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IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN

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					                          IN THE UNITED STATES BANKRUPTCY COURT
                                 SOUTHERN DISTRICT OF OHIO
                                      EASTERN DIVISION

 In re:                                                    Chapter 11

 ORMET CORPORATION,                                        Case No. 04-51255 through 04-51261
 a Delaware corporation, et al. 1                          Jointly Administered
              Debtors.                                     (04-51255)

                                                           Honorable Barbara J. Sellers


                             DISCLOSURE STATEMENT FOR DEBTORS’
                                JOINT PLAN OF REORGANIZATION




          DINSMORE & SHOHL LLP                             O’MELVENY & MYERS LLP
          Attorneys for Debtors and                        Special Corporate and Litigation Counsel
           Debtors in Possession                            for Debtors and Debtors in Possession
          255 East Fifth Street                            Times Square Tower
          Suite 1900                                       7 Times Square
          Cincinnati, Ohio 45202                           New York, New York 10036
          513-977-8000                                     212-326-2000

          Dated: Cincinnati, Ohio
                 October 1, 2004




          1
         The Debtors are the following entities: Ormet Corporation, Ormet Primary Aluminum Corporation,
Ormet Aluminum Mill Products Corporation, Specialty Blanks Holdings Corporation, Specialty Blanks, Inc.,
Formcast Development Inc. and Ormet Railroad Corporation.



NY1:1514179
                                                   TABLE OF CONTENTS

                                                                                                                                      Page

I. Introduction ............................................................................................................................4

          A.         General ...............................................................................................................4

          B.         Disclosure Statement Overview ..........................................................................5

          C.         Holders of Claims and Equity Interests Entitled to Vote......................................6

          D.         Voting Procedures...............................................................................................7

          E.         Vote Required for Acceptance; Best Interests; Binding Effect.............................8

          F.         Confirmation Hearing .........................................................................................8

          G.         Effective Date .....................................................................................................9

II. Overview of Distributions under the Plan ..............................................................................9

III. GENERAL INFORMATION.............................................................................................17

          A.         Description and History of the Debtors .............................................................17

                     1.         Organizational Structure of the Debtors.................................................17

                     2.         Overview of the Debtors’ Business........................................................18

                     3.         Customers, Sales and Marketing ............................................................26

                     4.         Employees.............................................................................................27

                     5.         Raw Materials .......................................................................................29

                     6.         Pricing...................................................................................................31

                     7.         Real Property.........................................................................................32

                     8.         Patents, Trademarks and Licenses..........................................................33

                     9.         Environmental Matters ..........................................................................33

                     10.        Legal Proceedings .................................................................................35

                     11.        Competition...........................................................................................35


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                                                (continued)
                                                                                                                             Page

                12.       Significant Prepetition Obligations ........................................................36

                13.       Other Prepetition Claims .......................................................................37

        B.      Events Leading to the Commencement of the Chapter 11 Cases........................38

IV. EVENTS DURING THE CHAPTER 11 CASES ...............................................................39

        A.      Stabilization of Business ...................................................................................39

                1.        Continuation of Business; Stay of Litigation..........................................39

                2.        First Day Orders ....................................................................................40

                3.        DIP Facility ...........................................................................................40

                4.        Appointment of the Creditors’ Committee .............................................41

                5.        Retention of Professionals .....................................................................42

                6.        Compliance with Bankruptcy Code, Bankruptcy Rules, Local
                          Court Rules and U.S. Trustee Deadlines ................................................43

                7.        Key Employee Retention and Severance Plan ........................................43

                8.        Disclosure Statement/Confirmation Hearings ........................................44

        B.      Other Significant Court Orders..........................................................................44

                1.        Orders Authorizing Assumption of Certain Contracts ............................44

                2.        Orders Authorizing the Sale of Equipment and Rejection of
                          Leases of Formcast Development Inc. ...................................................45

                3.        Orders Authorizing the Sale of the Jackson Facility ...............................46

                4.        Orders Authorizing Tax Settlements ......................................................47

                5.        Order Authorizing Creditor Setoff .........................................................47

                6.        Order Allowing Debtors to Pay Accrued and Unpaid Prepetition
                          Vacation Pay .........................................................................................47



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                                           TABLE OF CONTENTS
                                               (continued)
                                                                                                                         Page

                 7.       Order Authorizing Entry Into Long-Term Shipping Contracts ...............47

        C.       Significant Events Since the Commencement Date............................................48

                 1.       Elimination of Thixotropic Operations...................................................48

                 2.       Closure of One Cast Pit in Billet Casting House ....................................48

                 3.       Curtailment of One Potline at Hannibal Reduction Facility in
                          Response to Ohio River Shutdown ........................................................48

        D.       Deadline for Filing Proofs of Claim ..................................................................49

V. THE PLAN OF REORGANIZATION ................................................................................49

        A.       Deemed Partial Substantive Consolidation ........................................................49

        B.       Classification and Treatment of Claims Against All Debtors .............................51

                 1.       Administrative Expense Claims .............................................................51

                 2.       Professional Fees and Expense Claims ..................................................53

                 3.       Priority Tax Claims ...............................................................................54

                 4.       Class 1 - Other Priority Claims ..............................................................54

                 5.       Class 2 – Secured Claims.......................................................................54

                 6.       Class 3 – Convenience Claims ...............................................................55

                 7.       Class 4 – Old Debt Claims.....................................................................55

                 8.       Class 5 – General Unsecured Claims .....................................................56

                 9.       Class 6 – Formcast Unsecured Claims ...................................................56

                 10.      Class 7 – Insured Claims .......................................................................56

                 11.      Class 8 – Settled Environmental Claims ................................................57

                 12.      Class 9 – Intercompany Claims..............................................................57



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                                        TABLE OF CONTENTS
                                            (continued)
                                                                                                                           Page

              13.     Class 10 – Subordinated Claims ............................................................57

              14.     Class 11 – Subsidiary Equity Interest.....................................................58

              15.     Class 12 – Old Parent Equity Interest.....................................................58

        C.    Provisions Regarding Voting and Distributions Under the Plan and
              Treatment of Disputed, Contingent and Unliquidated Claims ............................58

              1.      Voting of Claims ...................................................................................58

              2.      Nonconsensual Confirmation.................................................................58

              3.      Method of Distribution Under the Plan ..................................................58

              4.      Distributions Withheld for Disputed General Unsecured Claims............60

              5.      Distributions Withheld for Disputed Formcast Unsecured Claims..........61

              6.      Procedures for Allowance or Disallowance of Disputed Claims.............62

              7.      Disbursing Agent...................................................................................63

              8.      Setoffs and Recoupment ........................................................................64

              9.      Allocation of Plan Distributions Between Principal and Interest ............64

              10.     Estimations of Claims............................................................................64

              11.     No Recourse..........................................................................................64

              12.     Amendments to Claims..........................................................................65

              13.     Postpetition Interest on Claims ..............................................................65

              14.     Distributions Relating to Allowed Insured Claims .................................65

        D.    Treatment of Executory Contracts and Unexpired Leases Under the Plan..........66

              1.      Assumption or Rejection of Executory Contracts and Unexpired
                      Leases ...................................................................................................66




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                                          TABLE OF CONTENTS
                                              (continued)
                                                                                                                             Page

              2.        Indemnification Obligations ..................................................................68

              3.        Compensation and Benefit Programs .....................................................68

              4.        Defined Benefit Plans ............................................................................69

              5.        Retiree Benefits .....................................................................................69

        E.    Partial Consolidation of Ormet and the Subsidiaries Other than Formcast .........70

              1.        Partial Substantive Consolidation Treatment..........................................70

              2.        Merger or Dissolution of Corporate Entities ..........................................70

        F.    Provisions Regarding Corporate Governance and Management of the
              Reorganized Debtors.........................................................................................71

              1.        Meetings of Stockholders ......................................................................71

              2.        Bylaws and Certificates of Incorporation ...............................................71

              3.        Boards of Directors................................................................................72

              4.        Officers .................................................................................................73

              5.        Authorization of New Securities ............................................................74

              6.        Issuance of New Securities ....................................................................74

              7.        Management Incentive Plan...................................................................76

        G.    Implementation and Effect of Confirmation of the Plan.....................................77

              1.        Effectiveness of Securities, Instruments and Agreements.......................77

              2.        Corporate Action ...................................................................................77

              3.        Approval of Agreements........................................................................77

              4.        Cancellation of Existing Securities and Agreements ..............................78

              5.        No Change of Control............................................................................78



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                                        TABLE OF CONTENTS
                                            (continued)
                                                                                                                       Page

              6.       Restructuring Transactions ....................................................................78

              7.       Termination of DIP Agreements ............................................................79

              8.       Cancellation of Old Parent Equity Interests............................................79

              9.       New Common Stock and New Term Notes............................................79

              10.      Shareholders Agreement........................................................................79

              11.      Operation of the Debtors in Possession Between the Confirmation
                       Date and the Effective Date ...................................................................80

              12.      Administration After the Effective Date.................................................80

              13.      Term of Bankruptcy Injunction or Stays ................................................80

              14.      Revesting of Assets ...............................................................................80

              15.      Causes of Action ...................................................................................80

              16.      Discharge of Debtors.............................................................................81

              17.      Injunction Related to Discharge.............................................................81

              18.      Injunction Against Interference with the Plan ........................................82

              19.      New Working Capital Facility ...............................................................82

              20.      The New Term Notes ............................................................................82

        H.    Confirmation and Effectiveness of the Plan.......................................................82

              1.       Conditions Precedent to Confirmation ...................................................82

              2.       Conditions Precedent to Effectiveness ...................................................83

              3.       Effect of Failure of Conditions ..............................................................84

              4.       Waiver of Conditions.............................................................................84

        I.    Summary of Other Provisions of the Plan..........................................................85



NY1:1514179                                              vi
                                      TABLE OF CONTENTS
                                          (continued)
                                                                                                                         Page

              1.    Retention of Jurisdiction........................................................................85

              2.    Effectuating Documents and Further Transactions .................................86

              3.    Exemption from Transfer Taxes ............................................................86

              4.    Authorization to Request Prompt Tax Determinations ...........................86

              5.    Exculpation ...........................................................................................86

              6.    Releases ................................................................................................87

              7.    Injunction Relating to Exculpation and Release .....................................87

              8.    Termination of Creditors’ Committee ....................................................87

              9.    Post-Effective Date Fees and Expenses..................................................88

              10.   Payment of Statutory Fees .....................................................................88

              11.   Amendment or Modification of Plan......................................................88

              12.   Severability ...........................................................................................89

              13.   Revocation or Withdrawal of the Plan ...................................................89

              14.   Binding Effect Notices ..........................................................................89

              15.   Notices ..................................................................................................89

              16.   Governing Law......................................................................................91

              17.   Withholding and Reporting Requirements .............................................91

              18.   Plan Supplement....................................................................................91

              19.   Section 1125(e) of the Bankruptcy Code................................................91

              20.   Rights of Old Indenture Trustee Under the Old Indenture and Old
                    Term Loan Agent and Old Term Loan Collateral Agent Under the
                    Old Term Loan Agreement, Respectively ..............................................92




NY1:1514179                                             vii
                                         TABLE OF CONTENTS
                                             (continued)
                                                                                                                            Page

