to the conditions set forth in
this Commitment Letter:
(a) R2 Investments, LDC, on behalf of one or more of its related or
associated entities to be designated by it (collectively, "R2 Investments"),
shall be obligated to purchase 50% of the shares of New Common Stock issued by
Reorganized Intermet in connection with the Private Placement Backstop
Investment, and 50% of the shares of New Common Stock issued by Reorganized
Intermet in connection with the Cash-Out Backstop Investment; and
(b) Stanfield Capital Partners, on behalf of one or more of its related
or associated entities to be designated by it (collectively, "Stanfield
Capital"), shall be obligated to purchase 50% of the shares of New Common Stock
issued by Reorganized Intermet in connection with the Private Placement Backstop
Investment, and 50% of the shares of New Common Stock issued by Reorganized
Intermet in connection with the Cash-Out Backstop Investment.
Neither of the Initial Committed Purchasers shall be obligated to pay or
fund any part of the other Initial Committed Purchaser's portion of the Purchase
Price.
Set forth in detail in the Term Sheet are: (a) the conditions precedent
to the obligations of the Initial Committed Purchasers to make the Backstop
Investment; and (b) the provisions relating to the obligation of Intermet to pay
the Commitment Amount and the Reimbursable Expenses.
Each of the Initial Committed Purchaser's commitment to make the
Backstop Investment is subject to, among other things, the satisfaction (or the
written waiver by each of the Initial Committed Purchasers) of the conditions
precedent set forth in the Term Sheet opposite the caption "Initial Committed
Purchasers Conditions Precedent".
The definitive investment documents, including, without limitation, the
Restructuring Documents (collectively, the "Definitive Investment Documents")
shall contain representations, warranties, and covenants customarily included in
subscription and related agreements for similar standby underwriting investments
or financings.
On the Effective Date, Reorganized Intermet and the Initial Committed
Purchasers shall enter into the Registration Rights Agreement. A summary of the
terms and conditions of the Registration Rights Agreement is set forth on Annex
"B" to this Commitment Letter.
On the Effective Date, Reorganized Intermet will complete the Key
Employees Rights Offering, in connection with which the Key Employees shall be
afforded the opportunity to purchase, on a pro rata basis, up to 181,249 shares
of New Common Stock, at a purchase price of $10.00 per share. The names of the
Key Employees and the number of shares of New Common
Intermet Corporation
June 21,2005
Page 3
Stock that may be purchased by each Key Employee are set forth on Annex "C" to
this Commitment Letter.
Upon reasonable notice and during normal business hours, Intermet will
afford the Initial Committed Purchasers and their counsel, accountants and other
representatives (collectively, the "Representatives") full and complete access
to the books, records and properties of the Company and the opportunity to
discuss the business, affairs and finances of the Company with the officers,
employees, accountants, attorneys and representatives of the Company in order to
enable the Initial Committed Purchasers and their Representatives to make such
investigations of the Company and its business as they deem reasonably
appropriate. Intermet agrees that it will cause the officers and employees of
the Company, and will request their respective legal counsel and accountants, to
cooperate so that the Initial Committed Purchasers can complete such review,
including promptly disclosing to the Initial Committed Purchasers any material
facts known to such parties which have resulted in, or could be expected to
result in, a Material Adverse Change.
Excluding any Indemnity Claim (as defined herein) arising solely from an
Indemnified Party's (as defined herein) breach of this Commitment Letter or
breach of any other agreements between an Indemnified Party and Intermet, or
among an Indemnified Party and the Reorganized Company, Intermet agrees to
indemnify and hold harmless the Initial Committed Purchasers and their
respective affiliates, directors, officers, partners, members, employees,
attorneys, agents and assignees (including affiliates thereof) (each an
"Indemnified Party") from and against any and all losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) or other expenses to which such Indemnified Party may become subject
(each an "Indemnity Claim"), insofar as such losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) or other expenses arise out of or in any way relate to or result from
this Commitment Letter or the proceeds of the Backstop Investment, and Intermet
agrees to reimburse (on an as incurred monthly basis) each Indemnified Party for
any legal or other out-of-pocket expenses incurred in connection with
investigating, defending or participating in any such loss, claim, damage,
liability or action or other proceeding (whether or not such Indemnified Party
is a party to any action or proceeding out of which such indemnified expenses
arise), but excluding there from all losses, claims, damages, liabilities and
expenses that are finally determined in a non-appealable decision of a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Indemnified Party. In the event of any litigation or
dispute involving this Commitment Letter, the Initial Committed Purchasers shall
not be responsible or liable to Intermet or any other person or entity for any
special, indirect, consequential, incidental or punitive damages. The
obligations of Intermet under this paragraph (the "Indemnification Obligations")
shall remain effective whether or not any of the transactions contemplated in
this Commitment Letter are consummated, any Definitive Investment Documents with
respect to the Backstop Investment are executed and notwithstanding any
termination of this Commitment Letter, and shall be binding upon Reorganized
Intermet in the event that any plan of reorganization of Intermet is
consummated.
Except as provided herein, Intermet agrees that, once paid, the fees or
any part thereof payable hereunder shall not be refundable or form the basis of
any defense, setoff, or recoupment claim under any circumstances, regardless of
whether the transactions contemplated by this
Intermet Corporation
June 21, 2005
Page 4
Commitment Letter are consummated. All fees payable hereunder shall be paid in
immediately available funds.
Intermet represents and warrants that: (i) all written information and
other materials concerning the Company and the Plan (the "Information") which
has been, or is hereafter, prepared by, or on behalf of, Intermet and delivered
to the Initial Committed Purchasers were or will be, when delivered, when
considered as a whole, complete and correct in all material respects and did
not, or will not when delivered, contain any untrue statement of material fact
or omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
statements have been made; and (ii) to the extent that any such Information
contains projections, such projections were prepared in good faith on the basis
of (A) assumptions, methods and tests which are believed by Intermet to be
reasonable at the time made and (B) information believed by Intermet to have
been accurate based upon the information available to Intermet at the time such
projections were furnished to the Initial Committed Purchasers.
Except as otherwise required by law, Intermet shall not issue any press
release or make any other announcement that refers to the Initial Committed
Purchasers or the Backstop Investment without the prior written consent of the
Initial Committed Purchasers. Notwithstanding the sentence immediately
preceding, in no event shall Intermet issue any such press release or make any
such announcement without providing each of the Initial Committed Purchasers at
least one business day to review the proposed press release or announcement and
provide their written comments or suggested revisions with respect thereto.
This Commitment Letter (a) supersedes all prior discussions, agreements,
commitments, arrangements, negotiations or understandings, whether oral or
written, of the parties with respect thereto, (b) shall be governed, except to
the extent that the Bankruptcy Code is applicable, by the laws of the State of
New York, without giving effect to the conflict of laws provisions thereof; (c)
shall not be assignable by Intermet or the Initial Committed Purchasers; (d) is
intended to be solely for the benefit of the parties hereto and is not intended
to confer any benefits upon, or create any rights in favor of, any person other
than the parties hereto; and (e) may not be amended or waived except by an
instrument in writing signed by Intermet and the Initial Committed Purchasers.
This Commitment Letter may be executed in any number of counterparts,
each of which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.
Notwithstanding anything herein to the contrary, all of the obligations
of Intermet hereunder are subject to the approval of the Bankruptcy Court.
Intermet shall file a motion seeking Bankruptcy Court approval of this
Commitment Letter (including the Indemnification Obligations and the payment of
the Commitment Amount (plus the Alternate Transaction Amount specified in the
Term Sheet, upon the occurrence of the events set forth therein, as a result of
which such Alternate Transaction Amount shall be payable) and Reimbursable
Expenses) as administrative expenses and obligations of the Intermet estates
within four business
Intermet Corporation
June 21, 2005
Page 5
days of the execution of this Commitment Letter by Intermet and the Initial
Committed Purchasers.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof by returning to the Initial Committed
Purchasers executed counterparts hereof not later than 5:00 p.m., New York City
time, on June 21, 2005. This Commitment Letter will become effective upon the
mutual exchange of executed counterparts hereof. This Commitment Letter shall
expire at 5:00 p.m., New York City time, on June 21,2005, unless it has
previously become effective.
Very truly yours,
R2 INVESTMENTS, LDC
(on behalf of certain of its related or
associated entities)
By: Amalgamated Gadget, L.P., as its
Investment Manager
By: Scepter Holdings, Inc., its General Partner
By: /s/ ROBERT MCCORMICK
-------------------------------------------
Name: Rob McCormick
-------------------------------------
Title: Vice President
------------------------------------
STANFIELD CAPITAL PARTNERS LLC
(on behalf of certain of its related or
associated entities)
By: /s/ CHRISTOPHER PUCILLO
-------------------------------------------
Name: Christopher Pucillo
-------------------------------------
Title: Partner
------------------------------------
Agreed and accepted on this
21 day of June, 2005
INTERMET Corporation
By: /s/ GARY F. RUFF
--------------------------------------------
Name: Gary F. Ruff
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
ANNEX "A"
Restructuring Term Sheet
EXECUTION COPY
INTERMET CORPORATION
RESTRUCTURING TERM SHEET
JUNE 21,2005
The terms and conditions described herein are part of a comprehensive
compromise, each element of which is consideration for the other elements and an
integral aspect of the proposed restructuring. This term sheet does not
constitute an offer or a legally binding obligation of the Company (as defined
below), the Initial Committed Purchasers (as defined below) or any other party
in interest, nor does it constitute an offer of securities or a solicitation of
the acceptance or rejection of a chapter 11 plan for the Company. The
transactions contemplated by this term sheet are subject to conditions to be set
forth in definitive documents. This term sheet is part of the commitment letter
(the "Commitment Letter"), dated June 21, 2005, addressed to Intermet (as
defined below) by the Initial Committed Purchasers and is subject to the terms
thereof. This term sheet is proffered in the nature of a settlement proposal in
furtherance of settlement discussions and is entitled to protection from any use
or disclosure to any party or person pursuant to Federal Rule of Evidence 408
and any other rule of similar import.
Until publicly disclosed by INTERMET Corporation, with the prior written consent
of the Initial Committed Purchasers, this term sheet and the information
contained herein is strictly confidential and may not be shared with any person
other than the DIP Lenders (as defined below), the Senior Credit Lenders (as
defined below), the Exit Facility Lenders (as defined below), the Official
Committee of Unsecured Creditors (the "Creditors' Committee") appointed in the
Chapter 11 Cases (as defined below), the Official Committee of Equity Holders
(the "Equity Committee") appointed in the Chapter 11 Cases, the Ad HOC Committee
of Trade Claimants (the "Ad Hoc Trade Committee") and each such party's
professionals and other advisors.
COMPANY: INTERMET Corporation ("Intermet" and, as
reorganized, "Reorganized Intermet"), and certain
of its subsidiaries (together with Intermet, the
"Company" and, as reorganized with Reorganized
Intermet, the "Reorganized Company").
NOTEHOLDERS: The entities (the "Noteholders") that hold 9.75%
Senior Notes due 2009 issued by Intermet and
guaranteed by certain subsidiaries of Intermet
(collectively, the "Notes"). The claims held by
the Noteholders (inclusive of principal and
interest accrued as of the petition date of the
Chapter 11 Cases) against Intermet and all of the
guaranty claims held by the Noteholders against
Intermet's debtor subsidiaries shall be
collectively referred to herein as the "Noteholder
Claims".
OTHER UNSECURED CLAIMANTS: Holders of all unsecured obligations (the "GUC
Claims") other than (i) the Notes; and (ii) such
obligations which qualify or elect to be treated
in a convenience class (the "Convenience Class
Claims") of Intermet and its debtor subsidiaries
(the "GUC Holders", together with the Noteholders,
the "Unsecured Holders").
INITIAL COMMITTED R2 Investments, LDC and/or one or more of its
PURCHASERS: related or associated entities (collectively,
"R2 Investments" and Stanfield Capital Partners
and/or one or more of its related or associated
entities (collectively, "Stanfield Capital" and,
together with Investments, the "Initial
1
Committed Purchaser").
RESTRUCTURING TRANSACTION: Subject to the terms of the Commitment Letter,
Intermet shall restructure its capital structure
(the "Restructuring") through a chapter 11 plan of
reorganization (the "Plan") filed with the United
States Bankruptcy Court for the Eastern District
of Michigan, Southern Division (the "Bankruptcy
Court"), in cases commenced by the Company on
September 29,2004 under chapter 11 of the
Bankruptcy Code (the "Chapter 11 Cases"), the
material terms and conditions of which are set
forth in this term sheet.
PRIVATE PLACEMENT PURCHASE In accordance with the terms and subject to the
AGREEMENT: conditions of a purchase agreement (the "Private
Placement Purchase Agreement"), the Initial
Committed Purchasers shall commit (the "Funding
Commitment") to purchase, on a pro rata basis, on
the Effective Date (as defined below), 7,500,000
shares (the "Private Placement Shares") of
newly-issued shares of common stock (the "New
Common Stock") of Reorganized Intermet, at a
purchase price of $10.00 per share, to the extent
not otherwise purchased in the Rights Offering (as
defined below). The Funding Commitment shall be
subject to the right of the Unsecured Holders,
including the Initial Committed Purchasers,
pursuant to an election to be made in conjunction
with voting on the Plan, to purchase, on a ratable
basis, the full amount of the Private Placement
Shares (the "Rights Offering"). The Private
Placement Shares shall be subject to dilution by
the Unsecured Shares (as defined the below), Key
Employees Rights Offering (as defined below), the
Management Incentive Plan (as defined below) and
the Alternate Subscription Shares (as defined
below). In no event shall any Unsecured Holder
have any right of over-subscription with respect
to the Rights Offering. Moreover, the rights
afforded to all Unsecured Holders to purchase the
New Common Stock shall be non-transferable. The
Private Placement Purchase Agreement, which shall
reflect the agreement of the Initial Committed
Purchasers to purchase the Private Placement
Shares to be issued by Reorganized Intermet in
connection with the Plan, shall include
representations, warranties and covenants
customary for transactions of similar type and
monetary amount and otherwise acceptable to the
parties thereto. The Private Placement Purchase
Agreement (and the Plan with respect to items (i)
and (ii) below) shall, among other things,
specifically contain:
(i) a provision specifying that Reorganized
Intermet shall obtain and maintain in full force
tail insurance covering such risks as are
presently covered for a period of not less than 5
years after the Effective Date in favor of the
former and current officers and directors of the
Company on terms and conditions acceptable to the
Company and the Initial Committed Purchasers;
provided. however, that the aggregate cost of such
tail insurance shall not exceed $1.5 million;
(ii) a provision specifying that Reorganized
Intermet shall indemnify all officers and
directors of the Company who served in such
capacity at any time prior to the Effective Date
(as defined
2
below) for any amounts such officers and directors
are required to pay as a result of any retentions
or deductibles applicable under policies of
insurance in effect on the date hereof or as
contemplated by paragraph (i) above, which
policies (or extensions thereof having terms no
less favorable to the officers and directors)
shall be assumed by Reorganized Intermet in the
Plan. The indemnity described in the preceding
sentence shall not include liability relating to
any action, omission, transaction, event,
occurrence or other circumstance that would
constitute an exclusion under the applicable
policies of insurance or liability in excess of
the limits of such policies. The provision shall
specify that amounts payable by Reorganized
Intermet pursuant to this provision shall be paid
on a current basis on behalf of the officers and
directors, without requiring the officers and
directors to first pay such amounts from their own
funds and then seek reimbursement from Reorganized
Intermet, so long as Reorganized Intermet shall
have received a written undertaking by each such
officer and director to repay such amounts to
Reorganized Intermet if it shall be determined by
a court of competent jurisdiction pursuant to a
final, non-appealable order that such officer or
director is not entitled to coverage under such
policies of insurance;
(iii) a provision that the Private Placement
Purchase Agreement and the Cash-Out Purchase
Agreement (as defined below) shall terminate
automatically upon the termination of the
Commitment Letter. Upon any such termination, the
obligations of the parties to the Private
Placement Purchase Agreement and the Cash-Out
Purchase Agreement shall be of no further force or
effect, except as otherwise expressly set forth
therein; and
(iv) a representation and warranty stating
that the Initial Committed Purchasers hold, as of
the date of the Commitment Letter, collectively,
on behalf of certain funds and managed accounts,
in excess of $58.0 million in face amount of the
Notes.
CASH-OUT PURCHASE The detailed terms and conditions pursuant to
AGREEMENT: which the Initial Committed Purchasers shall
purchase the Cash-Out Shares (as defined below)
shall be set forth in a purchase agreement (the
"Cash-Out Purchase Agreement") by and among
Intermet and the Initial Committed Purchasers. The
Cash-Out Purchase Agreement shall include.
representations, warranties and covenants
customary for transactions of similar type and
monetary amount and otherwise acceptable to the
parties.
TREATMENT OF CLAIMS AND
INTERESTS:
ADMINISTRATIVE, PRIORITY On or as soon as practicable after the effective
TAX, AND OTHER PRIORITY date of the Plan (the "Effective Date"), each
CLAIMS: holder of an administrative, priority tax or other
priority claim, including, without limitation, the
administrative claim, if any, of the Pension
Benefit Guaranty Corporation, shall receive cash
equal to the full amount of its claim or otherwise
be left
3
unimpaired, unless otherwise agreed to by such
holder or permitted by the Bankruptcy Code.
DIP CREDIT FACILITY: On the Effective Date, the loans made and letters
of credit issued in connection with the $60.0
million DIP Credit Facility (the "DIP Credit
Facility") made available to the Company by
Deutsche Bank Trust Company Americas, The Bank of
Nova Scotia and certain other lenders
(collectively, the "DIP Lenders") shall be
refinanced in full by the Exit Facility (as
defined below).
SENIOR CREDIT FACILITY On the Effective Date, the loans made and letters
LOANS: of credit issued in connection with the $210.0
million Senior Secured Credit Facility (the
"Senior Credit Facility Loans") made available to
the Company by The Bank of Nova Scotia (the
"Senior Credit Agent") and certain other
pre-petition lenders (collectively, the "Senior
Credit Lenders") shall be refinanced in part by
the Exit Facility, with the balance paid in cash
applied from the proceeds realized from the
issuance and sale of the Private Placement Shares
or the Rights Offering.
CAPITAL LEASES On or as soon as reasonably practicable after the
Effective Date, the capital leases to which the
Company is a party shall be, at the option of the
Company with the approval of the Initial Committed
Purchasers and in consultation with the Creditors'
Committee: (i) reinstated, (ii) reinstated and
assigned to a Debtor other than the existing
Debtor obligor; or (iii) restructured on terms
acceptable to the lessors thereunder, the Company
and the Initial Committed Purchasers.
UNSECURED CLAIMS: The Plan shall provide for a separate class of
unsecured creditors for each of the Debtors, which
class shall, except as otherwise agreed by the
Initial Committed Purchasers and the Company in
consultation with the Creditors' Committee,
include all unsecured claims against such Debtor,
other than Convenience Class Claims, including GUC
Claims and Noteholder Claims (each an "Unsecured
Class"). On or as soon as reasonably practicable
after the Effective Date, in exchange for their
allowed Noteholder Claims and GUC Claims, US. Bank
N.A., acting in its capacity as indenture trustee
(the "Indenture Trustee"), on behalf of the
Noteholders, and the GUC Holders shall, except as
otherwise agreed by the Initial Committed
Purchasers and the Company in consultation with
the Creditors' Committee, receive: (a)(i) a pro
rata portion of 2,500,000 newly issued shares of
New Common Stock allocated to the applicable
Debtor (the "Unsecured Shares") at a defined ratio
per $1,000 of Allowed Claim, which allocation
shall be acceptable to the Initial Committed
Purchasers. The Unsecured Shares shall be subject
to dilution by the issuance of the Private
Placement Shares, the Key Employees Rights
Offering, the Management Incentive Plan, and the
issuance of the Alternate Subscription Shares and
(ii) the right (the "Rights") to purchase three
(3) shares of New Common Stock in the Rights
Offering for every Unsecured Share issuable to an
Unsecured Holder at a price of $10.00 per share,
7,500,000 shares in the aggregate, allocated to
the applicable Debtor, which allocation shall be
acceptable to the Initial
4
Committed Purchasers; or (b) at the option of each
such Unsecured Holder and in lieu of such
Unsecured Shares, (i) cash in the amount of $10.00
per share of New Common Stock (the "Cash-Out
Amount") or (ii) to the extent that such Unsecured
Holder has agreed to seek recovery from the Debtor
that is the primary obligor according to the
Debtors' books and records with respect to its
allowed unsecured claim (each an "Allowed
Unsecured Claim"), has agreed to waive its right
to seek recovery from any additional Debtor
against whom it has a claim as an obligor or
otherwise for such Allowed Unsecured Claim, and
votes in favor of the Plan, the lesser of (x) cash
in an amount equal to a fixed percentage of its
Allowed Unsecured Claims against such Debtors,
which percentage will be in the range of 0% and 5%
- which percentage will vary from Debtor to Debtor
but in all cases shall yield a recovery which is
greater than or equal to the recovery to which
such Unsecured Holder would have been entitled in
clause (a) of this paragraph (except as otherwise
mutually agreed upon by the Debtors and the
Initial Committed Purchasers, in consultation with
the Creditors' Committee) (the "Inducement Cash
Amount") or (y) its pro rata share of a fixed
amount of cash (the "Inducement Cash Pool")
allocated under the Plan to pay all Inducement
Cash Amounts (the "Inducement Cash Election"),
which Inducement Cash Pool shall be acceptable to
the Initial Committed Purchasers, in consultation
with the Creditors' Committee.
To the extent that an Unsecured Holder does not
make an election in connection with the Plan, such
Unsecured Holder shall be deemed to have elected
the Cash-Out Amount.
Unsecured Holders that elect to receive the
Cash-Out Amount in lieu of Unsecured Shares are
referred to herein collectively as the "Cash-Out
Creditors". The Unsecured Shares that otherwise
would have been distributed to the Cash-Out
Creditors in exchange for their unsecured claims,
absent their election to receive cash in lieu of
such Unsecured Shares, are referred to herein as
the "Cash-Out Shares".
The Rights shall be deemed issued on the date that
ballots for voting on the Plan and subscription
forms (the "Subscription Forms") are mailed to the
Unsecured Holders (the "Subscription Commencement
Date"), which shall be the date of issuance of the
Rights if issued under the Section 1145 Offering
(as defined below) and shall expire on the date
that is the deadline established by the Bankruptcy
Court for voting on the Plan (the "Subscription
Expiration Date"). The Rights shall be exercisable
by each qualified Unsecured Holder by (i)
execution and delivery to a subscription agent to
be retained by the Debtors (the "Subscription
Agent") of a Subscription Form; and (ii) payment
in full in cash of the Exercise Price for the
number of Private Placement Shares proposed to be
purchased by such Unsecured Holder in the Rights
Offering on or before the Subscription Expiration
Date. The Rights Offering shall be effectuated
either (i) pursuant to section 1145(a) of the
Bankruptcy Code (the `Section 1145 Offering"); or
(ii)
5
in connection with a direct private placement of
the Rights Offering to be conducted in compliance
with section 4(2) of the Securities Act. To the
extent possible, the issuance of the Rights and
the sale of Private Placement Shares to the
holders of the Rights upon the exercise thereof
shall be deemed to have occurred pursuant to the
exemption from Securities Act registration granted
by section 1145(a) of the Bankruptcy Code.
In the event that counsel to the Debtors determine
that the exemption granted by section 1145(a) of
the Bankruptcy Code is unavailable to exempt the
issuance and sale of the Private Placement Shares
from Securities Act registration, (i) the issuance
and sale of the Private Placement Shares shall be
effected in a direct private placement to the
Unsecured Holders pursuant to Section 4(2) of the
Securities Act (the "Private Placement"); (ii) the
Rights shall be deemed issued only to Unsecured
Holders who are "accredited investors" within the
meaning of the applicable provisions of the
securities laws, (iii) each Unsecured Holder's
election to participate in the Rights Offering, as
reflected on its Subscription Form, shall remain
binding as to participation in the Private
Placement or as reflected on the ballot shall
remain binding as to Section 1145 Offering; (iv)
all funds participants in the tendered upon
exercise Subscription Rights in connection with of
the the Section 1145 Offering shall be applied to
the payment of the aggregate Exercise Price in
connection with the Private Placement or the
Section 1145 Offering; and (v) the Private
Placement or the Section 1145 Offering shall be
consummated by distribution of the Private
Placement the Unsecured Holders on the Effective
Shares to Date.
DISPUTED CLAIMS: In the event that any Debtor or party in interest
disputes the amount of an Unsecured Holder's
claim, the Company shall, with respect to each
disputed claim, reserve out of the Unsecured
Shares an amount of New Common Stock equal to the
lesser of: (i) the amount estimated by the
Bankruptcy Court pursuant to Bankruptcy Rule
3018(A), which amount shall be the maximum amount
of such Unsecured Holder's claim and (ii) the
amount asserted by such Unsecured Holder. An
Unsecured Holder that disputes the amount of its
claim shall only be able to exercise the rights
allocable in the Rights Offering with respect to
the undisputed portion of such claim, if any;
provided however, that the Company and the Initial
Committed Purchasers shall agree, in consultation
with the Creditors' Committee, to a mechanism to
determine the undisputed portion of a disputed
claim.
INDENTURE TRUSTEE FEES: In connection with the allocation of value among the
Debtors' estates, up to $500,000 in cash will be
allocated as treatment to Unsecured Creditors,
substantially all of which shall be Noteholders,
to SUDM, Inc. or another subsidiary, which cash
shall be used to pay the reasonable fees and
out-of-pocket expenses of the Indenture Trustee
and its counsel in connection with the Chapter 11
Cases.
CONVENIENCE CLAIMS: Pursuant to this class, an Unsecured Holder
holding one or more Allowed Unsecured Claims
against a particular Debtor in an aggregate
6
amount equal to or less than $125,000 or that
elects to reduce the aggregate amount of its
Allowed Unsecured Claims to $125,000 shall, in
exchange for its Allowed Unsecured Claims, receive
cash equal to a fixed percent of its Allowed
Unsecured Claims to be agreed upon by the Debtors
and the Initial Committed Purchasers, in
consultation with the Creditors' Committee, which
percentage recovery would be greater than or equal
to the percentage recovery applicable with respect
to the Inducement Cash Amount for such Debtor;
provided, however, that the aggregate amount of
distributions to holders of claims in these
convenience classes shall not exceed $5 million.
EXISTING EQUITY: The holders of the existing Intermet common stock
and the holders of any options, warrants or rights
to acquire any equity securities of Intermet will
not receive any distributions or retain any
property on account of their equity interests in
Intermet.
SETTLEMENT: All distributions to be made pursuant to the Plan
in treatment of claims will be in full
satisfaction of such claims, including but not
limited to satisfaction of all intercreditor
agreements and interests of and between the
parties receiving such distributions, including,
without limitation, any litigation claims, whether
known or unknown, which could be asserted by such
claimants against the Company or its directors,
officers, employees or agents.
RELEASES: On the Effective Date, effective as of date on
which the Bankruptcy Court confirms the Plan (the
"Confirmation Date"), and except as otherwise
provided herein or in the Confirmation Order (as
defined below), Intermet, Reorganized Intermet,
the Company, the Reorganized Company, each Initial
Committed Purchaser, the Senior Credit Agent on
its own behalf and on behalf of the Senior Credit
Lenders who consent to such release (the
"Consenting Senior Credit Lenders"), the
Creditors' Committee and its members, and the
Indenture Trustee shall waive, release, and
discharge each of the Company's former and current
directors and officers, employees, agents,
managers, advisors, attorneys or representatives
(in their capacity as such and in no other
capacity) from all liability based upon any act or
omission related to pre-petition service or
post-petition service with, for, or on behalf of
the Company or its affiliates through and
including the Effective Date, subject to a
carve-out for intentional fraud and willful
misconduct as determined by a final order of the
Bankruptcy Court.
On the Effective Date, effective as of the
Confirmation Date, and except as otherwise
provided herein or in the Confirmation Order,
Intermet, Reorganized Intermet, the Company and
the Reorganized Company (the "Releasing Parties")
shall waive, release and discharge each Initial
Committed Purchaser, the Senior Credit Agent, the
Consenting Senior Credit Lenders, the Creditors'
Committee, and the Indenture Trustee, and each of
their respective members, officers, directors,
agents, financial advisors, attorneys, employees,
equity holders, partners, affiliates and
representatives and their respective
7
properties, from any liability based upon any act
or omission related to post-petition date service
in such capacity with, for or on behalf of the
Releasing Parties, through and including the
Effective Date, subject to a carve-out for
intentional fraud and willful misconduct as
determined by a final order of the Bankruptcy
Court.
On the Effective Date, effective as of the
Confirmation Date, and except as otherwise
provided herein or in the Confirmation Order (a)
each person that votes to accept the Plan, and (b)
to the fullest extent permissible under applicable
law, all holders of claims, in consideration for
the obligations of the Company and the Reorganized
Company under the Plan and the cash and other
contracts, instruments, releases, agreements or
documents to be delivered in connection with the
Plan, each entity (other than the Company) that
has held, holds or may hold a claim, as
applicable, shall have conclusively, absolutely,
unconditionally, irrevocably and forever, released
each Released Party from any claim or cause of
action that is based in whole or in part upon any
act, omission, transaction, event or other
occurrence taking place before the Effective Date
in connection with any of the Debtors or their
respective property, except for intentional fraud
and willful misconduct as determined by a final
order of the Bankruptcy Court (collectively, the
"Released Actions") and in all respects shall be
entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under
the Plan; provided, however, that any party in
interest may enforce the terms of the Plan.
Nothing in the Plan shall prejudice any right,
remedy, defense, claim, cross-claim, counterclaim,
or third party claim that any person may have
against any person other than with respect to the
Released Actions against the Released Parties. As
used herein, "Released Parties" shall mean
collectively, Intermet, Reorganized Intermet, the
Company, the Reorganized Company, each Initial
Committed Purchaser, the Creditors' Committee, the
Senior Credit Agent, each Consenting Senior Credit
Lender and the Indenture Trustee, and each of
their respective former and current members,
officers, directors, agents, financial advisors,
attorneys, employees, equity holders, partners,
affiliates and representatives and their
respective properties.
Notwithstanding any provision of the Plan to the
contrary, the foregoing releases shall not apply
to (i) any indebtedness of any person to the
Company for money borrowed by such person, (ii)
any setoff or counterclaim that the Company may
have or assert against any person, provided that
the aggregate amount thereof shall not exceed the
aggregate amount of any claims held or asserted by
such person against the Company, and (iii) any
garnishments. Notwithstanding any provision in the
Plan to the contrary, the releases contained in
this section shall not be construed as or operate
as a release of any actions retained by the
Reorganized Company pursuant to the Plan.
8
OTHER FEATURES OF THE
RESTRUCTURING:
THE KEY EMPLOYEE RIGHTS The Company will conduct a key employee rights
OFFERING: offering (the "Key Employee Rights Offering"), in
connection with which the Company shall offer to
the Key Employees (as defined below) the right to
purchase, on a pro rata basis, 181,249 shares of
New Common Stock, in consideration for cash in the
amount of $10.00 per share. The Key Employees
shall have a right of over-subscription with
respect to the Key Employee Rights Offering as set
forth on Annex C. Moreover, the rights to purchase
shares of New Common Stock in connection with the
Key Employee Rights Offering shall be
non-transferable. Other terms and conditions of
the Key Employee Rights Offering are to be
determined by the Company and the Initial
Committed Purchasers, in consultation with the
Creditors' Committee.
As used herein, the term "Key Employees" means
those persons who: (i) shall be employed by the
Company on the Effective Date; (ii) upon
consummation of the Plan, shall be entitled to
receive stay bonuses under the Intermet Amended
and Restated Employee Retention Plan, dated
effective September 20,2004 and restated December
8, 2004 (the "KERP");and (iii) are identified in
an annex to the Commitment Letter.
The Key Employees either: (i) may receive in cash
any unpaid stay bonuses to which they may be
entitled in accordance with the terms and subject
to the conditions of the KERP, including, without
limitation, the stay bonus payment schedule set
forth therein or (ii) upon consummation of the
Plan, may purchase shares of New Common Stock in
connection with the Key Employee Rights Offering
by authorizing Reorganized Intermet to apply, on
their behalf, on a dollar-for-dollar basis, any
such stay bonuses toward the purchase of the
shares of New Common Stock covered by the Key
Employee Rights Offering.
PURCHASE OF On the Effective Date: (i) the Initial Committed
CASH-OUT SHARES: Purchasers shall purchase, on a pro rata basis, on
a Reorganized Intermet the Cash-Out Shares, for an
aggregate consideration equal to the product (the
"Aggregate Cash-Out Payment") determined by
multiplying the Cash-Out Amount by the total
number of Cash-Out Shares; and (ii) the Initial
Committed Purchasers shall deliver to Reorganized
Intermet, by wire transfer of immediately
available funds, cash in the amount of the
Aggregate Cash-Out Payment, in consideration of
the Cash-Out Shares.
EXIT FACILITY: A term loan facility and a revolving loan/letter
of credit facility the total of which shall not
exceed $260 million, or such other higher amount
as the Company and Initial Committed Purchasers,
in consultation Creditors' Committee, deem
appropriate with the and necessary (collectively,
the "Exit Facility"), shall be made available, by
one or more lenders (collectively, the "Exit
Facility Lenders"), to
9
the Company, on terms and conditions acceptable to
the Company and the Initial Committed Purchasers,
in consultation with the Creditors' Committee.
EMPLOYMENT AGREEMENTS: In connection with the Plan, each officer
currently a party to an employment agreement with
the Company shall enter into a new employment
agreement between such officer and the Company, on
terms and conditions acceptable to the Initial
Committed Purchasers, in consultation with the
Creditors' Committee, which shall supersede such
officer's existing employment agreement.
MANAGEMENT INCENTIVE On or as soon as reasonably practicable after the
PLAN: Effective Date, a management incentive plan (the
"Management Incentive Plan") shall be implemented
to reserve for designated members of senior
management of the Reorganized Company equity
interests (including, without limitation,
restricted common stock and/or options) in
Reorganized Intermet in an amount up to 5.0% of
the New Common Stock issued on the Effective Date.
The Management Incentive Plan will contain terms
and conditions that shall be determined by the
Board of Directors of Reorganized Intermet.
STOCKHOLDERS' AGREEMENT: All holders of New Common Stock will be subject to
a stockholders' agreement (the "Stockholders'
Agreement") which will, among other things, govern
appointment of the Board of Directors of
Reorganized Intermet, each holder of New Common
Stock`s access to information with respect to the
Reorganized Company, and ability to transfer such
holder's New Common Stock. No New Common Stock
shall be distributed pursuant to the Plan or
otherwise until and unless the recipient agrees in
writing to be bound by the Stockholders'
Agreement. Each certificate representing share(s)
of New Common Stock shall bear a legend indicating
that the New Common Stock is subject to the
Stockholders' Agreement. The Stockholders'
Agreement will be effective as of the Effective
Date. The Stockholders' Agreement shall be in form
and substance acceptable to the Initial Committed
Purchasers.
REIMBURSABLE EXPENSES: The Company shall pay, within 10 days of receipt
of an invoice from the Initial Committed
Purchasers, the reasonable and documented out-
of-pocket fees and expenses incurred by the
Initial Committed Purchasers, including the fees
and expenses of their legal counsel, on and after
January 10, 2005 in connection with the
Restructuring, plus all of the reasonable and
documented fees and expenses incurred by the
Initial Committed Purchasers, including the fees
and expenses of their legal counsel, in connection
with the drafting, negotiation, prosecution or
defense of the Commitment Letter (including this
term sheet), the Private Placement Purchase
Agreement, the Rights Offering, corporate
governance documents, the Cash-Out Purchase
Agreement, the Plan, the Disclosure Statement, the
Confirmation Order, the Stockholders' Agreement,
the Exit Facility agreements and related documents
and any and all agreements and other documents
ancillary hereto or thereto (collectively, the
"Restructuring
10
Documents"), including any fees and expenses
incurred by the Initial Committed Purchasers in
connection with obtaining all required regulatory
approvals (collectively, the "Reimbursable
Expenses"). The accrual of the Reimbursable
Expenses to be paid by Intermet hereunder shall
cease in the event that the Commitment Letter is
terminated. So long as the Initial Committed
Purchasers are not in material breach of their
obligations under the Commitment Letter, the
obligations of Intermet to pay the Reimbursable
Expenses provided herein shall remain effective
whether or not any of the transactions
contemplated by this Term Sheet are consummated,
any definitive documents with respect to the
Restructuring are executed and notwithstanding any
termination of the Commitment Letter, and shall be
binding upon Reorganized Intermet whether or not
any plan of reorganization with respect to
Intermet is consummated.
Notwithstanding anything contained herein or in
the Commitment Letter to the contrary, the payment
of any amounts due pursuant to the Commitment
Letter or this Term Sheet, including but not
limited to the Reimbursable Expenses due shall be
subject to the approval of the Commitment Letter
by the Bankruptcy Court, and such payment not
causing a default pursuant to the DIP Credit
Facility; provided, however, if any such payment
would cause a default pursuant to the DIP Credit
Facility, the Initial Committed Purchasers shall
have a super-priority administrative expense claim
for such unpaid amount subordinate only to the
claims of the DIP Lenders.
CORPORATE GOVERNANCE: On the Effective Date, the Board of Directors of
Reorganized Intermet shall be composed of seven
members. On the Effective Date, five of such
members shall be selected by the Initial Committed
Purchasers, one of such members shall be the Chief
Executive Officer of Reorganized Intermet and one
of such members shall be selected by the
Creditors' Committee. The member selected by the
Creditors' Committee shall be acceptable to the
Initial Committed Purchasers. Two of the five
members selected by the Initial Committed
Purchasers may not be officers, directors or
employees of either of the Initial Committed
Purchasers.
REGISTRATION RIGHTS: On the Effective Date, Reorganized Intermet shall
enter into a Registration Rights Agreement with
the Initial Committed Purchasers, pursuant to
which Intermet shall agree to register the resale
of the shares of New Common Stock issued to the
Initial Committed Purchasers in accordance with
the requirements of the Securities Act of 1933, as
amended. The Registration Rights Agreement shall
provide that any holder owning greater than 10% of
the outstanding New Common Stock upon emergence
shall be entitled to piggyback registration
rights. A summary of the material terms and
conditions of the Registration Rights Agreement
(including without limitation the time period
which must have lapsed before any demand
registration may be made thereunder) shall be set
forth in an annex to the Commitment Letter.
11
INITIAL COMMITTED The obligations of the Initial Committed
PURCHASERS CONDITIONS Purchasers, and such qualified holders of
PRECEDENT: Noteholder Claims that have so elected, to
purchase the Private Placement Shares, and the
obligations of the Initial Committed Purchasers to
purchase the Cash-Out Shares, will be subject to
the following conditions precedent (each, an
"Initial Committed Purchasers Condition
Precedent"), each of which may be waived in
writing by both of the Initial Committed
Purchasers:
(i) the Plan and the disclosure statement
(the "Disclosure Statement") shall be in
form and substance consistent with the
provisions of the Commitment Letter and
reasonably satisfactory to the Initial
Committed Purchasers;
(ii) a final, non-appealable order confirming
the Plan (the "Confirmation Order"), in
form and substance reasonably
satisfactory to the Initial Committed
Purchasers, shall have been entered by
the Bankruptcy Court;
(iii) there shall not have occurred any
Material Adverse Change (as defined
below);
(iv) execution and delivery of appropriate
legal documentation regarding the
Restructuring, including without
limitation, (A) the amended and restated
certificate of incorporation and bylaws
of Reorganized Intermet and each of its
subsidiaries, (B) the Exit Facility, (C)
the Registration Rights Agreement, (D)
Private Placement Purchase Agreement, (E)
the Stockholders' Agreement, and (F) the
Cash-Out Purchase Agreement, each in form
and substance satisfactory to the Initial
Committed Purchasers and the satisfaction
of the conditions precedent contained
therein, which conditions precedent shall
not vary materially h m the conditions
precedent set forth herein;
(v) all material governmental, regulatory and
third party approvals, waivers and/or
consents in connection with the
Restructuring (collectively, "Approvals")
shall have been obtained and shall remain
in full force and effect, and there shall
exist no claim, action, suit,
investigation, litigation or proceeding,
pending or threatened in any court or
before any arbitrator or governmental
instrumentality, which would prohibit the
Initial Committed Purchasers from
consummating the transactions
contemplated by the Commitment Letter;
(vi) the Company realizes year-to-date
consolidated EBITDA for 2005, excluding
administrative fees and expenses
associated with the Restructuring,
through the latest calendar month ending
at least 25 days prior to the Effective
Date, in an amount that is no less than
the amount specified for such calendar
month on Exhibit A
12
hereto, and the Company shall provide the
Initial Committed Purchasers on the
Effective Date a statement, which shall
be executed by the President and Chief
Executive Officer and Chief Financial
Officer of Intermet, which shall set
forth the actual year to date EBITDA
through such calendar month;
(vii) issuance by Reorganized Intermet of the
shares of New Common Stock to the Initial
Committed Purchasers as described herein;
(viii) cash (or cash equivalents) and/or
availability under the Exit Facility as
of the Effective Date, after giving
effect to the proceeds realized from the
issuance and sale of the Private
Placement Purchase Shares, but taking
into account distributions under the
Plan, of at least the amount required
pursuant to the Exit Facility, and the
Company shall provide the Initial
Committed Purchasers, on the business day
immediately preceding the Effective Date,
a certificate, executed by the President
and Chief Executive Officer and the Chief
Financial Officer of Intermet, confirming
such availability;
(ix) payment in full of the Commitment Amount
(as defined below) and all Reimbursable
Expenses outstanding on the Effective
Date, pursuant to the terms contained
herein;
(x) [Intentionally left blank;]
(xi) the Exit Facility shall have closed on
the terms and conditions acceptable to
the Company and the Initial Committed
Purchasers, in consultation with the
Creditors' Committee, and not materially
inconsistent with the terms of the
Commitment Letter;
(xii) on the Effective Date, all
representations and warranties of the
Company contained in the Commitment
Letter, Private Placement Purchase
Agreement and the Cash-Out Purchase
Agreement shall be true, complete and
accurate in all material respects; and
(xiii) on the Effective Date, all covenants of
the Company contained in the Commitment
Letter, Private Placement Purchase
Agreement and the Cash-Out Purchase
Agreement shall have been complied with
by the Company in all material respects.
INTERMET CONDITIONS The obligations of Intermet to consummate the
PRECEDENT: transactions contemplated by the Commitment
Letter will be subject to the following conditions
precedent (each an "Intermet Condition
Precedent"), each of which may be waived in
writing by Intermet, in
13
consultation with the Creditors' Committee:
(i) on the Effective Date, all
representations and warranties of the
Initial Committed Purchasers contained in
the Commitment Letter, Private Placement
Purchase Agreement and the Cash-Out
Purchase Agreement shall be true,
complete and accurate in all material
respects;
(ii) on the Effective Date, all covenants of
the Initial Committed Purchasers
Contained in the Commitment Letter,
Private Placement Purchase Agreement and
the Cash-Out Purchase Agreement shall
have been complied with by the Initial
Committed Purchasers in all material
respects;
(iii) the Confirmation Order, in form and
substance satisfactory to the Company,
shall have been entered by the Bankruptcy
Court;
(iv) execution and delivery of appropriate
legal documentation regarding the
Restructuring, including without
limitation, (A) the amended and restated
certificate of incorporation and bylaws
of Reorganized Intermet and each of its
Subsidiaries, (B) the Exit Facility, (C)
the Registration Rights Agreement (D) the
Private Placement Purchase Agreement, (E)
the Stockholders' Agreement and (F) the
Cash-Out Agreement, each in form and
substance satisfactory to the Company and
the satisfaction of the conditions
precedent contained therein, which
Conditions precedent shall not vary
materially from the conditions precedent
set forth herein;
(v) all material Approvals shall have been
obtained and shall remain in full force
and effect, and there shall exist no
claim, action, suit, investigation,
litigation or proceeding, pending or
threatened in any court or before any
arbitrator or governmental
instrumentality, which would prohibit the
Company from consummating the
transactions contemplated by the
Commitment Letter;
(vi) the Exit Facility shall have closed on
the terms and conditions acceptable to
the Company; and
(vii) (A) Reorganized Intermet shall obtain and
maintain in full force tail insurance covering
such risks as are presently covered for a period
of not less than 5 years after the Effective Date in
favor of the former and current officers and
directors of the Company on terms and conditions
acceptable to the Company and the Initial
Committed Purchasers; provided, however, that the
aggregate cost of such tail insurance shall not
exceed $1.5 million and (B) Reorganized Intermet
shall indemnify all officers and directors of the
Company who served
14
in such capacity at any time prior to the
Effective Date (as defined below) for any amounts
such officers and directors are required to pay as
a result of any retentions or deductibles
applicable under policies of insurance in effect
on the date hereof or as contemplated by paragraph
(A) above, which policies (or extensions thereof
having terms no less favorable to the officers and
directors) shall be assumed by Reorganized
Intermet in the Plan. The indemnity described
herein shall not include liability relating to any
action, omission, transaction, event, occurrence
or other circumstance that would constitute an
exclusion under the applicable policies of
insurance or liability in excess of the limits of
such policies. Furthermore, amounts payable by
Reorganized Intermet pursuant to the
aforementioned shall be paid on a current basis on
behalf of the officers and directors, without
requiring the officers and directors to first pay
such amounts from their own funds and then seek
reimbursement from Reorganized Intermet so long as
Reorganized Intermet shall have received Intermet,
a written undertaking by each such officer and
director to repay such amounts to Reorganized
Intermet if it shall be determined by a court of
competent jurisdiction pursuant to a final,
non-appealable order that such officer or director
is not entitled to coverage under such policies of
insurance.
