<PAGE>   1
                                                                    EXHIBIT 2.1


                     IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE

<Table>
<S>                                                   <C>     <C>
In re:                                                        Chapter 11
METAL MANAGEMENT, INC., et al.,                               Case Nos. 00-4303 through
                                                              00-4331 (PJW)
Debtors                                                       Jointly Administered
</Table>

                      DISCLOSURE STATEMENT WITH RESPECT TO
                   FIRST AMENDED JOINT PLAN OF REORGANIZATION
                           OF METAL MANAGEMENT, INC.
                           AND ITS SUBSIDIARY DEBTORS

Lawrence K. Snider
David S. Curry
Craig E. Reimer
MAYER, BROWN & PLATT
190 South LaSalle Street
Chicago, Illinois 60603-3441
(312) 782-0600
James L. Patton, Jr. (No. 2202)
Joel A. Waite (No. 2925)
YOUNG CONAWAY STARGATT & TAYLOR
1100 North Market Street
Wilmington Trust Center
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
ATTORNEYS FOR DEBTORS
Dated: May 4, 2001
<PAGE>   2

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
         INTRODUCTION................................................     1
I.       HOLDERS OF CLAIMS ENTITLED TO VOTE..........................     2
         A.   Voting Procedures......................................     3
         B.   Confirmation Hearing...................................     3
II.      OVERVIEW OF THE PLAN........................................     4
         A.   General Information Concerning Treatment of Claims and      4
         Interests...................................................
         B.   Summary of Distributions...............................     5
         C.   Treatment of Unsecured Claims..........................    12
         D.   Allocation of Value From Class 6 to Classes 7, 8 and       12
         9...........................................................
         E.   Terms of New Credit Agreement/Exit Facility............    12
         F.    Terms of Securities to Be Issued Pursuant to the          14
         Plan........................................................
         1.    New Common Stock......................................    14
         2.    Series A Warrants.....................................    14
         G.   Board of Directors of Reorganized MTLM.................    14
         H.   Junior Secured Notes...................................    14
         I.    Management Equity Incentive Plan......................    15
         J.    Registration Exemption................................    15
         K.   Listing of New Common Stock; Registration Rights           15
         Agreement...................................................
         L.   Value of Reorganized Debtors...........................    16
III.     GENERAL INFORMATION.........................................    17
         A.   Description and History of Debtors' Business...........    17
         1.    The Debtors...........................................    17
         2.    Business..............................................    18
         3.    History...............................................    18
         4.    Industry..............................................    21
         B.   Financial Results......................................    22
         C.   Significant Funded Indebtedness........................    22
         D.   Events Leading to Chapter 11 Filings...................    23
         E.   Negotiation of the Plan................................    23
IV.      THE CHAPTER 11 CASES........................................    24
         A.   First Day Motions Filed................................    24
         B.   Motion to Pay Critical Vendor Claims...................    25
         C.   Debtor in Possession Financing.........................    25
         D.   Other Significant Events Since Commencement of Chapter     25
         11 Cases....................................................
         E.   Certain Asset Sales....................................    26
         F.    Postponement in Emergence from Chapter 11.............    26
         G.   Dispute Concerning Shear at Tennessee Facility.........    26
         H.   National Metal's Claim to Stock........................    26
V.       THE PLAN OF REORGANIZATION..................................    26
         A.   Overview of Chapter 11.................................    27
         B.   Overall Structure of the Plan..........................    27
         C.   Classification and Treatment of Claims and Interests...    27
         D.   Unclassified Claims....................................    28
         1.    Fee Claims............................................    28
         2.    Other Administrative Claims...........................    28
         3.    Priority Tax Claims...................................    28
         E.   No Waiver of Defense Regarding Unimpaired Claims.......    29
         F.    Method of Distribution Under the Plan.................    29
         1.    Sources of Cash for Plan Distribution.................    29
         2.    Distributions for Claims or Interests Allowed as of       29
         the Effective Date..........................................
</Table>

                                        i
<PAGE>   3

<Table>
<Caption>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
         3.    Interest on Claims....................................    29
         4.    Distributions by the Reorganized Debtors..............    29
         5.    Delivery of Distributions and Undeliverable or            30
         Unclaimed Distributions.....................................
         6.    Record Date for Distributions.........................    30
         7.    Method of Cash Payment................................    30
         8.    Withholding and Reporting Requirements................    30
         9.    Setoffs...............................................    31
         10.   Fractional Shares.....................................    31
         11.   Surrender of Cancelled Securities.....................    31
         12.   Lost, Stolen, Mutilated or Destroyed Securities.......    32
         G.   Resolution of Disputed, Contingent and Unliquidated        32
         Claims......................................................
         H.   Means for Implementation of the Plan...................    32
         1.    Continued Corporate Existence and Vesting of Assets in    32
         Reorganized Debtors.........................................
         2.    Corporate Governance, Directors and Officers and          33
         Corporate Action............................................
         3.    Limited Substantive Consolidation.....................    33
         4.    Issuance of New Securities and Related Documents......    34
         I.    Treatment of Executory Contracts and Unexpired            34
         Leases......................................................
         1.    Assumption of Executory Contracts and Unexpired           34
         Leases......................................................
         2.    Claims Based on Rejection of Executory Contracts or       34
         Unexpired Leases............................................
         3.    Cure of Defaults of Assumed Executory Contracts and       34
         Unexpired Leases............................................
         4.    Indemnification of Directors, Officers and                35
         Employees...................................................
         5.    Compensation and Benefit Programs; Employment             35
         Contracts; Pension Plans....................................
         J.    Confirmation and Effectiveness of the Plan............    36
         K.   Consequences of Non-Occurrence of Effective Date.......    36
         L.   Effect of Plan Confirmation............................    36
         1.    Preservation of Rights of Action; Settlement of           36
         Litigation Claims...........................................
         2.    Releases..............................................    36
         3.    Discharge of Claims and Termination of Interests......    37
         4.    Exculpation and Limitation of Liability...............    37
         5.    Injunction............................................    37
         6.    Termination of Subordination Rights and Settlement of     38
         Related Claims..............................................
         7.    Dissolution of Official Committee Upon Effective Date     38
         of the Plan.................................................
         M.   Summary of Other Provisions of the Plan................    38
         1.    Exemption from Certain Transfer Taxes.................    38
         2.    Cancellation of Notes, Instruments, Debentures and        39
         Common Stock................................................
         3.    Effectuating Documents, Further Transactions and          39
         Corporate Action............................................
         4.    Severability of Plan Provisions.......................    39
         5.    Revocation, Withdrawal or Non-Consummation............    39
         6.    Section 1145 Exemption................................    40
         7.    Amendment or Modification of the Plan.................    41
VI.      CONFIRMATION AND CONSUMMATION PROCEDURE.....................    41
         A.   Solicitation of Votes..................................    41
         B.   The Confirmation Hearing...............................    42
         C.   Confirmation...........................................    42
         1.    Unfair Discrimination and Fair and Equitable Tests....    43
         2.    Best Interests Test...................................    43
         3.    Feasibility...........................................    44
VII.     RISK FACTORS TO BE CONSIDERED...............................    45
         A.   Certain Bankruptcy Considerations......................    45
         1.    Failure to Satisfy Vote Requirement...................    45
         2.    Non-Consensual Confirmation...........................    45
</Table>

                                        ii
<PAGE>   4

<Table>
<Caption>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
         3.    Risk of Non-Occurrence of the Effective Date..........    46
         4.    General Effect........................................    46
         5.    Effect of Debtors' Chapter 11 Cases on Relations with     46
         Trade Vendors...............................................
         6.    Classification and Treatment of Claims and Equity         46
         Interests...................................................
         B.   Factors Affecting the Value of the Securities to Be        46
         Issued Under the Plan.......................................
         1.    Speculative Nature....................................    46
         2.    Competitive Conditions................................    46
         3.    Variances from Projections............................    47
         4.    Disruption of Operations..............................    47
         5.    Lack of Trading Market................................    47
         6.    Dividend Policies.....................................    47
         C.   Risks Relating to the Reorganized Debtors..............    47
         1.    Leverage and Debt Service.............................    47
         2.    New Credit Agreement..................................    48
         3.    Metals Recycling Industry is Highly Cyclical..........    48
         4.    Volatility of Commodities Prices......................    48
         5.    Senior Management.....................................    49
         6.    Concentration of Customers and Exposure to Credit         49
         Risk........................................................
         7.    Use of Scrap Metals Alternatives......................    49
         8.    Environmental Regulation..............................    49
         9.    History of Recent Significant Operating Losses........    53
         D.   Special Note Regarding Forward-Looking Statement.......    53
VIII.    CERTAIN OTHER LEGAL CONSIDERATIONS..........................    54
         A.   Section 1145 of the Bankruptcy Code....................    54
         B.   Rule 144...............................................    54
IX.      CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.........    55
         A.   General................................................    55
         B.   Federal Income Tax Consequences to the Debtors.........    55
         1.    Cancellation of Indebtedness Income...................    55
         2.    Net Operating Losses..................................    56
         3.    Federal Alternative Minimum Tax.......................    57
         C.   Federal Income Tax Consequences to Holders of Claims       57
         and Interests...............................................
         1.    Holders of Subordinated Notes.........................    57
         2.    Holders of Junior Secured Notes.......................    58
         3.    Holders of Impaired Unsecured Claims in Class 6 and       59
         Holders of General Trade Claims in Class 5 Electing to be
               Treated as Class 6 Claims.............................
         4.    Holders of Preferred Stock and Old Common Stock.......    59
         D.   Allocation to Accrued Interest.........................    59
         E.   Market Discount........................................    60
         F.    Premium...............................................    60
         G.   Information Reporting and Backup Withholding...........    61
         H.   Importance of Obtaining Professional Tax Assistance....    61
X.       ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN...    61
         A.   Alternative Plan(s) of Reorganization..................    61
         B.   Liquidation of the Debtors.............................    62
XI.      CONCLUSION AND RECOMMENDATION...............................    63
</Table>

                                       iii
<PAGE>   5

                                    EXHIBITS

<Table>
<S>             <C>
EXHIBIT A       FIRST AMENDED JOINT PLAN OF REORGANIZATION OF METAL
                MANAGEMENT, INC. AND ITS SUBSIDIARY DEBTORS
EXHIBIT B       ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS)
EXHIBIT C       QUARTERLY REPORT ON FORM 10-Q (WITHOUT EXHIBITS)
EXHIBIT C-1     CERTAIN ADDITIONAL UNAUDITED FINANCIAL INFORMATION
EXHIBIT D       REORGANIZATION VALUATION ANALYSIS
EXHIBIT E       LIQUIDATION ANALYSIS
EXHIBIT F       PROJECTIONS
</Table>

                                        iv
<PAGE>   6

                                  INTRODUCTION

     Metal Management, Inc. ("MTLM" or the "Company") and its direct and
indirect subsidiaries (collectively with MTLM, the "Debtors") submit this
amended disclosure statement (this "Disclosure Statement") to holders of claims
against the Debtors in connection with the solicitation of acceptances of the
First Amended Joint Plan of Reorganization of Metal Management, Inc. and Its
Subsidiary Debtors, dated May 4, 2001, as the same may be amended (the "Plan").
Unless otherwise defined herein, all capitalized terms contained herein have the
respective meanings assigned to them in the Plan.

     On May 4, 2001, this Disclosure Statement was approved by the Bankruptcy
Court as containing adequate information, as required by Section 1125 of the
Bankruptcy Code, to permit holders of impaired claims and interests to make an
informed judgment in exercising their right to vote to accept or to reject the
Plan. The Bankruptcy Court, however, has not conducted an independent review or
investigation of the factual and financial matters described herein, nor has the
Bankruptcy Court approved or ruled on the merits of the Plan.

     This Disclosure Statement describes certain aspects of the Plan, the
Debtors' operations, the Debtors' projections with respect to their intended
operations following implementation of the Plan and other related matters. For a
complete understanding of the Plan, you should read the Disclosure Statement,
the Plan and the exhibits and schedules thereto in their entireties.

     The Debtors believe that confirmation of the Plan and consummation of the
restructuring provided for therein is in the best interests of the Debtors and
their respective creditors and equity holders. Accordingly, the Debtors urge
each creditor that is impaired under, and entitled to vote with respect to, the
Plan, to vote to accept the Plan. Detailed voting instructions are set forth in
Section I.A. of this Disclosure Statement. To be counted, a ballot containing
your vote to accept or to reject the Plan must be received by the Debtors'
balloting agent, Logan & Company ("Logan"), no later than the balloting
deadlines provided in the ballot. PLEASE NOTE THAT TO THE EXTENT YOU ARE
INSTRUCTED TO RETURN YOUR BALLOT TO YOUR BROKER, BANK OR OTHER NOMINEE YOU MUST
LEAVE SUFFICIENT TIME FOR YOUR BALLOT TO BE PROCESSED BY YOUR BROKER, BANK OR
OTHER NOMINEE AND SUBMITTED TO LOGAN BEFORE THE VOTING DEADLINE.

     THE DEBTORS STRONGLY URGE ACCEPTANCE OF THE PLAN.

     FOR THE REASONS DISCUSSED IN THE ACCOMPANYING LETTER FROM THE OFFICIAL
COMMITTEE OF UNSECURED CREDITORS THAT HAS BEEN APPOINTED IN THESE CHAPTER 11
CASES BY THE UNITED STATES TRUSTEE (THE "OFFICIAL COMMITTEE"), THE OFFICIAL
COMMITTEE SUPPORTS CONFIRMATION OF THE PLAN AND URGES ALL CREDITORS ENTITLED TO
VOTE TO ACCEPT THE PLAN.

     THE DEBTORS HAVE NEGOTIATED THE TERMS OF THE PLAN WITH AN INFORMAL
COMMITTEE OF UNAFFILIATED NOTEHOLDERS (THE "NOTEHOLDER COMMITTEE") OF THE
DEBTOR'S 10% SENIOR SUBORDINATED NOTES DUE 2008 (THE "SUBORDINATED NOTES") AND
THE 12 3/4% SENIOR SECURED NOTES DUE 2004 (THE "JUNIOR SECURED NOTES"). THE
MEMBERS OF THE NOTEHOLDER COMMITTEE, WHICH IS COMPRISED OF HOLDERS OF AT LEAST
67% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE SUBORDINATED NOTES, AND AT LEAST
93% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE JUNIOR SECURED NOTES, HAVE AGREED,
SUBJECT TO THE TERMS AND CONDITIONS OF THEIR AGREEMENT WITH THE DEBTORS, TO VOTE
IN FAVOR OF THE PLAN.

     The Plan provides for the restructuring of the Debtors' liabilities in a
manner designed to maximize recoveries to all creditors and equity holders and
to enhance the financial viability of the Debtors, as they are reorganized under
the Plan. The Plan contemplates the restructuring of the Debtors' senior secured
debt obligations and the conversion of the Debtors' subordinated debt
obligations and certain other liabilities into new equity in the reorganized
Company. The Debtors' general trade creditors are classified separately from the
subordinated noteholders and will receive payment of a portion of their claims
(30%) in cash over time, unless a general trade creditor elects (or is deemed to
have elected) on its ballot instead to be treated the same as the subordinated
noteholders, in which event it will receive equity of the reorganized Company.
Critical vendors
                                        1
<PAGE>   7

involved in supplying scrap metal to the Debtors, upon which the Debtors are
dependant for the continuation of their business, generally will receive full
payment of their claims, pursuant to prior order of the Bankruptcy Court, in
exchange for their agreement to continue to supply scrap metal to the Debtors
for a period of one year on credit and other terms no less favorable than those
that existed prior to the Debtors' chapter 11 filings. The Debtors' existing
preferred and common equity interests will be cancelled under the Plan and the
Company's existing preferred and common shareholders will receive no
distributions from the Debtors on account of their interests. However, the Plan
provides that, subject to approval of the Plan, the Class 6 creditors (which
consists of the claims with respect to the Company's subordinated notes and
certain other impaired unsecured claims) will allocate a portion of the shares
that otherwise would be distributed to them pursuant to the Plan to the Class 7
preferred shareholders, as well as to Class 8 common shareholders and Class 9
securities claims holders.

     NO PERSON IS AUTHORIZED BY ANY OF THE DEBTORS IN CONNECTION WITH THE PLAN
OR THE SOLICITATION OF ACCEPTANCES OF THE PLAN TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION REGARDING THIS DISCLOSURE STATEMENT OR THE PLAN OTHER
THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT AND THE EXHIBITS AND SCHEDULES
ATTACHED HERETO.

     THE ACCURACY OF THE ACCOUNTING, FINANCIAL, ECONOMIC AND OTHER INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT IS THE EXCLUSIVE RESPONSIBILITY OF THE
DEBTORS.

     THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE
DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN, AND THE DELIVERY OF THIS
DISCLOSURE STATEMENT AT ANY TIME AFTER THE DATE HEREOF SHALL NOT CREATE AN
IMPLICATION THAT THERE HAS BEEN ANY CHANGE IN THE INFORMATION STATED HEREIN.

     THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING THE
INFORMATION REGARDING THE HISTORY, BUSINESS AND OPERATIONS OF THE DEBTORS AND
THE HISTORICAL FINANCIAL INFORMATION REGARDING THE DEBTORS IS INCLUDED FOR
PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN BUT, AS TO CONTESTED MATTERS AND
ADVERSARY PROCEEDINGS, IS NOT TO BE CONSTRUED AS AN ADMISSION OR STIPULATION BUT
RATHER AS STATEMENTS MADE IN SETTLEMENT NEGOTIATIONS.

     FOR THE CONVENIENCE OF CREDITORS AND EQUITY HOLDERS, THIS DISCLOSURE
STATEMENT SUMMARIZES THE TERMS OF THE PLAN, BUT THE PLAN ITSELF QUALIFIES ALL
SUMMARIES. IF ANY INCONSISTENCY EXISTS BETWEEN THE PLAN AND THE DISCLOSURE
STATEMENT, THE TERMS OF THE PLAN ARE CONTROLLING. SUMMARIES OF CERTAIN
PROVISIONS OF AGREEMENTS REFERRED TO IN THIS DISCLOSURE STATEMENT DO NOT PURPORT
TO BE COMPLETE AND ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO, THE FULL TEXT OF THE APPLICABLE AGREEMENTS.

                     I.  HOLDERS OF CLAIMS ENTITLED TO VOTE

     Under the Bankruptcy Code, classes of claims that are unimpaired under a
chapter 11 plan are deemed to have accepted the plan and are not entitled to
vote to accept or reject the plan. Classes of claims that are not entitled to
receive any distribution on account of their claims are deemed to have rejected
the plan and are not entitled to vote to accept or reject the plan.

     Under the terms of the Plan, the holders of claims and interests in the
following classes are impaired and the holders of such claims as of the date of
approval of this Disclosure Statement (the "Voting Record Date") are entitled to
vote to accept or reject the Plan:

                                        2
<PAGE>   8

<Table>
<Caption>
CLASS                            DESCRIPTION
-----                            -----------
<S>                              <C>
Class 4........................  Junior Secured Note Claims
Class 5........................  General Trade Claims
Class 6........................  Impaired Unsecured Claims
Class 11.......................  Subsidiary Interests
</Table>

     Votes on the Plan are not being solicited from Holders of Non-Tax Priority
Claims (Class 1), Secured Lender Claims (Class 2A), Other Secured Claims (Class
2B), Critical Vendor Claims (Class 3A) and Convenience Claims (Class 3B), each
of which are unimpaired and deemed to have accepted the Plan. Votes on the Plan
are also not being solicited from holders of Preferred Stock Interests (Class 7)
and Old Common Stock Interests (Class 8) or Securities Claims (Class 9). While
the holders of such interests and claims may receive distributions under the
Plan, such distributions are to be made from property otherwise allocated to
Class 6 creditors under the Plan and not from the Debtors. As a result, the
Debtors believe such classes are conclusively presumed to have rejected the Plan
as set forth herein and in the Plan. The holders of Other Old Equity Interests
(Class 10) will receive nothing under the Plan and are therefore deemed to have
rejected the Plan and are not entitled to vote to accept or reject the Plan.

A.  VOTING PROCEDURES

     If you are entitled to vote to accept or reject the Plan, a ballot is
enclosed for the purpose of voting on the Plan. Please carefully follow the
instructions set forth in the Ballot and vote and return your ballot(s) to:

                             Logan & Company, Inc.
                                546 Valley Road
                       Upper Montclair, New Jersey 07043
                    Attn: Metal Management Balloting Center

or, if you are a beneficial owner of a Subordinated Note and you receive a
ballot from your broker, bank or other nominee, you should return the ballot to
such broker, bank or other nominee in accordance with the instructions provided
with your ballot.

     TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE PLAN
MUST BE RECEIVED BY LOGAN NO LATER THAN THE VOTING DEADLINE SPECIFIED IN THE
BALLOTS (THE "VOTING DEADLINE").

     ANY BALLOT THAT IS EXECUTED BUT DOES NOT INDICATE AN ACCEPTANCE OR
REJECTION OF THE PLAN WILL BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN, AND ANY
BALLOT THAT IS NOT EXECUTED OR IN WHICH BOTH THE ACCEPTANCE AND REJECTION BOX IS
CHECKED WILL BE CONSIDERED NULL AND VOID AND WILL NOT BE COUNTED.

     If you are a holder of a claim entitled to vote on the Plan and did not
receive a ballot, received a damaged ballot or lost your ballot, or if you have
any questions concerning the Disclosure Statement, the Plan or the procedures
for voting on the Plan, please call the Metal Management Balloting Center, c/o
Logan & Company, Inc., at (973) 509-3190. For additional information on voting,
see Section VI.A. of this Disclosure Statement.

B.  CONFIRMATION HEARING

     Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after
notice, to hold a hearing to determine whether the Plan meets the requirements
for confirmation established by Section 1129 of the Bankruptcy Code. Any party
in interest may object to confirmation of the Plan. The Bankruptcy Court has
scheduled a hearing with respect to confirmation of the Plan for June 18, 2001
(the "Confirmation Hearing"). Notice of the Confirmation Hearing has been, or
will be, provided to holders of claims and equity interests or their
representatives (the "Confirmation Notice"). Objections to confirmation must be
filed with the Bankruptcy Court by June 11, 2001 and served in accordance with
the Confirmation Notice and are governed

                                        3
<PAGE>   9

by Bankruptcy Rules 3020(b) and 9014 and local rules of the Bankruptcy Court.
UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE
CONSIDERED BY THE BANKRUPTCY COURT.

                           II.  OVERVIEW OF THE PLAN

     The following is an overview of certain material provisions of the Plan, a
copy of which is attached hereto as Exhibit A. The following summaries of the
material provisions of the Plan do not purport to be complete and are qualified
in their entirety by reference to all the provisions of the Plan, including all
exhibits thereto.

A.  GENERAL INFORMATION CONCERNING TREATMENT OF CLAIMS AND INTERESTS

     The Plan provides for payment in full of Administrative Claims, Priority
Tax Claims, Non-Tax Priority Claims, Secured Lender Claims, Other Secured
Claims, Critical Vendor Claims and certain other Unimpaired Claims and
Convenience Claims or such other treatment that will not impair the holders of
such claims within the meaning of section 1124 of the Bankruptcy Code. The Plan
also provides that: (i) holders of Allowed Junior Secured Note Claims will
receive new junior secured notes in a principal amount equal to the principal
balance of their junior secured notes, plus accrued and unpaid interest to the
effective date at the non-default rate of interest provided for under their
existing Junior Secured Notes and otherwise will retain their rights under
existing documents (with certain technical and conforming amendments) related to
the Junior Secured Notes; (ii) holders of Allowed General Trade Claims (who have
not elected, or otherwise been deemed to have elected under the terms of the
Plan to have their claim treated as a Class 6 claim that receives equity in
reorganized MTLM, instead of cash) will receive cash payments aggregating 30% of
their claim, with payment to be made in four equal annual installments,
commencing on the date that is approximately one year and one day after the
effective date of the Plan; and (iii) holders of Impaired Unsecured Claims
(along with any holders of General Trade Claims that elect (or are deemed to
have elected) on their ballot to be treated as a Class 6 claim) will receive
their pro rata share of 9,900,000 shares of New Common Stock, representing 99%
ownership of reorganized MTLM. Holders of Allowed Preferred Stock (Class 7)
Interests, Old Common Stock (Class 8) and Securities Claims, if any (Class 9),
will receive no distributions from the Debtors on account of their interest or
claims. However, the Plan contemplates that the other 1% of ownership of
reorganized MTLM (i.e., 100,000 shares of New Common Stock) and the Series A
Warrants (all of which otherwise would be distributed to holders of Class 6
Claims under the Plan) will be reallocated to the holders of Classes 7, 8 and 9
interests or claims, provided that doing so does not preclude confirmation of
the Plan.

     The Debtors believe that the Plan provides distributions to all classes of
claims and interests that reflect an appropriate resolution of the claims and
interests, taking into account the differing nature and priority of such claims
and interests under the Bankruptcy Code and applicable law.

                                        4
<PAGE>   10

B.  SUMMARY OF DISTRIBUTIONS

     The following table describes the classification and treatment of claims
and interests under the Plan.(1)

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 1 (NON-TAX PRIORITY CLAIMS)              Class 1 is unimpaired by the Plan. Each
                                                   holder of an Allowed Non-Tax Priority Claim
    A claim (other than an Administrative Claim    is conclusively presumed to have accepted
    or a Priority Tax Claim) that is entitled to   the Plan and is not entitled to vote to
    priority in payment pursuant to section        accept or reject the Plan.
    507(a) of the Bankruptcy Code.
                                                   The legal and equitable rights of the
                                                   holders of Non-Tax Priority Claims are
                                                   unaltered by the Plan. On, or as soon as
                                                   reasonably practicable after the later of
                                                   (i) the Distribution Date, (ii) the date on
                                                   which such Non-Tax Priority Claim becomes an
                                                   Allowed Non-Tax Priority Claim, or (iii) the
                                                   date such Non-Tax Priority Claim becomes due
                                                   and owing in the ordinary course of the
                                                   Debtor's business, each holder of an Allowed
                                                   Non-Tax Priority Claim will receive in full
                                                   satisfaction, settlement and release of and
                                                   in exchange for such Allowed Non-Tax
                                                   Priority Claim (a) cash equal to the amount
                                                   of such Allowed Non-Tax Priority Claim; (b)
                                                   such other treatment as to which the Debtors
                                                   or the reorganized Debtors and the holder of
                                                   such Allowed Non-Tax Priority Claim have
                                                   agreed upon in writing; or (c) such claim
                                                   will be otherwise treated in any other
                                                   manner such that it will not be impaired
                                                   pursuant to section 1124 of the Bankruptcy
                                                   Code.
    Estimated Amount of Allowed Claims: $0.00      Estimated Percentage Recovery: 100%
---------------------------------------------------------------------------------------------------
    CLASS 2A (SECURED LENDER CLAIMS)               Class 2A is unimpaired by the Plan. Each
                                                   holder of a Secured Lender Claim is
    Class 2A consists of all Secured Lender        conclusively presumed to have accepted the
    Claims.                                        Plan and is not entitled to vote to accept
                                                   or reject the Plan.
    Estimated Amount of Allowed Claims: $140
    million as of the Petition Date. The Secured   To the extent any Secured Lender Claims
    Lender Claims have already been paid in full,  remain outstanding as of the effective date
    as ordered in connection with approval of the  of the Plan, on, or as soon as reasonably
    DIP Credit Agreement.                          practicable after, the Distribution Date,
                                                   each holder of an Allowed Class 2A Claim
                                                   will receive payment in full in cash of its
                                                   Allowed Secured Lender Claim. All
                                                   distributions on account of Secured Lender
                                                   Claims shall be made to the Prepetition
                                                   Agent for distribution to the holders of
                                                   Allowed Secured Lender Claims.
                                                   Estimated Percentage Recovery: 100%
---------------------------------------------------------------------------------------------------
</Table>

---------------

(1) Claim amounts are estimated as of November 20, 2000. This table does not
    discuss the treatment of Administrative Claims or Priority Tax Claims, which
    are not required by the Bankruptcy Code to be classified and the holders of
    which are not entitled to vote to accept the Plan. All such claims will be
    paid in full as required by the Bankruptcy Code and described in Section
    V.D. of this Disclosure Statement, including the amounts owed under the DIP
    Credit Agreement, which is to be paid from a borrowing under the New Credit
    Agreement.
                                        5
<PAGE>   11

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 2B (OTHER SECURED CLAIMS)                Class 2B is unimpaired by the Plan. Each
                                                   Holder of an Allowed Other Secured Claim is
    A claim (other than an Administrative Claim    conclusively presumed to have accepted the
    or a Secured Lender Claim) that is secured by  Plan and is not entitled to vote to accept
    a lien on property in which a Debtor's Estate  or reject the Plan.
    has an interest or that is subject to setoff
    under section 553 of the Bankruptcy Code, to   The legal, equitable and contractual rights
    the extent of the value of the claim holder's  of the Holders of Allowed Other Secured
    interest in the applicable Estate's interest   Claims are unaltered by the Plan. On, or as
    in such property or to the extent of the       soon as reasonably practicable after the
    amount subject to setoff, as applicable, as    later of (i) the Distribution Date or (ii)
    determined pursuant to section 506(a) of the   the date on which such Other Secured Claim
    Bankruptcy Code or, in the case of the         becomes an Allowed Other Secured Claim, each
    setoff, pursuant to section 553 of the         holder of an Allowed Other Secured Claim
    Bankruptcy Code.                               will receive in full satisfaction,
                                                   settlement and release of and in exchange
                                                   for such Allowed Other Secured Claim (a)
                                                   cash equal to the amount of such Allowed
                                                   Other Secured Claim; (b) such other
                                                   treatment as to which the Debtors or
                                                   reorganized Debtors have agreed upon in
                                                   writing; or (c) such other treatment that
                                                   will not impair the Holder of such claim
                                                   pursuant to section 1124 of the Bankruptcy
                                                   Code.
    Estimated Amount of Allowed Claims: $6.4       Estimated Percentage Recovery: 100%
    million
---------------------------------------------------------------------------------------------------
    CLASS 3A (CRITICAL VENDOR CLAIMS)              Class 3A is unimpaired by the Plan. Each
                                                   holder of an Allowed Critical Vendor Claim
    Class 3A consists of Critical Vendor Claims.   is conclusively presumed to have accepted
                                                   the Plan and is not entitled to vote to
    Estimated Amount of Allowed Claims: $30        accept or reject the Plan.
    million as of the Petition Date, but by the
    confirmation date of the Plan, all such        The legal, equitable and contractual rights
    claims are expected to have been paid in       of Critical Vendor Claims, as such rights
    full.                                          exist after giving effect to the agreements
                                                   entered into for the payment of such claims
                                                   pursuant to and in accordance with the
                                                   Critical Vendor Order, are unaltered by the
                                                   Plan. To the extent a Critical Vendor Claim
                                                   remains outstanding on the Distribution
                                                   Date, such claim shall be paid in full in
                                                   cash in accordance with the agreement
                                                   entered into pursuant to the Critical Vendor
                                                   Order.
                                                   Estimated Percentage Recovery: 100%
---------------------------------------------------------------------------------------------------
    CLASS 3B (CONVENIENCE CLAIMS)                  Class 3B is unimpaired by the Plan. Each
                                                   holder of an Allowed Convenience Claim is
    Class 3B consists of all Convenience Claims    conclusively presumed to have accepted the
    (claims of $500.00 or less).                   Plan and is not entitled to vote to accept
                                                   or reject the Plan.
                                                   On or as soon as practicable after the later
                                                   of (i) the Distribution Date or (ii) the
                                                   date on which a Convenience Claim becomes an
                                                   Allowed Convenience Claim, the holder of
                                                   such Claim shall receive payment of its
                                                   Allowed Convenience Claim in full, in cash.
    Estimated Amount of Allowed Claims: $400,000.  Estimated Percentage Recovery: 100%
---------------------------------------------------------------------------------------------------
</Table>

                                        6
<PAGE>   12

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 4 (JUNIOR SECURED NOTE CLAIMS)           Class 4 is impaired and therefore entitled
                                                   to vote on the Plan.
    Class 4 consists of all Junior Secured Note
    Claims.                                        On, or as soon as reasonably practicable
                                                   after, the Distribution Date, each holder of
                                                   an Allowed Class 4 Claim will receive in
                                                   full satisfaction, settlement of, and in
                                                   exchange for, its Allowed Junior Secured
                                                   Note Claim, a New Junior Secured Note in an
                                                   amount equal to the principal amount of its
                                                   Junior Secured Note, plus accrued and unpaid
                                                   interest to the effective date of the Plan
                                                   at the non-default rate of interest
                                                   specified in the Junior Secured Notes.
                                                   Except for (i) the capitalization of accrued
                                                   and unpaid interest into principal, (ii) the
                                                   fact that the indenture under which the New
                                                   Junior Secured Notes will be issued will
                                                   differ from the indenture governing the
                                                   Junior Secured Notes in order to give effect
                                                   to certain technical and conforming
                                                   amendments and (iii) the fact that all
                                                   defaults under the indenture governing the
                                                   Junior Secured Notes arising prior to the
                                                   effective date of the Plan or caused by
                                                   transactions contemplated by the Plan will
                                                   be deemed cured, the rights of holders of
                                                   Junior Secured Note Claims shall be
                                                   unaltered by the Plan.
    Estimated Amount of Allowed Claims: $33        Estimated Percentage Recovery: 100%
    million
---------------------------------------------------------------------------------------------------
    CLASS 5 (GENERAL TRADE CLAIMS)                 Class 5 is impaired and therefore is
                                                   entitled to vote on the Plan.
    Class 5 consists of all General Trade Claims.
                                                   Except with respect to those holders of
                                                   Allowed General Trade Claims who elect (or
                                                   are deemed to have elected) on their ballot
                                                   to be treated as an Allowed Class 6 Claim,
                                                   each holder of an Allowed General Trade
                                                   Claim shall receive, in full satisfaction,
                                                   settlement of and in exchange for, its
                                                   Allowed General Trade Claim, payment in cash
                                                   from the Debtors in an amount equal to 30%
                                                   of its Allowed General Trade Claim. Such
                                                   payment shall be made, without interest, in
                                                   four equal annual installments, with the
                                                   first installment payable on, or as soon as
                                                   reasonably practicable after, the first
                                                   business day that is one day after the one
                                                   year anniversary of the effective date of
                                                   the Plan, and the remaining three
                                                   installments paid over the following three
                                                   years with one installment made on each
                                                   succeeding anniversary of the first
                                                   installment payment.
    Estimated Amount of Allowed Claims: $24.6      Estimated Percentage Recovery: Depends on
    million                                        whether election is made; see above.
---------------------------------------------------------------------------------------------------
</Table>

                                        7
<PAGE>   13

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 6 (IMPAIRED UNSECURED CLAIMS)            Class 6 is impaired and therefore entitled
                                                   to vote on the Plan.
    Class 6 consists of all Subordinated Note
    Claims and General Impaired Unsecured Claims.  On or as soon as reasonably practicable
                                                   after the later of (i) the Distribution Date
                                                   or (ii) the date on which such Impaired
                                                   Unsecured Claim becomes an Allowed Impaired
                                                   Unsecured Claim, each holder of an Allowed
                                                   Impaired Unsecured Claim will receive its
                                                   pro rata share of 10,000,000 shares of New
                                                   Common Stock and 100% of the Series A
                                                   Warrants; provided, however, that subject to
                                                   the provisions of the Plan, upon acceptance
                                                   of the Plan by Holders of Allowed Impaired
                                                   Unsecured Claims, each such Holder will be
                                                   deemed to have agreed to an aggregate
                                                   reallocation of 100,000 shares of their New
                                                   Common Stock and 100% of the Series A
                                                   Warrants to Classes 7, 8 and 9 on the terms
                                                   set forth in Section 3.3 of the Plan.
    Estimated Amount of Allowed Claims: $200       Estimated Percentage Recovery: Uncertain;
    million                                        the amount recovered will depend on the
                                                   value of the New Common Stock received on
                                                   the effective date of the Plan, whether, and
                                                   in what amount, contingent claims against
                                                   the Debtors become non-contingent and fixed
                                                   and whether, and to what extent, Disputed
                                                   Claims are resolved in favor of the Debtors
                                                   rather than the claimants. Subject to the
                                                   foregoing, and based on current information
                                                   available to the Debtors, the recovery is
                                                   estimated to be approximately 30%.
---------------------------------------------------------------------------------------------------
</Table>

                                        8
<PAGE>   14

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 7 (PREFERRED STOCK INTERESTS)            Class 7 is impaired. The Holders of Class 7
                                                   Interests will receive no distributions from
    Class 7 consists of the Series B Preferred     the Debtors on account of their Interests
    Stock and the Series C Preferred Stock,        and are therefore deemed to have rejected
    outstanding immediately prior to the Petition  the Plan and are not entitled to vote on the
    Date.                                          Plan.
                                                   The Holders of Class 7 Preferred Stock
                                                   Interests will receive no distributions of
                                                   the Debtors' property on account of their
                                                   Interests and such Preferred Stock Interests
                                                   are cancelled pursuant to the Plan.
                                                   On, or as soon as reasonably practicable
                                                   after the later of (i) the Distribution Date
                                                   or (ii) the date such Preferred Stock
                                                   Interest becomes Allowed, each Holder of an
                                                   Allowed Preferred Stock Interest in Class 7
                                                   will receive a pro rata share of the 7,300
                                                   shares of New Common Stock and Series A
                                                   Warrants exercisable into 54,750 shares of
                                                   New Common Stock that have been reallocated
                                                   by Class 6 to Class 7, pursuant to the Plan.
                                                   Notwithstanding the foregoing, if the
                                                   Bankruptcy Court determines that the
                                                   allocation of New Common Stock and Series A
                                                   Warrants to Class 7 renders the Plan
                                                   un-confirmable, then holders of Old
                                                   Preferred Stock Interests shall not receive
                                                   or retain any rights under the Plan on
                                                   account of such Interests.
                                                   Estimated Percentage Recovery: (1) from
                                                   property of the Debtors, zero; and (2) from
                                                   property reallocated by Class 6 to Class 7,
                                                   uncertain; the amount recovered will depend
                                                   on (i) whether any New Common Stock and
                                                   Series A Warrants are allocated and
                                                   distributed from Class 6 to Classes 8 and 9
                                                   under the Plan; and (ii) the value of the
                                                   New Common Stock and Series A Warrants to be
                                                   distributed under the Plan.
---------------------------------------------------------------------------------------------------
</Table>

                                        9
<PAGE>   15

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 8 (OLD COMMON STOCK INTERESTS)           Class 8 is impaired. The holders of Class 8
                                                   Interests will receive no distributions from
    Old Common Stock consists of common stock of   the Debtors on account of their Interests
    MTLM outstanding immediately prior to the      and are therefore deemed to have rejected
    Petition Date, including treasury stock.       the Plan and are not entitled to vote on the
                                                   Plan.
    Number of shares outstanding as of the
    Petition Date: Approximately 60 million.       The Holders of Class 8 Old Common Stock
    National Metals Company, Inc. ("NMI") has      Interests will receive no distributions of
    asserted a claim for approximately 25 million  the Debtors' property on account of their
    shares of Old Common Stock, which claim is     Interests and such Old Common Stock
    disputed by the Debtors; and on May 3, 2001,   Interests are cancelled pursuant to the
    the Bankruptcy Court ruled that NMI is         Plan.
    entitled to approximately 2.1 million shares.
                                                   On, or as soon as reasonably practicable
                                                   after the later of (i) the Distribution Date
                                                   or (ii) the date on which such Old Common
                                                   Stock Interest becomes an Allowed Old Common
                                                   Stock Interest, each holder of an Allowed
                                                   Old Common Stock Interest will receive,
                                                   together with holders of Allowed Securities
                                                   Claims, if any, a pro rata share of 92,700
                                                   shares of New Common Stock and Series A
                                                   Warrants exercisable into 695,250 shares of
                                                   New Common Stock that have been reallocated
                                                   by Class 6 to Classes 8 and 9 pursuant to
                                                   the Plan.
                                                   Notwithstanding the foregoing, if the
                                                   Bankruptcy Court determines that the
                                                   allocation of New Common Stock and Series A
                                                   Warrants to Class 8 renders the Plan
                                                   un-confirmable, then Holders of Old Common
                                                   Stock Interests shall not receive or retain
                                                   any rights under the Plan on account of such
                                                   Interests.
                                                   Estimated Percentage Recovery: (1) from
                                                   property of the Debtors, zero; and (2) from
                                                   property reallocated by Class 6 to Class 8,
                                                   uncertain; the amount recovered will depend
                                                   on (i) whether any New Common Stock and
                                                   Series A Warrants are allocated and
                                                   distributed from Class 6 to Class 9 under
                                                   the Plan; (ii) the outcome of NMI's claim to
                                                   Old Common Stock; and (iii) the value of the
                                                   New Common Stock and Series A Warrants to be
                                                   distributed under the Plan.
---------------------------------------------------------------------------------------------------
</Table>

                                        10
<PAGE>   16

<Table>
<Caption>
    DESCRIPTION AND AMOUNT OF CLAIMS OR INTERESTS  SUMMARY OF TREATMENT
---------------------------------------------------------------------------------------------------
<S> <C>                                            <C>                                          <C>
    CLASS 9 (SECURITIES CLAIMS)                    Class 9 is impaired. The holders of Class 9
                                                   Claims will receive no distributions from
    Class 9 consists of all claims arising from    the Debtors on account of their Claims and
    recission of a purchase or sale of a security  are therefore deemed to have rejected the
    of the Debtors, for damages arising from the   Plan and are not entitled to vote on the
    purchase or sale of such security, or for      Plan.
    reimbursement or contribution allowed under
    section 502 of the Bankruptcy Code on account  On, or as soon as practicable after the
    of such Claim. The Debtors do not believe      later of (i) the Distribution Date or (ii)
    there are any Securities Claims and,           the date on which such Securities Claim
    therefore, any Securities Claims filed will    becomes an Allowed Securities Claim, each
    be objected to by the Debtors.                 holder of an Allowed Securities Claim will
                                                   receive, together with the Holders of
                                                   Allowed Old Common Stock Interests a pro
                                                   rata share of the 92,700 shares of New
                                                   Common Stock and Series A Warrants
                                                   exercisable into 695,250 shares of New
                                                   Common Stock that have been reallocated by
                                                   Class 6 to Class 8 and Class 9 pursuant to
                                                   the Plan.
                                                   Notwithstanding the foregoing, if the
                                                   Bankruptcy Court determines that the
                                                   reallocation of New Common Stock and Series
                                                   A Warrants to Class 9 renders the Plan
                                                   un-confirmable, then Old Rights and
                                                   Warrants, Holders of Securities Claims shall
                                                   not receive or retain any rights under the
                                                   Plan on account of such Claims.
    Estimated Amount of Allowed Claims: $0.00      Estimated Percentage Recovery; (1) from
                                                   property of the Debtors, zero; and (2) from
                                                   property reallocated by Class 6 to Class 9,
                                                   uncertain; the amount recovered will depend
                                                   on (i) the amount, if any, of Allowed Class
                                                   9 Claims; and (ii) the value of the New
                                                   Common Stock and Series A Warrants to be
                                                   distributed under the Plan.
---------------------------------------------------------------------------------------------------
    CLASS 10 (OLD RIGHTS AND WARRANTS)             Class 10 is impaired and deemed to reject
                                                   the Plan.
    Class 10 consists of the Old Rights and
    Warrants.                                      Holders of Class 10 Interests will receive
                                                   or retain no property on account of such
                                                   Interests.
                                                   Estimated Percentage Recovery: Zero
---------------------------------------------------------------------------------------------------
    CLASS 11 (SUBSIDIARY INTERESTS)                Class 11 is impaired and is entitled to vote
                                                   on the Plan.
    Class 11 consists of the issued and
    outstanding shares of stock and other equity   On the effective date of the Plan,
    securities of the subsidiary Debtors as of     reorganized MTLM shall retain its Subsidiary
    the Petition Date.                             Interests (direct and indirect) in each of
                                                   the reorganized subsidiary debtors and each
                                                   reorganized subsidiary debtor will retain
                                                   its Subsidiary Interest (if any) in any
                                                   other reorganized subsidiary debtor.
                                                   Estimated Percentage Recovery: Uncertain,
                                                   based on the value of retained shareholder
                                                   interests which cannot be determined until
                                                   after the effective date of the Plan.
---------------------------------------------------------------------------------------------------
</Table>

                                        11
<PAGE>   17

C.  TREATMENT OF UNSECURED CLAIMS

     As set forth in the foregoing table, the Debtors have classified their
unsecured claims into 4 classes: (i) Class 6 contains the claims of the
subordinated noteholders and certain other similar unsecured claims, which are
to receive New Common Stock representing 99% ownership of reorganized MTLM; (ii)
Class 5 contains the claims of general trade creditors, which will be paid cash
totaling 30% of their claims in four equal, annual installments, without
interest, commencing approximately one year and one day after the effective date
of the Plan (unless they elect or are deemed to have elected to be treated as a
Class 6 claim); (iii) Class 3A contains the Critical Vendor Claims, the holders
of which are principally scrap suppliers which have agreed to continue to supply
scrap metal to the Debtors on acceptable credit term for a period of one year,
and which will be, or have been, paid in full in cash; and (iv) Class 3B
contains the Convenience Claims, which are to be paid in full. In the event a
general trade creditor in Class 5 does not make a proper or timely election on
its ballot, its claim automatically will be treated as a Class 6 claim.

     The treatment of Critical Vendor Claims in Class 3A under the Plan is
consistent with the Order of the Bankruptcy Court entered on November 20, 2000
authorizing payment of Critical Vendor Claims. See Section IV.B. of the
Disclosure Statement. It also reflects the Debtor's judgment, with which the DIP
Lenders and the Noteholder Committee agreed, that full payment of Critical
Vendor Claims was necessary to preserve the Debtors' going concern values.

D.  ALLOCATION OF VALUE FROM CLASS 6 TO CLASSES 7, 8 AND 9

     Under principles established by the Bankruptcy Code, holders of Class 6
claims are entitled to receive payment in full on their claims before the
holders of equity interests classified in Classes 7 and 8, and securities claims
classified in Class 9 receive any payment. Class 6 claims will not be paid in
full under the Plan. Nonetheless, in the negotiations leading up to the Plan,
the representatives of the holders of the Subordinated Notes agreed, and the
Plan provides, that a portion of the distribution otherwise allocated to Class 6
claim holders will be reallocated to the holders of interests and claims in
Classes 7, 8 and 9. The Debtors' believe that this reallocation of value does
not violate the priority provisions of the Bankruptcy Code and, if Class 6 votes
to accept the Plan, is enforceable against all holders of Class 6 claims.
However, if the Bankruptcy Court were to determine that this reallocation
provision renders the Plan unconfirmable, the Plan will be deemed modified,
without further action, to eliminate such reallocation and, therefore, to
eliminate the distributions to holders of Class 7 and 8 interests and Class 9
claims.

E.  TERMS OF NEW CREDIT AGREEMENT/EXIT FACILITY

     On the effective date of the Plan, the Debtors will enter into the New
Credit Agreement providing the terms and conditions of a new credit facility to
be made available to the Debtors by their existing DIP Lenders upon their
emergence from the Chapter 11 proceeding. Under the terms of the New Credit
Agreement the Debtors will have loan availability of at least $15 million in
excess of the availability provided under their prepetition credit agreement
(the "Supplemental Availability"), which Supplemental Availability will reduce
by $1.25 million on each 90-day anniversary of the effective date. The New
Credit Agreement will terminate, and all amounts outstanding thereunder will be
due, on the second anniversary of the effective date of the Plan. The lenders
under the New Credit Agreement will have a first priority lien on substantially
all of the reorganized Debtors' assets to secure the repayment of the loans made
thereunder.

     The Debtors will have access to funds under the New Credit Agreement on a
revolving credit basis. Availability of loans and letters of credit under the
New Credit Agreement is limited to a borrowing base constituted of 85% of
eligible accounts receivable, 70% of eligible inventory (up to a cap of
$65,000,000), a fixed asset sublimit of approximately $40,000,000 (which shall
reduce on July 1, 2001 and on the first day of each fiscal quarter thereafter by
$2.4 million) and the Supplemental Availability. Loans under the New Credit
Agreement shall bear interest at a floating rate per annum equal to (at the
Debtors' option) (i) 3% over LIBOR or (ii) 1.5% over the prime lending rate of
Deutsche Bank AG, New York Branch; provided, however, that the margin applicable
to loans bearing interest by reference to LIBOR shall be subject to reduction as
provided in the New Credit Agreement. The Debtors will be required to pay a
commitment fee of $1,000,000

                                        12
<PAGE>   18

on the effective date of the Plan and a facility fee of $2,000,000 on the first
anniversary of the effective date; provided, however, that no such facility fee
shall be payable if (x) the Debtors' consolidated EBITDA for the twelve-month
period ending on the last day of the last month ending immediately prior to the
first anniversary of the effective date (the "Fee Test Date") is $45,000,000 or
more, (y) the ratio of indebtedness of the Debtors on the Fee Test Date to the
Debtors' consolidated EBITDA for the twelve months ending on the Fee Test Date
does not exceed 4.75:1 and (z) excess availability under the borrowing base as
of the Fee Test Date is greater than $25,000,000. The Debtors must also pay
certain other fees to the lenders under the New Credit Agreement, including an
unused line fee, consistent with the prepetition credit agreement.