               21.     Filing of Additional Documents.............................................................92

               22.     No Admissions ......................................................................................93

               23.     Inconsistency.........................................................................................93

               24.     Waiver of Bankruptcy Rule 3020(e) and 7062 .......................................93

               25.     Time......................................................................................................93

               26.     Substantial Consummation ....................................................................93

               27.     Post-Confirmation Conversion/Dismissal ..............................................93

               28.     Final Decree ..........................................................................................94

VI. CERTAIN RISK FACTORS TO BE CONSIDERED.........................................................94

        A.     Risk that Distributions Will be Less than Estimated by the Debtors...................94

        B.     Additional Risks Related to the New Common Stock........................................95

               1.      No Anticipated Payment of Dividends ...................................................95

               2.      The New Common Stock Has No Anti-Dilution Protection ...................95

               3.      No Assurance that a Public Market for the New Common Stock
                       Will Develop .........................................................................................95

               4.      Uncertainty of and Fluctuations in Trading Prices..................................98

               5.      Liquidity Risks – Restrictions on Transfer .............................................98

        C.     Industry Conditions and Financial Condition of Reorganized Debtors...............99

               1.      Operating Losses ...................................................................................99

               2.      Indebtedness..........................................................................................99

               3.      Downturns in the United States and Worldwide Aluminum
                       Industry ...............................................................................................100




NY1:1514179                                               viii
                                             TABLE OF CONTENTS
                                                 (continued)
                                                                                                                            Page

                 4.        Price Fluctuations ................................................................................100

                 5.        Price of Raw Materials ........................................................................101

                 6.        Competition.........................................................................................103

                 7.        Environmental and Government Regulation ........................................103

                 8.        Need for Certain Capital Expenditures.................................................104

                 9.        Cyclicality of End-Use Markets...........................................................104

                 10.       Limited Net Operating Loss Carry-Forwards .......................................105

                 11.       Key Personnel .....................................................................................105

                 12.       Collective Bargaining Agreements ......................................................105

        D.       Bankruptcy Risks ............................................................................................105

                 1.        Objections to Classifications................................................................105

                 2.        Risk of Nonconfirmation of the Plan....................................................106

                 3.        Potential Effect of Bankruptcy on Certain Relationships......................106

        E.       Ability to Refinance Certain Indebtedness.......................................................106

        F.       Significant Holders .........................................................................................107

        G.       Litigation Risks...............................................................................................107

        H.       Restrictive Covenants Contained in the New Working Capital Facility...........107

        I.       Projected Financial Information ......................................................................108

VII. VALUATION OF REORGANIZED DEBTORS ............................................................109

VIII. CONFIRMATION OF THE PLAN ...............................................................................113

        A.       The Confirmation Hearing ..............................................................................113

        B.       Requirements for Confirmation of the Plan .....................................................113


NY1:1514179                                                   ix
                                                 TABLE OF CONTENTS
                                                     (continued)
                                                                                                                                  Page

                    1.         Unfair Discrimination and Fair and Equitable Tests.............................113

                    2.         Feasibility............................................................................................114

                    3.         Best Interests Test ...............................................................................115

IX. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE
      PLAN.........................................................................................................................116

          A.        Liquidation Under Chapter 7...........................................................................116

          B.        Alternative Plan of Reorganization..................................................................117

X. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.......................................117

          A.        Introduction ....................................................................................................117

          B.        Consequences to the Debtors...........................................................................118

                    1.         Cancellation of Debt............................................................................118

                    2.         Limitation on NOL Carryforwards and Other Tax Attributes ...............118

                    3.         Alternative Minimum Tax ...................................................................120

          C.        Consequences to Holders of Certain Claims ....................................................121

                    1.         Consequences to Holders of General Unsecured Claims ......................121

                    2.         Consequences to Holders of Old Debt Claims......................................121

                    3.         Consequences to Holders of Formcast Unsecured Claims ....................122

                    4.         Tax Treatment of Market Discount ......................................................123

                    5.         Distributions in Discharge of Accrued but Unpaid Interest ..................123

                    6.         Information Reporting and Withholding ..............................................123

XI. CONCLUSIONS AND RECOMMENDATIONS ............................................................125




NY1:1514179                                                        x
                              DISCLAIMER

           THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT
(THE “DISCLOSURE STATEMENT”) AND APPENDICES HERETO RELATES TO THE
DEBTORS’ JOINT PLAN OF REORGANIZATION (AS IT MAY BE AMENDED,
SUPPLEMENTED OR OTHERWISE MODIFIED, THE “PLAN”) AND ARE INCLUDED
HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN AND MAY
NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO
VOTE ON SUCH PLAN. NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS
CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR THE
SOLICITATION OF ACCEPTANCES OF THE PLAN.

     ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND THE PLAN IN ITS ENTIRETY BEFORE VOTING TO
ACCEPT OR REJECT THE PLAN. SUMMARIES OF THE PLAN AND STATEMENTS
MADE IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO THE PLAN, OTHER EXHIBITS ANNEXED OR REFERRED TO IN THE
PLAN AND THIS DISCLOSURE STATEMENT.

      THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE
WITH 11 U.S.C. § 1125 AND RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE (THE “BANKRUPTCY RULES”) AND NOT NECESSARILY IN
ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER LAWS
GOVERNING DISCLOSURE OUTSIDE THE CONTEXT OF TITLE 11 OF THE UNITED
STATES CODE §§ 101-1330 (THE “BANKRUPTCY CODE”). NEITHER THE SECURITIES
TO BE DISTRIBUTED NOR THIS DISCLOSURE STATEMENT HAS BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”)
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC APPROVED OR
DISAPPROVED OF THE ACCURACY OR ADEQUACY OF THE STATEMENTS
CONTAINED HEREIN.

      AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER
ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT AND
APPENDICES HERETO WILL NOT CONSTITUTE OR BE CONSTRUED AS AN
ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT
RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS
DISCLOSURE STATEMENT WILL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY
PROCEEDING NOR WILL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE
TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO
HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN, THE DEBTORS.

     NO PARTY IS AUTHORIZED TO PROVIDE TO ANY OTHER PARTY ANY
INFORMATION CONCERNING THE PLAN OTHER THAN THE CONTENTS OF THIS
DISCLOSURE STATEMENT. THE DEBTORS HAVE NOT AUTHORIZED ANY


NY1:1514179                         2
REPRESENTATIONS CONCERNING THE DEBTORS OR THE VALUE OF THEIR
PROPERTY OTHER THAN THOSE SET FORTH IN THIS DISCLOSURE STATEMENT.
HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD NOT RELY ON ANY
INFORMATION, REPRESENTATIONS OR INDUCEMENTS MADE TO OBTAIN YOUR
ACCEPTANCE OF THE PLAN THAT ARE OTHER THAN, OR INCONSISTENT WITH,
THE INFORMATION CONTAINED HEREIN AND IN THE PLAN.

     CERTAIN OF THE STATEMENTS CONTAINED IN THIS DISCLOSURE
STATEMENT ARE FORWARD-LOOKING PROJECTIONS AND FORECASTS BASED
UPON CERTAIN ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE
THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES, AND
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE PROJECTIONS AND
FORECASTS SET FORTH HEREIN. NOTHING CONTAINED IN THIS DISCLOSURE
STATEMENT, EXPRESS OR IMPLIED, IS INTENDED TO GIVE RISE TO ANY
COMMITMENT OR OBLIGATION OF THE DEBTORS OR WILL CONFER UPON ANY
PERSON ANY RIGHTS, BENEFITS OR REMEDIES OF ANY NATURE WHATSOEVER.

     THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE
MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE
THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME
AFTER THE DATE HEREOF. NEITHER THE DELIVERY OF THIS DISCLOSURE
STATEMENT NOR THE CONFIRMATION OF THE PLAN WILL CREATE ANY
IMPLICATION, UNDER ANY CIRCUMSTANCES, THAT THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT IS CORRECT AT ANY TIME AFTER
THE DATE HEREOF OR THAT THE DEBTORS WILL BE UNDER ANY OBLIGATION TO
UPDATE SUCH INFORMATION IN THE FUTURE.

      THE PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE
BEEN PREPARED BY THE DEBTORS’ MANAGEMENT AND THEIR FINANCIAL
ADVISORS. THESE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL
SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND
ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE AT THE TIME THEY
WERE MADE, MAY NOT BE ACHIEVED AND ARE INHERENTLY SUBJECT TO
SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY,
MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF
WHICH ARE BEYOND THE DEBTORS’ CONTROL. THE DEBTORS CAUTION THAT
NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THESE
PROJECTIONS OR TO THE DEBTORS’ ABILITY TO ACHIEVE THE PROJECTED
RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER,
EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON
WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE
ASSUMED OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS
THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A
MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER. THE
PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR
OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.



NY1:1514179                      3
     SEE ARTICLE VI. OF THIS DISCLOSURE STATEMENT, “CERTAIN RISK
FACTORS TO BE CONSIDERED”, FOR A DISCUSSION OF CERTAIN RISK FACTORS
WHICH SHOULD BE CONSIDERED IN CONNECTION WITH A DECISION BY A
HOLDER OF AN IMPAIRED CLAIM OR IMPAIRED EQUITY INTEREST TO ACCEPT
THE PLAN.

                                              I.
                                        INTRODUCTION

        Ormet Corporation, a Delaware corporation (“Ormet”), and its wholly-owned direct or
indirect subsidiaries Ormet Primary Aluminum Corporation, Ormet Aluminum Mill Products
Corporation, Specialty Blanks Holding Corporation, Specialty Blanks, Inc., Formcast
Development Inc. and Ormet Railroad Corporation (collectively with Ormet, the “Debtors”),
debtors and debtors in possession in these jointly administered Chapter 11 Cases, submit this
Disclosure Statement pursuant to section 1125 of the Bankruptcy Code to holders of Claims
against and Equity Interests in the Debtors in connection with (i) the solicitation of acceptances
of the Debtors’ Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated
October 1, 2004, (as amended, supplemented or otherwise modified, the “Plan”) filed by the
Debtors with the United States Bankruptcy Court for the Southern District of Ohio, Eastern
Division (the “Bankruptcy Court”) and (ii) the hearing to consider confirmation of the Plan (the
“Confirmation Hearing”) scheduled for November 23, 2004 at 2:00 p.m. (Eastern Time). Unless
otherwise defined herein, all capitalized terms contained herein have the meanings ascribed to
them in the Plan.

A.      General

         Ormet and each of the other Debtors filed a voluntary petition for relief under chapter 11
of title 11, United States Code (the “Bankruptcy Code”), on January 30, 2004 (the “Petition
Date”). Since that time, the Debtors have continued in the possession of their properties and in
the management of their businesses as debtors in possession pursuant to sections 1107 and 1108
of the Bankruptcy Code.

        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 equity interest holders. In addition to permitting rehabilitation of a debtor, another
goal of chapter 11 is to promote equality of treatment for similarly situated creditors and
similarly situated equity 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 provides
that the debtor may continue to operate its business and remain in possession of its property as a
“debtor in possession”.

        The consummation of a plan of reorganization is the principal objective of a chapter 11
reorganization case. A plan of reorganization sets forth the terms for satisfying claims against
and interests in a debtor. Upon confirmation of a plan of reorganization, the plan is binding upon
a debtor, any issuer of securities under the plan, any person acquiring property under the plan



NY1:1514179                                       4
and any creditor or equity interest holder of a debtor. Subject to certain limited exceptions, the
confirmation order discharges a debtor from any debts that arose prior to the date of confirmation
of the plan and substitutes the obligations specified under the confirmed plan.