TERMINATION OF The Commitment Letter shall terminate and all of
COMMITMENT LETTER: the obligations of the parties thereto (other than
the obligations of Intermet to pay the Commitment
Amount, the Alternate Transaction Amount and the
Reimbursable Expenses and to satisfy its
indemnification obligations thereunder in
accordance with the terms and conditions of the
Commitment Letter) shall be of no further force or
effect, upon the giving of written notice of
termination by the Initial Committed Purchasers
or, with respect to (xiii)(B) only, Intermet, in
the event that any of the following occurs (each,
a "Termination Event"), each of which may be
waived in writing by both of the Initial Committed
Purchasers or, with respect to (xiii)(B) only,
Intermet, as applicable:
(i) the Board of Directors of Intermet shall
fail to approve of the terms and
conditions of the Commitment Letter on or
before the fifth day following execution
of the Commitment Letter;
(ii) Intermet shall fail to file a motion with
the Bankruptcy Court seeking an order
(the "Approval Order"), approving the
terms and conditions of the Commitment
Letter and designating the payment of any
indemnification or the payment of the
Commitment Amount and the Reimbursable
Expenses payable thereunder as
administrative expenses and obligations
of Intermet, on the fourth business day
after the approval of the Commitment
Letter by the of Directors of Board
Intermet;
(iii) the Bankruptcy Court shall fail to enter
the Approval
15
Order on or before the 21st day following
the filing of the motion seeking entry of
the Approval Order;
(iv) Intermet and the Initial Committed
Purchasers shall fail to agree upon,
execute and deliver the Private Placement
Purchase Agreement and the Cash-Out
purchase Agreement on or before 30 days
after the entry of the Approval Order;
(v) the Company shall fail to file the Plan
and the related Disclosure Statement,
each in form and substance reasonably
satisfactory to the Initial Committed
Purchasers, with the Bankruptcy Court on
or before 10 days after the entry of the
Approval Order;
(vi) the Disclosure Statement or a version
thereof that is not inconsistent with the
terms set forth in the Commitment Letter
shall not have been approved by a final,
non-appealable order of the Bankruptcy
Court on or before 45 days after the
filing thereof with the Bankruptcy Court;
(vii) the Confirmation Order shall not have
been entered by the Bankruptcy Court
within 100 days of the entry of the
Approval order,
(viii) the Plan shall not have become effective
on or before the 20th day following
confirmation of the Plan;
(ix) there shall be any modification to any
provision of the Plan or the Disclosure
Statement that is inconsistent with the
terms and conditions set forth in the
Commitment Letter, without the prior
written consent of the Initial Committed
Purchasers, which consent shall not be
unreasonably withheld, or Intermet shall
withdraw, or file a motion to withdraw,
the Plan, except on terms reasonably
acceptable to the Initial Committed
Purchasers;
(x) an event shall have occurred or an order
shall have been entered by the Bankruptcy
Court that shall have the practical
effect of preventing confirmation of the
Plan on or before the date contemplated
in clause (vii) above and such order or
event shall not have been vacated or
otherwise corrected within 30 days after
receipt of notice from the Initial
Committed Purchasers;
(xi) the conversion of one or more of the
Chapter 11 Cases to a case under Chapter
7 of the Bankruptcy Code, unless any such
conversion is made with the prior written
consent of the Initial Committed
Purchasers;
16
(xii) the appointment of a trustee, receiver or
examiner with expanded powers in one or
more of the Chapter 11 Cases, unless any
such appointment is made with the prior
Written consent of the Initial Committed
Purchasers;
(xiii) (A) one or more of the Initial Committed
Purchasers Conditions Precedent shall not
have been satisfied (or waived by the
Initial Committed Purchasers) on or
before 120 days of the entry of the
Approval Order, unless such delay is
solely due to the fault of the Initial
Committed Purchasers; or (B) one or more
of the Intermet Conditions Precedent
shall not have been satisfied (or waived
by the Intermet) on or before 120 days of
the entry of the Approval Order, unless
such delay is solely due to the fault of
the Intermet;
(xiv) 10 days after the receipt of written
notice of termination by Intermet from
the Initial Committed Purchasers that
Intermet has failed to perform in any
material respect any of its obligations
under the Commitment Letter and such
failure remains uncured at the conclusion
of such ten-day period; or
(xv) at any time after the occurrence of a
Material Adverse Change. As used herein, the term
"Material Adverse Change" means any change,
effect, event, occurrence, state of facts or
development, either alone or in combination, and
either known or unknown by the Company as of the
date of the Commitment Letter, that is materially
adverse to the business, financial condition or
results of operation of Intermet and its
subsidiaries, taken as a whole; provided, however,
that in no event shall any change, effect, event,
occurrence, state of facts or development that is
disclosed in Intermet's Annual Report on Form 10-K
for the twelve-month period ended December 31,
2003, or in Intermet's Quarterly Report on Form 10-Q
for the three-month periods ended March
31, 2004, June 30, 2004 and September 30, 2004, or on
any filing on Form 8-K made by Intermet prior to
the date of the Commitment Letter, each in the
form first filed by Intermet with the Securities
and Exchange Commission, or any other information
delivered in writing by the Company to the Initial
Committed Purchasers prior to the date of the
Commitment Letter, be considered a Material
Adverse Change, and provided further, that in no
event shall the prosecution of the Chapter 11
Cases on terms and conditions consistent with the
terms and conditions set forth in the Commitment
Letter be considered a Material Adverse Change.
REPRESENTATION OF INITIAL The Initial Committed Purchasers represent to the
COMMITTED PURCHASER Debtors that the Initial Committed Purchasers
OWNERSHIP: hold, as of the date of the Commitment Letter,
collectively, on behalf of certain funds and
managed accounts, in $58.0 million in face amount
of the Notes. If excess of the Initial Committed
Purchasers, at any time prior to the date on which
the Plan shall be confirmed by the Bankruptcy
Court or the termination of the
17
Commitment Letter, shall fail to hold
collectively, on behalf of such funds and managed
accounts, at least $58 million in face amount of
the Notes, the Initial Committed Purchasers shall
promptly deliver written notice (the "Sell-Down
Notice") thereof to Intermet.
So long as Intermet is not in breach of its
obligations under the Commitment Letter, Intermet
may terminate the Commitment Letter at any time
within five business days of its receipt of the
Sell-Down Notice by delivering to the Initial
Committed Purchasers written notice (the "Sell
Down Termination Notice") of such termination.
Upon the receipt of the Sell-Down Termination
Notice by the Initial Purchasers, the Commitment
Letter shall terminate Committed and all of the
obligations of the parties thereto (other than the
obligations of Intermet to pay the Reimbursable
Expenses and to satisfy its indemnification
obligations thereunder in accordance with the
terms and conditions of the Commitment Letter)
shall be of no further force or effect.
COMMITMENT AMOUNT: In accordance with the terms and conditions of the
Commitment Letter and this Term Sheet, Intermet
shall pay the Initial Committed Purchasers an
amount equal to $3.0 million (the "Commitment
Amount"). $1.0 million of the Commitment Amount
shall be nonrefundable and shall be payable by
Intermet no later than one business day after the
Bankruptcy Court shall enter the Approval Order.
The balance of the Commitment Amount shall be
payable by Intermet:
(i) on the Effective Date except as otherwise
set forth herein;
(ii) in the event that Intermet fails to
consummate (other than by reason of the material
breach of the obligations of either of the Initial
Committed Purchasers hereunder) the transactions
Contemplated by this term sheet because the
Commitment Letter has been terminated by Intermet
as a result of failure to meet Intermet Conditions
Precedent (iii) through (vii) (except, in the case
of Intermet Condition Precedent (v), insofar as
the failure to meet the same is caused by the
failure to obtain Approvals due to the operations,
business or identity of the Initial Committed
Purchasers), in which event the balance of the
Commitment Amount shall be paid within three
business days of any such termination;
(iii) in the event that Intermet fails to
consummate (other than by reason of the material
breach of the obligations of either of the Initial
Committed Purchasers hereunder) the transactions
contemplated by this term sheet because the
Commitment Letter has been terminated by the
Initial Committed Purchasers based on the
occurrence of any Termination Event (xv) or
Termination Event (xiii) due to the fact that any
of the Initial Committed Purchasers Conditions
Precedents (iii), (vi) or (xi) have not been
satisfied, in which event Intermet shall pay the
Initial Committed Purchasers $500,000 in full
18
satisfaction of the balance of the Commitment
Amount within three business days of any such
termination;
(iv) in the event that Intermet fails to
consummate (other than by reason of the material
breach of the obligations of either of the Initial
Committed Purchasers hereunder) the transactions
contemplated by this term sheet because the
Commitment Letter has been terminated by the
Initial Committed Purchasers based on the
occurrence of any Termination Event (v) through
(viii) or Termination Event (xiii) due to the fact
that any of the Initial Committed Purchasers
Conditions Precedents (i), (ii) or (iv) have not
been satisfied, in which event Intermet shall pay
the Initial Committed Purchasers $1,000,000 in
full satisfaction of the balance of the Commitment
Amount within three business days of any such
termination;
(v) in the event that Intermet fails to
consummate (other than by reason of the material
breach of the obligations of either of the Initial
Committed Purchasers hereunder) the transactions
contemplated by this term sheet because the
Commitment Letter has been terminated by the
Initial Committed Purchasers based on the
occurrence of any Termination Event (ix) through
(xii) or Termination Event (xiv), or Termination
Event (xiii) due to the fact that any of the
Initial Committed Purchasers Conditions Precedents
(v), (vii) through (ix), (xii) or(xiii) have not
been satisfied (except, in the case of Initial
Committed Purchasers Condition Precedent (v),
insofar as the failure to satisfy the same is
caused by the failure to obtain Approvals due to
the operations, business or identity of the
Initial Committed Purchasers), in which went the
balance of the Commitment Amount, $2 million,
shall be paid within three business days of any
such termination;
(vi) [Intentionally Deleted]; or
(vii) in the event that Intermet fails to
consummate (other than by reason of the material
breach of the obligations of either of the Initial
Committed Purchasers hereunder) the transactions
Contemplated by this term sheet because the
Commitment Letter has been terminated by (A)
Intermet as a result of the failure to meet
Intermet Condition Precedent (i) or (ii), (B)
Intermet as a result of the delivery of a
Sell-Down Termination Notice, or (B) the Initial
Committed Purchasers based on the occurrence of
any Termination Event (i) through (iv); or (C) in
the event the Commitment Letter is terminated by
either party because of the failure to receive
Approvals is due to the operations, business or
identity of the Initial Committed Purchasers,
Intermet shall not have to pay the Initial
Committed Purchasers the balance of the Commitment
Amount.
Interment shall pay the Initial Committed
Purchasers $2.0 million (the "Alternate
Transaction Amount"), which Alternate Transaction
Amount is in addition to the balance of the
Commitment Amount
19
otherwise payable hereunder, in the event that (i)
Intermet consummates a financial restructuring the
other than Restructuring described herein prior to
or within 12 months after termination of the
Commitment Letter, (ii) there has a material
breach not been of the obligations of the Initial
Committed Purchasers hereunder and (iii) the
financial restructuring that is consummated (a)
pays the Senior Credit Facility Loans in full in
cash and (b) delivers a dollar recovery to all
Unsecured Holders in excess of the implied dollar
recovery to Unsecured Holders according to the
Rights Offering price. So long as the conditions
described in clauses (i) through (iii) of this
paragraph shall have been satisfied, Intermet
shall pay the Initial Committed Purchasers the
Alternative Transaction Amount on the day on which
any such financial restructuring is consummated.
The obligation to pay the Commitment Amount
(including the foregoing obligation to pay the
additional $2.0 million upon the occurrence of the
events specified herein) and the Reimbursable
Expenses shall be binding on Reorganized Intermet
whether or not any plan of reorganization for
Intermet is consummated.
The Initial Committed Purchasers shall have no
duties or obligations under the Commitment Letter,
Private Placement Purchase Agreement or Cash-Out
Purchase Agreement, other than those expressly set
forth herein or therein.
Notwithstanding anything contained herein or in
the Commitment Letter to the contrary, the payment
of any amounts due pursuant to the Commitment
Letter or this Term Sheet, including but not
limited to the payment of any portion of the
Commitment Fee due shall be subject to the
approval of the Commitment Letter by the
Bankruptcy Court, and such payment not causing a
default under the DIP Credit Facility; provided,
however, if any such payment would cause a default
pursuant to the DIP the Initial Credit Facility,
Committed Purchasers shall have a super-priority
administrative expense claim for such unpaid
amount subordinate only to the claims of the DIP
Lenders.
ALTERNATE APPLICATION OF THE So long as the Commitment Letter has not been
COMMITMENT AMOUNT: previously terminated, on the Effective Date, the
Initial Committed Purchasers: (i) may purchase up
to 300,000 additional shares of New Common Stock,
at shares of New a purchase price of $10.00 per
share, by delivering to Reorganized Intermet, by
wire transfer of immediately available funds, cash
in an amount up to the Commitment Amount that the
Initial Committed Purchasers shall have previously
received; and (ii) may apply all or any portion of
the Commitment Amount otherwise payable to the
Initial Committed Purchasers toward the purchase
of up to 300,000 additional shares of New Common
Stock at a purchase price of $10.00 per share. Any
shares of New Common Stock purchased by an Initial
Committed Purchaser (collectively, the "Alternate
Subscription Shares") pursuant to this paragraph
shall be issued to such Initial Committed
Purchaser on the Effective Date, and the portion
of the
20
Commitment Amount otherwise payable to such
Initial Committed Purchaser shall be
correspondingly reduced.
PLAN SUPPORT: Until the termination of the Commitment Letter in
accordance with its terms, the Initial Committed
Purchasers agree to support confirmation of the
Plan and agree not to support any other plan of
reorganization with regard to the Company.
21
EXHIBIT A
INTERMET Corporation
If the latest calendar Then the year-to-date
month ending at least 25 2005 consolidated
days prior to the EBITDA, excluding
Effective Date is the administrative fees
month of: and expenses
associated with the
Restructuring, for
such calendar month
shall be no less than:
June 2005 $15,230,000
July 2005 $14,163,000
August 2005 $17,149,000
September 2005 $22,476,000
October 2005 $26,799,000
November 2005 $29,725,000
December 2005 $27,459,000
22
ANNEX "B"
Summary of the Terms and Conditions
of the Registration Rights Agreement
The Registration Rights Agreement shall provide, among other things,
that:
(i) within sixty days after the date on which Reorganized Intermet shall
receive a written request, signed by either of the Initial Committed Purchasers,
pursuant to which such Initial Committed Purchaser shall request that
Reorganized Intermet register the resale of the shares of New Common Stock held
by such Initial Committed Purchaser under the Securities Act of 1933, as amended
(the "Securities Act"), Reorganized Intermet shall prepare and file, and shall
use its reasonable best efforts to have declared effective within sixty days
thereafter, a registration statement under the Securities Act for the offering
on a continuous basis pursuant to Rule 415 of the Securities Act, of the shares
of New Common Stock held by such Initial Committed Purchaser (the "Shelf
Registration"); and
(ii) Reorganized Intermet shall keep the Shelf Registration effective for
a period ending on the earlier of (a) the date that is the two-year anniversary
of the date upon which such registration statement is declared effective by the
Securities and Exchange Commission (the "SEC"), (b) the date such Registrable
Securities have been disposed of pursuant to an effective registration
statement, (c) the date such Registrable Securities have been disposed of (1)
pursuant to and in accordance with SEC rule 144 (or any similar provision then
in force) under the Securities Act or (2) pursuant to another exemption from the
registration requirements of the Securities Act pursuant to which the
Registrable Securities are thereafter freely tradeable without restriction under
the Securities Act, (d) the date such Registrable Securities may be disposed of
pursuant to SEC Rule 144 (or any similar provision then in force) within the
volume limitations thereunder within a 90 day period or pursuant to SEC Rule
144(k) (or any similar provision then in force) under the Securities Act or (e)
such Registrable Securities ceases to be outstanding.
The Registration Rights Agreement shall include such other provisions,
including provisions relating to indemnification and contribution and the
payment by Reorganized Intermet of the fees and expenses incurred by the Initial
Committed Purchasers, customarily included in registration rights agreements
entered into in connection with similar financings.
The Registration Rights Agreement shall also provide that any person
holding more than 10% of the outstanding New Common Stock on the Effective Date
shall be entitled to piggy-back registration rights.
ANNEX "C"
Key Employee Rights Offering
<Table>
<Caption>
Name of Number of Shares
Key Employee of New Common Stock
- ------------ -------------------
Those persons who upon consummation 181,249*
of the Plan, shall be entitled to receive
stay bonuses under the Intermet
Amended and Restated Employee
Retention Plan, dated effective
September 20, 2004 and restated
December 8, 2004 and are classified as
Tier I Participants or Tier II Participants
</Table>
* To the extent that the KERP Shares exercised by TIER I participants plus the
KERP Shares exercised by the TIER II participants is less than 181,249, such
TIER I participants and such TIER II participants may purchase the KERP Shares
that have not otherwise been exercised on a pro rata basis based upon the KERP
payment which would otherwise be due to such participant. In no event will more
than 181,249 shares be issued.
EXHIBIT C
DISTRIBUTION SCHEDULE
DISTRIBUTION SCHEDULE
<Table>
<Caption>
($)
Cash per Shares per $/Share Rights per $/Right Recovery
Debtor $1000 Claim $1000 Claim Per Valuation $1000 Claim Per Valuation as a % of Claim
- ----------------------------- ------------- ------------- ------------- ------------- ------------- ---------------
Intermet Corporation(b) $ 0.00 3.77 $ 16.15 11.31 $ 6.15 13.0%
Columbus Foundry, L.P. 0.00 3.54 16.15 10.63 6.15 12.3%
Diversified Diemakers, Inc. 0.00 1.40 16.15 4.19 6.15 4.8%
Tool Products, Inc. 0.00 1.08 16.15 3.23 6.15 3.7%
Northern Castings Corporation 0.00 0.94 16.15 2.81 6.15 3.2%
Cast-Matic Corporation 0.00 0.83 16.15 2.48 6.15 2.9%
Intermet U.S. Holding, Inc. 0.00 0.45 16.15 1.36 6.15 1.6%
Ganton Technologies, Inc. 0.00 0.26 16.15 0.77 6.15 0.9%
Lynchburg Foundry Company 0.00 0.17 16.15 0.51 6.15 0.6%
Sudbury, Inc. 0.00 0.13 16.15 0.40 6.15 0.5%
Wagner Havana, Inc. 0.00 0.14 16.15 0.41 6.15 0.5%
Intermet Illinois, Inc. 0.00 0.14 16.15 0.41 6.15 0.5%
Ironton Iron, Inc. 0.00 0.13 16.15 0.40 6.15 0.5%
Wagner Castings Company (c) 0.00 0.13 16.15 0.40 6.15 0.5%
SUDM, Inc.(d) 2.78 0.14 16.15 0.41 6.15 0.8%
Alexander City Castings 0.00 0.14 16.15 0.41 6.15 0.5%
Company, Inc.
Intermet International 0.00 N/A 16.15 N/A 6.15 100.0%
Intermet Holding Company 0.00 N/A 16.15 N/A 6.15 N/A
Intermet et. al.(e) 0.00 3.77 16.15 11.31 6.15 13.0%
Noteholders(d) 13.38 $ 16.15 40.14 $ 6.15 46.6%
<Caption>
($) Cash Inducement Convenience
Recovery Inducement Class Recovery
Debtor as a % of Claim Cash Pool(a) as a % of Claim
- ----------------------------- --------------- ------------- ---------------
Intermet Corporation(b) 14.0% $ 1,297,219 21.0%
Columbus Foundry, L.P. 13.0% 1,230,555 19.5%
Diversified Diemakers, Inc. 6.0% 201,586 9.0%
Tool Products, Inc. 5.0% 310,379 7.5%
Northern Castings Corporation 5.0% 77,550 7.5%
Cast-Matic Corporation 5.0% 163,326 7.5%
Intermet U.S. Holding, Inc. 5.0% 297,900 7.5%
Ganton Technologies, Inc. 5.0% 354,250 7.5%
Lynchburg Foundry Company 5.0% 470,572 7.5%
Sudbury, Inc. 5.0% 143,679 7.5%
Wagner Havana, Inc. 5.0% 71,921 7.5%
Intermet Illinois, Inc. 5.0% 70,000 7.5%
Ironton Iron, Inc. 5.0% 140,243 7.5%
Wagner Castings Company (c) 5.0% 232,445 7.5%
SUDM, Inc.(d) N/A N/A N/A
Alexander City Castings N/A N/A N/A
Company, Inc.
Intermet International 100.0% 14,000 0.0%
Intermet Holding Company N/A N/A N/A
Intermet et. al.(e) 14.0% 32,998 21.0%
-------------
$ 5,108,624
Noteholders(d) N/A N/A N/A
</Table>
Note: The allocation of shares and rights set forth above reflects current
estimates of claims at each Debtor. Actual distributions may be higher or lower
based on the resolution of disputed claims and actual allowed claims at each
Debtor.
Note: To the extent general unsecured creditors elect to receive shares and
rights in lieu of the Cash Inducement, the Reorganized Company's equity value
per share will increase.
Note: Claims are estimated based on data from Administar as of June 2, 2005.
(a) If outstanding allowed claims increase, claimants' pro rata portion of the
Inducement Cash Pool may be lower than the indicated recovery, provided that the
inducement cash pool may be increased according to the Plan to ensure a
percentage recovery that is at a minimum equal to the recovery that would
otherwise be realized through the issuance of common stock and rights.
(b) Recoveries reflect the equity value of Intermet International, the holding
company for Intermet's European operations. Assumes net debt of zero at Intermet
International.
(c) Recovery analyses for Wagner Castings Company, Inc. reflect no retiree
medical claims. Proposed percentage recoveries available under the Plan of
Reorganization to general unsecured creditors and convenience class claimants at
the entity will be adjusted downward based on the filing of any such claims in
the future.
(d) Recovery includes $500,000 of fees assumed paid to the Indentured Trustee at
SUDM, Inc.
(e) These claims are assumed to have only a single obligor; this presentation
assumes these claims receive treatment equal to the most favorable recovery of
claimants at any of the Debtors (i.e., Intermet Corp.).
EXHIBIT D
PRIVATE PLACEMENT PURCHASE AGREEMENT
EXHIBIT E
CASH-OUT PURCHASE AGREEMENT
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
EXHIBIT G
STOCKHOLDERS' AGREEMENT
EXHIBIT H
ARTICLES AND BYLAWS OF REORGANIZED DEBTORS
EXHIBIT I
ARTICLES AND BYLAWS OF REORGANIZED WAGNER CASTINGS COMPANY
EXHIBIT J
AVOIDANCE ACTIONS
EXHIBIT K
CAUSES OF ACTION
EXHIBIT L
KEY EMPLOYEES
EXHIBIT M
REJECTED EXECUTORY CONTRACTS
EXHIBIT N
CURE AMOUNT SCHEDULE
EXHIBIT B
[INTERMET CORPORATION - ORGANIZATIONAL CHART]
EXHIBIT C
LIST OF DEBTORS' PROPERTIES
FERROUS METALS SEGMENT
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED TYPE OF PRODUCTS SQUARE FOOTAGE LAND AREA
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Archer Creek Foundry Lynchburg, VA Owned Ductile Iron Castings 234,000 sq. ft. manufacturing
facility 184 acres
19,000 sq. ft. office space
110,000 sq. ft. warehouse space
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Columbus Foundry Columbus, GA Leased Ductile Iron Castings 235,000 sq. ft. manufacturing
facility 9 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Columbus Machining Midland, GA Owned Machined & Assembled Components 109,000 sq. ft. manufacturing
facility 40 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Decatur Foundry Decatur, IL Owned Ductile Iron Castings 373,000 sq. ft. manufacturing
facility 30 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Hibbing Foundry Hibbing, MN Owned Ductile Iron Castings 47,000 sq. ft. manufacturing
facility 11 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Neunkirchen Foundry Neunkirchen, Germany Owned Ductile Iron Castings 237,000 sq. ft. manufacturing
facility 16 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
New River Foundry Radford, VA Owned Ductile Iron Castings 176,000 sq. ft. manufacturing
facility 35 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Porto Foundry Maia, Portugal Owned Iron Castings 217,000 sq. ft. manufacturing
facility 12 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
Ueckermunde Foundry Ueckermunde, Germany Owned Ductile and Gray Iron Castings 134,000 sq. ft. manufacturing
facility 13 acres
- ---------------------- --------------------- -------- -------------------------------- -------------------------------- ------------
</Table>
LIGHT METALS SEGMENT
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED TYPE OF PRODUCTS SQUARE FOOTAGE LAND AREA
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Hannibal Plant Hannibal, MO Owned Magnesium Die Castings 58,000 sq. ft. manufacturing facility 20 acres
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Jackson Plant Jackson, TN Leased Precision-Engineered, 120,000 sq. ft. manufacturing facilities 23 acres
Close-Tolerance, Aluminum Die (2 buildings)
Castings
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Minneapolis Minneapolis, MN Owned Precision-Engineered, 98,000 sq. ft. manufacturing facility 9 acres
Close-Tolerance, Aluminum Die
Castings
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Monroe City Plant Monroe City, MO Owned Aluminum and Zinc Die Castings 140,000 sq. ft. manufacturing facilities 23 acres
(multiple buildings)
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Palmyra Plant Palmyra, MO Owned Magnesium Die Castings 164,000 sq. ft. manufacturing facility 15 acres
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Pulaski Plant Pulaski, TN Owned Aluminum Die Castings 115,000 sq. ft. manufacturing facility 25 acres
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Racine Machining Racine, WI Owned Machined and Assembled 155,000 sq. ft. manufacturing facility 60 acres
Components 24,000 sq. ft. office building (vacant)
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Racine Plant Racine, WI Owned Aluminum Die Castings 178,000 sq. ft. manufacturing facility 17 acres
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
Stevensville Plant Stevensville, MI Owned Aluminum Pressure/ 58,000 sq. ft. manufacturing facility 3 acres
Counter-Pressure Castings
- ------------------ ---------------- ------- ------------------------------ ---------------------------------------- ----------------
</Table>
OTHER
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED OPERATIONS SQUARE FOOTAGE LAND AREA
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Central Pattern Shop Lynchburg, VA Owned Pattern Construction and 17,000 sq. ft. manufacturing
Maintenance facility
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Flight Operations Waterford, MI Leased Office/Hangar Facility
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Executive Offices Troy, MI Leased Corporate Headquarters 33,000 sq. ft. office facility
(Until 10/31/05)
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Europe Headquarters Saarbrucken, Germany Leased European Corporate Offices 8,000 sq. ft. office facility
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Former Addison Plant Addison, IL Owned Former Addison Plant 47,000 sq. ft. vacant 2 acres
manufacturing facility
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Former Alexander City Plant Alexander City, AL Owned Former Alexander City Plant Vacant 9 acres
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Former Ironton Foundry Ironton, OH Owned Former Ironton Foundry 25,000 sq. ft. vacant office
facility 25 acres
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Former Radford Foundry Radford, VA Owned Former Radford Foundry Vacant 113 acres
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Management Information Columbus, GA Leased Offices & Data Center 10,000 sq. ft. office facility
Systems
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Research Foundry Lynchburg, VA Owned Research Facility 10,000 sq. ft. research building
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
Technical Center Lynchburg, VA Leased Design & Engineering, 22,000 sq. ft. office/testing
Technical Support facility
- ----------------------------- --------------------- ------ ---------------------------- -------------------------------- -----------
</Table>
EXHIBIT D
LIST OF PRESERVED CAUSES OF ACTION
(will be filed at a later date)
EXHIBIT E
LIST OF PENDING LITIGATION
<Table>
<Caption>
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
Compass Bank v. Intermet Corporation Action to recover possession of machining center Intermet Corporation
Muscogee County, Georgia. by a bank alleging a lien that has priority over
the purchaser.
Factory Mutual Insurance v. Claim by subrogated insurer of a customer for Intermet Corporation,
Intermet International, Inc., et al. damages of approximately $2.2 million for breach Intermet International,
U.S. District Court for the Western of contract for failure to deliver product. Inc.
District of Virginia
Intermet V. American Axle, Et Al. Complaint for declaratory judgment that no Intermet Corporation,
Oakland County, Mi. amounts are owing in the above-described case Intermet International,
titled Factory Mutual Insurance v. Intermet Inc.
International, Inc.
Lemelson Foundation v. Butler Mfg., Claim for patent infringement of bar coding and Intermet Corporation
et al. machine vision patents.
U.S. District Court for the District
of Arizona.
Parrish, Inc. V. Intermet Corporation Complaint to recover alleged transportation Intermet Corporation
St. Clair County, Illinois costs of approximately $65,000 incurred by
plaintiff trucking company.
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
Injury claim by employee of contractor due to Intermet Corporation,
Spanhook v. Intermet condition of premises. Wagner-Havana, Inc.
Corporation
Macon County,
Illinois
Complaint alleging age and national origin Intermet Corporation,
Merchut v. Frisby discrimination. In discovery. Intermet Illinois, Inc.
P.M.C., Inc.
U.S. District Court
for the Northern District of Illinois
Ramos v. Intermet Complaint alleging sexual harassment. Intermet Corporation,
Corporation, et al. Northern Castings
Corporation
U.S. District Court for the District
of Minnesota
Moore, et al. v. Complaint alleging injury due to asbestos Lynchburg Foundry Company
Airco, Inc., et al. exposure.
Fulton County, GA.
Colopy, et al. v. Age discrimination complaint brought by two Intermet Corporation,
Intermet Corporation employees. Intermet International,
Inc.
U.S. District Court for the Middle
District of Georgia
Huffman v. Frisby P.M.C., Complaint for alleged wrongful termination. Intermet Corporation,
Incorporated, et al. Intermet Illinois, Inc.
Cook County, Illinois
2
<Table>
<Caption>
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
Uaw v. Cast-Matic Appeal to National Labor Relations Board from Cast-Matic Corporation
administrative law judge decision granting
National Labor Relations Board bargaining order in favor of UAW.
UAW v. Cast-Matic Unfair labor practice charges. Cast-Matic Corporation
National Labor Relations Board
Edwards, et al. v. Alleged injury due to exposure to benzene. Intermet Corporation,
Air Products and Chemicals, Inc., et Wagner Castings Company
al.
Madison County, Illinois
Johnson v. Air Alleged injury due to exposure to benzene. Intermet Corporation,
Products and Chemicals, Inc., et al. Wagner Castings Company
Madison County, Illinois
McDonald, et al. v. Alleged injury due to exposure to benzene. Intermet Corporation,
Air Products and Chemicals, Inc., Wagner Castings Company
et al.
Madison County, Illinois
O'Brien, et al. v. Alleged injury due to exposure to benzene. Intermet Corporation,
Air Products and Wagner Castings Company
Chemicals, Inc., et al.
Madison County, Illinois
3
<Table>
<Caption>
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
Rose, et al. v. Air Alleged injury due to exposure to benzene. Intermet Corporation,
Products Wagner Castings Company
And Chemicals, Inc.,
et al.
Madison County, Illinois
Financial Federal Alleged damages for quantum meriut, unjust Intermet Corporation
Credit, Inc. enrichment etc. arising from use of machining
center at Columbus Machining plan.
v. Intermet
Corporation
U.S. District Court for the Northern
District of Georgia
Huffman v. Frisby P.M.C., Alleged wrongful termination. Intermet Corporation,
Incorporated, et al. Intermet Illinois, Inc.
Cook County, Illinois
Fitch v. Waste Wrongful death action against SDB, Inc./Accurate SUDM, Inc., successor to
Industries. SDB, Inc.
Management, Inc., et al.
Orange County, Florida
</Table>
4
EXHIBIT F
LIST OF FIRST DAY MOTIONS
DATE ORDER
FIRST DAY MOTION ENTERED
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' EX PARTE MOTION FOR IMMEDIATE AND EXPEDITED HEARINGS ON FIRST DAY MOTIONS 9/29/04
- --------------------------------------------------------------------------------------------- --------------
EX PARTE MOTION FOR EXPEDITED HEARING ON EMERGENCY MOTION FOR APPROVAL 9/29/04
AND ENTRY OF STIPULATED INTERIM ORDER (I) AUTHORIZING USE OF CASH COLLATERAL OF
THE PRE-PETITION LENDERS PURSUANT TO 11 U.S.C. SECTION 363 AND GRANT OF
ADEQUATE PROTECTION PURSUANT TO 11 U.S.C. SECTIONS 363 AND 364; AND (II)
SCHEDULING A FINAL HEARING PURSUANT TO BANKRUPTCY RULE 4001(B)
- --------------------------------------------------------------------------------------------- --------------
EMERGENCY MOTION FOR APPROVAL AND ENTRY OF STIPULATED INTERIM ORDER (I) 10/1/04
AUTHORIZING USE OF CASH COLLATERAL OF THE PRE-PETITION LENDERS PURSUANT TO 11
U.S.C. SECTION 363 AND GRANT OF ADEQUATE PROTECTION PURSUANT TO 11
U.S.C. SECTIONS 363 AND 364, AND (II) SCHEDULING A FINAL HEARING PURSUANT TO
BANKRUPTCY RULE 4001(B)
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' MOTION FOR ORDER DIRECTING THE JOINT ADMINISTRATION OF THE DEBTORS' 10/1/04
CHAPTER 11 CASES PURSUANT TO RULE 1015(B) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' MOTION FOR ENTRY OF AN ORDER AUTHORIZING PAYMENT OF PRE-PETITION WAGES,
SALARIES, PAYROLL TAXES, AND OTHER COMPENSATION, EMPLOYEE BENEFITS AND REIMBURSEABLE 10/1/04
EMPLOYEE EXPENSES AND CERTAIN OTHER RELIEF
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' MOTION FOR AN ORDER AUTHORIZING LIMITED NOTICE PROCEDURES WITH RESPECT TO 10/1/04
ALL PROCEEDINGS
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' MOTION FOR ORDER (I) AUTHORIZING CONTINUED USE OF EXISTING (A) 10/1/04
BANK ACCOUNTS, (B) BUSINESS FORMS AND CHECKS, AND (C) CASH MANAGEMENT SYSTEM;
(II) AUTHORIZING THE CONTINUATION OF
- --------------------------------------------------------------------------------------------- --------------
DATE ORDER
FIRST DAY MOTION ENTERED
- --------------------------------------------------------------------------------------------- --------------
INTERCOMPANY TRANSACTIONS AND ACCORDING ADMINISTRATIVE EXPENSE STATUS TO CLAIMS
FOR SUCH TRANSACTIONS; AND (III) WAIVING THE INVESTMENT AND DEPOSIT REQUIREMENTS
OF SECTION 345(B) OF THE BANKRUPTCY CODE
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' APPLICATION TO EMPLOY FOLEY & LARDNER LLP AS GENERAL COUNSEL 10/8/04
PURSUANT TO 11 U.S.C. SECTIONS 327(A), 328(A), 329 AND 1107, RULES 2014(A) AND
2016(B) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND LOCAL
BANKRUPTCY RULE 2014-1
- --------------------------------------------------------------------------------------------- --------------
APPLICATION FOR ORDER AUTHORIZING EMPLOYMENT AND RETENTION OF JPMORGAN TRUST 10/8/04
COMPANY, NATIONAL ASSOCIATION, AS THE OFFICIAL CLAIMS AND NOTICING AGENT OF THE BANKRUPTCY
COURT PURSUANT TO 28 U.S.C. SECTION 156(C)
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' MOTION FOR AN ORDER UNDER 11 U.S.C. SECTIONS 105, 503(B), 10/8/04
507(A), AND 366 (I) PROHIBITING UTILITIES FROM ALTERING, REFUSING OR
DISCONTINUING SERVICES ON ACCOUNT OF PRE-PETITION CLAIMS; (II) DEEMING
UTILITIES ADEQUATELY ASSURED OF FUTURE PERFORMANCE; AND (III) ESTABLISHING
PROCEDURES FOR DETERMINING REQUESTS FOR ADDITIONAL ADEQUATE ASSURANCE
- --------------------------------------------------------------------------------------------- --------------
DEBTORS' MOTION FOR AN ORDER UNDER 11 U.S.C. SECTIONS 105(A) AND 541 CONFIRMING
AUTHORITY TO PAY PRE-PETITION USE, EMPLOYMENT, SINGLE BUSINESS, PROPERTY AND OTHER TAXES 10/8/04
- --------------------------------------------------------------------------------------------- --------------
APPLICATION OF THE DEBTORS TO EMPLOY CONWAY MACKENZIE & DUNLEAVY AS FINANCIAL
ADVISORS AND INVESTMENT BANKERS NUNC PRO TUNC TO THE PETITION DATE 10/13/04
- --------------------------------------------------------------------------------------------- --------------
MOTION FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO OBTAIN 10/19/04
POST-PETITION, DEBTOR-IN-POSSESSION FINANCING PURSUANT TO 11 USC 363 AND 364,
GRANTING PRIMING LIENS AND SUPERPRIORITY CLAIMS TO THE DIP LENDERS,
APPROVING AND CONFIRMING THE GRANT OF ADEQUATE PROTECTION TO THE PRE-PETITION
LENDERS AND SETTING A HEARING FOR ENTRY OF A FINAL ORDER
- --------------------------------------------------------------------------------------------- --------------
EXHIBIT G
LIQUIDATION ANALYSIS
LIQUIDATION ANALYSIS
Pursuant to section 1129(a)(7) of the Bankruptcy Code (often called the "Best
Interests Test"), Holders of Allowed Claims must either (a) accept the Plan or
(b) receive or retain under the Plan property of value, as of the Plan's assumed
Effective Date, that is not less than the value such non-accepting Holder would
receive or retain if the Debtors were to be liquidated under Chapter 7 of the
Bankruptcy Code. In determining whether the Best Interests Test has been met,
the first step is to determine the dollar amount that would be generated from a
hypothetical liquidation of the Debtors' Assets under Chapter 7. The gross
amount of cash available would be the sum of the proceeds from the disposition
of the Debtors' Assets and the cash held by the Debtors at the commencement of
their Chapter 7 cases. Prior to delivering any proceeds to General Unsecured
Creditors, available cash and asset liquidation proceeds would first be applied
to DIP Facility Claims, Pre-Petition Lender Claims, Secured Claims and amounts
necessary to satisfy any Chapter 7 fees, other professional fees and wind-down
costs (including any incremental Administrative Claims that may result from the
termination of the Debtors' business and the liquidation of the Debtors'
Assets). Any remaining cash and asset liquidation proceeds after satisfaction of
DIP Facility Claims, Pre-Petition Lender Claims, Secured Claims, Administrative
Claims and Priority Claims would be available for distribution to General
Unsecured Creditors and Holders of Equity Interests in accordance with the
distribution hierarchy established by Section 726 of the Bankruptcy Code.
Underlying the Liquidation Analysis are a number of estimates and assumptions
regarding liquidation proceeds that, although developed and considered
reasonable by the Debtors' management, Lazard and the Debtors' legal advisors,
are inherently subject to significant business, economic and competitive
uncertainties and contingencies beyond the control of the Debtors and
management. ACCORDINGLY, WHILE THE LIQUIDATION ANALYSIS IS NECESSARILY PRESENTED
WITH NUMERICAL SPECFICITY, THERE CAN BE NO ASSURANCE THAT THE VALUES REFLECTED
IN THE LIQUIDATION ANALYSIS WOULD BE REALIZED IF THE DEBTORS WERE, IN FACT, TO
UNDERGO SUCH A LIQUIDATION; ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE
SHOWN HERE.
Lazard prepared the Liquidation Analysis with the assistance of the Debtors'
management, based upon the Debtors' unaudited actual balance sheets as of
December 31, 2004. The Liquidation Analysis assumes these unaudited actual
balance sheets are a proxy for the balance sheets on the date on which a
liquidation would commence. The Liquidation Analysis also assumes that the
liquidation of the Debtors would commence under the direction of a Bankruptcy
Court-appointed trustee and would continue for six to nine months (the
"Liquidation Period"), during which time all of the Debtors' major Assets would
either be sold or conveyed to the respective Lien Holders and the cash proceeds
or surplus, if any, net of liquidation-related costs, would be distributed to
Creditors in order of priority. Additionally, the Liquidation Analysis assumes a
distressed sale of the Debtors' equity ownership in its European business with
such cash proceeds, net of liquidation-related costs, being distributed to the
Creditors of the Debtor owning equity interests in the European operations.
Although some of the Debtors' Assets might be liquidated during a
shorter period of time, other Assets may be more difficult to collect or sell,
thus expanding the Liquidation Period.
During the Liquidation Period, the Debtors' receivables would be collected and
other Assets would be sold in a commercially reasonable manner. In the
Liquidation Analysis, liquidation values for certain Assets were determined by
general classes of Assets. The Liquidation Analysis was performed on a
Debtor-by-Debtor basis and assumes that liquidation proceeds would be
distributed in accordance with Bankruptcy Code Sections 726 and 1129(b). The
Liquidation Analysis does not assume proceeds from recoveries of any Avoidance
Actions or other Causes of Action. The Liquidation Analysis does not assume
proceeds from recoveries resulting from bank Liens on assets held outside of the
Debtors and its subsidiaries. Additionally, the Liquidation Analysis does not
assume proceeds from litigation which may provide awards in favor of the
Debtors. These claims could have substantial value.
The Liquidation Analysis is prepared on a Debtor-by-Debtor basis consistent with
the deconsolidated structure of the Plan. Therefore, certain Claims not already
allocated to a specific Debtor, including DIP Facility Claims, Pre-Petition
Lender Claims, Secured Claims, Administrative Claims, and Priority Claims, have
been allocated proportionally to each Debtor based on the net liquidation
proceeds available to satisfy those Claims at each Debtor.
Subject to all of the assumptions, conditions, and limitations set forth above,
the Debtors believe that Chapter 7 liquidations of the Debtors could result in a
diminution in the value to be realized by the Holders of Claims and, as set
forth below, the Debtors' management estimates that in a liquidation, the
Pre-Petition Lender Claims, Holders of Secured Claims, Administrative Claims and
Priority Claims would be Impaired. Furthermore, Holders of General Unsecured
Claims would not receive distributions on such Claims.
I. IMPORTANT CONSIDERATIONS AND ASSUMPTIONS
A. ESTIMATE OF NET PROCEEDS
The Liquidation Analysis assumes that a liquidation of the Debtors' assets would
occur under the direction of a Bankruptcy Court-appointed Chapter 7 trustee.
Liquidation values were generally assessed for classes of Assets by estimating
the percentage recoveries that a Chapter 7 might achieve through the Assets'
disposition. In the cases of machinery/equipment and inventory, Lazard utilized
appraisals produced by a third party appraiser as of December 31, 2004 to
determine liquidation values at some of the Debtors. The proceeds of these sale
transactions would be conveyed to the Debtors' Creditors in order of priority.
Proceeds from the sale of stock of foreign subsidiaries owned by one Debtor were
also estimated. Such sales are assumed to occur on a going concern basis, based
on Transaction Value-to-EBITDA multiples which reflect a distressed sale.
The Liquidation Period, estimated to be a minimum of six months to a maximum of
twelve months, would allow for an expedited sale process and the documentation
and closing of such sale transactions.
B. ESTIMATES OF COSTS
The Debtors' liquidation costs under Chapter 7 would include fees payable to a
Chapter 7 trustee as well as those that might be payable to attorneys, financial
advisors, appraisers, accountants, and other professionals in connection with
the Chapter 7 liquidation. Additionally, the Debtors would incur certain costs
of winding down operations during the Liquidation Period.
C. ALLOCATION OF CLAIMS AND DISTRIBUTION OF NET PROCEEDS BY DEBTOR
The Liquidation Analysis is prepared on a Debtor-by-Debtor basis consistent with
the deconsolidated structure of the Plan. Consequently, certain Claims not
already allocated to a specific Debtor, including certain DIP Facility Claims,
Pre-Petition Lender Claims, Secured Claims, Administrative Claims, and Priority
Claims, have been allocated proportionally to each Debtor based on the net
liquidation proceeds available to satisfy those Claims at each Debtor. This
allocation methodology allows Claims to maximize their recovery across all of
the Debtors.
DIP Facility Claims, Pre-Petition Lender Claims, and Secured Claims have
security interests in the North American Assets being liquidated and therefore
receive recovery from each Debtor before Administrative Claims, Priority Claims,
or General Unsecured Claims. Similarly, the DIP Lenders and the Pre-Petition
Lenders have security interests in two-thirds of the equity ownership of the
Debtors' European operations, the sole asset of Intermet International, Inc.