     The New Credit Agreement is expected to contain a number of covenants that,
among other things, will restrict the ability of the Debtors to make capital
expenditures, dispose of assets, incur additional indebtedness, pay dividends or
make distributions, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations and form subsidiaries and otherwise restrict certain
corporate activities. In addition, the Company is expected to be required to
comply with specified financial ratios and tests (including a ratio of
indebtedness to EBITDA and a ratio of EBITDA to interest expense).

     The New Credit Agreement is expected to contain various events of default,
including defaults relating to payments, breaches of representations, warranties
and covenants, certain events of bankruptcy and insolvency, defaults on certain
other indebtedness and certain changes of control of the Company.

     The New Credit Agreement is expected to contain a number of conditions
precedent to the initial funding thereunder, including without limitation that:

          (1) (i) all obligations under the DIP Credit Agreement (other than
     obligations in respect of letters of credit outstanding thereunder) shall
     have been (or concurrently with the initial advance under the New Credit
     Agreement shall be) repaid and the commitments thereunder shall have been
     terminated and (ii) all letter of credit obligations outstanding under the
     DIP Credit Agreement shall have been assumed by the Debtors under the New
     Credit Agreement on a joint and several basis;

          (2) the Bankruptcy Court shall have entered the confirmation order,
     which shall be in form and substance satisfactory to the Agent and each of
     the lenders under the New Credit Agreement in their sole discretion,
     authorizing the Debtors to enter into and consummate the New Credit
     Agreement; all modifications to the Plan, the confirmation order and all
     legal matters pertaining to the Debtors under the Plan and its confirmation
     and consummation shall be satisfactory to such Agent and such lenders in
     their sole discretion;

          (3) the confirmation order shall not have been stayed, reversed,
     vacated or materially modified without the consent of the Agent under the
     New Credit Agreement, which consent shall not be unreasonably withheld; all
     governmental and material third party approvals necessary or, in the
     reasonable discretion of such Agent, advisable in connection with the New
     Credit Agreement shall have been obtained and be in full force and effect;
     and

          (4) excess availability under the borrowing base shall be no less than
     $7,500,000, after giving effect to all amounts due and payable by the
     respective Debtors pursuant to the Plan upon effectiveness thereof.

The terms of the Exit Facility and the New Credit Agreement have not, as of the
date hereof, been finally negotiated and agreed to, and, therefore, the Debtors
reserve the right to modify the terms of the New Credit Agreement that is
described herein, with the consent of the lenders thereto, the Official
Committee and the Noteholder Committee. Further, the availability of the Exit
Facility and New Credit Agreement is dependent upon various factors beyond the
Debtors' control and consequently, as more particularly explained in the
discussion of "Risk Factors" in Sections VII.B.4 and VII.C.2 of this Disclosure
Statement, there can be no assurance that the Exit Facility and New Credit
Agreement will be made available to the Debtors by their senior lenders.

                                        13
<PAGE>   19

F.  TERMS OF SECURITIES TO BE ISSUED PURSUANT TO THE PLAN

1.  NEW COMMON STOCK

     On the effective date, reorganized MTLM will issue 10,000,000 shares of New
Common Stock pursuant the Plan, representing 100% of the equity value of
reorganized MTLM on the effective date of the Plan. The New Common Stock will be
distributed, subject to dilution, to holders of Class 6 claims (and holders of
Class 5 claims who elect or are deemed to have elected to be treated as Class 6
claims) on a pro rata basis and, as provided in the Plan, 1% of such shares will
be reallocated to holders of Classes 7, 8 and 9 interests and claims, on the
basis set forth in the Plan.

2.  SERIES A WARRANTS

     On the effective date of the Plan, reorganized MTLM will issue the Series A
Warrants, which will grant to the holders thereof the right to purchase 750,000
shares of New Common Stock. The Series A Warrants will have a five-year term and
a cash exercise price equal to the total amount of all allowed claims in Class 6
(as of the Petition Date), divided by 10,000,000. The Series A Warrants: (a)
shall contain customary anti-dilution provisions; (b) shall contain additional
customary protections found in warrants to the effect that in the event of any
combination or subdivision of the outstanding shares (including but not limited
to in reverse stock splits), the Series A Warrant shares and cash exercise price
shall be adjusted proportionately; and (c) shall not be subject to any future
valuation or pricing premised upon the Black-Scholes formula or any other
valuation methodology. The Series A Warrants will be reallocated, as provided in
the Plan, to holders of Classes 7, 8 and 9 interests and claims.

G.  BOARD OF DIRECTORS OF REORGANIZED MTLM

     As of the effective date of the Plan, the initial officers of reorganized
MTLM will be the officers of MTLM immediately prior to the effective date. See
Exhibit B of the Disclosure Statement for additional information concerning
management of the reorganized Debtors. On the effective date, the board of
directors of reorganized MTLM shall have five (5) members, consisting of the
chief executive officer of MTLM, and four (4) directors designated by the
Noteholder Committee. The Noteholder Committee may, in its sole discretion,
adjust the make-up of the board in light of NASDAQ listing requirements,
including the possible addition of independent directors. Except as may be
otherwise directed by the board of reorganized MTLM, the board of directors of
the reorganized subsidiary Debtors shall remain the same as prior to the
effective date. Pursuant to section 1129(a)(5), the Debtors will disclose, not
later than five days prior to the date the Plan is confirmed by the Bankruptcy
Court, the identity and affiliations of any person proposed to serve on the
initial board of directors of reorganized MTLM (including those persons
designated by the Noteholder Committee), and, to the extent such person is an
insider, other than by virtue of being a director, the nature of any
compensation for such person. The classification and composition of the board of
directors of each of the reorganized Debtors shall be consistent with the
amended certificates of incorporation. Each such director and officer shall
serve from and after the effective date pursuant to the terms of the amended
certificates of incorporation, the other constituent documents of the
reorganized Debtors, and applicable law. The board of directors of MTLM serving
prior to the effective date of the Plan will be deemed to have resigned on such
effective date.

H.  JUNIOR SECURED NOTES

     On the effective date of the Plan, reorganized MTLM will issue the New
Junior Secured Notes to the holders of the Allowed Junior Secured Note Claims.
The principal amount of the New Junior Secured Note issued to each such holder
will be equal to (i) the principal amount outstanding under its Junior Secured
Note and (ii) all accrued and unpaid interest to (but not including) the
effective date, calculated at the non-default rate of interest specified in the
Junior Secured Notes.

     The interest rate per annum, interest payment dates, maturity date,
collateral (which shall be junior in all respects to the obligations under the
New Credit Agreement), and all other terms of the New Junior Secured Notes shall
be the same as the terms governing the Junior Secured Notes pursuant to the
indenture governing
                                        14
<PAGE>   20

the Junior Secured Notes in effect as of the Petition Date, except for certain
modifications to be embodied in an amended and restated indenture that will
govern the New Junior Secured Notes to provide for (i) issuance of the New
Junior Secured Notes and the capitalization of accrued and unpaid interest as
provided in the Plan, and (ii) certain technical amendments to conform such
indenture and related documents to the transactions authorized pursuant to the
Plan. All defaults under such indenture arising prior to the effective date or
caused by the transactions contemplated by implementation of the Plan to occur
after the effective date will be deemed cured.

I.  MANAGEMENT EQUITY INCENTIVE PLAN

     The Plan provides that, on its effective date, reorganized MTLM will adopt
the Management Equity Incentive Plan. Pursuant to the Management Equity
Incentive Plan, reorganized MTLM will issue the Series B Warrants and the Series
C Warrants. The Series B Warrants will grant to the holders thereof the right to
purchase 1,000,000 shares of New Common Stock of reorganized MTLM. The Series B
Warrants will have a five-year term and a cash exercise price equal to $6.50 per
share. Series B Warrants shall be issued to, and allocated among, key management
as determined by the existing board of directors of MTLM, subject to approval of
the Noteholder Committee.

     The Series C Warrants will grant to the holders thereof the right to
purchase 500,000 shares of New Common Stock. The Series C Warrants will have a
seven-year term and a cash exercise price equal to $12.00 per share. Series C
Warrants shall be issued to, and allocated among, key management as determined
by the board of directors of reorganized MTLM, with such allocation to be made
within 90 days of the effective date.

     The Series B Warrants and Series C Warrants will vest 1/3 on the effective
date of the Plan and 1/3 on each of the first two anniversaries of the effective
date of the Plan. Any Series B Warrants and Series C Warrants that do not vest
are forfeited by the recipient thereof and may be reallocated by the board of
directors of reorganized MTLM to then or future members of management.

     In addition, the Series B Warrants and Series C Warrants: (i) shall contain
customary anti-dilution provisions; (ii) shall contain additional customary
protections found in warrants to the effect that in the event of any combination
or subdivision of the outstanding shares (including but not limited to reverse
stock splits), the Series B Warrant shares and Series C Warrant shares and
respective cash exercise prices shall be adjusted proportionately; and (iii)
shall not be subject to any future valuation or pricing premised upon the Black-
Scholes formula or any other valuation methodology.

J.  REGISTRATION EXEMPTION

     The New Junior Secured Notes, the New Common Stock and the Series A
Warrants to be issued pursuant to the Plan (and the New Common Stock to be
issued upon exercise of such warrants) shall be issued pursuant to the
registration exemption provided under Section 1145(a) of the Bankruptcy Code. As
a result, such New Junior Secured Notes, New Common Stock and Series A Warrants
shall be freely tradeable, without restriction, except to the extent a holder of
such shares or warrants is an "underwriter" as defined in section 1145(b) of the
Bankruptcy Code. See Section V.M.6. of this Disclosure Statement for an
additional discussion of the registration exemption.

K.  LISTING OF NEW COMMON STOCK; REGISTRATION RIGHTS AGREEMENT

     As promptly as practicable following the effective date of the Plan,
reorganized MTLM shall use its commercially reasonable best efforts to cause the
shares of New Common Stock issued under the Plan to be listed on a national
securities exchange or quoted in the national market system (or small cap
system) of the National Association of Securities Dealers' Automated Quotation
System. In addition, if requested by the Noteholder Committee, reorganized MTLM
shall enter into a registration rights agreement, pursuant to which it will use
commercially reasonable efforts, for the benefit of certain holders of New
Common Stock that may be "underwriters" under applicable securities laws, to (i)
cause to be filed with the Securities and Exchange Commission a registration
statement on Form S-1, or other appropriate form, under the Securities
                                        15
<PAGE>   21

Exchange Act of 1934, as amended (the "Exchange Act") with respect to the New
Common Stock, and (ii) take such other actions and file such other documents as
are specified in such registration rights agreement.

L.  VALUE OF REORGANIZED DEBTORS

     The Debtors have been advised by their financial advisor, Houlihan, Lokey,
Howard & Zukin ("Houlihan Lokey"), with respect to the reorganization equity
value of the reorganized Debtors. The reorganization equity value, which
includes the Debtors' operating business, the expected present value of certain
non-operating assets and the estimated debt balances at and beyond the effective
date of the Plan, is estimated by Houlihan Lokey to be approximately $65 million
as of an assumed effective date of June 30, 2001. The foregoing reorganization
equity value (ascribed as of the date of this Disclosure Statement) reflects,
among other things, factors discussed below, current financial market conditions
and the inherent uncertainty today as to the achievement of the Pro Forma
Financial Projections for Fiscal Years 2001 through 2004, which are attached as
Exhibit F to this Disclosure Statement (the "Projections").

     Based on the assumed reorganization equity value set forth above, the value
of the 10,000,000 shares of New Common Stock to be issued to the holders of
Allowed Claims in Class 6 (and in Class 5 if the holder so elects) under the
Plan and to holders of Allowed Interests in Classes 7, 8 and 9 is estimated to
be approximately $6.12 per share, after giving effect to the potentially
diluting impact of the warrants issued under the Plan. The foregoing valuation
also reflect a number of assumptions, including a successful reorganization of
the Debtors' business and finances in a timely manner, the amount of available
cash, market conditions and the Plan becoming effective in accordance with its
terms on a basis consistent with the estimates and other assumptions discussed
herein.

     In preparing the estimated reorganization equity value, Houlihan Lokey: (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 and assisted in developing financial projections relating to
their businesses and prospects; (c) met with certain members of senior
management of the Debtors to discuss the Debtors' operations and future
prospects; (d) reviewed publicly available financial data and considered the
market values of public companies that Houlihan Lokey deemed generally
comparable to the operating businesses of the Debtors; (e) reviewed the
financial terms, to the extent publicly available, of certain acquisitions of
companies that Houlihan Lokey believes were comparable to the operating
businesses of the Debtors; (f) considered certain economic and industry
information relevant to the Debtors' operating business; (g) visited certain of
the Debtors' facilities; and (h) conducted such other analyses as Houlihan Lokey
deemed appropriate under the circumstances. Although Houlihan Lokey conducted a
review and analysis of the Debtors' business, operating assets and liabilities
and business plans, Houlihan Lokey assumed and relied on the accuracy and
completeness of all financial and other information furnished to it by the
Debtors. No independent evaluations or appraisals of the Debtors' assets were
sought or were obtained in connection therewith.

     Estimates of reorganization equity value do not purport to be appraisals,
nor do they necessarily reflect the values that might by realized if assets were
sold. The estimates of reorganization equity value prepared by Houlihan Lokey
assume that the reorganized Debtors continue as the owners and operators of
their businesses and assets. Such estimates were developed solely for purposes
of formulation and negotiation of a plan of reorganization and analysis of
implied relative recoveries to creditors thereunder. Such estimates reflect
computations of the estimated reorganization equity value of the reorganized
Debtors through the application of various valuation techniques and do not
purport to reflect or constitute appraisals, liquidation values or estimates of
the actual market values that may be realized through the sale of any securities
to be issued pursuant to the Plan, which may be significantly different from the
amounts set forth herein. The value of an operating business is subject to
uncertainties and contingencies that are difficult to predict and will fluctuate
with changes in factors affecting the financial conditions and prospects of such
a business. As a result, the estimate of reorganization equity value set forth
herein is not necessarily indicative of actual outcomes, which may be
significantly more or less favorable than those set forth herein. Because
estimates are inherently subject to uncertainties, neither the Debtors, Houlihan
Lokey, nor any other person assumes responsibility for
                                        16
<PAGE>   22

their accuracy. Depending on the results of the Debtors' operations or changes
in the financial markets, Houlihan Lokey's valuation analysis of the effective
date of the Plan may differ from that disclosed herein.

     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, prevailing interest rates; conditions in the financial
markets; the anticipated initial securities holding of prepetition creditors,
some of which may prefer to liquidate their investment rather than hold it on a
long-term basis; and other factors that generally influence the prices of
securities. Actual market prices of such securities also may be affected by the
Debtors' history in chapter 11 or by other factors not possible to predict.
Accordingly, the reorganization equity value estimated by Houlihan Lokey does
not necessarily reflect, and should not be construed as reflecting, values that
will be attained in the public or private markets. The equity value ascribed in
the analysis does not purport to be an estimate of the post-reorganization
market trading value. Such trading value may be materially different from the
reorganization equity value ranges associated with Houlihan Lokey's valuation
analysis. Indeed, there can be no assurance that a trading market will develop
for the New Common Stock.

                           III.  GENERAL INFORMATION

A.  DESCRIPTION AND HISTORY OF DEBTORS' BUSINESS

1.  THE DEBTORS

     MTLM operates its business through a group of directly or indirectly owned
subsidiaries. The Debtors, in addition to MTLM, are:

          California Metals Recycling, Inc.
           CIM Trucking, Inc.
           Firma, Inc.
           Firma Plastic Co., Inc.
           MacLeod Metals Co.
           Metal Management Aerospace, Inc.
           Metal Management Alabama, Inc.
           Metal Management Arizona, L.L.C.
           Metal Management Connecticut, Inc.
           Metal Management Gulf Coast, Inc.
           Metal Management Indiana, Inc.
           Metal Management Memphis, L.L.C.
           Metal Management Midwest, Inc.
           Metal Management Mississippi, L.L.C.
           Metal Management Northeast, Inc.
           Metal Management Ohio, Inc.
           Metal Management Pittsburgh, Inc.
           Metal Management Realty, Inc.
           Metal Management S & A Holdings, Inc.
           Metal Management Services, Inc.
           Metal Management Stainless & Alloy, Inc.
           Metal Management West Coast Holdings, Inc.
           Metal Management West, Inc.
           metals.com, inc.
           MTLM Arizona, Inc.
           Proler Southwest Inc.
           Reserve Iron & Metal Limited Partnership
           Trojan Trading Co.

                                        17
<PAGE>   23

     MTLM is the parent corporation of the subsidiary Debtors and has made other
equity investments in other non-debtor U.S. corporations and entities.

2.  BUSINESS

     MTLM is a publicly-traded company which, with its directly and indirectly
owned subsidiaries, is the largest full service metals recycler in the United
States. MTLM has leadership positions in many major metropolitan markets,
including: Chicago, Illinois; Cleveland, Ohio; Denver, Colorado; Hartford/New
Haven, Connecticut; Houston, Texas; Memphis, Tennessee; Newark, New Jersey;
Phoenix, Arizona; and Pittsburgh, Pennsylvania. In addition, MTLM has a leading
market share in the Gulf Coast region through its 28.5% ownership interest in
Southern Recycling, L.L.C., the largest scrap metals recycler in that region.
MTLM also holds leading market positions in several important product segments,
including stainless steel, copper and aluminum generated from electric utility
applications and titanium and other high-temperature nickel alloys generated by
the aerospace industry. For the year ended March 31, 2000, MTLM sold
approximately 5.3 million tons of ferrous scrap and approximately 656.8 million
pounds of non-ferrous scrap.

     MTLM has achieved its leadership position in the metals recycling industry
primarily by implementing a regional "hub and spoke" consolidation strategy in
which it seeks to acquire market leaders in targeted geographic markets and
follow up these acquisitions with a series of smaller acquisitions in the same
geographic area to gain operating leverage and to become more important in the
market place. Since April 1996, MTLM has completed 27 acquisitions and, in the
process, added in excess of $900 million in annual revenues.

     In implementing its acquisition strategy, MTLM has focused on major
metropolitan markets where prime industrial and obsolete scrap (automobiles,
appliances and industrial equipment) is readily available and from where it
believes it can better serve its customer base. In pursuing this strategy, MTLM
has sought to acquire regional platform companies with strong operational
management and a history of successful financial performance to serve as
platforms into which subsequent acquisitions can be integrated. MTLM believes
that its consolidation strategy has enhanced its competitive position of the
operations it has acquired because of broader distribution channels, improved
managerial and financial resources, greater purchasing power and increased
economies of scale.

     MTLM's operations consist primarily of the collection and processing of
ferrous and non-ferrous metals for resale to metals brokers, steel producers,
and producers and processors of other metals. MTLM collects industrial scrap and
obsolete scrap, processes it into reusable forms and supplies the recycled
metals to its customers, including steel mini-mills, integrated steel mills,
foundries, secondary smelters and metals brokers. MTLM's ferrous products
primarily include shredded, sheared, hot briquetted, cold briquetted, bundled
scrap and other purchased scrap, such as turnings, cast and broken furnace iron.
MTLM also processes non-ferrous metals, including aluminum, copper, stainless
steel, brass, titanium and high temperature alloys, using similar techniques and
through application of its proprietary technologies.

3.  HISTORY

     MTLM's predecessor was incorporated on September 24, 1981 as a California
corporation under the name General Parametrics Corporation, and was
reincorporated as a Delaware corporation in June 1986 under the same name. Prior
to April 1996, General Parametrics manufactured and marketed color thermal and
dye sublimation printers and related consumables, including ribbons,
transparencies and paper. On April 12, 1996, General Parametrics changed its
name to Metal Management, Inc. MTLM sold its printer and related businesses in
two separate transactions in July 1996 and December 1996 for $1.3 million in
cash and future royalty payments, which terminated during the fiscal year ended
March 31, 2000.

     MTLM's common stock was listed on the Nasdaq National Market; however, it
is no longer listed on either the Nasdaq National Market or the Nasdaq SmallCap
Market. The stock now trades on the electronic bulletin board of the "over the
counter" market.

                                        18
<PAGE>   24

     MTLM entered the metals recycling business in April 1996 with the
acquisition of EMCO Recycling Corp., located in Phoenix, Arizona. Since 1996,
MTLM has completed 27 acquisitions which have increased its revenues from $113
million to $915 million for the year ended March 31, 2000. The table below
summarizes MTLM's acquisitions since April 1996.

<Table>
<Caption>
DATE OF                                                            LOCATION OF
ACQUISITION OR                                                     PRINCIPAL PROCESSING   ACQUISITION
INVESTMENT              COMPANY ACQUIRED                           FACILITIES             VALUE
--------------          ----------------                           --------------------   -----------
                                                                                           ($ MIL.)
                                                                                              (1)
<S>                     <C>                                        <C>                    <C>
April 1996............  EMCO Recycling Corp.(2)                    Phoenix, Arizona          26.084
January 1997..........  California Metals Recycling, Inc.          Los Angeles County,       12.362
                        Firma, Inc.                                California
                        Firma Plastic Co., Inc.
                        Mac Leod Metals Co.
                        Trojan Trading Co.
January 1997..........  HouTex Metals Company, Inc.                Houston, Texas            14.888
May 1997..............  Reserve Iron & Metal Limited               Cleveland, Ohio           44.642
                        Partnership(3)                             Chicago, Illinois
                                                                   Atalla, Alabama
June 1997.............  The Isaac Corporation                      Bryan, Ohio               72.515
                        Ferrex Trading Corporation                 Cleveland, Ohio
                        Briquetting Corporation of America(4)      Dayton, Ohio
                        Paulding Recycling, Inc.(4)                Defiance, Ohio
August 1997...........  Proler Southwest Inc.                      Houston, Texas            33.710
                        Proler Steelworks L.L.C.                   Jackson, Mississippi
December 1997.........  Cozzi Iron & Metal, Inc.                   Chicago, Illinois        144.786
                                                                   East Chicago,
                                                                   Illinois
                                                                   Pittsburgh,
                                                                   Pennsylvania
December 1997.........  Kankakee Scrap Corporation                 Kankakee, Illinois         4.748
January 1998..........  Houston Compressed Steel Corporation       Houston, Texas             4.768
January 1998..........  Aerospace Metals, Inc.                     Hartford, Connecticut     20.524
January 1998..........  Salt River Recycling, L.L.C.               Phoenix, Arizona           5.368
February 1998.........  Accurate Iron & Metal Co.(5)               Franklin Park,             0.234
                                                                   Illinois Huntington
                                                                   Beach,
March 1998............  Superior Forge, Inc.(6)                    California                19.810
March 1998............  Ellis Metals, Inc.                         Tucson, Arizona            2.025
April 1998............  Midwest Industrial Metals Corp.(5)         Chicago, Illinois          6.500
May 1998..............  138 Scrap, Inc.                            Riverdale, Illinois        1.689
                        Katrick, Inc.
May 1998..............  R&P Holdings, Inc.                         Sharon, Pennsylvania      21.035
                        Charles Bluestone Company(7)(8)            Elizabeth,
                        R&P Real Estate, Inc.(8)                   Pennsylvania
June 1998.............  Goldin Industries, Inc.(9)                 Gulfport, Mississippi      9.400
                        Goldin Industries Louisiana, Inc.(9)       Harvey, Louisiana
                        Goldin of Alabama, Inc.(9)                 Mobile, Alabama
June 1998.............  Newell Recycling of Denver, Inc.(10)       Denver, Colorado          14.683
                        Newell Recycling of Utah, L.L.C.(10)       Colorado Springs,
                                                                   Colorado
                                                                   Salt Lake City, Utah
July 1998.............  Naporano Iron & Metal Co.                  Newark, New Jersey       106.624
                        NIMCO Shredding Co.                        North Haven,
                                                                   Connecticut
</Table>

                                        19
<PAGE>   25

<Table>
<Caption>
DATE OF                                                            LOCATION OF
ACQUISITION OR                                                     PRINCIPAL PROCESSING   ACQUISITION
INVESTMENT              COMPANY ACQUIRED                           FACILITIES             VALUE
--------------          ----------------                           --------------------   -----------
                                                                                           ($ MIL.)
                                                                                              (1)
<S>                     <C>                                        <C>                    <C>
July 1998.............  Michael Schiavone & Sons, Inc.             Torrington,               25.436
                                                                   Connecticut
July 1998.............  M. Kimerling & Sons, Inc.                  Birmingham, Alabama       52.900
July 1998.............  Nicroloy Company                           Heidelberg,                7.484
                                                                   Pennsylvania
July 1998.............  Midwest Metallics L.P.(5)                  Chicago, Illinois         11.574
November 1998.........  PerlCo, L.L.C.(11)                         Memphis, Tennessee        16.300
February 1999.........  Southern Recycling, L.L.C.(12)             New Orleans,                 n/a
                                                                   Louisiana
                                                                   Gulfport, Mississippi
                                                                   Mobile, Alabama
                                                                   Little Rock, Arkansas
                                                                   Pensacola, Florida
November 1999.........  National Metals Company(13)                Phoenix, Arizona           6.400
                                                                   Tucson, Arizona
</Table>

---------------

Notes to Table:

(1)  Acquisition value is based upon cash paid, debt assumed, if any, and the
     market value of stock issued on the date of acquisition.

(2)  The operations of the former EMCO Recycling, Inc. have since been
     consolidated with the operations of Salt River Recycling, L.L.C.

(3)  The Attalla, Alabama recycling facility was operated through a joint
     venture in which Reserve Iron & Metal Limited Partnership held a 50%
     interest. The joint venture has since been liquidated.

(4)  In October 1998, Briquetting Corporation of America and Paulding Recycling,
     Inc. were merged with and into The Isaac Corporation.

(5)  Substantially all of the assets of Accurate Iron & Metal Co., and certain
     of the assets of Midwest Industrial Metals Corp. and Midwest Metallics
     L.P., were acquired and integrated into the operations of Cozzi Iron &
     Metal, Inc.

(6)  Superior Forge, Inc. was subsequently sold in March 1999.

(7)  The Sharon, Pennsylvania recycling facility was operated through a joint
     venture in which Charles Bluestone Company held a 50% interest. The joint
     venture has since been liquidated.

(8)  In March 1999, Charles Bluestone Company and R&P Real Estate, Inc. were
     merged with and into Nicroloy Acquisition Corp., a subsidiary formed to
     purchase the assets of Nicroloy Company, whereupon Nicroloy Acquisition
     Corp. changed its name to Metal Management Pittsburgh, Inc.

(9)  The operations of the former Goldin companies were abandoned and shut down
     contemporaneously with MTLM's acquisition of a 28.5% interest in Southern
     Recycling, L.L.C.

(10) Newell Recycling of Denver, Inc. was merged with and into Newell Recycling
     West, Inc., a subsidiary formed for such acquisition. Concurrently
     therewith, Newell Recycling West, Inc. purchased substantially all of the
     scrap metal assets of Newell Recycling of Utah, L.L.C.

                                        20
<PAGE>   26

(11) At the time of the acquisition of Cozzi Iron & Metal, Inc., it held a 50%
     joint venture interest in PerlCo, L.L.C. In November 1998, MTLM acquired
     FPX, Inc., which held the remaining 50% joint venture interest.

(12) MTLM acquired a 28.5% membership interest in Southern Recycling, L.L.C. In
     connection with this acquisition, MTLM was granted an option to purchase
     the remaining interest in Southern Recycling, L.L.C., based upon a
     predetermined formula, which expires on the third anniversary of the date
     of acquisition. Because this was a "costless" transaction, no acquisition
     value is ascribed.

(13) Substantially all of the scrap metal assets of National Metals Company were
     acquired and integrated into the operations of MTLM Arizona, L.L.C.,
     formerly Salt River Recycling, L.L.C.

     During the fiscal year ended March 31, 2000, the Company began a strategy
of accelerating the integration of its operating companies and create brand
awareness for the "Metal Management" name. The Company currently runs regional
operations within a national system of businesses. In Ohio, its Isaac Group and
Reserve Iron & Metal companies were consolidated and now operate under the
"Metal Management Ohio" name. In Chicago, its Cozzi Iron & Metal operation
changed its name to "Metal Management Midwest," and effective April 1, 2000,
took operational control of the Chicago facility formerly operated by Reserve
Iron & Metal. On the east coast, its Naporano Iron & Metal subsidiary changed
its name to "Metal Management Northeast," and consolidated its operations with
those of Michael Schiavone & Sons of North Haven, Connecticut, which was renamed
"Metal Management Connecticut."

     In addition, the Company's titanium and high temperature alloys business,
based in Hartford, Connecticut and formerly known as Suisman & Blumenthal, now
operates under the "Metal Management Aerospace" name. During the fiscal year
ended March 31, 2000, the Company also completed the integration of its
Pittsburgh stainless steel operations by relocating its operations from
Heidelberg, Pennsylvania to Elizabeth, Pennsylvania, the location of the former
Charles Bluestone Company operations. The combined company formed by this
consolidation now operates under the name "Metal Management Pittsburgh."

     Through its integration efforts, MTLM is also standardizing the reporting
systems and business practices of its operations so that it is better able to
gauge operating performance. Although the cost savings from the elimination of
redundant functions has been, and will continue to be, an important benefit of
consolidation, MTLM expects to realize even greater cost benefits as it
implements best management practices across the country. In addition, MTLM's
strategy of creating brand awareness for the Metal Management name will help
create an awareness by its customers of the size and geographic scope of its
operations and the breadth of its product offerings. This will benefit MTLM as
its customers consolidate their supplier base to create purchasing efficiencies.

4.  INDUSTRY

     The scrap metals industry is comprised of more than 3,000 independent
metals recyclers generating total revenues in 1995 of approximately $20 billion.
Many of these companies are family-owned regional businesses, with only a few
larger operators having a significant market presence. This industry framework
offers an excellent opportunity for consolidation, because of the potential for
a large, integrated company to take advantage of reduced purchasing, processing,
transportation, labor, selling and general and administrative costs available
through economies of scale. In addition, the ability of a large, public company
to attract the capital necessary to make the significant investments in plant
and equipment that are required due to increasingly stringent environmental
regulation and the need to upgrade processing facilities should present
significant competitive advantages.

     Significant growth has occurred in the ferrous metal sector of the industry
in recent years as a result of the proliferation of mini-mill steel producers
which utilize the relatively new manufacturing process known as electric arc
furnace ("EAF") technology. Growth in EAF technology has in recent years created
increasing demand for scrap metal because recycled materials are the primary raw
material used in this manufacturing process. EAF production has increased from
14.8 million tons (11.1% of total domestic steel production) in 1966 to 49.5
million tons (46.2% of total domestic steel production) in 1999. The Company
expects this trend to continue in the next few years as several new EAF
facilities are scheduled to start production,
                                        21
<PAGE>   27

notwithstanding the recent decline in market conditions in the steel industry.
The Company believes that as a large, reliable supplier of scrap metals, it is
well positioned to take advantage of the growth in this industry.

     In addition, the Company recycles a significant amount of non-ferrous
metals, including aluminum, copper, brass, stainless steel, high-temperature
alloys and other exotic metals. The geographic markets for non-ferrous scrap
tend to be larger than those for ferrous scrap due to their higher selling
prices relative to freight costs, which justify the cost of shipping over
greater distances. The market for these types of metals in recent years has
shown strong growth as the automobile manufacturing industry has expanded the
use of non-ferrous metals.

     Secondary smelters, utilizing processed non-ferrous scrap as raw material,
can produce non-ferrous metals at a lower cost than primary smelters producing
such metals from ore. This is due to the significant savings in energy
consumption, environmental compliance, and labor costs enjoyed by the secondary
smelters. These cost advantages, and other factors have resulted in sustained
demand and, until recently, strong prices for processed non-ferrous scrap during
the current period of high demand for finished non-ferrous metal products. As a
result, the Company believes that its non-ferrous business will also be a strong
one for it over the foreseeable future.

B.  FINANCIAL RESULTS

     The financial results achieved by the Debtors in respect of the operation
of their business, and management's decision and analysis of such results and
matters related thereto for the fiscal year ended March 31, 2000 and for the
quarter ended December 31, 2000 are described in detail in Form 10-K filed by
the Company for fiscal year ended March 31, 2000, a copy of which is attached as
Exhibit B to this Disclosure Statement and the Form 10-Q for the quarter ended
December 31, 2000, a copy of which is attached as Exhibit C to this Disclosure
Statement. Also attached as Exhibit C-1 is certain unaudited financial
information concerning the Debtors' financial results through March 31, 2001.

C.  SIGNIFICANT FUNDED INDEBTEDNESS

     In March 1998, MTLM entered into a credit agreement (the "Prepetition
Credit Agreement") with a consortium of lenders (the "Prepetition Lenders"). The
Prepetition Credit Agreement provided for a revolving credit and letter of
credit facility of $250 million, which was subject to certain borrowing base
limitations. The Prepetition Credit Agreement was amended in May 2000 to, among
other things, extend the expiration date of the facility to March 31, 2004.

     The aggregate obligations under the Prepetition Credit Agreement, as of the
commencement of the chapter 11 cases on November 20, 2000, was approximately
$142 million.

     MTLM and each subsidiary Debtor was a primary obligor under the Prepetition
Credit Agreement. The Prepetition Credit Agreement was secured by (a) a first
priority security interest in substantially all of the assets and properties of
MTLM and the subsidiary Debtors, and (b) a pledge of 100% of the capital stock
of the subsidiary Debtors.

     In May 1998, MTLM issued $180 million in 10% Senior Subordinated Notes due
2008 (the "Subordinated Notes"). As of November 20, 2000, an aggregate amount of
$180 million in principal and approximately $9 million in accrued interest was
outstanding under the Subordinated Notes. The Subordinated Notes are guaranteed
by the subsidiary Debtors.

     In May 1999, MTLM issued $30 million in 12 3/4% Senior Secured Notes due
2004 (the "Junior Secured Notes"). As of November 20, 2000, an aggregate amount
of $30 million in principal, plus accrued and unpaid interest was outstanding
under the Junior Secured Notes. The Junior Secured Notes are secured by (a) a
second priority security interest in substantially all of the accounts,
inventory, general tangibles, personal property, plant (to the extent it
constitutes fixtures) and equipment of MTLM and the subsidiary Debtors, and (b)
a pledge of 100% of the capital stock of the subsidiary Debtors. The security
interests that secure the Junior Secured Notes are subordinated to the security
interests that secure the Prepetition Credit Agreement. The Junior Secured Notes
are also guaranteed by the subsidiary Debtors.
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<PAGE>   28

D.  EVENTS LEADING TO CHAPTER 11 FILINGS

     Beginning in July 1998, the domestic steel industry and, in turn, the
metals recycling industry suffered the most dramatic and precipitous collapse in
the 100-year history of the industry, resulting in a significant decline in the
price and demand for scrap metal. The Company believes this event was
principally the result of the dumping of steel into the United States,
principally by Brazilian, Russian, Japanese and other Southeast Asian steel
producers, as these foreign producers attempted to export their way out of their
own domestic economic crises. For the ten months ended October 1998, steel
imports into the United States increased by approximately 30% compared to the
same period in 1997, according to the American Iron & Steel Institute ("AISI"),
and had already exceeded the previous full-year record which was set in 1997.

     The negative impact on the scrap metal industry was seen in the dramatic
decline in the price of scrap metal. For example, the price of No. 1 heavy melt
steel, the prime grade of metal used to manufacture steel (and one of the
Company's primary products), declined from approximately $140 per gross ton in
January 1998 to approximately $73 per gross ton in November 1998, with the most
precipitous decline coming after July 1998, when the price of No. 1 heavy melt
steel was $120 per gross ton. This was the most severe and rapid decline in
prices in the history of the industry, and resulted in the lowest price for No.
1 heavy melt steel since the 1970's. The decline in the market price for scrap
metal led to a significant reduction in the Company's buy price for inbound
material used to generate saleable scrap metal, and resulted in significant
inventory holding losses (non-cash) in the second half of 1998 as the Company
wrote down the value of its inventory to comply with applicable inventory
accounting principles.

     This foreign dumping resulted in the filing of a series of antidumping
actions in Washington, D.C. by participants in the U.S. steel industry and the
United Steelworkers Union. In November 1998, the U.S. Department of Justice made
a "critical circumstances" finding against Russian, Japanese and Brazilian steel
producers, meaning that there was sufficient evidence to conclude that these
producers were engaged in anti-competitive behavior and that the imposition of
tariffs was warranted. In February 1999, the Commerce Department announced that
there was evidence that Japan and Brazil had illegally dumped large quantities
of steel in the United States at prices of up to 70% below normal market prices.

     As a result, the United States imposed large tariffs and duties on imported
steel from various violating countries. In addition, other countries, most
notably Russia, reached agreement with the Department of Commerce on voluntary
import restraints in order to avoid punitive duties on their imported steel.

     Beginning in August 1998, when it became apparent that the fundamentals in
the scrap metals industry were deteriorating, MTLM began to take measures to
reduce its cost structure and to resolve potential liquidity problems which were
likely to arise from the then-current market conditions.

     In January 1999, the governmental trade actions began taking effect and
MTLM saw a significant increase in both volume and pricing for scrap metal.
Operating rates and pricing recovered to pre-crisis levels by late 1999 and
lasted through February 2000. Due to the cost-cutting measures invoked during
the crisis, MTLM believed it was well positioned to take advantage of an upturn
in the scrap metals market.

     However, beginning in March 2000, market conditions deteriorated again to
levels last seen in 1998 (and in some cases worse). The deterioration has been
caused by reduced net exports and slower than expected cyclical markets for
scrap metal.

     By September of 2000, Metal Management concluded that it might not be able
to weather the current market downturn without improving its capital structure
and reducing its substantial interest burden. Therefore, after consultation with
its professional advisors, MTLM determined that its interests, and those of its
creditors, employees and other constituencies, would be best served by a
financial restructuring to de-leverage its balance sheet.

E.  NEGOTIATION OF THE PLAN

     After exploring various out-of-court restructuring alternatives, MTLM
concluded that the best vehicle to achieve a restructuring of its indebtedness
was through a pre-arranged chapter 11 process. MTLM also

                                        23
<PAGE>   29

concluded that to return to viability it would have to emerge from any
restructuring with significantly less debt than currently on its books.

     Accordingly, in September 2000, the Company contacted representatives of
the holders of the Subordinated Notes and the Junior Secured Notes to begin
discussions concerning an overall financial restructuring. An ad hoc committee
of holders of Subordinated Notes and Junior Secured Notes (i.e., the Noteholder
Committee) was formed and negotiations ensued between the Company and the
Noteholder Committee. Those negotiations were successful, and on November 15,
2000, the Company and the Noteholder Committee reached agreement on the
principal terms for a restructuring of the Debtors, which is to be implemented
on a pre-arranged basis as a part of these chapter 11 cases. To evidence this
agreement, the Debtors and each of the members of the Noteholder Committee have
entered into a Lockup Agreement (the "Lockup Agreement") pursuant to which such
noteholders have agreed, subject to certain terms and conditions, to support and
vote in favor of a plan of reorganization containing the terms specified in the
Lockup Agreement. The Lockup Agreement has been entered into by holders of
approximately 93% of the principal amount of the Junior Secured Notes and
approximately 67% of the principal amount of the Subordinated Notes.

     The Plan is proposed by the Debtors to implement the financial
restructuring agreed to with the members of the Noteholder Committee. The Plan
also reflects negotiations with the Official Committee after the commencement of
these chapter 11 cases and, as stated above, is supported by the Official
Committee.

     The Debtors also initiated discussions with BT Commercial Corporation, as
agent for the Prepetition Lenders. These discussions led to an agreement by the
Prepetition Lenders to provide to the Debtors a $200 million post-petition
credit facility. The Prepetition Lenders have also agreed to provide exit
financing, subject to certain terms and conditions as set forth in the
post-petition credit facility, to enable the Debtors to emerge from chapter 11
following confirmation of the Plan.

     Thereafter, with such agreements in place, on November 20, 2000, MTLM and
the subsidiary Debtors each filed voluntary petitions under Chapter 11 of the
Bankruptcy Code.

                           IV.  THE CHAPTER 11 CASES

     As a consequence of the Debtors' commencement of the chapter 11 cases, all
actions and proceedings against the Debtors and all acts to obtain property from
the Debtors have been stayed under section 362 of the Bankruptcy Code. The
Debtors are continuing to operate their businesses and manage their properties
as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code.

A.  FIRST DAY MOTIONS FILED

     In an effort to minimize the impact of the commencement of the chapter 11
cases on the Debtors' operations and to facilitate the administration of the
chapter 11 cases, the Debtors filed various motions and applications on the
first day of these cases. These so-called "first-day motions" requested relief
that is typical for large, complex chapter 11 cases including, among other
things: (i) joint administration of the chapter 11 cases, (ii) authority to
continue to use the Debtors' existing cash management system, (iii)
authorization to pay certain prepetition compensation and benefits owed to the
Debtors' employees, (iv) continuation of payments relating to the Debtors'
financing of insurance policy premiums, and (v) entry of an order restraining
utilities from shutting off their services to the Debtors. The first-day motions
were heard and approved by the Bankruptcy Court on the Petition Date.

     The Debtors also filed applications requesting approval by the Bankruptcy
Court of the Debtors' retention of various professional firms they will be
utilizing throughout these bankruptcy proceedings, including the retention of
(i) Mayer, Brown & Platt as co-bankruptcy counsel, (ii) Young Conaway Stargatt &
Taylor as co-bankruptcy counsel, (iii) Houlihan Lokey, as financial advisor, and
(iv) Logan & Company, Inc. ("Logan"), as the claims, notice and balloting agent
for the Debtors.

                                        24
<PAGE>   30

B.  MOTION TO PAY CRITICAL VENDOR CLAIMS

     The Debtors believe that their business operations and, ultimately, their
enterprise value is dependent on the relationships the Debtors have with the
suppliers of scrap metal to their businesses and with certain other critical
service providers, and that preservation of those relationships require the
Debtors to make payment of the prepetition claims owed to many of these vendors.
As such, with the support of the Noteholder Committee and the Prepetition
Lenders, the Debtors filed a motion with the Bankruptcy Court requesting
authority to pay these prepetition claims, most of which are held by suppliers
of scrap metal to the Debtors, in exchange for agreement from these vendors to
continue to sell scrap metal to the Debtors for a period of one year on
acceptable credit terms. The Debtors' motion was approved by the Bankruptcy
Court on November 20, 2000. Since November 20, 2000, the Debtors have entered
into agreements with most of their suppliers of scrap metals and with certain
suppliers of critical services.

C.  DEBTOR IN POSSESSION FINANCING

     The Debtors also filed on November 20, 2000 a motion requesting approval of
a $200 million postpetition credit agreement (the "DIP Credit Agreement"). The
motion was granted on that date on an interim basis, subject to a final hearing
scheduled for December 11, 2000. Payment of the amounts borrowed under the
postpetition credit agreement are secured by superpriority liens and security
interests in substantially all of the Debtors' assets, subject, however, to a
carve-out of $1,250,000 for payment of fees and expenses incurred, in the
aggregate, by all of the professionals who are retained by order of the
Bankruptcy Court. The DIP Credit Agreement expires on June 30, 2001, unless
extended by the lenders thereto. The Bankruptcy Court also approved the Debtors'
request that they be authorized to apply all cash collected by the Debtors
during the interim period to reduce the indebtedness owed to the Prepetition
Lenders. At the conclusion of the hearing on December 11, 2000, the Bankruptcy
Court entered a final order approving the DIP Credit Agreement, pursuant to
which, among other things, the Debtors obtained authority to repay the remaining
indebtedness owed to the Prepetition Lenders from loan proceeds under the DIP
Credit Agreement. Thus, all amounts of principal and interest due and owing to
the Prepetition Lenders have been paid in full.

     In February, 2001, the Debtors obtained authority from the Bankruptcy Court
to amend the DIP Credit Agreement, which amendment was necessary to secure
waivers with respect to certain financial covenants. In addition, the Debtors
are currently in discussions with their lenders to secure further amendments to
the DIP Credit Agreement, also relating to financial covenants that will need to
be waived. See also Section VII.C.2 herein ("Risk Factors") and the discussion
of this subject in Exhibit C.

D.  OTHER SIGNIFICANT EVENTS SINCE COMMENCEMENT OF CHAPTER 11 CASES

     As stated above, an Official Committee comprised of unsecured creditors in
these chapter 11 cases was appointed by the U.S. Trustee's office on December 8,
2000. The Official Committee is comprised of the following five members: Scudder
Kemper Investments, Inc., SunAmerica Asset Management, National Metals Co.,
Republic Technologies International and Bank One, N.A., as the Indenture Trustee
for the Subordinated Notes. The Official Committee thereafter retained Milbank,
Tweed, Hadley & McCloy, LLP ("Milbank, Tweed") as lead counsel, Morris Nichols
Arsht & Tunnell, as local counsel and CIBC World Markets Corp. ("CIBC") as
financial advisors. Milbank, Tweed and CIBC were advising the Noteholder
Committee in those same capacities before the chapter 11 cases were commenced.

     A meeting of creditors under Section 341 of the Bankruptcy Code was
convened by the U.S. Trustee's office on January 12, 2001. On January 22, 2001,
the Debtors filed their schedule of assets and liabilities, list of equity
interest holders and statement of financial affairs. In January 2001, the
Bankruptcy Court entered an order establishing March 2, 2001 as the general bar
date for filing proof of claims in these chapter 11 cases and set May 18, 2001
as the bar date for governmental units.

                                        25
<PAGE>   31

E.  CERTAIN ASSET SALES

     The Debtors have obtained authority to sell real property in Connecticut
(which sale closed in March 2001 and yielded approximately $500,000) and to sell
real property in Ohio (which sale is estimated to close (subject to certain
environmental remediation) by June 2001 and is projected to yield in excess of
$8 million).

F.  POSTPONEMENT IN EMERGENCE FROM CHAPTER 11

     The Debtors expected to secure approval of the Plan by the end of March
2001. Due to the severity of the downturn in the steel industry and its
continuance following the commencement of the Debtors' Chapter 11 cases, the
Debtors elected to postpone their emergence from Chapter 11 until their
financial situation stabilized.

     The Debtors now believe that as a result of recent improved financial
performance it is prudent for the Debtors to move forward with requesting
confirmation of the Plan. Financial information concerning the Debtors covering
the period through March 31, 2001 is contained in Exhibits C and C-1 to this
Disclosure Statement.

G.  DISPUTE CONCERNING SHEAR AT TENNESSEE FACILITY

     The South Carolina Business Development Corporation ("BDC") filed a notice
to lift stay seeking, among other things, authority to enforce liens that it
asserts against a shear and related equipment ("Shear") used by the Debtors at
their Tennessee facility. The liens are based on loans that BDC extended to
ConwayMachine Works, Inc. The Debtor disputes the validity of BDC's liens and
claims ownership (or the right to ownership) of the Shear free of BDC's liens.
This matter remains pending. In the event it is established that BDC has a
valid, perfected and enforceable allowed secured claim against the Shear, it
will be treated as a secured claim in Class 2B.

H.  NATIONAL METAL'S CLAIM TO STOCK

     In April, 2001, NMI filed a motion seeking to compel MTLM to issue to it
approximately 25 million shares of Old Common Stock, which NMI contends it is
entitled to receive in connection with a pre-petition agreement with MTLM. The
Debtors oppose the relief requested by NMI. On May 3, 2001, the Bankruptcy Court
ruled that NMI is entitled to receive approximately 2,130,000 shares.

                         V.  THE PLAN OF REORGANIZATION

     The primary objectives of the Plan are to: (a) restructure the Debtors'
debt and capital structures to permit the Debtors to emerge from the Chapter 11
Cases with a capital structure that, among other things, contains significantly
less leverage and provides the Debtors with greater financial flexibility in
operating their business; (b) maximize the value of the ultimate recoveries to
all creditor groups on a fair and equitable basis given the value of the Debtors
and the priorities established by the Bankruptcy Code and applicable law; and
(c) settle, compromise or otherwise dispose of certain claims and interests on
terms that the Debtors believe to be fair and reasonable and in the best
interests of their respective estates and creditors.

     The Debtors believe that the Plan provides holders of allowed claims and
allowed interests with a substantially greater recovery than the recovery they
would receive without approval of the Plan, and that the Plan will afford the
Debtors the opportunity and ability to continue their business as a viable going
concern and preserve ongoing employment for their employees.

     The statements contained in this Disclosure Statement include summaries of
the provisions contained in the Plan and in documents referred to therein. The
statements contained in this Disclosure Statement do not purport to be precise
or complete statements of all the terms and provisions of the Plan or documents
referred to therein, and reference is made to the Plan and to such documents for
the full and complete statements of such terms and provisions.

                                        26
<PAGE>   32

     The Plan itself and the documents referred to therein control the actual
treatment of claims against and interests in the Debtors under the Plan and
will, upon the effective date of the Plan, be binding upon all holders of claims
against and interests in the Debtors and their estates, the reorganized Debtors
and other parties in interest. In the event of any conflict between this
Disclosure Statement, on the one hand, and the Plan or any other operative
document, on the other hand, the terms of the Plan and such other operative
document are controlling.