        After a plan of reorganization has been filed, holders of certain claims against or equity
interests in a debtor are permitted to vote to accept or reject the plan. Before soliciting
acceptances of the proposed plan, however, section 1125 of the Bankruptcy Code requires a
debtor to prepare a disclosure statement containing adequate information of a kind, and in
sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment
about the plan. The Debtors are submitting this Disclosure Statement to holders of Claims
against and Equity Interests in the Debtors to satisfy the requirement of section 1125 of the
Bankruptcy Code.

        Under the Plan, the Debtors will be reorganized on a stand alone basis, with holders of
Allowed General Unsecured Claims and Allowed Old Debt Claims receiving 100% of the New
Common Stock of Reorganized Parent, subject to dilution for shares of New Common Stock to
be issued in connection with the Management Incentive Plan. Pursuant to the Commitment
Agreement, MatlinPatterson Global Opportunities Partners II L.P. and MatlinPatterson Global
Opportunities Partners (Cayman) II L.P. (collectively, “MatlinPatterson”) have agreed to tender
the principal amount of the loans outstanding under the DIP Term Loan Agreement and purchase
an equal amount of the New Term Notes. MatlinPatterson is presently the DIP Term Loan
Lender, and also holds approximately $100 million in Allowed Old Debt Claims (inclusive of
accrued prepetition interest on the Old Debt). It is anticipated that from and after the Effective
Date of the Plan, MatlinPatterson will own the New Term Notes and approximately 31% of the
New Common Stock, which percentage (i) may be increased in the event interest on the New
Term Notes is paid in New Common Stock in accordance with the terms set forth in the New
Term Note Facility, and (ii) is subject to dilution for shares of New Common Stock issued
pursuant to the Management Incentive Plan.

B.      Disclosure Statement Overview

               Attached as exhibits to this Disclosure Statement are copies of the following:

               ●       Exhibit A – The Plan (including the Commitment Agreement, which is
                       Exhibit A to the Plan);

               ●       Exhibit B – Audited financial statements for Ormet Corporation and the
                       Subsidiaries for the fiscal year ended December 31, 2003;

               ●       Exhibit C – Ormet Corporation, et al., Projected Financial Information for
                       the period 2004 through 2007; and

               ●       Exhibit D – Ormet Corporation, et al. Liquidation Analysis.

               ●       Exhibit E – Term Sheet for Shareholders Agreement

               ●       Exhibit F – Term Sheet for New Term Notes



NY1:1514179                                      5
        In addition, a Ballot for the acceptance or rejection of the Plan is enclosed with the
Disclosure Statement submitted to the holders of Claims that the Debtors believe are entitled to
vote to accept or reject the Plan.

        On October 5, 2004, after notice and a hearing, the Bankruptcy Court entered an order
approving this Disclosure Statement as containing adequate information of a kind and in
sufficient detail to enable hypothetical, reasonable investors typical of the Debtors’ creditors and
equity interest holders to make an informed judgment whether to accept or reject the Plan, and
establishing certain procedures with respect to the solicitation of votes to accept or reject the
Plan (the “Disclosure Statement Order”). A copy of the Disclosure Statement Order is being
delivered with this Disclosure Statement. APPROVAL OF THIS DISCLOSURE STATEMENT
DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE BANKRUPTCY
COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.

        The Disclosure Statement Order sets forth in detail the deadlines, procedures and
instructions for voting to accept or reject the Plan and for filing objections to confirmation of the
Plan, the record date for voting purposes, and the applicable standards for tabulating Ballots. In
addition, detailed voting instructions accompany each Ballot. Each holder of a Claim entitled to
vote on the Plan should read the Disclosure Statement, the Plan, the Disclosure Statement Order
and the instructions accompanying the Ballots in their entirety before voting on the Plan. These
documents contain, among other things, important information concerning the classification of
Claims and Equity Interests for voting purposes and the tabulation of votes. No solicitation of
votes to accept the Plan may be made except pursuant to section 1125 of the Bankruptcy Code.

C.      Holders of Claims and Equity Interests Entitled to Vote

        Pursuant to the provisions of the Bankruptcy Code, only holders of allowed claims or
equity interests in classes of claims or equity interests that are impaired within the meaning of
section 1124 of the Bankruptcy Code (“Impaired”) and are entitled to receive distributions under
a proposed chapter 11 plan are entitled to vote to accept or reject such plan. Classes of claims or
equity interests in which the holders of such claims or equity interests 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 or equity interests in which the holders of such claims or
equity interests are Impaired and are not entitled to receive any distributions under a proposed
chapter 11 plan are deemed to have rejected the plan and are not entitled to vote to accept or
reject the plan.

        Under the Plan, holders of Allowed Claims in Classes 3 (Convenience Claims), 4 (Old
Debt Claims), 5 (General Unsecured Claims) and 6 (Formcast Unsecured Claims), collectively,
the “Voting Classes”) are treated as Impaired and entitled to vote on the Plan. Holders of Claims
in Class 10 (Subordinated Claims) and Equity Interests in Class 12 (Old Parent Equity Interests),
who will receive no distributions under the Plan, are deemed to have rejected the Plan pursuant
to section 1126(g) of the Bankruptcy Code and are not entitled to vote. Claims in Classes 1
(Other Priority Claims), 2 (Secured Claims), 7 (Insured Claims), 8 (Settled Environmental
Claims) and 9 (Intercompany Claims), and Allowed Administrative Claims, Professional Fee
Claims, and Priority Tax Claims and Subsidiary Equity Interests in Class 11 are not Impaired
under the Plan and thus holders of Claims and Equity Interests in such Classes and categories are


NY1:1514179                                       6
presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code and are
not entitled to vote.

D.      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. If you hold Claims in more than one Class and you are entitled to vote
Claims in more than one Class, you may receive separate Ballots which must be used for each
separate Class of Claims. Please vote and return your Ballot(s) to:

                                            IF BY MAIL

                                    Ormet Ballot Processing
                                        P.O. Box 5295
                                     Grand Central Station
                                New York, New York 10163-5295


                         IF BY HAND OR OVERNIGHT DELIVERY

                                     Ormet Ballot Processing
                                        757 Third Avenue
                                            3rd Floor
                                    New York, New York 10017


        DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT

     TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION
OF THE PLAN MUST BE RECEIVED NO LATER THAN 4:00 P.M., EASTERN TIME, ON
NOVEMBER 10, 2004. ANY EXECUTED BALLOT RECEIVED THAT DOES NOT
INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED TO CONSTITUTE AN ACCEPTANCE OF THE PLAN.

        Any Claim in an impaired Class as to which an objection or request for estimation is
pending or which is scheduled by the Debtors as unliquidated, disputed or contingent is not
entitled to vote unless the holder of such Claim has obtained an order of the Bankruptcy Court
temporarily allowing such Claim for the purpose of voting on the Plan.

       The Bankruptcy Court entered an order setting September 29, 2004 as the record date for
voting on the Plan. Accordingly, only holders of record as of September 29, 2004 that are
otherwise entitled to vote under the Plan will receive a Ballot and may vote on the Plan.

       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 Abbey Walsh
Ehrlich at O’Melveny & Myers LLP (212-326-2000) or Donald Mallory at Dinsmore & Shohl
LLP (513-977-8000).


NY1:1514179                                       7
E.      Vote Required for Acceptance; Best Interests; Binding Effect

        The Bankruptcy Code defines acceptance of a plan by an Impaired class of claims as
acceptance by holders of at least two-thirds in dollar amount, and more than one-half in number,
of the claims of that class which actually cast ballots. The Bankruptcy Code defines acceptance
of a plan by an Impaired class of equity interests as acceptance by holders of at least two-thirds
in amount of the equity interests of that class that actually casts ballots. The vote of a holder of a
claim or interest may be disregarded if the bankruptcy court determines, after notice and a
hearing, that the acceptance or rejection was not solicited or procured in good faith.

       In addition, section 1129 of the Bankruptcy Code requires that a plan of reorganization be
accepted by each holder of a claim or interest in an Impaired class or that the plan be found by
the court to provide the holder with at least as much value on account of the claim or interest as it
would receive if the debtor were liquidated under chapter 7 of the Bankruptcy Code.

        Confirmation of the Plan will make the Plan binding upon the Debtors, holders of Claims
against and Equity Interests in the Debtors, and other parties in interest regardless of whether
they have accepted the Plan, and such holders of Claims and/or Equity Interests will be
prohibited from receiving payment from, or seeking recourse against, the Reorganized Debtors
or any assets that are distributed to other holders of Claims and/or Equity Interests under the
Plan. In addition, confirmation of the Plan will enjoin creditors and equity interest holders from
taking a wide variety of actions on account of a debt, claim, liability, interest or right that arose
prior to the Confirmation Date. As of the Effective Date of the Plan, confirmation will also
operate as a discharge of all Claims against, and Equity Interests in the Debtors, to the fullest
extent authorized by section 1141(d) of the Bankruptcy Code.

F.      Confirmation Hearing

        Pursuant to section 1128 of the Bankruptcy Code, the Confirmation Hearing will be held
on November 23, 2004 at 2:00 p.m. (Eastern Time), before the Honorable Barbara J. Sellers,
United States Bankruptcy Judge, at the United States Bankruptcy Court, Southern District of
Ohio, Eastern Division, 170 North High Street, Columbus, Ohio 43215. The Bankruptcy Court
has directed that objections, if any, to confirmation of the Plan be served and filed so that they
are received on or before November 10, 2004 at 4:00 p.m. (Eastern Time) by (i) Dinsmore &
Shohl LLP, 255 E. 5th Street, Suite 1900, Cincinnati, Ohio 45202, attention: Kim Martin Lewis,
Esq., general bankruptcy counsel for the Debtors, (ii) O’Melveny & Myers LLP, Times Square
Tower, 7 Times Square, New York, New York 10036, attention: Adam Harris, Esq., special
corporate and litigation counsel to the Debtors, (iii) McGuireWoods LLP, Dominion Tower, 625
Liberty Ave, 23rd Floor, Pittsburgh, Pennsylvania 15222, attention: Robert Sable, Esq., counsel
for the Official Committee of Unsecured Creditors, (iv) Linklaters, 1345 Avenue of the
Americas, New York, New York 10105, attention: Mark Palmer, Esq. and Martin N. Flics, Esq.,
counsel to the DIP Term Loan Agent and (v) Latham & Watkins, 233 South Wacker Drive, Suite
5800, Chicago, Illinois 60606, attention David Crumbaugh, Esq., counsel to DIP Senior Loan
Agent. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice except for the announcement of the adjournment date made at the
Confirmation Hearing or any adjourned Confirmation Hearing.



NY1:1514179                                       8
G.       Effective Date

        The Plan will not be consummated immediately upon confirmation, but only upon the
Effective Date. The Effective Date will not occur unless various conditions to confirmation and
consummation are satisfied (or waived pursuant to, and in accordance with, the terms of the
Plan). Certain of the conditions may only be waived with the consent of MatlinPatterson and the
Creditors’ Committee. Certain other conditions may be waived with the consent of
MatlinPatterson upon three (3) Business Days prior notice to the Creditors’ Committee. The
Confirmation Order may be vacated if the conditions to the Effective Date are not timely met or
waived.

       Because of the conditions to the Effective Date provided in the Plan, a delay may occur
between confirmation of the Plan and the Effective Date. There is no assurance that the
conditions to the Effective Date will be fulfilled, or that any condition that is not fulfilled will be
waived.