Therefore, DIP Facility Claims and Pre-Petition Lender Claims are allocated to
Intermet International, Inc. in an amount equal to two-thirds of the assumed
purchase price of the equity of the European operations, net of transaction
fees, relative to all proceeds available to DIP Facility Claims and Pre-Petition
Lender Claims. Administrative Claims and Priority Claims not already allocated
to specific Debtors are allocated proportionally to Debtors with the highest net
proceeds available for distribution, after payments to DIP Facility Claims,
Pre-Petition Lender Claims and Secured Claims. Lastly, General Unsecured Claims
not already allocated to specific Debtors, including mainly Noteholder Claims,
are granted claims in their full amount at every Debtor, except Intermet
International, Inc. and Intermet Holding Company, based on guarantees provided
by all other Debtors. It is assumed that any deficiency claim is treated as pari
passu with General Unsecured Claims at each entity.
The liquidation analysis should be analyzed in conjunction with the footnotes
that follow it. Footnotes (a) through (k) refer to the same items in each
schedule of individual Debtors' build-up to net liquidation proceeds.
II. CLAIMS BY DEBTOR
In preparing the Liquidation Analysis, Lazard, the Debtors and the Debtors'
legal advisors estimated the amount of allowed Claims by Debtor on the
commencement of a hypothetical Chapter 7 liquidation. The following schedule
contains these estimated Claims by Debtor and by class. In the event of an
actual Chapter 7 liquidation, allowed claims may vary materially from those
presented below.
<Table>
<Caption>
ESTIMATED CLAIMS UNDER HYPOTHETICAL LIQUIDATION AS OF JUNE 2005
- ----------------------------------------------------------------------------------------------------------------------
($ in 000s)
Administrative Priority Secured Unsecured Total
-------------- ------------ ------------ ------------ ------------
INTERMET CORPORATION ET AL $ 39,622 $ 534 $ 200,382(a) $ 180,544 $ 421,082
ALEXANDER CITY CASTING 0 95 0 0 95
COMPANY, INC
CAST-MATIC 413 127 7 4,436 4,984
COLUMBUS FOUNDRY 2,138 374 202 13,215 15,929
DIVERSIFIED DIEMAKERS 349 606 51 6,186 7,192
GANTON 7,029 430 2,841 11,523 21,824
INTERMET CORPORATION 2,361 1,487 322 12,281 16,451
INTERMET HOLDING CO 0 0 0 0 0
INTERMET ILLINOIS 0 0 0 1,400 1,400
INTERMET INTERNATIONAL 0 7 0 7 14
INTERMET U.S. HOLDING, INC 1,695 433 23 8,321 10,472
IRONTON 0 9 0 2,807 2,816
LYNCHBURG 416 466 158 12,377 13,416
NORTHERN CASTINGS 259 40 1 2,669 2,968
SUDBURY 0 27 0 2,880 2,907
SUDM 0 0 0 0 0
TOOL PRODUCTS 389 194 618 9,304 10,505
WAGNER CASTINGS 26,559 15 331 27,599 54,504
WAGNER HAVANA 8 0 0 1,691 1,699
------------ ------------ ------------ ------------ ------------
TOTAL $ 81,238 $ 4,845 $ 204,935 $ 297,242 $ 588,260
</Table>
(a) Includes DIP Facility Claim as of the anticipated commencement of the
Liquidation Period equal to $45.3 million.
III. CONCLUSIONS
After consideration of the effects that a Chapter 7 liquidation would have on
the ultimate proceeds available for distribution to Creditors at each Debtor,
including (i) the increased costs and expenses of a liquidation under Chapter 7
arising from fees payable to a trustee in bankruptcy and professional advisors
to such trustee, (ii) the erosion in value of Assets in a Chapter 7 case in the
context of the expeditious liquidation required under Chapter 7, and (iii)
potential increases in claims which may arise in a liquidation, the Debtors have
determined, as summarized on the charts below, that Confirmation of the Plan
will provide Creditors with a recovery that is not less than they would receive
pursuant to a liquidation of the Debtors under Chapter 7 of the Bankruptcy Code.
IV. RECOVERIES UNDER A HYPOTHETICAL CHAPTER 7 LIQUIDATION
<Table>
<Caption>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- ---------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
ALEXANDER CITY CASTINGS
CO., INC. CAST-MATIC CORPORATION COLUMBUS FOUNDRY, L.P.
------------------------ ------------------------ ------------------------
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
Net Estimated Proceeds $ 215 $ 333 $ 6,577 $ 8,366 $ 17,981 $ 24,747
Net Estimated Proceeds from Subsidiary (l) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET ESTIMATED PROCEEDS $ 215 $ 333 $ 6,577 $ 8,366 $ 17,981 $ 24,747
DIP Facility Claims (m) 67 77 2,056 1,940 5,621 5,739
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 67 77 2,056 1,940 5,621 5,739
Recovery (%) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Secured Claims (n) 241 273 7,372 6,850 20,037 20,251
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 148 256 4,521 6,425 12,360 19,008
Recovery (%) 61.3% 93.8% 61.3% 93.8% 61.7% 93.9%
Admin Claims 0 0 413 413 2,138 2,138
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Priority Claims 95 95 127 127 374 374
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 180,544 180,544 184,980 184,980 193,759 193,759
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 0 0
<Caption>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- ---------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
DIVERSIFIED DIEMAKERS, INC. GANTON TECH., INC. INTERMET CORPORATION
--------------------------- ------------------------ ------------------------
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
Net Estimated Proceeds $ 19,457 $ 25,433 $ 11,015 $ 14,558 $ 4,180 $ 8,651
Net Estimated Proceeds from Subsidiary (l) 0 0 0 0 19,927 23,735
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET ESTIMATED PROCEEDS $ 19,457 $ 25,433 $ 11,015 $ 14,558 $ 24,107 $ 32,386
DIP Facility Claims (m) 6,082 5,898 3,443 3,376 1,307 2,006
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 6,082 5,898 3,443 3,376 1,307 2,006
Recovery (%) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Secured Claims (n) 21,788 20,822 10,558 11,733 4,484 7,062
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 13,375 19,535 7,572 11,182 2,874 6,644
Recovery (%) 61.4% 93.8% 71.7% 95.3% 64.1% 94.1%
Admin Claims 349 349 7,029 7,029 41,983 41,983
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 19,927 23,735
Recovery (%) 0.0% 0.0% 0.0% 0.0% 47.5% 56.5%
Priority Claims 606 606 430 430 2,022 2,022
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 186,730 186,730 192,067 192,067 192,825 192,825
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 0 0
</Table>
<Table>
<Caption>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- ---------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
INTERMET HOLDING COMPANY INTERMET ILLINOIS, INC. INTERMET INTERNATIONAL, INC.
------------------------ ------------------------ ---------------------------
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
Net Estimated Proceeds $ 0 $ 0 $ 0 $ 0 $ 59,823 $ 71,248
Net Estimated Proceeds from Subsidiary (l) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET ESTIMATED PROCEEDS $ 0 $ 0 $ 0 $ 0 $ 59,823 $ 71,248
DIP Facility Claims (m) 0 0 0 0 12,467 11,016
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 12,467 11,016
Recovery (%) 0.0% 0.0% 0.0% 0.0% 100.0% 100.0%
Secured Claims (n) 0 0 0 0 44,726 38,894
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 27,415 36,483
Recovery (%) 0.0% 0.0% 0.0% 0.0% 61.3% 93.8%
Admin Claims 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Priority Claims 0 0 0 0 7 7
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 7 7
Recovery (%) 0.0% 0.0% 0.0% 0.0% 100.0% 100.0%
Unsecured Claims 0 0 181,944 181,944 7 7
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 7 7
Recovery (%) 0.0% 0.0% 0.0% 0.0% 100.0% 100.0%
Residual Value 0 0 0 0 19,927 23,735
<Caption>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- --------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
LYNCHBURG FOUNDRY
INTERMET U.S. HOLDING, INC. IRONTON IRON, INC. COMPANY
--------------------------- ------------------------ ------------------------
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
Net Estimated Proceeds $ 14,444 $ 22,114 $ 0 $ 0 $ 8,343 $ 11,046
Net Estimated Proceeds from Subsidiary (l) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET ESTIMATED PROCEEDS $ 14,444 $ 22,114 $ 0 $ 0 $ 8,343 $ 11,046
DIP Facility Claims (m) 4,515 5,129 0 0 2,608 2,562
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 4,515 5,129 0 0 2,608 2,562
Recovery (%) 100.0% 100.0% 0.0% 0.0% 100.0% 100.0%
Secured Claims (n) 16,184 18,106 0 0 9,257 9,035
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 9,929 16,986 0 0 5,735 8,484
Recovery (%) 61.4% 93.8% 0.0% 0.0% 62.0% 93.9%
Admin Claims 1,695 1,695 0 0 416 416
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Priority Claims 433 433 9 9 466 466
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 188,865 188,865 183,351 183,351 192,921 192,921
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 0 0
</Table>
<Table>
<Caption>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- ---------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
NORTHERN CASTINGS
CORPORATION SUDBURY, INC. SUDM, INC.
------------------------ ------------------------ ------------------------
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
Net Estimated Proceeds $ 1,706 $ 2,548 $ 4 $ 5 $ 0 $ 0
Net Estimated Proceeds from Subsidiary (l) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET ESTIMATED PROCEEDS $ 1,706 $ 2,548 $ 4 $ 5 $ 0 $ 0
DIP Facility Claims (m) 533 591 1 1 0 0
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 533 591 1 1 0 0
Recovery (%) 100.0% 100.0% 100.0% 100.0% 0.0% 0.0%
Secured Claims (n) 1,913 2,086 4 4 0 0
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 1,173 1,957 3 4 0 0
Recovery (%) 61.3% 93.8% 61.3% 93.8% 0.0% 0.0%
Admin Claims 259 259 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Priority Claims 40 40 27 27 0 0
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 183,212 183,212 183,424 183,424 180,544 180,544
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 0 0
<Caption>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- -------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
TOOL PRODUCTS, INC. WAGNER CASTINGS COMPANY WAGNER HAVANA, INC.
------------------------ ------------------------ ------------------------
LOW HIGH LOW HIGH LOW HIGH
---------- ---------- ---------- ---------- ---------- ----------
Net Estimated Proceeds $ 12,085 $ 16,808 $ 8,328 $ 11,948 $ 693 $ 1,267
Net Estimated Proceeds from Subsidiary (l) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NET ESTIMATED PROCEEDS $ 12,085 $ 16,808 $ 8,328 $ 11,948 $ 693 $ 1,267
DIP Facility Claims (m) 3,778 3,898 2,603 2,771 217 294
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 3,778 3,898 2,603 2,771 217 294
Recovery (%) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Secured Claims (n) 13,163 13,722 9,131 9,762 777 1,038
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 8,307 12,910 5,725 9,177 476 973
Recovery (%) 63.1% 94.1% 62.7% 94.0% 61.3% 93.8%
Admin Claims 389 389 26,559 26,559 8 8
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Priority Claims 194 194 15 15 0 0
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 189,848 189,848 208,143 208,143 182,235 182,235
---------- ---------- ---------- ---------- ---------- ----------
Recovery ($) 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 0 0
</Table>
V. NET LIQUIDATION PROCEEDS DETAIL BY DEBTOR
HYPOTHETICAL LIQUIDATION ANALYSIS: ALEXANDER CITY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 134 40.0% 50.0% 54 67
Land (e) 37 100.0% 100.0% 37 37
Building and Improvements (net) (f) 500 30.0% 50.0% 150 250
Machinery and Equipment (net) (g) 20 20.0% 40.0% 4 8
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 691 $ 245 $ 362
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (29) $ (29)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 215 $ 333
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: CAST-MATIC
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 5,601 65.0% 75.0% 3,641 4,201
Inventory (d) 2,436 30.0% 30.0% 731 731
Land (e) 42 100.0% 100.0% 42 42
Building and Improvements (net) (f) 1,876 30.0% 50.0% 563 938
Machinery and Equipment (net) (g) 11,806 21.2% 26.7% 2,498 3,149
Construction in Progress (h) 128 0.0% 25.0% 0 32
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 21,889 $ 7,474 $ 9,093
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (897) $ (727)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 6,577 $ 8,366
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: COLUMBUS FOUNDRY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 1 100.0% 100.0% $ 1 $ 1
Accounts Receivable, Net (c) 19,253 65.0% 75.0% $ 12,514 $ 14,440
Inventory (d) 7,279 45.9% 48.4% 3,341 3,524
Land (e) 345 100.0% 100.0% 345 345
Building and Improvements (net) (f) 3,609 30.0% 50.0% 1,083 1,805
Machinery and Equipment (net) (g) 27,054 11.6% 25.0% 3,149 6,773
Construction in Progress (h) 51 0.0% 25.0% 0 13
Other Assets (i) 635 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 58,227 $ 20,432 $ 26,899
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (2,452) $ (2,152)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 17,981 $ 24,747
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: DIVERSIFIED DIEMAKERS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 30 100.0% 100.0% $ 30 $ 30
Accounts Receivable, Net (c) 10,702 65.0% 75.0% $ 6,956 $ 8,027
Inventory (d) 11,432 43.7% 45.8% 4,999 5,240
Land (e) 890 100.0% 100.0% 890 890
Building and Improvements (net) (f) 10,197 30.0% 50.0% 3,059 5,099
Machinery and Equipment (net) (g) 23,211 26.6% 34.9% 6,176 8,110
Construction in Progress (h) 1,000 0.0% 25.0% 0 250
Other Assets (i) 430 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 57,892 $ 22,110 $ 27,645
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (2,653) $ (2,212)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 19,457 $ 25,433
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: GANTON TECHNOLOGIES
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 185 100.0% 100.0% $ 185 $ 185
Accounts Receivable, Net (c) 9,897 65.0% 75.0% 6,433 7,423
Inventory (d) 5,329 14.2% 16.1% 758 859
Land (e) 630 100.0% 100.0% 630 630
Building and Improvements (net) (f) 7,595 30.0% 50.0% 2,279 3,798
Machinery and Equipment (net) (g) 11,674 19.1% 23.3% 2,232 2,721
Construction in Progress (h) 831 0.0% 25.0% 0 208
Other Assets (i) 784 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 36,925 $ 12,517 $ 15,824
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (1,502) $ (1,266)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 11,015 $ 14,558
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET CORPORATION
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 1,477 100.0% 100.0% $ 1,477 $ 1,477
Accounts Receivable, Net (c) 1,579 65.0% 75.0% 1,026 1,184
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 22,474 10.0% 30.0% 2,247 6,742
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 25,529 $ 4,750 $ 9,403
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (570) $ (752)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 4,180 $ 8,651
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET HOLDING CO.
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 0 $ 0 $ 0
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ 0 $ 0
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 0 $ 0
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET ILLINOIS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 0 $ 0 $ 0
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ 0 $ 0
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 0 $ 0
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET INTERNATIONAL
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 0.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 30,144 206.7% 241.2% 62,316 72,702
---------- ---------- ----------
TOTAL $ 30,144 $ 62,316 $ 72,702
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 4.0% 2.0% $ (2,493) $ (1,454)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 59,823 $ 71,248
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET U.S. HOLDINGS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 1 100.0% 100.0% $ 1 $ 1
Accounts Receivable, Net (c) 8,667 65.0% 75.0% 5,634 6,500
Inventory (d) 6,120 15.5% 16.8% 948 1,026
Land (e) 862 100.0% 100.0% 862 862
Building and Improvements (net) (f) 23,381 30.0% 50.0% 7,014 11,691
Machinery and Equipment (net) (g) 20,381 9.6% 19.4% 1,955 3,950
Construction in Progress (h) 29 0.0% 25.0% 0 7
Other Assets (i) 1,438 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 60,879 $ 16,414 $ 24,037
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (1,970) $ (1,923)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 14,444 $ 22,114
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: IRONTON IRON
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 0 $ 0 $ 0
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ 0 $ 0
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 0 $ 0
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: LYNCHBURG FOUNDRY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 6,540 65.0% 75.0% 4,251 4,905
Inventory (d) 3,722 66.7% 74.5% 2,481 2,774
Land (e) 670 100.0% 100.0% 670 670
Building and Improvements (net) (f) 2,348 30.0% 50.0% 704 1,174
Machinery and Equipment (net) (g) 11,705 11.7% 20.7% 1,375 2,419
Construction in Progress (h) 261 0.0% 25.0% 0 65
Other Assets (i) 495 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 25,741 $ 9,481 $ 12,007
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (1,138) $ (961)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 8,343 $ 11,046
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: NORTHERN CASTINGS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 1,723 65.0% 75.0% 1,120 1,292
Inventory (d) 536 61.4% 71.6% 329 384
Land (e) 12 100.0% 100.0% 12 12
Building and Improvements (net) (f) 706 30.0% 50.0% 212 353
Machinery and Equipment (net) (g) 1,037 25.7% 70.3% 266 729
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 129 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 4,143 $ 1,939 $ 2,770
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (233) $ (222)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 1,706 $ 2,548
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: SUDBURY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 7 65.0% 75.0% 5 5
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 77 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 84 $ 5 $ 5
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (1) $ (0)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 4 $ 5
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: SUDM, INC.
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 0 $ 0 $ 0
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ 0 $ 0
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 0 $ 0
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: TOOL PRODUCTS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 3 100.0% 100.0% $ 3 $ 3
Accounts Receivable, Net (c) 7,316 65.0% 75.0% 4,755 5,487
Inventory (d) 3,908 41.5% 62.8% 1,624 2,456
Land (e) 356 100.0% 100.0% 356 356
Building and Improvements (net) (f) 8,041 30.0% 50.0% 2,412 4,021
Machinery and Equipment (net) (g) 13,414 34.2% 43.0% 4,582 5,765
Construction in Progress (h) 729 0.0% 25.0% 0 182
Other Assets (i) 590 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 34,357 $ 13,733 $ 18,269
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (1,648) $ (1,462)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 12,085 $ 16,808
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: WAGNER CASTINGS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 32 100.0% 100.0% $ 32 $ 32
Accounts Receivable, Net (c) 8,041 65.0% 75.0% 5,227 6,031
Inventory (d) 5,096 33.3% 38.6% 1,699 1,965
Land (e) 343 100.0% 100.0% 343 343
Building and Improvements (net) (f) 816 30.0% 50.0% 245 408
Machinery and Equipment (net) (g) 12,203 15.7% 32.6% 1,919 3,984
Construction in Progress (h) 899 0.0% 25.0% 0 225
Other Assets (i) 1,264 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 28,694 $ 9,464 $ 12,987
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (1,136) $ (1,039)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 8,328 $ 11,948
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: WAGNER HAVANA
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ------------------------- -------------------------
LOW HIGH LOW HIGH
---------- ---------- ---------- ----------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 68 65.0% 75.0% 44 51
Inventory (d) 248 40.0% 50.0% 99 124
Land (e) 6 100.0% 100.0% 6 6
Building and Improvements (net) (f) 793 30.0% 50.0% 238 397
Machinery and Equipment (net) (g) 2,000 20.0% 40.0% 400 800
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
---------- ---------- ----------
TOTAL $ 3,115 $ 787 $ 1,378
========== ========== ==========
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% $ (94) $ (110)
---------- ----------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 693 $ 1,267
</Table>
NOTES TO LIQUIDATION ANALYSIS
(a) BOOK VALUES AS OF DECEMBER 31, 2004. Unless otherwise stated, the book
values contained/presented in the Liquidation Analysis are book values as
of December 31, 2004. These actual balances are used as a reference point
for the analysis and, as described in the introduction to the Liquidation
Analysis, are used as the value for which percentage recoveries for the
liquidation of certain assets (e.g., accounts receivable) are based.
Management of the Debtors provided all December 31, 2004 book values.
(b) CASH AND EQUIVALENTS. Cash consists of all cash in banks or operating
accounts and liquid investments with maturities of three months or less.
Cash is assumed to be fully recoverable.
(c) ACCOUNTS RECEIVABLE. Estimated proceeds realizable from short-term and
long-term accounts receivable under a liquidation are based on management's
assessment of the ability of the Debtors to collect on their accounts,
taking into consideration the credit quality and aging of the accounts. The
liquidation range of 65%-75% of book value is an estimate of the proceeds
that would be available in a "forced sale" or liquidation scenario. This
range conservatively takes into account the inevitable difficulty in
collecting receivables and any concessions or off-sets which might be
required to facilitate the collection of certain accounts.
(d) INVENTORY. Inventory includes finished goods, work-in-progress and raw
materials. The range of liquidation values is derived from an inventory
appraisal recently produced by a third party appraiser for the following
Debtors based on December 31, 2004 account balances: Cast-Matic
Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton
Technologies, Inc., Intermet U.S. Holding, Inc., Lynchburg Foundry Company,
Northern Castings Corporation, Tool Products, Inc. and Wagner Castings
Company. The low point of the range reflects the forced sale of all
inventory including work-in-progress in "as is" condition. The high point
of the range reflects the conversion of certain work-in-progress inventory
into finished goods. For the remaining entities for which appraisals were
not available, estimates were based on the average range of liquidation
values/recoveries at the Debtors listed above. Those Debtors for which
inventory appraisals were unavailable include Alexander City Casting
Company, Inc., Intermet Corporation, Intermet Holding Company, Intermet
Illinois, Inc., Intermet International, Inc., Ironton Iron, Inc., Sudbury,
Inc., SUDM, Inc., and Wagner Havana, Inc.
(e) LAND. Estimated proceeds realizable from the liquidation of land/real
estate reflect 100% of book value. No appraisals of land/real estate assets
were available for use in the liquidation analysis, and no provision for
environmental costs related to, for example, remediation were taken into
account.
(f) BUILDINGS AND IMPROVEMENTS. Estimated proceeds realizable from the sale of
building and improvements reflect a range of 30% - 50%.
(g) MACHINERY AND EQUIPMENT. Machinery and equipment includes machinery,
equipment and inventory of spare parts and safety equipment. The range of
liquidation proceeds is derived from machinery and equipment appraisals
recently produced by a third party appraiser for the
following Debtors based on December 31, 2004 account balances: Cast-Matic
Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton
Technologies, Inc., Intermet U.S. Holding, Inc., Lynchburg Foundry Company,
Northern Castings Corporation, Tool Products, Inc. and Wagner Castings
Company. The low range reflects a forced liquidation over an abbreviated
period whereas the high range reflects an orderly liquidation over a longer
timeframe. For the remaining entities for which appraisals were not
available, estimates were based on the average range of liquidation
values/recoveries at the debtors listed above. Those Debtors for which
appraisals were unavailable include Alexander City Casting Company, Inc.,
Intermet Corporation, Intermet Holding Company, Intermet Illinois, Inc.,
Intermet International, Inc., Ironton Iron, Inc., Sudbury, Inc., SUDM,
Inc., and Wagner Havana, Inc.
(h) CONSTRUCTION IN PROGRESS. Management estimates that fixed assets under
construction would yield limited to no value in a forced liquidation
scenario, resulting in a recovery range of 0%-25%.
(i) OTHER ASSETS. Management estimates that other assets, which include tooling
intangibles, prepaid assets, deposits, and unamortized bank fees would not
yield significant value in a forced liquidation scenario, and accordingly
have been ascribed 0% recovery. Other assets at Intermet Corporation,
however, do include items, such as cash deposits, which have some tangible
value. Consequently, the recoveries for other assets at Intermet
Corporation ranges from 10% - 30%.
(j) INVESTMENTS IN SUBSIDIARIES. Reflects the book value of the equity
ownership in the Debtors' European operations at Intermet International,
Inc.
(k) LIQUIDATION FEES AND EXPENSES. Chapter 7 trustee fees, other professional
fees and wind-down costs are estimated to be 8%-12% of gross sales
proceeds. In the case of Intermet International, liquidation fees and
expenses reflect professional fees that would be incurred in the sale of
the European operations, which are estimated at 2%-4% of gross sales
proceeds.
(l) NET ESTIMATED PROCEEDS FROM SUBSIDIARY. Applies only to Intermet
Corporation's recovery of value from its stock ownership in Intermet
International which, in turn, recovers value from its stock ownership in
Intermet's European subsidiaries. The Liquidation Analysis assumes a
distressed sale of these European subsidiaries, with proceeds, after
payment of net debt and transaction fees, going to Intermet International.
(m) DIP FACILITY CLAIMS. Reflects the projected DIP balance as of the
anticipated commencement of the Liquidation Period.
(n) SECURED CLAIMS. Pre-Petition Lender Claims and Secured Claims have security
interests in the domestic entities as well as two-thirds of the equity
value of the European operations. These Claims are allocated proportionally
by Debtor based on the net proceeds available at each Debtor to satisfy
Secured Claims.
EXHIBIT H
PROJECTED FINANCIAL INFORMATION FOR THE REORGANIZED DEBTORS
EXHIBIT H
PROJECTED FINANCIAL INFORMATION FOR THE REORGANIZED DEBTORS
The Debtors have prepared projected operating and financial results on a
consolidated basis for the five years ending December 31, 2009 (the
"Projections"). The Debtors have also prepared a pro-forma balance sheet of
INTERMET Corporation based upon an assumed Effective Date of August 31, 2005.
THE FINANCIAL PROJECTION INFORMATION DISCUSSED HEREIN CONTAINS CERTAIN
STATEMENTS THAT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS ARE SUBJECT
TO A NUMBER OF ASSUMPTIONS, RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND
THE CONTROL OF THE DEBTORS, INCLUDING THE IMPLEMENTATION OF THE PLAN, THE
CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO
FUND OPERATIONS, ACHIEVING OPERATING EFFICIENCIES, MAINTAINING GOOD EMPLOYEE
RELATIONS, EXISTING AND FUTURE GOVERNMENTAL REGULATIONS AND ACTIONS OF
GOVERNMENTAL BODIES, NATURAL DISASTERS, ACTS OF TERRORISM OR WAR,
INDUSTRY-SPECIFIC RISK FACTORS AND OTHER MARKET AND COMPETITIVE CONDITIONS.
HOLDERS OF CLAIMS ARE CAUTIONED THAT THE FORWARD-LOOKING STATEMENTS SPEAK AS OF
THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS OR
DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN
THE FORWARD-LOOKING STATEMENTS, AND THE DEBTORS UNDERTAKE NO OBLIGATION TO
UPDATE ANY SUCH STATEMENTS. SEE SECTION XI -- "CERTAIN FACTORS TO BE
CONSIDERED".
THE PROJECTIONS WERE NOT PREPARED TO COMPLY WITH THE GUIDELINES FOR PROSPECTIVE
FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS AND THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION. THE DEBTORS' INDEPENDENT ACCOUNTANTS HAVE NEITHER EXAMINED NOR
COMPILED THE ACCOMPANYING PROJECTIONS AND ACCORDINGLY DO NOT EXPRESS AN OPINION
OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO THE PROJECTIONS, ASSUME NO
RESPONSIBILITY FOR THE PROJECTIONS AND DISCLAIM ANY ASSOCIATION WITH THE
PROJECTIONS. EXCEPT FOR PURPOSES OF THIS DISCLOSURE STATEMENT, THE DEBTORS DO
NOT PUBLISH PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF
OPERATIONS.
THE DEBTORS BELIEVE THAT THE PROJECTIONS ARE BASED ON ESTIMATES AND ASSUMPTIONS
THAT ARE REASONABLE. THE ESTIMATES AND ASSUMPTIONS MAY NOT BE REALIZED, HOWEVER,
AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE DEBTORS' CONTROL.
NO REPRESENTATIONS CAN BE OR ARE MADE AS TO WHETHER THE ACTUAL RESULTS WILL BE
WITHIN THE RANGE SET FORTH IN THE PROJECTIONS.
THEREFORE, ALTHOUGH THE PROJECTIONS ARE NECESSARILY PRESENTED WITH NUMERICAL
SPECIFICITY, THE ACTUAL RESULTS OF OPERATIONS ACHIEVED DURING THE PROJECTION
PERIOD WILL VARY FROM PROJECTED RESULTS. THESE VARIATIONS MAY BE MATERIAL.
ACCORDINGLY, NO REPRESENTATION CAN BE OR IS BEING MADE WITH RESPECT TO THE
ACCURACY OF THE PROJECTIONS OR THE ABILITY OF THE REORGANIZED DEBTORS TO ACHIEVE
THE PROJECTIONS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE, AND EVENTS
AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THE PROJECTIONS WERE
PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED, OR MAY BE UNANTICIPATED, AND
THEREFORE MAY AFFECT FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE
MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTEE OR
OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. IN DECIDING WHETHER TO
VOTE TO ACCEPT OR REJECT THE PLAN, HOLDERS OF CLAIMS MUST MAKE THEIR OWN
DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY
OF THE PROJECTIONS. SEE SECTION XI -- "CERTAIN FACTORS TO BE CONSIDERED".
The Projections should be read in conjunction with the assumptions,
qualifications and explanations set forth in the historical consolidated
financial statements, including the notes and schedules thereto, incorporated
herein in Exhibit I - "Selected Historical Financial Information".
The Projections have been prepared on the assumption that the effective date of
the Plan will be August 31, 2005. Although the Debtors presently intend to seek
to cause the Effective Date to occur as soon as practicable, there can be no
assurance as to when the Effective Date will actually occur. The balance sheet
adjustments in the column captioned "Reorganization Adjustments" reflect the
assumed effect of Confirmation and the consummation of the transactions
contemplated by the Plan, including the settlement of various liabilities and
incurrence of new indebtedness.
The Projections are based on, and assume the successful implementation of
Reorganized Intermet's business plan.
I. PRINCIPAL ASSUMPTIONS FOR THE PROJECTIONS
A. GENERAL
1. Methodology. The Projections are based upon detailed operating
budgets for the Debtors for the three-year period ending
December 31, 2007, which were developed by management of the
Debtors and CMD at the plant level in North America and in
Europe. The Projections for the calendar years 2008 through
2009 were developed by management of the Debtors and Lazard
and were prepared on the same basis as 2005 through 2007, but
through trending analysis using key top-down assumptions.
Sales for all periods were developed by management of the
Debtors on a part-by-part buildup at each plant based on
current booked business as well as estimates for future
business opportunities.
2. Plan Consummation. The operating assumptions assume the Plan
will be Confirmed and consummated by August 31, 2005.
3. Macroeconomic and Industry Environment. The Projections
reflect currently forecasted build volumes per recent OEM
estimates, steel prices consistent with current levels
experienced by the Debtors and a rising interest rate
environment.
B. PROJECTED STATEMENTS OF OPERATIONS
1. Net Sales. Consolidated revenues, estimated to be $837.2
million in 2004, are projected to increase by 0.8% in 2005 to
$844.2 million, and then to continue to grow through the
projection period, peaking in 2009 at $1,050.7 million. Sales
for all periods were developed on a part-by-part buildup at
each plant based on current booked business as well as
estimates for future business opportunities.
2. Gross Margin. Gross margin is projected to be 4.1% in 2005,
increasing to 10.9% in 2009 based on more efficient production
as unprofitable facilities are closed or sold and optimum
capacities and efficiencies are realized at the continuing
facilities. Gross margin also improves as a larger sales base
absorbs fixed costs.
3. Selling, General and Administrative Expenses ("SG&A"). SG&A
includes corporate, research and development and customer
support expenses. These expenses decrease from $43.4 million
in 2005 to $40.2 million in 2006, reflecting cost savings
relating to the closure of multiple facilities in 2005. By
2009, selling, general and administrative expenses grow to
$43.7 million, consistent with the increase in sales
experienced during the 2006-2009 period.
4. Other Operating Costs. Reflects legacy costs at the Debtors'
inactive and discontinued operations including property taxes,
utility expense, insurance premiums, and general maintenance
expense.
5. Interest Expense. Interest expense reflects the accrual and
payment of interest on the Pre-Petition Credit Facility and
DIP Facility until the effective date; and on a $170 million
floating-rate term loan, a $90 million floating-rate revolving
credit facility post-emergence and on various credit
facilities in Europe. The European debt is assumed to be paid
down with European cash in excess of $20 million and interest
expense is affected accordingly. Interest expense also
includes letters of credit fees and agency fees.
6. Other Expense. Reflects interest expense and interest income
on certain intercompany obligations, charges to and from
affiliates and gains and losses on foreign exchange
transactions.
7. Restructuring Costs. Includes fees paid to professionals
advising the Debtors, fees paid to DIP Lenders and Exit
Lenders, fees paid to the Initial Committed Purchasers,
payments pursuant to the KERP and other one-time charges /
expenses. Cancellation of indebtedness income which is
incurred on the Effective Date is also included as income in
this line item.
8. Income Tax Provision. Income taxes in North America and Europe
were prepared by management of the Debtors, with the
assistance of tax and financial advisors. North American taxes
reflect the impact of cancellation of debt income on the
Effective Date and differences between tax and book pretax
income are adjusted accordingly. Taxes presented in North
America reflect these differences as well as the application
of pre-petition tax attributes to offset taxable income
subject to Section 382(l)(6) limitations. Income taxes in
Europe were approximated by the Debtors' tax advisors. Book
taxes in Europe are assumed to equal cash taxes.
C. PROJECTED STATEMENTS OF CASH FLOW
1. Working Capital. Accounts receivable are projected to be
outstanding for 50-60 days during the projection period,
reflecting historical trends. Accounts payable are projected
to be outstanding for 5 days in 2005 in North America. The
days outstanding in North America increases thereafter to 30
days by 2007 and remains constant through 2009. Inventory
days-on-hand are based on historical trends of approximately
20 days in North America and 45 days in Europe.
2. Capital Expenditures. Capital expenditures are expected to
total $43.6 million for 2005. This figure is projected to
increase to $50.5 million in 2006 reflecting certain catch-up
expenditures and continue in a normalized range of $40-$50
million per year in 2007-2009. Capital expenditure projections
were developed by management of the Debtors based on specific
capital projects and planned improvements at specific
facilities.
3. Proceeds from Asset Sales. Reflects the estimated sale
proceeds from certain property, machinery and equipment and
other assets related to discontinued or inactive facilities.
4. Increase/(Decrease) in Borrowings. Reflects seasonal
borrowings and repayments on the DIP and post-emergence
revolving credit facility as well as repayments of debt in
Europe based on a $20 million minimum cash balance in Europe.
5. Changes in Other Financing. Reflects the $75 million Rights
Offering on the Effective Date and some miscellaneous debt
borrowing and repayments in Europe.
II. PROJECTED BALANCE SHEET STATEMENT
Fresh Start Accounting
The American Institute of Certified Public Accountants ("AICPA") has
issued Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The Projections have
been prepared in accordance with the fresh-start reporting principles set forth
in the SOP 90-7, giving effect thereto as of August 31, 2005, subject to
significant simplifying assumptions.
The Pro Forma Reorganized Balance Sheet ("Reorganized Balance Sheet")
is based on an Estimated Pre-Reorganization Balance Sheet, as modified by
"Reorganization" and "Fresh-Start" adjustments. The Pre-Reorganization Balance
Sheet provides estimates of assets and liabilities just prior to confirmation,
including liabilities subject to compromise recorded in accordance with the SOP
90-7. The Reorganization Adjustments adjust the Pre-Reorganization Balance Sheet
for the discharge of administrative claims and of estimated claims allowed by
the Court upon confirmation. The Fresh-Start Adjustments further adjusts the
Pre-Reorganization Balance Sheet of the emerging entity to:
1. Reflect the reorganization value of the assets;
2. Allocate the reorganization value among the assets; and
3. Reflect each liability at the Plan Confirmation Date at its
fair value.
Reorganization value approximates the fair value of the entity before
considering liabilities and approximates the amount a willing buyer would pay
for the assets immediately after restructuring. Determination of the
reorganization value requires a detailed valuation of all of the Reorganized
Debtors' identifiable assets as of the Effective Date, including working capital
assets, fixed assets and identifiable intangible assets such as third-party
contracts. Allocation of the reorganization value among assets involves
revaluing each of these assets at its fair value. Each liability of the emerging
entity is reflected at its fair value.
The foregoing assumptions and resulting computations were made solely
for purposes of preparing the Projections. The Reorganized Debtors' will be
required to determine their reorganization value as of the Effective Date.
Reorganization value may change depending on the amount of cash retained upon
emergence. The actual reorganization and fresh start adjustments will depend on
the balance sheet as of the actual confirmation date and a final determination
of the fair value appraisals. Such fair value appraisals could be materially
higher or lower than the values assumed in the foregoing computations. In all
events, the determination of reorganization value and the fair value of
Reorganized Debtors' assets, as well as the determination of their actual
liabilities, will be made as of the Effective Date. Furthermore, the changes
between the amounts of any or all of the foregoing items as assumed in the
Projections and the actual amounts thereof as of the Effective Date may be
material.
PRO FORMA PROJECTED BALANCE SHEET (UNAUDITED)
(AS OF AUGUST 31, 2005)
INTERMET CORPORATION
($ in millions)
<Table>
<Caption>
Estimated
Pre- Pro Forma
Reorganization Reorganized
Balance Reorganization "Fresh Start" Balance
Sheet Adj. Adj. Sheet(a)
--------------- --------------- --------------- ---------------
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 19.4 $ 6.3(b) -- $ 25.6
Total Receivables 125.9 -- -- 125.9
Inventory 64.5 -- -- 64.5
Other Current Assets 9.1 -- -- 9.1
--------------- --------------- --------------- ---------------
Total Current Assets $ 218.8 $ 6.3 $ 0.0 $ 225.1
NON CURRENT ASSETS
Fixed Assets, Net 271.9 -- -- 271.9
Other Assets 23.5 -- 45.8(c) 69.3
--------------- --------------- --------------- ---------------
TOTAL ASSETS $ 514.2 $ 6.3 $ 45.8 $ 566.3
=============== =============== =============== ===============
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 22.1 -- -- $ 22.1
Accrued Liabilities 62.0 (1.7)(d) -- 60.2
Accrued Interest 1.2 -- -- 1.2
--------------- --------------- --------------- ---------------
Total Current Liabilities $ 85.2 $ (1.7) $ 0.0 $ 83.5
NON-CURRENT LIABILITIES
DIP $ 45.3 $ (45.3)(e) -- --
Exit Revolver 0.0 -- -- --
Long Term Debt 20.2 170.0(f) -- 190.2
Pre-Petition Liabilities 166.5 (166.5)(g) 39.3(k) --
Retirement Benefits 88.7 (5.2)(h) -- 122.8
Other Long-Term Liabilities 9.9 -- -- 9.9
--------------- --------------- --------------- ---------------
Total Non-Current Liabilities 330.6 (47.0) 39.3 322.9
Liabilities Subject To Compromise 248.3 (248.3)(i) -- --
--------------- --------------- --------------- ---------------
TOTAL LIABILITIES $ 664.1 $ (297.1) $ 39.3 $ 406.3
Shareholders' Equity $ (149.8) $ 303.3(j) $ 6.5(l) $ 160.0
--------------- --------------- --------------- ---------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 514.2 $ 6.3 $ 45.8 $ 566.3
=============== =============== =============== ===============
</Table>
NOTES TO PRO FORMA PROJECTED BALANCE SHEET
(a) The pro forma balance sheet adjustments contained herein
account for (i) the reorganization and related transactions
pursuant to the Plan and (ii) the implementation of "fresh
start" accounting pursuant to SOP 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code, as
issued by the AICPA. The fresh start adjustments are based on
a total equity value of $160 million consistent with the
mid-point of Lazard's Enterprise Valuation.
(b) Reflects $6.3 million in cash created in North America by
proceeds received from the Exit Facility financing and the
Rights Offering, partially offset by the repayment of the DIP
Facility, Pre-Petition Credit Facility, Senior Notes, payments
made to unsecured creditors, fees paid to various
Professionals, lenders and the Initial Committed Purchasers,
KERP payments and Pension Plan payments.
(c) Reflects a $45.8 million increase in intangible assets due to
the excess value of Reorganized Intermet over the fair value
of its assets.
(d) Reflects a $1.7 million KERP cash payment.
(e) Reflects repayment of the DIP Facility in cash.
(f) Reflects issuance of a $170 million Exit Term Loan.
(g) Reflects repayment of the Pre-Petition Credit Facility and
associated post-petition interest in cash.
(h) Reflects a $5.2 million cash Pension Plan payment.
(i) Reflects extinguishment of pre-petition accounts payable and
pre-petition Senior Notes and pre-petition accrued interest.
Intercompany obligations owed to Non-Debtor Affiliates are not
included in this number.
(j) Reflects cancellation of indebtedness income, the issuance of
the New Common Stock, Rights Offering, and various cash
payments.
(k) Increase in pension liability due to unrealized actuarial loss
and prior service costs / benefits.
(l) Reflects adjustments to shareholders' equity based on the
estimated equity value of the Reorganized Intermet ($160
million) in accordance with "fresh start" accounting
provisions of SOP 90-7.
1. PROJECTED STATEMENTS OF OPERATIONS
INTERMET CORPORATION
($ in millions)
<Table>
<Caption>
FISCAL YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------
2005E 2006E 2007E 2008E 2009E
---------- ---------- ---------- ---------- ----------
NET SALES
North America $ 626.3 $ 606.6 $ 663.0 $ 728.4 $ 745.8
Europe 217.9 252.2 265.5 291.7 304.9
---------- ---------- ---------- ---------- ----------
Total Sales 844.2 858.8 928.5 1,020.2 1,050.7
Cost of Sales 809.8 783.5 838.6 909.9 936.3
---------- ---------- ---------- ---------- ----------
GROSS MARGIN $ 34.4 $ 75.3 $ 89.9 $ 110.3 $ 114.4
Selling, General and Administrative Expense 43.4 40.2 40.3 42.2 43.7
Other Operating Expense 1.2 0.4 0.4 0.4 0.4
---------- ---------- ---------- ---------- ----------
OPERATING INCOME ($ 10.2) $ 34.7 $ 49.2 $ 67.7 $ 70.3
Interest Expense, Net 20.7 20.7 20.2 19.7 19.2
Other Expense 3.7 0.5 0.6 0.6 0.6
Restructuring Expense(a) (118.7) 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Pre-Tax Income 84.1 13.5 28.4 47.3 50.5
Income Taxes - Current 4.4 12.0 11.8 18.9 19.4
Income Taxes - Deferred 0.0 (3.8) (1.9) (2.3) (2.5)
---------- ---------- ---------- ---------- ----------
Total Income Taxes 4.4 8.2 9.9 16.6 16.9
Minority Interest 0.1 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 79.8 $ 5.3 $ 18.5 $ 30.7 $ 33.6
========== ========== ========== ========== ==========
</Table>
(a) Includes cancellation of indebtedness income in 2005 of $153.3 million.
2. PROJECTED BALANCE SHEETS
INTERMET CORPORATION
($ in millions)
<Table>
<Caption>
FISCAL YEAR ENDING DECEMBER 31,
----------------------------------------------------------------------
2005E 2006E 2007E 2008E 2009E
---------- ---------- ---------- ---------- ----------
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 22.0 $ 20.7 $ 23.6 $ 32.1 $ 54.2
Total Receivables 120.3 121.1 125.0 137.3 141.4
Inventory 67.4 67.3 68.8 67.3 67.7
Other Current Assets 8.2 7.8 7.5 7.5 7.5
---------- ---------- ---------- ---------- ----------
Total Current Assets $ 217.9 $ 216.9 $ 224.9 $ 244.2 $ 270.8
NON CURRENT ASSETS
Fixed Assets, Net 269.6 274.1 271.3 276.9 278.2
Other Assets 68.7 70.5 70.4 70.6 71.1
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS $ 556.2 $ 561.4 $ 566.5 $ 591.7 $ 620.1
========== ========== ========== ========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 28.2 $ 47.3 $ 50.5 $ 61.1 $ 63.4
Accrued Liabilities 64.1 56.5 55.0 55.0 55.0
Accrued Interest 0.9 0.9 0.9 0.9 0.9
---------- ---------- ---------- ---------- ----------
Total Current Liabilities $ 93.2 $ 104.7 $ 106.4 $ 117.0 $ 119.3
Long Term Debt 188.2 184.7 175.7 164.6 162.6
Retirement Benefits 120.6 112.5 106.4 101.3 95.9
Other Long-Term Liabilities 9.9 9.9 9.9 9.9 9.9
---------- ---------- ---------- ---------- ----------
Total Liabilities 411.8 411.8 398.4 392.8 387.7
Shareholders' Equity 144.3 149.6 168.1 198.9 232.4
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 556.2 $ 561.4 $ 566.5 $ 591.7 $ 620.1
========== ========== ========== ========== ==========
</Table>
2. 3. PROJECTED STATEMENTS OF CASH FLOW
INTERMET CORPORATION
($ in millions)
<Table>
<Caption>
FISCAL YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------
2005E 2006E 2007E 2008E 2009E
---------- ---------- ---------- ---------- ----------
FUNDS FROM OPERATIONS:
Net Income $ 79.8 $ 5.3 $ 18.5 $ 30.7 $ 33.6
Depreciation 45.6 41.1 42.7 43.4 44.0
Deferred Taxes 0.0 (3.8) (1.9) (2.3) (2.5)
COD Income (153.3) 0.0 0.0 0.0 0.0
Cash Payment to Unsecured Creditors (10.0) 0.0 0.0 0.0 0.0
WORKING CAPITAL
(Increase)/Decrease in Net A/R (4.1) (0.7) (3.9) (12.3) (4.1)
(Increase)/Decrease in Net Inventory 4.4 0.1 (1.4) 1.5 (0.4)
(Increase)/Decrease in Other Assets 5.6 2.3 2.3 2.0 2.0
Increase/(Decrease) in Accounts Payable 3.1 19.1 3.1 10.6 2.4
Increase/(Decrease) in Accrued Liabilities 3.9 (7.6) (1.5) (0.0) (0.0)
Increase/(Decrease) in Other LT Liabilities (3.6) (8.0) (6.1) (5.1) (5.5)
Changes in Working Capital 9.4 5.2 (7.5) (3.3) (5.6)
---------- ---------- ---------- ---------- ----------
Total $ (28.5) $ 47.7 $ 51.9 $ 68.5 $ 69.5
FUNDS PROVIDED BY INVESTING ACTIVITIES:
Capital Expenditures (43.6) (50.5) (39.9) (49.0) (45.4)
Proceeds from Asset Sales 8.0 5.0 0.0 0.0 0.0
Other Changes in Investing 4.3 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Total $ (31.3) $ (45.5) $ (39.9) $ (49.0) $ (45.4)
FUNDS PROVIDED BY FINANCING ACTIVITIES:
Increase/(Decrease) in Borrowings (2.0) (3.5) (9.0) (11.0) (2.1)
Changes in Other Financing (a) 72.6 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Total $ 70.5 $ (3.5) $ (9.0) $ (11.0) $ (2.1)
CHANGE IN CASH AND EQUIVALENTS $ 10.7 $ (1.3) $ 2.9 $ 8.5 $ 22.1
Beginning Cash 11.2 22.0 20.7 23.6 32.1
---------- ---------- ---------- ---------- ----------
ENDING CASH $ 22.0 $ 20.7 $ 23.6 $ 32.1 $ 54.2
========== ========== ========== ========== ==========
</Table>
(a) Reflects new equity investment of $75 million via a rights offering.