A.  OVERVIEW OF CHAPTER 11

     Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself, its creditors and interest holders. Another
goal of chapter 11 is to promote equality of treatment for similarly situated
creditors and similarly situated interest holders with respect to the
distribution of a debtor's assets.

     The commencement of a chapter 11 case creates an estate that is comprised
of all of the legal and equitable interests of the debtor as of the filing date.
The Bankruptcy Code contemplates that the debtor, through its pre-bankruptcy
management, will continue to operate its business in the ordinary course and
remain in possession of its property during the case and while it seeks to
negotiate and implement a reorganization plan. Any activities that are not
within the ordinary course of the debtor's business must be approved by the
bankruptcy court before they are undertaken.

     The consummation of a plan of reorganization is the principal objective of
a chapter 11 case. A plan of reorganization sets forth the means for satisfying
claims against and interests in a debtor. Confirmation of a plan of
reorganization by the bankruptcy court makes the plan binding upon the debtor,
any issuer of securities under the plan, any person or entity acquiring property
under the plan and any creditor of or equity security holder in the debtor,
whether or not such creditor or equity security holder (i) is impaired under or
has accepted the plan or (ii) receives or retains any property under the plan.
Subject to certain limited exceptions and other than as provided in the plan
itself or the confirmation order, the confirmation order discharges the debtor
from any debt that arose prior to the date of confirmation of the plan and
substitutes therefor the obligations specified under the confirmed plan, and
terminates all rights and interests of equity security holders.

B.  OVERALL STRUCTURE OF THE PLAN

     The Debtors believe that the Plan provides the best and most prompt
possible recovery to the Debtors' claim holders. Under the Plan, claims against
and interests in the Debtors are divided into different classes. If the Plan is
confirmed by the Bankruptcy Court and consummated, on the distribution date
provided for in the Plan, and at certain times thereafter as claims and
interests are resolved, liquidated or otherwise allowed, the Debtors will make
the distributions in respect of certain classes of claims and interests as
provided for in the Plan. The classes of claims against and interests in the
Debtors created under the Plan, the treatment of those classes under the Plan
and distributions to be made under the Plan are described below and in the
Summary Table set forth above in Section II.B. of this Disclosure Statement.

C.  CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS

     The Plan classifies claims and interests separately and provides different
treatment for different classes of claims and interests in accordance with the
Bankruptcy Code. A claim or interest is placed in a particular class only to the
extent that the claim or interest falls within the description of that class and
is classified in other classes to the extent that any portion of the claim or
interest falls within the description of such other classes. A claim or interest
is also placed in a particular class for the purpose of receiving distributions
pursuant to the Plan only to the extent that such claim or interest is an
allowed claim or interest in that class and such claim or interest has not been
paid, released or otherwise settled prior to the effective date. A description
of each class of claims and interests established by the Plan and the treatment
afforded each such class is contained in the Summary Table set forth above in
Section II.B. of this Disclosure Statement.

                                        27
<PAGE>   33

D.  UNCLASSIFIED CLAIMS

     In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims (including fee claims) and Priority Tax Claims have not
been classified. Nonetheless, the treatment afforded these claims is specified
in the Plan and is summarized below.

1.  FEE CLAIMS

     Fee claims are Administrative Claims under section 330(a), 331, 503, or
1103 of the Bankruptcy Code for compensation of professionals or other entities
for professional services rendered or expenses incurred in the chapter 11 cases
on or prior to the effective date of the Plan. All payments to professionals for
fee claims will be made in accordance with the procedures established by the
Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy Court relating to the
payment of interim and final compensation for services rendered and
reimbursement of expenses. The Bankruptcy Court will review and determine all
applications for compensation for services rendered and reimbursement of
expenses.

     All final applications for professional fees for services rendered in
connection with the chapter 11 cases prior to the confirmation date of the Plan
shall be filed no later than sixty (60) days after the effective date of the
Plan.

2.  OTHER ADMINISTRATIVE CLAIMS

     Other Administrative Claims include claims for costs and expenses of
administration of the cases allowed under section 503(b), 507(b) or 1114(e)(2)
of the Bankruptcy Code. Such claims include: (a) any actual and necessary costs
and expenses incurred after the petition date for preserving the Debtors'
estates and operating the Debtors' businesses (such as wages, salaries,
commissions for services and payments for inventories, leased equipment and
premises), and claims of governmental units for taxes (including tax audit
claims related to tax years commencing after the petition date, but excluding
claims relating to tax periods, or portions thereof, ending on or before the
petition date); (b) all fees and charges assessed against the Debtors' estates
under section 1930, chapter 123 of title 28, United States Code; and (c) claims
under the DIP Credit Agreement.

     Each Administrative Claim (other than fee claims) will be paid by the
Debtors, at their election: (a) in full, in cash, in such amounts as are
incurred in the ordinary course of business by the Debtors, or in such amounts
as the Bankruptcy Court may allow upon the later of the effective date or the
date upon which there is a final order allowing such Administrative Claim; (b)
upon such other terms as may exist in the ordinary course of such Debtor's
business; or (c) upon such other terms as may be agreed upon between the holder
of such Administrative Claim and the Debtors.

     The confirmation order will establish an Administrative Claims bar date for
filing Administrative Claims, which date will be sixty (60) days after the
confirmation date of the Plan. Holders of Administrative Claims not paid prior
to the confirmation date, other than certain Administrative Claims identified in
the confirmation order (such as those arising under the DIP Credit Agreement or
in the ordinary course of the Debtors' businesses), must make a request for
payment on or before such Administrative Claims bar date or be forever barred
from doing so. The notice of confirmation to be delivered pursuant to Fed. R.
Bankr. P. 3020(c) and 2002(f) will set forth such date and constitute notice of
this Administrative Claims bar date. The Debtors, or the reorganized Debtors, as
the case may be, will have sixty (60) days (or such longer period as the
Bankruptcy Court may allow) following the Administrative Claims bar date to
review and object to such Administrative Claims before a hearing for
determination of allowance of such Administrative Claims.

3.  PRIORITY TAX CLAIMS

     Priority Tax Claims are claims for taxes entitled to priority in payment
under sections 502(i) and 507(a)(8) of the Bankruptcy Code.

     The legal and equitable rights of the holders of Priority Tax Claims are
unaltered by the Plan and will be paid in full on the later of the distribution
date under the Plan or, if instructed by the Debtors, the date such
                                        28
<PAGE>   34

claim is allowed by the Bankruptcy Court. The Debtors and the holder of such
Priority Tax Claim may also agree to other treatment.

E.  NO WAIVER OF DEFENSE REGARDING UNIMPAIRED CLAIMS

     Except as otherwise provided in the Plan, the treatment of a claim as
unimpaired under the Plan is not intended to, and does not, affect the Debtors'
or the reorganized Debtors' rights and defenses, both legal and equitable, with
respect to such unimpaired claims, including, but not limited to, all rights
with respect to legal and equitable defenses to setoffs or recoupments against
such unimpaired claim.

F.  METHOD OF DISTRIBUTION UNDER THE PLAN

1.  SOURCES OF CASH FOR PLAN DISTRIBUTION

     Except as otherwise provided in the Plan or the confirmation order, all
cash necessary for reorganized Debtors to make payments pursuant to the Plan
will be obtained from existing cash balances, the operations of the Debtors' and
the reorganized Debtors' businesses or loans available to the reorganized
Debtors under the New Credit Agreement. The reorganized Debtors may also make
such payments using cash received from their subsidiaries through the
reorganized Debtors' consolidated cash management systems. The Debtors believe
that through such sources, it will have adequate cash to make the distributions
contemplated and required by the Plan and to operate their businesses from and
after the Plan's effective date.

2.  DISTRIBUTIONS FOR CLAIMS OR INTERESTS ALLOWED AS OF THE EFFECTIVE DATE

     Except as otherwise provided herein or as ordered by the Bankruptcy Court,
distributions to be made on account of claims or interests that are allowed as
of the effective date of the Plan will be made on the Distribution Date or as
soon thereafter as is practicable. Any distribution to be made on the effective
date pursuant to the Plan will be deemed to be made on the effective date if
such distribution is made on the effective date or as soon thereafter as is
practicable. Any payment or distribution required to be made under the Plan on a
day other than a business day will be made on the next succeeding business day.
Distributions on account of claims or interests that first become allowed claims
or interests after the effective date will be made pursuant to Articles III, VI
and VIII of the Plan. Notwithstanding the date on which any distribution of
securities is made to a holder of a claim or interest that is an allowed claim
or allowed interest, as of the date of the distribution such holder shall be
deemed to have the rights of a holder of such securities distributed as of the
effective date of the Plan.

3.  INTEREST ON CLAIMS

     Unless otherwise specifically provided for in the Plan or confirmation
order, or required by applicable bankruptcy law, postpetition interest shall not
accrue or be paid on any claims other than Secured Lender Claims as provided in
the Prepetition Credit Agreement and Junior Secured Note Claims at the
non-default rate of interest specified in the Junior Secured Notes, and no
holder of a claim shall be entitled to interest accruing on or after the
petition date.

4.  DISTRIBUTIONS BY THE REORGANIZED DEBTORS

     The reorganized Debtors or the disbursing agent to be appointed pursuant to
the Plan, will make all distributions required to be distributed under the Plan.
Distribution on account of Secured Lender Claims shall be made to the
prepetition agent for the holders of such claims. The reorganized Debtors may
employ or contract with other entities to assist in or make the distributions
required by the Plan. Distributions to holders of the Junior Secured Notes will
be made by the Indenture Trustee for the Junior Secured Notes. Distributions to
holders of Subordinated Notes may be made, at the election of the reorganized
Debtors, by either the Debtors, the Debtors disbursing agent, or by the
Indenture Trustee for the Subordinated Notes.

                                        29
<PAGE>   35

5.  DELIVERY OF DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS

     1.  Delivery of Distributions in General.  Distributions to holders of
allowed claims and allowed interests shall be delivered to the addresses set
forth in the Debtors' records unless such addresses are superseded by proofs of
claim or transfers of claim filed pursuant to Bankruptcy Rule 3001.

     2.  Undeliverable and Unclaimed Distributions.

          1.  Holding and Investment of Undeliverable and Unclaimed
     Distributions.  If the distribution to any holder of an allowed claim or
     interest is returned to the disbursing agent as undeliverable or is
     otherwise unclaimed, no further distributions shall be made to such holder
     unless and until the disbursing agent is notified in writing of such
     holder's then current address.

          2.  After Distributions Become Deliverable.  The reorganized Debtors
     shall make all distributions that have become deliverable or have been
     claimed since the distribution date as soon as practicable after such
     distribution has become deliverable.

          3.  Failure to Claim Undeliverable Distributions.  Any holder of an
     allowed claim or interest that does not assert a claim pursuant to the Plan
     for an undeliverable or unclaimed distribution within two (2) years after
     the effective date of the Plan shall be deemed to have forfeited its claim
     for such undeliverable or unclaimed distribution and shall be forever
     barred and enjoined from asserting any such claim for an undeliverable or
     unclaimed distribution against the Debtors, their estates, the reorganized
     Debtors or their property. In such cases, any cash distribution on account
     on such claims for undeliverable or unclaimed distributions shall become
     the property of the reorganized Debtors free of any restrictions thereon
     and notwithstanding any federal or state escheat laws to the contrary. Any
     New Common Stock and Series A Warrants held for distribution on account of
     such claim or interest shall be canceled and of no further force or effect.
     Nothing contained in the Plan shall require any disbursing agent,
     including, but not limited to, the reorganized Debtors, to attempt to
     locate any holder of an allowed claim or interest.

6.  RECORD DATE FOR DISTRIBUTIONS

     As of the close of business on the Distribution Record Date (as such date
is defined in the Plan and/or the Confirmation Order), the transfer register for
the Subordinated Notes, the Junior Secured Notes, the Preferred Stock, the Old
Common Stock and the Old Rights and Warrants, as maintained by the Debtors, any
applicable indenture trustee or their respective agents shall be closed. The
disbursing agent will have no obligation to recognize the transfer of, or the
sale of any participation in, any allowed claim or interest that occurs after
the close of business on the Distribution Record Date, and will be entitled for
all purposes herein to recognize and distribute only to those holders of allowed
claims and interests who are holders of such claims or interest, or participants
therein, as of the close of business on the Distribution Record Date. The
disbursing agent and the reorganized Debtors shall instead be entitled to
recognize and deal for all purposes under the Plan with only those record
holders stated on the official claims register as of the close of business on
the Distribution Record Date.

7.  METHOD OF CASH PAYMENT

     Payments of cash made pursuant to the Plan shall be in U.S. dollars and
shall be made, at the option and in the sole discretion of the reorganized
Debtors, by (a) checks drawn on or (b) wire transfer from a domestic bank
selected by the reorganized Debtors. Cash payments to foreign creditors may be
made, at the option of the reorganized Debtors, in such funds and by such means
as are necessary or customary in a particular foreign jurisdiction.

8.  WITHHOLDING AND REPORTING REQUIREMENTS

     In connection with the Plan and all distributions thereunder, the
reorganized Debtors shall comply with all withholding and reporting requirements
imposed by any federal, state, local or foreign taxing authority, and all
distributions hereunder shall be subject to any such withholding and reporting
requirements. The
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<PAGE>   36

reorganized Debtors 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 (i) each holder of
an allowed claim or interest that is to receive a distribution of cash, New
Junior Secured Notes, New Common Stock or Series A Warrants pursuant to the 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, and (ii)
no distribution shall be made to or on behalf of such holder pursuant to the
Plan unless and until such holder has made arrangements satisfactory to the
reorganized Debtors for the payment and satisfaction of such tax obligations.
Any cash, New Junior Secured Notes, New Common Stock or Series A Warrants to be
distributed pursuant to the Plan, pending the implementation of such
arrangements, shall be treated as an undeliverable distribution pursuant to
Section 6.4(b) of the Plan.

9.  SETOFFS

     The reorganized Debtors, pursuant to section 553 of the Bankruptcy Code or
applicable nonbankruptcy laws, may, but shall not be required to, set off
against any claim and the payments or other distributions to be made pursuant to
the Plan in respect of such claim, claims of any nature whatsoever that the
Debtors or the reorganized Debtors may have against the holder of such claim;
provided, however, that neither the failure to do so nor the allowance of any
claim hereunder shall constitute a waiver or release by the reorganized Debtors
of any such claim that the Debtors or the reorganized Debtors may have against
such holder.

10.  FRACTIONAL SHARES

     No fractional shares of New Common Stock or Series A Warrants shall be
distributed. When the issuance of a fractional share of New Common Stock or
Series A Warrants would otherwise be called for, the actual issuance shall
reflect a rounding up (in the case of .50 or more than .50) of such fraction to
the nearest whole share of New Common Stock or Series A Warrants or a rounding
down of such fraction (in the case of less than .50).

11.  SURRENDER OF CANCELLED SECURITIES

     As a condition precedent to receiving any distribution pursuant to the Plan
on account of an allowed claim or interest evidenced by the instruments,
securities or other documentation cancelled pursuant to Section 6.4 of the Plan,
the holder of such claim or interest shall tender the applicable instruments,
securities or other documentation evidencing such claim to the reorganized
Debtors unless waived in writing by the Debtors or the reorganized Debtors. Any
cash, New Junior Secured Note, New Common Stock or Series A Warrants to be
distributed pursuant to the Plan on account of any such claim or interest shall,
pending such surrender, be treated as an undeliverable distribution pursuant to
Section 6.4(b) of the Plan.

     a.  Notes and Common Stock.  Each holder of a Subordinated Note Claim, a
Junior Secured Note Claim, Preferred Stock Interests or Old Common Stock shall
tender its Subordinated Notes, Junior Secured Notes, Preferred Stock or Old
Common Stock relating to such claim or interest to the reorganized Debtors in
accordance with written instructions to be provided to such holders by the
reorganized Debtors, or, in the case of holders of either the Junior Secured
Notes or Subordinates Notes, by the applicable indenture trustee as promptly as
practicable following the effective date of the Plan. Such instructions shall
specify that delivery of the Subordinated Notes, Junior Secured Notes, Preferred
Stock or Old Common Stock will be effected, and risk of loss and title thereto
will pass, only upon the proper delivery of such Subordinated Notes, Junior
Secured Notes or Old Common Stock with a letter of transmittal in accordance
with the instructions. All surrendered Subordinated Notes, Junior Secured Notes,
Preferred Stock or Old Common Stock shall be marked as cancelled.

     b.  Failure to Surrender Cancelled Instruments.  Any holder of Junior
Secured Notes, Subordinated Notes, Preferred Stock Interests or Old Common Stock
that fails to surrender or is deemed to have failed to surrender the applicable
Junior Secured Notes, Subordinated Notes, Preferred Stock Interests or Old
Common Stock required to be tendered hereunder within two (2) years after the
effective date of the Plan

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<PAGE>   37

shall have its claim or interest and its distribution pursuant to the Plan on
account of such Junior Secured Notes, Subordinated Notes, Preferred Stock
Interests or Old Common Stock discharged and shall be forever barred from
asserting any such claim or interest against the reorganized Debtors or their
respective property. In such cases, any New Junior Secured Notes, New Common
Stock or Series A Warrants held for distribution on account of such claim shall
be disposed of pursuant to Article VI of the Plan.

12.  LOST, STOLEN, MUTILATED OR DESTROYED SECURITIES

     In addition to any requirements under the indentures governing,
respectively, the Junior Secured Notes, the Subordinated Notes or any other
applicable agreement, any holder of a claim or interest evidenced by a Junior
Secured Note, a Subordinated Note, Preferred Stock or Old Common Stock that has
been lost, stolen, mutilated or destroyed shall, in lieu of surrendering such
note or other instrument, deliver to the reorganized Company: (i) evidence
reasonably satisfactory to the reorganized Company of the loss, theft,
mutilation or destruction; and (ii) such security or indemnity as may be
required by reorganized Company to hold the reorganized Company harmless from
any damages, liabilities or costs incurred in treating such individual as a
holder of an allowed claim or interest. Upon compliance with Article VI of the
Plan by a holder of a claim or interest evidenced by a Junior Secured Note, a
Subordinated Note, Preferred Stock or Old Common Stock, such holder shall, for
all purposes under the Plan, be deemed to have surrendered such note, debenture
or equity. As soon as practicable after the effective date of the Plan, the
applicable indenture trustees for the Junior Secured Notes and Subordinated
Notes shall provide instructions to their respective noteholders that are
consistent with the terms of the Plan and this Disclosure Statement for any such
notes that are loss, stolen, mutilated or destroyed.

G.  RESOLUTION OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS

     The Debtors will be required to file any objections they may have to the
allowance of a claim or interest prior to a deadline to be established by the
Bankruptcy Court. Any claim or interest to which no objection is filed by the
applicable deadline is deemed to be allowed.

     No distributions will be made on account of any disputed claim or interest
unless and until the dispute is resolved either through agreement of the parties
or by a final order of the Bankruptcy Court (or other court of appropriate
jurisdiction). Pending the resolution of such dispute, the distribution which
would be made with respect to a disputed claim or interest if such claim or
interest were allowed in full shall be made into a disputed claim or interest
reserve, as the case may be, to be established pursuant to the Plan. Such
distribution shall be released to the holder of the disputed claim or interest
as, when and to the extent such claim or interest becomes an allowed claim. The
Plan does not provide for interest to accrue or to be paid with respect to
disputed claims that are ultimately allowed in whole or in part. No payment or
distribution will be made with respect to all or any portion of a disputed claim
or interest unless and until all objections to such claim or interest are
withdrawn or have been allowed pursuant to a final order.

     The provisions of the Plan in respect of the resolution and payment of
disputed claims and interests are set forth in Article VIII of the Plan.

H.  MEANS FOR IMPLEMENTATION OF THE PLAN

1.  CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN REORGANIZED DEBTORS

     After the effective date of the Plan, the reorganized Debtors shall
continue to exist as separate corporate or other legal entities in accordance
with the applicable law in the respective jurisdiction in which they are
incorporated and pursuant to their respective certificates or articles of
incorporation and by-laws, or other similar organizational documents, in effect
prior to the effective date, except to the extent such certificates or articles
of incorporation and by-laws are amended or amended and restated under this
Plan. Following the effective date of the Plan, the unimpaired claims of a
particular Debtor or reorganized Debtor will constitute the obligation solely of
such Debtor or reorganized Debtor and will not become obligations of any other
Debtor or reorganized Debtor by virtue of the Plan, the chapter 11 cases or
otherwise. Except as otherwise provided in the Plan, on and after the effective
date, all property of the Debtors' estates, including all claims, rights and
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<PAGE>   38

causes of action and any property acquired by the Debtors or the reorganized
Debtors under or in connection with the Plan, will vest in the reorganized
Debtors free and clear of all claims, liens, charges, other encumbrances and
interests. On and after the effective date of the Plan, the reorganized Debtors
may operate their businesses and may use, acquire and dispose of property and
compromise or settle any claims without supervision of or approval by the
Bankruptcy Court and free and clear of any restrictions of the Bankruptcy Code
or the Bankruptcy Rules, other than restrictions expressly imposed by the Plan
or the confirmation order.

2.  CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS AND CORPORATE ACTION

     a.  Certificates of Incorporation and By-laws.  The certificates or
articles of incorporation and by-laws, or other similar organizational
documents, of each of the Debtors will be amended as necessary to satisfy the
provisions of the Plan and the Bankruptcy Code and will include, among other
things, (i) a provision prohibiting the issuance of non-voting equity securities
to the extent required by the Bankruptcy Code; and (ii) provisions authorizing
the issuance of the New Common Stock, the Series A Warrants and the Management
Equity Incentive Plan. After the effective date, the reorganized Debtors may
amend and restate the amended certificates of incorporation and bylaws as
permitted by applicable law.

     b.  Directors and Officers of the Reorganized Debtors.  As of the effective
date of the Plan, the initial officers of the reorganized MTLM will be the
officers of the Debtors immediately prior to the effective date. On the
effective date, the board of directors of reorganized MTLM shall have five (5)
members consisting of the chief executive officer of reorganized MTLM, and four
(4) persons appointed by the Noteholder Committee. Unless otherwise directed by
the board of directors of reorganized MTLM, the board of directors of the
reorganized subsidiary Debtors will remain the same as prior to the effective
date. The Debtors will disclose, not later than five (5) days prior to the
Confirmation Hearing, the identity and affiliations of the person proposed by
the Noteholder Committee to serve on the initial board of directors of
reorganized MTLM and, to the extent such person is an insider, other than by
virtue of being a director, the nature of any compensation for such person. The
classification and composition of the board of directors of each of the
reorganized Debtors shall be consistent with the amended certificates of
incorporation. Each such director and officer shall serve from and after the
effective date pursuant to the terms of the amended certificates of
incorporation, the other constituent documents of the reorganized Debtors, and
applicable law. The existing board of directors of MTLM will be deemed to have
resigned on the effective date.

     c.  Corporate Action.  On the effective date of the Plan, the adoption of
the amended certificates of incorporation or other similar organizational
documents, the adoption of the amended by-laws, the selection of directors and
officers for the reorganized Debtors and all other actions contemplated by the
Plan will be authorized and approved in all respects (subject to the provisions
of the Plan and/or the Confirmation Order). All matters provided for in the Plan
involving the corporate structure of the Debtors or the reorganized Debtors, and
any corporate action required by the Debtors or the 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 the reorganized Debtors. In addition, on the effective date of
the Plan, the appropriate officers of the reorganized Debtors and members of the
boards of directors 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.

3.  LIMITED SUBSTANTIVE CONSOLIDATION

     The Plan contemplates and is predicated upon entry of an order authorizing
the treatment of Class 4, Class 5 and Class 6 claims as if the estates of the
Debtors had been substantively consolidated for voting, confirmation and
distribution purposes. The Plan does not contemplate the substantive
consolidation of the Debtors with respect to the other classes of claims or
interests set forth in the Plan or for any other purpose. As a result, and based
solely on Section 4.1 of the Plan, on the effective date, (i) all guaranties of
any Debtor of the payment, performance or collection of another Debtor with
respect to Class 4, Class 5 and Class 6 claims will be deemed eliminated and
cancelled, (ii) any obligation of any Debtor and all guarantees with respect to
Class 4, Class 5 and Class 6 claims executed by one (1) or more of the other
Debtors shall be treated as a
                                        33
<PAGE>   39

single obligation and any obligation of two or more Debtors, and all multiple
impaired claims against such entities on account of such joint obligations shall
be treated and allowed only as a single impaired claim against the consolidated
Debtors, and (iii) each Class 4, Class 5 and Class 6 claim filed or to be filed
against any Debtor shall be deemed filed against the consolidated Debtors and
shall be deemed a single claim against and a single obligation of the
consolidated Debtors. Except as set forth in the Plan, such substantive
consolidation shall not (other than for purposes related to the Plan) (a) affect
the legal and corporate structures of the reorganized Debtors, (b) cause any
Debtor to be liable for any impaired claim or unimpaired claim under the Plan
for which it otherwise is not liable, and the liability for any such claim shall
not be affected by such substantive consolidation, (c) affect intercompany
claims of Debtors against other Debtors, and (d) affect interests in subsidiary
Debtors.

4.  ISSUANCE OF NEW SECURITIES AND RELATED DOCUMENTS

     On the effective date of the Plan, the reorganized MTLM will issue the New
Junior Secured Notes, the New Common Stock, the Series A Warrants and the Series
B Warrants to be distributed pursuant to the Plan, and the reorganized
subsidiary Debtors will enter into guaranties of the New Junior Secured Notes,
without further act or action under applicable law, regulation, order or rule.
All documents, agreements and instruments entered into on or as of the effective
date contemplated by or in furtherance of the Plan, including without
limitation, the Management Equity Incentive Plan and any other agreement entered
into in connection with the foregoing, shall become effective and binding in
accordance with their respective terms and conditions upon the parties thereto.
A description of these documents is contained in Section II.F., and H. and I of
this Disclosure Statement.

I.  TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

1.  ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

     The Plan provides that immediately prior to the effective date, all
executory contracts or unexpired leases of the reorganized Debtors will be
deemed assumed except those executory contracts and unexpired leases that (1)
have been previously rejected by order of the Bankruptcy Court, (2) are the
subject of a motion to reject pending on the effective date, or (3) are
identified on a list to be filed with the Bankruptcy Court on or before the
confirmation date, or otherwise are rejected pursuant to the terms of the Plan.
Entry of the confirmation order by the Bankruptcy Court will constitute approval
of such assumptions and rejections pursuant to the Bankruptcy Code. Each
executory contract and unexpired lease assumed pursuant to the Plan shall revest
in and be fully enforceable by the respective reorganized Debtor in accordance
with its terms.

2.  CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED LEASES

     The Plan provides that all proofs of claim with respect to claims arising
from the rejection of executory contracts or unexpired leases, if any, must be
filed with the Bankruptcy Court within thirty (30) days after the date of entry
of an order of the Bankruptcy Court approving such rejection. Any claims arising
from the rejection of an executory contract or unexpired lease not filed within
such times will be forever barred from assertion against the Debtors or
reorganized Debtors, their estates and property unless otherwise ordered by the
Bankruptcy Court or provided for in this Plan. All such claims which become
allowed claims are treated as Class 6 claims.

3.  CURE OF DEFAULTS OF ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED LEASES

     Any monetary amounts by which each executory contract and unexpired lease
to be assumed pursuant to the Plan is in default shall be satisfied, by the
reorganized Debtors, by payment of the default amount in cash on the effective
date or on such other terms as the parties to such executory contracts or
unexpired leases may otherwise agree. In the event of a dispute regarding: (1)
the amount of any cure payments; (2) the ability of the reorganized Debtors or
any assignee to provide "adequate assurance of future performance" (within the
meaning of section 365 of the Bankruptcy Code) under the contract or lease to be
assumed; or (3) any other

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<PAGE>   40

matter pertaining to assumption, the cure payments required by the Bankruptcy
Code shall be made following the entry of a final order resolving the dispute
and approving the assumption.

4.  INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

     The Plan provides that the obligations of the Debtors to indemnify any
person or entity serving at any time on or prior to the effective date as one of
their directors, officers or employees by reason of such person's or entity's
service in such capacity (except with respect to claims against such persons
that are expressly preserved pursuant to Article X of the Plan), to the extent
provided in the Debtors' constituent documents or by a written agreement with
the Debtors or the applicable states' general corporation law, each as
applicable, shall be deemed and treated as executory contracts that are assumed
by the Debtors pursuant to the Plan and the Bankruptcy Code as of the effective
date.

5.  COMPENSATION AND BENEFIT PROGRAMS; EMPLOYMENT CONTRACTS; PENSION PLANS

     Except as otherwise expressly provided in the Plan (and as described
below), all employment and severance policies, and all compensation and benefit
plans, policies, and programs of the Debtors applicable to their employees,
retirees and non-employee directors and the employees and retirees of its
subsidiaries, including, without limitation, all savings plans, retirement
plans, healthcare plans, disability plans, severance benefit plans, incentive
plans, life, accidental death and dismemberment insurance plans are, to the
extent allowed by law, treated as executory contracts under the Plan and on the
effective date will be assumed pursuant to the Bankruptcy Code.

     Except as otherwise expressly provided in the Plan (and as described
below), each of the employment contracts between a Debtor and an employee of
such Debtor will be assumed pursuant to the provisions of sections 365 and 1123
of the Bankruptcy Code on the effective date of the Plan. All employment
contracts so assumed will be deemed modified such that the transactions
contemplated by the Plan shall be deemed not to constitute a "change of control"
as defined in, and for the purposes of, the relevant employment contracts.

     In accordance with Section 7.1 of the Plan, the Debtors reserve the right
to reject any compensation and benefit program and any employment contract prior
to the effective date of the Plan pursuant to the provisions of sections 365 and
1123 of the Bankruptcy Code. The Debtors will so reject a program or employment
contract if the assumption thereof has not been consented to by the Official
Committee, the Noteholder Committee and the Agent for the lenders under the DIP
Credit Agreement prior to the confirmation date.

     The Debtors have established and maintain the following pension plans for
certain of its employees (collectively, the "Pension Plans"): the Retirement
Plan for Employees of Charles Bluestone Co., employer identification/plan number
36-4235943/001; Aerospace Metals, Inc. Hourly Pension Plan, employer
identification/plan number 36-4201748/001; Aerospace Metals, Inc. Salaried
Retirement Plan, employer identification/plan number 36-4201748/002; and The
Isaac Corporation Pension Plan -- MMI98, employer identification/plan number
34-0901723/003. The Pension Plans are covered by Title IV of the Employment
Retirement Security Act of 1974, as amended ("ERISA") (29 U.S.C. sec. 1301, et
seq.).

     The Debtors have been advised by the Pension Benefit Guaranty Corporation
(the "PBGC") that the PBGC estimates the Aerospace Metals, Inc. Hourly
Retirement Plan is underfunded on a termination basis in the amount of
approximately $441,200; that the Aerospace Metals, Inc. Salaried Pension Plan is
underfunded on a termination basis in the amount of approximately $384,200; and
that the Retirement Plan for Employees of Charles Bluestone Co. is underfunded
on a termination basis in the amount of approximately $384,100. The PBGC further
has advised the Debtors that based on current estimates the PBGC does not
believe, as of the date of this Disclosure Statement, that The Isacc Corporation
Pension Plan -- MM198 was underfunded on a termination basis.

     Unless any of the Pension Plans is terminated prior to the effective date
of the Plan, the liability of the Debtors under ERISA (including the liability,
if any, to the PBCG), will not be discharged or affected in any way by
confirmation of the Plan. The Debtors are not seeking to terminate any of the
Pension Plans in

                                        35
<PAGE>   41

connection with confirmation of the Plan and, from and after the effective date
of the Plan, the reorganized Debtors will continue the Pension Plans in
accordance with ERISA and other applicable law.

J.  CONFIRMATION AND EFFECTIVENESS OF THE PLAN

     Article IX of the Plan sets forth certain conditions to confirmation of the
Plan and to the occurrence of the effective date thereunder. The Debtors believe
that all such conditions will be satisfied and, provided that the Bankruptcy
Court finds that the Plan meets the requirements of the Bankruptcy Code and
confirms the Plan, the Plan will be implemented in accordance with its terms.
The Plan further provides that each of the conditions to the effective date of
the Plan may be waived by the Debtors with the consent of the Official
Committee, the Noteholder Committee and the Agent for the DIP Lenders and
without further notice or a hearing. See Section II.E. of this Disclosure
Statement for a discussion of certain conditions to the effectiveness of the New
Credit Agreement.

K.  CONSEQUENCES OF NON-OCCURRENCE OF EFFECTIVE DATE

     If the effective date does not occur (i) on or before June 30, 2001 (in
which case the DIP Lenders shall be entitled to exercise rights under their
agreements); or (ii) by such later date, after notice and hearing, as is
proposed by the Debtors (with the consent of the Official Committee and the
Agent for the lenders under the DIP Credit Agreement) and approved by the
Bankruptcy Court, then upon motion by the Debtors and upon notice to such
parties in interest as the Bankruptcy Court may direct, the confirmation order
will be vacated by the Bankruptcy Court; provided, however, that,
notwithstanding the filing of such motion, the confirmation order may not be
vacated if the effective date occurs before the Bankruptcy Court enters an order
granting such motion. If the confirmation order is vacated pursuant to Section
9.4 of the Plan: (a) the Plan shall be null and void in all respects; (b) any
settlement of claims and interests provided for hereby shall be null and void
without further order of the Bankruptcy Court; (c) the time period within which
the Debtors may assume and assign or reject all executory contracts and
unexpired leases shall be extended for a period of sixty (60) days after the
date the confirmation order is vacated; and (d) the Agent and the DIP Lenders
may exercise rights as provided in Section 9.4 of the Plan.

L.  EFFECT OF PLAN CONFIRMATION

1.  PRESERVATION OF RIGHTS OF ACTION; SETTLEMENT OF LITIGATION CLAIMS

     Except as otherwise provided in the Plan, the confirmation order or in any
document, instrument, release or other agreement entered into in connection with
the Plan, the Debtors will retain under the Plan their rights with respect to
any and all claims or causes of action, whether known or unknown, that may exist
in favor of the Debtors. The reorganized Debtors, or the successors in interest
to the Debtors, may enforce, sue on, settle or compromise (or decline to do any
of the foregoing) any or all of such claims or causes of action.

2.  RELEASES

     a.  Releases by the Debtors.  On the effective date of the Plan, the
Debtors and reorganized Debtors, in their individual capacities and as debtors
in possession, will be deemed to release forever, waive and discharge completely
all claims, obligations, suits, judgments, damages, demands, debts, rights,
causes of action and liabilities (other than the rights of the Debtors or
reorganized Debtors to enforce the Plan and the contracts, instruments,
releases, indentures and other agreements or documents delivered thereunder)
whether known or unknown, foreseen or unforeseen, then existing or thereafter
arising, in law, equity or otherwise that are based in whole or part on any act,
omission, transaction, event or other occurrence taking place on or prior to the
effective date in any way relating to the Debtors, the reorganized Debtors,
their chapter 11 cases, or the Plan or this Disclosure Statement, and that could
have been asserted by or on behalf of the Debtors or their estates or the
reorganized Debtors against the current and former directors, officers and
employees of the Debtors; provided, however, that such release and waiver of
claims shall not be applicable to (i) avoidance actions listed in Section 550(a)
of the Bankruptcy Code, (ii) the obligations of such officers, director or
employees to any of the Debtors in respect of borrowed money, employment
contracts, or consulting contracts, (iii) the

                                        36
<PAGE>   42

receipt by such officers, director or employee of transfers from the Debtors,
direct or indirect, in connection with acquisitions by the Debtors of
subsidiaries, business enterprises or other material assets (or other express
contractual obligations under such acquisition agreements), and (iv) any acts or
omissions that constitute gross negligence, fraud, or willful misconduct.

     b.  Injunction Related to Releases.  The Confirmation Order will
permanently enjoin the commencement or prosecution by any entity, whether
directly, derivatively or otherwise, of any claims, obligations, suits,
judgments, damages, demands, debts, rights, causes of action or liabilities
released pursuant to the Plan, including but not limited to, the claims,
obligations, suits, judgments, damages, demands, debts, rights, causes of action
or liabilities released in Section 10.2 of the Plan.

3.  DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS

     Except as otherwise provided herein or in the confirmation order, all
consideration distributed under the Plan shall be in exchange for, and in
complete satisfaction, settlement, discharge and release of, all claims (other
than those claims that are unimpaired under the Plan) of any nature whatsoever
against the Debtors or any of their assets or properties, and regardless of
whether any property shall have been distributed or retained pursuant to the
Plan on account of such claims. Upon the effective date, the Debtors, and each
of them, shall be deemed discharged and released under section 1141(d)(1)(A) of
the Bankruptcy Code from any and all claims (other than claims that are not
impaired), including, but not limited to, demands and liabilities that arose
before the confirmation date, and all debts of the kind specified in section
502(g), 502(h) or 502(i) of the Bankruptcy Code and all equity interests of the
Company, including, without limitation, its Preferred Stock, Old Common Stock
and Old Rights and Warrants, shall be terminated.

4.  EXCULPATION AND LIMITATION OF LIABILITY

     Neither the Debtors, the Official Committee, the Noteholder Committee, the
Prepetition Lenders, the lenders under the DIP Credit Agreement, the Agent for
the Debtors' senior lenders, the Indenture Trustee for the Subordinated Notes,
the Indenture Trustee for the Junior Secured Notes, nor any of their respective
present or former members, officers, directors, shareholders, employees,
advisors, attorneys or agents acting in such capacity, shall have or incur any
liability to, or be subject to any right of action by, any holder of a claim or
an interest, or any other party in interest, or any of their respective agents,
shareholders, employees, representatives, financial advisors, attorneys or
affiliates, or any of their successors or assigns, for any act or omission in
connection with, relating to, or arising out of, the Debtors' chapter 11 cases,
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,
except for their willful misconduct or gross negligence, and in all respects
shall be entitled to rely reasonably upon the advice of counsel with respect to
their duties and responsibilities under the Plan.

5.  INJUNCTION

     Except as otherwise provided in the Plan, the confirmation order shall
provide, among other things, that from and after the confirmation date all
persons who have held, hold or may hold claims against or interests in the
Debtors are (i) permanently enjoined from taking any of the following actions
against the estate(s), or any of their property on account of any such claims or
interests and (ii) preliminarily enjoined from taking any of the following
actions against any of the Debtors, the reorganized Debtors or their property on
account of such claims or interests: (A) commencing or continuing, in any manner
or in any place, any action or other proceeding; (B) enforcing, attaching,
collecting or recovering in any manner any judgment, award, decree or order; (C)
creating, perfecting or enforcing any lien or encumbrance; (D) asserting a
setoff, right of subrogation or recoupment of any kind against any debt,
liability or obligation due to the Debtors; and (E) commencing or continuing, in
any manner or in any place, any action that does not comply with or is
inconsistent with the provisions of the Plan; provided, however, that nothing
contained herein shall preclude such persons from exercising their rights
pursuant to and consistent with the terms of the Plan.

                                        37
<PAGE>   43

     By accepting distributions pursuant to the Plan, each holder of an allowed
claim or interest will be deemed to have specifically consented to the
injunctions set forth in Section 10.6 of the Plan.

6.  TERMINATION OF SUBORDINATION RIGHTS AND SETTLEMENT OF RELATED CLAIMS

     The classification and manner of satisfying all claims and interests under
the Plan take into consideration all subordination rights, whether arising by
contract or under general principles of equitable subordination, section 510(b)
or 510(c) of the Bankruptcy Code, or otherwise. All subordination rights that a
holder of a claim or interest may have with respect to any distribution to be
made pursuant to the Plan will be discharged and terminated, and all actions
related to the enforcement of such subordination rights will be permanently
enjoined. Accordingly, distributions pursuant to the Plan to holders of allowed
claims or allowed interests will not be subject to payment to a beneficiary of
such terminated subordination rights, or to levy, garnishment, attachment or
other legal process by a beneficiary of such terminated subordination rights.

     All claims of holders of "senior debt" (as such term is defined in the
indenture governing the Subordinated Notes) against the Debtors, and all rights
and claims of such holders relating in any manner whatsoever to claimed
subordination rights, "make-whole" rights, rights to postpetition or default
interest or similar rights, if any (collectively "Subordination-Related
Rights"), are deemed satisfied by the distributions under, described in,
contemplated by, and/or implemented by the Plan to holders of such claims, and
such rights shall be deemed waived, released, discharged and terminated as of
the effective date, and all actions related to the enforcement of such
Subordination-Related Rights shall be permanently enjoined. Distributions under,
described in, contemplated by and/or implemented by the Plan shall not be
subject to levy, garnishment, attachment or like legal process by reason of any
claimed Subordination-Related Rights, so that each holder of a claim shall have
and receive the benefit of the distributions in the manner set forth and
described in the Plan.

     Pursuant to Bankruptcy Rule 9019 and in consideration of the distributions
and other benefits provided under the Plan, the provisions of the Plan will
constitute a good faith compromise and settlement of all claims or controversies
relating to the subordination rights that a holder of a claim including, but not
limited to, a holder of a Secured Lender Claim or Junior Secured Note Claim may
have or any distribution to be made pursuant to the Plan on account of such
claim. Entry of the confirmation order will constitute the Bankruptcy Court's
approval, as of the effective date, of the compromise or settlement of all such
claims or controversies and the Bankruptcy Court's finding that such compromise
or settlement is in the best interests of the Debtors, the reorganized Debtors,
and their respective properties and holders of claims and interests, and is
fair, equitable and reasonable; provided, however, that nothing contained in the
Plan will preclude any person from exercising their rights pursuant to and
consistent with the terms of this Plan, the New Credit Agreement or the Plan
Documents.

7.  DISSOLUTION OF OFFICIAL COMMITTEE UPON EFFECTIVE DATE OF THE PLAN

     Except as may otherwise be ordered by the Bankruptcy Court, thirty (30)
days after the effective date of the Plan, the Official Committee shall be
dissolved and each of its members, agents and professionals fully discharged and
released from any and all further responsibilities, in such capacities, in
respect of these chapter 11 cases.

M.  SUMMARY OF OTHER PROVISIONS OF THE PLAN

     The following paragraphs summarize certain other significant provisions of
the Plan. The Plan should be referred to for the complete text of these and
other provisions of the Plan.

1.  EXEMPTION FROM CERTAIN TRANSFER TAXES

     Pursuant to section 1146(c) of the Bankruptcy Code, any transfers from the
Debtors to reorganized Debtors or otherwise pursuant to the Plan shall not be
subject to any document recording tax, stamp tax, conveyance fee, intangibles or
similar tax, mortgage tax, stamp act, real estate transfer tax, mortgage
recording tax or other similar tax or governmental assessment, and the
confirmation order shall direct the appropriate
                                        38
<PAGE>   44

state or local governmental officials or agents to forgo 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.

2.  CANCELLATION OF NOTES, INSTRUMENTS, DEBENTURES AND COMMON STOCK

     On the effective date of the Plan, except as otherwise provided in the
Plan, (i) the Junior Secured Notes, the Subordinated Notes, the Preferred Stock,
the Old Common Stock, and the Old Rights and Warrants, any other notes, bonds
(with the exception of surety bonds outstanding), indentures or other
instruments or documents evidencing or creating any indebtedness or obligations
of a Debtor, except such notes or other instruments evidencing indebtedness or
obligations of a Debtor that are reinstated or amended and restated under the
Plan, shall be cancelled, and (ii) the obligations of the Debtors under any such
agreements, indentures or other documents, shall be discharged. As of the
effective date, all Preferred Stock, Old Common Stock and Old Rights and
Warrants that have been authorized to be issued but that have not been issued
shall be deemed cancelled and extinguished without any further action of any
party. Notwithstanding anything to the contrary in the Plan or this Disclosure
Statement, the Junior Secured Note Indenture, as amended and restated by the
Plan, shall survive and continue to be effective.

3.  EFFECTUATING DOCUMENTS, FURTHER TRANSACTIONS AND CORPORATE ACTION

     Each of the Debtors or the reorganized Debtors is authorized under the Plan
to execute, deliver, file or record such contracts, instruments, releases and
other agreements or documents and take such actions as may be necessary or
appropriate to effectuate, implement and further evidence the terms and
conditions of the Plan and any notes or securities issued pursuant to the Plan.

     Prior to, on or after the effective date (as appropriate), all matters
provided for under the Plan that would otherwise require approval of the
stockholders or directors of one (1) or more of the Debtors or the reorganized
Debtors are deemed to have occurred and shall be in effect prior to, on or after
the effective date (as appropriate) pursuant to the applicable general
corporation law (or other entity/organizational laws) of the states in which the
Debtors or the reorganized Debtors are incorporated without any requirement of
further action by the stockholders or directors of the Debtors or the
reorganized Debtors.

4.  SEVERABILITY OF PLAN PROVISIONS

     If, prior to the confirmation date of the Plan, any term or provision of
the Plan is determined by the Bankruptcy Court to be invalid, void or
unenforceable, the Bankruptcy Court, at the request of the Debtors, with the
consent of the Official Committee, the Noteholder Committee and the Agent for
the lenders under the DIP Credit Agreement, will have the power to alter and
interpret such term or provision to make it valid or enforceable to the maximum
extent practicable, consistent with the original purpose of the term or
provision held to be invalid, void or unenforceable, and such term or provision
will then be applicable as altered or interpreted. Notwithstanding any such
holding, alteration or interpretation, the remainder of the terms and provisions
of the Plan will remain in full force and effect and will in no way be affected,
impaired or invalidated by such holding, alteration or interpretation. The
confirmation order will constitute a judicial determination and will provide
that each term and provision of the Plan, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable pursuant
to its terms.

5.  REVOCATION, WITHDRAWAL OR NON-CONSUMMATION

     The Debtors reserve the right to revoke or withdraw the Plan as to any or
all of the Debtors prior to the confirmation date and to file subsequent plans
of reorganization with the consent of the Official Committee and the Agent for
the DIP Lenders. If the Debtors revoke or withdraw the Plan as to any or all of
the Debtors, or if confirmation or consummation as to any or all of the Debtors
does not occur, then, with respect to such Debtors: (a) the Plan shall be null
and void in all respects; (b) any settlement or compromise embodied in the Plan
(including the fixing or limiting to an amount certain any claim or interest or
class of claims or interests), assumption or rejection of executory contracts or
leases affected by the Plan, and any document or agreement

                                        39
<PAGE>   45

executed pursuant to the Plan, shall be deemed null and void; and (c) nothing
contained in the Plan shall (i) constitute a waiver or release of any claims by
or against, or any interests in, such Debtors or any other person, (ii)
prejudice in any manner the rights of such Debtors or any other person or (iii)
constitute an admission of any sort by the Debtors or any other person.

6.  SECTION 1145 EXEMPTION

     The New Junior Secured Notes, New Common Stock and Series A Warrants to be
distributed pursuant to the Plan are to be issued pursuant to an exemption from
registration under federal, state or local securities laws provided by section
1145(a)(1) of the Bankruptcy Code. Section 1145(a)(1) of the Bankruptcy Code
exempts from registration the "offer ... under a plan of a security of the
debtor ..." so long as the security is distributed:

     -  in exchange for a claim against, an interest in or a claim for an
        administrative expense in the case concerning the debtor; or

     -  principally in exchange for cash or property.

     The Debtors believe that the New Junior Secured Notes, New Common Stock and
Series A Warrants to be distributed pursuant to the Plan constitute a "security
of the debtor" and thus qualify for the exemption provided under section
1145(a)(1) of the Bankruptcy Code. The Debtors will seek an order of the
Bankruptcy Court, in conjunction with confirmation of the Plan, to that effect.

     To the extent that the New Junior Secured Notes, New Common Stock and
Series A Warrants distributed pursuant to the Plan qualify for the exemption
provided by section 1145(a)(1) of the Bankruptcy Code, such shares will be
freely transferable, without restriction, by the holders of claims and interests
that receive such note, stock and warrants under the Plan, except for any such
claim or interest holders that are an "underwriter," which is defined in section
1145(b) of the Bankruptcy Code.

     Under section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act"), an "issuer" includes any person directly or indirectly
controlling or controlled by the Debtors, or any person under direct or indirect
common control with the Debtors.

     To the extent that a creditor or interest holder that receives New Junior
Secured Notes, New Common Stock and/or Series A Warrants is deemed an
"underwriter," resales by such creditor or interest holder would not be exempted
by section 1145 of the Bankruptcy Code from registration under the Securities
Act or applicable state securities laws. However, such creditor or interest
holder may be able to sell its New Junior Secured Notes, New Common Stock or
Series A Warrants without registration subject to the provisions of Rule 144
under the Securities Act, which would permit the public sale of securities
received pursuant to the Plan by "underwriters" subject to the availability to
the public of current information regarding the Debtors and to compliance with
specified volume limitations and certain other conditions.