                                        II.
                     OVERVIEW OF DISTRIBUTIONS UNDER THE PLAN2

        The following briefly summarizes the classification and treatment of Claims and Equity
Interests under the Plan.



Class    Type of Claim          Estimated Amounts              Treatment                                 Estimated
         or Equity                                                                                       Recovery
         Interest

--       Administrative         $12,000,0003                   Unimpaired. Paid in full, in        100%
         Expense Claims                                        Cash either (i) on the later of the
                                                               Effective Date and the date such
                                                               Administrative Expense Claim
                                                               becomes an Allowed


         2
           This table is only a summary of the classification and treatment of Claims and Equity Interests under the
Plan. The estimated recoveries for Classes of Claims receiving New Common Stock are based upon the mid-point
of the range of the estimated equity value of the Reorganized Debtors set forth in Article VII, “Valuation of the
Reorganized Debtors,” hereof. To the extent that the actual value of the New Common Stock varies from the
amounts estimated, the recoveries of holders of such Claims may be higher or lower. See Article VII., “Valuation of
Reorganized Debtors.” Reference should be made to the entire Disclosure Statement and the Plan for a complete
description of the classification and treatment of Claims and Equity Interests.
         3
           This amount is the Debtors’ best estimate of total Administrative Expense Claims that will need to be paid
in connection with the confirmation of the Plan. This estimates (which is subject to change) includes payment of
accrued and unpaid professional fees (estimated to be $3.5 million), success fees (estimated to be $2.25 million),
fees and expenses related to exit financing (estimated to be $2.5 million), cure costs (estimated to be $1.5 million),
taxes (estimated to be $1.5 million), directors and officers insurance (estimated to be $500,000) and other
miscellaneous expenses (estimated to be $250,000).



NY1:1514179                                               9
Class    Type of Claim   Estimated Amounts        Treatment                            Estimated
         or Equity                                                                     Recovery
         Interest

                                                  Administrative Expense Claim,
                                                  or as soon thereafter as is
                                                  practicable, or (ii) with respect
                                                  to liabilities incurred in the
                                                  ordinary course of business or
                                                  liabilities arising under loans or
                                                  advances to or other obligations
                                                  incurred by the Debtors, paid in
                                                  full and performed by the
                                                  Reorganized Debtors in the
                                                  ordinary course of business
                                                  consistent with past practices
                                                  and in accordance with the
                                                  terms and subject to the
                                                  conditions of any agreements
                                                  governing, instruments
                                                  evidencing or other documents
                                                  relating to such transaction.

--       DIP Senior      $76,000,000              Unimpaired. The principal            100%
         Lender Claims                            amount of, and all accrued and
                                                  unpaid interest, fees and
                                                  expenses on, the loans
                                                  outstanding under the DIP
                                                  Senior Credit Facility, shall be
                                                  paid in full in Cash on the
                                                  Effective Date; all DIP Letters
                                                  of Credit shall either (x) be (i)
                                                  returned to the issuer undrawn
                                                  and marked cancelled, or (ii)
                                                  cash collateralized with Cash in
                                                  an amount equal to 105% of the
                                                  face amount of the outstanding
                                                  DIP Letters of Credit, or (y) the
                                                  issuer will be provided with
                                                  back-to-back letters of credit in
                                                  an amount equal to 105% of the
                                                  face amount of the outstanding
                                                  DIP Letters of Credit, and in
                                                  form and substance and from a
                                                  financial institution acceptable
                                                  to the issuer. Upon payment or
                                                  satisfaction in full of all


NY1:1514179                                  10
Class    Type of Claim   Estimated Amounts        Treatment                            Estimated
         or Equity                                                                     Recovery
         Interest

                                                  obligations under the DIP
                                                  Senior Credit Facility in
                                                  accordance with the terms
                                                  thereof and Section 2.1(a) of the
                                                  Plan, all Liens and security
                                                  interests granted to secure such
                                                  obligations shall be terminated
                                                  and shall be of no further force
                                                  and effect.

--       DIP Term Loan   $30,000,000              Unimpaired. On the Effective       100%
         Lender Claims                            Date (i) the principal amount of
                                                  the loans outstanding under DIP
                                                  Term Loan Agreement shall be
                                                  satisfied through the issuance by
                                                  Reorganized Parent and
                                                  purchase by MatlinPatterson of
                                                  the New Term Notes pursuant
                                                  to the Commitment Agreement,
                                                  and (ii) all accrued and unpaid
                                                  interest, fees and expenses
                                                  outstanding under the DIP Term
                                                  Loan Agreement shall be
                                                  indefeasibly paid in full in Cash,
                                                  in accordance with the terms of
                                                  the DIP Term Loan Agreement.
                                                  Upon payment or satisfaction in
                                                  full of all obligations under the
                                                  DIP Term Loan Agreement in
                                                  accordance with the terms
                                                  thereof and Section 2.1(b) of the
                                                  Plan, all Liens and security
                                                  interests granted to secure such
                                                  obligations shall be terminated
                                                  and shall be of no further force
                                                  and effect.

--       Priority Tax    $4,760,000               Unimpaired. At the sole option       100%
         Claims                                   of Reorganized Debtors, either
                                                  (i) paid in full, in Cash, or (ii)
                                                  paid over a period through a
                                                  date not later than the sixth
                                                  anniversary of the date of


NY1:1514179                                  11
Class    Type of Claim    Estimated Amounts        Treatment                              Estimated
         or Equity                                                                        Recovery
         Interest

                                                   assessment as provided in
                                                   Section 1129(a)(9)(C) of the
                                                   Bankruptcy Code (commencing
                                                   on the first anniversary of the
                                                   Effective Date) with interest
                                                   payable at a fixed annual rate
                                                   equal to the rate applicable to
                                                   underpayments of federal
                                                   income tax on the Effective
                                                   Date determined pursuant to
                                                   section 6621 of the Internal
                                                   Revenue Code, without regard
                                                   to subsection (c) thereof.

1        Other Priority   $0                       Unimpaired. Each holder of an          100%
         Claims                                    Allowed Other Priority Claim
                                                   shall receive, in full satisfaction,
                                                   release and exchange for such
                                                   Claim, Cash in an amount equal
                                                   to the amount of such Allowed
                                                   Other Priority Claim.

2        Secured Claims   $1,000,000               Unimpaired. Except to the              100%
                                                   extent that a holder of an
                                                   Allowed Secured Claim agrees
                                                   to a different treatment, at the
                                                   sole option of the Reorganized
                                                   Debtors, (i) each Allowed
                                                   Secured Claim shall be
                                                   reinstated and rendered
                                                   unimpaired in accordance with
                                                   section 1124(2) of the
                                                   Bankruptcy Code, or (ii) each
                                                   holder of an Allowed Secured
                                                   Claim shall receive Cash in an
                                                   amount equal to the present
                                                   value of such Allowed Secured
                                                   Claim, including any interest on
                                                   such Allowed Secured Claim
                                                   required to be paid pursuant to
                                                   section 506(b) of the
                                                   Bankruptcy Code.
                                                   Notwithstanding the foregoing,


NY1:1514179                                   12
Class    Type of Claim   Estimated Amounts        Treatment                              Estimated
         or Equity                                                                       Recovery
         Interest

                                                  each such holder receiving the
                                                  treatment specified in clause (ii)
                                                  of the preceding sentence shall
                                                  have an Old Debt Claim in
                                                  Class 4, a General Unsecured
                                                  Claim in Class 5, or a Formcast
                                                  Unsecured Claim in Class 6, as
                                                  applicable, for the amount by
                                                  which the amount of its
                                                  Allowed Claim exceeds the
                                                  value of its Collateral.

3        Convenience     $6,726,000               Impaired. Each holder of an            13%
         Claims                                   Allowed Convenience Claim
                                                  shall receive, in full satisfaction,
                                                  release and exchange for such
                                                  Claim, a payment in Cash in an
                                                  amount equal to thirteen percent
                                                  (13%) of the amount of such
                                                  Allowed Convenience Claim,
                                                  provided, however, that any
                                                  Person that holds more than one
                                                  General Unsecured Claim
                                                  and/or Convenience Class
                                                  Claim that in the aggregate
                                                  exceed $30,000.00 may elect,
                                                  by so indicating on such
                                                  holder’s Ballot, to have its
                                                  Claims treated as a single Class
                                                  5 General Unsecured Claim.

4        Old Debt        $257,045,000             Impaired. On the Initial               25.3%
         Claims                                   Distribution Date, subject to the
                                                  terms of Section 5.4(a) of the
                                                  Plan, each holder of an Allowed
                                                  Old Debt Claim shall receive, in
                                                  full satisfaction, release and
                                                  exchange for such Claim, such
                                                  holder’s Pro Rata Share of the
                                                  Creditor New Common Stock
                                                  Pool. In addition, each holder
                                                  of an Allowed Old Debt Claim
                                                  may be entitled to distributions


NY1:1514179                                  13
Class    Type of Claim          Estimated Amounts              Treatment                                 Estimated
         or Equity                                                                                       Recovery
         Interest

                                                               of additional shares of New
                                                               Common Stock on each
                                                               Subsequent Distribution Date in
                                                               accordance with Section 5.4(d)
                                                               of the Plan.

5        General                $61,700,000                    Impaired. On the Initial                  25.3%
         Unsecured                                             Distribution Date, subject to the
         Claims                                                terms of Section 5.4(a) of the
                                                               Plan, each holder of an Allowed
                                                               General Unsecured Claim shall
                                                               receive, in full satisfaction,
                                                               release and exchange for such
                                                               Claim, such holder’s Pro Rata
                                                               Share of the Creditor New
                                                               Common Stock Pool; provided,
                                                               however, that each holder of an
                                                               Class 5 Allowed General
                                                               Unsecured Claim may elect on
                                                               its Ballot to permanently and
                                                               irrevocably reduce the amount
                                                               of its Claim to $30,000 and
                                                               receive a distribution pursuant
                                                               to Class 3 (Convenience
                                                               Claims). In addition, each
                                                               holder of a Class 5 Allowed
                                                               General Unsecured Claim may
                                                               be entitled to distributions of
                                                               additional shares of New
                                                               Common Stock on each
                                                               Subsequent Distribution Date in
                                                               accordance with Section 5.4(d)
                                                               of the Plan.

6        Formcast               $395,000                       Impaired.4 On the Initial                 55%
         Unsecured                                             Distribution Date, subject to the
         Claims                                                terms of Section 5.5(a) of the
                                                               Plan, each holder of an Allowed

         4
          Although Class 6 is an impaired class of Claims, because the Formcast Unsecured Claims will not be
substantively consolidated with the Claims against the other Debtors, the vote of Class 6 will not be considered in
connection with a cram down pursuant to section 1129(b) of the Bankruptcy Code.



NY1:1514179                                              14
Class    Type of Claim    Estimated Amounts        Treatment                              Estimated
         or Equity                                                                        Recovery
         Interest

                                                   Formcast Unsecured Claim
                                                   shall receive, in full satisfaction,
                                                   release and exchange for such
                                                   Claim, its Pro Rata Share of the
                                                   Remaining Formcast Sale
                                                   Proceeds. In addition, each
                                                   holder of an Allowed Formcast
                                                   Unsecured Claim may be
                                                   entitled to additional
                                                   distributions of the Remaining
                                                   Formcast Sale Proceeds on each
                                                   subsequent Distribution Date in
                                                   accordance with Section 5.5(d)
                                                   of the Plan. However, to the
                                                   extent that any Formcast
                                                   Unsecured Claims would be
                                                   Intercompany Claims held by
                                                   other Debtors, such claims shall
                                                   be cancelled on the Effective
                                                   Date and no distribution shall be
                                                   made on account of such
                                                   Claims.