4. ADJUSTED EBITDA CALCULATION
INTERMET CORPORATION
($ in millions)
<Table>
<Caption>
INTERMET ADJUSTED EBITDA BUILD-UP
------------------------------------------------
LTM 2005E 2006E
---------- ---------- ----------
EBIT $ (234.4) $ (10.2) $ 34.7
Plus: Depreciation & Amortization 47.9 45.6 41.1
Less: Other Expense (a) 0.0 (2.9) (0.5)
---------- ---------- ----------
EBITDA $ (186.4) $ 32.5 $ 75.3
========== ========== ==========
Plus: Pro-Forma Adjustments 209.5(b) 0.0 0.0
Plus: KERP Charge 2.7 3.8 0.0
Less: Impairment Adjustment (1.7) 0.0 0.0
Plus: Pricing and Surcharge Related Adjustments (c) 23.2 0.0 0.0
Plus: Plant Closure / Restructuring Costs 9.8(d) 26.8(e) 0.0
---------- ---------- ----------
Adjusted EBITDA $ 56.9 $ 63.1 $ 75.3
========== ========== ==========
</Table>
(a) Reflects new equity investment of $75 million via a rights offering.
(b) Includes goodwill and asset impairment charges and reorganization costs.
(c) Includes both North American and European surcharge adjustments.
(d) Includes charges for the closure of the Havana and Decatur facilities and
adjustments related to the Radford and Racine operations.
(e) Includes charges for the closure of the Decatur facilities and adjustments
related to the Columbus Machining, Radford and Racine operations.
5. SUMMARY DEBTOR OPERATING / FINANCIAL STATISTICS
Below are key income statement items by Debtor for the periods
2005-2007 as well as the book value of assets by Debtor entity based on
unaudited balance sheets as of 12/31/04. The value of Intermet Corporation is
attributable to the equity value of Intermet International, the parent of
Intermet's foreign affiliates. Revenue, EBITDA and EBIT totals do not include
corporate expenses, corporate eliminations, or any other items not allocated on
an entity-by-entity basis.
<Table>
<Caption>
CONTRIBUTION ANALYSIS
-------------------------------------------------------------------------------
REVENUE EBITDA
---------------------------------- ------------------------------------
DEBTOR 2005 2006 2007 2005 2006 2007
- ------------------------------------- -------- -------- -------- -------- -------- --------
Intermet Corporation $ 217.9 $ 252.2 $ 265.5 $ 20.8 $ 30.4 $ 33.2
Columbus Foundry, L.P. 147.1 166.6 180.0 22.5 23.6 26.3
Diversified Diemakers, Inc. 87.3 78.1 84.6 11.8 11.5 13.3
Tool Products, Inc. 78.2 80.5 98.5 3.2 8.8 13.3
Northern Castings Corporation 28.4 33.0 33.1 5.3 6.3 6.1
Cast-Matic Corporation 47.4 36.3 37.2 4.6 6.7 6.8
Intermet U.S. Holding, Inc. 79.4 103.6 111.7 1.5 4.1 4.7
Ganton Technologies, Inc. 44.1 36.6 44.7 (12.9) 1.3 3.0
Lynchburg Foundry Company 88.5 73.0 73.9 (0.4) (3.0) (2.8)
Sudbury, Inc. 0.0 0.0 0.0 0.0 0.0 0.0
Wagner Havana, Inc. 0.0 0.0 0.0 (1.0) (0.8) (0.7)
Alexander City Castings Company, Inc. 0.0 0.0 0.0 (0.2) (0.1) (0.1)
Intermet Illinois, Inc. 0.0 0.0 0.0 0.0 0.0 0.0
SUDM, Inc. 0.0 0.0 0.0 0.0 0.0 0.0
Intermet Holding Company 0.0 0.0 0.0 0.0 0.0 0.0
Ironton Iron, Inc. 0.0 0.0 0.0 (0.5) (0.1) (0.1)
Wagner Castings Company 47.8 0.0 0.0 (14.2) (4.7) (3.3)
-------- -------- -------- -------- -------- --------
TOTAL $ 866.0 $ 859.8 $ 929.0 $ 40.6 $ 84.1 $ 99.8
<Caption>
---------------------------------------------------
EBIT BOOK
------------------------------------ VALUE
DEBTOR 2005 2006 2007 12/31/04
- ------------------------------------- -------- -------- -------- --------
Intermet Corporation $ 11.3 $ 19.5 $ 21.4 $ 155.6
Columbus Foundry, L.P. 17.4 18.5 21.2 84.2
Diversified Diemakers, Inc. 3.4 3.0 4.4 100.7
Tool Products, Inc. 0.4 5.6 9.4 44.1
Northern Castings Corporation 4.7 5.6 5.4 15.8
Cast-Matic Corporation 2.7 4.7 4.6 21.9
Intermet U.S. Holding, Inc. (4.6) (1.3) (0.2) 61.5
Ganton Technologies, Inc. (16.6) (0.0) 1.5 43.5
Lynchburg Foundry Company (3.0) (5.7) (5.4) 29.8
Sudbury, Inc. 0.0 0.0 0.0 12.9
Wagner Havana, Inc. (1.0) (0.8) (0.7) 3.1
Alexander City Castings Company, Inc. (0.2) (0.1) (0.1) 0.7
Intermet Illinois, Inc. 0.0 0.0 0.0 0.0
SUDM, Inc. 0.0 0.0 0.0 0.0
Intermet Holding Company 0.0 0.0 0.0 0.0
Ironton Iron, Inc. (0.5) (0.1) (0.1) 0.0
Wagner Castings Company (17.9) (4.7) (3.3) 28.8
-------- -------- -------- --------
TOTAL $ (3.8) $ 44.2 $ 58.2 $ 602.6
</Table>
EXHIBIT I
SELECTED HISTORICAL FINANCIAL INFORMATION
INTERMET Corporation
Consolidated Statements of Operations
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Net sales $ 731,167 $ 755,737 $ 782,884
Cost of sales 667,327 683,234 720,423
------------ ------------ ------------
Gross profit 63,840 72,503 62,461
Operating expenses:
Selling, general and administrative 39,406 32,826 28,381
Goodwill impairment charge 51,083 -- --
Restructuring and impairment
charges 9,968 -- 13,540
Goodwill amortization -- -- 6,328
------------ ------------ ------------
Total operating expenses 100,457 32,826 48,249
------------ ------------ ------------
Operating (loss) profit (36,617) 39,677 14,212
Other expenses (income):
Interest expense, net 29,895 28,270 29,822
Other income, net (1,959) (161) (3,441)
------------ ------------ ------------
Total other expenses 27,936 28,109 26,381
------------ ------------ ------------
(Loss) income from continuing
operations before income taxes and
equity interest in a joint venture (64,553) 11,568 (12,169)
Income tax (expense) benefit (18,536) (2,665) 4,259
Equity interest in a joint venture 752 1,573 946
------------ ------------ ------------
(Loss) income from continuing operations (82,337) 10,476 (6,964)
Loss from discontinued operations,
net of tax:
Loss from operation (16,535) (1,954) (1,739)
Loss from sale (41) -- --
------------ ------------ ------------
(Loss) income before cumulative
effect of change in accounting (98,913) 8,522 (8,703)
Cumulative effect of change in
accounting, net of tax -- 481 --
------------ ------------ ------------
Net (loss) income $ (98,913) $ 9,003 $ (8,703)
============ ============ ============
Net (loss) income per common share - basic:
Net (loss) income from continuing operations $ (3.22) $ 0.41 $ (0.27)
Loss from discontinued operations, net of tax (0.65) (0.08) (0.07)
Cumulative effect of change in
accounting, net of tax -- 0.02 --
------------ ------------ ------------
Net (loss) income $ (3.87) $ 0.35 $ (0.34)
============ ============ ============
Net (loss) income per common share -
assuming dilution Net (loss) income
from continuing operations $ (3.22) $ 0.40 $ (0.27)
Loss from discontinued operations,
net of tax (0.65) (0.07) (0.07)
Cumulative effect of change in
accounting, net of tax -- 0.02 --
------------ ------------ ------------
Net (loss) income $ (3.87) $ 0.35 $ (0.34)
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Statements of Comprehensive Income
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
Net (loss) income $ (98,913) $ 9,003 $ (8,703)
Other comprehensive income (loss),
net of tax:
Foreign currency translation
adjustment 10,537 9,793 (4,278)
Derivative instrument liability
adjustment 1,343 515 (1,858)
Minimum pension liability
adjustment (4,312) (11,481) (6,890)
------------ ------------ ------------
Total other comprehensive income
(loss) 7,568 (1,173) (13,026)
------------ ------------ ------------
Comprehensive (loss) income $ (91,345) $ 7,830 $ (21,729)
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Balance Sheets
<Table>
<Caption>
DECEMBER 31,
------------------------------
2003 2002
------------ ------------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents $ 1,035 $ 3,298
Accounts receivable:
Trade, less allowances of $6,528 in 2003
and $9,229 in 2002 76,218 74,025
Other 10,555 12,754
------------ ------------
86,773 86,779
Inventories 77,411 65,456
Deferred income tax assets -- 20,230
Other current assets 10,748 4,645
------------ ------------
Total current assets 175,967 180,408
------------ ------------
Property, plant and equipment, net 324,080 332,034
Goodwill 165,933 217,016
Deferred income tax assets 147 5,443
Other noncurrent assets 20,557 29,197
------------ ------------
Total noncurrent assets 510,717 583,690
------------ ------------
Total assets $ 686,684 $ 764,098
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 80,737 $ 70,933
Accrued payroll and benefits 33,885 31,148
Other accrued liabilities 25,657 34,057
Short-term lines of credit 9,992 --
Long-term debt due within one year 4,303 1,567
------------ ------------
Total current liabilities 154,574 137,705
Noncurrent liabilities:
Long-term debt due after one year 279,248 278,536
Retirement benefits 85,309 77,571
Deferred income tax liabilities -- 2,913
Other noncurrent liabilities 5,416 9,804
------------ ------------
Total noncurrent liabilities 369,973 368,824
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized;
none issued in 2003 and 2002 -- --
Common stock; $0.10 par value; 50,000,000
shares authorized in 2003 and 2002;
25,593,391 and 25,491,178 shares issued and
outstanding in 2003 and 2002 2,601 2,601
Capital in excess of par value 57,165 57,124
Retained earnings 109,428 212,437
Accumulated other comprehensive loss (6,994) (14,562)
Unearned restricted stock (63) (31)
------------ ------------
Total shareholders' equity 162,137 257,569
------------ ------------
Total liabilities and shareholders' equity $ 686,684 $ 764,098
============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Statements of Cash Flows
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
OPERATING ACTIVITIES:
(Loss) income from continuing
operations $ (82,337) $ 10,476 $ (6,964)
Adjustments to reconcile net
(loss) income to cash provided by
operating activities:
Cumulative effect of changes in
accounting -- 481 --
Depreciation and amortization 50,251 47,120 48,263
Amortization of debt discount
and issuance costs 2,211 2,083 1,476
Amortization of goodwill -- -- 6,328
Goodwill impairment charge 51,083 --
Restructuring and impairment
charges 9,506 -- 11,734
Results of equity investment (752) (1,573) (946)
Deferred income tax provision
(benefit) 22,613 548 (4,086)
(Gain) loss on disposal of
property, plant and equipment (1,526) 3,109 --
Gain on insurance proceeds from
involuntary conversion of assets -- -- (3,220)
Changes in operating assets and
liabilities:
Accounts receivable 6,772 28,538 16,750
Inventories (6,657) 6,968 20,293
Accounts payable and current
liabilities (11,233) (15,818) (39,465)
Other assets and liabilities (2,758) 4,497 13,207
------------ ------------ ------------
Cash provided by continuing
operating activities 37,173 86,429 63,370
Cash (used in) provided by
discontinued operations (4,066) 2,946 8,224
------------ ------------ ------------
Cash provided by operating
activities 33,107 89,375 71,594
INVESTING ACTIVITIES:
Additions to property, plant and
equipment (19,533) (8,427) (35,526)
Additions to property, plant and
equipment from insurance -- -- (3,389)
Additions to property, plant and
equipment by discontinued
operations (145) (1,018) (842)
Proceeds from insurance for
replacement of property, plant
and equipment -- -- 3,389
Proceeds from sale of property,
plant and equipment 1,700 -- --
Purchase of shares of a
subsidiary (5,571) --
Proceeds from sale of assets of
a subsidiary 3,925 -- --
------------ ------------ ------------
Cash used in investing activities (19,624) (9,445) (36,368)
FINANCING ACTIVITIES:
Net (decrease) increase in
revolving credit facility (3,000) (85,000) 9,000
Proceeds from term loan -- -- 182,750
Proceeds from debt offering -- 175,000 --
Repayment of term loan -- (171,750) (211,000)
Repayments of other debts (4,417) (1,646) (16,494)
Payments of debt issuance costs (2,110) (6,022) --
Issuance (purchase) of common
stock -- 374 (349)
Dividends paid (4,096) (4,075) (3,183)
------------ ------------ ------------
Cash used in financing activities (13,623) (93,119) (39,276)
Effect of exchange rate changes on
cash and cash equivalents (2,123) 2,621 (1,821)
------------ ------------ ------------
Net decrease in cash and cash
equivalents (2,263) (10,568) (5,871)
Cash and cash equivalents at
beginning of year 3,298 13,866 19,737
------------ ------------ ------------
Cash and cash equivalents at end
of year $ 1,035 $ 3,298 $ 13,866
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Statements of Shareholders' Equity
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
COMMON STOCK, $0.10 PAR VALUE
Balance as of January 1 $ 2,601 $ 2,590 $ 2,590
Issued in connection with exercise of
options to purchase 19,750 shares of
common stock -- 2 --
Issued in connection with deferred
compensation plan -- 9 --
------------ ------------ ------------
Balance as of December 31 2,601 2,601 2,590
CAPITAL IN EXCESS OF PAR VALUE
Balance as of January 1 57,124 56,761 57,110
Amounts in excess of par value of
common stock issued in connection with
exercise of options to purchase shares -- 189 --
Amounts in excess of par value of
common stock issued in connection
with stock compensation plan 41 174 --
Purchase of 104,000 shares for
deferred compensation plan -- -- (349)
------------ ------------ ------------
Balance as of December 31 57,165 57,124 56,761
RETAINED EARNINGS
Balance as of January 1 212,437 207,512 220,279
Net (loss) income (98,913) 9,003 (8,703)
Cash dividends of $0.16 per share in
2003, 2002 and 2001 (4,096) (4,078) (4,064)
------------ ------------ ------------
Balance as of December 31 109,428 212,437 207,512
ACCUMULATED TRANSLATION
Balance as of January 1 5,152 (4,641) (363)
Foreign currency translation adjustment 16,213 14,932 (6,582)
Related income tax (expense) credit (5,676) (5,139) 2,304
------------ ------------ ------------
Balance as of December 31 15,689 5,152 (4,641)
DERIVATIVE INSTRUMENT LIABILITY
Balance as of January 1 (1,343) (1,858) --
Derivative instrument liability
adjustment 2,066 792 (2,858)
Related income tax (expense) credit (723) (277) 1,000
------------ ------------ ------------
Balance as of December 31 -- (1,343) (1,858)
MINIMUM PENSION LIABILITY
Balance as of January 1 (18,371) (6,890) --
Additional minimum pension liability (6,634) (17,663) (10,600)
Related income tax credit 2,322 6,182 3,710
------------ ------------ ------------
Balance as of December 31 (22,683) (18,371) (6,890)
UNEARNED RESTRICTED STOCK
Balance as of January 1 (31) (194) (206)
Issuance of 7,500, 6,000 and 23,000
shares of common stock in 2003, 2002
and 2001, respectively (63) (20) (64)
Restricted stock vested 31 44 76
Forfeitures -- 139 --
------------ ------------ ------------
Balance as of December 31 (63) (31) (194)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 162,137 $ 257,569 $ 253,280
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Notes to Consolidated Financial Statements
Years ended December 31, 2003, 2002 and 2001
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
INTERMET Corporation produces castings worldwide for light and heavy vehicles,
including powertrain, chassis, brake, and body / interior components, as well as
industrial products. In addition, we perform value-added services including
advanced design and engineering, prototype casting, machining and sub-assembly,
principally for our worldwide automotive customers
Our business segments include two groups: Ferrous Metals Group and Light Metals
Group. Ferrous Metals consists of ductile iron casting and related
manufacturing. Light Metals consists of aluminum, magnesium and zinc casting,
along with associated value-added activities.
BASIS OF PRESENTATION
The accompanying consolidated financial statements, presented in conformity with
accounting principles generally accepted in the United States ("GAAP"), include
the accounts of INTERMET and its domestic and foreign subsidiaries. All
significant inter-company transactions and balances have been eliminated in
consolidation. All subsidiaries have a fiscal year ending December 31.
Investments in 20% to 50% owned companies are accounted for under the equity
method.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. There were no
material changes in the methods or policies used to establish estimates and
assumptions. Generally, matters subject to estimation and judgment include
accounts receivable realization, inventory obsolescence, long-lived asset
impairment, pension and other postretirement benefit obligations, accruals
related to litigation and environmental costs, and valuation reserves for
deferred tax assets. Actual results may differ from the estimates provided.
RECLASSIFICATIONS
On January 1, 2003, we adopted Statement of Financial Accounting Standards
(SFAS) No. 145, Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB
Statement No. 13 and Technical Corrections. This Statement requires certain
gains and losses associated with the extinguishment of debt previously treated
as extraordinary items to be classified as income or loss from continuing
operations. As required under SFAS No. 145, we reclassified pretax losses of
$927,000 related to the extinguishment of bank term loan in the 2002 Statement
of Operations from "Extraordinary Item" to "Interest Expense, Net."
Certain other amounts previously reported in the 2002 and 2001 financial
statements and notes thereto have been reclassified to conform to the 2003
presentation.
REVENUE RECOGNITION
We recognize revenue upon shipment of products and transfer of title.
SHIPPING AND HANDLING COSTS
We record shipping and handling costs as components of "Cost of Sales" within
our statements of operations.
INTERMET Corporation
Notes to Consolidated Financial Statements
Years ended December 31, 2003, 2002 and 2001
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STOCK-BASED COMPENSATION
We grant stock options to employees and directors with an exercise price equal
to the fair value of the shares at the date of grant. We account for stock
option grants in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and, accordingly, recognize no
compensation expense for the stock option grants. Had compensation expense for
these stock option grants been determined based on the fair value at the grant
dates for awards under the stock option plans consistent with the method of SFAS
No. 123, "Accounting for Stock-Based Compensation", our pro forma net (loss)
income, basic (loss) earnings per share and diluted (loss) earnings per share
would be the following:
<Table>
<Caption>
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Net (loss) income, as reported $ (98,913) $ 9,003 $ (8,703)
Less: Total stock-based employee
compensation expense determined under
fair value method for all awards, net
of related tax effects (670) (794) (898)
------------ ------------ ------------
Pro forma net (loss) income $ (99,583) $ 8,209 $ (9,601)
============ ============ ============
(Loss) earnings per share:
Basic - as reported $ (3.87) $ 0.35 $ (0.34)
============ ============ ============
Basic - pro forma $ (3.89) $ 0.32 $ (0.38)
============ ============ ============
Diluted - as reported $ (3.87) $ 0.35 $ (0.34)
============ ============ ============
Diluted - pro forma $ (3.89) $ 0.32 $ (0.38)
============ ============ ============
</Table>
We use the Black-Scholes option pricing model to estimate the fair value of our
stock options as described in Note 10, Stock Compensation, to our Consolidated
Financial Statements.
CASH AND CASH EQUIVALENTS
All short-term investments with original maturities of less than 90 days are
deemed to be cash equivalents for purposes of the statements of cash flows.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Allowance for doubtful accounts reduces trade accounts receivable to its net
recognizable amount. It is determined by a combination of factors, such as
customer charge-backs, a customer's inability to meet its financial obligations
to us, our past loss history, and the length of time the trade account
receivables are past due. If circumstances change, our estimates of the
recoverability of trade accounts receivable could be reduced by a material
amount. We typically do not require collateral.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined on the
last-in, first-out ("LIFO") method for 3% and 5% of inventories as of December
31, 2003 and 2002, respectively. If LIFO inventories were valued using the same
cost methods used for other inventories, their carrying values would have
increased by $869,000 and $897,000 at December 31, 2003 and 2002, respectively.
Certain raw materials and supplies inventories are valued on a weighted average
cost basis. Average production cost is used for certain work in process.
Finished goods inventories and other inventories are valued by the first-in,
first-out ("FIFO") method. The specific identification method is used for
pattern inventories. Supplies inventories are evaluated for obsolescence based
on length of time in the store-room and expected near-term use.
PREPAID EXPENSES
We recognize payments made in advance for future services as prepaid expenses
and include them in "Other Current Assets" in the accompanying balance sheets.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The provision for depreciation
and amortization of property, plant and equipment is determined using the
straight-line method on the basis of the following estimated useful lives: 2 to
40 years for buildings and improvements, and 2 to 21 years for machinery and
equipment. The amortization of property, plant and equipment under capital
leases is included in depreciation expense. Industrial development grants
provided by the federal and state governments of Germany are included as
reductions of property, plant and equipment and are being amortized over the
estimated useful lives of the related assets.
We evaluate our property, plant and equipment for impairment whenever events or
changes in circumstances indicate that the carrying amounts of such assets may
not be recoverable. The carrying amount of a long-lived asset is considered to
be not recoverable if it exceeds our estimates of its undiscounted future cash
flows based on our operation forecasts. Impairment charge will be measured and
recorded as the amount by which the carrying values of the long-lived assets
exceed their fair values.
GOODWILL
Goodwill represents the excess acquisition cost over the fair value of net
assets acquired. On January 1, 2002, we adopted SFAS No. 142 "Goodwill and Other
Intangible Assets". Under this statement, goodwill is no longer amortized but is
reviewed for impairment annually, or more frequently if certain events or
changes in circumstances indicate that the carrying value may not be
recoverable. We perform impairment tests of our goodwill as required. We
evaluate our goodwill recoverability based on a combination of an income method,
which estimates the fair value of our reporting units based on the future
discounted cash flows, and a market method, which estimates the fair values
based on comparable market prices.
DERIVATIVES
SFAS No. 133 requires us to recognize all of their derivative instruments as
either assets or liabilities in the statement of financial position at fair
value. The accounting for changes in the fair value (i.e., gains or losses) of a
derivative instrument depends on whether it has been designated and qualifies as
part of a hedging relationship and further, on the type of hedging relationship.
For those derivative instruments that are designated and qualify as hedging
instruments, we designate the hedging instrument, based upon the exposure being
hedged, as either a fair value hedge, cash flow hedge or a hedge of a net
investment in a foreign operation.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ENVIRONMENTAL MATTERS
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated. These accruals are adjusted periodically as assessment and
remediation efforts progress or other information becomes available. Related
insurance or other third-party recoveries for environmental liabilities are
recorded as a reduction of environmental reserve when it is probable that a
recovery will be realized.
Environmental costs are capitalized if the costs extend the life of the
property, increase its capacity, and / or mitigate or prevent contamination from
future operations. Costs related to environmental contamination treatment and
cleanup are charged to expense.
INCOME TAXES
We account for taxes on income using the asset and liability method wherein
deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities using statutory tax rates.
We regularly assess the likelihood that the deferred tax assets, including net
operating loss carryforwards, are recoverable. This process requires substantial
management judgment. To the extent that we believe the recoverability is less
than likely, we will establish a valuation reserve against the deferred tax
assets. Actual results could differ from our estimates and such differences
could be material to the financial statements. For the year ended December 31,
2003, we recorded a valuation reserve of $23.9 million and $5.8 million against
our domestic net deferred tax assets for continuing operations and discontinued
operations, respectively, due to the accumulation of losses experienced at our
domestic operations in the immediate past three years (2001 to 2003).
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of foreign subsidiaries for which the local currency
is the functional currency are translated into U.S. dollars at year-end exchange
rates. Income and expense items are translated at average exchange rates
prevailing during the year. The resulting translation adjustments are recorded
in Accumulated Other Comprehensive Income as a component of Shareholder's
Equity.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board issued SFAS 132
Revised, "Employers' Disclosures about Pensions and Other Postretirement
Benefits". This Statement revises the required disclosures about pension plans
and other postretirement benefit plans. We adopted this Statement on December
31, 2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
2. BALANCE SHEET DETAILS
Inventories:
The components of inventories are as follows (in thousands of dollars):
<Table>
<Caption>
DECEMBER 31,
-----------------------------
2003 2002
------------ ------------
Finished goods $ 22,433 $ 15,804
Work in process 8,198 9,059
Raw materials 8,113 6,794
Supplies and patterns 38,667 33,799
------------ ------------
Total inventories $ 77,411 $ 65,456
============ ============
</Table>
Property, Plant and Equipment, Net:
The components of property, plant and equipment are as follows (in thousands of
dollars):
<Table>
<Caption>
DECEMBER 31,
-----------------------------
2003 2002
------------ ------------
Land $ 6,681 $ 5,304
Buildings and improvements 143,382 135,191
Machinery and equipment 517,846 510,917
Construction in progress 26,443 9,595
------------ ------------
Property, plant and equipment, at cost 694,352 661,007
Less: Accumulated depreciation and foreign
industrial development grants, net of amortization 370,272 328,973
------------ ------------
Property, plant and equipment, net $ 324,080 $ 332,034
============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
3. ACQUISITION
On June 25, 2003, we entered into an agreement with Estudos, Servicos e
Participacoes, S.A. to acquire 100% ownership of the shares of Fundicao Nodular,
S.A. ("Porto Foundry"), which is located in Porto, Portugal. Previously we owned
50% interest in the Porto Foundry. The Porto Foundry is a caster of various
ductile-iron automotive components. Under the terms of the agreement, we
acquired 25% of the shares for a cash investment of Euros 4.9 million
(approximately $5.6 million) on July 1, 2003, increasing our ownership from 50%
to 75%. We have a call option to acquire, and Estudos, Servicos e Participacoes,
S.A. has a put option to sell, the remaining 25% ownership for an additional
cash investment of Euros 4.9 million (approximately $6.2 million at exchange
rate on December 31, 2003) on July 1, 2004. Because of the put option, we
recorded $6.0 million, the net present value of the $6.2 million future cash
investment, as "Accounts Payable" in the accompanying balance sheet as of
December 31, 2003, and we consolidate 100% of the financial results of the Porto
Foundry beginning in July 2003.
We accounted for the acquisition of additional shares using the purchase
accounting method. The purchase price has been allocated to the assets purchased
and liabilities assumed based upon the estimated fair values at the date of
acquisition. Fundicao Nodular, S.A. became a consolidated subsidiary at July 1,
2003 and the results of its operations from July 1, 2003 are included in our
consolidated results of operations. Our equity in the net income of the Porto
Foundry for the period before July 1, 2003 is included in "Equity interest in a
joint venture" in the accompanying statements of operations. The pro forma
effects of this acquisition are not material to our consolidated results of
operations.
4. DISCONTINUED OPERATIONS
Frisby
On July 24, 2003, we sold substantially all the assets of Frisby P.M.C.,
Incorporated ("Frisby") for $5.3 million, consisting of $3.9 million in cash and
$1.4 million in the form of a promissory note, the balance of which is due to be
paid by July 31, 2008. This disposition is consistent with our strategy to
divest non-strategic assets. This transaction resulted in a pre-tax loss on sale
of $1.2 million (after-tax loss $0.1 million). Frisby operated a machining plant
that manufactures precision-machined components primarily for the automotive,
truck and power tool markets. Frisby was a non-core operation, and is included
in our Corporate and Other segment in Note 14, Reporting for Business Segments,
to our Consolidated Financial Statements.
Major classes of assets and liabilities of Frisby are as follows (in thousands
of dollars):
<Table>
<Caption>
JULY 24, 2003 DECEMBER 31, 2002
------------- -----------------
Accounts receivable $ 2,061 $ 1,276
Inventory 1,552 1,717
Other current assets 158 414
Property, plant and equipment, net 4,453 5,072
------------ ------------
Total assets $ 8,224 $ 8,479
============ ============
Accounts payable $ 848 $ 973
Accrued liabilities 855 892
------------ ------------
Total liabilities $ 1,703 $ 1,865
============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
4. DISCONTINUED OPERATIONS (CONTINUED)
The results of operations of Frisby are summarized as follows (in thousands of
dollars):
<Table>
<Caption>
2003 2002 2001
------------ ------------ ------------
Sales $ 8,007 $ 13,603 $ 16,147
Cost of sales 7,645 14,319 15,926
------------ ------------ ------------
Gross profit (loss) 362 (716) 221
Expenses 526 886 1,019
------------ ------------ ------------
Loss before income taxes (164) (1,602) (798)
Income tax (expense) benefit (1,180) 623 312
------------ ------------ ------------
Loss from discontinued operation, net
of tax $ (1,344) $ (979) $ (486)
============ ============ ============
</Table>
Radford
In May 2003, we decided to permanently close our shell-molding plant in Radford,
Virginia due to changes in market conditions and production technology, as well
as a substantial investment in environmental controls that would have been
necessary for continued operation. The Radford Foundry manufactured gray-iron
and ductile-iron components for the automotive industry, and had approximately
41 salaried and 333 hourly employees. The facility is included in the Ferrous
Metals segment in Note 14, Reporting for Business Segments, to our Consolidated
Financial Statements.
As a result of this decision, we recorded an $11.6 million pre-tax restructuring
and impairment charge during the second quarter of 2003. The charges included a
write-down of $9.9 million to reduce the capital assets and inventories to their
fair values, $1.4 million for employee severance and related contractually
guaranteed benefit costs, and $0.3 million for employee pension costs. In the
fourth quarter of 2003, we accrued for an additional $0.1 million for employee
severance costs. The accruals for the employee severance and benefit costs are
included in "Other accrued liabilities" in the accompanying balance sheet in
2003.
In addition, we recorded pre-tax gains of $1.3 million and $0.7 million on the
reduction of postretirement benefit obligations when the employees were
terminated in the third and fourth quarter of 2003, respectively. The Radford
Foundry was closed, and all the hourly employees and substantially all the
salaried employees were terminated, by December 2003. We expect to incur
approximately $0.4 million for environmental remediation at the Radford foundry
in the future, which is in addition to the $2.5 million environmental
remediation costs that are discussed in Note 11, Commitments and Contingencies,
to our Consolidated Financial Statements. The after-tax results of operations of
Radford for all periods presented have been reported as "Loss from discontinued
operations, net of tax" in the accompanying statements of operations.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
4. DISCONTINUED OPERATIONS (CONTINUED)
Activities relating to the restructuring charges and liabilities related to the
Radford Foundry closure are as follows (in thousands of dollars):
<Table>
<Caption>
EMPLOYEE EMPLOYEE
IMPAIRMENT OF WRITE-DOWN OF TERMINATION POSTRETIREMENT
FIXED ASSETS INVENTORY BENEFITS BENEFITS OTHER TOTAL
------------- ------------ ------------ -------------- ------------ ------------
Initial charge in second quarter of 2003 $ 7,554 $ 2,351 $ 1,336 $ 301 $ 50 $ 11,592
Noncash charges (7,554) (2,351) -- (301) -- (10,206)
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 2003 -- -- 1,336 -- 50 1,386
Reduction of post-retirement obligations -- -- -- (1,278) -- (1,278)
Noncash credit -- -- -- 1,278 -- 1,278
Cash payments -- -- (28) -- (50) (78)
------------ ------------ ------------ ------------ ------------ ------------
Balance at September 30, 2003 -- -- 1,308 -- -- 1,308
Additional charge -- -- 138 -- -- 138
Reduction of post-retirement obligations -- -- -- (719) -- (719)
Noncash credit -- -- -- 719 -- 719
Cash payments -- -- (892) -- -- (892)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 2003 $ -- $ -- $ 554 $ -- $ -- $ 554
============ ============ ============ ============ ============ ============
</Table>
Major classes of assets and liabilities of the Radford Foundry are as follows
(in thousands of dollars):
<Table>
<Caption>
AT DECEMBER 31,
-----------------------------
2003 2002
------------ ------------
Accounts receivable $ 2,052 $ 3,595
Inventory 429 3,759
Other current assets 514 --
Property, plant and equipment, net 673 9,023
------------ ------------
Total assets $ 3,668 $ 16,377
============ ============
Accounts payable $ 491 $ 4,374
Accrued liabilities 1,611 2,045
Retirement benefits 1,959 804
Other noncurrent liabilities 2,508 1,004
------------ ------------
Total liabilities $ 6,569 $ 8,227
============ ============
</Table>
The results of operations of the Radford Foundry are summarized as follows (in
thousands of dollars):
<Table>
<Caption>
2003 2002 2001
------------ ------------ ------------
Sales $ 34,820 $ 45,592 $ 44,142
Cost of sales 38,271 47,216 45,301
------------ ------------ ------------
Gross loss (3,451) (1,624) (1,159)
Expenses 11,740 63 823
------------ ------------ ------------
Loss before income taxes (15,191) (1,687) (1,982)
Income tax benefit -- 712 729
------------ ------------ ------------
Loss from discontinued operation, net
of tax $ (15,191) $ (975) $ (1,253)
============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
4. DISCONTINUED OPERATIONS (CONTINUED)
Corporate interest expense has been allocated to Frisby and Radford based on the
ratio of their net assets to the consolidated net assets of INTERMET plus
consolidated debt, excluding the net assets of the European subsidiaries. The
European subsidiaries were excluded because they were cash flow positive and did
not directly use the proceeds from the debt outstanding during the periods
covered by the financial statements. The interest expense allocated to Frisby
and Radford for 2003, 2002 and 2001 was $546,000, $571,000 and $1,203,000,
respectively.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
provides that the results of operations of a component of an entity that has
been disposed of should be reported as discontinued operation when the
operations and cash flows of the component have been eliminated from the ongoing
operations of the entity and the entity will not have any significant continuing
involvement in the operations of the component after the disposal transaction.
This occurred when Frisby was sold in July 2003 and when Radford was closed and
abandoned in December 2003. As a result, the after-tax loss on sale of the
assets of Frisby, and the results of operations of both Frisby and Radford for
all periods presented, have been reported as discontinued operations in the
accompanying statements of operations.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
5. RESTRUCTURING AND IMPAIRMENT CHARGES
Havana Plant Closure
In December 2003, we decided to permanently close our castings plant in Havana,
Illinois in order to improve our capacity utilization. The Havana Foundry
manufactures ductile-iron components for the automotive industry, and has
approximately 33 salaried and 141 hourly employees. We anticipate that the final
plant closure will occur, and substantially all the salaried and hourly
employees will be terminated, by June 30, 2004. The facility is included in the
Ferrous Metals segment in Note 14, Reporting for Business Segments, to our
Consolidated Financial Statements. The Havana Foundry had revenues of $25.7
million, $27.3 million and $31.4 million, and net losses of $5.0 million, $2.2
million and $8.6 million for the years ended December 31, 2003, 2002 and 2001,
respectively.
Because of our decision to close the Havana Foundry, we recorded $8.5 million
pre-tax charges during the fourth quarter of 2003. These charges are included in
"Restructuring and impairment charges" in the accompanying statements of
operations. The amount included a write-down of $8.0 million to reduce the
capital assets and inventories to their fair values, and $0.5 million for
employee severance and related contractually guaranteed benefit costs. The
accruals for the charges are included in "Accrued payroll and benefits" in the
accompanying balance sheet in 2003. We expect to incur approximately $2 million
for additional employee severance and related benefit costs, environmental
remediation costs, and costs of testing required in order to transfer the
manufacturing processes of Havana Foundry to other INTERMET's facilities when
the Havana Foundry is finally closed.
Other Long-Lived Assets Impairment
On January 1, 2002, we adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", under which long-lived assets other than
goodwill are tested for recoverability if certain events or changes in
circumstances indicate that the carrying value may not be recoverable. During
our impairment review in the fourth quarter of 2003, we identified certain
tangible fixed assets with carrying values not recoverable and exceeding their
fair values. The carrying amounts of long-lived assets are considered to be not
recoverable if they exceed our estimates of their undiscounted future cash
flows, which are affected by our operations forecasts and strategic planning. As
a result, in addition to the impairment charge for Havana, we recorded a pre-tax
impairment loss of $1.5 million in the fourth quarter of 2003, which was
reported as "Restructuring and Impairment Charges" in the accompanying
statements of operations in 2003.
Alexander City Plant Closure
In December 2001, we permanently closed our aluminum plant in Alexander City,
Alabama. The Alexander City Plant is included in the Light Metals segment in
Note 14, Reporting for Business Segments, to our Consolidated Financial
Statements. The Alexander City Plant had revenues of $39.1 million and a net
loss of $9.8 million for the year ended December 31, 2001. The net loss of $9.8
million for 2001 includes after tax charges for asset impairment and shutdown
costs of $8.4 million.
The decision to close this plant was the principal reason we recorded $12.9
million pre-tax restructuring and impairment charges in the fourth quarter of
2001. These charges are included in "Restructuring and impairment charges" in
the accompanying statements of operations. The amount included a write-down of
$9.8 million to reduce the capital assets and inventories to their fair values,
an intangible asset write-down of $1.9 million, $0.7 million for site
environmental remediation and disposal costs, $0.4 million of provisions for
severance (for 18 salaried employees) and employee pay-related costs, and $0.1
million for legal costs. During 2002, we paid all of the $0.4 million of
severance accrued at December 31, 2001.
Reynosa Plant Closure
In the second quarter of 2001, we announced the shutdown of our Reynosa, Mexico,
machining operation. The Reynosa Plant is included in the Light Metals segment
in Note 14, Reporting for Business Segments, to our Consolidated Financial
Statements. We recorded a $0.6 million pre-tax shutdown charge, which was
included in "Restructuring and impairment charges" in the accompanying
statements of operations.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
6. GOODWILL
On January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible
Assets", under which goodwill is no longer amortized but is reviewed for
impairment at the reporting unit level annually, or more frequently if certain
events or changes in circumstances indicate that the carrying value may not be
recoverable. As required under SFAS No. 142, we wrote off negative goodwill of
$481,000 net of taxes, in the first quarter of 2002 as a cumulative effect of a
change in accounting principle. The following table reflects the proforma effect
of SFAS No. 142 on our net income for the years ended December 31:
<Table>
<Caption>
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Reported net (loss) income $ (98,913) $ 9,003 $ (8,703)
Add back: Goodwill amortization, net of taxes -- -- 5,298
------------ ------------ ------------
Adjusted net (loss) income $ (98,913) $ 9,003 $ (3,405)
============ ============ ============
Basic and diluted (loss) earnings per share:
Reported net (loss) income $ (3.87) $ 0.35 $ (0.34)
Add back: Goodwill amortization, net of taxes -- -- 0.21
------------ ------------ ------------
Adjusted net (loss) income $ (3.87) $ 0.35 $ (0.13)
============ ============ ============
</Table>
We have performed impairment tests according to the requirements of SFAS No.
142. In the second quarter of 2002, with the assistance of an independent
valuation firm, we performed our initial impairment test on our goodwill as of
January 1, 2002. In addition, we performed our annual impairment test of
goodwill as of November 30, 2002. Both tests indicated that goodwill was not
impaired as of those dates.
In December 2003, with the assistance of an independent valuation firm, we
performed our annual impairment test of goodwill as of November 30, 2003. Under
the first step of the annual impairment test, the fair values of our Ferrous
Metals reporting unit and Light Metals reporting unit were determined based on a
combination of an income method, which estimates the fair value based on the
future discounted cash flows, and a market method, which estimates the fair
values based on comparable market prices. Under the income method, we assumed a
cash flow period of 10 years, a discount rate of 11.5%, a compound annual growth
rate of 4.5% and 7.7% for Ferrous Metals reporting unit and Light Metals
reporting unit, respectively, for the ten-year period, and a terminal growth
rate of 1.0%. Due to the erosion of the profitability of the Light Metals
reporting unit, and the revision of our forecast as a result of the changing
market conditions, our estimated discounted cash flows from the Light Metals
reporting unit decreased significantly as compared to our impairment tests
performed in 2002. Based on the first step analysis, we determined that the
carrying value of the Light Metals reporting unit was in excess of its fair
value as of November 30, 2003. Accordingly, we were required to perform the
second step analysis on the Light Metals reporting unit to determine the amount
of the impairment. The second step analysis indicated that the pre-tax goodwill
impairment charge was $51.1 million, which was reported as "Goodwill Impairment
Charge" in the accompanying statements of operations in 2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
7. SHORT-TERM LINES OF CREDIT
Columbus Neunkirchen Foundry GmbH, our wholly owned subsidiary, has various
revolving lines of credit which are payable upon demand. These credit lines
provide for borrowings up to Euros 6.8 million (approximately $8.6 million) at
December 31, 2003. There were no outstanding borrowings under these agreements
as of December 31, 2003 and 2002.
As mentioned in Note 3, Acquisition, to our Consolidated Financial Statements,
we increased our ownership in the Porto Foundry to 75%. Therefore, the debt of
the Porto Foundry is consolidated into our financial results. At December 31,
2003, the Porto Foundry maintained lines of credit with various institutions for
up to Euros 13.7 million (approximately $17.3 million). There was approximately
$10.0 million outstanding under these credit lines as of December 31, 2003.
Interest accrues at various rates from approximately 3% to 5% and is payable
monthly.
8. DEBT
Long-term debt consists of the following at December 31 (in thousands of
dollars):
<Table>
<Caption>
2003 2002
------------ ------------
INTERMET:
Revolving credit facility $ 60,000 $ 63,000
Senior notes 175,000 175,000
Domestic subsidiaries:
Industrial development bonds 39,350 40,200
Capitalized leases 974 1,581
Foreign subsidiaries:
Bank term notes 7,629 322
Capitalized leases 598 --
------------ ------------
Total 283,551 280,103
Less: Long-term debt due within one year 4,303 1,567
------------ ------------
Long-term debt due after one year $ 279,248 $ 278,536
============ ============
</Table>
As of December 31, 2003, we had a bank revolving credit agreement under which,
as amended through December 19, 2003, we had a commitment amount of $190
million. That revolving credit agreement provided for a maturity date of
November 5, 2004 and was secured by all domestic assets and a pledge of 65% of
the stock of foreign subsidiaries. That revolving credit agreement contained
covenants that required us to maintain specified financial ratios. We were in
compliance with those covenants as of December 31, 2003. Various borrowing
options were available to us from overnight borrowings to term LIBOR borrowings.
At December 31, 2003, the borrowing under the revolving credit agreement
consisted of overnight borrowings and were at an interest rate of 6.50%. We must
also pay a fee, at a rate of 0.50% per annum, on any unused portion of the
secured revolving credit facility. Standby letters of credit reduce the amount
that the Company is able to borrow under its secured revolving credit facility.
At December 31, 2003, such standby letters of credit totaled $60.0 million.
Standby letters of credit are used to guarantee the payment or performance of
various obligations that we have, such as workers compensation, environmental
clean-up, and also in conjunction with several of our industrial revenue bonds.
These letters of credit are issued with one year maturity dates and re-issued
for an additional year upon each maturity date. Revolving credit agreement
covenants limit our availability to access the entire $190 million secured
revolving credit facility. At December 31, 2003, total borrowings and letter of
credit obligations under the $190 million secured revolving credit agreement
were $120.0 million. As of December 31, 2003, we had the ability to borrow an
additional $51.3 million under our credit agreement.