     Given the complex, subjective nature of the question of whether a
particular Noteholder or stockholder may be an underwriter, representations
concerning the right of any person to trade the New Junior Secured Notes, New
Common Stock or Series A Warrants to be received under the Plan. THE DEBTORS
RECOMMEND THAT POTENTIAL RECIPIENTS OF NEW JUNIOR SECURED NOTES, NEW COMMON
STOCK OR SERIES A WARRANTS UNDER THE PLAN CONSULT THEIR OWN COUNSEL CONCERNING
THE EFFECTS OF FEDERAL AND STATE SECURITIES LAWS ON THEIR ABILITY TO TRADE SUCH
SECURITIES.

     Sales by "stockbrokers" of the New Junior Secured Notes, New Common Stock
or Series A Warrants issued under the Plan will be exempt under section
1145(a)(4) of the Bankruptcy Code from the registration requirements of the
Securities Act and state securities laws if they deliver a copy of the
Disclosure Statement (and supplements hereto, if any, if ordered by the
Bankruptcy Court) at or before the time of delivery of such securities to their
customers for the first forty (40) days after the effective date of the Plan.
Section 101 of the Bankruptcy Code defines "stockbroker" as a person having
customers that are engaged in the business of

                                        40
<PAGE>   46

effecting transactions in securities (i) for the accounts of others or (ii) with
the general public from or for such person's own account.

7.  AMENDMENT OR MODIFICATION OF THE PLAN

     Subject to section 1127 of the Bankruptcy Code and, to the extent
applicable, sections 1122, 1123 and 1125 of the Bankruptcy Code, the Debtors
reserve the right, to alter, amend or modify the Plan with the consent of the
Official Committee, the Noteholder Committee and the Agent for the DIP Lenders
at any time prior to or after the confirmation date but prior to the substantial
consummation of the Plan. A holder of a claim or interest that has accepted the
Plan shall be deemed to have accepted the Plan, as altered, amended or modified,
if the proposed alteration, amendment or modification does not materially and
adversely change the treatment of the claim or interest of such holder.

                  VI.  CONFIRMATION AND CONSUMMATION PROCEDURE

     The Bankruptcy Court may confirm the Plan only if it determines that the
Plan complies with the requirements of chapter 11, including, among other
things, that (a) the Plan has properly classified claims and interests, (b) the
Plan complies with applicable provisions of the Bankruptcy Code, (c) the Debtors
have complied with applicable provisions of the Bankruptcy Code, (d) the Debtors
have proposed the Plan in good faith and not by any means forbidden by law, (e)
the Plan has been accepted by the requisite votes of all classes of creditors
(except to the extent that "cramdown" is available under section 1129(b) of the
Bankruptcy Code), (f) the Plan is in the "best interests" of all holders of
claims or interests in an impaired class, (g) the Plan is "feasible" in that
confirmation of the Plan is not likely to be followed by the liquidation or need
for further restructuring of the Debtors, and (h) all fees and expenses payable
under 28 U.S.C. sec. 1930, as determined by the Bankruptcy Court at the
Confirmation Hearing, have been paid or the Plan provides for the payment of
such fees on the effective date.

     Under the Bankruptcy Code, the following steps must be taken to confirm the
Plan:

A.  SOLICITATION OF VOTES

     Under the Bankruptcy Code, only classes of claims and interests that are
"impaired" (as that term is defined in section 1124 of the Bankruptcy Code)
under the Plan are entitled to vote to accept or reject the Plan. A class is
impaired if the legal, equitable or contractual rights to which the holders of
claims or interests are entitled are modified, other than by curing defaults and
reinstating the debt. Pursuant to sections 1126(f) and (g) of the Bankruptcy
Code, classes of claims and interests that are not impaired are conclusively
presumed to have accepted the Plan and are not entitled to vote on the Plan, and
classes of claims and interests whose holders will receive or retain no property
under the Plan are deemed to have rejected the Plan and are not entitled to vote
on the Plan. Creditors who hold disputed claims are not entitled to vote to
accept or reject the Plan.

     Under the Plan, the holders of claims in Classes 4, 5, 6 and 11 are
entitled to vote to accept or reject the Plan. All other classes of claims or
interests are deemed under the Bankruptcy Code to have accepted (Classes 1, 2A,
2B, 3A and 3B) or rejected (Classes 7, 8, 9 and 10) the Plan.

     This Disclosure Statement and an appropriate ballot are being distributed
to all holders of claims who are entitled to vote on the Plan. Because of the
difficulty associated with reaching beneficial owners of the Company's publicly
traded notes, many of which hold their notes in brokerage accounts or through
similar nominees, the Debtors are distributing a ballot (i) to each holder of
record of a Junior Secured Note or a Subordinated Note as of May 4, 2001 and
(ii) to each broker, bank or other nominee (or the agent therefor) identified by
Logan as an entity through which beneficial owners hold such notes. The banks,
brokers, nominees or agents are instructed to forward to each beneficial owner
of Junior Secured Notes or Subordinated Notes an appropriate ballot for voting,
along with a return envelope provided by and addressed to the broker, bank or
other nominee, so that the beneficial owner may return the completed beneficial
owner ballot to that entity. The broker, bank, or nominee is then instructed to
tabulate the individual votes of its

                                        41
<PAGE>   47

respective beneficial owners from their individual beneficial owner ballot on a
master ballot and to return such master ballot to Logan. This procedure will
enable the Debtors to transmit materials to the holders of their publicly traded
securities and affords beneficial owners of such notes a fair and reasonable
opportunity to vote. All ballots and master ballots received from the Debtors
must be returned to Logan by the applicable voting deadline as indicated on the
ballots.

     Under the Bankruptcy Code a class of claims accepts a plan if holders of at
least two-thirds in dollar amount and more than one-half in number of the claims
properly voted in that class, voted to accept.

     A vote may be disregarded if the Bankruptcy Court determines, after notice
and a hearing, that acceptance or rejection was not solicited or procured in
good faith or in accordance with the provisions of the Bankruptcy Code.

     Pursuant to an order of the Bankruptcy Court establishing voting procedures
with respect to the Plan, any ballot that is properly completed, executed and
timely returned to Logan but does not indicate an acceptance or rejection of the
Plan, will be deemed to be a vote to accept the Plan. Whenever a creditor casts
more than one ballot voting the same claim before the Voting Deadline, the last
ballot received before the Voting Deadline is deemed to reflect the voter's
intent and thus to supersede any prior ballots. Creditors must vote all of their
claims within a particular class under the Plan either to accept or reject the
Plan and may not split their vote, and thus a ballot that partially accepts and
partially rejects the Plan will not be counted.

     The following types of ballots will not be counted in determining whether
the Plan has been accepted or rejected:

          1. any ballot received after the Voting Deadline unless the Debtors
     have granted an extension of the voting deadline with respect to such
     ballot;

          2.  any ballot that is illegible or contains insufficient information
     to permit the identification of the creditor or interest holder;

          3.  any ballot cast by a person or entity that does not hold a claim
     in a class that is entitled to vote to accept or reject the Plan; and

          4.  any unsigned ballot.

B.  THE CONFIRMATION HEARING

     The Confirmation Hearing is scheduled for June 18, 2001 at 12:00 noon
before the Bankruptcy Court in Wilmington, Delaware. At that hearing, the
Bankruptcy Court will consider whether the Plan satisfies the various
requirements of Section 1129 of the Bankruptcy Code. At that time, the Debtors
will submit a report to the Bankruptcy Court reflecting the votes received with
respect to the acceptance or rejection of the Plan by the parties entitled to
vote thereon.

     Section 1128(b) of the Bankruptcy Code provides that any party in interest
may object to confirmation of the Plan. Any objection to confirmation of the
Plan must be made in writing and filed with the Bankruptcy Court and served on
all required parties on or before June 11, 2001, in accordance with the
requirements specified by the Bankruptcy Court. Unless an objection to
confirmation is served and filed, it may not be considered by the Bankruptcy
Court.

C.  CONFIRMATION

     At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan
only if all of the applicable requirements of section 1129 of the Bankruptcy
Code are met. Among the requirements for confirmation of a plan are that the
plan (a) has not been accepted by all impaired classes of claims and equity
interests or, if rejected by an impaired class, that the plan "does not
discriminate unfairly" and is "fair and equitable" as to such class, (b) is
feasible and (c) is in the "best interests" of creditors and stockholders that
are impaired under and that vote, or are deemed, to reject the plan.

                                        42
<PAGE>   48

1.  UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS

     To obtain confirmation of a plan over the objection of a class of claims or
interests that rejects such plan, it must be demonstrated that the plan "does
not discriminate unfairly" and is "fair and equitable" with respect to each such
non-accepting Class. In order for a plan to be found to be "fair and equitable"
and thus subject to confirmation by "clampdown" under Section 1129(b) of the
Bankruptcy Code the Debtor must demonstrate:

          a.  For a Class of Secured Creditors: That either (i) each impaired
     secured creditor retains its liens securing its secured claim and receives
     on account of its secured claim deferred cash payments having a present
     value equal to the amount of its allowed secured claim, (ii) each impaired
     secured creditor realizes the "indubitable equivalent" of its allowed
     secured claim, or (iii) the property securing the claim is sold free and
     clear of liens, with such liens to attach to the proceeds of the sale and
     the treatment of such liens on proceeds to be as provided in clause (i) or
     (ii) of this subparagraph.

          b.  For a Class of Unsecured Creditors: That either (i) each impaired
     unsecured creditor receives or retains, under the plan, property of a value
     equal to the amount of its allowed claim or (ii) the holders of claims and
     interests that are junior to the claims of the dissenting class will not
     receive any property under the Plan.

          c.  For a Class of Equity Interests: That either (i) each holder of an
     equity interest will receive or retain, under the plan, property of a value
     equal to the greatest of the fixed liquidation preference to which such
     holder is entitled, the fixed redemption price to which such holder is
     entitled or the value of the interest or (ii) the holder of an interest
     that is junior to the non-accepting class will not receive or retain any
     property under the Plan.

     As described above, holders of interests in Classes 7, 8, 9 and 10 are
presumed, under section 1126(g) of the Bankruptcy Code, to have rejected the
Plan. The Debtors request confirmation of the Plan under section 1129(b) of the
Bankruptcy Code notwithstanding the deemed rejection of the Plan by Classes 7,
8, 9 and 10. The Debtors believe that the Plan may be confirmed pursuant to the
above-described "cramdown" provisions, over the dissent of the interests in
Classes 7, 8 and 10 and Class 9 claims, in view of the terms of the Plan and the
value of the Debtors and their assets. The Debtors believe that the treatment
under the Plan of the holders of claims and interests in Classes 7, 8, 9 and 10
satisfies the "fair and equitable" test since there is no class junior to such
non-accepting classes that will receive or retain any property under the Plan
and since Class 5 and 6 creditors, whose claims have priority over the claims or
interests classified in Classes 7, 8, 9 and 10, are not paid in full under the
terms of the Plan. In addition, the Debtors do not believe that the Plan
unfairly discriminates against Classes 7, 8, 9 or 10.

2.  BEST INTERESTS TEST

     With respect to each impaired class of claims and interests, confirmation
of a plan requires that each holder of a claim or interest either (a) accept the
plan or (b) receive or retain under the plan property of a value, as of the
effective date, that is not less than the value such holder would receive or
retain if the debtor was liquidated under chapter 7 of the Bankruptcy Code. The
Debtors believe that holders of impaired claims and interests in each impaired
class under the Plan would receive significantly less under a chapter 7
liquidation than under the Plan. At the Debtors' request, Houlihan Lokey has
prepared a liquidation analysis (the "Liquidation Analysis") that estimates the
proceeds that may be generated as a result of a hypothetical chapter 7
liquidation. The Liquidation Analysis is attached hereto as Exhibit E. The
Liquidation Analysis is based on a number of significant assumptions that may
not be realized in an actual liquidation.

     To calculate the probable distribution to holders of each impaired class of
claims and interests if a Debtor was liquidated under chapter 7, a bankruptcy
court must first determine the aggregate dollar amount that would be generated
from such debtor's assets in a chapter 7 cases under the Bankruptcy Code. This
"liquidation value" would consist primarily of the proceeds from a forced sale
of the debtor's assets by a chapter 7 trustee.

     The amount of liquidation value available to unsecured creditors would be
reduced by, first, the claims of secured creditors to the extent of the value of
their collateral, and, second, by the costs and expenses of
                                        43
<PAGE>   49

liquidation, as well as by other administrative expenses and costs of the
bankruptcy case. Costs of liquidation under chapter 7 of the Bankruptcy Code
would include the compensation of a trustee, as well as that of counsel and
other professionals retained by the trustee, asset disposition expenses and all
unpaid expenses incurred until the liquidation is completed. The liquidation
would also prompt the rejection of a large number of executory contracts and
unexpired leases and thereby create a significantly larger amount of unsecured
claims than would be asserted if the plan were confirmed.

     The Debtors believe that the Plan meets the "best interests of creditors"
test of section 1129(a)(7) of the Bankruptcy Code. The Debtors believe that the
members of each impaired class will receive greater value under the Plan than
they would in a liquidation. The Liquidation Analysis shows that in the event of
a liquidation as described therein, holders of unsecured claims would not
receive any distribution on their claims, and holders of the Debtors' equity
interest would also receive no distribution. Based on the Liquidation Analysis,
the Plan meets the "best interests" test.

     The Liquidation Analysis, including a description of the underlying
assumptions used by Houlihan Lokey, is attached as Exhibit E to the Disclosure
Statement.

3.  FEASIBILITY

     The Bankruptcy Code requires that the bankruptcy court determine that
confirmation of a plan is not likely to be followed by liquidation or the need
for further financial reorganization of the debtor. For purposes of showing that
this Plan meets this feasibility standard, MTLM has analyzed the ability of the
reorganized Debtors to meet their obligations under the Plan and retain
sufficient liquidity and capital resources to conduct their business.

     The Debtors believe that with a significantly de-leveraged capital
structure their business will be able to return to viability. The decrease in
the amount of debt on the Debtors' consolidated balance sheet will substantially
improve the Debtors' cash flow and reduce their interest expense.

     To assess and demonstrate the feasibility of the Plan, the Debtors have
prepared the Projections, which are attached to this Disclosure Statement as
Exhibit F.

     The Projections indicate that the reorganized Debtors should have
sufficient cash flow to pay and service their debt obligations, including the
New Credit Agreement and the New Junior Secured Notes and to fund their
operations. Accordingly, the Debtors believe that the Plan complies with the
financial feasibility standard of section 1129(a)(11) of the Bankruptcy Code.

     The Projections were not prepared with a view toward compliance with the
published guidelines of the American Institute of Certified Public Accountants
or any other regulatory or professional agency or body or generally accepted
accounting principles. Furthermore, the Debtors' independent certified public
accountants have neither complied nor examined the Projections and accordingly
do not express any opinion or any other form of assurance with respect thereto
and assume no responsibility for the Projections.

     The Projections assume that (i) the Plan will be confirmed and consummated
in accordance with its terms, (ii) there will be no material change in
legislation or regulations, or the administration thereof, including
environmental legislation or regulations, that will have an unexpected effect on
the operations of the reorganized Debtors, (iii) there will be no change in
United States generally accepted accounting principles that will have a material
effect on the reported financial results of the reorganized Debtors, and (iv)
there will be no material contingent or unliquidated litigation or indemnity
claims applicable to the reorganized Debtors. To the extent that the assumptions
inherent in the Projections are based upon future business decisions and
objectives, they are subject to change. In addition, although they are presented
with numerical specificity and considered reasonable by the Debtors when taken
as a whole, the assumptions and estimates underlying the Projections are subject
to significant business, economic and competitive uncertainties and
contingencies, many of which will be beyond the control of the reorganized
Debtors. Accordingly, the Projections are only an estimate that is necessarily
speculative in nature. It can be expected that some or all of the assumptions in
the Projections will not be realized and that actual results will vary from the
Projections, which variation may be material and are likely to increase over
time. The Projections should therefore not be regarded as a
                                        44
<PAGE>   50

representation by the Debtors or any other person that the results set forth in
the Projections will be achieved. In light of the foregoing, readers are
cautioned not to place undue reliance on the Projections. The Projections should
be read together with the information in Section VII of this Disclosure
Statement entitled "Risk Factors to be Considered," which sets forth important
factors that could cause actual results to differ from those in the Projections.

     The Debtors are subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports and other information
with the SEC relating to its business, financial statements and other matters.
Such filings will not include projected financial information. The Debtors do
not intend to update or otherwise revise the Projections, including any
revisions to reflect events or circumstances arising after the date of this
Disclosure Statement or to reflect the occurrence of unanticipated events, even
if any or all of the underlying assumptions do not come to fruition.
Furthermore, the Debtors do not intend to update or revise the Projections to
reflect changes in general economic or industry conditions.

                      VII.  RISK FACTORS TO BE CONSIDERED

     Holders of claims against and interests in the Debtors should read and
consider carefully the information set forth below, as well as the other
information set forth in this Disclosure Statement (and the documents delivered
together herewith and/or incorporated by reference), prior to voting to accept
or reject the Plan. This information, however, should not be regarded as
necessarily setting forth the only potential risks involved in connection with
the Plan and its implementation.

A.  CERTAIN BANKRUPTCY CONSIDERATIONS

1.  FAILURE TO SATISFY VOTE REQUIREMENT

     In the event that sufficient votes accepting the Plan are not received and,
as a result, the Debtors are unable to confirm the Plan as proposed, the Debtors
will assess the alternatives available to them including (i) seeking to
restructure its capitalization and its obligations to creditors and equity
holders under an alternative plan of reorganization, (ii) a liquidation under
chapter 11 of the Code or (iii) a conversion of these cases to a chapter 7
liquidation proceeding. The inability to promptly confirm the Plan will delay
the Debtors' emergence from bankruptcy and could have a material adverse affect
on the value of the Debtors' business and assets. There is substantial risk that
any alternative restructuring or a liquidation will result in less favorable
treatment of claims and interests than that provided by the Plan.

     The obligation of the members of the Noteholder Committee to support and
vote to accept the Plan are subject to certain terms and conditions as provided
in the pre-petition agreement among such members and the Debtors. There is a
risk that such terms and conditions will not be satisfied, in which event the
members will not be obligated to support or vote to accept the Plan.

2.  NON-CONSENSUAL CONFIRMATION

     In the event any impaired Class of claims does not accept the Plan, a
Bankruptcy Court may nevertheless confirm the Plan at the Debtors' request if at
least one impaired class of Claims has accepted the Plan (with such acceptances
being determined without including the vote of any "insider" in such class),
and, as to each impaired Class that has not accepted the Plan, the Bankruptcy
Court determines that the Plan "does not discriminate unfairly" and is "fair and
equitable" with respect to the dissenting impaired classes. Because the Plan
deems Classes 7, 8, 9 and 10 to have rejected the Plan, these requirements must
be satisfied with respect to such Classes. The Debtors believe that the Plan
satisfies these requirements, although there can be no assurances that the
Bankruptcy Court will make the findings necessary to reach this result.
Notwithstanding the above, the Debtors have agreed not to seek confirmation of
the Plan, pursuant to cramdown under section 1129(b) of the Bankruptcy Code, at
the Confirmation Hearing if the Plan is not accepted by at least two-thirds
(2/3) in the amount of the claims in Class 6 voting on the Plan, unless
otherwise the Official Committee otherwise consents.

                                        45
<PAGE>   51

3.  RISK OF NON-OCCURRENCE OF THE EFFECTIVE DATE

     Although the Debtors believe that if the Plan is confirmed, the effective
date will occur soon after the confirmation date of the Plan, there can be no
assurance that all conditions to the occurrence of the effective date will
occur. In the event the effective date does not occur, the Debtors will assess
the alternatives available to them at that time as to such timing.

4.  GENERAL EFFECT

     The filing of a bankruptcy petition by the Debtors, and the publicity
attendant thereto, may adversely affect the Debtors' business. The Debtors
believe that any such adverse effects may worsen during the pendency of a
protracted bankruptcy case if the Plan is not confirmed as expected.

5.  EFFECT OF DEBTORS' CHAPTER 11 CASES ON RELATIONS WITH TRADE VENDORS

     The commencement of chapter 11 cases by the Debtors may adversely affect
their business and cause certain trade suppliers and vendors to cease shipping
goods to them. Although the Debtors believe that they have good relationships
with their suppliers and trade vendors and have sought and obtained authority
from the Bankruptcy Court to pay the prepetition claims of essential suppliers
and trade vendors (and have obtained agreements with most of its scrap suppliers
in connection with payment of their prepetition claims), there can be no
assurance that such suppliers and vendors will continue to provide such goods
and services to the Debtors in the event there is significant delay in the
Debtors' efforts to confirm and implement the Plan.

6.  CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS

     Section 1122 of the Bankruptcy Code requires that the Plan classify claims
against, and interests in, the Company. The Bankruptcy Code also provides that,
except for certain claims classified for administrative convenience, the Plan
may place a claim or interest in a particular class only if such claim or
interest is substantially similar to the other claims or interests of such
class. The Debtors believe that all claims and interests have been appropriately
classified in the Plan.

     The Bankruptcy Code also requires that the Plan provide the same treatment
for each claim or interest of a particular class unless the holder of a
particular claim or interest agrees to a less favorable treatment of its claim
or interest. The Debtors believe that they have complied with the requirement of
equal treatment.

     To the extent that the Bankruptcy Court finds that the Plan does not
satisfy these requirements, the Bankruptcy Court could deny confirmation of the
Plan. Issues or disputes relating to classification and/or treatment could
result in a delay in the confirmation and consummation of the Plan and could
increase the risk that the Plan will not be consummated.

B.  FACTORS AFFECTING THE VALUE OF THE SECURITIES TO BE ISSUED UNDER THE PLAN

1.  SPECULATIVE NATURE

     The New Common Stock, Series A Warrants and New Junior Secured Notes are
speculative securities. Under their terms, the Series A Warrants are exercisable
at specified exercise prices and will expire five (5) years from the effective
date of the Plan. There can be no assurance that the market value of the New
Common Stock will exceed the exercise price of the Series A Warrants. The Series
A Warrants will have no voting rights and no right to share in dividends, if
any, paid with respect to the New Common Stock and will have no rights on
liquidation of the reorganized Debtors. There can be no assurance that the New
Common Stock, Series A Warrants or New Junior Secured Notes will have access to
a liquid trading market.

2.  COMPETITIVE CONDITIONS

     The Debtors compete with many other scrap metal recyclers. Some of the
Debtors' competitors have greater financial resources than the Debtors and could
use those resources to take steps that would adversely affect the Debtors'
competitive position.

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<PAGE>   52

3.  VARIANCES FROM PROJECTIONS

     The fundamental premise of the Plan is the de-leveraging of MTLM and the
implementation and realization of the Debtors' business plan, as reflected in
the Projections attached to this Disclosure Statement. The Projections reflect
numerous assumptions concerning the anticipated future performance of the
reorganized Debtors, some of which may not materialize. Such assumptions
include, among other items, assumptions concerning the general economy, the
scrap metal industry and the ability to stabilize and grow the reorganized
Debtors' business and control future operating expenses, all of which are
extremely difficult to predict with any degree of certainty. The Debtors believe
that the assumptions underlying the Projections are reasonable. However,
unanticipated events and circumstances occurring subsequent to the preparation
of the Projections may affect the actual financial results of the reorganized
Debtors. Therefore, the actual results achieved throughout the periods covered
by the Projections necessarily will vary from the projected results, and such
variations may be material and adverse.

     Moreover, the recovery by creditors is based upon MTLM's estimate of the
values of the New Common Stock and the Series A Warrants. Because the market and
economic conditions upon which such values are based are beyond the control of
the Debtors, the actual results achieved are uncertain.

4.  DISRUPTION OF OPERATIONS

     The commencement and pendency of these chapter 11 Cases could adversely
affect the Debtors' relationship with their customers and suppliers, as well as
their ability to retain or attract high-quality employees. In such event,
weakened operating results could give rise to variances from the Projections,
and, as a consequence, cause the senior lenders of the Debtor to refuse to make
the New Credit Agreement available to the Debtors, without which the Debtors
will be unable to emerge from chapter 11.

5.  LACK OF TRADING MARKET

     The New Common Stock, the Series A Warrants and the New Junior Secured
Notes are new issues of securities with no established trading market or prior
trading history. There can be no assurance regarding the future development of a
market for the New Common Stock, the Series A Warrants or the New Junior Secured
Notes, the ability of holders thereof to sell their New Common Stock, the Series
A Warrants or the New Junior Secured Notes or the price for which such holders
may be able to sell their New Common Stock, the Series A Warrants or the New
Junior Secured Notes. If a market were to develop, the New Common Stock, the
Series A Warrants and the New Junior Secured Notes could trade at prices lower
than their initial values. The trading prices of such securities will depend on
many factors, including factors beyond the reorganized Debtors' control.

     Furthermore, the liquidity of, and trading market for, the New Common
Stock, the Series A Warrants and the New Junior Secured Notes may be adversely
affected by price declines and volatility in the market for similar securities,
as well as by any changes in the reorganized Debtors' financial condition or
results of operations.

6.  DIVIDEND POLICIES

     The Company does not anticipate that any dividends will be paid on its New
Common Stock in the foreseeable future. In addition, the covenants in the New
Credit Agreement will limit the ability of the reorganized Company to pay any
dividends. Certain institutional investors may invest only in dividend-paying
equity securities or may operate under other restrictions which may prohibit
their ability to invest in the New Common Stock.

C.  RISKS RELATING TO THE REORGANIZED DEBTORS

1.  LEVERAGE AND DEBT SERVICE

     After giving effect to the reorganization contemplated under the Plan,
reorganized MTLM will be a competitively capitalized company relative to its
reorganized stockholders' equity and other leverage ratios. As
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<PAGE>   53

of the effective date of the Plan, on a pro forma basis after giving effect to
the reorganization to be effected by the Plan, the reorganized Debtors are
estimated to have an aggregate net indebtedness of approximately $175 million,
including amounts funded under the New Credit Agreement, the New Junior Secured
Notes, capital leases and mortgages.

     The reorganized Debtors' capitalization could have important consequences
to the holders of the New Common Stock, including the following: (i) the
reorganized Debtors' ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired; and (ii) a substantial portion of the reorganized Debtors' cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the reorganized
Debtors for other purposes.

2.  NEW CREDIT AGREEMENT

     The New Credit Agreement has not been negotiated or delivered. While the
Debtors have received a commitment from the lenders under the DIP Credit
Agreement to provide senior bank financing upon emergence from these Chapter 11
Cases, this commitment is subject to the condition that no event of default
shall have occurred under the DIP Credit Agreement which has not been waived,
among others. In this regard, the Debtors are in discussions with its lenders to
obtain an amendment to the DIP Credit Agreement that will be necessary to waive
compliance with certain financial covenants. Such commitment also is subject to
a condition that the lenders providing such exit financing be satisfied with the
documentation governing the New Credit Agreement. The New Credit Agreement also
is expected to contain a number of conditions that must be satisfied before it
can become effective. There can be no certainty that any of the foregoing
conditions will be satisfied. In addition, the New Credit Agreement will provide
for a relatively rapid amortization of the Supplemental Availability and the
continued amortization of the fixed asset sublimit, which, under poor market
conditions, could cause the Debtors to experience tightened liquidity.

3.  METALS RECYCLING INDUSTRY IS HIGHLY CYCLICAL

     The operating results of the scrap metals recycling industry in general,
and the Debtors' operations specifically, are highly cyclical in nature. They
tend to reflect and be amplified by general economic conditions, both
domestically and internationally. Historically, in periods of national recession
or periods of slowing economic growth, the operations of scrap metals recycling
companies have been materially and adversely affected. For example, during
recessions or periods of slowing economic growth, the automobile and the
construction industries typically experience major cutbacks in production,
resulting in decreased demand for steel, copper and aluminum. This leads to
significant fluctuations in demand and pricing for the Debtors' products. Future
economic downturns in the national and international economy would likely
materially and adversely affect the Company's results of operations and
financial condition. The Debtors' ability to withstand significant economic
downturns in the future will depend in part on its level of capital and
liquidity.

     The Debtors' business can also be adversely affected by increases in steel
imports into the United States which generally have an adverse impact on
domestic steel production and a corresponding adverse impact on the demand for
scrap metals. For example, beginning in July 1998, the domestic steel industry
and, in turn, the metals recycling industry suffered a dramatic and precipitous
collapse, resulting in a significant decline in the price and demand for scrap
metals. The decline in the steel and scrap metal sectors was the result, in
large part, of the increase in steel imports flowing into the United States
during the last six months of 1998. A similar market collapse has been prevalent
across a broader segment of the metals sector during most of calendar 2000 and
continuing into the first part of 2001. See also discussion of this subject in
Exhibit C.

4.  VOLATILITY OF COMMODITIES PRICES

     Although the Debtors have a stated objective to turn over their inventory
of raw or processed scrap metals as rapidly as possible, the Debtors are exposed
to commodity price risk during the period that they have title to products that
are held in inventory for processing and/or resale. Prices of commodities,
including scrap metals, can be volatile due to numerous factors beyond the
Debtors' control, including general economic conditions;

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<PAGE>   54

labor costs; competition; the availability of imports; availability and relative
pricing of scrap metal substitutes; import duties; tariffs and currency exchange
rates. In an increasing price environment, competitive conditions may limit the
Debtors' ability to pass on price increases to their customers. In a decreasing
price environment, the reorganized Debtors may not have the ability to fully
recoup the cost of raw scrap they process and sell to their customers. The
Debtors' lack of long-term sale agreements with its significant customers may
exacerbate this risk.

5.  SENIOR MANAGEMENT

     The Debtors' operations to date have depended in large part on the skills
and efforts of MTLM's senior management team including Albert A. Cozzi, its
Chairman and Chief Executive Officer, and Michael W. Tryon, its President and
Chief Operating Officer. In addition, the Company relies substantially on the
experience of the management of its subsidiaries with regard to day-to-day
operations. While the Company has employment agreements with Messrs. Cozzi and
Tryon and certain members of its management team at the subsidiary level, the
Company cannot assure that it will be able to retain the services of any of
those individuals. The loss of any member of the Company's senior management
team or a significant number of managers could have a material adverse effect on
its operations.

     Employment contracts with certain members of senior management contain
severance provisions that obligate the Debtors to make payments upon termination
without cause. Unless the severance provisions are reduced, the contracts, in
the aggregate, could impose contingent liabilities on the Debtors and could have
an adverse effect.

6.  CONCENTRATION OF CUSTOMERS AND EXPOSURE TO CREDIT RISK

     The Debtors' ten (10) largest customers represented approximately 32% of
consolidated net sales during the year ended March 31, 2000. Accounts receivable
balances from these customers represented approximately 38% of consolidated
accounts receivable at March 31, 2000. The loss of any significant customers
could adversely affect the Debtors' results of operations or financial
condition.

     In connection with the sale of its products, the Debtors generally do not
require collateral as security for customer receivables. Some of the subsidiary
Debtors have significant balances owing from customers that operate in cyclical
industries and under leveraged conditions that may impair the collection of
those receivables. In light of the recent adverse market conditions in the steel
industry, this risk is particularly acute. Failure to collect a significant
portion of amounts due on those receivables could have a material adverse effect
on the Debtors' results of operations or financial condition.

7.  USE OF SCRAP METALS ALTERNATIVES

     During periods of high demand for scrap metals a tightness can develop in
the supply and demand balance for ferrous scrap. The relative scarcity of
ferrous scrap, particularly the "cleaner" grades, and its high price during such
periods have created opportunities for producers of scrap metals alternatives
such as pig iron and direct reduced iron pellets. Although these alternatives
have not been a major factor in the industry to date, the Debtors cannot provide
any assurance that the use of alternatives to scrap metals will not proliferate
if the prices for scrap metals rise or if the levels of available unprepared
ferrous scrap decrease.

8.  ENVIRONMENTAL REGULATION

     The Debtors are subject to comprehensive local, state, federal and
international statutory and regulatory requirements relating to, among others:

     -  the acceptance, storage, treatment, handling and disposal of waste;

     -  the discharge of materials into air;

     -  wastewater and storm water regulation;

     -  remediation of soil and groundwater contamination;
                                        49
<PAGE>   55

     -  natural resource damages; and

     -  employee health and safety.

     Furthermore, the nature of the Debtors' business, and previous operations
by others at facilities currently or formerly owned or operated by the Debtors,
expose the Debtors to risks of claims under environmental laws and regulations
in the future. The Debtors believe that they are in material compliance with
currently applicable environmental and other applicable laws and regulations.
There can be no assurance, however, that the reorganized Debtors will avoid
material fines, penalties and expenses associated with additional compliance
issues in the future. The reorganized Debtors may be required from time to time
to engage in certain remedial activities with regard to sites owned or operated
by them. Furthermore, the reorganized Debtors may be required to perform or pay
for certain remedial activities in regard to certain sites owned by third
parties. The Debtors are not able to predict the ultimate costs of resolving
environmental matters, but these costs are not expected to have a material
effect on their consolidated financial condition or results of operations based
on information currently available. However, the Debtors can give no assurance
that the reorganized Debtors will avoid potential damages, liabilities,
expenditures, fines, and penalties that will have a material adverse effect on
their financial condition or results from operations. In addition, environmental
requirements may become more stringent or new requirements may be enacted which
could result in material expenditures or penalties.

     Environmental legislation and regulations have changed rapidly in recent
years, and it is likely that the reorganized Debtors will be subject to even
more stringent environmental standards in the future. For example, the ultimate
effect of the regulations to be implemented under the Clean Air Act Amendments
of 1990 (the "Clean Air Act"), and the actual amount of any capital expenditures
required thereby, will depend on how the Clean Air Act is interpreted and
implemented pursuant to regulations that are currently being developed and on
additional factors such as the evolution of environmental control technologies
and the economic viability of these technologies. For these reasons, the Debtors
cannot predict future capital expenditures for environmental control facilities
with accuracy. However, the Debtors expect that environmental control standards
will become increasingly stringent and that the expenditures necessary to comply
with them could increase substantially.

     Local, state, federal, foreign and international authorities have also from
time to time proposed or adopted other types of laws, regulations or initiatives
with respect to the scrap metals recycling industry, including laws, regulations
and initiatives intended to:

     -  ban or restrict the intrastate, interstate or international shipment of
        wastes;

     -  impose higher taxes or fees on certain shipments of waste; or

     -  classify or reclassify certain categories of non-hazardous wastes as
        hazardous.

     Certain governmental authorities have promulgated "flow control" or other
regulations, which attempt to require that all waste (or certain types of waste)
generated within a particular jurisdiction go to certain disposal sites. None of
these are yet in effect in the primary jurisdictions where the Debtors operate.
However, the City of Chicago recently enacted an ordinance regulating recycling
activities which, among other things, requires various permits and materials
handling plans designed to prevent releases into the environment, which will
require additional expenditures by the reorganized Debtors.

     The Debtors are required to obtain, and must comply with, various permits
and licenses to conduct its operations. Violations of any permit or license, if
not remedied, could result in the reorganized Debtors incurring substantial
fines, suspension of operations or closure of one or more sites. Further, the
Debtors' operations are conducted primarily outdoors and as such, depending on
the nature of the ground cover, involve the risk of releases of regulated
materials to the soil and, possibly, to groundwater. There can be no assurance
that material expenditures will not be required to prevent or address these
conditions.

     Governmental authorities have a wide variety of powerful administrative
enforcement actions and remedial orders available to them to cause compliance
with environmental laws or to remedy or punish violations of such laws. Orders
may be directed to various parties, including present or former owners or
                                        50
<PAGE>   56

operators of the concerned sites, or parties that have or had control over the
sites. In certain instances, fines and treble damages may be imposed. In the
event that administrative actions fail to cure a perceived problem or where the
relevant regulatory agency so desires, an injunction or temporary restraining
order or damages may be sought in a court proceeding.

     Some laws also give private parties the right, in addition to existing
common law claims, to file claims for injunctive relief or damages against the
owners or operators of the site. Public interest groups, local citizens, local
municipalities and other persons or organizations may have a right to seek
judicial relief for purported violations of law or releases of pollutants into
the environment. In some jurisdictions, recourse to the courts by individuals
under common law principles such as trespass or nuisance have been or may be
enhanced by legislation providing members of the public with statutory rights of
action to protect the environment. Even if a scrap metals recycling facility is
operated in full compliance with applicable laws and regulations, local citizens
and other persons and organizations may seek compensation for damages allegedly
caused by the operation of the facility.

     In some cases, the operation of scrap metals recycling facilities is
subjected to heightened public scrutiny because of residential or other
non-industrial property uses that have developed around such facilities. So-
called "Not In My Backyard" grass roots community opposition to such facilities
can materially interfere with such facilities' on-going operations and growth.

     The Debtors believe that as a result of heightened legal, political and
citizen awareness and concerns all companies in the scrap metals recycling
industry may face, in the normal course of operating their businesses, fines and
penalties and the need to expend substantial funds for capital projects,
remedial work and operating activities, such as environmental contamination
monitoring, soil removal, groundwater treatment, creation of engineered barriers
and establishing institutional controls.

     Regulatory or technological developments relating to the environment may
require companies engaged in the scrap metals recycling industry to modify,
supplement or replace equipment and facilities at costs which may be
substantial. Because the scrap metals recycling industry has the potential for
discharge of regulated materials into the environment, the Debtors expect a
material portion of their capital expenditures to relate, directly or
indirectly, to environmental-related equipment and facilities. Moreover, it is
possible that future developments, such as increasingly strict requirements of
environmental laws and regulations, and enforcement policies will require even
more significant capital investments in this regard. Expenditures for
environmentally related capital improvements were not material for the fiscal
year ended March 31, 2000. However, there can be no assurance that this will be
the case in the future.

     As part of the Company's pre-transaction "due diligence" investigations, it
typically hires an environmental consulting firm to conduct pre-transaction
screen reviews, or Phase I and/or Phase II site assessments of the sites owned
or leased by particular acquisition or merger candidates. However, these
pre-transaction reviews and site assessments have not covered all of the sites
owned or leased by the companies which are acquired by the Company. Moreover,
those pre-transaction reviews and site assessments which have occurred have not
been designed or expected (and will not in the future be designed or expected)
to disclose all material contamination or liability that may be present. For
example, the Company has not included soil sampling or core borings as a
standard part of many pre-transaction reviews and site assessments that it has
conducted, even though such sampling and core borings might have increased the
chances of finding contamination on a particular site. Failure to conduct soil
sampling and core borings on a particular site could result in the Company
failing to identify a seriously contaminated site prior to an acquisition or
merger.

     Pre-transaction reviews and site assessments of the Debtors' current sites
conducted by independent environmental consulting firms have revealed that some
soil, surface water and/or groundwater contamination, including various metals,
arsenic, petrochemical byproducts, waste oils, polychlorinated biphenyls,
volatile organic compounds and baghouse dust, is likely to be present at certain
of these sites, and have recommended that the Debtors conduct additional
investigations and remediation. Based on its review of these reports, the
Debtors believe that it is likely that contamination at varying levels exists at
their sites, and some of their sites will require additional investigation,
monitoring and remediation.

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<PAGE>   57

     The ultimate extent of this contamination cannot be stated with any
certainty at this point, and the Debtors can give no assurance that the cost of
remediation will be immaterial. The existence of this contamination could result
in federal, state, local or private enforcement or cost recovery actions against
the reorganized Debtors, possibly resulting in disruption of the reorganized
Debtors' operations, the need for proactive remedial measures, and substantial
fines, penalties, damages, costs and expenses being imposed against the
reorganized Debtors.

     The Debtors expect to require future cash outlays as actual costs are
incurred relating to the remediation of environmental liabilities. The
incurrence of the costs may have a material adverse effect on the reorganized
Debtors' results of operations and financial condition. In this regard, the
Company has established an overall reserve of $1.4 million at March 31, 2000 for
environmental liabilities that have been identified and quantified.

     Many factors affect the level of expenditures the reorganized Debtors may
be required to make in the future to comply with environmental requirements,
including:

     -  new local, state and federal laws and regulations;

     -  the developing nature of administrative standards promulgated under the
        Comprehensive Environmental Response, Compensation, and Liability Act of
        1980, as amended ("Superfund"), and other environmental laws, and
        changing interpretations of such laws;

     -  uncertainty regarding adequate control levels, testing and sampling
        procedures, new pollution control technology and cost benefit analyses
        based on market conditions;

     -  the incompleteness of information regarding the condition of certain
        sites;

     -  the lack of standards and information for use in the apportionment of
        remedial responsibilities;

     -  the numerous choices and costs associated with diverse technologies that
        may be used in remedial actions at such sites;

     -  the possible ability to recover indemnification or contribution from
        third parties; and

     -  the time periods over which eventual remediation may occur.

     In general, the Debtors do not carry environmental impairment liability
insurance. If one or more of the reorganized Debtors were to incur significant
liability for environmental damage not covered by environmental impairment
insurance, reorganized MTLM's results of operations and financial condition
could be materially adversely affected.

     The Debtors' scrap metals recycling operations produce significant amounts
of by-products. Heightened environmental risk is associated with some of these
by-products. For example, certain of the Debtors operate shredders for which the
primary feed materials are automobile hulks and obsolete household appliances.
Approximately 20% of the weight of an automobile hulk consists of material,
referred to as shredder fluff, which remains after the segregation of ferrous
and saleable non-ferrous metals. Federal environmental regulations require
testing or evaluation of shredder fluff to avoid classification as a hazardous
waste. The Debtors endeavor to have hazardous contaminants from the feed
material removed prior to shredding. In general, the Debtors treat shredder
fluff as a special non-hazardous waste. If the shredder fluff is tested and
determined to be hazardous, then it is disposed of as a hazardous waste. If
reorganized MTLM is required to treat shredder fluff as a hazardous waste, it
may incur additional material expenditures for disposal or treatment.

     Several of the subsidiary Debtors have received notices from the United
States Environmental Protection Agency ("EPA") that each of these companies and
numerous other parties are considered potentially responsible parties and may be
obligated under Superfund to pay a portion of the cost of remedial
investigation, feasibility studies and, ultimately, remediation to correct
alleged releases of hazardous substances at various third party sites. Superfund
may impose joint and several liability for the costs of remedial investigations
and actions on the entities that arranged for disposal of certain wastes, the
waste transporters that selected the disposal sites, and the owners and
operators of these sites. Responsible parties (or any one of

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<PAGE>   58

them) may be required to bear all of such costs regardless of fault, legality of
the original disposal, or ownership of the disposal site. Based upon its
analysis of the situation, the Company currently does not expect the potential
liability of its subsidiaries in these matters to have a material adverse effect
on its financial condition or results of operation.

     The Debtors, in the past, have been found to be in violation of certain
environmental laws and regulations, have incurred fines which have not been
material in amount associated with such violations and may in the future incur
additional fines associated with such violations. The Debtors have also paid a
portion of the costs of certain remediation actions at certain sites. The
Debtors cannot assure security holders that they will avoid material fines,
penalties, damages and expenses resulting from additional compliance issues and
liabilities in the future.

9.  HISTORY OF RECENT SIGNIFICANT OPERATING LOSSES

     The Company has incurred pre-tax losses from continuing operations of
approximately $460 million since April 1, 1996. For the prior fiscal year, the
Company incurred pre-tax losses from continuing operations of approximately $366
million. As of March 31, 2001, the Company had an accumulated deficit of
approximately $460 million. The foregoing amounts for losses and deficit include
the write-off of good will by the Company. Although the Company does not expect
losses to continue in the future, it has incurred losses since the commencement
of the Chapter 11 cases and cannot assure creditors or interest holders that it
will not incur further losses.

D.  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENT

     This Disclosure Statement contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21C of the Exchange
Act, including statements concerning possible or assumed future results of
operations of the Debtors and those preceded by, followed by or that include the
word may, will, should, could, expects, plans, anticipates, believes, estimates,
predicts, potential, or continue or the negative of such terms and other
comparable terminology. You should understand that the factors described below,
in addition to those discussed elsewhere in this Disclosure Statement, could
affect the reorganized Debtors' future results and could cause those results to
differ materially from those expressed in such forward-looking statements. These
factors include:

     -  material adverse changes in economic conditions in the markets we serve;

     -  future regulatory actions and conditions in our operating areas;

     -  competition from others in the industry;

     -  increases in labor costs and relations with union bargaining units
        representing our employees;

     -  the integration of our operations with those of businesses we have
        acquired or may acquire in the future and the realization of the
        expected benefits;

     -  failure to obtain new customers or retain existing customers; and

     -  other risks and uncertainties as may be detailed from time to time in
        our public announcements and SEC filings.

     NO PROJECTIONS OR OTHER FORWARD-LOOKING ANALYSES CONTAINED HEREIN WERE
PREPARED WITH A VIEW TO COMPLYING WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL
STATEMENTS PUBLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS.
MTLM'S INDEPENDENT ACCOUNTANTS HAVE NEITHER COMPILED NOR EXAMINED THE
ACCOMPANYING PROSPECTIVE FINANCIAL INFORMATION TO DETERMINE THE REASONABLENESS
THEREOF AND, ACCORDINGLY, HAVE NOT EXPRESSED AN OPINION OR ANY OTHER FORM OF
ASSURANCE WITH RESPECT THERETO. FOR ADDITIONAL INFORMATION ABOUT MTLM AND ITS
OPERATING AND FINANCIAL CONDITIONS, PLEASE SEE MTLM'S ANNUAL REPORT ON FORM 10-K
FOR

                                        53
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THE FISCAL YEAR ENDED MARCH 31, 2000 FILED WITH THE SEC AND ATTACHED TO THIS
DISCLOSURE STATEMENT AS EXHIBIT B, THE FORM 10-Q FOR THE QUARTER ENDING DECEMBER
31, 2000 ATTACHED TO THIS DISCLOSURE STATEMENT AS EXHIBIT C, AND CERTAIN
UNAUDITED FINANCIAL INFORMATION ATTACHED HERETO AS EXHIBIT C-1.

                   VIII.  CERTAIN OTHER LEGAL CONSIDERATIONS

A.  SECTION 1145 OF THE BANKRUPTCY CODE

     MTLM intends to rely on section 1145(a) of the Bankruptcy Code to exempt
from registration under the Securities Act, and any applicable state securities
laws, the issuance of any New Common Stock, Series A Warrants and New Junior
Secured Notes pursuant to the Plan to holders of claims and interests in
exchange for their claims or interests. Generally, section 1145(a)(1) of the
Bankruptcy Code exempts the offer and sale of securities from the registration
requirements of the Securities Act if the following conditions are satisfied:
(i) the securities are issued by a debtor (or its affiliate or successor) under
a plan of reorganization; (ii) the recipients of the securities hold a claim
against, and interest in, or a claim for administrative expense or interest in
the debtor; and (iii) the securities are issued entirely in exchange for the
recipient's claim against or interest in the debtor, or principally in such an
exchange for cash or property. MTLM believes that, as the issuer of the security
and a debtor under the Plan, it is entitled to the exemption from registration
under section 145(a) of the Bankruptcy Code.

     The New Common Stock, Series A Warrants and New Junior Secured Notes,
subject to the exemption from registration under Bankruptcy Code section
1145(a), may be resold by the holders thereof without restriction, except for
any such holder that is deemed to be an "underwriter" as defined in section
1145(b) of the Bankruptcy Code. An "underwriter" is defined as any person who
(i) purchases a claim against, or an interest in, a debtor with a view toward
distribution of any security issued pursuant to a plan of reorganization for the
holders of such securities, (ii) offers to sell securities issued pursuant to a
plan of reorganization for the holders of such securities, (iii) offers to buy
securities, if the offer to buy is made with a view toward distribution of such
securities or (iv) is an issuer within the meaning of section 2(11) of the
Securities Act. Section 2(11) of the Securities Act provides that the term
"issuer" includes all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by or are under common control with an
issuer of securities. Under Rule 405 of Regulation C under the Securities Act,
the term "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the policies of a person, whether through the
ownership of voting securities, by contract or otherwise. Moreover, the
legislative history of section 1145 of the Bankruptcy Code suggests that a
creditor who owns at least 10% of the voting securities of a reorganized debtor
may be presumed to be a control person.

B.  RULE 144

     Holders of securities who are deemed to be "underwriters" within the
meaning of section 1145(b)(1) of the Bankruptcy Code or who may otherwise be
deemed to be "underwriters" of, or to exercise "control" over, the Debtors
within the meaning of Rule 405 of Regulation C under the Securities Act may,
under certain circumstances, be able to sell their securities pursuant to the
more limited safe harbor resale provisions of Rule 144 under the Securities Act.
Generally, Rule 144 provides that, if certain conditions are met (e.g., holding
for a period of one year with respect to "restricted securities," volume
limitations, manner of sale, availability of current information about the
issuer, etc.), (a) any person who resells "restricted securities" and (b) any
"affiliate" of the issuer of the securities sought to be resold will not be
deemed to be an "underwriter" as defined in Section 2(11) of the Securities Act.
Under paragraph (k) of Rule 144, the aforementioned conditions to resale will no
longer apply to restricted securities sold for the account of a holder who is
not an affiliate of the Company at the time of such resale and who has not been
such during the three-month period next preceding such resale, so long as a
period of at least two years has elapsed since the later of (i) the effective
date of the Plan and (ii) the date on which such holder acquired his or its
securities from an affiliate of the Debtors.