7        Insured Claims   N/A                      Unimpaired. The Claim of each          100%
                                                   holder of an Allowed Insured
                                                   Claim shall be satisfied from
                                                   proceeds payable to such holder
                                                   under any applicable insurance
                                                   policies and applicable law. To
                                                   the extent that an Allowed
                                                   Insured Claim is not satisfied in
                                                   full by available insurance
                                                   proceeds, the remaining Claim
                                                   shall be a Class 5 Allowed
                                                   General Unsecured Claim.

8        Settled          N/A                      Unimpaired. Holders of           100%
         Environmental                             Allowed Settled Environmental
         Claims                                    Claims shall be treated in
                                                   accordance with the terms of the
                                                   settlement relating to such
                                                   Claims.



NY1:1514179                                   15
Class    Type of Claim      Estimated Amounts        Treatment                          Estimated
         or Equity                                                                      Recovery
         Interest

9        Intercompany       N/A                      Unimpaired. On the Effective     100%
         Claims                                      Date, each holder of an Allowed
                                                     Intercompany Claim shall
                                                     receive, in full satisfaction,
                                                     release and exchange for such
                                                     Claim, the following treatment:
                                                     (i) the legal, equitable and
                                                     contractual rights of each
                                                     holder’s Allowed Intercompany
                                                     Claim shall remain unaltered by
                                                     the Plan, or (ii) such other
                                                     treatment agreed to in writing
                                                     between such holder and the
                                                     Debtors or Reorganized
                                                     Debtors, as applicable, and
                                                     MatlinPatterson; provided,
                                                     however that any Claim of
                                                     Formcast against any of the
                                                     other Debtors shall not be
                                                     included as an Intercompany
                                                     Claim, shall be cancelled on the
                                                     Effective Date and shall receive
                                                     no distribution under the Plan.

10       Subordinated       $0                       Impaired. The holders of           0%
         Claims                                      Subordinated Claims will not
                                                     receive or retain any property
                                                     on account of such Claims.

11       Subsidiary                                  Unimpaired. The holders of         100%
         Equity Interests                            Allowed Subsidiary Equity
                                                     Interests shall retain ownership
                                                     of their Subsidiary Interests in
                                                     each of the Reorganized
                                                     Subsidiaries.

12       Old Parent                                  Impaired. The holders of Old       0%
         Equity Interests                            Parent Equity Interests will not
                                                     receive or retain any property
                                                     on account of such interest.




NY1:1514179                                     16
                                               III.

                                 GENERAL INFORMATION

A.      Description and History of the Debtors

        1.     Organizational Structure of the Debtors

        Ormet Corporation has 8 direct and indirect subsidiaries, 6 of which are Debtors in the
Chapter 11 Cases. The following chart depicts, as of the Petition Date, the organizational
structure of Ormet Corporation and its subsidiaries and the percentage ownership of each
subsidiary by its parent.

                [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




NY1:1514179                                    17
                                             ORMET STRUCTURE CHART

                                                        Ormet Corporation
                                                              (DE)




    100%                 100%               100%             100%              100%             100%            45%




    Ormet                 Ormet            Specialty          Ormet             Ormet           Formcast       SPL Recycling
   Primary              Aluminum            Blanks           Railroad           Power         Development,       LLC (DE)
  Aluminum             Mill Products       Holding          Corporation       Marketing            Inc.
  Corporation          Corporation        Corporation          (DE)           LLC (DE)            (DE)
     (DE)                  (DE)              (DE)                              (formed
                                                                              12/18/02)


                                           100%


                                          Specialty
                                           Blanks,
                                            Inc.
                                            (IN)


         2.         Overview of the Debtors’ Business

       Ormet was formed as a Delaware corporation in 1989 and operated under the name of
Oralco, Inc. until 1994. Ormet is a holding and management company and conducts all of its
operations through its subsidiaries. Ormet Primary Aluminum Corporation (“Ormet Primary”)
was formed as a Delaware corporation in 1956 and operated under the name of Ormet
Corporation until 1994 and is a provider of primary aluminum, extrusion billet, and alumina and
operates an alumina production facility. Ormet Aluminum Mill Products (“Ormet Products”), a
Delaware corporation, was formed in 1994 in connection with the acquisition of certain
aluminum fabrication, lamination and recycling assets from Consolidated Aluminum
Corporation. In September of 1997, Specialty Blanks Holdings Corporation, a Delaware
Corporation, was formed to acquire Specialty Blanks, Inc. (“Specialty Blanks”), a producer of
aluminum blanks and specialty aluminum rims for the automotive aftermarket. In November
1997, Ormet acquired a 65 percent interest in Formcast Development Inc. (“Formcast”), a
producer of complex aluminum cast parts, and subsequently increased its ownership to 100
percent.5 Ormet also owns a 45 percent interest in SPL Recycling LLC, an entity formed by


         5
             The Debtors discontinued Formcast’s operations and sold all of its assets shortly after the Petition Date.


NY1:1514179                                                 18
Ormet and Vortec Corporation in 1997 to commercialize technology that processes hazardous
waste generated in the aluminum reduction process into non-hazardous glass material.

        The Debtors operate the following facilities: (i) the Hannibal reduction plant, located in
Hannibal, Ohio, (ii) the Burnside alumina refinery, located in Burnside, Louisiana (the “Burnside
Refinery”), (iii) the Burnside marine terminal, located adjacent to the Burnside Refinery, (iv) the
Hannibal rolling mill located in Hannibal, Ohio, (v) the Jackson coated sheet and foil facility
located in Jackson, Tennessee6 (the “Jackson Facility”), (vi) the Bens Run recycling plant
located in Friendly, West Virginia, and (vii) the Specialty Blanks facility, located in Terre Haute,
Indiana (collectively, the “Facilities”). All of the Facilities are owned by the Debtors. Of these
Facilities, the Company’s primary operating facilities are the Burnside Refinery and the
reduction plant and rolling mill located in Hannibal, Ohio (the “Hannibal Facilities”).

        The Debtors also maintain their chief executive offices and chief places of business in
Wheeling, West Virginia and Terre Haute, Indiana. The Company maintains the vast majority of
its inventory at its owned Facilities or in transit thereto; at any given time, inventory is also
located at various outside processors, consignment customers or outside warehouses. The
majority of the inventory is located at the Hannibal Facilities.

        The Debtors are integrated producers and marketers of alumina, primary aluminum and
fabricated aluminum products in the United States. The Debtors operate seven facilities in five
states and have approximately 2,200 employees. The Debtors’ main operations consist of the
production of alumina, primary aluminum and fabricated and semi-fabricated aluminum products
for customers in the transportation, containers and packaging, building and construction,
electrical, consumer durables and machinery and equipment industries.

       The Company’s main operations are divided into two operating segments: (i) the
production of alumina and primary aluminum, through its wholly-owned subsidiary, Ormet
Primary, and (ii) the production of fabricated and semi-fabricated aluminum products through its
wholly-owned subsidiaries, Ormet Products and Specialty Blanks.

        The production of aluminum is a multi-stage process. The initial stage involves mining
bauxite, the principal ore of aluminum, found primarily in South America, Australia and Africa.7
The bauxite is transported to refineries that convert it to aluminum oxide (alumina), the raw
material from which aluminum is made. This process takes approximately two tons of bauxite
for every one ton of alumina produced. The alumina is transported to aluminum reduction plants
where it takes approximately two tons of alumina to make one ton of primary aluminum.
Therefore, approximately four tons of bauxite ultimately becomes one ton of primary aluminum.




         6
             The Debtors closed on the sale of the Jackson Facility on October 5, 2004.
         7
          The Debtors do not engage in the actual mining of the bauxite, but instead purchase it from third party
foreign suppliers. Once the bauxite is received at the Company’s alumina production facility, however, the
Company is vertically integrated and is involved in each other stage in the process.



NY1:1514179                                                19
         The process which involves the reduction of alumina to primary aluminum is often
referred to as smelting, in which the alumina is reduced in electrolytic reduction cells after it is
added to a molten electrolyte at 1,775 degrees Fahrenheit. The primary aluminum produced has
a purity which typically averages 99.7%. Once the primary aluminum is made, it is mixed with
various alloys to match its metallurgical characteristics to the customer's specific needs. The
final stage of aluminum production involves casting it into shapes, such as billet and ingot,
according to the customers' needs and specifications. After the introduction of any necessary
alloys, the metal is fabricated into sheet, bar, wire and other products. For the production of
sheet products, ingots are hot and cold rolled to be reduced in thickness, eventually resulting in
coil, flat sheet products or foil.

        Fabrication plants located in close proximity to aluminum reduction plants, such as the
Debtors’ Hannibal facilities, reduce costs by allowing the transfer of aluminum in the molten
state directly from the reduction plant to the fabrication plant. The Debtors’ customers utilize
one or several more steps to convert the aluminum into end products such as packaging material,
furniture, ladders, kitchenware, signs, fasteners, automotive parts, construction materials and
other products.

                  (a)      Ormet Primary

         Ormet Primary produces alumina and makes primary aluminum and produces extrusion
billet for automotive, transportation, construction, electronic technology, consumer appliance
and other product applications. Ormet Primary is comprised of three principal facilities: (i) the
Hannibal reduction facility, located in Hannibal, Ohio, (ii) the Burnside Refinery, located in
Burnside, Louisiana, and (iii) the Burnside marine terminal, located adjacent to the Burnside
Refinery.

        Hannibal Reduction Plant. The Hannibal reduction plant, located on the Ohio River
adjacent to the Debtors’ rolling mill, is within a 500-mile radius of many of the major aluminum
extrusion operators and aluminum fabricators in the United States. The Hannibal reduction plant
is among the largest in the United States, with an annual capacity of approximately 585 million
pounds of aluminum.8 The Hannibal reduction plant consists of a carbon plant (which was idled
in 2001), a rodding room, six process potlines, a spent potliner recycling plant and two QS
9000/ISO 9002 certified cast houses (one capable of producing conventional extrusion billet and
one capable of producing thixotropic billet).9 The facility covers 256 acres and employs
approximately 1,100 workers when operating at full capacity.

      The aluminum reduction process is monitored electronically by an installed Celtrol
System®, a series of 1,032 sophisticated microprocessor computer systems. The Celtrol
System® constantly gathers, processes and evaluates data from the production stream and


         8
         The reduction facility must be operating at full capacity in order to produce this amount of primary
aluminum. The reduction facility is currently operating at approximately 50% capacity.
         9
           Since the Petition Date, the Debtors have discontinued operations at the thixotropic cast house and sold
their thixotropic assets and are operating only one of two pits in the conventional extrusion billet cast house.



NY1:1514179                                              20
continually regulates and adjusts the ongoing process on each electrolytic cell. Every 30
seconds, the Celtrol System® monitors each of the 1,032 electrolytic cells or “pots,” where the
actual aluminum reduction takes place. The entire system of microprocessors is linked to a
central computer that is used to precisely monitor the flow of electric power and raw materials to
the electrolytic cells. The Debtors believe that this technology enhances process consistency and
effectiveness, as well as overall efficiency, productivity and safety.