On January 8, 2004, we refinanced our revolving credit agreement by entering
into a new agreement, which provides for a $90 million revolving credit line and
a $120 million term loan. See Note 21, Subsequent Event, to our Consolidated
Financial Statements for further details regarding our new revolving credit
agreement. Because of this new agreement, the $60 million outstanding under our
prior revolving credit agreement is included in "Long-term debt due after one
year" in the accompanying balance sheet as of December 31, 2003.
As a result of the various amendments to our $300 million bank revolving credit
agreement and the processing of the new credit agreement in 2003, we incurred
$2.1 million of debt issuance costs which are included in "Other noncurrent
asset" in the accompanying balance sheet as of December 31, 2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
8. DEBT (CONTINUED)
On June 13, 2002, we completed a senior note offering of $175 million. The notes
bear a fixed rate of interest at 9.75% and will mature on June 15, 2009.
Interest is due each June 15 and December 15. The notes are unsecured and rank
equally with all of our existing and future unsecured senior debt. The net
proceeds of the senior note offering were used to pay the remaining balance on a
then existing bank term loan and for working capital purposes. The write-off of
unamortized debt issuance costs of $0.9 million pretax related to the
extinguishment of the bank term loan was reported as interest expense in the
accompanying statements of operations of 2002. Debt issuance costs of $5.9
million were capitalized in connection with the note offering and are included
in "Other noncurrent assets" in the accompanying balance sheet and are being
amortized over seven years. See Note 9, Supplemental Condensed Consolidating
Financial Information, for additional information regarding the senior unsecured
notes. The estimated fair value of our senior notes based on market data as of
December 31, 2003, was approximately $179.4 million.
On December 23, 1999, Columbus Foundry, L.P., a wholly owned subsidiary, issued
$35,000,000 of variable rate limited obligation revenue bonds. Under the terms
of the indenture, Columbus Foundry, L.P. is required to make interest-only
payments at a variable rate. The interest rate resets weekly and at December 31,
2003, was 1.17%. The principal is due December 1, 2019.
Under the terms of a bond indenture entered into by Lynchburg Foundry Company, a
wholly owned subsidiary, Lynchburg Foundry Company is required to make partial
redemption of its industrial development revenue bonds on an annual basis
through June 2006. The redemption amount is $350,000 per year, with a final
payment at maturity of $1,650,000. The balance outstanding as of December 31,
2003 was $2,350,000. The bonds are subject to optional redemption prior to
maturity and bear an interest rate of 7.0%.
As part of our acquisition of Tool Products, Inc. in 1998, we assumed $4,500,000
of industrial development revenue bond debt. We are required to make annual
principal payments of $500,000, with a final maturity date of January 1, 2007.
The balance as of December 31, 2003 was $2,000,000. The interest rate resets
weekly and it was 1.35% at December 31, 2003
We had capital leases of $1.6 million at December 31, 2003 and 2002, and these
leases relate to assets with net book values of $3.0 million and $2.4 million at
December 31, 2003 and 2002, respectively. Interest rates for these leases range
from 3.00% to 8.58% in 2003 and 2002. The amortization of assets under capital
leases is included in depreciation expense.
The foreign bank term notes bear interest rates from 3.00% to 5.00% per annum.
These borrowings are secured by property, plant and equipment with net book
values aggregating to approximately $21.0 million at December 31, 2003. At
December 31, 2003, the Porto Foundry had term loans of Euros 5.9 million
(approximately $7.4 million). These loans amortize semi-annually with various
amounts coming due from 2004 through 2008.
Maturities of long-term debt and capital leases at December 31, 2003, after
taking into effect of the new loan agreement entered into on January 8, 2004,
are as follows (in thousands of dollars):
<Table>
2004 $ 4,303
2005 3,934
2006 3,550
2007 1,132
2008 632
Thereafter 270,000
------------
Totals $ 283,551
============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
8. DEBT (CONTINUED)
We paid interest of $28.9 million, $26.5 million and $30.8 million in 2003, 2002
and 2001, respectively. No interest expense was capitalized in 2003 or 2002.
Our current bank agreements and senior note indenture limit our ability to pay
dividends. In 2003, under such agreements, we were able to pay dividends of up
to $5,000,000.
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
On June 13, 2002, we issued $175 million of senior notes, which will mature in
2009. The senior notes are guaranteed by certain of our domestic wholly owned
subsidiaries ("Combined Guarantor Subsidiaries"). The guarantees are
unconditional and joint and several. The senior notes are effectively
subordinated to the secured debt of the Company ("Parent"). Restrictions
contained in the indenture covering the senior notes include, but are not
limited to, restrictions on incurring additional secured debt, repurchasing of
our capital stock, disposal of assets, affiliate transactions, and transfer of
assets. As of December 31, 2003, the Parent and the Combined Guarantor
Subsidiaries had $98.0 million of secured debt outstanding and $70.0 million of
unused commitments, net of outstanding letters of credit, under our credit
facility. The secured debt of the Parent is also guaranteed by each of the
Combined Guarantor Subsidiaries.
Certain of our domestic subsidiaries (Intermet International, Inc., Intermet
Holding Company, Transnational Indemnity Company, and Western Capital
Corporation) and all of our foreign subsidiaries are not guarantors of the notes
("Combined Non-Guarantor Subsidiaries"). The Combined Non-Guarantor Subsidiaries
had $18.2 million of debt outstanding as of December 31, 2003.
Presented below are summarized condensed consolidating financial information for
the Parent, the Combined Guarantor Subsidiaries, the Combined Non-Guarantor
Subsidiaries, and the Company on a consolidated basis as of December 31, 2003
and 2002 and for the years ended December 31, 2003, 2002 and 2001.
Investments in subsidiaries are presented using the equity method of accounting.
Separate financial statements of the Combined Guarantor Subsidiaries are not
provided as the condensed consolidating financial information contained herein
provides a more meaningful disclosure to allow investors to determine the nature
of the assets held by and the operations of the combined group.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2003
----------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
INCOME STATEMENT DATA
Net sales $ -- $ 632,431 $ 116,405 $ (17,669) $ 731,167
Cost of sales -- 583,730 101,266 (17,669) 667,327
------------ ------------ ------------ ------------ ------------
Gross profit -- 48,701 15,139 -- 63,840
Selling, general and administrative 3,592 24,540 11,274 -- 39,406
Goodwill impairment charge -- 51,083 -- -- 51,083
Restructuring and impairment charges -- 9,707 261 -- 9,968
------------ ------------ ------------ ------------ ------------
Operating (loss) profit (3,592) (36,629) 3,604 -- (36,617)
Other expenses (income), net:
Interest expense, net 20,313 9,000 582 -- 29,895
Other expense (income), net (1,054) 124 (1,029) -- (1,959)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations before income taxes and
equity interest in a joint venture (22,851) (45,753) 4,051 -- (64,553)
Income tax benefit (expense) (23,222) 3,774 912 -- (18,536)
Equity interest in a joint venture -- -- 752 -- 752
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations (46,073) (41,979) 5,715 -- (82,337)
Loss from discontinued operations,
net of tax -- (16,576) -- -- (16,576)
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (46,073) $ (58,555) $ 5,715 $ -- $ (98,913)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2002
----------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
INCOME STATEMENT DATA
Net sales $ -- $ 683,634 $ 87,950 $ (15,847) $ 755,737
Cost of sales (35) 619,931 79,225 (15,887) 683,234
------------ ------------ ------------ ------------ ------------
Gross profit 35 63,703 8,725 40 72,503
Selling, general and administrative 3,709 22,578 6,537 2 32,826
------------ ------------ ------------ ------------ ------------
Operating (loss) profit (3,674) 41,125 2,188 38 39,677
Other expenses (income), net:
Interest expense (income), net 20,259 8,468 (457) -- 28,270
Other expense (income), net 57 (100) (118) -- (161)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations before income taxes and
equity interest in a joint venture (23,990) 32,757 2,763 38 11,568
Income tax benefit (expense) 10,556 (13,167) (54) -- (2,665)
Equity interest in a joint venture -- -- 1,573 -- 1,573
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations (13,434) 19,590 4,282 38 10,476
Loss from discontinued operations,
net of tax -- (1,954) -- -- (1,954)
Cumulative effect of change in
accounting principle, net of
tax -- -- 481 -- 481
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (13,434) $ 17,636 $ 4,763 $ 38 $ 9,003
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
INCOME STATEMENT DATA
Net sales $ -- $ 710,119 $ 89,986 $ (17,221) $ 782,884
Cost of sales 292 661,742 74,585 (16,196) 720,423
------------ ------------ ------------ ------------ ------------
Gross (loss) profit (292) 48,377 15,401 (1,025) 62,461
Selling, general and administrative 3,643 18,645 6,093 -- 28,381
Restructuring and impairment charges -- 13,540 -- -- 13,540
Goodwill amortization -- 6,328 -- -- 6,328
------------ ------------ ------------ ------------ ------------
Operating (loss) profit (3,935) 9,864 9,308 (1,025) 14,212
Other expenses (income), net:
Interest expense (income), net 17,588 12,435 (201) -- 29,822
Other expense (income), net (30) 131 (3,542) -- (3,441)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations before income taxes
and equity interest in a joint
venture (21,493) (2,702) 13,051 (1,025) (12,169)
Income tax benefit (expense) 7,198 26 (3,223) 258 4,259
Equity interest in a joint venture -- -- 946 -- 946
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations (14,295) (2,676) 10,774 (767) (6,964)
Loss from discontinued operations,
net of tax -- (1,739) -- -- (1,739)
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (14,295) $ (4,415) $ 10,774 $ (767) $ (8,703)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
AS OF DECEMBER 31, 2003
---------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
BALANCE SHEET DATA
ASSETS
Current assets:
Cash and cash equivalents $ (2,674) $ 127 $ 3,582 $ -- $ 1,035
Accounts receivable, net 7 64,457 22,309 -- 86,773
Inventories -- 58,030 19,440 (59) 77,411
Other current assets 7,319 1,677 1,751 1 10,748
------------ ------------ ------------ ------------ ------------
Total current assets 4,652 124,291 47,082 (58) 175,967
Property, plant and equipment, net 3,765 247,681 71,766 868 324,080
Other noncurrent assets:
Goodwill -- 165,933 -- -- 165,933
Other noncurrent assets 15,834 1,378 2,049 1,443 20,704
Intercompany, net (65,291) 86,241 (24,711) 3,761 --
Investments in subsidiaries 550,411 -- -- (550,411) --
------------ ------------ ------------ ------------ ------------
Total assets $ 509,371 $ 625,524 $ 96,186 $ (544,397) $ 686,684
============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,151 $ 58,504 $ 20,398 $ (316) $ 80,737
Accrued liabilities 27,671 29,041 224 2,606 59,542
Short-term lines of credit -- -- 9,992 -- 9,992
Long-term debt due within one year 350 983 2,970 -- 4,303
------------ ------------ ------------ ------------ ------------
Total current liabilities 30,172 88,528 33,584 2,290 154,574
Noncurrent liabilities:
Long-term debt due after one year 237,000 36,991 5,257 -- 279,248
Retirement benefits 84,135 1,174 -- -- 85,309
Other noncurrent liabilities (4,073) 4,843 3,838 808 5,416
------------ ------------ ------------ ------------ ------------
Total noncurrent liabilities 317,062 43,008 9,095 808 369,973
Shareholders' equity 162,137 493,988 53,507 (547,495) 162,137
------------ ------------ ------------ ------------ ------------
Total liabilities shareholders'
equity $ 509,371 $ 625,524 $ 96,186 $ (544,397) $ 686,684
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
AS OF DECEMBER 31, 2002
---------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
BALANCE SHEET DATA
ASSETS
Current assets:
Cash and cash equivalents $ 1,122 $ 167 $ 2,009 $ -- $ 3,298
Accounts receivable, net 162 63,336 23,281 -- 86,779
Inventories -- 57,376 8,139 (59) 65,456
Other current assets 21,291 2,901 682 1 24,875
------------ ------------ ------------ ------------ ------------
Total current assets 22,575 123,780 34,111 (58) 180,408
Property, plant and equipment, net 4,598 294,781 32,112 543 332,034
Other noncurrent assets:
Goodwill -- 217,016 -- -- 217,016
Other noncurrent assets 18,749 3,867 10,581 1,443 34,640
Intercompany, net (40,038) 63,759 (25,323) 1,602 --
Investments in subsidiaries 592,765 -- -- (592,765) --
------------ ------------ ------------ ------------ ------------
Total assets $ 598,649 $ 703,203 $ 51,481 $ (589,235) $ 764,098
============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,462 $ 63,399 $ 5,337 $ (265) $ 70,933
Accrued liabilities 19,603 34,480 11,041 81 65,205
Long-term debt due within one year 350 1,107 110 -- 1,567
------------ ------------ ------------ ------------ ------------
Total current liabilities 22,415 98,986 16,488 (184) 137,705
Noncurrent liabilities:
Long-term debt due after one year 240,350 37,974 212 -- 278,536
Retirement benefits 70,812 6,759 -- -- 77,571
Other noncurrent liabilities 7,503 6,955 (2,488) 747 12,717
------------ ------------ ------------ ------------ ------------
Total noncurrent liabilities 318,665 51,688 (2,276) 747 368,824
Shareholders' equity 257,569 552,529 37,269 (589,798) 257,569
------------ ------------ ------------ ------------ ------------
Total liabilities and shareholders'
equity $ 598,649 $ 703,203 $ 51,481 $ (589,235) $ 764,098
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2003
---------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
CASH FLOW DATA
Cash provided by continuing
operating activities $ 5,435 $ 14,896 $ 16,842 $ -- $ 37,173
Cash used in discontinued
operations -- (4,066) -- -- (4,066)
------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities 5,435 10,830 16,842 -- 33,107
Investing activities:
Additions to property, plant
and equipment by continuing
operations (1,725) (13,193) (4,615) -- (19,533)
Additions to property, plant
and equipment by discontinued
operations -- (145) -- -- (145)
Purchase of shares of a subsidiary -- -- (5,571) -- (5,571)
Proceeds from sale of assets of
a subsidiary -- 3,925 -- -- 3,925
Proceeds from sale of property,
plant and equipment 1,700 -- -- -- 1,700
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities (25) (9,413) (10,186) -- (19,624)
Financing activities:
Net decrease in revolving credit
facility (3,000) -- -- -- (3,000)
Repayment of other debts -- (1,457) (2,960) -- (4,417)
Payment of debt issuance costs (2,110) -- -- -- (2,110)
Dividends paid (4,096) -- -- -- (4,096)
------------ ------------ ------------ ------------ ------------
Net cash used in financing
activities (9,206) (1,457) (2,960) -- (13,623)
Effect of exchange rate changes on
cash and cash equivalents -- -- (2,123) -- (2,123)
------------ ------------ ------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents $ (3,796) $ (40) $ 1,573 $ -- $ (2,263)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2002
---------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
CASH FLOW DATA
Cash provided by (used in) continuing
operating activities $ 92,225 $ 4,231 $ (10,027) $ -- $ 86,429
Cash provided by discontinued
operations -- 2,946 -- -- 2,946
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities 92,225 7,177 (10,027) -- 89,375
Investing activities:
Additions to property, plant
and equipment by continuing
operations (1,714) (5,358) (1,355) -- (8,427)
Additions to property, plant
and equipment by discontinued
operations -- (1,018) -- -- (1,018)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities (1,714) (6,376) (1,355) -- (9,445)
Financing activities:
Net decrease in revolving credit
facility (85,000) -- -- -- (85,000)
Proceeds from debt offering 175,000 -- -- -- 175,000
Repayment of term loan (171,750) -- -- -- (171,750)
Repayment of other debts (244) (1,100) (302) -- (1,646)
Payment of debt issuance costs (6,022) -- -- -- (6,022)
Dividends paid (4,075) -- -- -- (4,075)
Issuance of common stock 374 -- -- -- 374
------------ ------------ ------------ ------------ ------------
Net cash used in financing
activities (91,717) (1,100) (302) -- (93,119)
Effect of exchange rate changes on
cash and cash equivalents -- -- 2,621 -- 2,621
------------ ------------ ------------ ------------ ------------
Net decrease in cash and cash
equivalents $ (1,206) $ (299) $ (9,063) $ -- $ (10,568)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2001
---------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------- ------------ ------------
(IN THOUSANDS OF DOLLARS)
CASH FLOW DATA
Cash provided by continuing operating
activities $ 29,320 $ 19,935 $ 14,115 $ -- $ 63,370
Cash provided by discontinued
operations -- 8,224 -- -- 8,224
------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities 29,320 28,159 14,115 -- 71,594
Investing activities:
Additions to property, plant
and equipment by continuing
operations (456) (26,802) (8,268) -- (35,526)
Additions to property, plant
and equipment from insurance -- -- (3,389) -- (3,389)
Additions to property, plant
and equipment by discontinued
operations -- (842) -- -- (842)
Proceeds from insurance for
replacement of property,
plant and equipment -- -- 3,389 -- 3,389
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities (456) (27,644) (8,268) -- (36,368)
Financing activities:
Net increase in revolving
credit facility 9,000 -- -- -- 9,000
Proceeds from term loan 182,750 -- -- -- 182,750
Repayment of term loan (211,000) -- -- -- (211,000)
Repayment of other debts (15,175) (1,149) (170) -- (16,494)
Purchase of common stock (349) -- -- -- (349)
Dividends paid (3,183) -- -- -- (3,183)
------------ ------------ ------------ ------------ ------------
Net cash used in financing
activities (37,957) (1,149) (170) -- (39,276)
Effect of exchange rate changes
on cash and cash equivalents -- -- (1,821) -- (1,821)
------------ ------------ ------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents $ (9,093) $ (634) $ 3,856 $ -- $ (5,871)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. STOCK COMPENSATION
We have executive stock option and incentive award plans ("Employee Plans") and
a directors stock option plan ("Directors Plan"). The Employee Plans permit the
grant of options and restricted shares for up to 3,000,000 shares of common
stock. The Directors Plan permits the grant of options to purchase up to 150,000
shares of common stock. Options granted under the Employee Plans vest over a
four-year period. Options under the Directors Plan are exercisable at the grant
date. The exercise prices of options issued under Employee Plans and Directors
Plan are equal to the fair values of the common stock at the option grant date.
Certain options also remain outstanding from prior stock option plans. At
December 31, 2003, options for 1,190,320 shares were exercisable, while 947,133
of the Employee Plans options and restricted shares and 26,000 Directors Plan
options were available for future grant.
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for the stock
option plans. Accordingly, we have not recognized compensation expense for our
stock option plans.
The fair values of our stock options presented in Note 1 were estimated as of
the date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions for 2003, 2002 and 2001:
<Table>
<Caption>
2003 2002 2001
------------ ------------ ------------
Risk-free interest
rate 3.50% 3.00% 2.50%
Dividend yield 1.00% 1.00% 1.00%
Volatility 0.464 0.769 0.480
Expected life 6 years 6 years 6 years
</Table>
For purposes of the pro forma disclosures required under SFAS No. 123, the
estimated fair value of the options is amortized over the options' vesting
period.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
our employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of our stock options.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. STOCK COMPENSATION (CONTINUED)
A summary of our stock option activity for the three years ended December 31,
2003, is as follows:
<Table>
<Caption>
NUMBER OF WEIGHTED AVERAGE EXERCISE
OPTIONS EXERCISE PRICE PRICE RANGE
------------ ---------------- ------------
Outstanding at January 1, 2001 1,524,050 $ 11.31
Granted 462,300 3.54 $ 3.37-$5.04
Exercised -- -- --
Forfeited (320,500) 10.30 3.37 - 18.06
------------
Outstanding at December 31, 2001 1,665,850 $ 9.54 3.37 - 19.38
============
Exercisable at December 31, 2001 899,230 $ 11.94
Weighted average fair value of
options granted during 2001 $ 1.51
Outstanding at January 1, 2002 1,665,850 $ 9.54
Granted 175,000 5.07 $ 4.20-$8.39
Exercised (19,750) 9.67 8.66 - 11.20
Forfeited (80,125) 5.41 3.44 - 18.06
------------
Outstanding at December 31, 2002 1,740,975 $ 9.27 3.38 - 19.38
============
Exercisable at December 31, 2002 1,141,248 $ 11.25
Weighted average fair value of
options granted during 2002 $ 3.03
Outstanding at January 1, 2003 1,740,975 $ 9.27
Granted 325,500 3.57 $ 3.57
Exercised -- -- --
Forfeited (272,000) 9.72 3.44 - 18.06
------------
Outstanding at December 31, 2003 1,794,475 $ 8.17 3.38 - 19.38
============
Exercisable at December 31, 2003 1,190,320 $ 10.29
Weighted average fair value of
options granted during 2003 $ 1.58
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. STOCK COMPENSATION (CONTINUED)
The following table summarizes information about options outstanding as of
December 31, 2003:
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- -------------------------------
WEIGHTED-AVERAGE
REMAINING
RANGE OF EXERCISE NUMBER CONTRACTUAL LIFE WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
PRICE OUTSTANDING (IN YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------------- ----------- ---------------- ---------------- ----------- ----------------
$0.00 - $9.68 1,228,725 6.7 $ 5.06 624,570 $ 6.07
9.69 - 19.38 565,750 3.8 14.94 565,750 14.94
----------- -----------
1,794,475 1,190,320
=========== ===========
</Table>
We have an Employee Stock Ownership Plan ("ESOP") to purchase INTERMET common
stock for some of our United States employees who are not covered by collective
bargaining agreements. We make contributions equal to 3% of the annual
compensation of the ESOP participants. We may, at our discretion, make
additional contributions within specified limits. Since 2003, our contributions
have been made to the Savings and Investment Plan, a 401(k) retirement plan,
instead of the ESOP. Our contributions to the Savings and Investment Plan were
$747,000 in 2003. ESOP expenses were $615,000 and $554,000 in 2002 and 2001,
respectively.
On October 6, 1995, our Board of Directors declared a dividend of one right for
each share of INTERMET common stock held of record at the close of business on
October 17, 1995, pursuant to a Shareholder Protection Rights Agreement dated
October 6, 1995. The rights generally are not exercisable until 10 days after an
announcement by us that a person, as defined (excluding, with certain
limitations, certain holders of 10% or more of our common stock who do not
acquire additional shares, any of our ESOPs or benefit plans, and INTERMET or
any of its wholly-owned subsidiaries), has acquired 10% of our common stock or
announces a tender offer that could result in the ownership of 10% or more of
our common stock. Each right, should it become exercisable, will entitle the
owner to buy 1/100th of a share of Participating Preferred Stock, a new series
of our preferred stock, at an exercise price of $40. On October 16, 1997, we
amended the rights agreement to provide that certain institutional investors who
own in excess of 10%, but less than 15% of our common stock, are not "Acquiring
Persons" as defined by the rights agreement.
In the event the rights become exercisable as a result of the acquisition of
shares, each right will entitle the owner, other than the acquiring person, to
buy at the rights' then current exercise price a number of shares of common
stock with a market value equal to twice the exercise price. In addition, unless
the acquiring person owns more than 50% of the outstanding shares of common
stock, the board of directors may elect to exchange all outstanding rights
(other than those owned by such acquiring person or affiliates thereof) at an
exchange ratio of one share of common stock per right. Unless we merge with
another company under certain conditions or redeem or exchange the rights before
October 6, 2005, the rights will expire on such date.
In February 2001 our Board of Directors adopted a Restricted Share Unit Award
Plan for certain key executives. Under this plan, eligible executives were
entitled to surrender all or a portion of the bonuses they earned under our 2000
profit-sharing plan in exchange for an award of Restricted Share Units. The
number of shares awarded under this program was matched one for one for the
participants who remained with the company for at least two years from the award
date.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments required under building and equipment operating
leases that have initial or remaining non-cancelable lease terms in excess of
one year at December 31, 2003 are as follows (in thousands of dollars):
<Table>
2004 $ 4,745
2005 4,065
2006 2,425
2007 1,790
2008 1,055
Thereafter 4
------------
Total $ 14,084
============
</Table>
Total rental expense under operating leases aggregated $4,498,000, $5,464,000,
and $6,046,000 in 2003, 2002 and 2001, respectively.
We had commitments to purchase capital equipment of approximately $5.7 million
as of December 31, 2003.
At December 31, 2003, 46% of the domestic labor force is covered by collective
bargaining agreements, and 25% of the domestic labor force is covered by
collective bargaining agreements that will expire within one year.
We are subject to federal, state, local and foreign environmental laws and
regulations concerning, among other things, air emissions, effluent discharges,
storage treatment and disposal of hazardous materials and remediation of
contaminated soil and groundwater. At some of our industrial sites hazardous
materials have been managed for many years. Consequently, we are subject to
various environmental laws that impose compliance obligations and can create
liability for historical releases of hazardous substances. It is likely that we
will be subject to increasingly stringent environmental standards in the future
and that we will be required to make additional expenditures, which could be
significant, relating to environmental matters on an ongoing basis.
The 1990 amendments to the Federal Clean Air Act and regulations promulgated
thereunder are expected to have a major impact on the compliance cost of many
U.S. companies, including foundries of the type we own. We are in the process of
reviewing Maximum Achievable Control Technology Standards that will be
applicable to our industry.
We also have current and former operating entities (for which we may be
responsible) that are potentially responsible for cleanup of known environmental
sites. These include third-party-owned sites, as well as sites that are
currently owned, or formerly owned, by us or our subsidiaries. For known
environmental sites, we have recorded reserves to cover estimated future
environmental expenditures. Environmental reserves at December 31, 2003 and 2002
were $6,852,000 and $5,845,000, respectively. As of December 31, 2003, the
environmental reserves included a $3.1 million cash escrow account acquired as a
part of the acquisition of Ganton Technologies in 1999 that is being used to
fund the clean-up of an inactive property located in Addison, Illinois, and we
expect that the cleanup will occur and the account will be settled in 2004. The
reserves also include $2.5 million for the now closed Radford facilities, which
is discussed below. There can be no assurance that costs in excess of these
accruals will not be incurred, or that unknown conditions will not be discovered
that result in material additional expenditures by us for environmental matters.
On March 14, 2002, we entered into a Consent Order with the U.S. Environmental
Protection Agency ("USEPA"), which will require investigation of the nature and
extent of any hazardous waste disposed of at our Radford, Virginia, facilities.
We have entered into this Consent Order in connection with the USEPA's
Corrective Action Program, which is being undertaken on a nationwide basis by
USEPA pursuant to the Resource Conservation and Recovery Act of 1976. The
Corrective Action Program requires facilities that have historically generated
or handled hazardous waste to determine whether those activities have or could
adversely affect groundwater or human health. Because we historically disposed
of waste material at this site, it is probable that remedial action will be
required with respect to that on-site disposal. We have accrued $2.5 million for
such remediation activity based on our investigation to date. However, our
investigation of this site will continue and it is possible that ultimate
remediation costs could exceed the amounts we have accrued.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
We are also a party to other legal proceedings associated with environmental,
employment, commercial, product liability or other matters in the ordinary
course of our business. At the present time, we do not believe that any of such
proceedings will have a material adverse effect on our results of operations. We
self-insure a significant portion of our health care and property and casualty
insurance risks. However, we purchase additional insurance for catastrophic
losses. The events of September 11, 2001, caused extreme turmoil in the property
and casualty insurance market. This, coupled with property losses at our New
River and Neunkirchen plants that were incurred in the first half of 2000,
resulted in increases in our property insurance deductible. We now carry a $2.5
million property deductible per occurrence.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS
We maintain four noncontributory defined benefit pension plans for certain U.S.
employees covered by collective bargaining agreements and for which the benefits
are based on years of service. Additionally, we maintain two non-contributory
defined benefit pension plans for certain U.S. salaried and non-union hourly
employees and for which the benefits are based on final average compensation.
Our policy is to fund amounts as required under applicable laws and regulations.
In addition to providing pension benefits, we provide health care and life
insurance benefits to certain retired U.S. employees and their dependents. In
2003, eligibility requirements for retiree health care for certain salaried
employees were changed so that these employees can become eligible for retiree
health care benefits at age 62, depending on years of service. Additionally,
newly-hired employees will not be eligible for retiree health care benefits.
Certain salaried employees who already have met eligibility requirements at age
55 or age 60, depending on years of service, would continue to be eligible for
retiree health care benefits. Retirees and their dependents under age 65 receive
substantially the same health care benefits as active employees. The medical
plans generally pay most medical expenses less deductible and co-pay amounts.
Salaried and hourly employees also contribute to the cost of coverage. Certain
salaried employee coverage converts to a Medicare carve-out plan at age 65. We
subsidize a Medicare supplement plan for certain eligible salaried employees
over age 65. Most hourly employee coverage ceases at age 65. However, certain
hourly employees retain eligibility for coverage supplementing Medicare.
Our amendments to certain plans in 2003 increased the pension benefit
obligations by $1.6 million and reduced the other postretirement benefit
obligations by $5.0 million. In addition, the curtailment of a postretirement
benefit plan in 2003 reduced the other postretirement benefit obligations by
$0.5 million.
Due to the closure of the Radford Foundry in 2003, other postretirement benefit
obligations decreased by $2.0 million and resulted in an after-tax gain of $1.2
million. There was also an increase in pre-tax pension cost of $0.3 million
($0.2 million after-tax loss) due to pension curtailment. The net after-tax gain
of $1.0 million was reported in "Loss from Discontinued Operation, Net of Tax"
in the accompanying statements of operations in 2003.
We use a September 30 measurement date for all of our pension and other
postretirement benefit plans.
The obligations and funded status of the retirement benefit plans are as follows
(in thousands of dollars):
<Table>
<Caption>
AT DECEMBER 31,
---------------------------------------------------------------
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year $ 90,828 $ 81,195 $ 43,435 $ 40,870
Service cost - benefits earned
during the year 2,443 1,922 1,018 973
Interest cost on benefit obligation 6,018 5,966 2,746 2,925
Amendments 1,636 -- (4,985) 142
Curtailment -- -- (520) --
Actuarial losses 8,229 5,391 4,332 2,177
Benefits paid (4,432) (3,646) (3,496) (3,652)
------------ ------------ ------------ ------------
Benefit obligation at end of year $ 104,722 $ 90,828 $ 42,530 $ 43,435
------------ ------------ ------------ ------------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning
of year $ 58,897 $ 66,650
Actual return on plan assets 5,793 (5,890)
Company contributions 2,214 1,783
Benefits paid (4,432) (3,646)
------------ ------------
Fair value of plan assets at end
of year $ 62,472 $ 58,897
------------ ------------
Funded status of the plan
(under-funded) $ (42,250) $ (31,931) $ (42,530) $ (43,435)
Unrecognized net actuarial losses
(gains) 35,550 28,767 3,207 (3,037)
Unrecognized transition obligation 286 58 -- --
Unrecognized prior service cost
(benefit) 6,497 5,849 (4,678) 271
------------ ------------ ------------ ------------
Prepaid (accrued) benefit cost on
balance sheets $ 83 $ 2,743 $ (44,001) $ (46,201)
============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
Amounts recognized for pension benefits in the consolidated balance sheets
consist of (in thousands of dollars):
<Table>
<Caption>
AT DECEMBER 31,
-----------------------------
2003 2002
------------ ------------
Prepaid pension benefit cost $ 4,708 $ 4,815
Accrued pension benefit liability (46,020) (36,184)
Intangible assets 6,497 5,849
Accumulated other comprehensive income, pretax 34,898 28,263
------------ ------------
Net amount recognized $ 83 $ 2,743
============ ============
</Table>
The accumulated benefit obligation for all of the pension plans was $104.1
million and $90.3 million at December 31, 2003 and 2002, respectively.
All of our pension plans had accumulated benefit obligations in excess of plan
assets (under-funded plans) as of December 31, 2003 and 2002.
The components of net periodic benefit cost are as follows (in thousands of
dollars):
<Table>
<Caption>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------------------
PENSION BENEFITS OTHER POST RETIREMENT BENEFITS
------------------------------------------ ------------------------------------------
2003 2002 2001 2003 2002 2001
------------ ------------ ------------ ------------ ------------ ------------
Service cost $ 2,443 $ 1,922 $ 2,109 $ 1,018 $ 973 $ 899
Interest cost 6,018 5,966 5,747 2,746 2,925 2,701
Expected return on plan assets (5,878) (6,120) (6,275) -- -- --
Amortization of net transition
obligation -- 15 51 -- -- --
Amortization of prior service cost 735 756 717 (60) (2) (13)
Amortization of loss (gain) 1,531 (382) (661) (208) (445) (992)
Curtailment loss 253 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net periodic benefit cost $ 5,102 $ 2,157 $ 1,688 $ 3,496 $ 3,451 $ 2,595
============ ============ ============ ============ ============ ============
</Table>
The assumptions used to determine benefit obligations and cost are as follows:
Weighted-average assumptions used to determine benefit obligations:
<Table>
<Caption>
AT DECEMBER 31,
---------------------------------------------------------------
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Discount rate 6.00% 6.75% 6.00% 6.75%
Rate of compensation increase for
benefit plans with benefit obligations
based on compensation 3.66% 3.61%
</Table>
Weighted-average assumptions used to determine net periodic benefit cost:
<Table>
<Caption>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------------------
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
------------------------------------------ ------------------------------------------
2003 2002 2001 2003 2002 2001
------------ ------------ ------------ ------------ ------------ ------------
Discount rate 6.75% 7.50% 8.00% 6.75% 7.50% 8.00%
Expected long-term return on plan
assets 8.75% 9.50% 9.50%
Rate of compensation increase for
benefit plans with benefit cost
based on compensation 3.61% 3.61% 3.72%
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
To determine the overall expected long-term rate of return on assets, we
consider the current level of expected returns on risk-free investments
(primarily government bonds), the historical level of the risk premium
associated with the other asset categories in which the portfolio is invested,
and the expected returns of each asset category of the investment portfolio. The
expected return of each asset category is then weighted based on the target
asset allocation to develop the overall expected long-term rate of return on
assets.
During each quarter, our pension plan actuaries determine a range of expected
rates of return based on actual asset mix. Expected rates of return that are
between the 25th and 75th percentile of this range are considered reasonable.
The expected rates of return of 8.50% and 8.75% as of September 30, 2003 and
2002, respectively, were near the 70th percentile of the ranges of expected
rates of return.
Assumed health care cost trend rates for other postretirement benefits:
<Table>
<Caption>
AT DECEMBER 31,
-----------------------------
2003 2002
------------ ------------
Health care cost trend rate assumed for next year 10.50% 8.00% to 10.00%
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2015 2006 to 2008
</Table>
The assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rates would have the following effects for 2003
(in thousands of dollars):
<Table>
<Caption>
ONE PERCENTAGE ONE PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
Effect on total service and interest cost $ 299 $ (263)
Effect on postretirement benefit obligation $ 2,266 $ (2,154)
</Table>
Our pension plans weighted-average asset allocations at December 31, 2003 and
2002, by asset category are as follows:
<Table>
<Caption>
PLAN ASSETS AT DECEMBER 31,
-----------------------------
2003 2002
------------ ------------
Asset Category:
Equity securities 52% 50%
Debt securities 48 50
------------ ------------
Total 100% 100%
============ ============
</Table>
Equity securities do not include any common stock of INTERMET Corporation.
Under our investment policies and strategies, pension funds are invested in
equity securities (including convertible securities), debt securities (including
preferred stock), and cash equivalents (including senior debt under one year to
maturity). Pension plan assets allocation guidelines as follows:
Asset Category: Allocation Guidelines Equity securities 30% to 75% Debt
securities 25% to 70% Cash equivalents 0% to 30%
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
Investment managers have full discretion to invest assets within our investment
guidelines, including timing, turnover and selection of investment. Pension plan
assets are held such that assets are available for near-term, mid-term and
long-term future benefit payments.
Equity asset holdings are selected from established markets (including New York
Stock Exchange, over-the-counter markets, and regional and foreign markets) and
equity portfolios are expected to achieve an absolute and risk adjusted return,
which surpasses the comparative index. Equity assets cannot be held in private
placement securities, letter stock or uncovered options. Short sales, margin
transactions and other specialized transactions are prohibited. No more than 10%
of assets may be held in an individual security, or 15% in a particular
industry. This pertains to both equity and debt investments, exclusive of
treasuries and agencies.
Debt asset holdings can be invested in liquid preferred stocks, corporate debt,
obligations of the U.S. Government and its fully guaranteed agencies, and debt
issues convertible to equities. Investments in single-issue securities are
limited to 5% of assets (except for U.S. Government or agency obligations).
Assets are not to be invested in private placements, fixed income or interest
rate futures, or from arbitrage or other specialized investments. Up to 5% of
assets may be invested in below investment grade debt securities. Up to 5% of
assets may be invested in global fixed income securities.
Cash equivalent holdings may be invested in commercial paper, repurchase
agreements, Treasury bills, certificates of deposit, and money market funds.
Investments in cash equivalents can be made for income, for liquidity for
expense and benefit payments, or to preserve principal value. Assets must
represent maturity of less than one year at the time of purchase. Short-term
instruments considered speculative in nature may not be purchased. Single issuer
paper is limited to 5% of the funds, except for U.S. Government or agencies.
Pension funds may also be invested in mutual funds or other pooled funds
containing securities. Direct investments in financial futures, commodities and
currency exchanges are prohibited; however, such investments may be made in
mutual funds.
We expect to contribute $14.9 million to our pension plans in 2004. This
estimate is based on the assumption that the funding relief provided by the U.S.
government, which has already expired in 2003, will not be extended to 2004. If
the funding relief is ultimately extended to 2004, the estimated contribution
amount will be reduced.
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid (in thousands of dollars):
<Table>
<Caption>
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
---------------- -----------------------------
2004 $ 5,501 $ 3,863
2005 5,749 3,857
2006 6,030 3,736
2007 6,250 3,385
2008 6,515 3,386
Years 2009 to 2013 35,210 17,502
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
We provide prescription drug benefits to some of our retirees and will,
therefore, be impacted by the provisions of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the "Medicare Reform Act"), which was
enacted on December 8, 2003. The Medicare Reform Act provides for a federal
subsidy to sponsors of retiree health care benefit plans which provide a benefit
that is at least actuarially equivalent to the benefit established by this Act,
and therefore may reduce our postretirement benefit obligations. In accordance
with the Position of the Staff of the Financial Accounting Standards Board FAS
106-1, the effects on our accumulated postretirement benefit obligation and net
periodic postretirement benefit cost have not been recognized in our financial
statements. Specific authoritative guidance on the accounting for the Medicare
Reform Act is pending and that guidance, when issued, could require changes in
the information reported in our financial statements. Due to the lack of
direction regarding the provision of the Medicare Reform Act and the uncertainty
associated with the related accounting issues, we are deferring recognition of
the effects of the Medicare Reform Act.
We maintain several defined contribution plans for certain salaried employees,
hourly employees covered by collective bargaining agreements, and non-union
hourly employees. All of these plans allow participants to make pretax
contributions as a percentage of their compensation. We contribute a specified
percentage of the annual compensation of participants of some of the plans.
Certain plans provide a matching contribution on employees' pretax contribution
to a specified limit. Some plans provide for contributions based on hours worked
by each employee; other plans provide for profit-sharing contributions or other
base contributions. Costs recognized as expenses to these plans, excluding ESOP
expenses, totaled $2,958,000, $2,414,000 and $2,065,000 in 2003, 2002 and 2001,
respectively.
13. INCOME TAXES
The provision for income taxes consists of the following (in thousands of
dollars):
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
Current:
Federal $ -- $ -- $ (6,791)
State 484 504 1,457
Foreign (374) 739 3,644
------------ ------------ ------------
110 1,243 (1,690)
------------ ------------ ------------
Deferred:
Federal 18,314 1,522 (2,920)
State -- (100) 351
Foreign 112 -- --
------------ ------------ ------------
18,426 1,422 (2,569)
------------ ------------ ------------
Total tax provision (benefit) $ 18,536 $ 2,665 $ (4,259)
============ ============ ============
</Table>
We paid federal income taxes of approximately $2,501,000 and $1,100,000 in 2003
and 2002, respectively. We did not pay any federal income taxes in 2001.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
13. INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount computed using the
statutory U.S. federal income tax rate for the following reasons (in thousands
of dollars):
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
Provision for income taxes (benefits)
at U.S. statutory rate $ (22,594) $ 4,672 $ (3,951)
Foreign operations (94) 573 (1,658)
Utilization of credits and credit
carryforwards -- (3,065) --
State income taxes excluding valuation
allowance, net of federal income tax
benefits (415) 691 1,070
Non-deductible goodwill amortization
and write-off 13,767 -- 1,613
Valuation allowance for federal tax 22,981 -- --
Valuation allowance for state tax 899 -- --
Other 3,992 (206) (1,333)
------------ ------------ ------------
Total tax provision (benefit) $ 18,536 $ 2,665 $ (4,259)
============ ============ ============
</Table>
The components of the Company's net deferred income tax assets at December 31,
2003 and 2002 are as follows (in thousands of dollars):
<Table>
<Caption>
2003 2002
------------ ------------
Compensation and benefit items $ 37,618 $ 37,263
Operating loss, foreign tax credit and Alternative
Minimum Tax credit carryforwards 19,449 15,704
Impairment and shutdown costs 1,539 905
Deductible goodwill 3,991 2,512
Reserve for bad debts, returns and allowances 1,984 3,651
Inventory reserve 5,337 4,763
State income taxes 1,093 3,280
Other temporary differences 1,274 2,304
------------ ------------
Gross deferred tax assets 72,285 70,382
Valuation allowance (29,732) (50)
------------ ------------
Deferred tax assets 42,553 70,332
Depreciation and related items (32,346) (43,330)
Other temporary differences (10,060) (4,242)
------------ ------------
Gross deferred tax liabilities (42,406) (47,572)
------------ ------------
Net deferred tax assets $ 147 $ 22,760
============ ============
</Table>
We generated foreign tax credits of $179,000, $3,773,000 and $7,190,000 in 2003,
2002 and 2001, respectively, which will expire in 2008, 2007 and 2006,
respectively, if not utilized. In December 2003, we provided a valuation
allowance for this entire accumulated foreign tax credit of $11,142,000 since we
may not generate sufficient U.S. tax liabilities to utilize these credits before
the expiration dates. In addition, in December 2003, we provided a valuation
allowance of $18,540,000 for the remaining domestic net deferred tax assets of
$18,687,000, reducing the carrying value of our net deferred tax assets as of
December 31, 2003 to $147,000. This is due to the accumulation of losses
experienced at our domestic operations in the immediate past three years (2001
to 2003).
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
14. REPORTING FOR BUSINESS SEGMENTS
We evaluate our financial results in two business segments, namely Ferrous
Metals segment and Light Metals segment. Our segment reporting is consistent
with the manner in which our business is managed and our resources are allocated
by the management. The Ferrous Metals segment consists of ferrous foundry
operations and their related machining operations. The Light Metals segment
consists of aluminum, magnesium and zinc casting operations and their related
machining operations. Corporate and Other segment includes operations that do
not fall within the Ferrous Metals segment or Light Metals segment and the
corporate business unit and its related expenses and eliminations. Selected
financial information of the business segments is displayed in the following
table.
<Table>
<Caption>
FERROUS CORPORATE
METALS LIGHT METALS AND OTHER CONSOLIDATED
------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
Year ended December 31, 2003
Net sales $ 493,401 $ 237,766 $ -- $ 731,167
Depreciation and amortization
expense 31,143 17,202 1,906 50,251
Goodwill impairment charge -- 51,083 -- 51,083
Restructuring and impairment
charges 9,138 556 274 9,968
Operating profit (loss) 13,333 (44,192) (5,758) (36,617)
Interest expense, net 4,600 4,928 20,367 29,895
Purchases of property, plant
and equipment - continuing
operations 8,036 9,772 1,725 19,533
Purchases of property, plant
and equipment - discontinued
operations 145 -- -- 145
As of December 31, 2003
Goodwill $ 59,731 $ 106,202 $ -- $ 165,933
Total assets 372,812 281,396 32,476 686,684
Year ended December 31, 2002
Net sales $ 484,146 $ 271,591 $ -- $ 755,737
Depreciation and amortization
expense 27,011 18,019 2,090 47,120
Operating profit (loss) 25,867 20,216 (6,406) 39,677
Interest expense, net 3,584 4,390 20,296 28,270
Cumulative effect of change in
accounting -- -- 481 481
Purchases of property, plant
and equipment - continuing
operations 2,648 4,065 1,714 8,427
Purchases of property, plant
and equipment - discontinued
operations 671 -- 347 1,018
As of December 31, 2002
Goodwill $ 59,731 $ 157,285 $ -- $ 217,016
Total assets 367,002 332,905 64,191 764,098
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
14. REPORTING FOR BUSINESS SEGMENTS (CONTINUED)
<Table>
<Caption>
FERROUS CORPORATE
METALS LIGHT METALS AND OTHER CONSOLIDATED
------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
Year ended December 31, 2001
Net sales $ 482,139 $ 300,745 $ -- $ 782,884
Depreciation and amortization expense 24,715 20,274 3,274 48,263
Goodwill amortization expense 2,030 4,298 -- 6,328
Restructuring and impairment charges -- 13,540 -- 13,540
Operating profit (loss) 21,412 2,016 (9,216) 14,212
Interest expense, net 6,013 6,003 17,806 29,822
Purchases of property, plant
and equipment - continuing
operations* 20,653 14,440 433 35,526
Purchases of property, plant
and equipment - discontinued
operations 842 -- -- 842
As of December 31, 2001
Goodwill $ 59,731 $ 157,285 $ -- $ 217,016
Total assets 411,294 360,021 69,224 840,539
</Table>
- ----------
* Does not include $3,389,000 capital reimbursed through insurance in 2001.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
15. GEOGRAPHIC AREA AND MAJOR CUSTOMER INFORMATION
The following is a breakout of net sales, operating profit, income before income
taxes, and identifiable assets based on the geographic locations of our domestic
and foreign operations as of and for years ended December 31, 2003, 2002 and
2001. We operate in North America and have international operations in Europe,
mainly Germany and Portugal.