                                        54
<PAGE>   60

            IX.  CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

A.  GENERAL

     The following discussion summarizes certain anticipated U.S. federal income
tax consequences of the transactions proposed in the Plan for the Debtors and
for the holders of claims who are entitled to vote to accept or reject the Plan.
The summary is provided for information purposes only and is based on the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder, judicial authority, and current administrative rulings
and practice, all as in effect as of the date hereof and all of which are
subject to change, possibly with retroactive effects that could adversely affect
the federal income tax consequences described below.

     The summary does not address all aspects of federal income taxation that
may be relevant to a particular holder of a claim in light of its particular
facts and circumstances or to certain types of holders of claims subject to
special treatment under the Code (for example, non-U.S. Taxpayers, financial
institutions, broker-dealers, life insurance companies, and tax-exempt
organizations). The summary also does not discuss any aspects of state, local,
or foreign tax consequences. The summary furthermore does not address the
federal income tax consequences to holders of claims who are not entitled to
vote on the Plan and federal income tax consequences to persons holding
Subordinated Notes, Junior Secured Notes, Old Common Stock and Preferred Stock
other than as capital assets.

     In addition, a substantial amount of time may elapse between the
confirmation date of the Plan and the receipt of a final distribution under the
Plan. Events subsequent to the date of this Disclosure Statement, such as
additional tax legislation, court decisions, or administrative changes, could
affect the federal income tax consequences of the Plan and the transactions
contemplated thereunder. No ruling will be sought from the Internal Revenue
Service with respect to any of the tax aspects of the Plan and no opinion of
counsel has heretofore been obtained by the Debtors with respect thereto.
Accordingly, each holder of a claim or interest is strongly urged to consult
with its own tax advisor regarding the federal, state, local and foreign tax
consequences of the Plan to such holder.

B.  FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS

1.  CANCELLATION OF INDEBTEDNESS INCOME

     Under the Code, a U.S. taxpayer generally must include in gross income the
amount of any discharged indebtedness ("COD") realized during the taxable year.
If a new debt instrument is exchanged for an old debt instrument of an issuer,
COD generally equals the difference between the principal amount of the debt
discharged and the amount "paid" for it in the exchange. For this purpose, the
outstanding amount of the old debt discharged generally equals the "adjusted
issue price" of the old debt plus any accrued interest other than OID already
included in the adjusted issue price, while the amount "paid" generally equals
the issue price of the new debt. As discussed below, the issue price depends on
whether the debt instruments are publicly traded. If a debt instrument is
exchanged for the stock of the issuer, COD generally equals the difference
between the principal amount of the debt discharged and the fair market value of
the stock. Upon implementation of the Plan, certain of the Debtors expect to
realize a substantial amount of COD upon the exchange of the Subordinated Notes
for the New Common Stock, the exchange of the Impaired Unsecured Claims for the
New Common Stock and/or upon the exchange of the Junior Secured Notes for the
New Junior Secured Notes.

     The Debtors, however, may exclude from gross income any COD arising from
the discharge of its debt while under the jurisdiction of a court in a chapter
11 case. Instead, such COD will generally reduce certain tax attributes of the
Debtors as prescribed by the Code, including net operating losses ("NOL"), NOL
carry forwards, and tax basis in property held by the Debtors (collectively,
"Tax Attributes"). Reduction of tax basis in a debtor's property is limited to
the excess of the aggregate tax basis of the property held by the debtor
immediately after discharge over the aggregate of the debtor's liabilities
immediately after the discharge. Any COD remaining after the reduction of Tax
Attributes will not have any further federal income tax consequences.

                                        55
<PAGE>   61

     The Debtors may elect to avoid the prescribed order of Tax Attribute
reduction and instead reduce, to the extent available, the basis of depreciable
property prior to the reduction of other Tax Attributes. This election extends
to the stock of a subsidiary if the subsidiary consents to reduce the basis of
its depreciable property, but may be made only to the extent of the aggregate
adjusted basis of the Debtor's depreciable property. The Debtors have not yet
determined whether to make this election.

     Although not free from doubt, based on existing authorities, the Debtors
believe that any reduction in Tax Attributes will generally occur on a separate
company basis even though the Debtors file a consolidated federal income tax
return. The Internal Revenue Service has recently taken the position, however,
that consolidated NOL must be reduced irrespective of the source of those
losses. The current Internal Revenue Service position as to the impact of the
attribute reduction rules on other Tax Attributes of consolidated group members
is unclear.

2.  NET OPERATING LOSSES

     The Debtors have an NOL carry forward of approximately $60 million for the
taxable year ending October 31, 2000. As explained above, current year NOL and
the NOL carry forwards may be reduced or eliminated by COD realized upon the
implementation of the Plan. If the current year NOLs and the existing NOL carry
forwards are not so eliminated, however, Section 382 of the Code may
substantially limit the Debtors' ability to use such NOL carry forwards in
future years.

     When a corporation undergoes an "ownership change," Section 382 of the Code
generally limits the subsequent ability of the corporation to utilize historic
NOL and/or NOL carry forwards and subsequently recognized "built-in" losses
(i.e., losses economically accrued but unrecognized as of the date of the
ownership change), with respect to any post-ownership change taxable periods.
The amount of such pre-ownership NOL and built-in losses that can be utilized in
the post-ownership change taxable periods generally equals the product of the
value of the stock of the corporation (with certain adjustments) immediately
before the ownership change multiplied by the applicable "long-term tax-exempt
rate" (currently 5.39%) ("Annual Section 382 Limitation"). Any portion of the
Annual Section 382 Limitation unused in a particular taxable post-ownership
change period is generally available in subsequent years. A corporation must
meet certain continuity of business enterprise requirements for at least two
years following an ownership change in order to preserve the Annual Section 382
Limitation. The Debtors believe that it is likely that they will undergo the
"ownership change" within the meaning of Section 382 of the Code as a result of
the implementation of the Plan.

     Section 382 of the Code provides an exception to the application of the
Annual Section 382 Limitation for certain corporations under the jurisdiction of
a court in a chapter 11 case (the "Bankruptcy Exception"). The Bankruptcy
Exception could apply to the Debtors if the Debtors' historic shareholders and
creditors that held certain "qualified indebtedness" (as defined by regulation)
prior to implementation of the Plan were to own more than 50% of the total
voting power and total value of the stock of the Debtors after such
implementation. Under the Bankruptcy Exception, the continuity of business
enterprise requirement described above would not apply to the Debtors. However,
a second ownership change occurring during the two-year period immediately
following the first ownership change would eliminate any NOL carry forwards that
arose before the first ownership change. The Bankruptcy Exception, if
applicable, would reduce the Debtors' pre-change losses and excess credits that
may be carried over to a post-ownership change taxable year by any interest paid
or accrued on any Subordinated Notes exchanged for the New Common Stock. An
eligible corporation may elect out of the Bankruptcy Exception.

     If the Debtors do not qualify for the Bankruptcy Exception or elect out as
discussed below, another special rule under Section 382 of the Code applicable
to corporations under the jurisdiction of a court in a chapter 11 case will
apply in calculating the Debtors' Annual Section 382 Limitation. Under this
special rule, the Annual Section 382 Limitation will be calculated by reference
to the lesser of the value of the Company's New Common Stock (with certain
adjustments) immediately after the ownership change (as opposed to immediately
before the ownership change, as discussed above) or the value of reorganized
MTLM's assets (determined without regard to liabilities) immediately before the
ownership change.

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<PAGE>   62

     At this time, it is uncertain whether reorganized MTLM will qualify for the
Bankruptcy Exception or, if it does so qualify, whether it would be advantageous
to elect out and instead utilize the special rule described immediately above.
The Debtors are studying this issue and will make a timely decision on the best
course of action.

3.  FEDERAL ALTERNATIVE MINIMUM TAX

     To the extent NOL and NOL carry forwards are not eliminated or limited
under the rules discussed above, the Debtors will be able to offset their
taxable income following the implementation of the Plan with any NOL carry
forwards. Because of differences in the way alternative minimum taxable income
("AMTI") is calculated as compared to regular taxable income, the Debtors may
nonetheless be subject in such taxable years to the alternative minimum tax
("AMT"), which generally equals the amount by which 20% of a corporation's AMTI
exceeds its regular tax liability.

     The Code calculates AMTI pursuant to specific rules that eliminate or limit
the availability of certain tax deductions and which include as income certain
amounts not generally included in computing regular tax liability. Of particular
importance is the AMT limitation permitting a corporation to offset only 90% of
its AMTI by any available NOL carry forwards (as computed for AMT purposes).
This AMT limitation generally applies on a group basis to consolidated groups.
Thus, in any year in which 20% of the Debtors' AMTI exceeded their regular tax
liability, the Debtors would be subject to AMT, regardless of the size of any
NOL carry forwards they might have. Any AMT incurred by the Debtors in such a
taxable year generally would be allowable as a non-refundable credit against the
Debtors' regular federal income tax liability in future taxable years when they
are no longer subject to AMT.

C.  FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CLAIMS AND INTERESTS

1.  HOLDERS OF SUBORDINATED NOTES

     The federal income tax consequences to holders of the Subordinated Notes
exchanged for the New Common Stock under the terms of the Plan depend on whether
the Subordinated Notes are classified as "securities" for federal income tax
purposes. The term "securities" is not defined in the Code or applicable
regulations and has not been clearly defined by court decisions. The
determination of whether an instrument constitutes a "security" for federal
income tax purposes is based upon all the facts and circumstances including, but
not limited to:

     a.    the term of the debt instrument;

     b.    the degree of participation and continuing interest in the business;

     c.    the extent of proprietary interest compared with the similarity of
           the note to a cash payment; and

     d.    the overall purpose of the advances.

     Although the determination of whether a debt instrument constitutes a
"security" is based upon all facts and circumstances, the term of a debt
instrument is usually considered the most significant factor. In general, a bona
fide debt instrument with the maturity of ten (10) years or more is more likely
to be classified as a "security." Because of the terms of the Subordinated Notes
and their ten (10)-year maturity, the Debtors believe that the Subordinated
Notes constitute "securities" for federal income tax purposes.

     Assuming that the Subordinated Notes constitute "securities" for federal
income tax purposes, the exchange of the Subordinated Notes for the New Common
Stock under the terms of the Plan will be part of a tax-free reorganization in
which no gain or loss is recognized, except to the extent any New Common Stock
received in the exchange is allocated to accrued but unpaid interest under the
rules discussed below. A holder of a Subordinated Note will take a basis in each
share of the New Common Stock equal to a ratable portion of such holder's basis
in its Subordinated Notes, except for any shares allocated to accrued but unpaid
interest. A holder's basis in any shares of the New Common Stock issued in
respect of accrued but unpaid interest will equal the fair market value of any
accrued but unpaid interest that such holder realized in the exchange.

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<PAGE>   63

     A holder receiving the New Common Stock in exchange for the Subordinated
Notes would have a holding period in such New Common Stock determined by
reference to a holder's holding period in the Subordinated Notes, except for any
shares allocated to accrued but unpaid interest. A holder's holding period of
any shares of the New Common Stock issued in respect of accrued but unpaid
interest would begin on the day after their issuance.

2.  HOLDERS OF JUNIOR SECURED NOTES

     a. Exchange of Junior Secured Notes.  Based on the term of the Junior
Secured Notes and the New Junior Secured Notes and other factors, the Debtors
believe that under existing legal authorities it is unclear whether the Junior
Secured Notes and the New Junior Secured Notes will be classified as
"securities" for federal income tax purposes under the rules discussed above. If
either the Junior Secured Notes or the New Junior Secured Notes do not
constitute "securities," a holder receiving the New Junior Secured Notes in
exchange for the Junior Secured Notes as a result of the implementation of the
Plan will be required to recognize gain or loss for federal income tax purposes
if the exchange constitutes a significant modification of the Junior Secured
Notes. In that case, a holder's gain or loss recognized would equal the
difference between its adjusted tax basis in the Junior Secured Notes (exclusive
of any basis attributable to accrued but unpaid interest) and the "amount
realized" on the exchange. In turn, the determination of the "amount realized"
would depend on whether the Junior Secured Notes and/or New Junior Secured Notes
are treated as publicly traded under the "OID rules" (which are discussed
below). Any such recognized gain or loss would be capital gain or loss, subject
to the treatment of accrued unpaid interest and unrecognized market discount, as
discussed below. The holder would take a basis in the New Junior Secured Notes
equal to the "amount realized." The holder would have a holding period in the
New Junior Secured Notes commencing on the day after the effective date of the
Plan.

     The determination whether the exchange of the Junior Secured Notes for the
New Junior Secured Notes constitutes a significant modification will depend upon
the degree to which legal rights or obligations are altered as a result of the
exchange. The determination whether a change in legal rights or obligations
constitutes a significant modification of a debt instrument is made under
several tests. For example, a modification of a debt instrument that changes the
timing of payments (including any resulting change in the amount of payments)
due under a debt instrument generally constitutes a significant modification if
it results in the material deferral of scheduled payments. For this purpose, the
determination whether a deferral of payments is material is based on all facts
and circumstances, including the length of the deferral, the original term of
the instrument, the amounts of the payments that are deferred, the time period
between the modification, and the actual deferral of payments. In addition, a
significant modification of a debt instrument generally takes place if its yield
is changed by a greater of one fourth of one percent or five percent of the debt
instrument's yield prior to the yield change. Certain waivers of material rights
by a Holder of the Junior Secured Notes may also constitute a significant
modification.

     If the Junior Secured Notes and the New Junior Secured Notes were both
treated as "securities" for federal income tax purposes under the rules
discussed above and the exchange of the Junior Secured Notes for the New Junior
Secured Notes constituted a "significant modification," the exchange should be
part of a tax-free reorganization. In that case, no gain or loss would be
recognized, except for any boot and subject to the treatment discussed below of
accrued but unpaid interest. To the extent the principal amount of the New
Junior Secured Notes exceeds the principal amount of the Junior Secured Notes,
the fair market value of such excess will be treated as boot received by a
holder exchanging the Junior Secured Notes for the New Junior Secured Notes and
will result in such holder recognizing gain to the extent of the boot received.
Under existing law it is not entirely clear how the principal of a debt
instrument is calculated for this purpose. A holder's basis and holding period
in the New Junior Secured Notes would be determined under the rules similar to
the rules discussed with respect to the basis and holding of the New Common
Stock exchanged for the Subordinated Notes, except to the extent any boot is
received by a holder in the exchange.

     Each holder of the Junior Secured Notes should consult his or her own tax
advisor concerning (i) whether or not the Junior Secured Notes and the New
Junior Secured Notes constitute "securities,"

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<PAGE>   64

(ii) whether or not a significant modification has occurred, and (iii) whether a
holder has received any taxable boot upon the exchange of the Junior Secured
Notes for the New Junior Secured Notes.

     b. New Junior Secured Notes -- OID Rules.  A holder of a debt instrument
issued with original issue discount ("OID") must include a portion of the OID in
gross income in each taxable year or portion thereof in which the holder holds
the debt instrument, even if the holder does not receive a cash payment in
respect of such OID. A debt instrument is issued with OID if its "stated
redemption price at maturity" exceeds its "issue price." The amount of OID, if
any, is determined by using a constant yield to maturity method that reflects
the compounding of interest. A holder of a debt instrument is required to
include such OID in income as it accrues, regardless of the holder's method of
accounting for federal income tax purposes.

     The issue price of the New Junior Secured Notes will affect the
determination whether such notes are issued with OID and the amount, if any,
thereof. In this regard, the issue price is calculated differently for publicly
traded debt instruments than for non-publicly traded debt instruments. Under
existing law it is unclear whether the Junior Secured Notes and the New Junior
Secured Notes are treated as publicly traded. If a debt instrument is issued in
exchange for a debt instrument that is publicly traded, its issue price is the
fair market value of the old debt as of the issue date of the new debt. If the
old debt instrument and the new debt instrument are not publicly traded, the
issue price of the new debt instrument is face value of the new debt instrument,
provided that its interest rate equals or exceeds the applicable federal rate.
Each holder should consult a tax advisor in this regard.

3.  HOLDERS OF IMPAIRED UNSECURED CLAIMS IN CLASS 6 AND HOLDERS OF GENERAL TRADE
    CLAIMS IN CLASS 5 ELECTING TO BE TREATED AS CLASS 6 CLAIMS

     The Debtors believe that it is unlikely that the Impaired Unsecured Claims
would constitute "securities" for federal income tax purposes under the rules
described above. As a result, the holders of the Impaired Unsecured Claims
receiving the New Common Stock as a result of the implementation of the Plan
will have a taxable exchange in which gain or loss will be recognized. The
portion of the New Common Stock received by the holders of the Impaired
Unsecured Claims allocable to unpaid interest which accrued during the holder's
holding period of the Impaired Unsecured Claims will be treated as a payment of
interest. The remainder of the New Common Stock received by holders of the
Impaired Unsecured Claims will be treated as received in exchange for the
principal amount of the Impaired Unsecured Claims and gain will be recognized by
a holder if the fair market value of the New Common Stock exceeds the tax basis
of the Impaired Unsecured Claims relinquished. If the fair market value of the
New Common Stock received by a holder is lower than the tax basis of the
Impaired Unsecured Claims relinquished, such holder will recognize a loss. The
basis of the New Common Stock received by the holders of the Impaired Unsecured
Claims as a result of the implementation of the Plan will equal the fair market
value of the New Common Stock received.

4.  HOLDERS OF PREFERRED STOCK AND OLD COMMON STOCK

     The exchange of the Old Common Stock and the Preferred Stock for the New
Common Stock and Series A Warrants will be part of a tax-free reorganization.
The holders of the Old Common Stock and Preferred Stock will not recognize any
gain or loss upon the receipt of the New Common Stock and Series A Warrants in
exchange for the Old Common Stock or Preferred Stock. The holder's basis in the
New Common Stock and Series A Warrants should equal the proportion that their
respective fair market values bears to the holder's basis in the Old Common
Stock or Preferred Stock relinquished, respectively, upon the implementation of
the Plan. The holder would have a holding period in the New Common Stock and
Series A Warrants determined by reference to the holding period of the Old
Common Stock or Preferred Stock relinquished, respectively, upon the
implementation of the Plan.

D.  ALLOCATION TO ACCRUED INTEREST

     The foregoing rules will not apply to any property received by a holder of
the Subordinated Notes, the Impaired Unsecured Claims, or the Junior Secured
Notes that is treated for federal income tax purposes as interest.

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<PAGE>   65

     In particular, a holder of a Subordinated Note who was not previously
required to include in income accrued but unpaid interest attributable to the
ownership of the Subordinated Note and who receives the New Common Stock in
exchange for the Subordinated Note would be treated as receiving ordinary
interest income to the extent any New Common Stock received is allocable to
unpaid interest which accrued during the holder's holding period of the
Subordinated Note. Similarly, a holder of a Junior Secured Note, would be
treated as receiving ordinary interest income to the extent any New Junior
Secured Notes received are allocable to unpaid interest which accrued during the
holder's holding period of the Junior Secured Note, and that was not previously
included in income of such holder. The determination whether a Holder would have
such ordinary interest income at the time of the exchange may depend on whether
the Junior Secured Notes and/or the New Junior Secured Notes are treated as
publicly traded under the rules discussed above, and other circumstances, such
as holder's accounting method for federal income tax purposes. Similar rules
will apply to the exchange of the Impaired Unsecured Claims for the New Common
Stock.

     A holder who had previously included in income accrued but unpaid interest
attributable to the holding by such holder of a Subordinated Note or a Junior
Secured Note should be allowed to recognize a loss to the extent such accrued
but unpaid interest is not satisfied in full in the exchange. Such loss could be
deductible against other ordinary income of the holder.

     Under existing law it is unclear how property received in an exchange of a
debt instrument should be allocated between accrued but unpaid interest and
return of principal. Each holder should consult a tax advisor with respect to
whether (i) the New Common Stock and the New Junior Secured Notes received in
the exchange may represent interest income of such holder, and (ii) a loss, if
any, attributable to accrued interest income previously included is deductible.

E.  MARKET DISCOUNT

     If a holder of either a Junior Secured Note or a Subordinated Note has
accrued but unrecognized market discount, a portion of the gain, if any,
recognized on the exchange of the Junior Secured Notes for the Junior Secured
Notes or the exchange of the Subordinated Notes for the New Common Stock will be
treated as ordinary income. The amount of such ordinary income is an amount
equal to the lesser of:

     -  any gain recognized on the exchange, determined under the rules
        discussed above; and

     -  any accrued and unrecognized market discount.

     A debt instrument issued without OID will be considered to have "market
discount" if a holder purchases it for an amount that is less than its issue
price, or in the case of a subsequent purchaser, less than its stated redemption
price at maturity. In the case of a debt instrument issued with OID, market
discount generally equals the excess of the revised issue price of the debt
instrument over the adjusted basis of the instrument in the hands of the holder
immediately after the acquisition by the holder.

     Any accrued "market discount" not treated as ordinary income upon a
tax-free exchange of a debt instrument with market discount should carry over to
any nonrecognition property received in the tax-free exchange. Therefore, any
market discount accrued but unrecognized should carry over upon the
implementation of the Plan to the New Common Stock or New Junior Secured Notes,
as the case may be. Any gain recognized by a holder on a subsequent disposition
of such New Common Stock or New Junior Secured Notes would be treated as
ordinary income to the extent of any accrued market discount not previously
included in such holder's income. Each holder should consult a tax advisor in
this regard.

F.  PREMIUM

     A holder of a debt instrument may have the acquisition premium generally
equal to the excess, if any, of the purchase price of the debt instrument over
the adjusted issue price of the debt instrument. Such acquisition premium can be
used by a holder of a debt instrument to reduce OID accruals with respect to the
debt instrument. In some case, a holder may also have the bond premium that can
be amortized by such holder. The holders of the Junior Secured Notes may,
depending on the basis and the issue price, have the acquisition premium and/or
bond premium arising with respect to the exchange of the Junior Secured Notes
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<PAGE>   66

for the New Junior Secured Notes under the Plan. Each holder should consult a
tax advisor with respect to the availability of the acquisition premium and the
bond premium.

G.  INFORMATION REPORTING AND BACKUP WITHHOLDING

     Certain payments, including the payments under the Junior Secured Notes and
Subordinated Notes made pursuant to the Plan, are generally subject to
information reported by the payor (the Debtors) to the Internal Revenue Service.
Moreover, such reportable payments are subject to backup withholding under
certain circumstances. Under the Code's backup withholding rules, a holder may
be subject to backup withholding at a rate of thirty-one percent (31%) with
respect to distributions or payments made pursuant to the Plan, unless the
holder: (a) comes within certain exempt categories (which generally include
corporations) and, when required, demonstrates this fact or (b) provides a
correct taxpayer identification number and certifies under penalty of perjury
that the taxpayer identification number is correct and that the taxpayer is not
subject to backup withholding because of a failure to report all dividend and
interest income.

H.  IMPORTANCE OF OBTAINING PROFESSIONAL TAX ASSISTANCE

     THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX
PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES
UNCERTAIN AND MAY VARY DEPENDING ON A HOLDER'S INDIVIDUAL CIRCUMSTANCES.
ACCORDINGLY, HOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS ABOUT THE
FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN.

         X.  ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN

     The Debtors believe that the Plan affords holders of claims and interest
the potential for the greatest recovery and, therefore, is in the best interests
of such holders. The Plan as presented is the result of considerable
negotiations among the Debtors, the Prepetition Lenders, the Noteholder
Committee and the Official Committee.

     If, however, the requisite acceptances are not received, or the Plan is not
confirmed and consummated, the theoretical alternatives include: (a) formulation
of an alternative plan of reorganization or (b) liquidation of the Debtors under
chapter 7 of the Bankruptcy Code.

A.  ALTERNATIVE PLAN(S) OF REORGANIZATION

     If the Plan is not confirmed, the Debtors may attempt to formulate and
propose a different plan or plans of reorganization. Such a plan or plan(s)
might involve either a reorganization and continuation of the Debtor's
businesses or an orderly liquidation of their assets.

     The Debtors' business could suffer from increased costs, erosion of
customer confidence and liquidity difficulties if they remained debtors in
possession during a lengthy chapter 11 process, while trying to negotiate a
consensual plan of reorganization. In addition, to formulate and secure approval
of an alternative plan, the Debtors would be required to secure an extension of
the DIP Credit Agreement (which expires on June 30, 2001) or obtain replacement
financing, and the Debtors would have to obtain financing to permit them to
emerge from chapter 11. The Debtors can offer no assurance that they would be
successful in this regard.

     The Debtors believe that the Plan, as described herein, which is the result
of extensive negotiations between the Debtors and their principal creditor
constituencies, enables creditors to realize the greatest possible value under
the circumstances and, compared to any later alternative plan of reorganization,
has the greatest chance of being confirmed and consummated.

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B.  LIQUIDATION OF THE DEBTORS

     If no plan is confirmed, the Debtors may be forced to liquidate under
chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be elected
or appointed to liquidate the Debtors' assets for distribution to creditors in
accordance with the priorities established by the Bankruptcy Code. It is
impossible to predict precisely how the proceeds of the liquidation would be
distributed to the respective holders of claims against or interests in the
Debtors.

     The Debtors believe that in a liquidation under chapter 7, before creditors
received any distribution, additional administrative expenses involved in the
appointment of a trustee or trustees and attorneys, accountants and other
professionals to assist such trustees would cause a substantial diminution in
the value of the Debtors' estates. The assets available for distribution to
creditors would be reduced by such additional expenses and by claims, some of
which would be entitled to priority, which would arise by reason of the
liquidation and from the rejection of leases and other executory contracts in
connection with the cessation of operations and the failure to realize the
greater going concern value of the Debtors' assets. The Liquidation Analysis,
discussed supra in VI.C.2. ("Best Interests Test"), and attached hereto as
Exhibit E, shows that unsecured creditors would not receive any distribution on
their claims in a liquidation.

     The Debtors could also be liquidated pursuant to the provisions of a
chapter 11 plan of reorganization. In a liquidation under chapter 11, the
Debtors' assets could be sold in an orderly fashion over a more extended period
of time than in a liquidation under chapter 7. Thus, a chapter 11 liquidation
might result in larger recoveries than in a chapter 7 liquidation, but the delay
in distributions could result in lower present values received and higher
administrative costs. Because a trustee is not required in a chapter 11 case,
expenses for professional fees could be lower than in a chapter 7 case, in which
a trustee must be appointed. Any distribution to the holders of claims under a
chapter 11 liquidation plan probably would be delayed substantially.

     Although preferable to a chapter 7 liquidation, the Debtors believe that
any liquidation under chapter 11 is a much less attractive alternative to
creditors than the Plan because the Debtors believe confirmation of the Plan
will enable creditors to realize a greater recovery than they otherwise may
realize pursuant to a chapter 11 liquidating plan.

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<PAGE>   68

                       XI.  CONCLUSION AND RECOMMENDATION

     The Debtors believe that confirmation and implementation of the Plan is
preferable to any of the alternatives described above because it will result in
the greatest recoveries to holders of claims and interests. Consequently, the
Debtors strongly urge acceptance of the Plan.

Dated: May 4, 2001
                                          Respectfully submitted,

                                          METAL MANAGEMENT, INC.
                                          (for itself and on behalf of the
                                          Subsidiary Debtors)
                                          By: /s/ DAVID A. CARPENTER
                                          --------------------------------------
                                          Name:  David A. Carpenter
                                          Title:  Executive Vice President and
                                          Secretary

                                          CO-COUNSEL FOR DEBTORS AND DEBTORS IN
                                          POSSESSION
                                          James L. Patton, Jr. (No. 2202)
                                          Joel A. Waite (No. 2925)
                                          YOUNG, CONAWAY, STARGATT & TAYLOR
                                          1100 North Market Street
                                          Wilmington Trust Center
                                          P.O. Box 391
                                          Wilmington, Delaware 19899-0391
                                          (302) 571-6600
                                          and
                                          COUNSEL:
                                          Lawrence K. Snider
                                          David S. Curry
                                          Craig E. Reimer
                                          MAYER, BROWN & PLATT
                                          190 South LaSalle Street
                                          Chicago, Illinois 60603
                                          (312) 782-0600

                                        63
<PAGE>   69

                                   EXHIBIT A
              FIRST AMENDED JOINT PLAN OF REORGANIZATION OF METAL
                  MANAGEMENT, INC. AND ITS SUBSIDIARY DEBTORS

                                   EXHIBIT A-1
<PAGE>   70

                         UNITED STATES BANKRUPTCY COURT
                              DISTRICT OF DELAWARE

<Table>
<S>                                                   <C>     <C>
In re:                                                        Chapter 11
METAL MANAGEMENT, INC., et al.,                               Case Nos. 00-4303 through
                                                              00-4331 (PJW)
Debtors                                                       Jointly Administered
</Table>

                   FIRST AMENDED JOINT PLAN OF REORGANIZATION
              OF METAL MANAGEMENT, INC. AND ITS SUBSIDIARY DEBTORS

Lawrence K. Snider
David S. Curry
Craig E. Reimer
MAYER, BROWN & PLATT
190 South LaSalle Street
Chicago, Illinois 60603-3441
(312) 782-0600
James L. Patton, Jr. (No. 2202)
Joel A. Waite (No. 2925)
Young Conaway Stargatt & Taylor
1100 N. Market Street
Wilmington Trust Center
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
ATTORNEYS FOR DEBTORS
Dated: May 4, 2001
<PAGE>   71

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
INTRODUCTION................................................    1
ARTICLE I
DEFINED TERMS AND RULES OF INTERPRETATION...................    1
1.1   Administrative Claim..................................    1
1.2   Agent for the DIP Lenders.............................    1
1.3   Allowed...............................................    1
1.4   Allowed Claim.........................................    1
1.5   Allowed Interest......................................    1
1.6   Amended Certificates of Incorporation and By-Laws.....    1
1.7   Amendment to Junior Secured Note Indenture............    2
1.8   Bankruptcy Code.......................................    2
1.9   Bankruptcy Court......................................    2
1.10 Bankruptcy Rules.......................................    2
1.11 Business Day...........................................    2
1.12 Cash...................................................    2
1.13 Chapter 11 Cases.......................................    2
1.14 Claim..................................................    2
1.15 Claims Objection Deadline..............................    2
1.16 Class..................................................    2
1.17 Confirmation Date......................................    2
1.18 Confirmation Hearing...................................    2
1.19 Confirmation Order.....................................    2
1.20 Convenience Claim......................................    2
1.21 Critical Vendor Claim..................................    2
1.22 Critical Vendor Order..................................    2
1.23 Debtor(s)..............................................    2
1.24 DIP Credit Agreement...................................    3
1.25 DIP Financing Documents................................    3
1.26 DIP Lenders............................................    3
1.27 DIP Lender Claims......................................    3
1.28 Disbursing Agent.......................................    3
1.29 Disclosure Statement...................................    3
1.30 Disputed Claim.........................................    3
1.31 Disputed Claim Amount..................................    3
1.32 Disputed Claims Reserve................................    3
1.33 Disputed Interest......................................    3
1.34 Disputed Interest Amount...............................    3
1.35 Disputed Interest Reserve..............................    3
1.36 Distribution Date......................................    3
1.37 Distribution Record Date...............................    3
1.38 Effective Date.........................................    3
1.39 Estate(s)..............................................    3
1.40 Exchange Act...........................................    3
1.41 Exit Facility..........................................    4
1.42 Fee Claim..............................................    4
1.43 File, Filed or Filing..................................    4
1.44 Final Order............................................    4
1.45 General Impaired Unsecured Claim.......................    4
1.46 General Impaired Unsecured Claims List.................    4
1.47 General Trade Claims...................................    4
</Table>

                                        i
<PAGE>   72

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
1.48 Holder.................................................    4
1.49 Impaired...............................................    4
1.50 Impaired Unsecured Claim...............................    4
1.51 Intercompany Claim.....................................    4
1.52 Interest...............................................    4
1.53 Junior Secured Note Claims.............................    5
1.54 Junior Secured Note Indenture..........................    5
1.55 Junior Secured Note Indenture Trustee..................    5
1.56 Junior Secured Noteholders.............................    5
1.57 Junior Secured Notes...................................    5
1.58 Litigation Claims......................................    5
1.59 Management Equity Incentive Plan.......................    5
1.60 Management Equity Plan Participants....................    5
1.61 Management Warrants....................................    5
1.62 New Common Stock.......................................    5
1.63 New Credit Agreement...................................    5
1.64 New Credit Financing Documents.........................    5
1.65 New Junior Secured Notes...............................    5
1.66 Non-Tax Priority Claim.................................    5
1.67 Noteholder Committee...................................    5
1.68 Official Committee.....................................    6
1.69 Old Common Stock.......................................    6
1.70 Old Rights and Warrants................................    6
1.71 Other Secured Claim....................................    6
1.72 Pension Plans..........................................    6
1.73 Petition Date..........................................    6
1.74 Plan...................................................    6
1.75 Plan Document..........................................    6
1.76 Preferred Stock........................................    6
1.77 Prepetition Agent......................................    6
1.78 Prepetition Credit Agreement...........................    6
1.79 Prepetition Lenders....................................    6
1.80 Priority Tax Claim.....................................    6
1.81 Professional...........................................    6
1.82 Registration Rights Agreement..........................    6
1.83 Reorganized Debtors....................................    6
1.84 Reorganized MTLM.......................................    7
1.85 Reorganized Subsidiary Debtors.........................    7
1.86 Secured Lender Claim...................................    7
1.87 Securities Act.........................................    7
1.88 Securities Claims......................................    7
1.89 Series A Warrant Agreement.............................    7
1.90 Series A Warrants......................................    7
1.91 Series B Warrants......................................    7
1.92 Series C Warrants......................................    7
1.93 Series B Preferred Stock...............................    7
1.94 Series C Preferred Stock...............................    7
1.95 Subordinated Note Claims...............................    7
1.96 Subordinated Note Indenture............................    7
1.97 Subordinated Note Indenture Trustee....................    7
1.98 Subordinated Noteholders...............................    7
</Table>

                                        ii
<PAGE>   73

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
1.99 Subordinated Notes.....................................    7
1.100 Subsidiary Debtors....................................    7
1.101 Subsidiary Interests..................................    7
1.102 Substantive Consolidation Order.......................    8
1.103 Trustees..............................................    8
1.104 Unimpaired Claim......................................    8
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS......................    8
2.1   Unclassified Claims...................................    8
2.2   Unimpaired Classes of Claims..........................    8
2.3   Impaired Classes of Claims............................    9
2.4   Impaired Classes of Interests.........................    9
ARTICLE III
TREATMENT OF CLAIMS AND INTERESTS...........................    9
3.1   Unclassified Claims...................................    9
3.2   Unimpaired Classes of Claims..........................   10
3.3   Impaired Classes of Claims............................   10
3.4   Impaired Class of Interests...........................   11
3.5   Retention of Defenses Regarding Claims................   12
ARTICLE IV
MEANS FOR IMPLEMENTATION OF THE PLAN........................   13
4.1   Limited Substantive Consolidation for Purposes of
      Treating Impaired Claims..............................   13
4.2   Continued Corporate Existence and Vesting of Assets in
      the Reorganized Debtors...............................   13
4.3   Corporate Governance, Directors and Corporate
      Action................................................   14
4.4   Cancellation of Notes, Instruments and Common Stock...   14
4.5   Issuance of New Securities and Related Documents......   15
4.6   Exit Financing and the New Credit Agreement...........   15
4.7   Listing of New Common Stock; Registration Rights
      Agreement.............................................   15
4.8   Management Equity Incentive Plan......................   15
4.9   Sources of Cash for Plan Distributions................   15
4.10 Risk Management Program................................   15
ARTICLE V
ACCEPTANCE OR REJECTION OF THE PLAN.........................   16
5.1   Classes Entitled to Vote..............................   16
5.2   Cramdown..............................................   16
ARTICLE VI
PROVISIONS GOVERNING DISTRIBUTIONS..........................   16
6.1   Distributions for Claims or Interests Allowed as of
      the Effective Date....................................   16
6.2   Interest on Claims....................................   16
6.3   Distributions by Reorganized Debtors..................   16
6.4   Delivery of Distributions and Undeliverable or
      Unclaimed Distributions...............................   16
6.5   Record Date for Distributions.........................   17
6.6   Compliance with Tax Requirements......................   17
6.7   Allocation of Plan Distributions Between Principal and
      Interest..............................................   17
6.8   Means of Cash Payment.................................   17
6.9   Withholding and Reporting Requirements................   18
6.10 Setoffs................................................   18
6.11 Fractional Shares......................................   18
</Table>

                                       iii
<PAGE>   74

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
6.12 Surrender of Cancelled Instruments or Securities.......   18
6.13 Lost, Stolen, Mutilated or Destroyed Debt Securities...   19
ARTICLE VII
TREATMENT OF EXECUTORY CONTRACTS, UNEXPIRED LEASES AND
PENSION PLANS...............................................   19
7.1   Assumption of Executory Contracts and Unexpired
      Leases................................................   19
7.2   Claims Based on Rejection of Executory Contracts or
      Unexpired Leases......................................   19
7.3   Cure of Defaults of Assumed Executory Contracts and
      Unexpired Leases......................................   19
7.4   Indemnification of Directors, Officers and
      Employees.............................................   19
7.5   Compensation and Benefit Programs.....................   20
ARTICLE VIII
PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT AND
UNLIQUIDATED CLAIMS.........................................   20
8.1   Objection Deadline; Prosecution of Objections.........   20
8.2   No Distributions Pending Allowance....................   20
8.3   Disputed Claims Reserve; Disputed Interest Reserve....   20
8.4   Distributions After Allowance.........................   21
ARTICLE IX
CONFIRMATION AND CONSUMMATION OF THE PLAN...................   21
9.1   Conditions to Confirmation............................   21
9.2   Conditions to Effective Date..........................   21
9.3   Waiver of Conditions..................................   22
9.4   Consequences of Non-Occurrence of Effective Date......   22
ARTICLE X
EFFECT OF PLAN CONFIRMATION.................................   23
10.1 Binding Effect.........................................   23
10.2 Releases by the Debtors................................   23
10.3 Discharge of Claims and Termination of Interests.......   23
10.4 Preservation of Rights of Action; Settlement of
     Litigation Claims......................................   23
10.5 Exculpation and Limitation of Liability................   24
10.6 Injunction.............................................   24
10.7 Term of Bankruptcy Injunction or Stays.................   24
10.8 Termination of Subordination Rights and Settlement of
     Related Claims.........................................   24
ARTICLE XI
RETENTION OF JURISDICTION...................................   25
ARTICLE XII
MISCELLANEOUS PROVISIONS....................................   26
12.1 Effectuating Documents and Further Transactions........   26
12.2 Corporate Action.......................................   26
12.3 Exemption from Transfer Taxes..........................   27
12.4 Bar Dates for Administrative Claims....................   27
12.5 Payment of Statutory Fees..............................   27
12.6 Amendment or Modification of the Plan..................   27
12.7 Severability of Plan Provisions........................   27
12.8 Successors and Assigns.................................   27
12.9 Plan Documents.........................................   27
12.10 Revocation, Withdrawal or Non-Consummation............   28
</Table>

                                        iv
<PAGE>   75

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
12.11 Notice................................................   28
12.12 Governing Law.........................................   28
12.13 Tax Reporting and Compliance..........................   28
12.14 Schedules.............................................   28
12.15 Dissolution of Committee(s)...........................   28
12.16 Section 1145 Exemption................................   29
Schedule 1 -- List of Subsidiary Debtors....................   30
Schedule 2 -- General Impaired Unsecured Claims List........   31
</Table>

                                        v
<PAGE>   76

                                  INTRODUCTION

     Metal Management, Inc. ("MTLM" or the "Company"), and each of its direct or
indirect debtor subsidiaries listed on Schedule 1 hereto, propose the following
first amended joint plan of reorganization pursuant to the provisions of Chapter
11 of the Bankruptcy Code. Reference is made to the Disclosure Statement (as
that term is defined herein), for a discussion of the debtors' history, business
and operations, projections for those operations, risk factors, and certain
related matters. The Disclosure Statement also provides a summary of this Plan.

                                   ARTICLE I

                   DEFINED TERMS AND RULES OF INTERPRETATION

     Defined Terms: As used herein, capitalized terms have the meanings set
forth below. Any term that is not otherwise defined herein, but that is used in
the Bankruptcy Code or the Bankruptcy Rules, will have the meaning given to that
term in the Bankruptcy Code or the Bankruptcy Rules, as applicable.

     1.1  ADMINISTRATIVE CLAIM means a Claim for costs and expenses of
administration of the Chapter 11 Cases Allowed under sections 503(b), 507(b) or,
if applicable, 1114(e)(2) of the Bankruptcy Code, including: (a) any actual and
necessary costs and expenses incurred after the Petition Date of preserving the
Debtors' Estates and operating the businesses of the Debtors (such as wages,
salaries, commissions for services and payments for inventories, leased
equipment and premises) and Claims of governmental units for taxes (including
tax audit Claims related to tax years commencing after the Petition Date, but
excluding Claims relating to tax periods, or portions thereof, ending on or
before the Petition Date); (b) compensation for legal, financial, advisory,
accounting and other services and reimbursement of expenses Allowed by the
Bankruptcy Court under section 330, 331 or 503(b) of the Bankruptcy Code to the
extent incurred prior to the Effective Date; (c) all fees and charges assessed
against the Debtors' Estates under section 1930, chapter 123 of title 28, United
States Code; (d) Claims under the DIP Credit Agreement; (e) the fees and
expenses incurred by the Trustee under the Subordinated Note Indenture,
including the reasonable fees and expenses of its attorneys; and (f) the fees
and expenses incurred by the Trustee under the Junior Secured Note Indenture,
including the reasonable fees and expenses of its attorneys.

     1.2  AGENT FOR THE DIP LENDERS means BT Commercial Corporation, as agent
for the DIP Lenders under the DIP Credit Agreement.

     1.3  ALLOWED means an Allowed Claim or Interest in a particular Class or
category specified. Any reference herein to a particular Allowed Claim includes
both the secured and unsecured portions of such Claim.

     1.4  ALLOWED CLAIM means a Claim: (a) as to which no objection or request
for estimation has been filed on or before the Claims Objection Deadline or the
expiration of such other applicable period fixed by the Bankruptcy Court; or (b)
as to which any objection has been settled, waived, withdrawn or denied by a
Final Order; or (c) that is Allowed (i) by a Final Order; (ii) by an agreement
between the Holder of such Claim and the Debtors or Reorganized Debtors; or
(iii) pursuant to the terms of this Plan.

     For purposes of computing distributions under this Plan, the term "Allowed
Claim" shall not include interest on such Claim from and after the Petition
Date, except as provided in section 506(b) of the Bankruptcy Code, as provided
for in the DIP Financing Documents or as otherwise expressly set forth in this
Plan.

     1.5  ALLOWED INTEREST means any Interest that: (a) is registered as of the
Distribution Record Date in a stock register maintained by or on behalf of the
Debtors and (b) is not a Disputed Interest.

     1.6  AMENDED CERTIFICATES OF INCORPORATION AND BY-LAWS means the
Reorganized Debtors' certificates of incorporation and by-laws or other similar
organizational documents, as amended by the Plan, which shall be filed with the
Bankruptcy Court as Plan Documents.

                                        1
<PAGE>   77

     1.7  AMENDMENT TO JUNIOR SECURED NOTE INDENTURE means the amendment to and
restatement of the Junior Secured Note Indenture to provide for (i) the issuance
under the Plan of the New Junior Secured Notes and (ii) certain technical
amendments to conform the Junior Secured Note Indenture to the other
transactions provided for under the Plan, which shall be in form and substance
satisfactory to the Debtors, the Agent for the DIP Lenders and the Noteholders
Committee. The Amendment to the Junior Secured Note Indenture will be filed with
the Bankruptcy Court as a Plan Document.

     1.8  BANKRUPTCY CODE means title 11, United States Code, as now in effect
or hereafter amended.

     1.9  BANKRUPTCY COURT means the United States District Court having
jurisdiction over the Chapter 11 Cases and, to the extent any reference is made
pursuant to Section 157 of Title 28 of the United States Code or the General
Order of the District Court pursuant to Section 151 of Title 28 of the United
States Code, the bankruptcy unit of such District Court.

     1.10  BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure and
the local rules of the Bankruptcy Court, as now in effect or hereafter amended.

     1.11  BUSINESS DAY means any day, other than a Saturday, Sunday or "legal
holiday" (as defined in Bankruptcy Rule 9006(a)).

     1.12  CASH means legal tender of the United States of America and
equivalents thereof.

     1.13  CHAPTER 11 CASES means (a) when used with reference to a particular
Debtor, the case under chapter 11 of the Bankruptcy Code commenced by the Debtor
in the Bankruptcy Court and (b) when used with reference to all Debtors, the
cases under chapter 11 of the Bankruptcy Code commenced by Debtors in the
Bankruptcy Court.

     1.14  CLAIM means a "claim," as defined in section 101(5) of the Bankruptcy
Code.

     1.15  CLAIMS OBJECTION DEADLINE means the last day for Filing objections to
Claims or Interests to be established by order of the Bankruptcy Court.

     1.16  CLASS means a category of holders of Claims or Interests, as
described in Article II hereof.

     1.17  CONFIRMATION DATE means the date on which the Clerk of the Bankruptcy
Court enters the Confirmation Order on the docket of the Bankruptcy Court.

     1.18  CONFIRMATION HEARING means the hearing held by the Bankruptcy Court
pursuant to section 1128 of the Bankruptcy Code to consider confirmation of this
Plan, as such hearing may be adjourned or continued from time to time.

     1.19  CONFIRMATION ORDER means the order of the Bankruptcy Court, in form
and substance satisfactory to Debtors, the DIP Lenders, and the Noteholder
Committee, confirming this Plan pursuant to section 1129 of the Bankruptcy Code.

     1.20  CONVENIENCE CLAIM means an unsecured, nonpriority Claim as of the
Petition Date in the amount of $500.00 or less; provided, however that if the
holder of an unsecured, nonpriority Claim in an amount greater than $500.00
shall make an election to reduce such Claim to $500.00, such Claim shall be
treated as a Convenience Claim for all purposes. Such election shall be made on
the ballot for accepting or rejecting the Plan, completed and returned within
the time fixed by order of the Court.

     1.21  CRITICAL VENDOR CLAIM means an unsecured, nonpriority Claim of a
vendor or other supplier to one or more of the Debtors that has entered into an
agreement the with the Debtors for the payment of such Claim pursuant to and in
accordance with the Critical Vendor Order.

     1.22  CRITICAL VENDOR ORDER means the Order Authorizing Payment of Critical
Vendor Claims, dated November 20, 2000, as entered by the Bankruptcy Court.

     1.23  DEBTOR(S) means, individually, the Company or any Subsidiary Debtor
and, collectively, all of the Company and each of the Subsidiary Debtors listed
on Schedule 1 hereto.

                                        2
<PAGE>   78

     1.24  DIP CREDIT AGREEMENT means the $200 million debtor in possession
credit facility entered into by MTLM and the Subsidiary Debtors, as borrowers
dated November 20, 2000, and the DIP Lenders, as amended, modified or
supplemented, and as approved by order of the Bankruptcy Court.

     1.25  DIP FINANCING DOCUMENTS means the DIP Credit Agreement, and all
exhibits, schedules, annexes and related documents.

     1.26  DIP LENDERS means those entities identified as "Lenders" in the DIP
Credit Agreement and their respective successors and assigns.

     1.27  DIP LENDER CLAIMS means all claims of the Agent for the DIP Lenders
and the DIP Lenders arising out of the DIP Financing Documents.

     1.28  DISBURSING AGENT means the Reorganized Debtors, or any person or
entity (including, without limitation, the applicable Trustee for distributions
to Holders of either Subordinated Note Claims or Junior Secured Note Claims)
that may be designated by the Reorganized Debtors to serve as disbursing agent
under the Plan.

     1.29  DISCLOSURE STATEMENT means that certain disclosure statement,
including all exhibits and schedules thereto, as amended or supplemented from
time to time, relating to this Plan as approved by order of the Bankruptcy
Court.

     1.30  DISPUTED CLAIM means any Claim as to which the Debtors have
interposed a timely objection or request for estimation in accordance with the
Bankruptcy Code and the Bankruptcy Rules, or any claim otherwise disputed by the
Debtors in accordance with applicable law, which objection has not been
withdrawn or determined by a Final Order.

     1.31  DISPUTED CLAIM AMOUNT means (a) with respect to contingent or
unliquidated Claims, the amount estimated by the Bankruptcy Court for purposes
of distributions in respect of such Claim in accordance with section 502(c) of
the Bankruptcy Code; or (b) the amount set forth in a timely Filed proof of
claim.

     1.32  DISPUTED CLAIMS RESERVE means the reserve established pursuant to the
Plan and maintained for and on account of Disputed Claims in Class 6.

     1.33  DISPUTED INTEREST means an Interest as to which the Debtors
interposed a timely objection or request for estimation in accordance with the
Bankruptcy Code and the Bankruptcy Rules or any Interest otherwise disputed by
the Debtors in accordance with applicable law, which objection has not been
withdrawn or determined by a Final Order.

     1.34  DISPUTED INTEREST AMOUNT means, with respect to a Disputed Interest,
the number of shares set forth in a timely Filed proof of interest.

     1.35  DISPUTED INTEREST RESERVE means the reserve established pursuant to
the Plan and maintained by the Reorganized Debtors on account of Disputed
Interests and Disputed Claims in Class 9.