        The extrusion billet cast house, where molten aluminum is cast into billet, is an integral
parts of the Hannibal reduction plant. Billet is sold to various markets including the
transportation, building products, automotive, tubing and HVAC and refrigeration industries.
The conventional SatinPlus® extrusion billet cast house includes three melting furnaces, a dry
hearth furnace, two tilting holding furnaces and advanced filtering systems that are directed at
ensuring metal purity, homogenization furnaces and computer-controlled saws to increase the
precision and uniformity of each billet. The Debtors’ Satin Plus® billet is produced in diameters
of up to 15 inches and billet logs of up to 300 inches in length, thereby enabling them to meet a
broad range of customer specifications. Adherence to procedures, employee training and
application of statistical technologies are directed at assuring quality, consistency, reliability and
value. Quality checks begin with the arrival of aluminum and other raw materials and continue
through the production and final inspection processes. The Debtors’ current extrusion billet
capacity is approximately 220 million pounds per year.

         When the Hannibal reduction facility is operating at full capacity, Ormet Primary uses
substantially all of the alumina produced at the Burnside Refinery in the operation of its own
business. However, Ormet Primary may also choose from time to time to operate the reduction
facility at less than full capacity, in which case it may sell alumina to third parties. Due to
market circumstances, Ormet Primary curtailed two potlines (approximately one-third of the
capacity of the Hannibal reduction facility) in January 2004 and curtailed a third potline in June
2004.10 Sales of primary aluminum are primarily made to manufacturers of rolled aluminum
products and to metal brokers.

        During 2003, approximately 5.4% of the primary aluminum produced at the Hannibal
reduction plant was sold to third parties in the form of primary aluminum; 32% was sold as
extrusion or forging billet; 2.2% was sold as thixotropic billet and 60.4% was transferred
(primarily in the form of molten aluminum) to the Debtors’ Hannibal rolling mill.

        During 2001, facing substantial increased costs for compliance with stringent
environmental standards that became effective for the Debtors at such time, the Debtors
discontinued producing carbon anodes at the Hannibal reduction facility. The Debtors have
entered into long-term contracts to acquire larger-sized carbon anodes from third-party producers
in the United States, China, Egypt and Venezuela. The Debtors’ use of larger-sized anodes
allows for the production of approximately 25 million pounds of additional primary aluminum


        10
           Depending on the market prices of alumina, electricity, other raw materials and primary aluminum, the
Company may sell alumina to third parties to capture incremental value (thus reducing its ability to produce primary
aluminum) while at the same time purchasing primary aluminum on the open market to satisfy the needs of its
customers, including Ormet Products.



NY1:1514179                                             21
per year (thereby raising the capacity of the Hannibal reduction plant to approximately 585
million pounds), the reduction of unit electrical consumption, the reduction of the labor force at
the plant by approximately 200 employees, as well as certain other operating benefits. In order
to physically handle the larger-sized carbon anodes and to clean spent anodes, the Debtors made
capital expenditures approximating $4.8 million through December 31, 2002.

        Burnside Alumina Refinery. The Burnside Refinery, situated on approximately 2,500
acres and located adjacent to the Burnside bulk marine terminal, is one of only four alumina
refineries in the United States. When operating at capacity, the facility employs approximately
235 employees and can produce up to approximately 545,000 tons of alumina each year. Its
products include metallurgical-grade alumina and certain specialty products, including alumina
hydrate filter cake and dried hydrates. These specialized products are used in the production of a
variety of items, including dishwashing detergents, abrasives, water purification systems and
grinding materials. In 2001, the Burnside refinery produced approximately 6,438 tons of wet
hydrate, 6,465 tons of dried hydrate, and 519,689 tons of calcined, metallurgical grade alumina.
During 2001, the Debtors utilized approximately 97% of the Burnside refinery's production at
their Hannibal reduction plant, representing nearly all of the Hannibal reduction plant's alumina
requirements.

        In December 2001, the Debtors announced the temporary idling of the Burnside refinery
as a result of low market prices for alumina making it more economical for the Debtors to
purchase their alumina requirements from a third party alumina producer. Through December
31, 2003, the Company obtained its alumina requirements through a fixed price contract at a
price below the cost of producing alumina at the Burnside refinery. Due to a substantial increase
in the market price of alumina, beginning in the third quarter of 2003, the Company re-started the
Burnside Refinery in order to (a) provide a steady source of alumina for its business at prices
significantly below the price which would have to be paid to acquire alumina from a third party
and (b) capture the higher market price resulting from sales of alumina to third parties. The
Burnside Refinery is now fully operational.

        The Debtors have historically sourced their bauxite requirements for the Burnside
refinery under short- to medium-term contracts with bauxite mines located primarily in South
America. The Burnside refinery's bauxite storage building has an indoor storage capacity of
150,000 tons.

       Burnside Bulk Marine Terminal. The Burnside marine terminal is located between New
Orleans and Baton Rouge, Louisiana at the 170-mile marker on the Mississippi River.
Employing approximately 85 employees, it is one of the largest fixed deep-water terminals on
the lower Mississippi River and serves as a transfer station between ocean-going vessels, barges,
railway cars and trucks. The Burnside terminal handles shipments of aluminum, alumina,
bauxite, alloys, ores, coal, coke, fertilizers and other bulk commodities. Historically, the
Burnside terminal has handled three to seven million metric tons of bulk cargoes annually,
primarily for third parties. In 2003, 12.5% of the marine terminal's volume was related to the
Debtors’ other facilities, and the remaining 87.5% of the volume was for various third party
customers; in 2001, the last full year that the Burnside Refinery was fully operational, 25% of the
marine terminal's volume was related to the Debtors’ other facilities.



NY1:1514179                                     22
               (b)    Ormet Products

        Ormet Products comprises the Debtors’ main downstream operations and includes: (a)
the Hannibal rolling mill, located in Hannibal, Ohio and (b) the Bens Run recycling plant located
in Friendly, West Virginia. Ormet Products also operated a coated sheet and foil facility located
in Jackson, Tennessee. The Jackson facility was sold on October 5, 2004. Ormet Products
produces a variety of fabricated and semi-fabricated products in numerous alloys (including
1000, 3000, 5000 series and other specialty alloys) with widths of up to 72 inches and gauges as
thin as 0.00025 inches. Through Ormet Products, the Company is a major domestic producer of
fabricated (including semi-fabricated) aluminum products with annual individual plant capacity
aggregating approximately 650 million pounds. Ormet Products’ production process begins with
primary aluminum, supplied by Ormet Primary or a third party, or scrap aluminum, and ends
with a variety of fabricated and semi-fabricated products in numerous alloys. Ormet Products
supplies a wide range of high quality aluminum sheet and foil products for the transportation,
printing, packaging, consumer durables and construction industries.

        Hannibal Rolling Mill. The Hannibal rolling mill, located adjacent to the Hannibal
reduction plant, employs approximately 510 employees and has an annual capacity, depending
upon product mix, of approximately 420 million pounds of products. Products of the facility
include aluminum coil for lithographic printing sheet, automotive and appliance trim; overhead
lighting sheet and common alloy coils for architectural building materials; tread plate; and
distributor products. The facility is located within 500 miles (a single truck day's reach) of a
significant portion of the United States aluminum markets and services approximately 100
customers. During 2003, in terms of pounds sold, approximately 93% of the Hannibal rolling
mill's metal requirements was furnished from the Hannibal reduction plant and approximately
2% was furnished from the Bens Run recycling facility, with the balance being provided from
third party purchases of scrap, primary aluminum and alloy additives. During 2003,
approximately 70.2% of the total shipments from the Hannibal rolling mill were sold to third
parties, with 24.2% shipped to the Jackson Facility and 5.6% shipped to Specialty Blanks. No
single third party customer accounted for more than 15% of the Hannibal rolling mill's sales in
2003.

        Jackson Coated Sheet and Foil Plant. The Jackson Facility produced converter foil,
capacitor foil and other specialty products, including coated and embossed aluminum sheet and
continuous cast sheet products for the packaging industry as well as products used in the
electronics, graphics arts, building and recreational vehicle markets.

        In November 2001, the Debtors curtailed certain foil operations at the Jackson Facility
resulting in the layoff of approximately 113 of the 250 salaried and hourly workers. As a result
of that decision, the Debtors exited the narrow-width foil business to concentrate on wider-width
foil production at the Jackson Facility, and their foil production declined from approximately 2.5
to 3.0 million pounds per month to approximately 1.0 to 1.5 million pounds per month.

        During 2003, substantially all of the facility's metal supply came from the Hannibal
rolling mill or the Bens Run facility. Annually, the Jackson Facility could produce
approximately 60 million pounds of painted coil, 24 million pounds of common alloy bare sheet
and 18 million pounds of foil products. At the Jackson Facility, products were manufactured to


NY1:1514179                                     23
customer specification in gauge, shape, purity and finish, including capacitor foil which is
capable of holding the electrical charge required by computers and other electronic equipment.
Foil for food packaging includes the complex aseptic and retort packages, while heavy foil
becomes stock for pharmaceutical and other specialized packaging applications. The Debtors’
coated aluminum sheet is used for such applications as the production of recreational vehicles
and trailers, architectural panels in commercial construction and modular housing. The largest
customer accounted for approximately 26.6% of the Jackson Facility's production in 2003.

         As part of their ongoing efforts to reorganize, the Debtors determined to discontinue
operations at, and to sell, the Jackson Facility and surrounding real property. On June 28, 2004,
the Bankruptcy Court entered an order approving procedures for the marketing and sale of the
Jackson Facility and real property. Under the order, bids by interested parties for the Jackson
Facility and/or the real property were required to be submitted to the Debtors and financial
advisors for the Creditors’ Committee by August 6, 2004. On August 6th, the Debtors received
five bids for the Jackson Facility (including the buildings, underlying real estate, machinery and
equipment, but excluding all current assets) and one bid for the remaining real property.
Pursuant to the procedures approved by the Bankruptcy Court, the Debtors conducted an auction
for the Jackson Facility and remaining real property on August 10, 2004. At the conclusion of
the auction, the Debtors, in consultation with the Creditors’ Committee, concluded that the
highest and best offer for the Jackson Facility had been submitted by Rollex Corporation,
comprised of (i) $13,550,000 cash at closing11 and (ii) reimbursement of any severance or health
care benefit costs incurred by the Debtors upon termination of any employee at the Jackson
Facility in the event such employee is not offered employment by Rollex Corporation. The
Debtors and the Creditors’ Committee further concluded that JW Aluminum Corporation had
submitted the second highest bid for the Jackson Facility (having submitted an offer containing
virtually identical economic terms as Rollex Corporation, except that cash paid at closing would
be $13,000,000 and reimbursement of up to $475,000 on payments on account of workers’
compensation claims made by employees at the Jackson Facility and arising prior to the closing
date), and that the City of Jackson had submitted the highest and best offer for the remaining real
property at $775,000 (together with certain agreements to facilitate the sale of the Jackson
Facility). By order of the Bankruptcy Court dated August 13, 2004, the Debtors were authorized
to sell (a) the Jackson Facility to Rollex Corporation in accordance with the terms and conditions
set forth in the Asset Purchase Agreement which is an exhibit to such Order or, to the extent such
transaction is not consummated, to JW Aluminum Corporation, in accordance with an asset
purchase agreement having terms (other than price) not materially less favorable to the Debtors,
and (b) the remaining real property to the City of Jackson in accordance with the terms and
conditions of the Real Property Purchase Agreement which is an exhibit to such Order. The
sales each closed on October 5, 2004.