<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
Net sales:
North America $ 614,762 $ 667,787 $ 692,898
Europe 116,405 87,950 89,986
------------ ------------ ------------
Total $ 731,167 $ 755,737 $ 782,884
============ ============ ============
Operating (loss) profit:
North America $ (41,291) $ 36,239 $ 3,700
Europe 4,674 3,438 10,512
------------ ------------ ------------
Total $ (36,617) $ 39,677 $ 14,212
============ ============ ============
(Loss) income from continuing operations before
income taxes and equity interest in a joint
venture:
North America $ (68,693) $ 8,379 $ (25,572)
Europe 4,140 3,189 13,403
------------ ------------ ------------
Total $ (64,553) $ 11,568 $ (12,169)
============ ============ ============
</Table>
<Table>
<Caption>
AS OF DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
Identifiable assets:
North America $ 560,117 $ 683,775 $ 764,903
Europe 126,567 80,323 75,636
------------ ------------ ------------
Total $ 686,684 $ 764,098 $ 840,539
============ ============ ============
</Table>
Net sales to customers exceeding 10% of consolidated net sales in 2003, 2002 or
2001, and other major customers, were as follows (as a percentage of
consolidated net sales):
<Table>
<Caption>
CUSTOMER: 2003 2002 2001
- ------------------------------------------------------- ------------ ------------ ------------
DaimlerChrysler (1) 10% 18% 19%
Delphi 11% 11% 10%
Ford 11% 12% 12%
Metaldyne (1) 8% 1% --
TRW 6% 2% 4%
Visteon 6% 5% 6%
PBR Automotive 6% 5% 5%
General Motors 5% 5% 6%
</Table>
- ----------
(1) During 2003, Metaldyne acquired a facility from DaimlerChrysler to
which we supply products. This accounts for the majority of the change
in the amounts we supply to Metaldyne and DaimlerChrysler from 2002 to
2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
16. EARNINGS PER SHARE
Earnings per share are computed as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------------------------------
2003 2002 2001
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net (loss) income $ (98,913) $ 9,003 $ (8,703)
============ ============ ============
Denominator:
Denominator for basic earnings per
share - weighted average shares 25,581 25,441 25,359
Effect of dilutive securities:
Employee stock options and
unearned restricted stock -- 437 --
------------ ------------ ------------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 25,581 25,878 25,359
============ ============ ============
Net (loss) income per common share -
basic $ (3.87) $ 0.35 $ (0.34)
============ ============ ============
Net (loss) income per common share -
assuming dilution $ (3.87) $ 0.35 $ (0.34)
============ ============ ============
</Table>
Dilutive earnings per share reflect the assumed exercise of stock options and
unearned restricted stock.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
17. QUARTERLY DATA AND SHARE INFORMATION (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 2003 and 2002:
<Table>
<Caption>
THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
2003
Net sales (1) $ 193,040 $ 182,118 $ 172,700 $ 183,309
Gross profit (1) 21,241 17,923 14,729 9,947
(Loss) income from discontinued operations,
net of tax (188) (8,643) 655 (8,400)
Net income (loss)(2) 3,152 (6,589) (50) (95,426)
Net income (loss) per common share
- - Basic 0.12 (0.26) -- (3.73)
- - Diluted 0.12 (0.26) -- (3.73)
Share prices (Nasdaq)(3)
- - High 4.400 4.000 4.700 5.610
- - Low 3.260 3.060 3.330 4.140
2002
Net sales (1) $ 191,922 $ 202,722 $ 180,615 $ 180,478
Gross profit (1) 20,977 24,147 12,073 15,306
Loss from discontinued operations,
net of tax (507) (907) (199) (341)
Income (loss) before cumulative
effect of change in accounting(4) 4,355 4,750 (1,013) 430
Net income (loss) 4,836 4,750 (1,013) 430
Income (loss) before cumulative
effect of change in accounting(4)
per common share
- - Basic 0.17 0.19 (0.04) 0.02
- - Diluted 0.17 0.18 (0.04) 0.02
Net income (loss) per common share
- - Basic 0.19 0.19 (0.04) 0.02
- - Diluted 0.19 0.18 (0.04) 0.02
Share prices (Nasdaq)(3)
- - High 7.100 11.800 11.240 5.590
- - Low 3.120 7.080 4.500 3.150
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
17. QUARTERLY DATA AND SHARE INFORMATION (UNAUDITED) (CONTINUED)
(1) The net sales and gross profit data for 2003 and 2002 above are different
from amounts previously reported on Form 10-Q and 2002 annual report,
respectively, because Frisby and Radford became discontinued operations in
the third quarter of 2003 and fourth quarter of 2003, respectively. The
reconciliations of the amounts above with those previously reported are as
follows:
<Table>
<Caption>
THREE MONTHS ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30
------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
2003
Net sales - previously reported $ 207,104 $ 196,766 $ 182,054
Less: Net sales of Frisby (3,817) (3,275) --
Less: Net sales of Radford (10,247) (11,373) (9,354)
------------ ------------ ------------
Net sales $ 193,040 $ 182,118 $ 172,700
============ ============ ============
Gross profit - previously reported $ 21,282 $ 17,541 $ 14,722
Less: Gross (profit) loss of Frisby (406) 48 --
Less: Gross loss of Radford 365 334 7
------------ ------------ ------------
Gross profit $ 21,241 $ 17,923 $ 14,729
============ ============ ============
</Table>
<Table>
<Caption>
THREE MONTHS ENDED
---------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
(IN THOUSANDS OF DOLLARS)
2002
Net sales - previously reported $ 206,096 $ 217,958 $ 196,564 $ 194,314
Less: Net sales of Frisby (3,252) (3,611) (3,961) (2,779)
Less: Net sales of Radford (10,922) (11,625) (11,988) (11,057)
------------ ------------ ------------ ------------
Net sales $ 191,922 $ 202,722 $ 180,615 $ 180,478
============ ============ ============ ============
Gross profit - previously reported $ 20,519 $ 22,945 $ 12,046 $ 14,653
Less: Gross loss (profit) of Frisby 64 73 (89) 668
Less: Gross loss (profit) of Radford 394 1,129 116 (15)
------------ ------------ ------------ ------------
Gross profit $ 20,977 $ 24,147 $ 12,073 $ 15,306
============ ============ ============ ============
</Table>
(2) During the fourth quarter of 2003, we recorded pretax goodwill
impairment charge of $51,083,000 because the carrying value of the
Light Metals reporting unit was in excess of its fair value. We also
recorded pretax restructuring and asset impairment charges of
$9,968,000, which included a $8,481,000 charge for the announced
closure of our Havana Foundry, and $1,487,000 in write-downs of other
long-lived assets with carrying values exceeding their fair values. In
addition, we recorded a valuation reserve against our domestic net
deferred tax assets of $23.9 million for our continuing operations.
This is due to the accumulation of losses experienced at our domestic
operations for the immediate past three years (2001 to 2003). All of
these charges have negative impact on our net income (loss), and total
assets and shareholders' equity.
(3) The share price information represents inter-dealer transactions in the
Nasdaq National Market (Nasdaq) without detail markup, markdown or
commission.
(4) During the first quarter of 2002, we adopted SFAS No. 142. As required
under SFAS No. 142, we wrote off negative goodwill of $481,000, net of
taxes, as a cumulative effect of a change in accounting principle.
Third- and fourth-quarter sales are usually lower than the first- and
second-quarter sales due to plant closings by automotive manufacturers for
vacations and model changeovers.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
18. DERIVATIVE FINANCIAL INSTRUMENTS
Under our risk management policy, the use of derivatives for managing risk is
confined to hedging the exposure related to variable rate funding activities,
hedging the foreign currency exposure of inter-company payables and receivables,
and hedging purchase commitments relating to raw materials used in our
production processes and related energy costs. Specifically, we review our
liability structure on a recurring basis and make the determination as to
whether our risk exposure should be adjusted using derivative instruments. We do
not participate in speculative derivatives trading.
On October 24, 2000, we entered into an interest rate swap agreement with a
notional principal amount of $50,000,000 through Scotia Capital, Inc., a
broker-dealer subsidiary of The Bank of Nova Scotia. Interest rate swaps are
contractual agreements between parties to exchange fixed and floating interest
rate payments periodically, over the life of the agreements, without the
exchange of underlying principal amounts. Under the terms of the agreement, we
paid quarterly at a fixed interest rate of 6.468% with Scotia Capital, Inc.
paying at the three-month LIBOR rate. This swap was used to partially hedge an
underlying debt obligation and is marked to market. The agreement expired on
October 24, 2003.
We designated this swap transaction as a cash flow hedge. The effectiveness of
this hedge transaction was assessed using the short-cut method as it met the
criteria outlined in SFAS No. 133. This hedge was considered to be perfectly
effective; therefore, the entire change in the fair value of the derivative was
recorded in other comprehensive income, and no hedge ineffectiveness was
recorded in earnings.
To hedge our European operations, we had outstanding foreign exchange contracts
with a notional amount of Euros 15.5 million (approximately $19.1 million) and
Euros 15.9 million (approximately $16.7 million) at December 31, 2003 and 2002,
respectively. The market value of such foreign exchange contracts was minimal at
December 31, 2003 and 2002.
In addition to the above derivative financial instruments, we have other
contracts that have the characteristics of derivatives but are not required to
be accounted for as derivatives. These contracts for the physical delivery of
commodities qualify for the normal purchases and normal sales exception under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" as
we take physical delivery of the commodity and use it in the production process.
This exception is an election and, if not elected, these contracts would be
carried in the balance sheet at fair value with changes in the fair value
reflected in earnings. These contracts are used to cover our raw materials and
energy purchases.
19. INSURANCE CLAIMS
On May 20, 2000, our Neunkirchen Foundry suffered a fire that caused extensive
damage. The Foundry was shut down for a period of approximately two weeks.
On March 5, 2000, our New River Foundry suffered an explosion that shut down
operations at the facility until November of 2000. The rebuilding of our New
River facility was completed in 2001.
The resulting business interruption and loss of fixed assets was covered under
our insurance policies. We received final settlements for the above two claims
totaling $133.8 million from our insurance carriers, $30.6 million in 2001 and
$103.2 million in 2000. In 2001, we recorded accident-related expenses of $7.8
million as Cost of Sales, and insurance recovery related to business
interruption of $13.4 million as an offset to Cost of Sales. We also recorded
$3.2 million for the replacement of property, plant and equipment as gains in
"Other income, net" in the accompanying statements of operations in 2001.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
20. RELATED PARTY TRANSACTIONS
We received management and technical support fees from Fundicao Nodular, S.A.
("Porto Foundry"), our previously 50% owned Portuguese joint venture, for
providing administrative service and technical support to them. We also had an
outstanding interest-bearing loan to and other receivables from the Porto
Foundry, mainly consisting of management and technical support fee receivables
and advances made by us to finance the Porto Foundry's operations. Interest
rates on these loan and other receivables ranged from three-month European
Interbank Offered Rate ("EURIBOR") plus 0.8% to three-month EURIBOR plus 1.0%.
On July 1, 2003, our ownership in the Porto Foundry increased from 50% to 75%.
Therefore our related party transactions with the Porto Foundry from July 1,
2003 to December 31, 2003, were eliminated from our consolidated financial
statements.
The related party transactions with the Porto Foundry are summarized as follows
(in thousands of dollars):
<Table>
<Caption>
2003 * 2002 2001
------------ ------------ ------------
Management fee $ 152 $ 329 $ 319
Technical support fee 220 427 480
Interest income 98 164 153
</Table>
- ----------
* The 2003 figures are for the period from January 1, 2003 to June 30, 2003.
<Table>
<Caption>
AS OF DECEMBER 31, 2002
- -----------------------
Loan receivable $ 812
Other receivable 4,144
</Table>
There were no other material transactions with, or material balances due to or
from, any other related party.
21. SUBSEQUENT EVENT
On January 8, 2004, we refinanced our revolving credit agreement by entering
into a new First Amended and Restated Credit Agreement, which provides for a $90
million revolving credit line and a $120 million term loan. The new credit
agreement continues to be secured by all domestic assets and a pledge of 65% of
the stock of foreign subsidiaries. The $90 million revolving credit portion
matures January 8, 2009, and the $120 million term loan has a final maturity of
January 8, 2010. Pricing on the revolving loan is based on our leverage. The
current spread above LIBOR is 3.50%. We are also required to pay 0.50% on any
unused portion of the revolving credit agreement. Letters of credit reduce the
amount available under this revolving credit facility. Pricing on the term loan
is LIBOR plus 4.25%. Both loans continue to have covenants that require us to
maintain certain financial ratios, restrictions on the amount that we can pay in
dividends, as well as other covenants and restrictions. At December 31, 2003, we
would have been in compliance with these new covenants. Under our current bank
agreements and senior note indenture, we are able to pay dividends of up to $5
million in 2004. As a result of the new agreement, capitalized debt issuance
costs of $1.4 million were written off in January 2004.
Also on January 8, 2004, we entered into a $35.6 million Letter of Credit
Facility Agreement, as well as a Cash Collateral Agreement of the same amount.
$35.6 million of the proceeds from the term loan were used as collateral for the
issuance of a $35.6 million letter of credit. This letter of credit was issued
under our prior bank revolving credit agreement. We are required to pay a fee of
0.625% for the Letter of Credit Facility Agreement. The agreement has a
five-year maturity and requires us to be in compliance with the covenants that
govern the First Amended and Restated Credit Agreement.
Report of Independent Auditors
The Board of Directors and Shareholders
INTERMET Corporation
We have audited the accompanying consolidated balance sheets of INTERMET
Corporation as of December 31, 2003 and 2002, and the related consolidated
statements of operations, comprehensive income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2003. Our
audits also include the financial statement schedule included as Item 15(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of INTERMET
Corporation at December 31, 2003 and 2002, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 6 to the consolidated financial statements, the Company
adopted SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets" in
2002.
/s/ Ernst & Young LLP
- ----------------------
Detroit, Michigan
March 4, 2004
CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of management, including our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the year
covered by this report. Based upon that evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls
and procedures are effective in timely alerting them to material information
relating to us (including our consolidated subsidiaries) that is required to be
included in our periodic Security Exchange Commission reports.
There was no change in our internal control over financial reporting that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
INTERMET Corporation
Consolidated Statements of Operations
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
(in thousands of dollars, except per share data)
Net sales $ 837,173 $ 731,167 $ 755,737
Cost of sales 820,938 667,327 683,234
------------ ------------ ------------
Gross profit 16,235 63,840 72,503
Operating expenses:
Selling, general and administrative 43,317 39,406 32,826
Reorganization charges 14,733 -- --
Goodwill impairment charge 165,933 51,083 --
Restructuring and impairment charges 32,213 9,968 --
------------ ------------ ------------
Total operating expenses 256,196 100,457 32,826
------------ ------------ ------------
Operating (loss) profit (239,961) (36,617) 39,677
Other expenses (income):
Interest expense, net 30,484 29,895 28,270
Other income, net (511) (1,959) (161)
------------ ------------ ------------
Total other expenses 29,973 27,936 28,109
------------ ------------ ------------
(Loss) income from continuing operations before
income taxes and equity interest in a joint
venture (269,934) (64,553) 11,568
Income tax expense (736) (18,536) (2,665)
Equity interest in a joint venture -- 752 1,573
------------ ------------ ------------
(Loss) income from continuing operations (270,670) (82,337) 10,476
Loss from discontinued operations, net of tax:
Loss from operation (2,958) (16,535) (1,954)
Loss from sale -- (41) --
------------ ------------ ------------
(Loss) income before cumulative effect of change
in accounting (273,628) (98,913) 8,522
Cumulative effect of change in accounting, net
of tax -- -- 481
------------ ------------ ------------
Net (loss) income $ (273,628) $ (98,913) $ 9,003
============ ============ ============
Net (loss) income per common share - basic:
(Loss) income from continuing operations $ (10.57) $ (3.22) $ 0.41
Loss from discontinued operations, net
of tax (0.12) (0.65) (0.08)
Cumulative effect of change in accounting,
net of tax -- -- 0.02
------------ ------------ ------------
Net (loss) income $ (10.69) $ (3.87) $ 0.35
============ ============ ============
Net (loss) income per common share - assuming
dilution
(Loss) income from continuing operations $ (10.57) $ (3.22) $ 0.40
Loss from discontinued operations, net
of tax (0.12) (0.65) (0.07)
Cumulative effect of change in accounting,
net of tax -- -- 0.02
------------ ------------ ------------
Net (loss) income $ (10.69) $ (3.87) $ 0.35
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Statements of Comprehensive Income
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
(in thousands of dollars)
Net (loss) income $ (273,628) $ (98,913) $ 9,003
Other comprehensive income (loss),
net of tax:
Foreign currency translation adjustment 6,312 10,537 9,793
Derivative instrument liability adjustment -- 1,343 515
Minimum pension liability adjustment (1,410) (4,312) (11,481)
------------ ------------ ------------
Total other comprehensive income
(loss) 4,902 7,568 (1,173)
------------ ------------ ------------
Comprehensive (loss) income $ (268,726) $ (91,345) $ 7,830
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Balance Sheets
<Table>
<Caption>
December 31,
------------------------------
2004 2003
------------ ------------
(in thousands of dollars,
except per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 11,239 $ 1,035
Accounts receivable:
Trade, less allowances of $9,560 in 2004
and $6,528 in 2003 108,932 76,218
Other 5,593 10,555
------------ ------------
114,525 86,773
Inventories 71,527 77,411
Other current assets 11,410 10,748
------------ ------------
Total current assets 208,701 175,967
------------ ------------
Property, plant and equipment, net 278,080 324,080
Goodwill -- 165,933
Deferred income tax assets -- 147
Other noncurrent assets 26,042 20,557
------------ ------------
Total noncurrent assets 304,122 510,717
------------ ------------
Total assets $ 512,823 $ 686,684
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,969 $ 80,737
Accrued payroll and benefits 37,198 33,885
Other accrued liabilities 24,632 25,657
Current portion of retirement benefits 11,855 14,542
Short-term lines of credit 15,975 9,992
Long-term debt due within one year 168,180 4,303
------------ ------------
Total current liabilities 287,809 169,116
Liabilities subject to compromise 250,464 --
Noncurrent liabilities:
Long-term debt due after one year 4,055 279,248
Retirement benefits 70,982 70,767
Deferred income tax liabilities 1,977 --
Other noncurrent liabilities 6,191 5,416
------------ ------------
Total noncurrent liabilities 83,205 355,431
Shareholders' equity (deficit):
Preferred stock; 5,000,000 shares
authorized; none issued in 2004 and 2003 -- --
Common stock, $0.10 par value; 50,000,000 shares
authorized in 2004 and 2003; 25,665,257 and
25,593,391 shares issued and outstanding in
2004 and 2003 2,606 2,601
Capital in excess of par value 57,276 57,165
Retained earnings (deficit) (166,254) 109,428
Accumulated other comprehensive loss (2,092) (6,994)
Unearned restricted stock (191) (63)
------------ ------------
Total shareholders' equity (deficit) (108,655) 162,137
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 512,823 $ 686,684
============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Statements of Cash Flows
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
(in thousands of dollars)
OPERATING ACTIVITIES:
(Loss) income from continuing operations $ (270,670) $ (82,337) $ 10,476
Adjustments to reconcile net (loss) income to
cash provided by operating activities:
Cumulative effect of change in
accounting -- -- 481
Depreciation and amortization 49,750 50,251 47,120
Amortization of debt discount and
issuance costs 8,389 2,211 2,083
Goodwill impairment charge 165,933 51,083 --
Restructuring and impairment charges 32,213 9,506 --
Results of equity investment -- (752) (1,573)
Deferred income tax provision 2,124 22,613 548
(Gain) loss on disposal of property,
plant and equipment (289) (1,526) 3,109
Changes in operating assets and
liabilities:
Accounts receivable (28,017) 6,772 28,538
Inventories 4,336 (6,657) 6,968
Accounts payable and current
liabilities 29,032 (11,233) (15,818)
Other assets and liabilities (17,636) (2,758) 4,497
------------ ------------ ------------
Cash (used in) provided by operating
activities (24,835) 37,173 86,429
Cash (used in) provided by discontinued
operations (359) (4,066) 2,946
------------ ------------ ------------
Cash (used in) provided by operating
activities (25,194) 33,107 89,375
INVESTING ACTIVITIES:
Additions to property, plant and
equipment (22,858) (19,533) (8,427)
Additions to property, plant and
equipment by discontinued operations -- (145) (1,018)
Proceeds from sale of property, plant
and equipment 969 1,700 --
Purchase of shares of a subsidiary (6,220) (5,571) --
Proceeds from sale of assets of a
subsidiary -- 3,925 --
------------ ------------ ------------
Cash used in investing activities (28,109) (19,624) (9,445)
FINANCING ACTIVITIES:
Net decrease in revolving credit
facility (14,139) (3,000) (85,000)
Proceeds from term loan 120,000 -- --
Proceeds from debtor-in-possession
facility 3,000 -- --
Proceeds from debt offering -- -- 175,000
Repayment of term loan -- -- (171,750)
Repayment of revenue bonds (35,000) -- --
Repayments of other debts (3,624) (4,417) (1,646)
Payments of debt issuance costs (5,200) (2,110) (6,022)
Issuance of common stock 16 -- 374
Dividends paid (3,078) (4,096) (4,075)
------------ ------------ ------------
Cash used in financing activities 61,975 (13,623) (93,119)
Effect of foreign currency exchange
rate changes 1,532 (2,123) 2,621
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 10,204 (2,263) (10,568)
Cash and cash equivalents at beginning
of year 1,035 3,298 13,866
------------ ------------ ------------
Cash and cash equivalents at end of year $ 11,239 $ 1,035 $ 3,298
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Consolidated Statements of Shareholders' Equity (Deficit)
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
(in thousands of dollars, except share and per share data)
COMMON STOCK, $0.10 PAR VALUE
Balance as of January 1 $ 2,601 $ 2,601 $ 2,590
Issued in connection with exercise of options
to purchase 19,750 shares of common stock -- -- 2
Issued in connection with deferred compensation
plan 5 -- 9
------------ ------------ ------------
Balance as of December 31 2,606 2,601 2,601
CAPITAL IN EXCESS OF PAR VALUE
Balance as of January 1 57,165 57,124 56,761
Amounts in excess of par value of common stock
issued in connection with exercise of options
to purchase shares -- -- 189
Amounts in excess of par value of common stock
issued in connection with stock compensation
plan 111 41 174
------------ ------------ ------------
Balance as of December 31 57,276 57,165 57,124
RETAINED EARNINGS (DEFICIT)
Balance as of January 1 109,428 212,437 207,512
Net (loss) income (273,628) (98,913) 9,003
Cash dividends of $0.08 per share in 2004, and
$0.16 per share in 2003 and 2002 (2,054) (4,096) (4,078)
------------ ------------ ------------
Balance as of December 31 (166,254) 109,428 212,437
ACCUMULATED TRANSLATION
Balance as of January 1 15,689 5,152 (4,641)
Foreign currency translation adjustment 6,312 16,213 14,932
Related income tax expense -- (5,676) (5,139)
------------ ------------ ------------
Balance as of December 31 22,001 15,689 5,152
DERIVATIVE INSTRUMENT LIABILITY
Balance as of January 1 -- (1,343) (1,858)
Derivative instrument liability adjustment -- 2,066 792
Related income tax expense -- (723) (277)
------------ ------------ ------------
Balance as of December 31 -- -- (1,343)
MINIMUM PENSION LIABILITY
Balance as of January 1 (22,683) (18,371) (6,890)
Additional minimum pension liability (1,410) (6,634) (17,663)
Related income tax credit -- 2,322 6,182
------------ ------------ ------------
Balance as of December 31 (24,093) (22,683) (18,371)
UNEARNED RESTRICTED STOCK
Balance as of January 1 (63) (31) (194)
Issuance of 60,000, 7,500 and 6,000 shares
of common stock in 2004, 2003 and 2002,
respectively (226) (63) (20)
Restricted stock vested 98 31 44
Forfeitures -- -- 139
------------ ------------ ------------
Balance as of December 31 (191) (63) (31)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) $ (108,655) $ 162,137 $ 257,569
============ ============ ============
</Table>
See accompanying notes.
INTERMET Corporation
Notes to Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
INTERMET Corporation produces castings in North America and Europe for light and
heavy vehicles, including powertrain, chassis, brake, and body / interior
components, as well as industrial products. In addition, we perform value-added
services including advanced design and engineering, prototype casting and
machining and sub-assembly, principally for our automotive customers.
Our business segments include two groups: the Ferrous Metals Group and the Light
Metals Group. Ferrous Metals consists of ductile iron casting and related
manufacturing. Light Metals consists of aluminum, magnesium and zinc casting,
along with associated value-added activities.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements, presented in
conformity with accounting principles generally accepted in the United States
("GAAP"), include the accounts of INTERMET and its domestic and foreign
subsidiaries. All significant inter-company transactions and balances have been
eliminated in consolidation. All subsidiaries have a fiscal year ending December
31. Investments in 20% to 50% owned companies are accounted for under the equity
method.
On September 29, 2004, INTERMET Corporation and 17 of its wholly-owned domestic
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
Eastern District of Michigan. These Chapter 11 cases have been consolidated for
the purposes of joint administration as In re: INTERMET Corporation, et al.
(Case No. 04-67597).
The accompanying consolidated financial statements have been prepared in
accordance with AICPA Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") using a going
concern assumption. However, as a result of the Chapter 11 proceedings, such
realization of assets and liquidation of liabilities, without substantial
adjustments and/or change of ownership, is highly uncertain. Given this
uncertainty, there is substantial doubt about our ability to continue as a going
concern. However, we expect to propose a plan of reorganization to the
Bankruptcy Court by June 27, 2005. When filed, the plan of reorganization will
set forth the means for treating claims, including liabilities subject to
compromise. The plan of reorganization may result in, among other things,
significant dilution of equity interests as a result of issuance of equity
securities to creditors or new investors. The confirmation of any plan of
reorganization will require creditor acceptance as required under the Bankruptcy
Code and approval of the Bankruptcy Court. Further, the plan of reorganization
could materially change the amounts and classifications in our historical
consolidated financial statements. While operating the businesses as
debtors-in-possession, we and our subsidiaries may dispose of assets or settle
liabilities for amounts materially different from those in the accompanying
consolidated financial statements. The appropriateness of using a going concern
assumption in the preparation of the accompanying consolidated financial
statements is dependent upon, among other things, our ability to comply with the
covenants of our secured debtor-in-possession revolving credit facility and our
ability to generate cash from operations.
INTERMET Corporation
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. During 2004, there
were no material changes in the methods or policies used to establish estimates
and assumptions. Generally, matters subject to estimation and judgment include
accounts receivable realization, inventory obsolescence, long-lived asset
impairment, pension and other postretirement benefit obligations, accruals
related to litigation and environmental costs and valuation reserves for
deferred tax assets. Actual results may differ from the estimates provided.
RECLASSIFICATIONS
Certain other amounts previously reported in the 2003 financial statements and
notes thereto have been reclassified to conform to the 2004 presentation.
REVENUE RECOGNITION
We recognize revenue upon shipment of products and transfer of title.
SHIPPING AND HANDLING COSTS
We record shipping and handling costs as components of "Cost of Sales" within
our statements of operations.
STOCK-BASED COMPENSATION
We grant stock options to employees and directors with an exercise price equal
to the fair value of the shares at the date of grant. We account for stock
option grants in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and, accordingly, recognize no
compensation expense for the stock option grants. Had compensation expense for
these stock option grants been determined based on the fair value at the grant
dates for awards under the stock option plans consistent with the method of
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", our pro forma net (loss) income, basic (loss)
earnings per share and diluted (loss) earnings per share would be the following:
<Table>
<Caption>
2004 2003 2002
------------ ------------ ------------
(in thousands of dollars, except per share data)
Net (loss) income,
as reported $ (273,628) $ (98,913) $ 9,003
Less: Total stock-based employee compensation
expense determined under fair value
method for all awards, net of related tax
effects (937) (1,043) (794)
------------ ------------ ------------
Pro forma net (loss) income $ (274,565) $ (99,956) $ 8,209
============ ============ ============
(Loss) earnings per share:
Basic - as reported $ (10.69) $ (3.87) $ 0.35
============ ============ ============
Basic - pro forma $ (10.72) $ (3.91) $ 0.32
============ ============ ============
Diluted - as reported $ (10.69) $ (3.87) $ 0.35
============ ============ ============
Diluted - pro forma $ (10.72) $ (3.91) $ 0.32
============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
We use the Black-Scholes option pricing model to estimate the fair value of our
stock options as described in Note 10 to our Consolidated Financial Statements,
Stock Compensation.
CASH AND CASH EQUIVALENTS
All short-term investments with original maturities of less than 90 days are
deemed to be cash equivalents for purposes of the statements of cash flows.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Allowance for doubtful accounts reduces trade accounts receivable to its net
recognizable amount. It is determined by a combination of factors, such as
customer charge-backs, a customer's inability to meet its financial obligations
to us, our past loss history and the length of time the trade account
receivables are past due. If circumstances change, our estimates of the
recoverability of trade accounts receivable could be reduced by a material
amount. We typically do not require collateral from our customers.
INVENTORIES
Inventories are stated at the lower of cost or market. Certain raw materials and
supplies inventories are valued on a weighted average cost basis. Average
production cost is used for certain work in process. Finished goods inventories
and other inventories are valued by the first-in, first-out ("FIFO") method. The
specific identification method is used for pattern inventories. Cost is
determined on the last-in, first-out ("LIFO") method for 5.4% and 3.2% of
inventories as of December 31, 2004 and 2003, respectively. If LIFO inventories
were valued using the same cost methods used for other inventories, their
carrying values would have increased by $2.2 million and $0.9 million at
December 31, 2004 and 2003, respectively. Supplies inventories are evaluated for
obsolescence based on length of time in the store-room and expected near-term
use.
The components of inventories are as follows (in thousands of dollars):
<Table>
<Caption>
December 31,
-----------------------------
2004 2003
------------ ------------
Finished goods $ 24,123 $ 22,433
Work in process 9,751 8,198
Raw materials 11,947 8,113
Supplies and patterns 25,706 38,667
------------ ------------
Total inventories $ 71,527 $ 77,411
============ ============
</Table>
PREPAID EXPENSES
We recognize payments made in advance for future services as prepaid expenses
and include them in "Other Current Assets" in the accompanying balance sheets.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The provision for depreciation
and amortization of property, plant and equipment is determined using the
straight-line method on the basis of the following estimated useful lives: 2 to
40 years for buildings and improvements and 2 to 21 years for machinery and
equipment. The amortization of property, plant and equipment under capital
leases is included in depreciation expense. Industrial development grants
provided by the federal and state governments of Germany are included as
reductions of property, plant and equipment and are being amortized over the
estimated useful lives of the related assets.
We evaluate our property, plant and equipment for impairment whenever events or
changes in circumstances indicate that the carrying amounts of such assets may
not be recoverable. The carrying amount of a long-lived asset is considered to
be not recoverable if it exceeds our estimates of its undiscounted future cash
flows based on our operation forecasts. Impairment charges will be measured and
recorded as the amount by which the carrying values of the long-lived assets
exceed their fair values.
The components of property, plant and equipment are as follows (in thousands of
dollars):
<Table>
<Caption>
December 31,
-----------------------------
2004 2003
------------ ------------
Land $ 6,716 $ 6,681
Buildings and improvements 141,361 143,382
Machinery and equipment 549,759 517,846
Construction in progress 22,695 26,443
------------ ------------
Property, plant and equipment, at cost 720,531 694,352
Less: Accumulated depreciation 442,451 370,272
------------ ------------
Property, plant and equipment, net $ 278,080 $ 324,080
============ ============
</Table>
GOODWILL
Goodwill represents the excess acquisition cost over the fair value of net
assets acquired and is not amortized, but is reviewed for impairment annually or
more frequently if certain events or changes in circumstances indicate that the
carrying value may not be recoverable. We perform impairment tests of our
goodwill as required. We evaluate our goodwill recoverability based on a
combination of an income method, which estimates the fair value of our reporting
units based on the future discounted cash flows, and a market method, which
estimates the fair values based on comparable market prices. In December 2004,
we recorded an impairment charge against goodwill of $165.9 million, which
represented the total value of goodwill in both of our reporting segments. As a
result, as of December 31, 2004, the carrying value of goodwill was $0. See Note
6, Goodwill, for further discussion.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
DERIVATIVES
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
requires us to recognize all of our derivative instruments as either assets or
liabilities in the statement of financial position at fair value. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and, if so, on the type of hedging relationship. For those
derivative instruments that are designated and qualify as hedging instruments,
we designate the hedging instrument as either a fair value hedge, cash flow
hedge or a hedge of a net investment in a foreign operation, based upon the
exposure being hedged.
ENVIRONMENTAL MATTERS
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated. These accruals are adjusted periodically as assessment and
remediation efforts progress or other information becomes available. Related
insurance or other third-party recoveries for environmental liabilities are
recorded as a reduction of environmental reserve when it is probable that a
recovery will be realized.
Environmental costs are capitalized if the costs extend the life of the
property, increase its capacity and / or mitigate or prevent contamination from
future operations. Costs related to environmental contamination treatment and
clean-up are charged to expense.
INCOME TAXES
We account for taxes on income using the asset and liability method where
deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities using statutory tax rates.
We regularly assess the likelihood that the deferred tax assets, including net
operating loss carryforwards, are recoverable. This process requires substantial
management judgment. To the extent that we believe the recoverability is less
than likely, we will establish a valuation reserve against the deferred tax
assets. Actual results could differ from our estimates and such differences
could be material to the financial statements. For the years ended December 31,
2004 and 2003, we recorded a valuation reserve of $42.9 million and $23.9
million, respectively, against our domestic net deferred tax assets due to the
accumulation of losses experienced at our domestic operations between 2002 and
2004.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of foreign subsidiaries for which the local currency
is the functional currency are translated into U.S. dollars at year-end exchange
rates. Income and expense items are translated at average exchange rates
prevailing during the year. The resulting translation adjustments are recorded
in Accumulated Other Comprehensive Income as a component of Shareholders'
Equity.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued Statement No. 123 (revised 2004) (FAS 123R),
"Share-Based Payment." FAS 123R replaces FASB Statement No. 123 (FAS 123),
"Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees." FAS 123, as originally issued in
1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. The approach to accounting for
share-based payments in FAS 123R is similar to the fair-value approach permitted
in FAS 123, however, FAS 123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on their fair values and the current pro forma disclosure is no
longer an alternative to financial statement recognition. In April 2005, the SEC
delayed the effective date for FAS 123R until the first fiscal year beginning
after June 15, 2005. We are currently assessing the effect of FAS 123R and
believe the effect will not be material to our results of operations.
2. VOLUNTARY REORGANIZATION UNDER CHAPTER 11 AND ADMINISTRATION
On September 29, 2004, INTERMET and 17 of its wholly-owned domestic subsidiaries
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Michigan. These Chapter 11 cases have been consolidated for the
purposes of joint administration as In re: INTERMET Corporation, et al. (Case
No. 04-67597).
INTERMET's subsidiaries for which bankruptcy petitions were filed are Alexander
City Casting Company, Inc., Cast-Matic Corporation, Columbus Foundry, L.P.,
Diversified Diemakers, Inc., Ganton Technologies, Inc., INTERMET Holding
Company, INTERMET Illinois, Inc., INTERMET International, Inc., INTERMET U.S.
Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company, Northern Castings
Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc., Wagner Castings
Company and Wagner Havana, Inc., all of which, together with INTERMET, are
currently operating as debtors and debtors-in-possession. Other INTERMET
subsidiaries, including foreign subsidiaries, are not parties to the Chapter 11
proceedings and are operating in the normal course.
Our bankruptcy proceedings were initiated primarily in response to substantial
and unprecedented increases in the cost of raw materials, especially scrap
steel. The price of scrap steel, which is our primary raw material, increased
from approximately $160 per net ton at the beginning of 2003 to approximately
$210 per net ton at the end of 2003 to approximately $400 per net ton by the end
of 2004. This included record increases of $85 per gross ton and $65 per gross
ton in July and August of 2004, respectively. The price of scrap steel reached a
peak of $440 per net ton in November, 2004. Because of pre-existing contractual
pricing terms with most of our customers, we were limited in our ability to pass
these cost increases to our customers. At the same time, some of our largest
trade creditors began to tighten or eliminate credit terms, which increased our
working capital requirements. We also experienced operational difficulties at
our Pulaski, Tennessee and Racine, Wisconsin light-metals plants.
These financial and operational difficulties impaired our ability to continue to
draw on our pre-petition revolving credit facility. In an effort to avoid
anticipated defaults under our loan covenants, which would have occurred as of
September 30, 2004, we entered into discussions with the agent for our
pre-petition lenders, seeking waivers of certain conditions contained in the
pre-petition credit facility. We were unable to obtain waivers on acceptable
terms and, consequently, the Chapter 11 cases were filed on September 29, 2004.
We have continued to operate our U.S. businesses as debtors-in-possession under
bankruptcy court protection from creditors. We continue to review all aspects of
our business for opportunities to improve performance, while seeking to
restructure our secured and unsecured debt, rationalize our facilities and cost
structure and effect a customer strategy focused on scrap steel cost recovery
and other commercial and financial issues.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
2. VOLUNTARY REORGANIZATION UNDER CHAPTER 11 AND ADMINISTRATION (CONTINUED)
On December 8, 2004, our Board of Directors adopted an Amended and Restated Key
Employee Retention Plan in order to retain certain key employees during our
bankruptcy proceedings. The plan provides for the payment of bonuses to
participants who remain employed by us through a successful reorganization or
sale of the company. The plan was approved by the bankruptcy court on December
22, 2004. The number of employees who are participants in the plan is
approximately 100, and we estimate that the total amount payable to participants
will be approximately $5.2 million. One third (1/3) of each participant's
payment is due following confirmation of a plan of reorganization and the
remaining two thirds (2/3) is due between January 1, 2006 and January 10, 2006.
The plan also provides for severance benefits under certain conditions.
LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise refers to liabilities of the debtors incurred
prior to September 29, 2004, and represent the estimates of known or potential
pre-petition claims to be resolved in connection with the bankruptcy
proceedings. Such claims remain subject to future proceedings. Payment terms for
these claims will be established in connection with the bankruptcy proceedings.
The amounts of the various liabilities that are subject to compromise are set
forth below (in thousands of dollars):
<Table>
<Caption>
December 31, 2004
-----------------
Senior notes payable $ 177,000
Accounts payable 64,192
Other accrued liabilities 3,369
Interest payable 5,000
Accrued payroll and benefits 903
-----------
Subtotal 250,464
Intercompany payables to affiliates 197,547
-----------
Total $ 448,011
===========
</Table>
DEBTORS' FINANCIAL STATEMENTS
The condensed consolidated financial statements of the debtors are presented
below. These statements reflect the financial position, results of operations
and cash flows of the combined Debtor companies, including certain amounts and
activities between Debtor and non-Debtor subsidiaries of the Company, which are
eliminated in the consolidated financial statements.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
2. VOLUNTARY REORGANIZATION UNDER CHAPTER 11 AND ADMINISTRATION (CONTINUED)
DEBTORS' CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars)
<Table>
<Caption>
Year Ended
December 31,
2004
------------
Net sales $ 661,328
Cost of sales 667,650
------------
Gross loss (6,322)
Operating expenses:
Selling, general and administrative 28,849
Management fee income from non-Debtors (806)
Reorganization charges 14,733
Goodwill impairment charge 164,671
Restructuring and impairment charges 32,213
------------
Total operating expenses 239,660
------------
Operating loss (245,982)
Other expenses (income):
Interest expense, net 31,135
Other income, net (478)
------------
Net other expenses 30,657
------------
Loss from continuing operations before income taxes and
equity income of non-Debtor subsidiaries (276,639)
Income tax benefit 582
------------
Loss from continuing operations before equity loss of
non-Debtor subsidiaries (276,057)
Equity income from continuing operations of non-Debtor
subsidiaries 5,387
------------
Loss from continuing operations (270,670)
Loss from discontinued operations, net of tax (2,958)
------------
Net loss $ (273,628)
============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
2. VOLUNTARY REORGANIZATION UNDER CHAPTER 11 AND ADMINISTRATION (CONTINUED)
DEBTORS' CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
<Table>
<Caption>
as of December
31, 2004
ASSETS
Current assets:
Cash and cash equivalents $ 1,729
Accounts receivable, net 78,454
Accounts receivable, non-Debtors 68,897
Inventories 45,856
Other current assets 10,757
------------
Total current assets 205,693
------------
Property, plant and equipment, net 201,215
Investment in non-Debtors 69,399
Loan receivable from non-Debtors 154,821
Other noncurrent assets 19,167
------------
Total noncurrent assets 444,602
------------
Total assets $ 650,295
============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 9,877
Accounts payable, non-Debtors (3)
Accrued payroll and benefits 26,131
Other accrued liabilities 35,730
Short-term lines of credit 3,000
Long-term debt due within one year 163,585
------------
Total current liabilities 238,320
Liabilities subject to compromise 448,011
Noncurrent liabilities:
Long-term debt due after one year --
Retirement benefits 70,982
Deferred income tax liabilities (2,781)
Other noncurrent liabilities 4,418
------------
Total noncurrent liabilities 72,619
Shareholders' equity (deficit) (108,655)
------------
Total liabilities and shareholders' equity (deficit) $ 650,295
============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
2. VOLUNTARY REORGANIZATION UNDER CHAPTER 11 AND ADMINISTRATION (CONTINUED)
DEBTORS' CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
<Table>
<Caption>
Year Ended
December 31,
2004
------------
Cash used in by operating activities (42,781)
INVESTING ACTIVITIES:
Additions to property, plant and equipment (14,231)
Proceeds from sale of property, plant and equipment 969
------------
Cash used in investing activities (13,262)
FINANCING ACTIVITIES:
Net decrease in revolving credit facility (16,339)
Proceeds from term loan 120,000
Proceeds from debtor-in-possession facility 3,000
Repayment of revenue bonds (35,000)
Repayments of other debts (3,113)
Payments of debt issuance costs (5,200)
Issuance of common stock 16
Dividends paid (3,078)
------------
Cash provided by financing activities 60,286
Effect of foreign currency exchange rate changes --
------------
Net increase in cash and cash equivalents 4,243
Cash and cash equivalents at beginning of year (2,514)
------------
Cash and cash equivalents at end of year $ 1,729
============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
3. ACQUISITION
On June 25, 2003, we entered into an agreement with Melfina - Estudos, Servicos
e Participacoes, S.A. to acquire 100% ownership of the shares of Fundicao
Nodular, S.A. ("Porto Foundry"), which is located in Porto, Portugal. Previously
we owned a 50% interest in the Porto Foundry. The Porto Foundry is a caster of
various ductile-iron automotive components. Under the terms of the agreement, we
acquired an additional 25% of the Porto Foundry's shares for a cash investment
of Euro 4.9 million (approximately $5.6 million) on July 1, 2003, increasing our
ownership from 50% to 75%. We had a call option to acquire, and Melfina -
Estudos, Servicos e Participacoes, S.A. had a put option, requiring us to buy
the remaining 25% ownership for an additional cash investment of Euro 4.9
million (approximately $6.2 million based on the exchange rate on December 31,
2003) on July 1, 2004. Because of the put option, we recorded $6.0 million, the
net present value of the $6.2 million future cash investment, as "Accounts
payable" in the accompanying balance sheet as of December 31, 2003.
On July 1, 2004, we exercised the call option to acquire the remaining 25%
ownership of the Porto Foundry. The purchase price of approximately Euro 4.9
million (approximately $6.2 million at the exchange rates at the time of the
payments) together with interest accruing at European Interbank Offered Rate
("EURIBOR") was paid in six equal monthly installments beginning July 2004.
We accounted for the acquisition of additional shares using the purchase
accounting method. The purchase price has been allocated to the assets purchased
and liabilities assumed based upon the estimated fair values at the date of
acquisition. As the Porto Foundry became our consolidated subsidiary at July 1,
2003, the results of its operations from that date are included in our
consolidated results of operations. Our equity in the net income of the Porto
Foundry for the period before July 1, 2003 is included in "Equity interest in a
joint venture" in the accompanying statements of operations. The pro forma
effects of this acquisition are not material to our consolidated results of
operations.