     1.36  DISTRIBUTION DATE means the date, within 30 days after the Effective
Date, upon which the initial distributions will be made to Holders of Allowed
Claims and Allowed Interests.

     1.37  DISTRIBUTION RECORD DATE means the Confirmation Date (except with
respect to any distributions made by the Subordinated Note Indenture Trustee
under the Plan, in which case the Distribution Record Date for such
distributions shall mean the twenty-fifth Business Day prior to the Distribution
Date).

     1.38  EFFECTIVE DATE means the Business Day the Plan becomes effective as
provided in Article IX hereof.

     1.39  ESTATE(S) means, individually, the estate of MTLM or any Subsidiary
Debtor and, collectively, the estates of all of the Debtors created under
section 541 of the Bankruptcy Code.

     1.40  EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

                                        3
<PAGE>   79

     1.41  EXIT FACILITY means the New Credit Agreement to be provided to the
Reorganized Debtors on the Effective Date.

     1.42  FEE CLAIM means an Administrative Claim arising or asserted under
section 330(a), 331, 503 or 1103 of the Bankruptcy Code for compensation of a
Professional or other entity for services rendered or expenses incurred in the
Chapter 11 Cases on or prior to the Effective Date.

     1.43  FILE, FILED OR FILING means file, filed or filing with the Bankruptcy
Court or its authorized designee in the Chapter 11 Cases.

     1.44  FINAL ORDER means an order of the Bankruptcy Court as to which the
time to appeal, petition for certiorari or move for re-argument or rehearing has
expired and as to which no appeal, petition for certiorari or other proceedings
for re-argument or rehearing shall then be pending or as to which any right to
appeal, petition for certiorari, reargue or rehear shall have been waived in
writing in form and substance satisfactory to the Debtors or the Reorganized
Debtors or, in the event that an appeal, writ of certiorari or re-argument or
rehearing thereof has been sought, such order of the Bankruptcy Court shall have
been determined by the highest court to which such order was appealed, or
certiorari, re-argument or rehearing shall have been denied and the time to take
any further appeal, petition for certiorari or move for reargument or rehearing
shall have expired; provided, however, that the possibility that a motion under
Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous
rule under the Bankruptcy Rules, may be filed with respect to such order shall
not preclude such order from being a Final Order.

     1.45  GENERAL IMPAIRED UNSECURED CLAIM means an unsecured Claim (i) listed
on the General Impaired Unsecured Claims List or (ii) arising from the rejection
of an executory contract or unexpired lease as provided in Article VII hereof.

     1.46  GENERAL IMPAIRED UNSECURED CLAIMS LIST means the list of General
Impaired Unsecured Claims attached hereto as Schedule 2, as it may be amended or
supplemented from time to time by MTLM, with the consent of the Official
Committee and the Noteholder Committee, which consent will not be unreasonably
withheld or delayed.

     1.47  GENERAL TRADE CLAIMS means an unsecured, nonpriority Claim other than
a Critical Vendor Claim, General Impaired Unsecured Claim, Intercompany Claim,
or Convenience Claim; provided, however, that each Holder of such Claim shall
have the right, in its sole discretion, to elect to be treated as an Impaired
Unsecured Claim, in which event such Claim shall be treated as if classified in
Class 6 and shall receive the treatment provided to Impaired Unsecured Claims as
set forth in Section 3.3(c) hereof. Such election shall be made on the ballot
for accepting or rejecting the Plan. In the event an election is not timely or
properly made by the Holder of a General Trade Claim, such Claim automatically
shall be treated as an Impaired Unsecured Claim for all purposes under the Plan.

     1.48  HOLDER means an entity holding a Claim or Interest and, with respect
to Junior Secured Notes and Subordinated Notes, the beneficial holder as of the
applicable voting record date or any authorized agent who has completed and
executed a ballot or on whose behalf a master ballot has been completed and
executed in accordance with applicable voting instructions.

     1.49  IMPAIRED means, when used in reference to a Claim or Interest, a
Claim or Interest that is impaired within the meaning of section 1124 of the
Bankruptcy Code.

     1.50  IMPAIRED UNSECURED CLAIM means any Subordinated Note Claim or General
Impaired Unsecured Claim.

     1.51  INTERCOMPANY CLAIM means (a) any account reflecting intercompany book
entries by one Debtor with respect to any other Debtor or (b) any Claim that is
not reflected in such book entries and is held by a Debtor against any other
Debtor.

     1.52  INTEREST means the legal, equitable, contractual and other rights of
the holders of any of (i) the Series B Preferred Stock, (ii) the Series C
Preferred Stock, (iii) the Old Common Stock, (iv) the Old Rights and Warrants,
including the rights of any entity to purchase or demand the issuance of any of
the foregoing,

                                        4
<PAGE>   80

including (a) conversion, exchange, voting, participation and dividend rights;
(b) liquidation preferences; (c) stock options, warrants and put rights; and (d)
share-appreciation rights, or (v) any other stock right, whether preferred or
common, pertaining or relating in any way to the Company.

     1.53  JUNIOR SECURED NOTE CLAIMS means the Claims arising from or related
to the Junior Secured Notes.

     1.54  JUNIOR SECURED NOTE INDENTURE means the Indenture dated as of May 7,
1999, between MTLM, as issuer, the Subsidiary Debtors, as guarantors, and Bank
of New York, as trustee and any successor trustee, relating to the Junior
Secured Notes, as amended from time to time.

     1.55  JUNIOR SECURED NOTE INDENTURE TRUSTEE means Bank of New York, as
trustee and any successor trustee, under the Junior Secured Note Indenture.

     1.56  JUNIOR SECURED NOTEHOLDERS means the Holders of Junior Secured Note
Claims.

     1.57  JUNIOR SECURED NOTES means the $30 million Senior Secured Notes due
June 15, 2004 issued by MTLM pursuant to the Junior Secured Note Indenture.

     1.58  LITIGATION CLAIMS means the Claims, rights of action, suits or
proceedings, whether in law or in equity, whether known or unknown, that any
Debtor or Estate may hold against any person or entity under the Bankruptcy Code
or any non-bankruptcy law.

     1.59  MANAGEMENT EQUITY INCENTIVE PLAN means a stock incentive plan to be
adopted by the board of directors of Reorganized MTLM on the Effective Date and
providing for the issuance of the Management Warrants. The Management Equity
Incentive Plan will be in form and substance satisfactory to the Debtors, the
Noteholder Committee and the Agent for the DIP Lenders and filed with the
Bankruptcy Court as a Plan Document.

     1.60  MANAGEMENT EQUITY PLAN PARTICIPANTS means the employees of the
Reorganized Debtors entitled to participate in the Management Equity Incentive
Plan.

     1.61  MANAGEMENT WARRANTS means warrants to purchase up to 1,500,000 shares
of New Common Stock of Reorganized MTLM, consisting of Series B Warrants and
Series C Warrants, to be issued by the Reorganized Debtors to the Management
Equity Plan Participants pursuant to (and to be subject to the terms and
conditions of) the Management Equity Incentive Plan.

     1.62  NEW COMMON STOCK means the 10,000,000 shares of common stock of
Reorganized MTLM to be issued and authorized pursuant the Plan.

     1.63  NEW CREDIT AGREEMENT means that certain credit agreement governing
the Exit Facility to be entered into by MTLM and the other Subsidiary Debtors
identified therein, as borrowers, and the lenders that are parties thereto,
which shall be consistent with the terms set forth herein and in the DIP Credit
Agreement, which will be filed with the Bankruptcy Court as a Plan Document.

     1.64  NEW CREDIT FINANCING DOCUMENTS means all exhibits, schedules, annexes
and ancillary documents to the new Credit Agreement.

     1.65  NEW JUNIOR SECURED NOTES means the 12 3/4% secured notes due 2004 of
the Reorganized Debtors to be issued and distributed pursuant to the Plan on the
Effective Date to the Holders of the Junior Secured Note Claims and governed by
the terms of the Junior Secured Note Indenture, as amended by the Amendment to
Junior Secured Note Indenture.

     1.66  NON-TAX PRIORITY CLAIM means a Claim, other than an Administrative
Claim or Priority Tax Claim, that is entitled to priority in payment pursuant to
section 507(a) of the Bankruptcy Code.

     1.67  NOTEHOLDER COMMITTEE means the ad hoc committee of the Subordinated
Noteholders and the Junior Secured Noteholders organized prior to the Petition
Date.

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<PAGE>   81

     1.68  OFFICIAL COMMITTEE means the Official Committee of Unsecured
Creditors that was appointed in these Chapter 11 Cases on or about December 8,
2000, pursuant to section 1102 of the Bankruptcy Code by the United States
Trustee.

     1.69  OLD COMMON STOCK means the common stock of the Company issued and
outstanding immediately prior to the Petition Date, including treasury stock.

     1.70  OLD RIGHTS AND WARRANTS means all options, warrants, call, rights,
puts, awards or other agreements to acquire the Old Common Stock outstanding
immediately prior to the Petition Date.

     1.71  OTHER SECURED CLAIM means a Claim (other than an Administrative
Claim) that is secured by a lien on property in which a Debtor's Estate has an
interest or that is subject to setoff under section 553 of the Bankruptcy Code,
to the extent of the value of the Claim Holder's interest in the applicable
Estate's interest in such property or to the extent of the amount subject to
setoff, as applicable, as determined pursuant to section 506(a) of the
Bankruptcy Code or, in the case of a setoff, pursuant to section 553 of the
Bankruptcy Code, other than the Junior Secured Note Claims and the Secured
Lender Claims.

     1.72  PENSION PLANS means, collectively, the Retirement Plan for Employees
of Charles Bluestone Co., employer identification/plan number 36-4235943/001;
Aerpospace Metals, Inc. Hourly Pension Plan, employer identification/plan number
36-4201748/001; Aerospace Metals, Inc. Salaried Retirement Plan, employer
identification/plan number 36-4201748/002; and The Isaac Corporation Pension
Plan -- MMI98, employer identification/plan number 34-0901723/003. The Pension
Plans are covered by Title IV of the Employment Retirement Security Act of 1974,
as amended ("ERISA") (29 U.S.C. sec. 1301, et seq.).

     1.73  PETITION DATE means the date on which the Debtors filed their
petitions for relief commencing the Chapter 11 Cases.

     1.74  PLAN means this chapter 11 plan of reorganization and all
supplements, appendices and schedules hereto, either in its present form or as
the same may be altered, amended or modified from time to time.

     1.75  PLAN DOCUMENT means the documents and form of documents specified in
the Plan to be filed as set forth in Section 12.9 hereof.

     1.76  PREFERRED STOCK means, collectively, the Series B Preferred Stock,
the Series C Preferred Stock and any other warrants or options in respect
thereto, including, without limitation, the rights (if any) in respect of the
series A preferred stock previously issued by MTLM.

     1.77  PREPETITION AGENT means the agent for the Prepetition Lenders under
the Prepetition Credit Agreement.

     1.78  PREPETITION CREDIT AGREEMENT means the credit agreement dated as of
March 31, 1998 among MTLM and the Subsidiary Debtors, as borrowers or as
guarantors, and the Prepetition Lenders, as amended.

     1.79  PREPETITION LENDERS means the entities identified as "lenders" under
the Prepetition Credit Agreement and their respective successors and assigns.

     1.80  PRIORITY TAX CLAIM means a Claim of a governmental unit of the kind
specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.

     1.81  PROFESSIONAL means (a) any professional employed in the Chapter 11
Cases pursuant to section 327 or 1103 of the Bankruptcy Code or otherwise and
(b) any professional or other entity seeking compensation or reimbursement of
expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4)
of the Bankruptcy Code.

     1.82  REGISTRATION RIGHTS AGREEMENT means an agreement to be entered into
by Reorganized MTLM, upon request of the Noteholder Committee, with respect to
the rights of registration as to the New Common Stock, substantially in the form
to be filed with the Bankruptcy Court as a Plan Document.

     1.83  REORGANIZED DEBTORS means the Debtors or any successors thereto by
merger, consolidation, or otherwise, on or after the Effective Date.

                                        6
<PAGE>   82

     1.84  REORGANIZED MTLM means MTLM, on or after the Effective Date.

     1.85  REORGANIZED SUBSIDIARY DEBTORS means the Subsidiary Debtors, on or
after the Effective Date.

     1.86  SECURED LENDER CLAIM means individually, a Claim of a Prepetition
Lender under the Prepetition Credit Agreement and, collectively, the Claims of
the Prepetition Lenders under the Prepetition Credit Agreement, including Claims
for principal, accrued but unpaid interest through the Effective Date and fees
and expenses payable under the Prepetition Credit Agreement.

     1.87  SECURITIES ACT means the Securities Act of 1933, 15 U.S.C.
sec.sec. 77c-77aa, as now in effect or hereafter amended.

     1.88  SECURITIES CLAIMS means a claim arising from rescission of a purchase
or sale of a security of the Debtors, for damages arising from the purchase or
sale of such security, or for reimbursement or contribution allowed under
section 502 of the Bankruptcy Code on account of such Claim.

     1.89  SERIES A WARRANT AGREEMENT means the warrant agreement governing the
issue of the Series A Warrants, the material terms of which are described in the
Disclosure Statement. A copy of the Series A Warrant Agreement will be filed
with the Bankruptcy Court as a Plan Document.

     1.90  SERIES A WARRANTS means the warrants to purchase 750,000 shares of
New Common Stock of Reorganized MTLM, which will be issued pursuant to, and
exercisable in accordance with, the terms of the Series A Warrant Agreement.

     1.91  SERIES B WARRANTS means the warrants to purchase 1,000,000 shares of
New Common Stock of Reorganized MTLM, which will be issued pursuant to, and
exercisable in accordance with, the terms of the Management Equity Incentive
Plan.

     1.92  SERIES C WARRANTS means the warrants to purchase 500,000 shares of
New Common Stock of Reorganized MTLM, which will be issued pursuant to, and
exercisable in accordance with, the terms of the Management Equity Incentive
Plan.

     1.93  SERIES B PREFERRED STOCK means the convertible preferred stock of the
Company, designated as Series B, issued and outstanding immediately prior to the
Petition Date.

     1.94  SERIES C PREFERRED STOCK means the convertible preferred stock of the
Company, designated as Series C, issued and outstanding immediately prior to the
Petition Date.

     1.95  SUBORDINATED NOTE CLAIMS means the Claims arising from or related to
the Subordinated Notes, which Claims shall be Allowed in the aggregate principal
amount equal to $180 million, plus interest accrued but unpaid as of the
Petition Date.

     1.96  SUBORDINATED NOTE INDENTURE means the Indenture dated as of May 13,
1998, between MTLM, as issuer, the Subsidiary Debtors, as guarantors, and
LaSalle National Bank, as trustee and any successor trustee, relating to the
Subordinated Notes, as amended from time to time.

     1.97  SUBORDINATED NOTE INDENTURE TRUSTEE means Bank One, N.A., as trustee
and any successor trustee, under the Subordinated Note Indenture.

     1.98  SUBORDINATED NOTEHOLDERS means the Holders of Subordinated Note
Claims.

     1.99  SUBORDINATED NOTES means the 10% Senior Subordinated Notes due May
15, 2008 issued by MTLM on May 13, 1998 under the Subordinated Note Indenture.

     1.100  SUBSIDIARY DEBTORS means, individually or collectively, a Debtor or
Debtors (other than MTLM), as listed in Schedule 1 hereto.

     1.101  SUBSIDIARY INTERESTS means, collectively, the issued and outstanding
shares of stock or other equity interests of the Subsidiary Debtors, as of the
Petition Date.

                                        7
<PAGE>   83

     1.102  SUBSTANTIVE CONSOLIDATION ORDER means the order, or provision of the
Confirmation Order, substantively consolidating the Chapter 11 Cases for the
limited purpose and to the extent provided in Section 4.1 of the Plan.

     1.103  TRUSTEES means, collectively, the Junior Secured Note Trustee and
the Subordinate Note Indenture Trustee.

     1.104  UNIMPAIRED CLAIM means a Claim that is not impaired within the
meaning of section 1124 of the Bankruptcy Code.

     RULES OF INTERPRETATION AND COMPUTATION OF TIME.  For purposes of this
Plan, unless otherwise provided herein: (a) whenever from the context it is
appropriate, each term, whether stated in the singular or the plural, will
include both the singular and the plural; (b) unless otherwise provided in this
Plan, any reference in this Plan to a contract, instrument, release or other
agreement or document being in a particular form or on particular terms and
conditions means that such document will be substantially in such form or
substantially on such terms and conditions; (c) any reference in this Plan to an
existing document or schedule Filed or to be Filed means such document or
schedule, as it may have been or may be amended, modified or supplemented
pursuant to this Plan; (d) any reference to an entity as a Holder of a Claim or
Interest includes that entity's successors and assigns; (e) all references in
this Plan to Sections, Articles and Schedules are references to Sections,
Articles and Schedules of or to this Plan; (f) the words "herein," "hereunder"
and "hereto" refer to this Plan in its entirety rather than to a particular
portion of this Plan; (g) 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 this Plan;(h) the rules of construction set
forth in section 102 of the Bankruptcy Code will apply; and (i) in computing any
period of time prescribed or allowed by this Plan, the provisions of Bankruptcy
Rule 9006(a) will apply.

                                   ARTICLE II

                     CLASSIFICATION OF CLAIMS AND INTERESTS

     All Claims and Interests, except Administrative Claims and Priority Tax
Claims, are placed in the Classes set forth below. In accordance with section
1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax
Claims, as described below, have not been classified.

     This Plan constitutes a single plan of reorganization for all Debtors. A
Claim or Interest is placed in a particular Class only to the extent that the
Claim or Interest falls within the description of that Class and is classified
in other Classes to the extent that any portion of the Claim or Interest falls
within the description of such other Classes. A Claim or Interest is also placed
in a particular Class for the purpose of receiving distributions pursuant to the
Plan only to the extent that such Claim or Interest is an Allowed Claim or
Allowed Interest in that Class and such Claim or Interest has not been paid,
released or otherwise settled prior to the Effective Date.

     2.1  UNCLASSIFIED CLAIMS (not entitled to vote on the Plan).

     (a) Administrative Claims.

     (b) Priority Tax Claims.

     2.2  UNIMPAIRED CLASSES OF CLAIMS (deemed to have accepted the Plan and,
therefore, not entitled to vote).

     (a)  Class 1: Non-Tax Priority Claims.  Class 1 consists of all Non-Tax
Priority Claims.

     (b)  Class 2A. Secured Lender Claims.  Class 2A consists of all Secured
Lender Claims.

     (c)  Class 2B: Other Secured Claims.  Class 2B consists of all Other
Secured Claims.

     (d)  Class 3A: Critical Vendor.  Class 3A consists of all Critical Vendor
Claims.

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<PAGE>   84

     (e)  Class 3B: Convenience Claims.  Class 3B consists of all Convenience
Claims.

     2.3  IMPAIRED CLASSES OF CLAIMS (entitled to vote on the Plan).

     (a)  Class 4: Junior Secured Note Claims.  Class 4 consists of all Junior
Secured Note Claims.

     (b)  Class 5: General Trade Claims.  Class 5 consists of all General Trade
Claims.

     (c)  Class 6: Impaired Unsecured Claims.  Class 6 consists of all
Subordinated Note Claims and General Impaired Unsecured Claims.

     2.4  IMPAIRED CLASSES OF INTERESTS (Classes 7, 8, 9 and 10 are deemed to
have rejected the Plan and, therefore, will not be entitled to vote to accept or
reject the Plan; Class 11 is entitled to vote on the Plan).

     (a) Class 7: Preferred Stock Interests.  Class 7 consists of all Interests
directly arising from, under or relating in any way to, Preferred Stock.

     (b) Class 8: Old Common Stock Interests.  Class 8 consists of all Interests
directly arising from, under, or relating in any way to, Old Common Stock.

     (c) Class 9: Securities Claims.  Class 9 consists of all Securities Claims.

     (d) Class 10: Other Old Equity.  Class 10 consists of all Interests
directly arising from, under or relating in any way to the Old Rights and
Warrants.

     (e) Class 11: Subsidiary Interests.  As to each Debtor, Class 11 consists
of all Subsidiary Interests of such Debtor.

                                  ARTICLE III
                       TREATMENT OF CLAIMS AND INTERESTS

     3.1  UNCLASSIFIED CLAIMS.

     (a) Administrative Claims.  Subject to the provisions of sections 330(a),
331 and 503(b) of the Bankruptcy Code, each Administrative Claim shall be paid
by the Debtors, at their election, (A) in full, in Cash, in such amounts as are
owing in the ordinary course of business by the Debtors, or in such amounts as
such Administrative Claim is Allowed by the Bankruptcy Court upon the later of
(x) the Effective Date, (y) the date upon which there is a Final Order allowing
such Administrative Claim, or (z) the date on which such Administrative Claim
becomes due in the ordinary course of business, or (B) upon such other terms as
may be agreed upon between the Holder of such Administrative Claim and the
Debtors.

          (i) Professional Fees.  All final applications for Professional Fee
     Claims for services rendered in connection with the Chapter 11 Cases prior
     to the Confirmation Date shall be filed no later than sixty (60) days after
     the Effective Date, unless otherwise ordered by the Bankruptcy Court.

          (ii) Claims Under the DIP Credit Agreement.  All DIP Lender Claims
     shall be deemed Allowed Claims on the Effective Date. On the Effective
     Date, all DIP Lender Claims shall be paid in full (A) in Cash or (B) as
     provided in the DIP Financing Documents.

     (b) Priority Tax Claims.  The legal and equitable rights of the Holders of
Priority Tax Claims are unaltered by the Plan. On, or as soon as reasonably
practicable after, the later of (i) the Distribution Date or (ii) the date on
which such Priority Tax Claim becomes an Allowed Priority Tax Claim, each Holder
of an Allowed Priority Tax Claim shall receive in full satisfaction, settlement
and release of and in exchange for such Allowed Priority Tax Claim at the
election of the Debtors or the Reorganized Debtors (A) Cash equal to the amount
of such Allowed Priority Tax Claim; (B) such other treatment as to which the
Debtors or the Reorganized Debtors and the Holder of such Allowed Priority Tax
Claims shall have agreed upon in writing; or (C) such other treatment as may be
permitted so as to render the Holder of such Priority Tax Claim unimpaired
pursuant to section 1124 of the Bankruptcy Code; provided, however, that any
Allowed Priority

                                        9
<PAGE>   85

Tax Claim not due and owing on the Distribution Date will be paid in accordance
with this section when such Claim becomes due and owing.

     3.2  UNIMPAIRED CLASSES OF CLAIMS.

     (a) Class 1. Non-Tax Priority Claims.  The legal and equitable rights of
the Holders of Allowed Non-Tax Priority Claims are unaltered by the Plan. On, or
as soon as reasonably practicable after, the later of (i) the Distribution Date
or (ii) the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax
Priority Claim, each Holder of an Allowed Non-Tax Priority Claim shall receive
in full satisfaction, settlement and release of and in exchange for such Allowed
Non-Tax Priority Claim at the election of the Debtors (A) Cash equal to the
amount of such Allowed Non-Tax Priority Claim; (B) such other treatment as to
which the Debtors or the Reorganized Debtors and the Holder of such Allowed
Non-Tax Priority Claim have agreed upon in writing; or (C) such other treatment
as may be permitted so as to render the Holder of such Non-Tax Priority Claim
unimpaired pursuant to section 1124 of the Bankruptcy Code, provided, however,
any Allowed Non-Tax Priority Claim not due and owing on the Distribution Date
will be paid in accordance with this section when such Claim becomes due and
owing.

     Any default with respect to any Non-Tax Priority Claim that existed
immediately prior to the Petition Date will be deemed cured on the Effective
Date.

     (b) Class 2A: Secured Lender Claims.  To the extent any Secured Lender
Claims remain outstanding as of the Effective Date, on, or as soon as reasonably
practicable after, the Distribution Date, each Holder of an Allowed Secured
Lender Claim shall receive payment in full in Cash of its Allowed Secured Lender
Claim. All distributions on account of Secured Lender Claims shall be made to
the Prepetition Agent for distribution to the Holders of Allowed Secured Lender
Claims.

     (c) Class 2B: Other Secured Claims.  The legal, equitable and contractual
rights of the Holders of Allowed Other Secured Claims are unaltered by the Plan.
On, or as soon as reasonably practicable after, the later of (i) the
Distribution Date or (ii) the date on which such Other Secured Claim becomes an
Allowed Other Secured Claim, each Holder of an Allowed Other Secured Claim shall
receive at the election of the Debtors in full satisfaction, settlement and
release of, and in exchange for, such Allowed Other Secured Claim (A) Cash equal
to the amount of such Allowed Other Secured Claim; (B) such other treatment as
to which the Debtors or Reorganized Debtors and the Holder of such Allowed Other
Secured Claim shall have agreed upon in writing; (C) reinstatement of the
Allowed Other Secured Claim; or (D) such other treatment as may be permitted so
as to render the Holder of such Allowed Other Secured Claim unimpaired pursuant
to section 1124 of the Bankruptcy Code.

     Any default with respect to any Other Secured Claim that existed
immediately prior to the Petition Date shall be deemed cured upon the Effective
Date.

     (d) Class 3A: Critical Vendor Claims.  The legal, equitable and contractual
rights of the Holders of Critical Vendor Claims, as such rights exist after
giving effect to the agreement entered into for the payment of such Claims
pursuant to and in accordance with the Critical Vendor Order are unaltered by
the Plan. To the extent a Critical Vendor Claim remains outstanding on the
Distribution Date, such Claim shall be paid in accordance with the agreement
entered into pursuant to the Critical Vendor Order.

     (e) Class 3B: Convenience Claims.  On, or as soon as a practicable after,
the later of (i) the Distribution Date or (ii) the date on which a Convenience
Claim becomes an Allowed Convenience Claim, the Holder of such Claim shall
receive in full satisfaction, settlement of, and in exchange for its Allowed
Convenience Claim, payment of its Allowed Convenience Claim in full, in Cash.

     3.3  IMPAIRED CLASSES OF CLAIMS.

     (a) Class 4: Junior Secured Note Claims.  On or as soon as practicable
after the Distribution Date, each Holder of an Allowed Junior Secured Note Claim
shall receive in full satisfaction, settlement of, and in exchange for, its
Allowed Junior Secured Note Claim a New Junior Secured Note in an amount equal
to the sum of (i) the principal amount outstanding with respect to its Junior
Secured Note Claim as of the Petition

                                        10
<PAGE>   86

Date, and (ii) all accrued and unpaid interest through to the Effective Date
calculated at the non-default rate of interest specified in the Junior Secured
Notes. Except for (x) the capitalization of accrued and unpaid interest into the
principal amount of the New Junior Secured Note as herein provided and (y)
certain technical and conforming changes as provided in the Amendment to Junior
Secured Note Indenture, the rights of the Holders of the Junior Secured Note
Claims shall be unaltered by the Plan, subject to the intercreditor agreement
described in Section 9.2(c)(v) hereof.

     (b) Class 5: General Trade Claims.  Except with respect to those Holders of
Allowed General Trade Claims who have elected on their ballots to be treated as
an Allowed Class 6 Claim (or are deemed to have so elected), each Holder of an
Allowed General Trade Claim shall receive, in full satisfaction, settlement of,
and in exchange for, its Allowed Claim payment in Cash from the Debtors in an
amount equal to thirty percent (30%) of its Allowed General Trade Claim. Such
payment shall be made, without interest, in four (4) equal annual installments,
with the first such installment to be made on, or as soon as reasonably
practicable after, the date that is one Business Day after the one year
anniversary of the Effective Date and the remaining three (3) annual
installments to be made on, or as soon as reasonably practicable after, the
first Business Day following each succeeding annual anniversary of the first
such payment.

     (c) Class 6: Impaired Unsecured Claims.  On, or as soon as practicable
after, the later of (i) the Distribution Date or (ii) the date on which such
Impaired Unsecured Claim becomes an Allowed Impaired Unsecured Claim, each
Holder of an Allowed Impaired Unsecured Claim (and each Holder of an Allowed
General Trade Claim in Class 5 that elects to be treated as a Class 6 Claim),
shall receive in full satisfaction, settlement of, and in exchange for, its
Allowed Claim its pro rata share of 10,000,000 shares of New Common Stock and
100% of the Series A Warrants; provided, however, that 100,000 shares of New
Common Stock and 100% of the Series A Warrants shall be reallocated as set forth
below in this Section 3.3(c).

     In connection with a settlement of a General Impaired Unsecured Claim that
is a Disputed Claim, the Debtors, subject to the approval of the Official
Committee and the Noteholder Committee, may agree to treat such Disputed Claim
as a Class 5 Claim and in the manner specified in the settlement agreement
between the Holder of such Disputed Claim and the Debtor(s), provided that such
settlement shall have been approved by order of the Bankruptcy Court.

     Subject to the occurrence of the Effective Date and the terms of Sections
3.4(a), (b) and (c) hereof, the Holders of Allowed Impaired Unsecured Claims in
Class 6 (and each electing Holder of an Allowed General Trade Claim in Class 5)
shall be deemed to have agreed that 100,000 shares of New Common Stock and all
of the Series A Warrants that but for the provisions of this paragraph would be
distributed to them pursuant to the first paragraph of this Section 3.3(c)
instead shall be reallocated for distribution by the Reorganized Debtors or the
Disbursing Agent as follows: (1) 7,300 shares of New Common Stock and Series A
Warrants to acquire an additional 54,750 shares of New Common Stock shall be
allocated, in the aggregate, to Holders of Allowed Preferred Stock Interests in
Class 7; and (2) 92,700 shares of New Common Stock and Series A Warrants to
acquire 695,250 additional shares of New Common Stock shall be allocated, in the
aggregate, to Holders of Allowed Old Common Stock Interests in Class 8 and
Allowed Securities Claims, if any, in Class 9. Notwithstanding the foregoing, if
and to the extent the Bankruptcy Court determines that as a result of the
inclusion of this provision in the Plan, the Plan cannot be confirmed, the
Debtors shall treat this provision of the Plan as a nullity. In such event,
provided that the Plan otherwise meets the requirements for confirmation
provided by the Bankruptcy Code, the Plan shall be confirmed as if the
provisions were never included herein.

     3.4  IMPAIRED CLASS OF INTERESTS.

     (a) Class 7: Preferred Stock Interests.  On the Effective Date, the
Preferred Stock Interests shall be extinguished and cancelled and no
distributions shall be made to the Holders thereof on account of such Preferred
Stock Interests. Notwithstanding the foregoing, each Holder of an Allowed
Preferred Stock Interest shall receive from the shares and warrants to be
reallocated by Holders of Allowed Class 6 Claims pursuant to Section 3.3(c) of
the Plan, a pro rata share of 7,300 shares of New Common Stock and Series A
Warrants to acquire 54,750 shares of New Common Stock, with such distribution to
occur on, or as soon as practicable

                                        11
<PAGE>   87

after, the later of (i) the Distribution Date or (ii) the date such Preferred
Stock Interest becomes an Allowed Interest.

     Notwithstanding the foregoing, if the Bankruptcy Court determines that, as
a result of the inclusion in the Plan of the reallocation provisions set forth
in Section 3.3(c) of the Plan, the Plan cannot be confirmed, the Plan shall be
deemed to be automatically amended to delete such reallocation provision and, in
such event, the Holders of Allowed Preferred Stock Interests shall not receive
any New Common Stock or Series A Warrants.

     (b) Class 8: Old Common Stock Interests.  On the Effective Date, the Old
Common Stock Interests shall be extinguished and cancelled and there shall be no
distributions shall be made to the Holders of such Old Common Stock Interests.
Notwithstanding the foregoing, each Holder of an Allowed Old Common Stock
Interest shall receive, together with Holders of Allowed Class 9 Claims, from
the shares and warrants to be reallocated by the Holders of Allowed Class 6
Claims pursuant to Section 3.3(c) of the Plan, a pro rata share of 92,700 shares
of New Common Stock and Series A Warrants to acquire up to 695,250 shares of New
Common Stock, with such distribution to occur on, or as soon as practicable
after, the later of (i) the Distribution Date and (ii) the date such Old Common
Stock Interest becomes an Allowed Interest.

     Notwithstanding the foregoing, if the Bankruptcy Court determines that as a
result of the inclusion of the reallocation provisions set forth in Section
3.3(c) of the Plan, the Plan cannot be confirmed, the Plan shall be deemed to be
automatically amended to delete such reallocation provision and, in such event,
the Holders of Allowed Old Common Stock Interests shall not receive any New
Common Stock or Series A Warrants.

     (c) Class 9: Securities Claims.  The Holders of Allowed Securities Claims
will receive no distributions on account of their Claims. Notwithstanding the
foregoing, each Holder of an Allowed Securities Claim, if any, shall receive
together with Holders of Allowed Class 8 Interests, from the shares and warrants
to be reallocated by Holders of Allowed Class 6 Claims pursuant to Section
3.3(c) of the Plan, a pro rata share of the shares of New Common Stock and
Series A Warrants specified in Section 3.4 (b) hereof with such distribution to
occur on, or as soon as practicable after, the later of (i) the Distribution
Date and (ii) the date all Class 8 Interests and Class 9 Claims are Allowed or
disallowed. The Debtors do not believe there are any Securities Claims and,
therefore, any Securities Claims Filed will be objected to by the Debtors.

     Notwithstanding the foregoing, if the Bankruptcy Court determines that, as
a result of the inclusion of the reallocation provision set forth in Section
3.3(c) of the Plan, the Plan cannot be confirmed, the Plan shall be deemed to be
automatically amended to delete such reallocation provision and, in such event,
the Holders of Allowed Securities Claims shall not receive any New Common Stock
or Series A Warrants.

     (d) Class 10: Old Rights and Warrants.  On the Effective Date, the Old
Rights and Warrants will be extinguished and cancelled and the Holders of Old
Rights and Warrants shall not receive any distribution or retain any rights on
account of such Interests under the Plan.

     (e) Class 11: Subsidiary Interests.  On the Effective Date, all Subsidiary
Interests (direct and indirect) in each Reorganized Subsidiary Debtor shall vest
in Reorganized MTLM and each Reorganized Subsidiary Debtor shall be vested with
Subsidiary Interests (if any) in any other Reorganized Subsidiary Debtor
equivalent to the Subsidiary Interests (if any) that had been held by the
corresponding Subsidiary Debtor.

     3.5  RETENTION OF DEFENSES REGARDING CLAIMS.  Except as otherwise provided
in the Plan, nothing shall affect the Debtors' or the Reorganized Debtors'
rights and defenses, both legal and equitable, with respect to any Claims,
including, but not limited to, all rights with respect to legal and equitable
defenses to setoffs or recoupments against Claims.

                                        12
<PAGE>   88

                                   ARTICLE IV

                      MEANS FOR IMPLEMENTATION OF THE PLAN

     4.1  LIMITED SUBSTANTIVE CONSOLIDATION FOR PURPOSES OF TREATING IMPAIRED
CLAIMS.

     (a) Substantive Consolidation.  The Substantive Consolidation Order shall
contain one or more provisions substantively consolidating the Estates solely
for the purposes of treating Class 4, 5 and 6 Claims under the Plan, including
for voting, confirmation and distribution purposes. The Plan does not
contemplate the substantive consolidation of the Estates with respect to the
other Classes of Claims or Interests set forth in the Plan, or for any other
purpose. On the Effective Date and except as otherwise provided in the Plan, (i)
all guarantees of any Debtor of the payment, performance or collection of
another Debtor with respect to Class 4, 5 and 6 Claims shall be deemed
eliminated and cancelled, (ii) any obligation of any Debtor and all guaranties
with respect to Class 4, 5 and 6 Claims thereof executed by one (1) or more of
the other Debtors shall be treated as a single obligation and any obligation of
two or more Debtors, and all multiple Claims against such entities on account of
such joint obligations shall be treated and Allowed only as a single Claim
against the consolidated Debtors, and (iii) each Class 4, 5 and 6 Claim filed or
to be filed against any Debtor shall be deemed filed against the consolidated
Debtors and shall be deemed a single Class 4, 5 and 6 Claim against and a single
obligation of the consolidated Debtors. On the Effective Date, and in accordance
with the terms of the Plan and the consolidation of the assets and liabilities
of the Debtors, all Class 4, 5 and 6 Claims based upon guaranties of collection,
payment or performance made by the Debtors as to the obligations of another
Debtor shall be released and of no further force and effect. Except as set forth
in this Section 4.1, such substantive consolidation shall not (other than for
purposes related to the Plan) (w) affect the legal and corporate structures of
the Reorganized Debtors, (x) cause any Debtor to be liable under the Plan for
any Claim for which it otherwise is not liable, and the liability for any such
Claim shall not be affected by such substantive consolidation, (y) affect
Intercompany Claims of Debtors against Debtors, or (z) affect Interests in
Subsidiary Debtors. On the Effective Date, the Intercompany Claims of Debtors
against Debtors shall be reinstated or discharged and satisfied, at the option
of the Reorganized Debtors, by contributions, distributions or otherwise. On the
Effective Date, except as otherwise expressly provided for in the Plan, the
Interests in the Subsidiary Debtors shall remain outstanding.

     (b) Substantive Consolidation Order.  Unless the Bankruptcy Court has
approved the substantive consolidation of the Estates by a prior order, this
Plan shall serve as, and shall be deemed to be, a motion for entry of an order
substantively consolidating the Debtors as provided in Section 4.1(a) hereof. If
no objection to substantive consolidation is timely filed and served by any
Holder of an Impaired Claim affected by the Plan as provided herein on or before
the deadline for objection to confirmation of the Plan, the Substantive
Consolidation Order (which may be the Confirmation Order) may be entered by the
Bankruptcy Court. If any such objections are timely filed and served, a hearing
with respect to the substantive consolidation of the Estates and the objections
thereto shall be scheduled by the Bankruptcy Court, which hearing may, but is
not required to, coincide with the Confirmation Hearing.

     4.2  CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED
DEBTORS.  After the Effective Date the Reorganized Debtors shall continue to
exist as separate legal entities in accordance with applicable law in the
respective jurisdictions in which they are incorporated or organized and
pursuant to their respective Amended Certificates of Incorporation and By-Laws.
Notwithstanding anything to the contrary in this Plan, including Section 4.1
hereof as to substantive consolidation, the Unimpaired Claims of a particular
Debtor or Reorganized Debtor shall remain the obligations solely of such Debtor
or Reorganized Debtor and shall not become obligations of any other Debtor or
Reorganized Debtor by virtue of the Plan, the Chapter 11 Cases or otherwise.
Except as otherwise provided in the Plan, on and after the Effective Date, all
property of the Estates of the Debtors, including all Litigation Claims and any
property acquired by the Debtors or the Reorganized Debtors under or in
connection with the Plan, shall vest in the Reorganized Debtors free and clear
of all Claims, liens, charges, other encumbrances and interests subject,
however, to all claims, liens, charges and other encumbrances arising under the
New Credit Agreement and the New Credit Financing Documents. On and after the
Effective Date, the Reorganized Debtors may operate their businesses and may
use, acquire and dispose of property and, subject to Article VIII hereof,
compromise or settle any Claims,
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<PAGE>   89

without supervision of or approval by the Bankruptcy Court and free and clear of
any restrictions of the Bankruptcy Code or the Bankruptcy Rules, other than
restrictions expressly imposed by the Plan or the Confirmation Order. Without
limiting the foregoing, the Reorganized Debtors may pay the charges that they
incur on or after the Effective Date for Professionals' fees, disbursements,
expenses or related support services without application to the Bankruptcy
Court.

     4.3  CORPORATE GOVERNANCE, DIRECTORS AND CORPORATE ACTION.

     (a) Certificates of Incorporation and By-laws.  The Amended Certificates of
Incorporation and By-Laws shall satisfy the provisions of the Plan and the
Bankruptcy Code (as so amended, the "Amended Certificates of Incorporation and
By-laws"), and shall include, among other things, (i) pursuant to section
1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of
non-voting equity securities, but only to the extent required by section
1123(a)(6) of the Bankruptcy Code; and (ii) authorize the issuance of New Common
Stock, Series A Warrants and the Management Warrants in amounts not less than
the amounts necessary to permit the distributions thereof required or
contemplated by the Plan. After the Effective Date, the Reorganized Debtors may
amend and restate the Amended Certificates of Incorporation and Bylaws as
permitted by applicable law.

     (b) Directors of the Reorganized Debtors.  On the Effective Date, the board
of directors of Reorganized MTLM shall have five (5) members, consisting of the
Chief Executive Officer of MTLM, Albert A. Cozzi, and four (4) directors
designated by the Noteholder Committee. Unless otherwise directed by the board
of directors of Reorganized MTLM, the board of directors of each of the
Reorganized Subsidiary Debtors shall be the same as the board of such entity
immediately prior to the Effective Date. Pursuant to section 1129(a)(5) of the
Bankruptcy Code, the Noteholder Committee will identify and the Debtors will
disclose, not later than five (5) days prior to the Confirmation Date, the
identity and affiliations of the persons proposed to serve on the initial board
of directors of Reorganized MTLM. Subject to the Amended Certificates of
Incorporation and By-Laws and applicable non-bankruptcy law, the Noteholder
Committee shall designate the length of term of each of its designated
directors. The classification and composition of the board of directors of each
of the Reorganized Debtors shall be consistent with the Amended Certificates of
Incorporation and By-laws. Each such director and officer shall serve from and
after the Effective Date pursuant to the terms of the Amended Certificates of
Incorporation and By-laws, the other constituent documents of the Reorganized
Debtors, and applicable law. The board of directors of MTLM serving immediately
prior to the Effective Date (i) shall appoint the nominee directors for the
board of directors of Reorganized MTLM, as herein provided, and (ii) will be
deemed to have resigned on the Effective Date.

     (c) Corporate Action.  On the Effective Date, the adoption of the Amended
Certificates of Incorporation or similar constituent documents, the selection of
directors and officers for the Reorganized Debtors, the execution of and entry
into the New Credit Financing Documents and all other actions contemplated by
the Plan 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 Debtors or the Reorganized Debtors, and any corporate
action required by the Debtors or the 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 the Reorganized Debtors. On the Effective Date, the appropriate
officers of the Debtors or the Reorganized Debtors and members of the boards of
directors of the Debtors or the Reorganized Debtors are authorized and directed
to issue, execute and deliver the agreements, documents, securities and
instruments contemplated by the Plan.

     4.4  CANCELLATION OF NOTES, INSTRUMENTS AND COMMON STOCK.  On the Effective
Date, except as otherwise provided for herein, (i) the Junior Secured Notes,
Subordinated Notes, the Series B Preferred Stock, the Series C Preferred Stock,
Old Common Stock, the Old Rights and Warrants, any other notes, indentures or
other instruments or documents evidencing or creating any indebtedness or
obligations of a Debtor, except such notes or other instruments evidencing
indebtedness or obligations of a Debtor that are reinstated or amended and
restated under the Plan, shall be cancelled, and (ii) the obligations of the
Debtors under any agreements, indentures or certificates of designation
governing such indebtedness and Interests and any other notes, indentures or
other instruments or documents (including the obligations of the Debtors under

                                        14
<PAGE>   90

any shareholder agreements) evidencing or creating any indebtedness or
obligations of a Debtor shall be discharged, except for (x) such notes or other
instruments evidencing indebtedness or obligations of a Debtor that are
reinstated or amended and restated under the Plan and (y) the fees and expenses
of the Trustees under the applicable indenture which shall be paid as provided
in Section 1.1 of this Plan. As of the Effective Date, all Preferred Stock, Old
Common Stock, Old Rights and Warrants and any Interests that have been
authorized to be issued but that have not been issued shall be deemed cancelled
and extinguished without any further action of any party. Notwithstanding any of
the foregoing, in the event either of the Trustees serve as Disbursing Agent
with respect to disbursements to Holders of Subordinated Note Claims or Junior
Secured Claims, as applicable, then the portion of such Trustee's indenture
relating to distributions of trust property and reimbursement of the trustee's
fees and expenses relating thereto shall remain in effect until all such
distributions under this Plan have been completed.

     4.5  ISSUANCE OF NEW SECURITIES AND RELATED DOCUMENTS.  On the Effective
Date, the Company shall issue the New Common Stock, Series A Warrants and New
Junior Secured Notes to be distributed pursuant to the Plan without further act
or action under applicable law, regulation, order or rule. All documents,
agreements and instruments entered into on or as of the Effective Date
contemplated by or in furtherance of the Plan, including without limitation, the
New Credit Agreement, the New Credit Financing Documents, the Series A Warrant
Agreement, the Amendment to the Junior Secured Note Indenture, the Management
Equity Incentive Plan and any other agreement entered into in connection with
the foregoing, shall become effective and binding in accordance with their
respective terms and conditions.

     4.6  EXIT FINANCING AND THE NEW CREDIT AGREEMENT.  On the Effective Date,
the Reorganized Debtors shall be authorized and directed to enter into the Exit
Facility and to enter into and execute the New Credit Agreement, the New Credit
Financing Documents and any notes, documents or agreements in furtherance
thereof. The rights and obligations of the lenders that are parties to the New
Credit Agreement shall be governed by the terms of the New Credit Agreement and
such other documents, agreements and instruments as may be executed and
delivered pursuant thereto or in connection therewith.

     4.7  LISTING OF NEW COMMON STOCK; REGISTRATION RIGHTS AGREEMENT.  On the
Effective Date, Reorganized MTLM shall be authorized and directed to use its
commercially reasonable best efforts to cause the shares of New Common Stock
issued hereunder to be listed on a national securities exchange or quoted in the
national market system (or small cap system) of the National Association of
Securities Dealers' Automated Quotation System. In addition, if requested by the
Noteholder Committee, Reorganized MTLM shall enter into the Registration Rights
Agreement pursuant to which it will use commercially reasonable efforts to (i)
cause to be filed with the Securities and Exchange Commission a registration
statement on Form 10 under the Exchange Act with respect to the New Common
Stock, and (ii) take such other actions and file such other documents as are
specified in the Registration Rights Agreement.

     4.8  MANAGEMENT EQUITY INCENTIVE PLAN.  On the Effective Date, Reorganized
MTLM shall be authorized and directed to adopt, execute and perform its
obligations pursuant to the Management Equity Incentive Plan, including, without
limitation, the issuance of the Management Warrants, in accordance with the
terms thereof.

     4.9  SOURCES OF CASH FOR PLAN DISTRIBUTIONS.  Except as otherwise provided
in the Plan or the Confirmation Order, all Cash necessary for Reorganized
Debtors to make payments pursuant to the Plan shall be obtained from existing
Cash balances, the operations of the Debtors and the Reorganized Debtors or from
loans to be advanced to or for the benefit of the Reorganized Debtors pursuant
to the New Credit Agreement.

     4.10  RISK MANAGEMENT PROGRAM.  On the Effective Date the Reorganized
Debtors shall secure directors and officers liability insurance and adopt a risk
management program, in each case in form and substance reasonably satisfactory
to the Official Committee and the Noteholder Committee and designed, among other
things, to provide adequate protection to the directors and officers of
Reorganized MTLM from liabilities based on past, present or future activities of
the Debtors or the Reorganized Debtors that may, or are alleged to, violate
environmental laws or regulations.

                                        15
<PAGE>   91

                                   ARTICLE V
                      ACCEPTANCE OR REJECTION OF THE PLAN

     5.1  CLASSES ENTITLED TO VOTE.  Classes 4, 5, 6 and 11 are entitled to vote
to accept or reject the Plan. Ballots shall be cast and tabulated on a
consolidated basis, in accordance with the expected limited substantive
consolidation of the Debtors' Estates and Chapter 11 Cases. Classes 7, 8, 9 and
10 are deemed by operation of law to reject the Plan and, therefore, are not
entitled to vote to accept or reject the Plan. The Holders of Claims in Classes
1, 2A, 2B, 3A and 3B are unimpaired under the Plan and are deemed by operation
of law to have accepted the Plan and, therefore, are not entitled to vote to
accept or reject the Plan.

     5.2  CRAMDOWN.  The Debtors will request confirmation of the Plan, as it
may be modified from time to time, under section 1129(b) of the Bankruptcy Code
with respect to Classes 5 and 11 (if it is rejected by such Classes) and with
respect to Classes 7, 8, 9 and 10. The Debtors will not request confirmation of
the Plan at the Confirmation Hearing under Section 1129(b) of the Bankruptcy
Code with respect to Class 6 if the Plan is not accepted by at least two-thirds
(2/3) in the amount of the Claims in Class 6 voting in respect of the Plan;
provided, however, that nothing contained herein shall limit the right of the
Debtors to so request confirmation by motion, with notice and a hearing.