        11
            Pursuant to an order of the Bankruptcy Court dated October 2, 2004, the purchase price to be paid by
Rollex Corporation was adjusted downward by $610,000 to compensate for the loss of the largest annealing furnace
at the Jackson Facility which exploded following the execution of the purchase agreement with Rollex Corporation
and prior to the closing. Thus, the total cash paid by Rollex Corporation at closing was $12,940,000.00.




NY1:1514179                                            24
        In addition, the Debtors will retain title to all working capital assets generated by the
Jackson Facility prior to the date of the closing of the sale, including working capital attributable
to the collection of accounts receivable and the liquidation of inventory. The Debtors estimate
that recovery on these working capital assets to generate approximately $10 to $12 million of
Cash, which will be used to reduce the outstanding amounts under the DIP Senior Credit
Facility.

        Bens Run Recycling Facility. The Bens Run recycling facility, constructed in 1989, is an
aluminum scrap recycling facility that melts and processes recycled metal and provides the
Debtors with a source of secondary aluminum. The Bens Run facility purchases scrap cans and
other aluminum scrap and converts it into secondary aluminum in gas-fired or reverberatory
furnaces. In addition to performing such services under tolling contracts, the facility is also
capable of processing dross and other forms of scrap aluminum generated at the Hannibal
reduction plant, Hannibal rolling mill and Jackson Facility. During 2003, approximately 91.8%
of the Bens Run facility's production was for the Debtors’ other facilities, with the remainder
either being direct sales to customers or tolling arrangements. The plant has an annual capacity
of approximately 170 million pounds of recycled metal. The facility, located approximately 20
miles from the Hannibal rolling mill, is on 66 acres and employs approximately 40 salaried and
hourly employees. Depending on product mix, up to 85% of Bens Run aluminum can be tapped
into crucibles and shipped to the Hannibal rolling mill in molten form. The remainder is molded
into secondary ingot and shipped to the Hannibal reduction plant, the Jackson Facility or to third
party customers.

               (c)     Other Ormet Subsidiaries

        Specialty Blanks. In October 1997, the Debtors acquired Specialty Blanks, headquartered
in Terre Haute, Indiana. Specialty Blanks produces industrial aluminum blanks and aftermarket
wheel rims. Industrial aluminum alloy blanks are used in the lighting, cookware and automotive
industries and to produce diesel fuel tanks, propane tanks, and water and compressed gas
cylinders and canisters. Specialty Blanks has an annual capacity of 35 million pounds of circles
and shapes and 360,000 high margin spun wheel rims. In 2003, Specialty Blanks consumed 24.6
million pounds of sheet products produced primarily at the Hannibal rolling mill and sold or
tolled 17.3 million pounds of circles and other shapes and internally consumed 1.6 million
pounds of aluminum in the production of wheel rims which amounted to 143,140 wheel rims.
No single third party customer represented more than 15 % of Specialty Blanks' net sales in
2003.

        Formcast Development. In November 1997, the Debtors acquired a 65% interest (and the
Debtors subsequently bought the remaining 35%) in Formcast (formerly named Formcast, Inc.),
which is headquartered in Denver, Colorado. Formcast utilized the Debtors’ VelvetFlow®
thixotropic billet to provide small part design services and other designs not previously possible
with traditional casting processes. The Debtors acquired Formcast to improve their new product
development and parts design capabilities for the automotive, industrial and recreational goods
markets. Since its acquisition, the Debtors have transitioned Formcast from a parts manufacturer
to a product development and marketing center focusing on developing parts for third party
customers and assisting in the sales activities for their VelvetFlow® thixotropic billets. During
2002, the Debtors had sales to Formcast of $0.03 million. In 2002, Formcast began to offer


NY1:1514179                                      25
development services for customers of the Debtors’ SatinPlus® extrusion billet. The lease for
the Formcast facility expired on March 31, 2004 and the Debtors determined in their business
judgment not to extend the lease and to discontinue operations at the facility. Formcast’s assets
were sold pursuant to an order of the Bankruptcy Court at the same time.

        Ormet Power Marketing LLC. Ormet Power Marketing LLC is licensed as a wholesale
reseller of electrical power by the State of Ohio Public Utilities Commission. As of the date
hereof, this company is inactive and is conducting no business. In the future, Ormet Power
Marketing LLC may enter into agreements with third parties pursuant to which it will contract
for certain quantities of electrical power for subsequent resale to Ormet Primary and/or Ormet
products.

        In August, 2004, Ormet Power Marketing entered into a long-term agreement with Lima
Energy Company ("Lima Energy") pursuant to which Ormet Power Marketing has agreed to
purchase from Lima, and Lima has agreed to sell to Ormet Power Marketing, 540 megawatts per
hour of electrical power on the terms and subject to the conditions set forth therein, commencing
in or about June, 2008. Among the conditions set forth in the Power Purchase Agreement is the
ability of Lima to obtain financing by March 31, 2005 for the development and construction of
the facility that would generate the electrical power to be sold to Ormet Power Marketing and, if
such financing is timely obtained, the timely development and construction of the facility. If the
Power Purchase Agreement becomes effective and the facility timely developed and constructed,
Ormet Power Marketing would have the obligation to purchase such electrical power at the price
of $29.17 per megawatt for the first five years of the Power Purchase Agreement, which price
would thereafter escalate to a high of $33.14 per megawatt.

        SPL Recycling LLC. SPL Recycling LLC is an entity formed by Ormet and Vortec
Corporation in 1997 to commercialize technology that processes hazardous waste generated in
the aluminum reduction process into non-hazardous glass material. The Debtors own a 45%
interest in SPL Recycling LLC.

        3.     Customers, Sales and Marketing

       The Debtors’ customer base consists of approximately 200 active customers. The
Debtors’ largest accounts are all long time customers. Its customer base consists primarily of
aluminum manufacturers, fabricators, and distributors. The end-use markets for U.S. aluminum
shipments are (in descending order) (i) transportation, (ii) containers and packaging, (iii)
building and construction, (iv) consumer durables (v) electrical and (vi) machinery and
equipment. The Debtors’ principal primary aluminum customers (including SatinPlus® billet
customers) are aluminum fabricators, other aluminum producers and trading intermediaries and
metal brokers that resell primary aluminum to fabricated product manufacturers.

        Ormet Products markets fabricated aluminum products directly to end use customers and
to aluminum distributors, who in turn sell to a large number of customers. An aluminum
distributor will typically purchase aluminum coiled sheet which is later broken down or
fabricated prior to resale to the distributor's customers.




NY1:1514179                                     26
        Ormet Primary's marketing and sales efforts are conducted by a staff located primarily at
the Hannibal reduction plant and by the Debtors’ senior executives who often participate in the
structuring of major sales transactions. Members of Ormet Products' sales and marketing staff
are located at certain of the operating facilities, at the Wheeling, West Virginia corporate
headquarters and regionally to serve the customer base. Furthermore, in all facilities an inside
sales correspondent supports the outside selling effort and serves as a liaison with the Debtors’
customers. The Debtors offer customers the ability to place orders, to track inventory and
production status and to receive other information concerning their orders online.

        4.       Employees

       As of May 30, 2004, the Debtors employed in the aggregate approximately 2,200
employees (the “Employees”) at seven facilities in five states. Of these Employees,
approximately 1,700 are union members subject to one of nine collective bargaining agreements
with the Company, which are either in negotiations or set to expire at various times in 2004
through 2006.

        The Debtors generally consider their relationships with their employees and the unions to
be satisfactory, and have not experienced a work stoppage of any significance since 1986. The
following table sets forth their current collective bargaining agreements:
                 Facility                        Union                Employees   Expiration of Contract
                                                                       Covered

       Hannibal Reduction Plant    United Steelworkers of America       949       Expired July 31, 2004

       Burnside Alumina Refinery   United Steelworkers of America       235        September 25, 2005

       Burnside Marine Terminal    International Longshoreman's          42          October 1, 2004
                                   Association

                                   International Union of Operating      33       Debtors have declared
                                   Engineers                                          impasse and
                                                                                   implemented final
                                                                                          offer

       Hannibal Rolling Mill       United Steelworkers of America       494        Expired August 31,
                                                                                         2004

                                   United Plant Guard Workers of          5         October 30, 2004
                                   America

       Bens Run Recycling          United Steelworkers of America        30           June 1, 2006
       Facility

       Jackson Facility            United Steelworkers of America        95           July 1, 2006

                                   International Association of          41        November 19, 2006
                                   Machinists and Aerospace
                                   Workers




NY1:1514179                                          27
         On July 31, 2004, the collective bargaining agreement between Ormet Primary and the
United Steelworkers of America, AFL-CIO-CLC (the “USWA”), Local 5724 (Hannibal
Reduction Facility) expired. The collective bargaining agreement covering these employees was
initially scheduled to expire on August 31, 2003, but had been extended by agreement of the
parties several times.

      On August 31, 2004, the collective bargaining agreement between Ormet Primary and the
the USWA, Local 5760 (Hannibal Rolling Mill Facility) expired.

         In March, 2004, the Debtors submitted to Local 5724 and Local 5760 proposals for
modifications to their collective bargaining agreements pursuant to section 1113 of the
Bankruptcy Code, which modifications (in the aggregate) would provide the Debtors with
approximately $14.6 million in annual savings. Since March, 2004, the Debtors have responded
to extensive information requests and have made efforts to engage these unions in good faith
bargaining. On August 11, 2004, the Debtors and Local 5724 and Local 5760 commenced
bargaining negotiations. Although some progress has been made in these bargaining sessions,
there have been no negotiations on economic issues. On September 21, 2004, the Debtors filed a
conditional application pursuant to section 1113 of the Bankruptcy Code for authority to modify
the collective bargaining agreements with Local 5724 and Local 5760 pursuant to the proposal
submitted to the Locals in March 2004. The Debtors remain willing to bargain with the USWA
to try to reach consensual agreement on terms of the new collective bargaining agreement
pending the hearing on the conditional application. On September 27, 2004, the USWA filed a
motion to dismiss the 1113 conditional application on the grounds that relief under section 1113
of the Bankruptcy Code is not available because the collective bargaining agreements have
expired by their terms. The Bankruptcy Court held a hearing on the USWA’s motion to dismiss
on October 6, 2004 and will commence the hearing on the Debtors’ conditional application on
October 13, 2004.

         In the draft of the Commitment Agreement initially filed with the Bankruptcy Court, it
was a condition to the effectiveness of the Commitment Agreement and the Plan that the Debtors
have in place new collective bargaining agreements with both Local 5724 and Local 5760 on
terms and conditions reasonably satisfactory to the Debtors, MatlinPatterson and the Creditors’
Committee. In fact, the Commitment Agreement provided, in Article IX, Section 9.2(c) thereof,
that it shall be a condition precedent to MatlinPatterson’s obligations thereunder that the Debtors
“shall have entered into new collective bargaining agreements with the United Steel Workers of
America, AFL-CIO-CLC and each of its locals 5724 and 5760, which shall be on terms and
conditions: (i) not less favorable to the Ormet Parties than those set forth in the proposals
delivered to Locals 5724 and 5760 in March 2004, and (ii) otherwise reasonably acceptable to
[MatlinPatterson].” However, there can be no assurances that the Debtors will be able to
negotiate collective bargaining agreements on terms favorable to them, or that the Debtors will
not experience work stoppages. If these collective beginning agreements cannot be either
negotiated consensually or resolved through section 1113 relief the condition to the Effective
Date of the Plan will not be satisfied and the Plan will not be consummated.