4. DISCONTINUED OPERATIONS
FRISBY
On July 24, 2003, we sold substantially all the assets of Frisby P.M.C.,
Incorporated ("Frisby") for $5.3 million, consisting of $3.9 million in cash and
$1.4 million in the form of a promissory note, the balance of which is due to be
paid by July 31, 2008. This disposition is consistent with our strategy to
divest non-strategic assets. This transaction resulted in a pre-tax loss on sale
of $1.2 million (after-tax loss $0.1 million). Frisby operated a machining plant
that manufactured precision-machined components primarily for the automotive,
truck and power tool markets. Frisby was a non-core operation and is included in
our Corporate and Other segment in Note 14 to our Consolidated Financial
Statements, Reporting for Business Segments.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
4. DISCONTINUED OPERATIONS (CONTINUED)
Major classes of assets and liabilities of Frisby were (in thousands of
dollars):
<Table>
<Caption>
July 24, 2003 December 31, 2002
------------- -----------------
Accounts receivable $ 2,061 $ 1,276
Inventory 1,552 1,717
Other current assets 158 414
Property, plant and equipment, net 4,453 5,072
------------ ------------
Total assets $ 8,224 $ 8,479
============ ============
Accounts payable $ 848 $ 973
Accrued liabilities 855 892
------------ ------------
Total liabilities $ 1,703 $ 1,865
============ ============
</Table>
The results of operations of Frisby included in the accompanying statements of
operations as discontinued operations were (in thousands of dollars):
<Table>
<Caption>
2004 2003 2002
------------ ------------ ------------
Sales $ -- $ 8,007 $ 13,603
Cost of sales -- 7,645 14,319
------------ ------------ ------------
Gross profit (loss) -- 362 (716)
Expenses -- 526 886
------------ ------------ ------------
Loss before income taxes -- (164) (1,602)
Income tax (expense) benefit -- (1,180) 623
------------ ------------ ------------
Loss from discontinued operation, net of
tax $ -- $ (1,344) $ (979)
============ ============ ============
</Table>
RADFORD
In May 2003, we decided to close our facility in Radford, Virginia due to
changes in market conditions and production technology, as well as the fact that
substantial investment in environmental controls would have been necessary for
continued operation of this facility. The Radford facility manufactured
gray-iron and ductile-iron components for the automotive industry and had
approximately 41 salaried and 333 hourly employees. The facility is included in
the Ferrous Metals segment in Note 14 to our Consolidated Financial Statements,
Reporting for Business Segments.
As a result of this decision, we recorded an $11.6 million pre-tax restructuring
and impairment charge during the second quarter of 2003. The charge included a
write-down of $9.9 million to reduce the capital assets and inventories to their
fair values, $1.4 million for employee severance and related contractually
guaranteed benefit costs, and $0.3 million for employee pension costs. In the
fourth quarter of 2003, we accrued an additional $0.1 million for employee
severance costs. The accruals for the employee severance and benefit costs are
included in "Other accrued liabilities" in the accompanying balance sheet in
2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
4. DISCONTINUED OPERATIONS (CONTINUED)
In addition, we recorded pre-tax gains of $1.3 million and $0.7 million on the
reduction of postretirement benefit obligations when the employees were
terminated in the third and fourth quarter of 2003, respectively. By December
2003, the Radford Foundry was closed and substantially all of the employees were
terminated. At December 31, 2004, we had $2.3 million accrued for environmental
remediation at the Radford Foundry. See additional discussion in Note 11 to our
Consolidated Financial Statements, Commitments and Contingencies. The after-tax
results of operations of the Radford Foundry for all periods presented have been
reported as "Loss from discontinued operations, net of tax" in the accompanying
statements of operations.
Activities relating to the restructuring charges and liabilities arising from
the Radford Foundry closure are as follows (in thousands of dollars):
<Table>
<Caption>
Employee Employee
Impairment of Write-down of Termination Postretirement
Fixed Assets Inventory Benefits Benefits Other Total
------------- ------------- ------------ -------------- ------------ ------------
Initial charge in second quarter
of 2003 $ 7,554 $ 2,351 $ 1,336 $ 301 $ 50 $ 11,592
Additional charge -- -- 138 -- -- 138
Noncash charges (7,554) (2,351) -- (301) -- (10,206)
Reduction of post-retirement
obligations -- -- -- (1,997) -- (1,997)
Noncash credit -- -- -- 1,997 -- 1,997
Cash payments -- -- (920) -- (50) (970)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 2003 -- -- 554 -- -- 554
Additional charges -- 120 35 -- -- 155
Noncash charges -- (120) -- -- -- (120)
Cash payments -- -- (473) -- -- (473)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 2004 $ -- $ -- $ 116 $ -- $ -- $ 116
============ ============ ============ ============ ============ ============
</Table>
Major classes of assets and liabilities of the Radford Foundry are as follows
(in thousands of dollars):
<Table>
<Caption>
At December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
Accounts receivable $ 56 $ 2,052 $ 3,595
Inventory -- 429 3,759
Other current assets -- 514 --
Property, plant and equipment, net 440 673 9,023
------------ ------------ ------------
Total assets $ 496 $ 3,668 $ 16,377
============ ============ ============
Accounts payable $ -- $ 491 $ 4,374
Accrued liabilities 1,062 1,611 2,045
Retirement benefits 2,439 1,959 804
Other noncurrent liabilities 2,039 2,508 1,004
------------ ------------ ------------
Total liabilities $ 5,540 $ 6,569 $ 8,227
============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
4. DISCONTINUED OPERATIONS (CONTINUED)
The results of operations of the Radford Foundry included in the accompanying
statements of operations as discontinued operations are summarized as follows
(in thousands of dollars):
<Table>
<Caption>
2004 2003 2002
------------ ------------ ------------
Sales $ 18 $ 34,820 $ 45,592
Cost of sales 2,836 38,271 47,216
------------ ------------ ------------
Gross loss (2,818) (3,451) (1,624)
Expenses 140 11,740 63
------------ ------------ ------------
Loss before income taxes (2,958) (15,191) (1,687)
Income tax benefit -- -- 712
------------ ------------ ------------
Loss from discontinued operation, net
of tax $ (2,958) $ (15,191) $ (975)
============ ============ ============
</Table>
Corporate interest expense has been allocated to Frisby and the Radford Foundry
based on the ratio of their net assets to our consolidated net assets plus
consolidated debt, excluding the net assets of our European subsidiaries. The
European subsidiaries were excluded because they were cash flow positive and did
not directly use the proceeds from the debt outstanding during the periods
covered by the financial statements. The interest expense allocated to Frisby
and the Radford Foundry for 2003 and 2002 was $546,000 and $571,000,
respectively. No corporate interest expense was allocated to Frisby or the
Radford Foundry in 2004.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
provides that the results of operations of a component of an entity that has
been disposed of should be reported as discontinued operation when the
operations and cash flows of the component have been eliminated from the ongoing
operations of the entity and the entity will not have any significant continuing
involvement in the operations of the component after the disposal transaction.
This occurred when the assets of Frisby were sold in July 2003 and when the
Radford Foundry was closed in December 2003. As a result, the after-tax loss on
sale of the assets of Frisby, and the results of operations of both Frisby and
the Radford Foundry for all periods presented, have been reported as
discontinued operations in the accompanying statements of operations.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
5. RESTRUCTURING AND IMPAIRMENT CHARGES
RACINE CLOSURE
In December 2004, we announced the closure of our Racine Plant and Racine
Machining Plant, both of which are located in Sturtevant, Wisconsin. We closed
these plants during the second quarter of 2005. We decided to close these
operations due to high costs and under-utilization of capacity. We recognized
plant closure and asset impairment charges in 2004 of $10.3 million. The amount
included a write-down of $8.9 million to reduce the capital assets and
inventories to their fair values, a pension curtailment expense of $1.2 million
and $0.2 million for employee severance and related contractually guaranteed
benefit costs.
COLUMBUS MACHINING CLOSURE
In October 2004, we announced the closure of our Columbus Machining Plant,
located in Midland, Georgia. We closed this plant during the first quarter of
2005. We recognized plant closure costs in 2004 of $0.3 million. We decided to
close the facility because of declining sales and the anticipated need for
capital expenditures that are non-strategic to our operations.
HAVANA PLANT CLOSURE
In December 2003, we decided to close our ductile iron foundry in Havana,
Illinois, in order to improve our capacity utilization. The Havana Foundry
manufactured ductile-iron components for the automotive industry and had
approximately 33 salaried and 141 hourly employees. The plant closure was
completed in June, 2004. We recognized a $1.7 million pre-tax charge during the
second and third quarter of 2004 due to the closing. This charge is included in
the "Restructuring and impairment charges" in the accompanying statements of
operations and is in addition to the $8.5 million and $4.9 million charges
discussed below.
Due to the announced closing, we recorded an $8.5 million pre-tax charge during
the fourth quarter of 2003. This charge is included in "Restructuring and
impairment charges" in the accompanying statements of operations. The amount
included a write-down of $8.0 million to reduce the capital assets and
inventories to their fair values and $0.5 million for employee severance and
related contractually guaranteed benefit costs. The accruals for the employee
severance and benefit costs are included in "Accrued payroll and benefits" in
the accompanying balance sheet at December 31, 2003.
The facility is included in the Ferrous Metals segment in Note 14 to our
Consolidated Financial Statements, Reporting for Business Segments. The Havana
Foundry had revenues of $25.7 million and $27.3 million, and net losses of $5.0
million and $2.2 million for the years ended December 31, 2003, and 2002,
respectively.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
5. RESTRUCTURING AND IMPAIRMENT CHARGES (CONTINUED)
OTHER LONG-LIVED ASSETS IMPAIRMENT
Long-lived assets other than goodwill are tested for recoverability if certain
events or changes in circumstances indicate that the carrying value may not be
recoverable. The carrying amounts of long-lived assets are considered to be not
recoverable if they exceed our estimates of their undiscounted future cash
flows, which are affected by our operations forecasts and strategic planning.
The annual growth rate of each segment was decreased from the prior year because
of the uncertainties and risks associated with our bankruptcy proceedings,
compiled with changing market conditions. During our impairment review in the
third quarter of 2004, we identified certain tangible fixed assets with carrying
values not recoverable and exceeding their fair values as of September 30, 2004.
As a result, we recorded a pre-tax impairment charge of $26.4 million for idle
asset impairment at our Decatur, Illinois facility ($10.9 million), Racine,
Wisconsin facility ($6.5 million), Havana, Illinois facility ($4.9 million),
Alexander City, Alabama facility ($1.6 million), Monroe City, Missouri
facilities ($0.5 million), Columbus, Georgia facility ($0.4 million) and $1.6
million at various other locations. These amounts were reported as
"Restructuring and impairment charges" in the accompanying statements of
operations in 2004.
In the fourth quarter of 2003, in addition to the impairment charge for the
Havana Foundry, we recorded a pre-tax impairment loss of $1.5 million, which is
reported as "`Restructuring and impairment charges" in the accompanying
statements of operations.
6. GOODWILL
On January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible
Assets," under which goodwill is no longer amortized but is reviewed for
impairment at the reporting unit level annually, or more frequently if certain
events or changes in circumstances indicate that the carrying value may not be
recoverable. As required under SFAS No. 142, we wrote off negative goodwill of
$0.5 million net of taxes in the first quarter of 2002 as a cumulative effect of
a change in accounting principle.
We also performed impairment tests according to the requirements of SFAS No.
142. In the second quarter of 2002, with the assistance of an independent
valuation firm, we performed our initial impairment test on our goodwill as of
January 1, 2002. In addition, we performed our annual impairment test of
goodwill as of November 30, 2002. Both tests indicated that goodwill was not
impaired as of those dates.
In December 2003, with the assistance of an independent valuation firm, we
performed our annual impairment test of goodwill as of November 30, 2003. Under
the first step of the annual impairment test, the fair values of our Ferrous
Metals reporting unit and Light Metals reporting unit were determined based on a
combination of an income method, which estimates the fair value based on the
future discounted cash flows, and a market method, which estimates the fair
values based on comparable market prices. Under the income method, we assumed a
cash flow period of 10 years, a discount rate of 11.5%, a compound annual growth
rate of 4.5% and 7.7% for Ferrous Metals reporting unit and Light Metals
reporting unit, respectively, for the ten year period and a terminal growth rate
of 1.0%. Due to the erosion of the profitability of the Light Metals reporting
unit and the revision of our forecast as a result of the changing market
conditions, our estimated discounted cash flows from the Light Metals reporting
unit decreased as compared to our impairment tests performed in 2002. Based on
the first step of the impairment test, we determined that the carrying value of
the Light Metals reporting unit was in excess of its fair value as of November
30, 2003. Accordingly, we were required to perform the second step of the
impairment test on the Light Metals reporting unit to determine the amount of
the impairment. The second step of the impairment test indicated that the
pre-tax goodwill impairment charge was $51.1 million, which was reported as
"Goodwill Impairment Charge" in the accompanying statements of operations in
2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
6. GOODWILL (CONTINUED)
In December 2004, with the assistance of an independent valuation firm, we
performed our annual impairment test of goodwill as of September 30, 2004. Under
the first step of the impairment test, the fair values of our Ferrous Metals
reporting unit and Light Metals reporting unit were determined based on a
combination of an income method, which estimates the fair value based on the
future discounted cash flows, and a market method, which estimates the fair
values based on comparable market prices. Under the income method, we assumed a
cash flow period of 10 years, a discount rate of 16.0%, a compound annual growth
rate of 1.6% and 0.4% for the Ferrous Metals reporting unit and Light Metals
reporting unit, respectively, for the ten year period and a terminal growth rate
of 1.1%. The discount rate was increased and the annual growth rate was
decreased from the prior year because of the uncertainties and risks associated
with our bankruptcy proceedings. Because of the erosion of the profitability of
the Ferrous Metals reporting unit (due primarily to increased costs for scrap
steel and other raw materials), operational difficulties in the Light Metals
reporting unit, the filing of our bankruptcy petitions and the revision of our
forecast and assumptions as a result of changing market conditions, our
estimated discounted cash flows from the Ferrous and Light Metals reporting
units and estimated values using the market method decreased compared to the
results of our impairment tests performed in 2003. Based on the first step of
the impairment test, we determined that the carrying amounts of the Ferrous and
Light Metals reporting units were in excess of their fair value as of September
30, 2004. Accordingly, we were required to perform the second step of the
impairment test on each of these reporting units to determine the amount of the
impairment. The second step indicated that the total goodwill of both units was
fully impaired. The amount of pre-tax goodwill impairment charge was $59.7
million for the Ferrous Metals unit and $106.2 million for the Light Metals
unit, which are reported as "Goodwill Impairment Charge" in the accompanying
statements of operations for 2004.
7. SHORT-TERM LINES OF CREDIT
Columbus Neunkirchen Foundry GmbH, our wholly-owned subsidiary, has various
revolving lines of credit which are payable upon demand. These credit lines
provide for borrowings up to Euro 4.5 million (approximately $6.1 million) at
December 31, 2004. There were no outstanding borrowings under these agreements
as of December 31, 2004 or 2003.
Portcast Fundicao Nodular, SA, our wholly-owned foreign subsidiary, has various
lines of credit for up to Euro 16.3 million (approximately $22.2 million). There
was approximately $12.9 million outstanding under these credit lines as of
December 31, 2004. Annual interest accrues at various rates from approximately
3% to 4% and is payable monthly.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
7. SHORT-TERM LINES OF CREDIT (CONTINUED)
On October 22, 2004, we entered into a $60.0 million debtor-in-possession credit
facility, as amended by seven amendments through May 31, 2005 (the "DIP
Facility"), to supplement our liquidity and fund operations during our
bankruptcy proceedings. Available borrowings under the DIP Facility are
determined based on a budget that is subject to approval by the collateral and
administrative agents, and are subject to a borrowing base calculated as a
percentage of our accounts receivable, inventory and fixed assets, less reserves
and fees. Interest on borrowings made under the DIP Facility is a base rate plus
2.0% per annum or a Eurodollar rate plus 3.0% per annum. Principal repayments
are made on a daily basis from our cash collections. Borrowings under the DIP
Facility are secured by a first priority lien on substantially all of our
domestic assets and a pledge of 65% of the stock of our foreign subsidiaries.
The maturity date of the DIP Facility is the earlier of October 21, 2005 or the
dates of certain accelerating events. In addition, the DIP Facility requires us
to maintain certain financial covenants. The key financial covenants are
limitations on capital expenditures and requirements that we achieve certain
minimum consolidated EBITDA thresholds. At December 31, 2004 and April 30, 2005,
we were in compliance with all debt covenants under our DIP Facility. As a
result of entering into the DIP Facility, we incurred $1.8 million of debt
issuance costs in October 2004 which were capitalized as "Other non-current
assets" in the balance sheet. As of December 31, 2004 the balance outstanding
under the DIP Facility was $3.0 million. Interest rates on the $3.0 million
balance ranged from 5.2% to 7.2%. The issuance of letters of credit also reduces
the amount we have available under the DIP Facility. As of December 31, 2004, we
had $4.5 million in letters of credit outstanding under the DIP Facility.
8. DEBT
Long-term debt consists of the following at December 31 (in thousands of
dollars):
<Table>
<Caption>
2004 2003
------------ ------------
INTERMET:
Revolving credit facility $ 43,661 $ 60,000
Bank term loan 119,708 --
Senior notes -- 175,000
Domestic subsidiaries:
Industrial development bonds -- 39,350
Capitalized leases 504 974
Foreign subsidiaries:
Bank term notes 5,890 7,629
Capitalized leases 2,472 598
------------ ------------
Total 172,235 283,551
Less: Long-term debt due within one year 168,180 4,303
------------ ------------
Long-term debt due after one year $ 4,055 $ 279,248
============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
8. DEBT (CONTINUED)
Due to the bankruptcy proceedings, unsecured pre-petition long-term debt has
been reclassified to "Liabilities subject to compromise" in the December 31,
2004 consolidated balance sheet. The following is the long-term debt included in
liabilities subject to compromise (in thousands of dollars):
<Table>
<Caption>
2004
------------
Senior notes $ 175,000
Industrial development bonds 2,000
------------
Total debt included in liabilities subject to compromise $ 177,000
============
</Table>
BANK CREDIT AGREEMENT
On January 8, 2004, we refinanced our then-existing bank credit agreement by
entering into a First Amended and Restated Credit Agreement, subsequently
amended through April 13, 2004 ("Bank Credit Agreement"), which provided for a
$90.0 million revolving credit line and a $120.0 million term loan. The Bank
Credit Agreement is secured by substantially all of our domestic assets and a
pledge of 65% of the stock of our foreign subsidiaries. The $90.0 million
revolving credit portion has a maturity date of January 8, 2009, and the $120
million term loan has a maturity date of January 8, 2010. During 2004, principal
payments of $0.6 million had been made towards the term loan before the filing
of our bankruptcy proceedings. Due to the filing of our bankruptcy proceedings,
we are in default under the Bank Credit Agreement. As a result, effective
September 30, 2004 pricing on the revolving loan and term loan were modified to
a floating rate. The annual interest rates as of December 31, 2004 were 6.5% for
the revolving credit line and 7.0% for the term loan. Interest is payable
monthly on both loans. In addition, and also effective as of September 30, 2004,
we are required to accrue additional interest at an annual rate of 1.5%, which
is added monthly to the outstanding loan balances for both the revolver and term
loan.
In addition to borrowings under the $90.0 million credit line, we also had
standby letters of credit outstanding totaling $24.4 million as of December 31,
2004. These letters of credit are used to guarantee the payment or performance
of various obligations that we have, such as workers compensation and
environmental remediation. These letters of credit are issued with one year
maturity dates and re-issued for an additional year upon each maturity date. Any
draws under the letters of credit increase the bank revolver balance and have a
corresponding decrease in the outstanding letter of credit amounts.
Both the term loan and the revolver have covenants that require us to maintain
certain financial ratios, place restrictions on the amount that we can pay in
dividends, as well as impose other covenants and restrictions. At September 30,
2004 and December 31, 2004, we were not in compliance with these covenants and
the outstanding balances were included in "Long-term debt due within one year"
in the consolidated balance sheet. As a result of entering into this loan
agreement, we capitalized debt issuance costs of $3.4 million and wrote off
capitalized debt issuance costs of $1.4 million related to our previous bank
financing in 2004.
Also on January 8, 2004, we entered into a $35.7 million Letter of Credit
Facility Agreement as well as a Cash Collateral agreement of the same amount.
Under these agreements, we used $35.7 million of the proceeds from the Bank
Credit Agreement term loan as cash collateral for the issuance of a $35.7
million letter of credit to continue a guaranty of payment on our Columbus
Foundry revenue bonds in the amount of $35.0 million. These bonds were issued on
December 23, 1999 by the Development Authority of Columbus, Georgia in
connection with an expansion project at our Columbus Foundry. Because we were in
default of our obligations, on October 29, 2004 these bonds were paid in full by
a draw of the letter of credit and, subsequently, we released the cash
collateral to our pre-petition lenders.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
8. DEBT (CONTINUED)
SENIOR NOTES
On June 13, 2002, we completed an unsecured senior note offering of $175.0
million (the "Senior Notes"). The Senior Notes bear a fixed rate of interest of
9.75% and mature on June 15, 2009. The net proceeds of the Senior Note offering
were used to pay the remaining balance on a then-existing bank term loan and for
working capital purposes. Debt issuance costs of $5.9 million were capitalized
in connection with the note offering and were included in "Other noncurrent
assets" in the accompanying balance sheet and were being amortized over seven
years. Interest on the Senior Notes is due each June 15 and December 15. The
Senior Notes are unsecured and rank equally with all of our existing and future
unsecured senior debt. We are in default under the Senior Notes and the balance
due together with interest has been classified as "Liabilities subject to
compromise" in the December 31, 2004 consolidated balance sheet. In September
2004, the remaining $4.0 million of capitalized debt issuance costs were written
off and have been classified as "Reorganization charges" in the December 31,
2004 consolidated income statement. See Note 9 to the Consolidated Financial
Statements, Supplemental Condensed Consolidating Financial Information, for
additional information regarding the Senior Notes. The estimated fair value of
our Senior Notes based on market data as of December 31, 2004, was approximately
$85.7 million. Due to our Chapter 11 filing, interest that was due on December
15, 2004 was not paid.
COLUMBUS FOUNDRY REVENUE BONDS
On December 23, 1999 the Development Authority of Columbus Georgia issued $35.0
million in revenue bonds in connection with an expansion project at our Columbus
Foundry. Certain equipment financed with proceeds of these bonds, together with
the real property on which the foundry is situated, was leased by Columbus
Foundry, L.P. from the development authority. We were required to maintain a
letter of credit to secure payment of our obligations. As described above, on
October 29, 2004 these bonds were paid in full with a draw of the letter of
credit.
LYNCHBURG FOUNDRY COMPANY REVENUE BONDS
Under the terms of an unsecured bond indenture, Lynchburg Foundry Company, our
wholly-owned subsidiary, is required to make partial redemption of certain
industrial development revenue bonds on an annual basis through June 2006. The
redemption amount is $0.4 million per year, with a final payment at maturity of
$1.7 million. The balance outstanding as of December 31, 2004 was $2.0 million.
Lynchburg Foundry Company is in default of its obligations under these bonds. No
letters of credit have been issued to secure payment of these bonds and they are
otherwise unsecured. The bonds are subject to optional redemption prior to
maturity and bear interest at an annual rate of 7.0%. Interest is paid
semi-annually, however, the interest payment that was due in December 2004 was
not paid due to the Chapter 11 filing. The outstanding balance together with
interest has been classified as "Liabilities subject to compromise" in the
December 31, 2004 consolidated balance sheet.
TOOL PRODUCTS, INC. REVENUE BONDS
As part of our acquisition of Tool Products, Inc. in 1998, we assumed $4.5
million in obligations in connection with industrial development revenue bonds
issued by the Industrial Development Board of the City of Jackson, Tennessee.
These bonds were issued in connection with an expansion project at our Jackson,
Tennessee facility. Certain equipment and real estate financed with the proceeds
of these bonds was leased from the development board. We were required to
maintain a letter of credit to secure payment of our obligations under these
bonds. Terms of the indenture governing these bonds required us to make annual
principal payments of $0.5 million every January, with a final maturity date of
January 1, 2007. Because we were in default of our obligations, the letter of
credit was drawn and these bonds were paid in full on December 1, 2004 in the
amount of $1.5 million, which increased the balance under our bank revolving
loan by the same amount.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
8. DEBT (CONTINUED)
OTHER OBLIGATIONS
We had capital leases of $2.9 million and $1.6 million at December 31, 2004 and
2003, respectively. These leases relate to assets with net book values of $5.1
million and $3.0 million at December 31, 2004 and 2003, respectively. Annual
interest rates for these leases ranged from 3.00% to 8.58% in 2004 and 2003. The
amortization of assets under capital leases is included in depreciation expense.
The foreign bank term notes bear interest rates from 3.0% to 4.0% per annum.
These borrowings are secured by property, plant and equipment of our European
operations with net book values aggregating to approximately $34.5 million at
December 31, 2004. At December 31, 2004, the Porto Foundry had term loans of
Euro 4.2 million (approximately $5.7 million). These loans amortize
semi-annually with various amounts coming due from 2005 through 2008.
Maturities of long-term debt and capital leases at December 31, 2004 are as
follows (in thousands of dollars):
<Table>
2005 $ 168,180
2006 2,693
2007 681
2008 681
2009 --
Thereafter --
------------
Totals $ 172,235
============
</Table>
We paid interest of $21.5 million, $28.9 million and $26.5 million in 2004, 2003
and 2002, respectively. No interest expense was capitalized in 2004 or 2003.
During our bankruptcy proceedings, we have not been paying interest on unsecured
pre-petition obligations and as of the date of filing of the bankruptcy
proceedings we ceased accruing interest on all unsecured pre-petition debt in
accordance with SOP 90-7. Interest expense not accrued or recorded on unsecured
pre-petition debt totaled $4.3 million at December 31, 2004.
On October 22, 2004, we entered into a $60.0 million debtor-in-possession credit
facility, as amended by seven amendments through a May 31, 2005 (the "DIP
Facility"), to supplement our liquidity and fund operations during our
bankruptcy proceedings. See addition discussion regarding the DIP Facility in
Note 7 to the Consolidated Financial Statements, Short-term Lines of Credit.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
On June 13, 2002, we issued $175.0 million of senior notes, which will mature in
2009 (the "Senior Notes"). The Senior Notes are guaranteed by certain of our
wholly-owned domestic subsidiaries ("Combined Guarantor Subsidiaries"). The
guarantees are unconditional and joint and several. The Senior Notes are
effectively subordinated to the secured debt of INTERMET Corporation ("Parent").
Restrictions contained in the indenture covering the Senior Notes include, but
are not limited to, restrictions on incurring additional secured debt,
repurchasing our capital stock, disposing assets, engaging in affiliate
transactions and transferring assets. As of December 31, 2004, the Parent and
the Combined Guarantor Subsidiaries had $166.9 million of secured debt
outstanding and $52.5 million of unused commitments, net of outstanding letters
of credit, under our credit facility. The secured debt of the Parent is also
guaranteed by each of the Combined Guarantor Subsidiaries.
Certain of our domestic subsidiaries (Intermet International, Inc., Intermet
Holding Company, Transnational Indemnity Company and Western Capital
Corporation) and all of our foreign subsidiaries ("Combined Non-Guarantor
Subsidiaries") are not guarantors of the Senior Notes. The Combined
Non-Guarantor Subsidiaries had $21.3 million of debt outstanding as of December
31, 2004.
Presented below are summarized condensed consolidating financial information for
the Parent, the Combined Guarantor Subsidiaries, the Combined Non-Guarantor
Subsidiaries and INTERMET on a consolidated basis as of December 31, 2004, 2003
and 2002, respectively.
Investments in subsidiaries are presented using the equity method of accounting.
Separate financial statements of the Combined Guarantor Subsidiaries are not
provided as the condensed consolidating financial information contained herein
provides information to allow investors to determine the nature of the assets
held by and the operations of the combined group.
The senior notes are unsecured pre-petition obligations. Under the Bankruptcy
Code, actions to collect pre-petition indebtedness, as well as most other
pending litigation, are stayed and other contractual obligations against us may
not be enforced. On September 29, 2004 we ceased accruing interest on the Senior
Notes and other liabilities subject to compromise in accordance with SOP 90-7.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
Year Ended December 31, 2004
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
INCOME STATEMENT DATA
Net sales $ -- $ 674,655 $ 175,845 $ (13,327) $ 837,173
Cost of sales -- 680,989 153,288 (13,339) 820,938
------------ ------------ ------------ ------------ ------------
Gross profit (loss) -- (6,334) 22,557 12 16,235
Selling, general and administrative 23,908 4,126 15,274 9 43,317
Reorganization charges 14,733 -- -- -- 14,733
Goodwill impairment charge -- 164,671 1,262 -- 165,933
Restructuring and impairment charges -- 32,213 -- -- 32,213
------------ ------------ ------------ ------------ ------------
Operating (loss) profit (38,641) (207,344) 6,021 3 (239,961)
Other expenses (income), net:
Interest expense, net 20,281 8,855 1,343 5 30,484
Other expense (income), net (372) (163) 24 -- (511)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations before income taxes (58,550) (216,036) 4,654 (2) (269,934)
Income tax benefit (expense) 1,672 (1,090) (1,318) -- (736)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations (56,878) (217,126) 3,336 (2) (270,670)
Loss from discontinued operations,
net of tax -- (2,958) -- -- (2,958)
Equity in net income (loss) of
subsidiaries (216,750) 3,334 -- 213,416 --
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (273,628) $ (216,750) $ 3,336 $ 213,414 $ (273,628)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
Year Ended December 31, 2003
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
INCOME STATEMENT DATA
Net sales $ -- $ 632,431 $ 116,405 $ (17,669) $ 731,167
Cost of sales -- 583,730 101,266 (17,669) 667,327
------------ ------------ ------------ ------------ ------------
Gross profit -- 48,701 15,139 -- 63,840
Selling, general and administrative 3,592 24,540 11,274 -- 39,406
Goodwill impairment charge -- 51,083 -- -- 51,083
Restructuring and impairment charges -- 9,707 261 -- 9,968
------------ ------------ ------------ ------------ ------------
Operating (loss) profit (3,592) (36,629) 3,604 -- (36,617)
Other expenses (income), net:
Interest expense, net 20,313 9,000 582 -- 29,895
Other expense (income), net (1,054) 124 (1,029) -- (1,959)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations before income taxes and
equity interest in a joint venture (22,851) (45,753) 4,051 -- (64,553)
Income tax benefit (expense) (23,222) 3,774 912 -- (18,536)
Equity interest in a joint venture -- -- 752 -- 752
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations (46,073) (41,979) 5,715 -- (82,337)
Loss from discontinued operations,
net of tax -- (16,576) -- -- (16,576)
Equity in net income (loss) of
subsidiaries (52,840) 5,715 -- 47,125 --
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (98,913) $ (52,840) $ 5,715 $ 47,125 $ (98,913)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
Year Ended December 31, 2002
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
INCOME STATEMENT DATA
Net sales $ -- $ 683,634 $ 87,950 $ (15,847) $ 755,737
Cost of sales (35) 619,931 79,225 (15,887) 683,234
------------ ------------ ------------ ------------ ------------
Gross profit 35 63,703 8,725 40 72,503
Selling, general and administrative 3,709 22,578 6,537 2 32,826
------------ ------------ ------------ ------------ ------------
Operating (loss) profit (3,674) 41,125 2,188 38 39,677
Other expenses (income), net:
Interest expense (income), net 20,259 8,468 (457) -- 28,270
Other expense (income), net 57 (100) (118) -- (161)
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations before income taxes
and equity interest in a joint
venture (23,990) 32,757 2,763 38 11,568
Income tax benefit (expense) 10,556 (13,167) (54) -- (2,665)
Equity interest in a joint venture -- -- 1,573 -- 1,573
------------ ------------ ------------ ------------ ------------
(Loss) income from continuing
operations (13,434) 19,590 4,282 38 10,476
Loss from discontinued operations,
net of tax -- (1,954) -- -- (1,954)
Cumulative effect of change in
accounting principle, net of
tax -- -- 481 -- 481
Equity in net income (loss) of
subsidiaries 22,437 4,763 -- (27,200) --
------------ ------------ ------------ ------------ ------------
Net (loss) income $ 9,003 $ 22,399 $ 4,763 $ (27,162) $ 9,003
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
As of December 31, 2004
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
BALANCE SHEET DATA
ASSETS
Current assets:
Cash and cash equivalents $ 1,477 $ 252 $ 9,510 $ -- $ 11,239
Accounts receivable, net 654 77,806 36,065 -- 114,525
Inventories -- 45,915 25,671 (59) 71,527
Other current assets 6,812 6,175 654 (2,231) 11,410
------------ ------------ ------------ ------------ ------------
Total current assets 8,943 130,148 71,900 (2,290) 208,701
Property, plant and equipment, net 8,738 191,618 76,865 859 278,080
Other noncurrent assets:
Other noncurrent assets 13,853 10,881 2,116 (808) 26,042
Intercompany, net (50,741) 78,189 (31,210) 3,762 --
Investments in subsidiaries 291,505 64,426 -- (355,931) --
------------ ------------ ------------ ------------ ------------
Total assets $ 272,298 $ 475,262 $ 119,671 $ (354,408) $ 512,823
============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,986 $ 7,958 $ 20,025 $ -- $ 29,969
Accrued liabilities 20,392 41,123 12,112 58 73,685
Short-term lines of credit 3,000 -- 12,975 -- 15,975
Long-term debt due within
one year 163,369 504 4,307 -- 168,180
------------ ------------ ------------ ------------ ------------
Total current liabilities 188,747 49,585 49,419 58 287,809
Liabilities subject to compromise 186,820 63,644 -- -- 250,464
Noncurrent liabilities:
Long-term debt due after
one year -- -- 4,055 -- 4,055
Retirement benefits 4,786 66,196 -- -- 70,982
Other noncurrent liabilities 600 5,795 1,773 -- 8,168
------------ ------------ ------------ ------------ ------------
Total noncurrent liabilities 5,386 71,991 5,828 -- 83,205
Shareholders' equity (deficit) (108,655) 290,042 64,424 (354,466) (108,655)
------------ ------------ ------------ ------------ ------------
Total liabilities and shareholders'
equity (deficit) $ 272,298 $ 475,262 $ 119,671 $ (354,408) $ 512,823
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
As of December 31, 2003
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
BALANCE SHEET DATA
ASSETS
Current assets:
Cash and cash equivalents $ (2,674) $ 127 $ 3,582 $ -- $ 1,035
Accounts receivable, net 7 64,457 22,309 -- 86,773
Inventories -- 58,030 19,440 (59) 77,411
Other current assets 7,319 1,677 1,751 1 10,748
------------ ------------ ------------ ------------ ------------
Total current assets 4,652 124,291 47,082 (58) 175,967
Property, plant and equipment, net 3,765 247,681 71,766 868 324,080
Other noncurrent assets:
Goodwill -- 164,671 1,262 -- 165,933
Other noncurrent assets 9,337 9,318 2,049 -- 20,704
Intercompany, net (101,560) 122,510 (24,711) 3,761 --
Investments in subsidiaries 515,513 54,769 -- (570,282) --
------------ ------------ ------------ ------------ ------------
Total assets $ 431,707 $ 723,240 $ 97,448 $ (565,711) $ 686,684
============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,151 $ 58,504 $ 20,398 $ (316) $ 80,737
Accrued liabilities 28,377 42,877 224 2,606 74,084
Short-term lines of credit -- -- 9,992 -- 9,992
Long-term debt due within one
year 350 983 2,970 -- 4,303
------------ ------------ ------------ ------------ ------------
Total current liabilities 30,878 102,364 33,584 2,290 169,116
Noncurrent liabilities:
Long-term debt due after one
year 237,000 36,991 5,257 -- 279,248
Retirement benefits 5,765 65,002 -- -- 70,767
Other noncurrent liabilities (4,073) 4,843 3,838 808 5,416
------------ ------------ ------------ ------------ ------------
Total noncurrent liabilities 238,692 106,836 9,095 808 355,431
Shareholders' equity 162,137 514,040 54,769 (568,809) 162,137
------------ ------------ ------------ ------------ ------------
Total liabilities and shareholders'
equity $ 431,707 $ 723,240 $ 97,448 $ (565,711) $ 686,684
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
Year Ended December 31, 2004
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
CASH FLOW DATA
Cash (used in) provided by continuing
operating activities $ (55,152) $ 12,763 $ 17,554 $ -- $ (24,835)
Cash used in discontinued operations -- (359) -- -- (359)
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by
operating activities (55,152) 12,404 17,554 -- (25,194)
Investing activities:
Additions to property, plant
and equipment by continuing
operations (3,161) (11,070) (8,627) -- (22,858)
Proceeds from sale of
property, plant and
equipment 969 -- -- -- 969
Purchase of shares of a
subsidiary -- -- (6,220) -- (6,220)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (2,192) (11,070) (14,847) -- (28,109)
Financing activities:
Net (decrease) increase in
revolving credit facility (16,339) -- 2,200 -- (14,139)
Proceeds from term loan 120,000 -- -- -- 120,000
Proceeds from debtor-in-
possession facility 3,000 -- -- -- 3,000
Repayment of revenue bonds (35,000) -- -- -- (35,000)
Repayment of other debts (1,904) (1,209) (511) -- (3,624)
Payment of debt issuance costs (5,200) -- -- -- (5,200)
Issuance of common stock 16 -- -- -- 16
Dividends paid (3,078) -- -- -- (3,078)
------------ ------------ ------------ ------------ ------------
Net cash used in financing activities 61,495 (1,209) 1,689 -- 61,975
Effect of exchange rate changes on
cash and cash equivalents -- -- 1,532 -- 1,532
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents $ 4,151 $ 125 $ 5,928 $ -- $ 10,204
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
Year Ended December 31, 2003
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
CASH FLOW DATA
Cash provided by continuing operating
activities $ 5,435 $ 14,896 $ 16,842 $ -- $ 37,173
Cash used in discontinued operations -- (4,066) -- -- (4,066)
------------ ------------ ------------ ------------ ------------
Net cash provided by operating activities 5,435 10,830 16,842 -- 33,107
Investing activities:
Additions to property, plant
and equipment by continuing
operations (1,725) (13,193) (4,615) -- (19,533)
Additions to property, plant
and equipment by discontinued
operations -- (145) -- -- (145)
Proceeds from sale of property,
plant and equipment 1,700 -- -- -- 1,700
Purchase of shares of a subsidiary -- -- (5,571) -- (5,571)
Proceeds from sale of assets of
a subsidiary -- 3,925 -- -- 3,925
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (25) (9,413) (10,186) -- (19,624)
Financing activities:
Net decrease in revolving
credit facility (3,000) -- -- -- (3,000)
Repayment of other debts -- (1,457) (2,960) -- (4,417)
Payment of debt issuance costs (2,110) -- -- -- (2,110)
Dividends paid (4,096) -- -- -- (4,096)
------------ ------------ ------------ ------------ ------------
Net cash used in financing activities (9,206) (1,457) (2,960) -- (13,623)
Effect of exchange rate changes on
cash and cash equivalents -- -- (2,123) -- (2,123)
------------ ------------ ------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents $ (3,796) $ (40) $ 1,573 $ -- $ (2,263)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<Table>
<Caption>
Year Ended December 31, 2002
---------------------------------------------------------------------------
Combined Combined
Guarantor Non-guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
(in thousands of dollars)
CASH FLOW DATA
Cash provided by (used in) continuing
operating activities $ 92,225 $ 4,231 $ (10,027) $ -- $ 86,429
Cash provided by discontinued operations -- 2,946 -- -- 2,946
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities 92,225 7,177 (10,027) -- 89,375
Investing activities:
Additions to property, plant and
equipment by continuing operations (1,714) (5,358) (1,355) -- (8,427)
Additions to property, plant and
equipment by discontinued
operations -- (1,018) -- -- (1,018)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (1,714) (6,376) (1,355) -- (9,445)
Financing activities:
Net decrease in revolving
credit facility (85,000) -- -- -- (85,000)
Proceeds from debt offering 175,000 -- -- -- 175,000
Repayment of term loan (171,750) -- -- -- (171,750)
Repayment of other debts (244) (1,100) (302) -- (1,646)
Payment of debt issuance costs (6,022) -- -- -- (6,022)
Issuance of common stock 374 -- -- -- 374
Dividends paid (4,075) -- -- -- (4,075)
------------ ------------ ------------ ------------ ------------
Net cash used in financing activities (91,717) (1,100) (302) -- (93,119)
Effect of exchange rate changes on
cash and cash equivalents -- -- 2,621 -- 2,621
------------ ------------ ------------ ------------ ------------
Net decrease in cash and cash
equivalents $ (1,206) $ (299) $ (9,063) $ -- $ (10,568)
============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. STOCK COMPENSATION
We have executive stock option and incentive award plans ("Employee Plans") and
a directors stock option plan ("Directors Plan"). The Employee Plans permit the
grant of options and restricted shares for up to 3,000,000 shares of common
stock. The Directors Plan permits the grant of options to purchase up to 150,000
shares of common stock. Options granted under the Employee Plans vest over a
four-year period. Options granted under the Directors Plan are exercisable at
the grant date. The exercise prices of options issued under Employee Plans and
Directors Plan are equal to the fair values of the common stock at the option
grant date. Certain options also remain outstanding from prior stock option
plans. At December 31, 2004, options for 1,571,094 shares were exercisable,
while 649,383 of the Employee Plan options and restricted shares and 6,000
Directors Plan options were available for future grant.
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for our stock
option and incentive award plans. Accordingly, we have not recognized
compensation expense for our stock option and incentive award plans.
The fair values of our stock options utilized in developing the disclosures
presented in Note 1 were estimated as of the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions:
<Table>
<Caption>
2004 2003 2002
------------ ------------ ------------
Risk-free interest rate 4.38% 3.50% 3.00%
Dividend yield 0.00% 1.00% 1.00%
Volatility 2.185 0.464 0.769
Expected life 6 years 6 years 6 years
</Table>
For purposes of the pro forma disclosures required under SFAS No. 123, the
estimated fair value of the options is amortized over the options' vesting
period.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
our employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of our stock options.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. STOCK COMPENSATION (CONTINUED)
A summary of our stock option activity for the three years ended December 31,
2004, is as follows:
<Table>
<Caption>
Weighted
Number of Average Exercise
Options Exercise Price Price Range
------------ -------------- ------------
Outstanding at January 1, 2002 1,665,850 $ 9.54
Granted 175,000 5.07 $ 4.20-$8.39
Exercised (19,750) 9.67 8.66 - 11.20
Forfeited (80,125) 5.41 3.44 - 18.06
---------
Outstanding at December 31, 2002 1,740,975 $ 9.27 3.38 - 19.38
=========
Exercisable at December 31, 2002 1,141,248 $ 11.25
Weighted average fair value of
options granted during 2002 $ 3.03
Outstanding at January 1, 2003 1,740,975 $ 9.27
Granted 325,500 3.57 $ 3.57
Exercised -- -- --
Forfeited (272,000) 9.72 3.44 - 18.06
---------
Outstanding at December 31, 2003 1,794,475 $ 8.17 3.38 - 19.38
=========
Exercisable at December 31, 2003 1,190,320 $ 10.29
Weighted average fair value of
options granted during 2003 $ 1.58
Outstanding at January 1, 2004 1,794,475 $ 8.17
Granted 428,250 5.09 $ 5.09
Exercised (4,875) 3.45 3.44 - 3.57
Forfeited (235,000) 6.30 3.38 - 17.00
---------
Outstanding at December 31, 2004 1,982,850 $ 7.74 3.44 - 19.38
=========
Exercisable at December 31, 2004 1,571,094 $ 8.62
Weighted average fair value of
options granted during 2004 $ 5.07
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
10. STOCK COMPENSATION (CONTINUED)
The following table summarizes information about options outstanding as of
December 31, 2004:
<Table>
<Caption>
Options Outstanding Options Exercisable
----------------------------------------- --------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Range of Exercise Number Life Exercise Number Exercise
Price Outstanding (In Years) Price Exercisable Price
----------------- ----------- ----------- --------- ----------- ---------
$0.00 - $9.68 1,448,850 6.5 $ 5.12 1,026,094 $ 5.31
9.69 - 19.38 534,000 2.9 14.85 545,000 14.85
---------- ----------
1,982,850 1,571,094
========== ==========
</Table>
We have an Employee Stock Ownership Plan ("ESOP") which enables of some our
United States employees who are not covered by collective bargaining agreements
to purchase our common stock. We make contributions equal to 3.0% of the annual
compensation of the ESOP participants. We may, at our discretion, make
additional contributions within specified limits. Beginning with the 2003 plan
year, our contributions have been made to the Savings and Investment Plan, a
401(k) retirement plan, instead of the ESOP. Our contributions to the Savings
and Investment Plan were $0.7 million 2004 and 2003. ESOP expenses were $0.6
million in 2002.