                                   ARTICLE VI
                       PROVISIONS GOVERNING DISTRIBUTIONS

     6.1  DISTRIBUTIONS FOR CLAIMS OR INTERESTS ALLOWED AS OF THE EFFECTIVE
DATE.  Except as otherwise provided herein or as ordered by the Bankruptcy
Court, distributions to be made on account of Claims or Interests that are
Allowed Claims or Allowed Interests as of the Effective Date shall be made on
the Distribution Date or as soon thereafter as is practicable; provided,
however, that DIP Lender Claims and Secured Lender Claims (if any) shall be paid
in full in cash on the Effective Date. Any distribution to be made on the
Effective Date pursuant to this Plan shall be deemed as having been made on the
Effective Date if such distribution is made on the Effective Date or as soon
thereafter as is practicable. Any payment or distribution required to be made
under the Plan on a day other than a Business Day shall be made on the next
succeeding Business Day. Distributions on account of Claims or Interests that
first become Allowed Claims or Interests after the Effective Date shall be made
pursuant to Articles III, VI and VIII of this Plan. Notwithstanding the date on
which any distribution of securities is made to a Holder of a Claim or Interest
that is an Allowed Claim or Allowed Interest on the Effective Date, as of the
date of the distribution such Holder shall be deemed to have the rights of a
Holder of such securities distributed as of the Effective Date.

     6.2  INTEREST ON CLAIMS.  Unless otherwise specifically provided for in the
Plan or Confirmation Order, or required by applicable bankruptcy law,
postpetition interest shall not accrue or be paid on any Claims, and no Holder
of any other Claim shall be entitled to interest accruing on or after the
Petition Date on any such Claim, other than (i) DIP Lender Claims, (ii) Secured
Lender Claims as provided in the Prepetition Credit Agreement, (iii) Class 2B
Claims, as provided in the applicable agreements and (iv) Junior Secured Note
Claims, as provided in the Plan.

     6.3  DISTRIBUTIONS BY REORGANIZED DEBTORS.  Except as otherwise provided
below, the Reorganized Debtors or the Disbursing Agent shall make all
distributions required to be distributed under the Plan. Distribution on account
of Secured Lender Claims shall be made to the Prepetition Agent. Distributions
on account of DIP Lender Claims shall be made to the Agent for the DIP Lenders.
Distributions on account of the Junior Secured Notes will be made by the Junior
Secured Note Indenture Trustee. The Reorganized Debtors may employ or contract
with other entities to assist in or make the distributions required by the Plan.

     6.4  DELIVERY OF DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED
DISTRIBUTIONS.

     (a) Delivery of Distributions in General.  Distributions to Holders of
Allowed Claims and Allowed Interests shall be made at the addresses set forth in
the Debtors' records (or the records of the Trustees) unless such addresses are
superseded by proofs of claim or transfers of claim filed pursuant to the
Bankruptcy
                                        16
<PAGE>   92

Rules. Distributions to Holders of Subordinated Note Claims shall be made to the
legal owners of the Subordinated Notes, as appearing on the books and records of
the Subordinated Note Indenture Trustee as of the Distribution Record Date.

     (b) Undeliverable and Unclaimed Distributions.

          (i) Holding and Investment of Undeliverable and Unclaimed
     Distributions.  If the distribution to any Holder of an Allowed Claim or
     Interest is returned to the Disbursing Agent as undeliverable or is
     otherwise unclaimed, no further distributions shall be made to such Holder
     unless and until the Disbursing Agent is notified in writing of such
     Holder's then current address.

          (ii) After Distributions Become Deliverable.  The Reorganized Debtors
     shall make all distributions that have become deliverable or have been
     claimed since the Distribution Date as soon as practicable after such
     distribution has become deliverable.

          (iii) Failure to Claim Undeliverable Distributions.  Any Holder of an
     Allowed Claim or Interest that does not assert a claim pursuant to the Plan
     for an undeliverable or unclaimed distribution within two (2) years after
     the Effective Date shall be deemed to have forfeited its claim for such
     undeliverable or unclaimed distribution and shall be forever barred and
     enjoined from asserting any such claim for an undeliverable or unclaimed
     distribution against the Debtors or their Estates, Reorganized Debtor or
     their property. In such cases, any Cash for distribution on account of such
     claims for undeliverable or unclaimed distributions shall become the
     property of the Reorganized Debtors free of any restrictions thereon and
     notwithstanding any federal or state escheat laws to the contrary. Any New
     Common Stock held for distribution on account of such Claim or Interest
     shall be canceled and of no further force or effect. Any Series A Warrant
     held for distribution on account of such Interest shall be cancelled and of
     no full force or effect. Nothing contained in the Plan shall require any
     Dis bursing Agent, including, but not limited to, the Reorganized Debtors,
     to attempt to locate any Holder of an Allowed Claim or Interest.

     6.5  RECORD DATE FOR DISTRIBUTIONS.  As of the close of business on the
Distribution Record Date, the transfer register for the Junior Secured Notes,
the Subordinated Notes, the Old Common Stock, the Preferred Stock and the Old
Rights and Warrants, as maintained by the Debtors, any applicable trustee or
their respective agents, shall be closed. The Disbursing Agent will have no
obligation to recognize the transfer of, or the sale of any participation in,
any Allowed Claim or Allowed Interest that occurs after the close of business on
the Distribution Record Date, and will be entitled for all purposes herein to
recognize and distribute only to those Holders of Allowed Claims and Allowed
Interests who are Holders of such Claims or Interest, or participants therein,
as of the close of business on the Distribution Record Date. The Disbursing
Agent and the Reorganized Debtors shall instead be entitled to recognize and
deal for all purposes under the Plan with only those record holders stated on
the official claims register as of the close of business on the Distribution
Record Date.

     6.6  COMPLIANCE WITH TAX REQUIREMENTS.  Any federal, state or local
withholding taxes or amounts required to be withheld under applicable law shall
be deducted from distributions hereunder. All entities holding Claims or
Interests shall be required to provide any information necessary to effect the
withholding of such taxes.

     6.7  ALLOCATION OF PLAN DISTRIBUTIONS BETWEEN PRINCIPAL AND INTEREST.  To
the extent that any Allowed Claim entitled to a distribution under the Plan is
comprised of indebtedness and accrued but unpaid interest thereon, such
distribution shall, for federal income tax purposes, be allocated to the
principal amount of the Claim first and then, to the extent the consideration
exceeds the principal amount of the claim, to the portion of such Claim
representing accrued but unpaid interest.

     6.8  MEANS OF CASH PAYMENT.  Payments of Cash made pursuant to the Plan
shall be in U.S. dollars and shall be made, at the option and in the sole
discretion of the Reorganized Debtors, by (a) checks drawn on or (b) wire
transfer from a domestic bank selected by the Reorganized Debtors. Cash payments
to foreign creditors may be made, at the option of the Reorganized Debtors, in
such funds and by such means as are necessary or customary in a particular
foreign jurisdiction.

                                        17
<PAGE>   93

     6.9  WITHHOLDING AND REPORTING REQUIREMENTS.  In connection with the Plan
and all distributions hereunder, the Reorganized Debtors shall comply with all
withholding and reporting requirements imposed by any federal, state, local or
foreign taxing authority, and all distributions hereunder shall be subject to
any such withholding and reporting requirements. The Reorganized Debtors 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 the Plan (i) each Holder of an Allowed Claim or Allowed
Interest that is to receive a distribution of New Common Stock or Series A
Warrants pursuant to the 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, and (ii) no distribution shall be made to or on behalf of
such Holder pursuant to the Plan unless and until such Holder has made
arrangements satisfactory to the Reorganized Debtors for the payment and
satisfaction of such tax obligations.

     6.10  SETOFFS.  The Reorganized Debtors may, pursuant to section 553 of the
Bankruptcy Code or applicable nonbankruptcy laws, but shall not be required to,
set off against any Claim and the payments or other distributions to be made
pursuant to the Plan in respect of such Claim, Litigation Claims that the
Debtors or the Reorganized Debtors may have against the Holder of such Claim;
provided, however, that neither the failure to do so nor the allowance of any
Claim hereunder shall constitute a waiver or release by the Reorganized Debtors
of any such Litigation Claim that the Debtors or the Reorganized Debtors may
have against such Holder.

     6.11  FRACTIONAL SHARES.  No fractional shares of New Common Stock or
Series A Warrants shall be distributed, and the actual issuance of New Common
Shares or Series A Warrants shall reflect a rounding up (in the case of .50 or
more than .50) of such fraction to the nearest whole New Common Stock share or
Series A Warrant or a rounding down of such fraction (in the case of less than
 .50).

     6.12  SURRENDER OF CANCELLED INSTRUMENTS OR SECURITIES.  Except as provided
below, as a condition precedent to receiving any distribution pursuant to the
Plan on account of an Allowed Claim or Allowed Interest evidenced by the
instruments, securities or other documentation canceled pursuant to Section 4.4
hereof, the Holder of such Claim or Interest shall tender the applicable
instruments, securities or other documentation evidencing such Claim or Interest
to the Reorganized Debtors, unless waived in writing by the Debtors or the
Reorganized Debtors. Any New Common Stock and any Series A Warrants to be
distributed pursuant to the Plan on account of any such Claim or Interest shall,
pending such surrender, be treated as an undeliverable distribution pursuant to
Section 6.4(b) hereof.

     (a) Notes and Common Stock.  Each Holder of a Subordinated Note Claim,
Series B Preferred Stock Interest, Series C Preferred Stock Interest or Old
Common Stock Interest shall tender its Subordinated Notes, Series B Preferred
Stock, Series C Preferred Stock or Old Common Stock relating to such Claim or
Interest to the Reorganized Debtors in accordance with written instructions to
be provided to such Holders by the Reorganized Debtors or the applicable Trustee
as promptly as practicable following the Effective Date. Each Holder of a Junior
Secured Note Claim shall tender its Junior Secured Note to the Junior Secured
Note Indenture Trustee which, in turn, shall provide copies of the Junior
Secured Notes that are surrendered to it to the Reorganized Debtors (unless
waived in writing by the Debtors or Reorganized Debtors). All surrendered Junior
Secured Notes, Subordinated Notes, Series B Preferred Stock, Series C Preferred
Stock or Old Common Stock shall be marked as cancelled.

     (b) Failure to Surrender Cancelled Instruments.  Any Holder of Junior
Secured Notes, Subordinated Notes, Series B Preferred Stock, Series C Preferred
Stock or Old Common Stock that fails to surrender or is deemed to have failed to
surrender the applicable document or instrument required to be tendered
hereunder within two years after the later of the Effective Date or that date on
which such Holder's Claim or Interest becomes Allowed shall have its Claim or
Interest and its distribution pursuant to the Plan on account of such Junior
Secured Notes, Subordinated Notes, Series B Preferred Stock, Series C Preferred
Stock or Old Common Stock discharged and shall be forever barred from asserting
any such Claim or Interest against the Reorganized Debtors or their respective
property. In such cases, any New Common Stock or Series A Warrants held for
distribution on account of such Claim shall be disposed of pursuant to Section
6.4 hereof.

                                        18
<PAGE>   94

     6.13  LOST, STOLEN, MUTILATED OR DESTROYED DEBT SECURITIES.  In addition to
any requirements under the Junior Secured Note Indenture, Subordinated Note
Indenture or any other applicable agreement or any other instructions that may
be provided by the Trustees, any Holder of a Claim or Interest evidenced by a
Junior Secured Note, Subordinated Note, Series B Preferred Stock, Series C
Preferred Stock or Old Common Stock that has been lost, stolen, mutilated or
destroyed shall, in lieu of surrendering such document or instrument, deliver to
the Reorganized Debtors or the applicable Trustee: (i) evidence reasonably
satisfactory to the Reorganized Debtors of the loss, theft, mutilation or
destruction; and (ii) such security or indemnity as may be required by
Reorganized Debtors to hold the Reorganized Debtors harmless from any damages,
liabilities or costs incurred in treating such individual as a Holder of an
Allowed Claim or Allowed Interest. Upon compliance with this Article VI by a
Holder of a Claim or Interest evidenced by a Junior Secured Note, Subordinated
Note, Series B Preferred Stock, Series C Preferred Stock or Old Common Stock,
such Holder, for all purposes under the Plan, shall be deemed to have
surrendered such note, debenture or equity security.

                                  ARTICLE VII
                       TREATMENT OF EXECUTORY CONTRACTS,
                       UNEXPIRED LEASES AND PENSION PLANS

     7.1  ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.  Immediately
prior to the Effective Date, all executory contracts or unexpired leases of the
Reorganized Debtors will be deemed assumed in accordance with the provisions and
requirements of sections 365 and 1123 of the Bankruptcy Code, except those
executory contracts and unexpired leases that (a) have previously been rejected
by order of the Bankruptcy Court, (b) are the subject of a motion to reject
pending on the Effective Date, (c) are identified on a list to be filed with the
Bankruptcy Court on or before the Confirmation Date as to be rejected, or (d)
are rejected pursuant to the terms of the Plan, including without limitation, as
provided in Section 7.5(b) hereof. Entry of the Confirmation Order by the
Bankruptcy Court shall constitute approval of such assumptions and rejections
pursuant to sections 365(a) and 1123 of the Bankruptcy Code. Each executory
contract and unexpired lease assumed pursuant to this Article VII shall re-vest
in and be fully enforceable by the respective Reorganized Debtor in accordance
with its terms, except as otherwise provided in the Plan, or any order of the
Bankruptcy Court authorizing and providing for its assumption.

     7.2  CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED
LEASES.  All proofs of claim with respect to Claims arising from the rejection
of executory contracts or unexpired leases, if any, must be filed with the
Bankruptcy Court within thirty (30) days after the date of entry of an order of
the Bankruptcy Court approving such rejection. Any claims arising from the
rejection of an executory contract or unexpired lease not filed within such time
will be forever barred from assertion against the Debtors or Reorganized
Debtors, their Estates and property unless otherwise ordered by the Bankruptcy
Court. All such Allowed Claims for which proofs of claim are required to be
filed will be, and will be treated as, Allowed General Impaired Unsecured Claims
subject to the provisions of Article III hereof, subject to any limitation on
allowance of such Claims under section 502(b) of the Bankruptcy Code or
otherwise.

     7.3  CURE OF DEFAULTS OF ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED
LEASES.  Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default shall be satisfied,
pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of the default
amount in Cash on the Effective Date or on such other terms as the parties to
such executory contracts or unexpired leases may otherwise agree. In the event
of a dispute regarding: (1) the amount of any cure payments, (2) the ability of
the Reorganized Debtors or any assignee to provide "adequate assurance of future
performance" (within the meaning of section 365 of the Bankruptcy Code) under
the contract or lease 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.

     7.4  INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.  Except with
respect to Claims against such persons that are expressly preserved pursuant to
Article X herein, the obligations of the Debtors to indemnify any person or
entity serving at any time on or prior to the Effective Date as one of their
directors, officers or

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<PAGE>   95

employees by reason of such Person's or Entity's service in such capacity, to
the extent provided in the Debtors' constituent documents or by a written
agreement with the Debtors or the applicable states' general corporation law,
each as applicable, shall be deemed and treated as executory contracts that are
assumed by the Debtors pursuant to the Plan and section 365 of the Bankruptcy
Code as of the Effective Date.

     7.5  COMPENSATION AND BENEFIT PROGRAMS; EMPLOYMENT CONTRACTS; PENSION
PLANS.

     (a) Assumption of Programs and Policies.  Except as otherwise expressly
provided in this Plan and subject to Section 7.5(c), all employment and
severance policies, and all compensation and benefit plans, policies, and
programs of the Debtors applicable to their employees, retirees and non-employee
directors and the employees and retirees of its subsidiaries, including, without
limitation, all savings plans, retirement plans, healthcare plans, disability
plans, severance benefit plans, incentive plans, life and accidental death and
dismemberment insurance plans, are treated as executory contracts under the Plan
and on the Effective Date will be assumed pursuant to the provisions of sections
365 and 1123 of the Bankruptcy Code. The Debtors will continue the Pension Plans
in accordance with ERISA and other applicable law. Notwithstanding section
1141(d)(1)(A) of the Bankruptcy Code and Section 10.3 of this Plan, confirmation
of the Plan will not discharge the Debtors' liability under ERISA with respect
to the Pension Plans.

     (b) Employment Contracts.  Except as otherwise expressly provided in this
Plan and subject to Section 7.5(c), each of the employment contracts between a
Debtor and an employee of such Debtor will be assumed pursuant to the provisions
of section 365 and 1123 of the Bankruptcy Code on the Effective Date. All
employment contracts assumed pursuant to this Section 7.5(b) shall be deemed
modified such that the transactions contemplated by the Plan shall be deemed not
to constitute a "change of control" as defined in, and for the purposes of, the
relevant employment contracts.

     (c) Reservation to Reject.  In accordance with Section 7.1 hereof, the
Debtors reserve the right to reject any compensation and benefit program and any
employment contract prior to the Effective Date pursuant to the provisions of
sections 365 and 1123 of the Bankruptcy Code. The Debtors will so reject a
program or employment contract if the assumption thereof has not been consented
to by the Official Committee and the Noteholder Committee prior to the
Confirmation Date.

                                  ARTICLE VIII

                       PROCEDURES FOR RESOLVING DISPUTED,
                       CONTINGENT AND UNLIQUIDATED CLAIMS

     8.1  OBJECTION DEADLINE; PROSECUTION OF OBJECTIONS.  No later than the
Claims Objection Deadline (unless extended by an order of the Bankruptcy Court),
the Debtors or the Reorganized Debtors, as the case may be, shall file
objections to Claims and Interests with the Bankruptcy Court and serve such
objections upon the Holders of each of the Claims and Interests to which
objections are made; provided, however, the Debtors and Reorganized Debtors
shall not object to Claims Allowed pursuant to the Plan. Nothing contained
herein shall limit the Reorganized Debtors' right to object to Claims or
Interests, if any, filed or amended after the Claims Objection Deadline. The
Debtors and the Reorganized Debtors shall be authorized to, and shall, resolve
all Disputed Claims or Disputed Interests by withdrawing or settling such
objections thereto, or by litigating to judgment (in the Bankruptcy Court or
such other court having jurisdiction) the validity, nature and/or amount
thereof.

     8.2  NO DISTRIBUTIONS PENDING ALLOWANCE.  Notwithstanding any other
provision of the Plan, no payments or distributions shall be made with respect
to all or any portion of a Disputed Claim or Disputed Interest unless and until
all objections to such Disputed Claim or Disputed Interest have been settled or
withdrawn or have been determined by Final Order, and the Disputed Claim or
Disputed Interest, or some portion thereof, has become an Allowed Claim or
Allowed Interest.

     8.3  DISPUTED CLAIMS RESERVE; DISPUTED INTEREST RESERVE.  On the Effective
Date (or as soon thereafter as is practicable), the Reorganized Debtors shall
establish the Disputed Claims Reserve and the Disputed

                                        20
<PAGE>   96

Interest Reserve by withholding from the initial distribution (i) with respect
to the Disputed Claims Reserve, an amount of New Common Stock calculated as if
all Class 6 Claims were Allowed Class 6 Claims, in an amount equal to one
hundred percent (100%) of the distributions to which Holders of Disputed Class 6
Claims would be entitled if their Claims were allowed in their respective
Disputed Claim Amount (including for these purposes any Class 5 Claims that are
to receive treatment as Class 6 Claims); and (ii) with respect to the Disputed
Interest Reserve, an amount of New Common Stock and Series A Warrants calculated
as if all Class 7 and 8 Interests were Allowed Interests and all Class 9 Claims
were Allowed Class 9 Claims, in an amount equal to one hundred percent (100%) of
the distributions to which Holders of Disputed Class 7 and 8 Interests or
Disputed Class 9 Claims would be entitled if their Interest or Claims were
allowed in their respective Disputed Interest Amount or Disputed Claim Amount;
provided, however, that the Debtors and the Reorganized Debtors shall have the
right to file a motion seeking to modify any Disputed Claim Amounts or Disputed
Interest Amounts.

     8.4  DISTRIBUTIONS AFTER ALLOWANCE.  The Reorganized Debtors shall make
payments and distributions from the Disputed Claims Reserve or Disputed Interest
Reserve, as appropriate, to the Holder of any Disputed Claim or Disputed
Interest that has become an Allowed Claim or Allowed Interest, as soon as
practicable after the date such Disputed Claim or Disputed Interest becomes an
Allowed Claim or Allowed Interest. Such distributions shall be based upon the
cumulative distributions that would have been made to the Holder of such Claim
or Interest under the Plan if the Disputed Claim or Disputed Interest had been
Allowed on the Effective Date. After a Final Order has been entered, or other
final resolution has been reached, with respect to each Disputed Claim or
Disputed Interest, any New Common Stock or Series A Warrant that remains in the
Disputed Claims Reserve or Disputed Interest Reserve, as applicable, shall be
distributed (i) with respect to the Disputed Claims Reserve, pro rata to Holders
of Allowed Class 6 Claims; and (ii) with respect to the Disputed Interest
Reserve, to Holders of Allowed Class 7 and 8 Interests and Allowed Class 9
Claims in accordance with the terms of this Plan. All distribution made under
this Section 8.4 shall be made as if such Allowed Claim or Allowed Interest had
been Allowed on the Effective Date.

                                   ARTICLE IX

                   CONFIRMATION AND CONSUMMATION OF THE PLAN

     9.1  CONDITIONS TO CONFIRMATION.  The Bankruptcy Court shall not enter the
Confirmation Order unless and until the Confirmation Order shall be reasonably
acceptable in form and substance to the Debtors, the Official Committee, the
Noteholder Committee and the Agent for the DIP Lenders. The Confirmation Order
shall provide that:

          (i) the Debtors and Reorganized Debtors are authorized and directed to
     take all actions necessary or appropriate to enter into, implement and
     consummate the contracts, instruments, releases, leases, indentures and
     other agreements or documents created in connection with the Plan;

          (ii) the Reorganized Debtors are authorized to issue the New Common
     Stock, Series A Warrants and the Management Warrants and enter into the New
     Credit Agreement and the New Credit Financing Documents; and

          (iii) the New Junior Secured Notes, New Common Stock and Series A
     Warrants issued under the Plan in exchange for Claims against and Interests
     in the Debtors are exempt from registration under the Securities Act of
     1933 pursuant to section 1145 of the Bankruptcy Code, except to the extent
     that Holders thereof are "underwriters" as that term is defined in section
     1145 of the Bankruptcy Code.

     9.2  CONDITIONS TO EFFECTIVE DATE.  The following are conditions precedent
to the occurrence of the Effective Date:

     (a) The Effective Date shall occur on or before June 30, 2001.

                                        21
<PAGE>   97

     (b) The Confirmation Order confirming the Plan, as such Plan may have been
modified, shall be in full force and effect and shall not have been vacated,
amended, modified or stayed, and if it is the subject of any appeal,
reconsideration or other review, no stay of the Confirmation Order shall be in
effect.

     (c) The following agreements, in form and substance satisfactory to the
Reorganized Debtors, the Agent for the DIP Lenders, the Official Committee and
the Noteholder Committee, shall have been executed and delivered, and all
conditions precedent to the effectiveness thereof shall have been satisfied:

          (i) Amended Certificates of Incorporation and By-Laws of the
     Reorganized Debtors;

          (ii) New Credit Agreement, New Financing Documents and all documents
     provided for therein or contemplated thereby;

          (iii) Series A Warrant Agreement, and all similar documents provided
     for therein or contemplated thereby;

          (iv) Amendment to Junior Secured Note Indenture;

          (v) an agreement, substantially similar to that certain Intercreditor
     Agreement, dated as of May 7, 1999, between the Prepetition Agent and the
     trustee for the Junior Secured Notes, providing for subordination of the
     New Junior Secured Notes to the indebtedness evidenced by the New Credit
     Agreement;

          (vi) Management Equity Incentive Plan; and

          (vii) Registration Rights Agreement.

     (d) The Amended Certificates of Incorporation and By-Laws of the
Reorganized Debtors shall have been adopted, and, as necessary, shall have been
filed (or are in form for immediate filing) with the applicable authority of
each entity's jurisdiction of incorporation in accordance with such
jurisdiction's corporation laws.

     (e) All actions, documents and agreements necessary to implement the Plan
shall have been effected or executed.

     (f) The new board of directors of Reorganized MTLM shall have been
appointed.

     9.3  WAIVER OF CONDITIONS.  Each of the conditions set forth in Section 9.2
above may be waived in whole or in part by the Debtors, with the written consent
of the Official Committee, the Noteholder Committee and the Agent for the DIP
Lender, without any other notice to parties in interest or the Bankruptcy Court
and without a hearing. The failure of a Debtor or Reorganized Debtor to exercise
any of the foregoing rights shall not be deemed a waiver of any other rights,
and each right shall be deemed an ongoing right that may be asserted at any
time.

     9.4  CONSEQUENCES OF NON-OCCURRENCE OF EFFECTIVE DATE.  If the Effective
Date does not occur (i) on or before June 30, 2001 (in which case the DIP
Lenders shall be entitled to exercise any and all rights under the DIP Financing
Documents); or (ii) by such later date, after notice and hearing, as is proposed
by the Debtors (with the written consent of the Agent for the DIP Lenders, the
Official Committee and the Noteholders Committee) and approved by the Bankruptcy
Court, then upon motion by the Debtors and upon notice to such parties in
interest as the Bankruptcy Court may direct, the Confirmation Order will be
vacated by the Bankruptcy Court; provided, however, that, notwithstanding the
filing of such motion, the Confirmation Order may not be vacated if the
Effective Date occurs before the Bankruptcy Court enters an order granting such
motion. If the Confirmation Order is vacated pursuant to this Section 9.4, (a)
the Plan shall be null and void in all respects; (b) any settlement of Claims
and Interests provided for hereby shall be null and void without further order
of the Bankruptcy Court; (c) the time within which the Debtors may assume and
assign or reject all executory contracts and unexpired leases shall be extended
for a period of sixty (60) days after the date the Confirmation Order is
vacated, subject to such further extension as the Bankruptcy Court may order;
and (d) the Agent for the DIP Lenders and the DIP Lenders can exercise all
rights and remedies under the DIP Financing Documents and applicable law and the
Agent for the DIP Lenders and the DIP Lenders shall not be subject to the
automatic stay provisions of 11 U.S.C. sec. 362 or any injunction of any kind.

                                        22
<PAGE>   98

                                   ARTICLE X

                          EFFECT OF PLAN CONFIRMATION

     10.1  BINDING EFFECT.  The Plan shall be binding upon and inure to the
benefit of the Debtors, all present and former Holders of Claims and Interests,
and their respective successors and assigns, including, but not limited to, the
Reorganized Debtors.

     10.2  RELEASES BY THE DEBTORS.

     (a) As of the Effective Date, for good and valuable consideration, the
adequacy of which is hereby confirmed, the Debtors and Reorganized Debtors in
their individual capacities and as debtors in possession will be deemed to
release forever, waive and discharge all claims, obligations, suits, judgments,
damages, demands, debts, rights, causes of action and liabilities (other than
the rights of the Debtors or Reorganized Debtors to enforce the Plan, the Plan
Documents and other agreements or documents delivered thereunder) whether known
or unknown, foreseen or unforeseen, then existing or thereafter arising, in law,
equity or otherwise that are based in whole or part on any act, omission,
transaction, event or other occurrence taking place on or prior to the Effective
Date in any way relating to the Debtors, the Reorganized Debtors, the Chapter 11
Cases, or the Plan or the Disclosure Statement, and that could have been
asserted by or on behalf of the Debtors or their Estates or the Reorganized
Debtors against the Prepetition Agent, Prepetition Lenders, Agent for the DIP
Lenders or DIP Lenders, the Trustees, current and former directors, officers and
employees of the Debtors; provided, however, that such release and waiver of
claims shall not be applicable to (i) avoidance actions against such current and
former directors, officers and employees of the Debtors listed in section 550
(a) of the Bankruptcy Code, (ii) obligations of such officers, director or
employees to any of the Debtors in respect of borrowed money, employment
contracts, or consulting contracts, (iii) the receipt by such officers, director
or employee of transfers from the Debtors, direct or indirect, in connection
with acquisitions by Debtors of subsidiaries, business enterprises or other
material assets (or other express contractual obligations under such acquisition
agreements), and (iv) any acts or omissions that constitute gross negligence,
fraud, or willful misconduct.

     (b) Injunction Related to Releases.  The Confirmation Order will
permanently enjoin the commencement or prosecution by any entity, whether
directly, derivatively or otherwise, of any claims, obligations, suits,
judgments, damages, demands, debts, rights, causes of action or liabilities
released pursuant to the Plan, including but not limited to the claims,
obligations, suits, judgments, damages, demands, debts, rights, causes of action
or liabilities released in this Section 10.2 of this Plan.

     10.3  DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS.  Except as
otherwise provided herein or in the Confirmation Order, all consideration
distributed under the Plan shall be in exchange for, and in complete
satisfaction, settlement, discharge and release of, all Claims (other than those
Claims that are Unimpaired under the Plan) of any nature whatsoever against the
Debtors or any of their assets or properties, and regardless of whether any
property shall have been distributed or retained pursuant to the Plan on account
of such Claims. Upon the Effective Date, the Debtors, and each of them, shall be
deemed discharged and released under section 1141(d)(1)(A) of the Bankruptcy
Code from any and all Claims (other than Claims that are not Impaired),
including, but not limited to, demands and liabilities that arose before the
Confirmation Date, and all debts of the kind specified in section 502(g), 502(h)
or 502(i) of the Bankruptcy Code, and the Preferred Stock, the Old Common Stock
and Old Rights and Warrants, and all Interests relating to any of the foregoing,
shall be terminated, extinguished and cancelled.

     10.4  PRESERVATION OF RIGHTS OF ACTION; SETTLEMENT OF LITIGATION CLAIMS.

     Preservation of Rights of Action.  Except as otherwise provided in the
Plan, the Confirmation Order or in any document, instrument, release or other
agreement entered into in connection with the Plan, in accordance with section
1123(b) of the Bankruptcy Code, the Debtors and their Estates shall retain the
Litigation Claims. The Reorganized Debtors, as the successors in interest to the
Debtors and the Estates, may enforce, sue on, settle or compromise any or all of
the Litigation Claims or, in the exercise of their discretion,

                                        23
<PAGE>   99

may determine not to pursue any or all Litigation Claims. The Reorganized
Debtors shall retain and may enforce all defenses, counterclaims and rights
asserted against the Debtors or their Estates.

     10.5  EXCULPATION AND LIMITATION OF LIABILITY.  Neither the Debtors, the
Noteholder Committee, the Official Committee, the Prepetition Lenders, the DIP
Lenders, the Agent for the DIP Lenders, the Trustees, nor any of their
respective present or former members, officers, directors, shareholders,
employees, advisors, attorneys or agents acting in such capacity, shall have or
incur any liability to, or be subject to any right of action by, any person or
entity, for any act or omission in connection with, relating to, or arising out
of, the Chapter 11 Cases, 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, except for their fraud, willful misconduct or gross
negligence, and in all respects shall be entitled to rely reasonably upon the
advice of counsel with respect to their duties and responsibilities under the
Plan.

     10.6  INJUNCTION.  Except as otherwise provided in the Plan, the
Confirmation Order shall provide, among other things, that from and after the
Confirmation Date all Persons who have held, hold or may hold Claims against or
Interests in the Debtors are (i) permanently enjoined from taking any of the
following actions against the Estate(s), or any of their property, on account of
any such Claims or Interests and (ii) permanently enjoined from taking any of
the following actions against any of the Debtors, the Reorganized Debtors or
their property on account of such Claims or Interests: (1) commencing or
continuing, in any manner or in any place, any action or other proceeding; (2)
enforcing, attaching, collecting or recovering in any manner any judgment,
award, decree or order; (3) creating, perfecting or enforcing any lien or
encumbrance; (4) asserting a setoff, right of subrogation or recoupment of any
kind against any debt, liability or obligation due to the Debtors; and (5)
commencing or continuing, in any manner or in any place, any action that does
not comply with or is inconsistent with the provisions of the Plan; provided,
however, that nothing contained herein shall preclude such persons from
exercising their rights pursuant to and consistent with the terms of this Plan
and the Plan Documents.

     10.7  TERM OF BANKRUPTCY INJUNCTION OR STAYS.  All injunctions or stays
provided for in the Chapter 11 Cases under section 105 or 362 of the Bankruptcy
Code, or otherwise, and in existence on the Confirmation Date, shall remain in
full force and effect until the Effective Date.

     10.8  TERMINATION OF SUBORDINATION RIGHTS AND SETTLEMENT OF RELATED CLAIMS.

     (a) Consideration of Subordinated Claims. The classification and manner of
satisfying all Claims and Interests under the Plan take into consideration all
subordination rights, whether arising by contract or under general principles of
equitable subordination, sections 510(b) or 510(c) of the Bankruptcy Code, or
otherwise. All subordination rights that a Holder of a Claim or Interest may
have with respect to any distribution to be made pursuant to the Plan will be
discharged and terminated, and all actions related to the enforcement of such
subordination rights will be permanently enjoined. Accordingly, distributions
pursuant to the Plan to Holders of Allowed Claims or Allowed Interests will not
be subject to payment to a beneficiary of such terminated subordination rights,
or to levy, garnishment, attachment or other legal process by a beneficiary of
such terminated subordination rights.

     (b) Satisfaction and Waiver of Subordination Claims.  All Claims of holders
of "Senior Debt" (as such term is defined in the Junior Secured Note Indenture
and the Subordinated Note Indenture) against the Debtors, and all rights and
claims between or among the Holders of such Senior Debt and the Junior Secured
Note Holders or the Subordinated Note Holders, relating in any manner whatsoever
to claimed subordination rights, "make-whole" rights, rights to postpetition or
default interest or similar rights, if any (collectively "Subordination-Related
Rights"), shall be deemed satisfied by the distributions under, described in,
contemplated by, and/or implemented by this Plan to Holders of such Claims, and
such rights shall be deemed waived, released, discharged and terminated as of
the Effective Date, and all actions related to the enforcement of such
Subordination-Related Rights shall be permanently enjoined. Distributions under,
described in, contemplated by and/or implemented by this Plan shall not be
subject to levy, garnishment, attachment or like legal process by any Holder of
a Claim, by reason of any claimed Subordination-Related Rights or otherwise, so
that each Holder of a Claim shall have and receive the benefit of the
distributions in

                                        24
<PAGE>   100

the manner set forth and described in this Plan. Nothing contained herein shall
affect any subordination related rights that are created by, or pursuant to, the
Junior Secured Note Indenture, as amended by the Amendment to Junior Secured
Note Indenture, or other Plan Documents.

     (c) Settlement and Compromise of Subordination Claims.  Pursuant to
Bankruptcy Rule 9019 and in consideration of the distributions and other
benefits provided under the Plan, the provisions of the Plan will constitute a
good faith compromise and settlement of all claims or controversies relating to
the subordination rights that a Holder of a Claim (including, but not limited
to, a Holder of a Secured Lender Claim, Junior Secured Note Claim or a
Subordinated Note Claim), may have or any distribution to be made pursuant to
the Plan on account of such Claim. Entry of the Confirmation Order will
constitute the Bankruptcy Court's approval, as of the Effective Date, of the
compromise or settlement of all such claims or controversies and the Bankruptcy
Court's finding that such compromise or settlement is in the best interests of
the Debtors, the Reorganized Debtors, and their respective properties and
Holders of Claims and Interests, and is fair, equitable and reasonable.

                                   ARTICLE XI

                           RETENTION OF JURISDICTION

     Pursuant to sections 105(c) and 1142 of the Bankruptcy Code and
notwithstanding entry of the Confirmation Order and the occurrence of the
Effective Date, the Bankruptcy Court will retain exclusive jurisdiction over all
matters arising out of, and related to, the Chapter 11 Cases and the Plan to the
fullest extent permitted by law, including, among other things, jurisdiction to:

          (a) Allow, disallow, determine, liquidate, classify, estimate or
     establish the priority or secured or unsecured status of any Claim or
     Interest, including the resolution of any request for payment of any
     Administrative Claim and the resolution of any objections to the allowance
     or priority of Claims or Interests;

          (b) Resolve any matters related to the assumption, assumption and
     assignment, or rejection of any executory contract or unexpired lease to
     which any Debtor is a party or with respect to which any Debtor or any
     Reorganized Debtor may be liable and to hear, determine and, if necessary,
     liquidate any Claims arising therefrom;

          (c) Resolve any matters related to the Critical Vendor Order,
     including, without limitation, any dispute regarding a critical vendor's
     performance in respect of the agreement such person or entity must enter
     into with the applicable Debtor under the terms of the Critical Vendor
     Order;

          (d) Ensure that distributions to Holders of Allowed Claims and Allowed
     Interests are accomplished pursuant to the provisions of the Plan;

          (e) Decide or resolve any motions, adversary proceedings, contested or
     litigated matters and any other matters and grant or deny any applications
     involving the Debtors that may be pending on the Effective Date;

          (f) Enter such orders as may be necessary or appropriate to implement
     or consummate the provisions of the Plan and all contracts, instruments,
     releases and other agreements or documents created in connection with the
     Plan, the Disclosure Statement or the Confirmation Order;

          (g) Resolve any cases, controversies, suits or disputes that may arise
     in connection with the consummation, interpretation or enforcement of the
     Plan or any contract, instrument, release or other agreement or document
     that is executed or created pursuant to the Plan, or any entity's rights
     arising from or obligations incurred in connection with the Plan or such
     documents;

          (h) Modify the Plan before or after the Effective Date pursuant to
     section 1127 of the Bankruptcy Code or modify the Disclosure Statement, the
     Confirmation Order or any contract, instrument, release or other agreement
     or document created in connection with the Plan, the Disclosure Statement
     or the

                                        25
<PAGE>   101

     Confirmation Order, or remedy any defect or omission or reconcile any
     inconsistency in any Bankruptcy Court order, the Plan, the Disclosure
     Statement, the Confirmation Order or any contract, instrument, release or
     other agreement or document created in connection with the Plan, the
     Disclosure Statement or the Confirmation Order, in such manner as may be
     necessary or appropriate to consummate the Plan;

          (i) Grant or deny any applications for allowance of compensation or
     reimbursement of expenses authorized pursuant to the Bankruptcy Code or the
     Plan for periods ending on or before the Effective Date, including all
     applications for compensation and reimbursement of expenses of
     Professionals under the Plan or under sections 330, 331 503(b), 1103 and
     1129(c)(9) of the Bankruptcy Code; provided, however, that from and after
     the Effective Date the payment of fees and expenses of the Reorganized
     Debtors, including counsel fees, shall be made in the ordinary course of
     business and shall not be subject to the approval of the Bankruptcy Court;

          (j) Issue injunctions, enter and implement other orders or take such
     other actions as may be necessary or appropriate to restrain interference
     by any entity with consummation, implementation or enforcement of the Plan
     or the Confirmation Order;

          (k) Hear and determine Litigation Claims;

          (l) Hear and determine matters concerning state, local and federal
     taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;

          (m) Enter and implement such orders as are necessary or appropriate if
     the Confirmation Order is for any reason or in any respect modified,
     stayed, reversed, revoked or vacated or distributions pursuant to the Plan
     are enjoined or stayed;

          (n) Determine any other matters that may arise in connection with or
     relate to the Plan, the Disclosure Statement, the Confirmation Order or any
     contract, instrument, release or other agreement or document created in
     connection with the Plan, the Disclosure Statement or the Confirmation
     Order;

          (o) Enforce all orders, judgments, injunctions, releases,
     exculpations, indemnifications and rulings entered in connection with the
     Chapter 11 Cases;

          (p) Hear and determine all matters related to the property of the
     Estates from and after the Confirmation Date;

          (q) Hear and determine such other matters as may be provided in the
     Confirmation Order or as may be authorized under the Bankruptcy Code; and

          (r) Enter an order closing the Chapter 11 Cases.

                                  ARTICLE XII

                            MISCELLANEOUS PROVISIONS

     12.1  EFFECTUATING DOCUMENTS AND FURTHER TRANSACTIONS.  Each of the Debtors
or the Reorganized Debtors is authorized to execute, deliver, file or record
such contracts, instruments, releases and other agreements or documents and take
such actions as may be necessary or appropriate to effectuate, implement and
further evidence the terms and conditions of the Plan and any notes or
securities issued pursuant to the Plan.

     12.2  CORPORATE ACTION.  Prior to, on or after the Effective Date (as
appropriate), all matters provided for under the Plan that would otherwise
require approval of the stockholders or directors of one or more of the Debtors
or the Reorganized Debtors shall be deemed to have occurred and shall be in
effect prior to, on or after the Effective Date (as appropriate) pursuant to the
applicable general corporation law of the states in which the Debtors or the
Reorganized Debtors are incorporated without any requirement of further action
by the stockholders or directors of the Debtors or the Reorganized Debtors.

                                        26
<PAGE>   102

     12.3  EXEMPTION FROM TRANSFER TAXES.  Pursuant to section 1146(c) of the
Bankruptcy Code, (a) the issuance, transfer or exchange of notes or equity
securities under the Plan; (b) the creation of any mortgage, deed of trust,
lien, pledge or other security interest; (c) the making or assignment of any
lease or sublease; or (d) the making or delivery of any deed or other instrument
of transfer under, in furtherance of, or in connection with, the Plan,
including, without limitation, any merger agreements; agreements of
consolidation, restructuring, disposition, liquidation or dissolution; deeds;
bills of sale; and transfers of tangible property, will not be subject to any
stamp tax, recording tax, conveyance fee, personal property or intangible tax,
real estate transfer tax, sales or use tax or other similar tax or governmental
assessment, and the appropriate governmental entities are directed to accept for
filing and recordation any of the foregoing instruments or documents without the
payment of any such tax or governmental assessment. Unless the Bankruptcy Court
orders otherwise, all sales, transfers and assignments of owned and leased
property approved by the Bankruptcy Court on or prior to the Effective Date,
shall be deemed to have been in furtherance of, or in connection with, the Plan.

     12.4  BAR DATES FOR ADMINISTRATIVE CLAIMS.  The Confirmation Order will
establish an Administrative Claims Bar Date for filing certain Administrative
Claims (which shall not include Claims arising under the DIP Credit Agreement),
which date will be sixty (60) days after the Effective Date, unless otherwise
ordered by the Bankruptcy Court. Holders of asserted Administrative Claims that
are subject to the Administrative Claims Bar Date shall submit requests for
payment on or before such Administrative Claims Bar Date or forever be barred
from doing so.

     12.5  PAYMENT OF STATUTORY FEES.  All fees payable pursuant to section 1930
of title 28, United States Code shall be paid by the Debtors or the Reorganized
Debtors as and when they become due.

     12.6  AMENDMENT OR MODIFICATION OF THE PLAN.  Subject to section 1127 of
the Bankruptcy Code, the Debtors reserve the right, to alter, amend or modify
the Plan with consent of the Official Committee, the Noteholder Committee and
the Agent for the DIP Lenders at any time prior to or after the Confirmation
Date but prior to the substantial consummation of the Plan. A Holder of a Claim
or Interest that has accepted the Plan shall be deemed to have accepted the
Plan, as altered, amended or modified, if the proposed alteration, amendment or
modification does not materially and adversely change the treatment of the Claim
or Interest of such Holder.

     12.7  SEVERABILITY OF PLAN PROVISIONS.  If, prior to the Confirmation Date,
any term or provision of the Plan is determined by the Bankruptcy Court to be
invalid, void or unenforceable, the Bankruptcy Court, at the request of the
Debtor with the consent of the Official Committee, the Noteholder Committee and
the Agent for the DIP Lenders, will have the power to alter and interpret such
term or provision to make it valid or enforceable to the maximum extent
practicable, consistent with the original purpose of the term or provision held
to be invalid, void or unenforceable, and such term or provision will then be
applicable as altered or interpreted. Notwithstanding any such holding,
alteration or interpretation, the remainder of the terms and provisions of the
Plan will remain in full force and effect and will in no way be affected,
impaired or invalidated by such holding, alteration or interpretation. The
Confirmation Order will constitute a judicial determination and will provide
that each term and provision of the Plan, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable pursuant
to its terms.

     12.8  SUCCESSORS AND ASSIGNS.  The Plan shall be binding upon and inure to
the benefit of the Debtors, and their respective successors and assigns,
including, without limitation, the Reorganized Debtors. The rights, benefits and
obligations of any entity named or referred to in the Plan shall be binding on,
and shall inure to the benefit of any heir, executor, administrator, successor
or assign of such entity.

     12.9  PLAN DOCUMENTS.  The Plan Documents shall be filed with the
Bankruptcy Court and delivered to counsel for the Agent for the DIP Lenders not
later than five (5) days prior to the Confirmation date of the Hearing. Upon
their filing, the Plan Documents may be inspected in the office of the clerk of
the Bankruptcy Court or its designee during normal business hours. Holders of
Claims and Interests may obtain a copy of the Plan Documents upon written
request to the Company. The Plan Documents shall be approved by the Bankruptcy
Court pursuant to the Confirmation Order.

                                        27
<PAGE>   103

     12.10  REVOCATION, WITHDRAWAL OR NON-CONSUMMATION.  The Debtors reserve the
right to revoke or withdraw the Plan as to any or all of the Debtors prior to
the Confirmation Date and to file subsequent plans of reorganization. If the
Debtors revoke or withdraw the Plan as to any or all of the Debtors, or if
confirmation or consummation of the Plan as to any or all of the Debtors does
not occur, then, with respect to such Debtors, (a) the Plan shall be null and
void in all respects, (b) any settlement or compromise embodied in the Plan
(including the fixing or limiting to an amount certain any Claim or Interest or
Class of Claims or Interests), assumption or rejection of executory contracts or
leases affected by the Plan, and any document or agreement executed pursuant to
the Plan, shall be deemed null and void, and (c) nothing contained in the Plan
shall (i) constitute a waiver or release of any Claims by or against, or any
Interests in, such Debtors or any other Person, (ii) prejudice in any manner the
rights of such Debtors or any other Person, or (iii) constitute an admission of
any sort by the Debtors or any other Person.

     12.11  NOTICE.  All notices, requests and demands to or upon the Debtors or
the Reorganized Debtors to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when actually delivered or, in the case of notice by facsimile
transmission, when received and telephonically confirmed, addressed as follows:

       METAL MANAGEMENT, INC.
        500 North Dearborn Street
        Suite 400
        Chicago, Illinois 60610
        Facsimile: (312) 645-0570
        Attn: David A. Carpenter
        with a copy to:
        MAYER, BROWN & PLATT
        190 South LaSalle Street
        Chicago, Illinois 60603-3491
        Facsimile: (312) 701-7711
        Attn: Lawrence K. Snider/David S. Curry/Craig E. Reimer

     12.12  GOVERNING LAW.  Except to the extent the Bankruptcy Code, the
Bankruptcy Rules or other federal law is applicable, or to the extent a Plan
Document, exhibit or schedule to the Plan provides otherwise, the rights and
obligations arising under this Plan shall be governed by, and construed and
enforced in accordance with, the laws of New York, without giving effect to any
principles of conflicts of law of such jurisdiction.

     12.13  TAX REPORTING AND COMPLIANCE.  In connection with the Plan and all
instruments issued in connection therewith and distributions thereof, the
Debtors, and the Reorganized Debtors, as the case may be, shall comply with all
withholding and reporting requirements imposed by any federal, state, local or
foreign taxing authority and all distributions hereunder shall be subject to any
such withholding and reporting requirements. The Reorganized Debtors are hereby
authorized, on behalf of each of the Debtors, to request an expedited
determination under section 505(b) of the Bankruptcy Code of the tax liability
of the Debtors for all taxable periods ending after the Petition Date through,
and including, the Effective Date.

     12.14  SCHEDULES.  All exhibits and schedules to the Plan and the Plan
Documents are incorporated and are a part of the Plan as if set forth in full
herein.

     12.15  DISSOLUTION OF COMMITTEE(S).  Thirty (30) days after the Effective
Date, the Noteholder Committee and any official committees appointed in the
Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, shall dissolve
and shall have no further duties, except with respect to any appeal of the
Confirmation Order.

                                        28
<PAGE>   104

     12.16  SECTION 1145 EXEMPTION.  The offer, issuance, transfer or exchange
of any security under the Plan (including, the New Junior Secured Notes, New
Common Stock and Series A Warrants), or the making or delivery of an offering
memorandum or other instrument of offer or transfer under this Plan, shall be
exempt from Section 5 of the Securities Act or any similar state or local law
requiring the registration for offer or sale of a security or registration or
licensing of an issuer or a security as and to the maximum extent provided in
section 1145(a) of the Bankruptcy Code.

Dated: May 4, 2001
                                          Respectfully submitted,

                                          METAL MANAGEMENT, INC.
                                          (for itself and on behalf of the
                                          Subsidiary Debtors)
                                          By:

                                          Name:

                                          Title:

                                          ATTORNEYS FOR DEBTORS:
                                          Lawrence K. Snider
                                          David S. Curry
                                          Craig E. Reimer
                                          MAYER, BROWN & PLATT
                                          190 South LaSalle Street
                                          Chicago, Illinois 60603-3441
                                          (312) 782-0600
                                          and
                                          James L. Patton, Jr. (No. 2202)
                                          Joel A. Waite (No. 2925)
                                          YOUNG CONAWAY STARGATT & TAYLOR
                                          1100 N. Market Street
                                          Wilmington Trust Center
                                          P.O. Box 391
                                          Wilmington, Delaware 19899-0391
                                          (302) 571-6600

                                        29
<PAGE>   105

                                   SCHEDULE 1

LIST OF SUBSIDIARY DEBTORS

California Metals Recycling, Inc.
CIM Trucking, Inc.
Firma Plastic Co., Inc.
Firma, Inc.
Mac Leod Metals Co.
Metal Management Aerospace, Inc.
Metal Management Alabama, Inc.
Metal Management Arizona, L.L.C.
Metal Management Connecticut, Inc.
Metal Management Gulf Coast, Inc.
Metal Management Indiana, Inc.
Metal Management Memphis, L.L.C.
Metal Management Midwest, Inc.
Metal Management Mississippi, L.L.C.
Metal Management Northeast, Inc.
Metal Management Ohio, Inc.
Metal Management Pittsburgh, Inc.
Metal Management Realty, Inc.
Metal Management S&A Holdings, Inc.
Metal Management Services, Inc.
Metal Management Stainless & Alloy, Inc.
Metal Management West, Inc.
Metal Management West Coast Holdings, Inc.
metals.com, inc.
MTLM Arizona, Inc.
Proler Southwest Inc.
Reserve Iron & Metal Limited Partnership
Trojan Trading Co.

                                        30
<PAGE>   106

                                   SCHEDULE 2
                     GENERAL IMPAIRED UNSECURED CLAIM LIST

1.   Claims of the Environmental Protection Agency, an agency of the United
     States (the "EPA") and/or by the State of Illinois or any subdivision
     thereof against Metal Management Midwest, Inc. alleging violation of
     certain environmental laws, including as set forth in a letter from the EPA
     dated January 10, 2000 and relating to CFC removal certifications.

2.   Claims of National Metals Company against Metal Management Arizona, L.L.C.
     (i) evidenced by two promissory notes each dated November 22, 1999, with a
     principal balance of approximately $690,000 and the other with a principal
     balance of $100,000; (ii) for earn-out payments arising in connection with
     the acquisition of the assets of National Metals; and (iii) for the
     issuance of "additional shares" of Metal Management, Inc. in connection
     with the purchase of the assets of National Metals.

3.   Claims of Grau Trading Company against Metal Management Pittsburgh, Inc.
     pursuant to an Agreement for Contract Buy-Out dated August, 1998.

4.   Claims of Kohart Surplus & Supply evidenced by a promissory note dated
     December 6, 1996 from Metal Management Ohio, Inc., with a principal balance
     of approximately $25,000.

5.   Claims by the EPA and/or state environmental protection agencies or
     departments against Metal Management Pittsburgh, Inc. relating to
     "superfund" sites including, without limitation, the Tonolli Corp. site,
     Jacks Creek/Sitkin Smelting Facility Site, Metcoa superfund site, Marjol
     superfund site, and any claims for contribution or indemnity relating
     thereto.

6.   Claims by former employees of the Debtors alleging wrongful termination or
     other claims arising out of their former employment with MTLM.

7.   Claims of Soo Line Railroad Company arising out of the settlement agreement
     that was executed in connection with Case No. 97 C 0670 filed in the United
     States District Court for the Northern District of Illinois.

8.   Claims by the Arizona Department of Revenue against Metal Management
     Arizona, L.L.C. arising from a sale tax audit.

9.   Claims by Richard J. Wasicki against Metal Management Connecticut, Inc.
     allegedly arising from personal injuries allegedly sustained on the
     property of Metal Management Connecticut, Inc., to the extent such claims
     are not covered by the Debtors' insurance.

10. Claim of the State of Connecticut Department of Environmental Protection
    Against Metal Management Aerospace, Inc. arising from a Notice of Violation
    dated April 13, 2000.

11. Claims by the Connecticut Department of Environmental Protection against
    Metal Management Connecticut, Inc. resulting from the transfer of the
    Connecticut facility from the former owner, Michael Schiavone & Sons, Inc.,
    to the company, and for other alleged environmental violations as described
    in a Notice of Violation dated July 28, 2000.

12. Claims by MidSouth Towing Company against Metal Management Indiana, Inc. for
    damages allegedly resulting from a barge fire, to the extent such claims are
    not covered by the Debtors' insurance.

13. Claims by SSX, L.L.C. against Metal Management Memphis, L.L.C. arising under
    a certain non-competition agreement between the parties.

14. Claims by Sonoco Products Company against Metal Management Memphis, L.L.C.
    arising from a contract dispute between the parties.

15. Claims by Conway Machine Works, Inc. (and/or any such unsecured claims by
    the South Carolina Business Development Corporation) against Metal
    Management Memphis, L.L.C. pertaining to a contract between the parties and
    related ownership dispute regarding certain equipment located at the
    Debtors' facilities.

                                        31
<PAGE>   107

16. Claims by Security Link from Ameritech, Inc. against Metal Management
    Midwest, Inc. arising from an alleged breach of contract between the
    parties.

17. Claim by Kelso Burnett against Metal Management Midwest, Inc. for alleged
    negligence.

18. Claims by Denton Cartage Co. against Metal Management Midwest, Inc. for
    alleged indemnification liability relating to certain disposal costs.

19. Claim by the Illinois Department of Revenue against Metal Management
    Midwest, Inc. arising from sales tax audits (to the extent not entitled to
    priority).

20. Claim by Frank Arcona against Metal Management Northeast, Inc. for alleged
    personal injuries incurred, to the extent such claims are not covered by the
    Debtors' insurance.

21. Claims by Eric Bard against Metal Management Northeast, Inc., pertaining to
    litigation involving the parties, to the extent such claims are not covered
    by the Debtors' insurance.

22. Claims by the EPA against Metal Management Northeast, Inc. relating to the
    Consolidated Iron & Metal superfund site in New York.

23. Claims by Gould Inc. against Metal Management Pittsburgh, Inc. for alleged
    contribution liability pertaining to clean-up cost at the Marjol superfund
    site.

24. Claims by the Tonoli Superfund Site PRP Group against Metal Management
    Pittsburgh, Inc. for alleged contribution liability pertaining to clean up
    cost at the Tonoli superfund site.

25. Claims by the Jack's Creek PRP Group against Metal Management Pittsburgh,
    Inc. for alleged contribution liability pertaining to clean-up costs at the
    Jack's Creek superfund site.

26. Claims by Joe L. Fulton against Metal Management West, Inc. for alleged
    indemnification liability arising out of a flash fire at the Debtors'
    facilities located in Denver, Colorado.

27. Claims by David Lazarov against Metal Management Memphis, L.L.C. arising
    under a Non-competition Agreement, dated October 10, 1996.

28. Claims by Lazarov Brothers Tin Compressed Company, Inc., Mid-America
    Recycling Corporation and Lazarov Brothers, Inc. against Metal Management
    Memphis L.L.C. arising under a Non-Negotiable Promissory Note dated October
    10, 1996 in the original principal amount of $2,000,000.

29. Claims by Lazarov Consulting, L.L.C. against Metal Management Memphis,
    L.L.C. arising under a Consulting Agreement dated October 10, 1996.

30. Claims arising in connection with executory contracts that are rejected
    pursuant to Section 365 of the Bankruptcy Code by the Debtors under the
    terms of the Plan or otherwise, including, but not necessarily limited to,
    any claims pertaining to non-competition agreements rejected by the Debtors
    which are not otherwise identified in this Schedule 2.

31. Claims by third parties against the Company for personal injury, negligence,
    breach of contract, tort or other damages arising with respect to periods
    preceding November 20, 2000, to the extent not covered by insurance.

32. Claims by any governmental authority or other third party with respect
    matters arising prior to November 20, 2000 under, or asserted pursuant to,
    applicable environmental laws, rules, regulations or statutes.

     The Debtors reserve the right to add other claims to this list prior to the
confirmation hearing on the Plan.

                                        32
<PAGE>   108
                                   EXHIBIT D
                       REORGANIZATION VALUATION ANALYSIS

     The Debtors have been advised by Houlihan Lokey with respect to the
reorganization equity value of the Reorganized Debtors. The reorganization
equity value, which includes the Debtors' operating business, the expected
present value of certain non-operating assets and the estimated debt balances at
and beyond the Effective Date, was estimated by Houlihan Lokey to be
approximately $65 million as of an assumed Effective Date of June 30, 2001. The
foregoing reorganization equity value (ascribed as of the date of the Disclosure
Statement) reflects, among other things, factors discussed below, current
financial market conditions and the inherent uncertainty today as to the
achievement of the Projections (which are attached as Exhibit F to the
Disclosure Statement).

     Based on the assumed reorganization equity value set forth above, the value
of the 10,000,000 shares of New Common Stock to be issued to the holders of
allowed claims in Class 6 under the Plan and to holders of allowed interests in
Classes 7, 8 and 9, is estimated to be approximately $6.12 per share, after
giving effect to the potentially relative impact of the warrants. The foregoing
valuation also reflects a number of assumptions, including a successful
reorganization of the Debtors' business and finances in a timely manner, the
amount of available cash, market conditions and the Plan becoming effective in
accordance with its terms on a basis consistent with the estimates and other
assumptions discussed herein.

     In preparing the estimated reorganization equity value, Houlihan Lokey: (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 and assisted in developing financial projections relating to
their businesses and prospects; (c) met with certain members of senior
management of the Debtors to discuss the Debtors' operations and future
prospects; (d) reviewed publicly available financial data and considered the
market values of public companies that Houlihan Lokey deemed generally
comparable to the operating businesses of the Debtors; (e) reviewed the
financial terms, to the extent publicly available, of certain acquisitions of
companies that Houlihan Lokey believes were comparable to the operating
businesses of the Debtors; (f) considered certain economic and industry
information relevant to the Debtors' operating business; (g) visited certain of
the Debtors' facilities; and (h) conducted such other analyses as Houlihan Lokey
deemed appropriate under the circumstances. Although Houlihan Lokey conducted a
review and analysis of the Debtors' business, operating assets and liabilities
and business plans, Houlihan Lokey assumed and relied on the accuracy and
completeness of all financial and other information furnished to it by the
Debtors. No independent evaluations or appraisals of the Debtors' assets were
sought or were obtained in connection therewith.

     Estimates of reorganization equity value do not purport to be appraisals,
nor do they necessarily reflect the values that might be realized if assets were
sold. The estimates of reorganization equity value prepared by Houlihan Lokey
assume that the reorganized Debtors continue as the owner and operator of their
businesses and assets. Such estimates were developed solely for purposes of
formulation and negotiation of a plan of reorganization and analysis of implied


                                  EXHIBIT D-1
<PAGE>   109
relative recoveries to creditors thereunder. Such estimates reflect
computations of the estimated reorganization equity value of the reorganized
Debtors through the application of various valuation techniques and do not
purport to reflect or constitute appraisals, liquidation values or estimates of
the actual market values that may be realized through the sale of any
securities to be issued pursuant to the Plan, which may be significantly
different from the amounts set forth herein. The value of an operating business
is subject to uncertainties and contingencies that are difficult to predict and
will fluctuate with changes in factors affecting the financial conditions and
prospectus of such a business. As a result, the estimate of reorganization
equity value set forth herein is not necessarily indicative of actual outcomes,
which may be significantly more or less favorable than those set forth herein.
Depending on the results of the Debtors' operations or changes in the financial
markets, Houlihan Lokey's valuation analysis as of the effective date may
differ from that disclosed herein.

     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, prevailing interest rates; conditions in the financial
markets; the anticipated initial securities holdings of prepetition creditors,
some of which may prefer to liquidate their investment rather than hold it on a
long-term basis; and other factors that generally influence the prices of
securities. Actual market prices of such securities also may be affected by
the Debtors' history in chapter 11 or by other factors not possible to predict.
Accordingly, the reorganization equity value estimated by Houlihan Lokey does
not necessarily reflect, and should not be construed as reflecting, values that
will be attained in the public or private markets. The equity value ascribed in
the analysis does not purport to be an estimate of the post-reorganization
market trading value. Such trading value may be materially different from the
reorganization equity value ranges associated with Houlihan Lokey's valuation
analysis. Indeed, there can be no assurance that a trading market will develop
for the New Common Stock.




                                  EXHIBIT D-2
<PAGE>   110
                                   EXHIBIT E
                              LIQUIDATION ANALYSIS

     The Bankruptcy Code requires that each holder of an impaired claim or
equity interest either (a) accept the Plan or (b) receive or retain under the
Plan property of a value, as of the effective date of the Plan, that is not
less than the value such holder would receive or retain if Metal Management
were liquidated under chapter 7 of the Bankruptcy Code on the effective date.
The first step in determining whether this test has been met is to determine
the dollar amount that would be generated from the liquidation of the Debtors'
assets and properties in the context of a chapter 7 liquidation case. 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 time of the
commencement of the chapter 7 case. Such amount is reduced by the amount of any
claims secured by such assets, the costs and expenses of the liquidation, and
such additional administrative expenses that may result from the termination of
the Debtors' businesses and the use of chapter 7 for the purposes of
liquidation. Any remaining net cash would be allocated to creditors and
shareholders in strict priority in accordance with section 726 of the
Bankruptcy Code.

     A general summary of the assumptions used by the Debtors and Houlihan
Lokey in preparing this Liquidation Analysis follows. The more specific
assumptions are discussed below.

Estimate of Net Proceeds

     Estimates were made of the cash proceeds which might be realized from the
liquidation of the Debtors' assets. The chapter 7 liquidation period is assumed
to commence on June 30, 2001 and to last six months following the appointment of
a chapter 7 trustee. For purposes of the analysis, Debtors' estimated June 30,
2001 balances were used. There can be no assurance that the liquidation would be
completed in a limited time frame nor is there any assurance that the recoveries
assigned to the assets would in fact be realized. Under Section 704 of the
Bankruptcy Code, an appointed trustee must, among other duties, collect and
convert the property of the estate as expeditiously as is compatible with the
best interests of the parties-in-interest. The liquidation analysis assumes that
there would be pressure to complete the sales process within six months. The
need to convert property to cash so rapidly may have an adverse impact on the
proceeds realized from the sale of the Debtors' assets. For certain assets, such
as prepaid expenses and other current assets, estimates of the liquidation
proceeds were made for each asset individually. For other assets, such as
accounts receivable, liquidation values were assessed for general classes of
assets by estimating the percentage recoveries which the Debtors might achieve
through their disposition.

Estimate of Costs

     The Debtors' cost of liquidation under chapter 7 would include fees
payable to a chapter 7 trustee, as well as those which might be payable to
attorneys and other professionals that such a

                                  EXHIBIT E-1
<PAGE>   111
trustee may engage. Further, costs of liquidation would include any obligations
and unpaid expenses incurred by the Debtors until conclusion of their chapter 7
cases.

     Additional claims would arise by reason of the breach or rejections or
obligations incurred and executory contracts or leases entered into by the
Debtors. It is possible that in a chapter 7 case, the wind-down expenses may be
greater or less than the estimated amount. Such expenses are in part dependent
on the length of time of the liquidation.

Distribution of Net Proceeds under Absolute Priority

     The foregoing types of claims, costs, expenses, fees and such other claims
that may arise in a liquidation case would be paid in full from the liquidation
proceeds before the balance of those proceeds would be made available to
unsecured claims. Under the absolute priority rule, no junior creditor would
receive any distribution until all senior creditors are paid in full. The
Debtors believe that in a chapter 7 case, general unsecured creditors would not
receive a distribution of any kind. In fact, administrative and priority claims
would likely be impaired.

     After consideration of the effects that a chapter 7 liquidation would have
on the ultimate proceeds available for distribution to creditors, including (i)
the increased costs and expenses of a liquidation under chapter 7 arising from
fees payable to a trustee in a 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 the "forced sale"
atmosphere that would likely prevail, and (iii) substantial increase in claims
which would be satisfied on a prior basis, THE DEBTORS HAVE DETERMINED, AS
SUMMARIZED ON THE FOLLOWING CHART, THAT CONFIRMATION OF THE PLAN WILL PROVIDE
EACH CREDITOR AND EQUITY HOLDER WITH A RECOVERY THAT IS NOT LESS THAN IT WOULD
RECEIVE PURSUANT TO A LIQUIDATION OF THE DEBTORS UNDER CHAPTER 7 OF THE
BANKRUPTCY CODE.




                                  EXHIBIT E-2

<PAGE>   112
                             METAL MANAGEMENT, INC.
                              LIQUIDATION ANALYSIS
                                ($ in thousands)


<Table>
<Caption>
                                                                                                           Estimated
                                                            June 30, 2001             Estimated          Liquidation
                                                          Estimated Balance            Recovery            Proceeds
                                                          -----------------           ----------         ------------
<S>                                                       <C>                         <C>                <C>
PROCEEDS FROM LIQUIDATION
Cash                                                             $1,428                   100.0%              $1,428
Accounts receivable, net                                         82,322                    79.9%              65,798
Inventories                                                      37,576                    72.5%              27,253
Prepaid expenses                                                  2,247                    30.6%                 687
Other current assets                                              6,169                    58.2%               3,592
Property and equipment, net                                     147,851                    61.6%              91,068
Goodwill, net                                                       --                      0.0%                 --
Deferred financing costs, net                                     1,309                     0.0%                 --
Investments in joint ventures                                     1,832                     0.0%                 --
Other long-term assets                                            1,601                    34.8%                 557
                                                             ----------               ----------          ----------
                                                               $282,336                    67.4%            $190,383
                                                             ==========               ==========          ==========
</Table>

<Table>
<Caption>
                                                              Estimated               Estimated               %
                                                                Claim                  Recovery            Recovery
                                                          -----------------           ----------         ------------
<S>                                                       <C>                         <C>                <C>
ALLOCATION OF PROCEEDS
Wind-down Administrative Costs
  Wind-down operating costs                                      $9,722                   $9,722              100.0%
  Trustee & professional fees                                     6,611                    6,611              100.0%
  Severance / stay bonuses                                        1,618                    1,618              100.0%
                                                             ----------               ----------          ----------
    Total Wind-down Administrative Costs                        $17,951                  $17,951              100.0%
                                                             ==========               ==========          ==========

Proceeds available for payment of secured claims                                        $172,432

Secured Claims
  DIP borrowings, plus interest                                $117,611                 $117,611              100.0%
  Letters of credit                                               4,700                    4,700              100.0%
  Mortgages                                                       1,000                    1,000              100.0%
  Senior Secured Notes, plus interest                            32,151                   32,151              100.0%
                                                             ----------               ----------          ----------
    Total Secured Claims                                       $155,462                 $155,462              100.0%
                                                             ==========               ==========          ==========

Proceeds available for payment of administrative claims                                 $16,970

Administrative and Priority Claims
  Tax claims                                                     $1,577                     $581               36.8%
  Employee claims                                                 2,500                     $921               36.8%
  Post-petition accounts payable and critical trade              40,501                  $14,916               36.8%
  Other priority claims                                           1,500                     $552               36.8%
                                                             ----------               ----------          ----------
                                                                $46,078                  $16,970               36.8%
                                                             ==========               ==========          ==========
Proceeds available for payment of general unsecured claims                                    $0

General Unsecured Claims
  Accounts payable (non-critical)                               $20,204                       $0                0.0%
  Accrued expenses                                                9,001                      --                 0.0%
  Senior Notes, plus accrued interest                           189,000                      --                 0.0%
  Severance and other unsecured employee claims                  20,274                      --                 0.0%
  Other debt                                                      2,201                      --                 0.0%
  Other liabilities                                               1,949                      --                 0.0%
  Other liabilities subject to compromise                        15,842                      --                 0.0%
                                                             ----------               ----------          ----------
                                                               $258,470                      --                 0.0%
                                                             ==========               ==========          ==========
Proceeds available for distribution to preferred and common
  interests                                                                                   $0
                                                                                      ----------
</Table>


                                  EXHIBIT E-3





<PAGE>   113
NOTES TO CHART

Cash
Consists of all cash in banks or operating accounts and cash held at divisions
and is assumed to be fully recoverable.

Accounts receivable
Accounts receivable primarily consist of various customer and trade
receivables. Recoveries were calculated based on 90% of net book value of all
"prime" receivables (defined as those receivables less than 60 days aged, not
subject to potential offset, not due from a corporation in bankruptcy, and not
owed from an entity outside the U.S.). All other "non-prime" receivable
recoveries were calculated based on 5% of book value.

Inventories
Inventories are comprised primarily of various quantities of ferrous and
non-ferrous metals at yards throughout the U.S. Recoveries were calculated
based on 72.5% of book value (cost). This recovery percentage reflects the
estimated cost to build out materials to finished form (i.e., shredded, broken,
sorted, etc. material) for sale at market prices.

Prepaid expenses
Prepaid expenses consist primarily of prepaid parts and supplies, insurance,
licenses, rent, interest, and other items. A recovery of 50% was assumed for
most items, excluding prepaid insurance and interest, for which no recovery was
assumed.

Other current assets
Other current assets include material advances, assets held for sale, certain
certificates of deposit, hedging account balances and other deposits and
receivables. A recovery of 100% of book value was assumed for certificates of
deposit and hedging account balances, and 50% for other receivables balances.

Property & equipment, net
Property and equipment is composed of land and improvements; buildings and
improvements; furniture; fixtures and office equipment; information systems;
equipment; construction in progress; and autos and trucks. Recovery on land and
improvements was calculated at 100% of net book value and based on experience in
the sale of numerous parcels of land in recent periods. Proceeds from the sale
of equipment were estimated at $71.3 million per the most recent (May 2000)
orderly liquidation value appraisal of these assets. Other asset category
recoveries were estimated at 5% to 10% of net book value based on the nature,
age and useful life of these assets. Total gross proceeds were reduced by 5% to
account for marketing and brokerage fees and expenses necessary to realize the
assets.


                                  EXHIBIT E-4
<PAGE>   114
Other long-term assets
Other long-term assets consist of various deposits and other intangible assets.
A recovery of 50% was assumed for deposits and 0% on all intangible items.

Wind-down operating costs
Ongoing operating expenses consist of corporate overhead and occupancy costs to
be incurred during the chapter 7 liquidation period. The Debtors assume that
the liquidation would occur over a six-month period and that such expenses,
costs and overhead would decrease over time.

Trustee & professional fees
Based on the Debtors' review of the nature of these costs and the outcomes of
similar liquidations, fees were estimated at $6.6 million. This figure is
comprised of $5.7 million of trustee fees and $900,000 of other professional
fees.

Severance/stay bonuses
Severance and stay bonuses are estimated based on the Debtors' anticipated
severance payments in a liquidation scenario.

DIP borrowings
The Debtors' current assumption is that the balance due under the DIP facility
will be approximately $110.3 million as of June 30, 2001. Accrued interest as
of June 30, 2001 and six months of additional interest (for the liquidation
period) is included in the estimated claim amount of $117.6 million. Moreover,
it is estimated letters of credit under the DIP facility totaling $4.7 million
are drawn as of that date. The DIP and associated letters of credit will be
secured by a super-priority lien on substantially all of the Debtors' assets.

Junior Secured Notes
The estimated claim of the Junior Secured Notes is based on the accreted amount
as of the filing date, plus accrued and unpaid interest through the filing
date, plus interest due during the Chapter 11 and liquidation period. The
Junior Secured Notes were secured pre-petition by a junior security interest in
substantially all the Debtors' personal property.

Administrative and Priority Claims
Approximately $46 million of administrative and priority claims relating to
tax, employee, post-petition and critical trade accounts payable, and other
priority claims are estimated for purposes of this analysis. Such amounts may
differ materially from actual claims submitted during the course of a chapter 7
liquidation.

General Unsecured Claims
General unsecured claims are based on management's most current estimate as of
the filing of this schedule. Moreover, the Debtors believe that the value of
any distributions from the liquidation proceeds to each class of allowed claims
in a chapter 7 liquidation would be the same or less than the

                                  EXHIBIT E-5
<PAGE>   115
value of distribution under the Plan, because such distribution in a
chapter 7 case may not occur for a substantial period of time. In this
regard, it is possible that distribution of the proceeds of the liquidation
could be delayed for a year or more after the completion of such liquidation in
order to resolve the claims and prepare for distributions. In the event
litigation were necessary to resolve claims asserted in the chapter 7 case,
the delay could be further prolonged and administrative expenses further
increased. The effects of this delay on the value of distributions under the
hypothetical liquidation have not been considered.

     THE DEBTORS' LIQUIDATION ANALYSIS IS AN ESTIMATE OF THE PROCEEDS THAT MAY
BE GENERATED AS A RESULT OF A HYPOTHETICAL CHAPTER 7 LIQUIDATION OF THE ASSETS
OF THE DEBTORS. Underlying the liquidation analysis are a number of estimates
and assumptions that are inherently subject to significant economic, competitive
and operational uncertainties and contingencies beyond the control of the
Debtors or a chapter 7 trustee. In addition, various liquidation decisions upon
which certain assumptions are based are subject to change. Therefore, there can
be no assurance that the assumptions and estimates employed in determining the
liquidation values of the Debtors' assets will result in an accurate estimate of
the proceeds that would be realized were the Debtors to undergo an actual
liquidation. The actual amounts of claims against the estate could vary
significantly from the estimate set forth herein, depending on the claims
asserted during the pendency of the chapter 7 case. Moreover, this liquidation
analysis does not include liabilities that may arise as a result of litigation,
certain new tax assessments, or other potential claims. This analysis also does
not include potential recoveries from avoidance actions. No value was assigned
to additional proceeds that might result from the sale of certain items with
intangible value. Therefore, the actual liquidation value of the Debtors could
vary materially from the estimates provided herein.

     The estimated recovery for general unsecured claims under the Plan is based
upon a reorganized equity value for the Debtors of $65.0 million. See
Reorganization Valuation Analysis, attached to the Disclosure Statement as
Exhibit D. This value is based upon a number of assumptions, including a
favorable economic environment for scrap metal sales. There can be no assurance
that these assumptions will prove to be correct. In addition, the Debtors and
Houlihan Lokey have assumed wind-down costs, severance, and professional fees
will be paid before secured claims, which depends on secured creditors' consent
and a court order.

     The liquidation analysis set forth herein was based on the estimated values
of the Debtors' assets on June 30, 2001. To the extent operations through such
date are different than estimated, the asset values may change. These values
have not been subject to any review, compilation or audit by any independent
accounting firm.




                                  EXHIBIT E-6

<PAGE>   116
                                   EXHIBIT F
                                  PROJECTIONS

     INTRODUCTION

     As a condition to confirmation of a plan of reorganization, the Bankruptcy
Code requires, among other things, that the bankruptcy court determine that
confirmation is not likely to be followed by the liquidation or the need for
further financial reorganization of the debtor. See the discussion regarding
"Feasibility" that is contained in Article VI, subpart C.3 of the Disclosure
Statement. In connection with the development of the Plan, and for purposes of
determining whether the Plan satisfies this feasibility standard, the Debtors'
management analyzed the ability of the reorganized Debtors to meet their
obligations under the Plan with sufficient liquidity and capital resources to
conduct their businesses. Prior to the Petition Date, the Debtors' management
developed the Debtors' Business Plan and prepared certain projections of the
Debtors' operating profit, free cash flow and certain other items for the
fiscal years 2002 through 2004 (the "Projection Period"). Such projections
summarized below are based upon assumptions made prior to the Petition Date and
have been adjusted to reflect the terms of the Plan, certain subsequent events
and additional assumptions, including those set forth below (as adjusted, the
"Projections").

     THE DEBTORS DO NOT, AS A MATTER OF COURSE, PUBLISH THEIR BUSINESS PLANS,
BUDGETS OR STRATEGIES OR MAKE EXTERNAL PROJECTIONS OR FORECASTS OF THEIR
ANTICIPATED FINANCIAL POSITIONS OR RESULTS OF OPERATIONS. ACCORDINGLY, THE
DEBTORS (INCLUDING THE REORGANIZED DEBTORS) DO NOT ANTICIPATE THAT THEY WILL,
AND DISCLAIM ANY OBLIGATION TO, FURNISH UPDATED BUSINESS PLANS, BUDGETS OR
PROJECTIONS TO HOLDERS OF CLAIMS OR INTERESTS PRIOR TO THE EFFECTIVE DATE OR TO
STOCKHOLDERS, HOLDERS OF WARRANTS OR CREDITORS AFTER THE EFFECTIVE DATE OF THE
PLAN OR TO INCLUDE SUCH INFORMATION IN DOCUMENTS REQUIRED TO BE FILED WITH THE
SEC OR OTHERWISE MAKE SUCH INFORMATION PUBLICLY AVAILABLE.

     The Projections should be read in conjunction with the assumptions,
qualifications and explanations set forth herein and the historical
consolidated financial information (including the notes and schedules thereto)
including the Annual Report on Form 10-K and the Quarterly Report on Form 10-Q
that are attached, respectively,as Exhibits B and C to the Disclosure
Statement.

     PRINCIPAL ASSUMPTIONS FOR THE PROJECTIONS

     The Projections are based on, and assume the successful implementation of,
the Debtors' Business Plan. Both the Business Plan and the Projections reflect
numerous assumptions, including various assumptions regarding the anticipated
future performance of the Debtors and the reorganized Debtors, industry
performance, general business and economic conditions and other matters, most of

                                  EXHIBIT F-1
<PAGE>   117


which are beyond the control of the Debtors. Therefore, although the
Projections are necessarily presented with numerical specificity, the actual
results achieved during the Projection Period will vary from the 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 Debtors or the reorganized Debtors to achieve the projected
results of operations. See the discussion of "Risk Factors" contained in
Article VII of the Disclosure Statement for a discussion of the certain factors
that may affect the future financial performance of the Debtors and the
reorganized Debtors and of various risks associated with the Plan.

     Although the Debtors believe that the assumptions underlying the
Projections, when considered on an overall basis, are reasonable in light of
current circumstances, no assurance can be or is given that the Projections will
be realized. 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 "Risk Factors" in
Article VII of the Disclosure Statement.

     Additional information relating to the principal assumptions used in
preparing the Projections is set forth below:

     General Economic Conditions: The Projections were prepared on assumptions
that general economic conditions existing at the time of the Projections were
prepared will last throughout the Projection Period and that the general
economic climate in the United States will remain relatively stable. With
respect to the industry environment affecting the scrap metal recycling
industry, during most of fiscal 2001 (calendar 2000), a pronounced decline in
pricing has adversely affected the Company. The Projections generally assume no
further material cyclical declines and an industry environment similar to
calendar 1999 exists during the fiscal 2002 through fiscal 2004 time frame.

     Other General Assumptions: The Projections do not assume any material
acquisitions or divestitures of businesses. Specific capital expenditures lead
to volume growth in certain regional locations. Seasonality is considered, with
the first quarter slightly stronger than other quarters.

     Sales: Sales are projected based on separate regional assumptions of
volumes and pricing. Beginning in April 2001 market pricing is assumed to
gradually return to long-term historical average ferrous and non-ferrous prices
by fiscal 2003. Separate adjustments to long-term average prices are made to
calculate regional sales levels, based on historical variations in such regions
to the national average price.

     Cost of Sales: Cost of sales is based on metal margin and process costs.
Metal margin during the Projection Period is generally consistent with the
levels earned during fiscal 2001. Processing costs include specific assumptions
relating to direct wages and benefits (assumed to increase at 4% per year),
freight costs (assumed at $15 per ton), fuel and operating costs (based on
current levels, with modest energy price declines beginning in fiscal 2002), and
repair costs (at historical levels).



                                  EXHIBIT F-2



<PAGE>   118
Rent expense is assumed at current levels, with no favorable impact reflected
from potential lease rejections or additional rationalization of facilities.

     Sales and Administrative Expense ("S&A Expense"): Salaries are projected
at current levels, increasing 4% per year, with overtime and bonus costs
generally consistent with historical levels. Corporate rent is projected with
inflation factors.

     Interest Expense: The Projections reflect the terms of the Exit Facility
and Senior Notes as set forth in the Plan.

     Income Taxes: A tax rate of 38% is applied to derive tax expense.

     Capital Expenditures: Approximately $12 million in fiscal 2002 and $15.5
million annually thereafter projected, with the bulk of such amount related to
ordinary maintenance and the remainder attributable to specific projects.

     Working Capital: Receivables, inventory, and payables levels are projected
according to historical relationships with respect to purchase and sales
volumes.

     Fresh-Start Reporting: The American Institute of Certified Public
Accountants has issued a Statement of Position on Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code (the "Reorganization
SOP"). The Projections have been prepared generally in accordance with the
"fresh-start" reporting principles set forth in the Reorganization SOP, giving
effect thereto as of June 30, 2001. The principal effects of the application of
these fresh-start principles are summarized below:

     Under the Reorganization SOP, the reorganized Debtors will be required to
record as an intangible asset the excess, if any, of the Debtors' total
reorganization value over the fair value of the Debtors' identifiable net
assets ("Reorganized Goodwill") as of the effective date of the Plan to be
amortized over a period which, in accordance with the Reorganization SOP,
generally is to be substantially less than 40 years. For purposes of the
Projections, it has been assumed that the leveraged net equity balance as of
the effective date of the Plan is $65 million. The Projections also assume
that, after giving effect to certain eliminations in connection with the
reorganization, the fair value of the reorganized Debtors' fixed assets and
other non-current assets will be equal to the projected net book value of such
assets as of the effective date, except that the property, plant and equipment
accounts will be reduced accordingly.

     The foregoing assumptions and resulting computations were made solely for
purposes of preparing the Projections. The reorganized Debtors will be required
to determine the amount by which its reorganization value as of the effective
date exceeds, or is less than, the fair value of their assets as of the
effective date of the Plan. Such determination will be based upon the fair
values at that time, which may be based on, among other things, a different
methodology with respect to the

                                  EXHIBIT F-3

<PAGE>   119
valuation of the reorganized Debtors' value. In all event, such valuations, as
well as the determination of the fair value of reorganized Debtors' assets and
the determination of their actual liabilities, will be made as of the effective
date of the Plan, and 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.

     PROJECTIONS

     The projected consolidated financial statements of the reorganized Debtors
set forth below have been prepared based on the assumption that the effective
date of the Plan is June 30, 2001. 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 actually will occur.

     The Reorganized Metal Management and Subsidiaries Projected Consolidated
Balance Sheets as of June 30, 2001 (the "Effective Date Balance Sheet") set
forth below present: (a) the projected consolidated financial position of the
reorganized Debtors prior to confirmation and the consummation of the
transactions contemplated by the Plan; (b) the projected adjustments to such
projected consolidated financial position required to reflect confirmation and
the consummation of the transactions contemplated by the Plan (collectively, the
"Balance Sheet Adjustments"); and (c) the projected consolidated financial
position of the reorganized Debtors, after giving effect to the Balance Sheet
Adjustments, as of June 30, 2001. The Balance Sheet Adjustments set forth in the
columns captioned "Debt Discharge" and "Fresh Start and Other Adjustments"
reflect the assumed effects of confirmation and the consummation of the
transactions contemplated by the Plan, including the settlement of various
liabilities and related securities issuances, cash payments and borrowings. The
various Balance Sheet Adjustments are described in greater detail in the Notes
to the Effective Date Balance Sheet.

     The Reorganized Metal Management and Subsidiaries Projected Consolidated
Balance Sheets as of the end of fiscal years 2001 through 2004 set forth below
present the projected consolidated position of the reorganized Debtors, after
giving effect to confirmation and the consummation of the transactions
contemplated by the Plan, as of the effective date and the end of each fiscal
year in the Projection Period.

     The Reorganized Metal Management and Subsidiaries Projected Consolidated
Statements of Operations and Projected Consolidated Statements of Cash Flows
set forth below present the projected consolidated results of operations for
the fiscal year ending June 30, 2001 and for each fiscal year included in the
Projection Period.

                                  EXHIBIT F-4
<PAGE>   120
         THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
                      PROJECTED CONSOLIDATED BALANCE SHEET


<Table>
<Caption>
                                                                           June 30, 2001
                                                                            (Unaudited)
                                                                          (Actual Dollars)
                                             ---------------------------------------------------------------------------
                                                                                   Fresh Start
                                               Projected          Debt             and Other         Projected
                                            Pre-Confirmation    Discharge         Adjustments    Post-Confirmation   Notes
                                            ----------------    ---------         -----------    -----------------   -----
<S>                                         <C>                  <C>               <C>            <C>                 <C>
ASSETS
Current assets:
  Cash                                      $   1,427,550        $          --     $         --  $  1,427,550
  Accounts receivable, net                     82,322,179                                          82,322,179
  Inventories                                  37,575,963                                          37,575,963
  Prepaid expenses                              2,247,373                                           2,247,373
  Other current assets                          6,169,467                                           6,169,467
                                            -------------       -------------     ------------   ------------
  Total current assets                        129,742,532                   --               --   129,742,532

Property and equipment, net                   147,851,035                           (6,587,173)   141,263,862
Goodwill, net                                          --                                     --           --        (1)
Reorg. value in excess of ident. assets                --                                     --           --        (1)
Deferred financing costs, net                   1,308,932                           (1,308,932)            --        (1)
Investments in joint ventures                   1,832,465                                           1,832,465
Other assets                                    1,600,941                                           1,600,941
                                            -------------       -------------     ------------   ------------
  Total assets                              $ 282,335,905       $          --     $ (7,896,105)  $274,439,800
                                            =============       =============     ============   ============

LIABILITIES AND EQUITY
Current liabilities:
  Accounts Payable                          $  40,500,699                                        $ 40,500,699
  Other accrued liabilities                     7,910,256                                           7,910,256
  Accrued bond interest                         3,506,250         (3,506,250)                              --        (2)
  Accrued DIP interest                            890,087                             (890,087)            --        (2)
  Accrued bonuses                               1,436,794                                           1,436,794
  Accrued insurance                             1,090,609                                           1,090,609
  Current portion of debt                       2,184,516                                           2,184,516
                                            -------------       -------------     ------------   ------------
  Total current liabilities                    57,519,211          (3,506,250)        (890,087)    53,122,874

Long term debt, SCF                           110,326,081             500,000        3,520,000    114,346,081        (3)
Long-term debt, 12 3/4% Senior Notes           28,000,892           5,505,358                      33,506,250        (2)
Long-term debt, other                           1,016,022                                           1,016,022
Liabilities subject to compromise             216,045,762        (216,045,762)                             --        (2)
Income Tax Payable                              1,577,027                           (1,577,027)            --        (1)
Other liabilities                               1,948,573                            5,500,000      7,448,573        (3)
                                            -------------       -------------     ------------   ------------
  Total liabilities                           416,433,568        (213,546,654)       6,552,886    209,439,800

Stockholders equity:
  Convertible preferred stock - Series B          815,000            (815,000)                             --        (2)
  Convertible preferred stock - Series C        5,100,000          (5,100,000)                             --        (2)
  Common Stock, Warrants, P-I-C               312,559,354         219,461,654     (467,021,008)    65,000,000        (1)
  Retained earnings (accumulated deficit)    (452,572,017)                         452,572,017             --        (1)
                                            -------------       -------------     ------------   ------------
  Total stockholders equity                  (134,097,663)        213,546,654      (14,448,991)    65,000,000
                                            -------------       -------------     ------------   ------------
  Total liabilities and equity              $ 282,335,905       $          --     $ (7,896,105)  $274,439,800
                                            =============       =============     ============   ============
</Table>


                                  EXHIBIT F-5
<PAGE>   121
Notes to Reorganized Metal Management Projected Consolidated Balance Sheet

     1.   Estimated "fresh start" accounting adjustments reflect a leveraged
          equity value of $65 million. For illustrative purposes, all of the
          book intangible asset value is eliminated and Property, Plant &
          Equipment is reduced to derive balanced accounts.

     2.   Adjustments in connection with the financial restructuring transaction
          which will result in the conversion of $216 million of liabilities
          subject to compromise and treatment of the 12 3/4% Senior Notes.

     3.   Costs at closing pertain to exit financing fees, professional fees,
          estimated convenience class payments, and unsecured notes to be issued
          for payment of certain professional fees and a portion of impaired
          trade claims.


                                  EXHIBIT F-6
<PAGE>   122
         THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
                 PROJECTED CONSOLIDATED STATEMENT OF OPERATIONS

                                  (UNAUDITED)
                                (DOLLARS ACTUAL)


<Table>
<Caption>
                                                 Pre-Effective Date,
                                                     Debtors*                         Reorganized Metal Management
                                        ---------------------------------   -------------------------------------------------
                                            Fiscal         April 1, 2001-   July 1, 2001-        Fiscal            Fiscal
                                             2001          June 30, 2001    March 31, 2002        2003              2004
                                        --------------     --------------   --------------    ------------     --------------
<S>                                     <C>                <C>              <C>               <C>              <C>
Net Sales                               $ 767,012,785      $182,715,080     $585,101,298      $978,971,207     $1,024,533,666

Cost of Goods Sold                        722,729,502       167,958,100      528,147,514       888,253,559        929,356,872
                                        --------------     -------------    ------------      ------------     --------------

Gross Profit                            $  44,283,283      $ 14,756,980     $ 56,953,784      $ 90,717,648     $   95,176,794
  Gross Profit %                                  5.8%              8.1%             9.7%              9.3%               9.3%

General & Administrative Expense           57,921,404        12,786,349       37,967,530        55,715,782         55,970,784

Goodwill Impairment Charge                280,131,992             --                --                --                 --

Other (Income)/Expense                      1,242,014           130,474          392,413           (13,800)           (13,800)

Interest Expense and Fees                  34,191,420         3,930,326       10,667,334        16,395,254         13,725,619

Amortization of Financing Costs             3,911,307           894,630             --                --                 --

(Gain)/Loss on Sale of Assets                 463,391        (6,000,000)        (700,000)             --                 --

Other/Non-Recurring Expense                16,507,919         4,590,000             --                --                 --
                                        --------------     -------------    ------------      ------------     --------------

Earnings Before Tax                     $(350,086,164)     $ (1,574,799)    $  8,626,507      $ 18,620,413     $   25,494,191
                                        --------------     -------------    ------------      ------------     --------------

Provision (Benefit) for Income Taxes        8,291,107             --           3,278,073         7,075,757          9,687,793
                                        --------------     -------------    ------------      ------------     --------------

Net Income                              $(358,377,271)     $ (1,574,799)    $  5,348,434      $ 11,544,656     $   15,806,398
                                        ==============     =============    ============      ============     ==============
</Table>

*Fiscal 2001 financial results are estimated and subject to change based on the
completion of the Debtors' internal and external audit processes.


                                  EXHIBIT F-7
<PAGE>   123
         THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
                      PROJECTED CONSOLIDATED BALANCE SHEET

                                  (UNAUDITED)
                                (DOLLARS ACTUAL)


<Table>
<Caption>
                                                                     Fiscal Year Ended March 31,

                                                       2001*            2002             2003            2004
                                                  -------------     ------------     ------------    ------------
<S>                                               <C>              <C>             <C>             <C>
ASSETS
Current assets:
     Cash                                         $   1,427,550     $  1,427,550     $  1,427,550    $  1,427,550
     Accounts receivable, net                        80,029,140       86,247,867       88,862,464      92,998,287
     Inventories                                     39,548,885       38,311,774       54,409,944      56,176,406
     Prepaid expenses                                 2,247,373        2,247,373        2,247,373       2,247,373
     Other current assets                             6,169,467        6,169,467        6,169,467       6,169,467
                                                  -------------     ------------     ------------    ------------
     Total current assets                           129,422,415      134,404,031      153,116,798     159,019,083

Property and equipment, net                         153,233,842      135,313,520      130,497,477     124,967,149
Goodwill, net                                                --               --               --              --
Reorg. value in excess of ident. assets                      --               --               --              --
Deferred financing costs, net                         2,203,562               --               --              --
Investments in joint ventures                         2,132,465       (2,067,535)       1,137,725       1,137,725
Other assets                                          1,600,941        1,600,941        1,600,941       1,600,941
                                                  -------------     ------------     ------------    ------------
     TOTAL ASSETS                                 $ 288,593,225     $269,250,957     $286,352,942    $286,724,898
                                                  =============     ============     ============    ============
LIABILITIES AND EQUITY
Current liabilities:
     Accounts Payable                             $  37,597,364     $ 48,337,893     $ 51,744,425    $ 54,549,248
     Other accrued liabilities                        7,910,256        7,910,256        7,126,095       6,566,095
     Accrued bond interest                            2,550,000        1,246,014        1,082,058       1,082,058
     Accrued interest SCF                             1,598,777          705,897               --              --
     Accrued bonuses                                  1,340,395        1,534,991        1,534,991       1,534,991
     Accrued insurances                               1,090,609        1,090,609        1,090,609       1,090,609
     Current portion of debt                          2,444,016          558,599          468,599         378,599
                                                  -------------     ------------     ------------    ------------
     Total current liabilities                       54,531,417       61,384,259       63,046,777      65,201,600

Long term debt, SCF                                 121,666,396       95,547,419      102,062,230      86,092,965
Long-term debt, 12 3/4% Senior Notes                 27,850,892       33,506,250       33,506,250      33,506,250
Long-term debt, other                                 1,016,022        1,016,022          896,022         776,022
Liabilities subject to compromise                   216,045,762               --               --              --
Income Tax Payable                                    1,577,027               --               --              --
Other liabilities                                     1,948,573        7,448,573        4,948,573       3,448,573
                                                  -------------     ------------     ------------    ------------
     TOTAL LIABILITIES                              424,636,089      198,902,523      204,459,852     189,025,410

Stockholders equity:
     Convertible preferred stock -- Series B            815,000              --                --              --
     Convertible preferred stock -- Series C          5,100,000              --                --              --
     Common Stock, Warrants, P-I-C                  312,559,354      65,000,000        65,000,000      65,000,000
     Retained earnings (accumulated deficit)       (454,517,218)      5,348,434        16,893,090      32,699,488
                                                  -------------     ------------     ------------    ------------
     Total stockholders equity                     (136,042,864)     70,348,434        81,893,090      97,699,488
                                                  -------------     ------------     ------------    ------------
     TOTAL LIABILITIES AND EQUITY                 $ 288,593,225     $269,250,957     $286,352,942    $286,724,898
                                                  =============     ============     ============    ============

</Table>

* Fiscal 2001 financial results are estimated and subject to change based on the
  completion of the Debtors' internal and external audit processes.


                                  EXHIBIT F-8
<PAGE>   124
         THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
                 PROJECTED CONSOLIDATED STATEMENT OF CASH FLOWS

                                  (UNAUDITED)
                                (DOLLARS ACTUAL)

<Table>
<Caption>
                                Pre-Effective Date, Pre-Effective Date,
                                        Debtors*        Debtors*                 Reorganized Metal Management
                                ----------------------------------------   ---------------------------------------------
                                         Fiscal      April 1, 2001-        July 1, 2001-       Fiscal          Fiscal
                                          2001       June 30, 2001         March 31, 2002       2003            2004
                                     -------------   -------------         --------------   -------------   ------------
<S>                                  <C>              <C>                  <C>            <C>             <C>
OPERATING ACTIVITIES
Net income (loss)                    $(358,377,271)   $(1,574,799)         $  5,348,434   $  11,544,656   $ 15,806,398
Depreciation & Amortization             23,340,569      4,882,807             3,496,060      20,316,043     21,030,328
Financing Accretion/Amortization         3,477,959      1,044,630                     -               -              -
Deferred taxes                           8,291,107              -                     -               -              -
Non-recurring items                    293,365,179              -                     -               -              -
Equity in joint ventures                 1,878,803        300,000               900,000               -              -
Other                                    5,018,536     (6,000,000)             (700,000)              -              -
Changes in working capital              86,306,060      2,927,177             5,225,803     (19,460,249)    (5,157,462)
                                     -------------    -----------          ------------    ------------   ------------

NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES                 $  63,300,942    $ 1,579,814          $ 24,270,297    $ 12,400,449   $ 31,679,265
                                     =============    ===========          ============    ============   ============

INVESTING ACTIVITIES
Purchases of fixed assets              (11,258,172)    (1,500,000)          (10,545,718)    (15,500,000)   (15,500,000)
Disposals of fixed assets                1,814,679      8,000,000             3,700,000               -              -
Acquisitions, net of cash acquired          75,466              -                     -               -              -
Investment in joint ventures              (158,525)             -             3,000,000      (3,205,260)             -
                                     -------------    -----------          ------------    ------------   ------------

NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES                 $  (9,526,552)   $ 6,500,000          $ (3,845,718)   $(18,705,260)  $(15,500,000)
                                     =============    ===========          ============    ============   ============

FINANCING ACTIVITIES
Proceeds from long-term debt           760,223,041              -             2,540,681      17,277,620      9,434,658
Repayments of long-term debt          (809,540,051)    (7,820,314)          (21,339,343)    (10,762,809)   (25,403,923)
Fees paid to issue long-term debt       (4,359,097)             -                     -               -              -
Repurchase of common stock                 (67,188)             -                     -               -              -
Payments of other long-term debt                 -       (259,500)           (1,625,917)       (210,000)      (210,000)
                                     -------------    -----------          ------------    ------------   ------------

NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES                 $ (53,743,295)   $(8,079,814)          (20,424,579)   $  6,304,811   $(16,179,265)
                                     =============    ===========          ============    ============   ============

NET CASH PROVIDED (USED)             $      31,095    $         0          $          -    $          0             $0
                                     =============    ===========          ============    ============   ============

CASH AT BEGINNING OF PERIOD          $   1,396,455    $ 1,427,550          $  1,427,550    $  1,427,550   $  1,427,550

CASH AT END OF PERIOD                $   1,427,550    $ 1,427,550          $  1,427,550    $  1,427,550   $  1,427,550
</Table>

* Fiscal 2001 financial results are estimated and subject to change based on the
  completion of the Debtors' internal and external audit processes.


                                  EXHIBIT F-9