On October 6, 1995, pursuant to a Shareholder Protection Rights Agreement of the
same date, our Board of Directors declared a dividend of one right for each
share of INTERMET common stock held of record at the close of business on
October 17, 1995. The rights generally are not exercisable until 10 days after
an announcement by us that an acquiring person, as defined (excluding, with
certain limitations, certain holders of 10% or more of our common stock who do
not acquire additional shares, any of our ESOPs or benefit plans, and us and our
wholly-owned subsidiaries), has acquired 10% of our common stock or announces a
tender offer that could result in the ownership of 10% or more of our common
stock. Each right, should it become exercisable, will entitle the owner to buy
1/100th of a share of Participating Preferred Stock, a new series of our
preferred stock, at an exercise price of $40. On October 16, 1997, we amended
the rights agreement to provide that certain institutional investors who own in
excess of 10%, but less than 15% of our common stock, are not "acquiring
persons" as defined by the rights agreement.
In the event the rights become exercisable as a result of an acquiring person's
acquisition of shares, each right will entitle the owner, other than the
acquiring person, to buy at the rights' then-current exercise price a number of
shares of common stock with a market value equal to twice the exercise price. In
addition, unless the acquiring person owns more than 50% of the outstanding
shares of common stock, the board of directors may elect to exchange all
outstanding rights (other than those owned by such acquiring person or
affiliates thereof) at an exchange ratio of one share of common stock per right.
Unless we merge with another company under certain conditions or redeem or
exchange the rights before October 6, 2005, the rights will expire on that date.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments required under building and equipment operating
leases that have initial or remaining non-cancelable lease terms in excess of
one year at December 31, 2004 are as follows (in thousands of dollars):
<Table>
2005 $ 4,122
2006 2,474
2007 1,976
2008 1,128
2009 68
Thereafter 21
------------
Total $ 9,789
============
</Table>
Under the Bankruptcy Code we may assume or reject executory contracts, including
lease obligations. Therefore, the commitments shown above may not reflect actual
cash outlays in the future periods. Total rental expense under operating leases
aggregated $5.2 million, $4.5 million, and $5.5 million in 2004, 2003 and 2002,
respectively.
We had commitments to purchase capital equipment of approximately $3.5 million
as of December 31, 2004.
At December 31, 2004, 48% of our domestic labor force was covered by collective
bargaining agreements, with 14% of our domestic labor force covered by
collective bargaining agreements that will expire within one year.
We are subject to federal, state, local and foreign environmental laws and
regulations concerning, among other things, air emissions, effluent discharges,
storage treatment and disposal of hazardous materials and remediation of
contaminated soil and groundwater. In addition, at some of our industrial sites
hazardous materials have been managed for many years. Consequently, we are
subject to various environmental laws that impose compliance obligations and can
create liability for historical releases of hazardous substances. It is likely
that we will be subject to increasingly stringent environmental standards in the
future and that we will be required to make additional expenditures, which could
be significant, relating to environmental matters on an ongoing basis.
The 1990 amendments to the Federal Clean Air Act and regulations promulgated
thereunder are expected to have a major impact on the compliance cost of many
U.S. companies, including foundries of the type we own. We are in the process of
reviewing Maximum Achievable Control Technology Standards that will be
applicable to our industry.
We also have current and former operating entities (for which we may be
responsible) that are potentially responsible for clean-up of known
environmental sites. These include third-party-owned sites, as well as sites
that are currently or formerly owned by us or our subsidiaries. For known
environmental sites, we have recorded reserves, on an undiscounted basis, to
cover estimated future environmental expenditures. Environmental reserves at
December 31, 2004 and 2003 were $6.3 million and $6.9 million, respectively. As
of December 31, 2004, the environmental reserves included a $3.1 million cash
escrow account required as a part of our acquisition of Ganton Technologies in
1999 that is being used to fund the clean-up of an inactive property located in
Addison, Illinois. We expect that the clean-up will occur in 2005. The reserves
also include $2.3 million for the now-closed Radford Foundry, which is discussed
below. There can be no assurance that costs in excess of these accruals will not
be incurred, or that unknown conditions will not be discovered that result in
material additional expenditures by us for environmental matters.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
On March 14, 2002, we entered into a consent order with the U.S. Environmental
Protection Agency ("USEPA"), which will require investigation of the nature and
extent of any hazardous waste disposed of at our Radford Foundry. We have
entered into this consent order in connection with the USEPA's Corrective Action
Program, which is being undertaken on a nationwide basis by USEPA pursuant to
the Resource Conservation and Recovery Act of 1976. The Corrective Action
Program requires facilities that have historically generated or handled
hazardous waste to determine whether those activities have or could adversely
affect groundwater or human health. Because we historically disposed of waste
material at this site, it is probable that remedial action will be required with
respect to that on-site disposal. We have accrued $2.3 million for such
remediation activity based on our investigation to date. However, our
investigation of this site will continue and it is possible that ultimate
remediation costs could exceed the amounts we have accrued.
We are also a party to other legal proceedings in the ordinary course of our
business, most of which were stayed with the filing of our bankruptcy cases on
September 29, 2004. At the present time, we do not believe that any of these
proceedings will have a material adverse effect on our results of operations.
We self-insure a significant portion of our health care and property and
casualty insurance risks. However, we purchase additional insurance for
catastrophic losses. We carry a $2.5 million property deductible per occurrence.
12. RETIREMENT PLANS AND BENEFITS
We maintain four non-contributory defined benefit pension plans for certain U.S.
employees covered by collective bargaining agreements for which the benefits are
based on years of service. Additionally, we maintain two non-contributory
defined benefit pension plans for certain U.S. salaried and non-union hourly
employees for which the benefits are based on final average compensation. Our
policy is to fund amounts as required under applicable laws and regulations.
In addition to providing pension benefits, we provide health care and life
insurance benefits to certain retired U.S. employees and their dependents. In
2003, eligibility requirements for retiree health care for certain salaried
employees were changed so that these employees can become eligible for retiree
health care benefits at age 62, depending on years of service. Employees hired
on or after January 1, 2004 will not be eligible for retiree health care
benefits. Certain salaried employees who already have met eligibility
requirements at age 55 or age 60, depending on years of service, continue to be
eligible for retiree health care benefits. Retirees and their dependents under
age 65 receive substantially the same health care benefits as active employees.
The medical plans generally pay most medical expenses less deductible and co-pay
amounts. Salaried and hourly employees also contribute to the cost of coverage.
Certain salaried employee coverage converts to a Medicare carve-out plan at age
65. We subsidize a Medicare supplement plan for certain eligible salaried
employees over age 65. Coverage for most hourly employees ceases at age 65.
However, certain hourly employees retain eligibility for coverage supplementing
Medicare.
Our amendments to certain plans in 2003 increased our pension benefit
obligations by $1.6 million and reduced our other postretirement benefit
obligations by $5.0 million. In addition, the curtailment of a postretirement
benefit plan in 2003 reduced the other postretirement benefit obligations by
$0.5 million.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
Due to the closure of the Radford Foundry in 2003, other postretirement benefit
obligations decreased by $2.0 million and resulted in an after-tax gain of $1.2
million. We also incurred an increase in pre-tax pension cost of $0.3 million
($0.2 million after-tax loss) due to pension curtailment. The net after-tax gain
of $1.0 million was reported in "Loss from discontinued operation, net of tax"
in the accompanying statements of operations in 2003.
During 2004, amendments to certain pension plans increased our pension benefit
obligation by $1.5 million. No other postretirement benefit amendments were
recognized during 2004. In addition, we recognized a curtailment in the Ganton
Technologies Inc., Racine Hourly Employees Retirement Plan as of December 15,
2004, increasing pension benefit obligation by $0.5 million, also resulting in a
$1.2 million increase to our pension cost.
We use a September 30 measurement date for all of our pension and other
postretirement benefit plans.
The obligations and funded status of our retirement benefit plans are as follows
(in thousands of dollars):
<Table>
<Caption>
At December 31,
---------------------------------------------------------------
Pension Benefits Other Postretirement Benefits
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year $ 104,722 $ 90,828 $ 42,530 $ 43,435
Service cost - benefits earned
during the year 2,347 2,443 447 1,018
Interest cost on benefit obligation 6,231 6,018 2,433 2,746
Amendments 1,478 1,636 -- (4,985)
Curtailment 455 -- -- (520)
Actuarial losses 2,277 8,229 (1,126) 4,332
Benefits paid (5,076) (4,432) (5,479) (3,496)
------------ ------------ ------------ ------------
Benefit obligation at end of year $ 112,434 $ 104,722 $ 38,805 $ 42,530
------------ ------------ ------------ ------------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning
of year $ 62,472 $ 58,897
Actual return on plan assets 4,456 5,793
Company contributions 9,063 2,214
Benefits paid (5,076) (4,432)
------------ ------------
Fair value of plan assets at end of
year $ 70,915 $ 62,472
------------ ------------
Funded status of the plan
(under-funded) $ (41,519) $ (42,250) $ (38,805) $ (42,530)
Unrecognized net actuarial losses 36,910 35,550 1,931 3,207
Unrecognized transition obligation -- 286 -- --
Unrecognized prior service cost
(benefit) 6,323 6,497 (4,315) (4,678)
------------ ------------ ------------ ------------
Prepaid (accrued) benefit cost on
balance sheets $ 1,714 $ 83 $ (41,189) $ (44,001)
============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
Amounts recognized for pension benefits in the consolidated balance sheets
consist of (in thousands of dollars):
<Table>
<Caption>
At December 31,
-----------------------------
2004 2003
------------ ------------
Prepaid pension benefit cost $ 1,788 $ 4,708
Accrued pension benefit liability (42,705) (46,020)
Intangible assets 6,323 6,497
Accumulated other comprehensive income, pretax 36,308 34,898
------------ ------------
Net amount recognized $ 1,714 $ 83
============ ============
</Table>
The accumulated benefit obligation for all of the pension plans was $111.8
million and $104.1 million at December 31, 2004 and 2003, respectively.
All of our pension plans had accumulated benefit obligations in excess of plan
assets (under-funded plans) as of December 31, 2004 and 2003.
The components of net periodic benefit cost are as follows (in thousands of
dollars):
<Table>
<Caption>
Years Ended December 31,
---------------------------------------------------------------------------------------
Pension Benefits Other Postretirement Benefits
------------------------------------------ ------------------------------------------
2004 2003 2002 2004 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
Service cost $ 2,347 $ 2,443 $ 1,922 $ 447 $ 1,018 $ 973
Interest cost 6,231 6,018 5,966 2,433 2,746 2,925
Expected return on plan assets (5,732) (5,878) (6,120) -- -- --
Amortization of net transition
obligation -- -- 15 -- -- --
Amortization of prior service cost 919 735 756 (364) (60) (2)
Amortization of loss (gain) 2,195 1,531 (382) 151 (208) (445)
Curtailment loss 1,187 253 -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net periodic benefit cost $ 7,147 $ 5,102 $ 2,157 $ 2,667 $ 3,496 $ 3,451
============ ============ ============ ============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
The assumptions used to determine benefit obligations and cost are as follows:
Weighted-average assumptions used to determine benefit obligations:
<Table>
<Caption>
At December 31,
---------------------------------------------------------------
Pension Benefits Other Postretirement Benefits
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Discount rate 5.75% 6.00% 5.75% 6.00%
Rate of compensation increase for
benefit plans with benefit obligations
based on compensation 3.65% 3.66%
</Table>
Weighted-average assumptions used to determine net periodic benefit cost:
<Table>
<Caption>
Years Ended December 31,
---------------------------------------------------------------------------------------
Pension Benefits Other Postretirement Benefits
------------------------------------------ ------------------------------------------
2004 2003 2002 2004 2003 2002
------------ ------------ ------------ ------------ ------------ ------------
Discount rate 6.00% 6.75% 7.50% 6.00% 6.75% 7.50%
Expected long-term return on plan assets 8.50% 8.75% 9.50%
Rate of compensation increase for benefit
plans with benefit cost based on
compensation 3.66% 3.61% 3.61%
</Table>
To determine the overall expected long-term rate of return on assets, we
consider the current level of expected returns on risk-free investments
(primarily government bonds), the historical level of the risk premium
associated with the other asset categories in which the portfolio is invested
and the expected returns of each asset category of the investment portfolio. The
expected return of each asset category is then weighted based on the target
asset allocation to develop the overall expected long-term rate of return on
assets.
During each quarter, our pension plan actuaries determine a range of expected
rates of return based on actual asset mix. Expected rates of return that are
between the 25th and 75th percentile of this range are considered reasonable.
The expected rate of return of 8.50% as of September 30, 2004 and 2003 was near
the 70th percentile of the ranges of expected rates of return.
Assumed health care cost trend rates for other postretirement benefits:
<Table>
<Caption>
At December 31,
-----------------------------
2004 2003
------------ ------------
Health care cost trend rate assumed for next year 10.00% 10.50%
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2015 2015
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
The assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rates would have the following effects for 2004
(in thousands of dollars):
<Table>
<Caption>
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
Effect on total service and interest cost $ 190 $ (167)
Effect on postretirement benefit obligation $ 2,318 $ (2,086)
</Table>
Our pension plans' weighted-average asset allocations at December 31, 2004 and
2003 by asset category are as follows:
<Table>
<Caption>
Plan Assets At December 31,
-----------------------------
2004 2003
------------ ------------
Asset Category:
Equity securities 53% 52%
Debt securities 47% 48%
------------ ------------
Total 100% 100%
============ ============
</Table>
Equity securities do not include any of our common stock.
Under our investment policies and strategies, pension funds are invested in
equity securities (including convertible securities), debt securities (including
preferred stock) and cash equivalents (including senior debt less than one year
to maturity). Pension plan assets allocation guidelines as follows:
<Table>
<Caption>
Asset Category: Allocation Guidelines
Equity securities 30% to 75%
Debt securities 25% to 70%
Cash equivalents 0% to 30%
</Table>
Investment managers have full discretion to invest assets within our investment
guidelines, including timing, turnover and selection of investment. Pension plan
assets are held such that assets are available for near-term, mid-term and
long-term future benefit payments.
Equity asset holdings are selected from established markets (including New York
Stock Exchange, over-the-counter markets and regional and foreign markets) and
equity portfolios are expected to achieve an absolute and risk adjusted return
which surpasses the comparative index. Equity assets cannot be held in private
placement securities, letter stock or uncovered options. Short sales, margin
transactions and other specialized transactions are prohibited. No more than 10%
of assets may be held in an individual security or 15% in a particular industry.
This pertains to both equity and debt investments, exclusive of treasuries and
agencies.
Debt asset holdings can be invested in liquid preferred stocks, corporate debt,
obligations of the U.S. Government and its fully guaranteed agencies and debt
issues convertible to equities. Investments in single-issue securities are
limited to 5% of assets (except for U.S. Government or agency obligations).
Assets are not to be invested in private placements, fixed income or interest
rate futures, or from arbitrage or other specialized investments. Up to 5% of
assets may be invested in below investment grade debt securities. Up to 5% of
assets may be invested in global fixed income securities.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
12. RETIREMENT PLANS AND BENEFITS (CONTINUED)
Cash equivalent holdings may be invested in commercial paper, repurchase
agreements, Treasury bills, certificates of deposit and money market funds.
Investments in cash equivalents can be made for income, for liquidity, for
expense and benefit payments or to preserve principal value. Assets must
represent maturity of less than one year at the time of purchase. Short-term
instruments considered speculative in nature may not be purchased. Single issuer
paper is limited to 5% of the funds, except for U.S. Government or agencies.
Pension funds may also be invested in mutual funds or other pooled funds
containing securities. Direct investments in financial futures, commodities and
currency exchanges are prohibited; however, such investments may be made in
mutual funds.
We expect to contribute $8.1 million to our pension plans in 2005.
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid (in thousands of dollars):
<Table>
<Caption>
Other
Postretirement
Pension Benefits Benefits
----------------- --------------
2005 $ 5,772 $ 3,755
2006 5,884 3,559
2007 6,187 3,468
2008 6,431 3,247
2009 6,756 3,155
Years 2010 to 2014 38,029 16,216
</Table>
Our measurement of the Wagner Castings Company postretirement medical
obligations includes the anticipated impact of the federal subsidy enabled by
the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.
These effects are measured in accordance with the Financial Accounting Standards
Board Staff Position (FSP FAS106-2) as of the 2004 year-end disclosure. For
expense, the impact is to be recognized prospectively, beginning with the 2005
fiscal year expense. While final regulations have not been issued on
qualifications for the subsidy or the determination of actuarial equivalence,
these measurements are believed to be reasonable best estimates based on the
"two-pronged" approach to subsidy determination set forth in the proposed
regulations. Under this standard, the Wagner Casting Company's post-Medicare
prescription drug plan is "actuarially equivalent" for all retirees receiving
medical benefits after 65 years of age (except for hourly participants who
retired prior to June 1, 1980) as the value of the plan benefits exceeds the
value of Medicare Part D benefits less participant premiums. The annual Medicare
subsidy is projected to be $623 per person starting in 2006. This average
subsidy amount is assumed to increase at a rate of 8.12% in 2007 decreasing to
5.0% in 2022 and thereafter. With respect to our other (non-Wagner) retiree
medical plans, because we do not provide prescription drug benefits to retirees
after age 65, it is assumed that the employer will not qualify for the federal
subsidy. The Act had no impact on disclosed results.
We maintain several defined contribution plans for certain salaried employees,
hourly employees covered by collective bargaining agreements and non-union
hourly employees. All of these plans allow participants to make pretax
contributions as a percentage of their compensation. We contribute a specified
percentage of the annual compensation of participants to some of the plans.
Certain plans provide a matching contribution on employees' pretax contribution
up to a specified limit. Some plans provide for contributions based on hours
worked by each employee; other plans provide for profit-sharing contributions or
other base contributions. Costs recognized as expenses to these plans, excluding
ESOP expenses, were $2.6 million, $3.0 million and $2.4 million in 2004, 2003
and 2002, respectively.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
13. INCOME TAXES
Components of income (loss) from continuing operations before income taxes are
as follows:
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
Domestic $ (277,902) $ (70,508) $ 6,343
Foreign 7,968 6,707 6,798
------------ ------------ ------------
Total $ (269,934) $ (63,801) $ 13,141
============ ============ ============
</Table>
The provision for income taxes consists of the following (in thousands of
dollars):
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
Current:
Federal $ (2,656) $ -- $ --
State 355 484 504
Foreign 913 (374) 739
------------ ------------ ------------
(1,388) 110 1,243
------------ ------------ ------------
Deferred:
Federal -- 18,314 1,522
State -- -- (100)
Foreign 2,124 112 --
------------ ------------ ------------
2,124 18,426 1,422
------------ ------------ ------------
Total tax provision $ 736 $ 18,536 $ 2,665
============ ============ ============
</Table>
In 2004 we did not pay any federal income taxes. We received refunds of $2.7
million in 2004 attributable to an audit of our 2001 federal tax return and
resulting carryback claims to our 2002, 1999 and 1996 tax returns. We paid
federal income taxes of approximately $2.5 million and $1.1 million in 2003 and
2002, respectively.
The provision for income taxes differs from the amount computed by applying the
statutory U.S. federal income tax rate to (loss) income from continuing
operations before income taxes and equity interest in a joint venture in the
following amounts (in thousands of dollars):
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
Provision for income taxes
(benefits) at U.S. statutory rate $ (94,476) $ (22,594) $ 4,672
Foreign operations 4,435 (94) 573
Utilization of credits and credit carryforwards -- -- (3,065)
State income taxes excluding valuation allowance,
net of federal income tax benefits (1,368) (415) 691
Non-deductible goodwill amortization and write-off 49,528 13,767 --
Valuation allowance for federal tax 41,325 22,981 --
Valuation allowance for state tax 1,622 899 --
Refund of federal income tax (2,656)
Other 2,326 3,992 (206)
------------ ------------ ------------
Total tax provision $ 736 $ 18,536 $ 2,665
============ ============ ============
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
13. INCOME TAXES (CONTINUED)
The components of our net deferred income tax assets at December 31, 2004 and
2003 are as follows (in thousands of dollars):
<Table>
<Caption>
2004 2003
------------ ------------
Compensation and benefit items $ 36,320 $ 37,618
Operating loss, foreign tax credit and Alternative
Minimum Tax credit carryforwards 40,864 19,449
Impairment and shutdown costs 1,262 1,539
Deductible goodwill 12,516 3,991
Reserve for bad debts, returns and allowances 2,566 1,984
Inventory reserve 7,382 5,337
State income taxes (14) 1,093
Other temporary differences 3,804 1,274
------------ ------------
Gross deferred tax assets 104,700 72,285
Valuation allowance (62,646) (29,732)
------------ ------------
Deferred tax assets 42,054 42,553
Depreciation and related items (34,121) (32,346)
Other temporary differences (9,910) (10,060)
------------ ------------
Gross deferred tax liabilities (44,031) (42,406)
------------ ------------
Net deferred tax assets (liabilities) $ (1,977) $ 147
============ ============
</Table>
There are limitations on the use of operating loss carryforwards included in the
deferred tax assets. Domestic operating loss carryforwards have a life of 15 to
20 years.
As a result of an audit of the 2001 federal tax return, foreign tax credits of
$0.2 million, $3.8 million and $7.2 million generated in the returns as filed
for 2003, 2002 and 2001, respectively, were either converted to foreign tax
deductions to create net operating loss deductions or available for
carryover/carryback to earlier tax years resulting in a tax refund of $2.7
million during 2004.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
14. REPORTING FOR BUSINESS SEGMENTS
We evaluate our financial results in two business segments, Ferrous Metals and
Light Metals. Our segment reporting is consistent with the manner in which our
business is managed and our resources are allocated by management. The Ferrous
Metals segment consists of ferrous foundry operations and their related
machining operations. The Light Metals segment consists of aluminum, magnesium
and zinc casting operations and their related machining operations. Our
Corporate and Other segment includes operations that do not fall within the
Ferrous Metals segment or Light Metals segment, including our corporate business
unit and its related expenses and eliminations. Selected financial information
for our each of our business segments is as follows:
<Table>
<Caption>
Light Corporate
Ferrous Metals Metals and Other Consolidated
-------------- ------------ ------------ ------------
(in thousands of dollars)
Year ended December 31, 2004
Net sales $ 562,623 $ 274,550 $ -- $ 837,173
Depreciation and amortization
expense 30,548 17,266 1,936 49,750
Goodwill impairment charge 59,731 106,202 -- 165,933
Restructuring and impairment
charges 18,569 11,299 2,345 32,213
Reorganization charges -- -- 14,733 14,733
Operating loss (16,906) (124,642) (98,413) (239,961)
Interest expense, net 6,162 4,789 19,533 30,484
Purchases of property,
plant and equipment -
continuing operations 10,830 8,918 3,110 22,858
As of December 31, 2004
Total assets $ 378,720 $ 104,031 $ 30,072 $ 512,823
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
14. REPORTING FOR BUSINESS SEGMENTS (CONTINUED)
<Table>
<Caption>
Light Corporate
Ferrous Metals Metals and Other Consolidated
-------------- ------------ ------------ ------------
(in thousands of dollars)
Year ended December 31, 2003
Net sales $ 493,401 $ 237,766 $ -- $ 731,167
Depreciation and amortization
expense 31,143 17,202 1,906 50,251
Goodwill impairment charge -- 51,083 -- 51,083
Restructuring and impairment
charges 9,138 556 274 9,968
Operating profit (loss) 13,333 (44,192) (5,758) (36,617)
Interest expense, net 4,600 4,928 20,367 29,895
Purchases of property,
plant and equipment -
continuing operations 8,036 9,772 1,725 19,533
Purchases of property,
plant and equipment -
discontinued operations 145 -- -- 145
As of December 31, 2003
Goodwill $ 59,731 $ 106,202 $ -- $ 165,933
Total assets 372,812 281,396 32,476 686,684
Year ended December 31, 2002
Net sales $ 484,146 $ 271,591 $ -- $ 755,737
Depreciation and amortization
expense 27,011 18,019 2,090 47,120
Operating profit (loss) 25,867 20,216 (6,406) 39,677
Interest expense, net 3,584 4,390 20,296 28,270
Cumulative effect of change
in accounting -- -- 481 481
Purchases of property,
plant and equipment -
continuing operations 2,648 4,065 1,714 8,427
Purchases of property,
plant and equipment -
discontinued operations 671 -- 347 1,018
As of December 31, 2002
Goodwill $ 59,731 $ 157,285 $ -- $ 217,016
Total assets 367,002 332,905 64,191 764,098
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
15. GEOGRAPHIC AREA AND MAJOR CUSTOMER INFORMATION
The following is a breakout of net sales, operating profit, income before income
taxes and identifiable assets based on the geographic locations of our domestic
and foreign operations as of and for the years ended December 31, 2004, 2003 and
2002. We operate in North America and have international operations in Europe,
mainly Germany and Portugal.
<Table>
<Caption>
For the Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
(in thousands of dollars)
Net sales:
North America $ 661,328 $ 614,762 $ 667,787
Europe 175,845 116,405 87,950
------------ ------------ ------------
Total $ 837,173 $ 731,167 $ 755,737
============ ============ ============
Operating (loss) profit:
North America $ (248,051) $ (41,291) $ 36,239
Europe 8,090 4,674 3,438
------------ ------------ ------------
Total $ (239,961) $ (36,617) $ 39,677
============ ============ ============
(Loss) income from continuing operations
before income taxes and equity interest
in a joint venture:
North America $ (275,903) $ (68,693) $ 8,379
Europe 5,969 4,140 3,189
------------ ------------ ------------
Total $ (269,934) $ (64,553) $ 11,568
============ ============ ============
</Table>
<Table>
<Caption>
As of December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
Identifiable assets:
North America $ 357,260 $ 560,117 $ 683,775
Europe 155,563 126,567 80,323
------------ ------------ ------------
Total $ 512,823 $ 686,684 $ 764,098
============ ============ ============
</Table>
Net sales to customers exceeding 10% of consolidated net sales in 2004, 2003 or
2002, and other major customers, were as follows (as a percentage of
consolidated net sales):
<Table>
<Caption>
Customer: 2004 2003 2002
------------ ------------ ------------
DaimlerChrysler (1) 11% 10% 18%
Delphi 11% 11% 11%
Ford 9% 11% 12%
Metaldyne (1) 10% 8% 1%
TRW 7% 6% 2%
Visteon 6% 6% 5%
PBR Automotive 5% 6% 5%
General Motors 3% 5% 5%
</Table>
- ----------
(1) During 2003, Metaldyne acquired a facility from DaimlerChrysler to which we
supply products. This accounts for the majority of the change in the amounts
we supply to Metaldyne and DaimlerChrysler from 2002 to 2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
16. EARNINGS PER SHARE
Earnings per share are computed as follows:
<Table>
<Caption>
Years Ended December 31,
------------------------------------------------
2004 2003 2002
------------ ------------ ------------
(in thousands, except per share data)
Numerator:
Net (loss) income $ (273,628) $ (98,913) $ 9,003
============ ============ ============
Denominator:
Denominator for basic earnings per
share - weighted average shares 25,607 25,581 25,441
Effect of dilutive securities:
Employee stock options and
unearned restricted stock -- -- 437
------------ ------------ ------------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 25,607 25,581 25,878
============ ============ ============
Net (loss) income per common share -
basic $ (10.69) $ (3.87) $ 0.35
============ ============ ============
Net (loss) income per common share -
assuming dilution $ (10.69) $ (3.87) $ 0.35
============ ============ ============
</Table>
Dilutive earnings per share reflect the assumed exercise of stock options and
unearned restricted stock.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
17. QUARTERLY DATA AND SHARE INFORMATION (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 2004 and 2003:
<Table>
<Caption>
Three Months Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
(in thousands of dollars, except per share data)
2004
Net sales $ 210,646 $ 217,185 $ 197,713 $ 211,629
Gross profit 13,490 12,712 (4,344) (5,623)
Loss from discontinued
operations, net of tax (712) (1,255) (677) (314)
Net loss (1) (7,853) (6,454) (225,046) (34,275)
Net loss per common share
- - Basic (0.31) (0.25) (8.63) (1.49)
- - Diluted (0.31) (0.25) (8.63) (1.49)
Share prices (Nasdaq)(2)
- - High 5.80 4.83 4.25 0.34
- - Low 4.01 3.55 0.25 0.08
2003
Net sales $ 193,040 $ 182,118 $ 172,700 $ 183,309
Gross profit 21,241 17,923 14,729 9,947
(Loss) income from discontinued
operations, net of tax (188) (8,643) 655 (8,400)
Net income (loss)(3) 3,152 (6,589) (50) (95,426)
Net income (loss) per common share
- - Basic 0.12 (0.26) -- (3.73)
- - Diluted 0.12 (0.26) -- (3.73)
Share prices (Nasdaq)(4)
- - High 4.40 4.00 4.70 5.61
- - Low 3.26 3.06 3.33 4.14
</Table>
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
17. QUARTERLY DATA AND SHARE INFORMATION (UNAUDITED)
(1) During the third quarter of 2004, we recorded pretax goodwill impairment
charge of $165.9 million because the carrying value of the Ferrous Metals
reporting unit and Light Metals reporting unit were in excess of their fair
value. We also recorded pretax asset impairment charges of $26.4 million
for write-downs of other long-lived assets with carrying values exceeding
their fair values. During the fourth quarter of 2004, we recognized
reorganization costs of $8.8 million and plant closure and asset impairment
charges of $3.8 million related to the closure of our Racine Plant and
Racine Machining Plant. All of these charges had a negative impact on our
net loss, and total assets and shareholders' equity.
(2) On October 1, 2004, we received a written notice from The NASDAQ Stock
Market (Nasdaq) that our shares of common stock would be delisted from
Nasdaq at the opening of business on October 12, 2004 in accordance with
Marketplace Rule 4815(a) based on Nasdaq's determination that we did not
comply with the continued listing requirements under Marketplace Rules 4300
and 4450(f). Since October 12, 2004 our common stock, $0.10 par value, has
been traded on the Pink Sheets under the symbol "INMTQ" and had a closing
price of $0.13 on June 14, 2005.
(3) During the fourth quarter of 2003, we recorded pretax goodwill impairment
charge of $51.1 million because the carrying value of the Light Metals
reporting unit was in excess of its fair value. We also recorded pretax
restructuring and asset impairment charges of $10.0 million, which included
an $8.5 million charge for the announced closure of our Havana Foundry, and
$1.5 million in write-downs of other long-lived assets with carrying values
exceeding their fair values. In addition, we recorded a valuation reserve
against our domestic net deferred tax assets of $23.9 million for our
continuing operations. This is due to the accumulation of losses
experienced at our domestic operations between 2001 and 2003. All of these
charges had a negative impact on our net income (loss), and total assets
and shareholders' equity.
(4) The share price information represents inter-dealer transactions in the
Nasdaq without detail markup, markdown or commission.
Third- and fourth-quarter sales are usually lower than the first- and
second-quarter sales due to plant closings by automotive manufacturers for
vacations and model changeovers.
18. DERIVATIVE FINANCIAL INSTRUMENTS
Under our risk management policy, the use of derivatives for managing risk is
confined to hedging the exposure related to variable rate funding activities,
hedging the foreign currency exposure of inter-company payables and receivables
and hedging purchase commitments relating to raw materials used in our
production processes and related energy costs. Specifically, we review our
liability structure on a recurring basis and make the determination as to
whether our risk exposure should be adjusted using derivative instruments. We do
not participate in speculative derivatives trading.
On October 24, 2000, we entered into an interest rate swap agreement with a
notional principal amount of $50.0 million through Scotia Capital, Inc., a
broker-dealer subsidiary of The Bank of Nova Scotia. Interest rate swaps are
contractual agreements between parties to exchange fixed and floating interest
rate payments periodically, over the life of the agreements, without the
exchange of underlying principal amounts. Under the terms of the agreement, we
paid interest quarterly at an annual fixed interest rate of 6.468% with Scotia
Capital, Inc. paying at the three-month LIBOR rate. This swap was used to
partially hedge an underlying debt obligation and is marked to market. The
agreement expired on October 24, 2003.
INTERMET Corporation
Notes to Consolidated Financial Statements (continued)
18. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
We designated this swap transaction as a cash flow hedge. The effectiveness of
this hedge transaction was assessed using the short-cut method as it met the
criteria outlined in SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This hedge was considered to be perfectly effective;
therefore, the entire change in the fair value of the derivative was recorded in
other comprehensive income, and no hedge ineffectiveness was recorded in
earnings.
To hedge foreign currency risks, we periodically use over-the-counter forward
contracts. To hedge our European operations, we had outstanding foreign exchange
contracts with a notional amount of Euro 15.5 million (approximately $19.1
million) and Euro 15.9 million (approximately $16.7 million) at December 31,
2003 and 2002, respectively. We had no outstanding foreign exchange contracts at
December 31, 2004. The market value of such foreign exchange contracts was
minimal at December 31, 2003 and 2002.
In addition to these derivative financial instruments, we have other contracts
for the purchase of raw materials and energy that have the characteristics of
derivatives but are not required to be accounted for as derivatives. These
contracts for the physical delivery of commodities qualify for the normal
purchases and normal sales exception under SFAS No. 133 as we take physical
delivery of the commodity and use it in the production process. This exception
is an election and, if not elected, these contracts would be carried on our
balance sheet at fair value with changes in the fair value reflected in
earnings.
19. SUBSEQUENT EVENTS
On March 29, 2005, we announced our plan to close our Decatur Foundry located in
Decatur, Illinois during the fourth quarter of 2005. We recognized asset
impairment charges in 2004 of $10.9 million to reduce the capital assets to
their fair values. We are in the process of determining reserves required for
plant closing costs.
Some customers of our Hannibal facility have informed us that present product
programs will end or they intend to move their magnesium die casting work from
that facility to other suppliers or transition to alternative processes. A
portion of the work in that facility will end on or about July 1, 2005. If the
customers proceed with plans to move the remaining work, we anticipate that this
would occur in late 2005 or early 2006. If we are unable to secure new business
for the plant within that timeframe, we anticipate that operations at the
Hannibal plant would be suspended until the Company is able to utilize that
capacity, and all remaining work would be transferred to the Palmyra facility,
which also produces magnesium die castings.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
INTERMET Corporation
We have audited the accompanying consolidated balance sheets of INTERMET
Corporation and subsidiaries (the Company) as of December 31, 2004 and 2003, and
the related consolidated statements of operations, shareholders' deficit, and
cash flows for each of the three years in the period ended December 31, 2004.
Our audits also included the financial statement schedule for the three years in
the period ended December 31, 2004, listed in the index at Item 15(2). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 2004 and 2003, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule for
the three years in the period ended December 31, 2004, when considered in
relation to the basic financial statements, taken as a whole, represents fairly
in all material respects the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully described in
the notes to the consolidated financial statements, on September 29, 2004,
INTERMET Corporation and its wholly owned United States subsidiaries filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code. Uncertainties inherent in the bankruptcy process raise
substantial doubt about the Company's ability to continue as a going concern.
Management's intentions with respect to these matters are also described in the
notes to the consolidated financial statements. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As discussed in Note 6 to the consolidated financial statements, the Company
changed its method of accounting for goodwill in 2002.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated June 14, 2005 expressed an unqualified opinion on management's assessment
and an adverse opinion on the effectiveness of internal control over financial
reporting.
/s/ Ernst & Young LLP
Troy, Michigan
June 14, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
INTERMET Corporation
We have audited management's assessment, included in the accompanying
Management's Report on Internal Controls Over Financial Reporting, that INTERMET
Corporation and subsidiaries (the Company) did not maintain effective internal
control over financial reporting as of December 31, 2004, because of the effect
of deficiencies in their financial statement close process, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weakness has been identified and included in
management's assessment.
Controls and procedures surrounding the Company's financial statement close
process were not designed in a manner to allow the preparation of consolidated
financial statements on a timely and accurate basis, which constitutes a
material weakness in internal control over financial reporting. This material
weakness was exemplified by (1) the Company's failure to file timely 2004 third
quarter and year-end reports with the Securities and Exchange Commission (SEC),
which was a result of the Company and certain of its subsidiaries filing
voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code
on September 29, 2004, (2) the identification of adjusting entries during the
year-end audit process that resulted in a revision to income tax
expense and associated liabilities related to the conversion of foreign entity
financial statements from local generally accepted accounting principles (GAAP)
to U.S. GAAP during the consolidation process, and (3) adjusting entries
identified during the audit process related to the write-off of capitalized debt
issuance costs associated with the Company's senior notes as required for
companies in bankruptcy. The Company is now in a position to file its 2004 third
quarter and year-end reports with the SEC, which reflect the aforementioned
adjusting entries.
This material weakness was considered in determining the nature, timing, and
extent of audit tests applied in our audit of the December 31, 2004 consolidated
financial statements, and this report does not affect our report dated June 14,
2005 on those financial statements.
In our opinion, management's assessment that INTERMET Corporation did not
maintain effective internal control over financial reporting as of December 31,
2004, is fairly stated, in all material respects, based on the COSO control
criteria. Also, in our opinion, because of the effect of the material weakness
described above on the achievement of the objectives of the control criteria,
the Company has not maintained effective internal control over financial
reporting as of December 31, 2004, based on the COSO control criteria.
/s/ Ernst & Young LLP
Troy, Michigan
June 14, 2005
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation
of management, including our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the year
covered by this report. Based upon that evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls
and procedures are not effective in timely alerting them to material information
relating to us (including our consolidated subsidiaries) that is required to be
included in our periodic Securities and Exchange Commission reports. We have
reached this conclusion because of the material weakness in internal control
over financial reporting described below.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness for future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
assessment of the effectiveness of internal control over financial reporting as
of December 31, 2004. This assessment identified a material weakness in internal
control over financial reporting relating to our financial statement closing
process. The material weakness was the result of a substantial increase in the
volume of financial reporting requirements associated with our Chapter 11
bankruptcy proceedings and employee turnover, which resulted in an insufficient
compliment of accounting personnel and expertise. As a result, we were not able
to prepare consolidated financial statements to meet regulatory filing
requirements and deadlines in the course of our financial statement closing
process. Additionally, adjustments were detected during the year-end audit
process that resulted in a revision of income tax expense and accrued income tax
liabilities related to the conversion of foreign entity financial statements
from local GAAP to United States GAAP during the consolidation process and
entries related to the write-off of capitalized debt issuance costs associated
with our outstanding senior notes as required by applicable accounting guidance
for companies in Chapter 11 bankruptcy proceedings. These items were corrected
and reflected in the audited consolidated financial statements as of and for the
year ended December 31, 2004. A material weakness is defined as a significant
deficiency, or combination of significant deficiencies that results in more than
a remote likelihood that a material misstatement of the consolidated financial
statements will not be prevented or detected. Our process to assess internal
controls over financial reporting was also delayed and negatively affected due
to the resignation of our manager of internal audit shortly after we filed our
Chapter 11 proceedings and also because the engagement of our external
consultants for the assessment project was delayed for more than three months
due to the approval process required under our Chapter 11 bankruptcy
proceedings.
In making its assessment of internal control over financial reporting,
management used the criteria established in the framework Internal Control -
Integrated Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Because of the material weakness described in the preceding
paragraph, management has concluded that, as of December 31, 2004, the Company's
internal control over financial
reporting was not effective based on those criteria. Our external auditors,
Ernst & Young LLP, have issued an attestation report with respect to this
assessment. The corrections noted were included in the December 31, 2004
financial results and Ernst & Young LLP has issued an unqualified opinion with
respect to our financial statements for that period.
Changes in Internal Control Over Financial Reporting
To remediate the material weakness discussed above, we have taken a number of
steps including the hiring of a Director of Corporate Accounting and working
with search firms to assist with hiring additional accounting and internal
control expertise. In addition, we have mitigated the burden of bankruptcy
reporting through reallocation of accounting resources and through increased
proficiency with the bankruptcy reports. We believe we will be current with the
SEC reporting requirements effective with our second quarter Form 10-Q.
ITEM 9B. OTHER INFORMATION
None
EXHIBIT J
DISTRIBUTION SCHEDULE
EXHIBIT J
DISTRIBUTION SCHEDULE
<Table>
<Caption>
($)
Cash per Shares per $/Share Rights per $/Right Recovery
Debtor $1000 Claim $1000 Claim Per Valuation $1000 Claim Per Valuation as a % of Claim
- ----------------------------- ------------- ------------- ------------- ------------- ------------- ---------------
Intermet Corporation(b) $ 0.00 3.77 $ 16.15 11.31 $ 6.15 13.0%
Columbus Foundry, L.P. 0.00 3.54 16.15 10.63 6.15 12.3%
Diversified Diemakers, Inc. 0.00 1.40 16.15 4.19 6.15 4.8%
Tool Products, Inc. 0.00 1.08 16.15 3.23 6.15 3.7%
Northern Castings Corporation 0.00 0.94 16.15 2.81 6.15 3.2%
Cast-Matic Corporation 0.00 0.83 16.15 2.48 6.15 2.9%
Intermet U.S. Holding, Inc. 0.00 0.45 16.15 1.36 6.15 1.6%
Ganton Technologies, Inc. 0.00 0.26 16.15 0.77 6.15 0.9%
Lynchburg Foundry Company 0.00 0.17 16.15 0.51 6.15 0.6%
Sudbury, Inc. 0.00 0.13 16.15 0.40 6.15 0.5%
Wagner Havana, Inc. 0.00 0.14 16.15 0.41 6.15 0.5%
Intermet Illinois, Inc. 0.00 0.14 16.15 0.41 6.15 0.5%
Ironton Iron, Inc. 0.00 0.13 16.15 0.40 6.15 0.5%
Wagner Castings Company (c) 0.00 0.13 16.15 0.40 6.15 0.5%
SUDM, Inc.(d) 2.78 0.14 16.15 0.41 6.15 0.8%
Alexander City Castings 0.00 0.14 16.15 0.41 6.15 0.5%
Company, Inc.
Intermet International 0.00 N/A 16.15 N/A 6.15 100.0%
Intermet Holding Company 0.00 N/A 16.15 N/A 6.15 N/A
Intermet et. al.(e) 0.00 3.77 16.15 11.31 6.15 13.0%
Noteholders(d) 13.38 $ 16.15 40.14 $ 6.15 46.6%
<Caption>
($) Cash Inducement Convenience
Recovery Inducement Class Recovery
Debtor as a % of Claim Cash Pool(a) as a % of Claim
- ----------------------------- --------------- ------------- ---------------
Intermet Corporation(b) 14.0% $ 1,297,219 21.0%
Columbus Foundry, L.P. 13.0% 1,230,555 19.5%
Diversified Diemakers, Inc. 6.0% 201,586 9.0%
Tool Products, Inc. 5.0% 310,379 7.5%
Northern Castings Corporation 5.0% 77,550 7.5%
Cast-Matic Corporation 5.0% 163,326 7.5%
Intermet U.S. Holding, Inc. 5.0% 297,900 7.5%
Ganton Technologies, Inc. 5.0% 354,250 7.5%
Lynchburg Foundry Company 5.0% 470,572 7.5%
Sudbury, Inc. 5.0% 143,679 7.5%
Wagner Havana, Inc. 5.0% 71,921 7.5%
Intermet Illinois, Inc. 5.0% 70,000 7.5%
Ironton Iron, Inc. 5.0% 140,243 7.5%
Wagner Castings Company (c) 5.0% 232,445 7.5%
SUDM, Inc.(d) N/A N/A N/A
Alexander City Castings N/A N/A N/A
Company, Inc.
Intermet International 100.0% 14,000 0.0%
Intermet Holding Company N/A N/A N/A
Intermet et. al.(e) 14.0% 32,998 21.0%
-------------
$ 5,108,624
Noteholders(d) N/A N/A N/A
</Table>
Note: The allocation of shares and rights set forth above reflects current
estimates of claims at each Debtor. Actual distributions may be higher or lower
based on the resolution of disputed claims and actual allowed claims at each
Debtor.
Note: To the extent general unsecured creditors elect to receive shares and
rights in lieu of the Cash Inducement, the Reorganized Company's equity value
per share will increase.
Note: Claims are estimated based on data from Administar as of June 2, 2005.
(a) If outstanding allowed claims increase, claimants' pro rata portion of the
Inducement Cash Pool may be lower than the indicated recovery, provided that the
inducement cash pool may be increased according to the Plan to ensure a
percentage recovery that is at a minimum equal to the recovery that would
otherwise be realized through the issuance of common stock and rights.
(b) Recoveries reflect the equity value of Intermet International, the holding
company for Intermet's European operations. Assumes net debt of zero at Intermet
International.
(c) Recovery analyses for Wagner Castings Company, Inc. reflect no retiree
medical claims. Proposed percentage recoveries available under the Plan of
Reorganization to general unsecured creditors and convenience class claimants at
the entity will be adjusted downward based on the filing of any such claims in
the future.
(d) Recovery includes $500,000 of fees assumed paid to the Indentured Trustee at
SUDM, Inc.
(e) These claims are assumed to have only a single obligor; this presentation
assumes these claims receive treatment equal to the most favorable recovery of
claimants at any of the Debtors (i.e., Intermet Corp.).
EXHIBIT K
STOCKHOLDERS' AGREEMENT
(will be filed at a later date)