       In a letter dated September 15, 2004 from David R. McCall, the Director of the United
Steelworkers of America, District 1, and certain members of the Local 5724 and Local 5760, to
R. Emmett Boyle, the chief executive officer of Ormet, the USWA advised the Debtors that


NY1:1514179                                     28
“[n]either the predictably unacceptable March 2004 proposal nor anything like it will ever form
the basis for collective bargaining agreements with the USWA. Any attempt by the company to
unilaterally implement terms and conditions of employment based upon that proposal will be met
with an immediate work stoppage.”

         In the final version of the Commitment Agreement, the Debtors and MatlinPatterson
agreed to amend the closing condition set forth in Section 9.2(c) to provide that the condition
may be satisfied if reduction in labor costs can be achieved either through new collective
bargaining agreements or otherwise under applicable law. The condition in Section 9.2(c)
provides that the Reorganized Debtors “shall have entered into new collective bargaining
agreements with the United Steel Workers of America, AFL-CIO-CLC and each of its locals
5724 and 5760, or obtained relief under applicable law, which shall be on terms and conditions:
(i) not less favorable to the Ormet Parties than those set forth in the proposals delivered to Locals
5724 and 5760 in March 2004, or (ii) otherwise reasonably acceptable to [MatlinPatterson].”
Based on this modification, the closing condition may be satisfied even if the Debtors are unable
to negotiate and execute new collective bargaining agreements with the USWA.

        5.     Raw Materials

        The Company is vertically integrated; its alumina refining operations supply its primary
aluminum operations, which in turn supply many of its fabricated product operations. The most
significant inputs for the Burnside Refinery are bauxite ore and natural gas. At the Hannibal
reduction plant, the principal inputs are alumina, which is either produced at the Burnside
Refinery or purchased from third parties, carbon anodes, electric power and natural gas. The
Hannibal reduction plant supplies most of the primary aluminum used at the Hannibal rolling
mill. The Hannibal rolling mill, directly or indirectly, supplies most of the metal inputs for the
Debtors’ other fabrication operations.

        Bauxite. The Debtors have historically purchased bauxite originating from the
Mineracao Rio do Norte (“MRN”) mine in Brazil and occasionally the Bauxilum mine in
Venezuela; however, with the recent modernization of the Burnside Refinery, bauxite from
certain other mines can now be used in the Debtors’ production process. Since the idling of the
Burnside Refinery in December, 2001, the Debtors did not purchase any Venezuelan bauxite,
and have only recently taken the first delivery of MRN bauxite since 2001. In connection with
the restart of the Burnside Refinery, the Debtors have a contract with Itabira International
Company, LTD to purchase MRN bauxite from the Trombetas region which runs through 2006.
This contract covers approximately 80% of the annual bauxite required to support full scale
operations of the Burnside Refinery. The Debtors purchase the remaining bauxite on a spot basis
from various sources. The Debtors’ cost of bauxite has increased significantly in the last
calendar year as a result of increases in transportation costs. Every one dollar increase in the cost
of bauxite results in an approximately $1.1 million decrease in the Debtors’ EBITDA.

        Alumina. Alumina, a commodity for which there is a global market, is obtained by
refining bauxite ore. The Burnside Refinery provides the Debtors with the flexibility to
internally source their alumina requirements or, depending on market prices for alumina, to
purchase their alumina requirements on the open market. For the two-year period ending
December 31, 2003, the Company purchased 100 percent of its alumina requirements from a


NY1:1514179                                      29
major alumina producer under a fixed price contract. However, due to significant increases in
the market price of alumina in 2003, the Company re-started the Burnside Refinery during the
second half of 2003 and is producing alumina sufficient to meet 100% of the Debtors’ present
aluminum production.

       Carbon Anodes. The Debtors’ production of primary aluminum consumes
approximately 168,000 metric tons of carbon anodes on an annual basis assuming an operational
configuration of four potlines at the Debtors’ Hannibal reduction facility. As discussed above,
the Debtors discontinued producing carbon anodes at the Hannibal reduction facility when faced
with substantial increased costs for compliance with stringent environmental standards that
became effective in 2001. The purchase of the carbon anodes from third parties has provided the
Company with a reduction in electrical consumption, an increase in metal production, a
reduction in headcount and a reduction in other operating and maintenance costs.

       The Debtors presently have in place a long-term contract with a broker for the acquisition
of carbon anodes from a third party producer in China and they are currently seeking Bankruptcy
Court approval for the modification and extension of their long-term contract with another
broker for the acquisition of carbon anodes from third party producers in Venezuela, Egypt and
the United States. The purchase price of carbon anodes under these contracts can increase or
decrease based on formulas tied to the price of calcined petroleum coke, pitch and freight.

        Electrical Energy. The Debtors consume substantial amounts of energy in the aluminum
production process, and energy costs accounted for approximately 21% of their 2002 total cost of
sales. Of this amount, electricity consumed at the Hannibal reduction facility represented the
largest portion, approximately 96% of total energy costs in 2002. In July 2003, the Debtors
executed an electrical energy supply agreement with Entergy-Koch Trading, L.P. that provides
for approximately 95% of their electrical energy requirements for the Hannibal facilities at a
fixed price through December 31, 2004. This power supply is in addition to the Company’s
other utility needs to meet demands apart from the reduction process.

        Given the pending expiration of their energy supply contract, the Debtors have issued
requests for proposals to approximately 40 parties seeking proposals to satisfy their needs for
electrical energy for 2005 and thereafter. Responses received by the Debtors to date indicate that
the Debtors’ cost to obtain electrical energy to meet their operating needs in 2005 could increase
by approximately 30%. This increased cost will have a material adverse effect on the Debtors
financial performance in future years. Every one dollar increase in the Debtors’ cost of
electricity on a per megawatt hour basis results in an approximately $3.2 million decrease in
EBITDA, assuming an operational configuration of four potlines at the Debtors’ Hannibal
reduction facility.

       The Debtors are continuing discussions with numerous parties in an effort to obtain
reasonably priced electrical energy sufficient to meet their operating needs. However, there can
be no assurance that the Debtors will be able to obtain a contract that will allow them to avoid
substantial increase in their costs.

         Natural Gas. The Debtors receive natural gas via physical delivery to the Hannibal
facilities under various contracts that run through October 31, 2004 and to the Burnside Refinery


NY1:1514179                                    30
under various contracts that run through December 31, 2005. When liquidity permits, the
Debtors have the ability to hedge their exposure to gas prices by buying forward. At present,
only a portion of the Debtors’ gas requirements are set at a fixed price though November, 2004.
Every one dollar increase in the Debtors’ cost of natural gas, on an MMBTU basis, results in an
approximately $9.7 million decrease in EBITDA, assuming an operational configuration of four
potlines at the Debtors’ Hannibal reduction facility.

        6.     Pricing.

        Prices for primary aluminum are quoted on the London Metals Exchange (the “LME”) in
U.S. dollars. The LME price, however, does not represent the actual price paid for all aluminum
products. For example, primary aluminum delivered to U.S. customers is often sold at a price
that includes a premium to the LME price, typically referred to as the Average Midwest
Transaction Price (“MWTP”). Historically, the MWTP premium over the LME price per pound
has averaged between $0.030 and $0.055 per pound; however, this amount can vary according to
market conditions, and as of the date hereof is approximately $0.075 per pound. In addition,
premiums are charged for adding certain alloys to aluminum for use in specific applications and
for casting aluminum into specific shapes, such as extrusion billet or rolling slab. Primary
aluminum prices are affected by numerous factors beyond the Debtors’ control, including the
overall demand for, and worldwide supply of, primary aluminum, the availability and price of
competing commodities, international economic trends, currency exchange rate fluctuations,
expectations consisting of macro factors of inflation, actions of commodity market participants,
consumption and demand patterns and political events in major producing countries.

        The following table sets forth the average monthly MWTP for the periods stated:

                               [SEE NEXT PAGE FOR TABLE]




NY1:1514179                                    31
                                  Average Monthly Mid-West Transaction Prices

                                                      (per pound)

                                 1998        1999          2000       2001        2002     2003     2004

        January             $0.725         $0.592       $0.810      $0.767       $0.654   $0.671   $0.772

        February             0.711          0.582          0.804     0.759        0.650    0.694    0.820

        March                0.697          0.587          0.764     0.726        0.671    0.678    0.821

        April                0.693          0.630          0.709     0.720        0.667    0.651    0.854

        May                  0.666          0.649          0.715     0.733        0.658    0.673    0.807

        June                 0.639          0.643          0.738     0.702        0.662    0.667    0.832

        July                 0.640          0.682          0.767     0.681        0.653    0.676    0.842

        August               0.639          0.693          0.748     0.667        0.629    0.682    0.845

        September            0.652          0.720          0.777     0.653        0.631    0.674

        October              0.634          0.713          0.724     0.625        0.637    0.708

        November             0.626          0.713          0.707     0.642        0.665    0.723

        December             0.604          0.751          0.749     0.645        0.666    0.744

                Annual      $0.660         $0.663       $0.751      $0.693       $0.654   $0.687
               Average

Source: Metals Week

        7.        Real Property

        The Debtors’ real property assets are summarized on the chart below:

                                                                     Approximate
                    Facilities                                       Square Footage

                    Specialty Blanks, Terre Haute Indiana            242,652
                    (3 buildings)

                    Burnside Terminal & Refinery                     432,275

                    Hannibal Rolling Mill                            1,256,273

                    Hannibal Reduction                               2,350,738




NY1:1514179                                           32
                     Jackson                                               518,96912

                     Bens Run Recycling                                    112,000

                     Office Space

                     Wheeling, W. Va.                                      38,000

        8.         Patents, Trademarks and Licenses

        The Debtors own various patents, trademarks and licenses. Except for a license from
Aluminum Machinery relating to thixotropic billet, the Debtors do not believe that any part of
the business is dependent to any material degree on their intellectual property rights.

        9.         Environmental Matters

        The Debtors are subject to various federal, state and local environmental laws and
regulations which regulate, among other things, air and water emissions and discharges; the
generation, storage, treatment, transportation and disposal of solid and hazardous substances and
waste; the release of hazardous or toxic substances, pollutants and contaminants into the
environment; in certain instances, the environmental condition of industrial property prior to
transfer or sale; and local workplace health and safety. Such environmental laws have in recent
years become increasingly stringent, and this trend is expected to continue. The current cost of
compliance with such laws and regulations does not have a material adverse effect upon the
Debtors. However, compliance with new laws and regulations could require the Debtors to make
substantial expenditures, and there can be no assurance that future capital expenditures and costs
for compliance with such laws and regulations will not have a material adverse effect on their
financial condition, results of operations or liquidity.

         From time to time, the Debtors are subject, with respect to their operations, to fines or
penalties assessed for alleged breaches of environmental laws and to claims and litigation
brought by federal, state or local agencies and by private parties seeking remedial or other
enforcement action under environmental laws or damages relating to alleged injuries to health or
to the environment, including claims with respect to certain waste disposal sites and the
remediation of sites currently or formerly operated by the Debtors. In September 1995, the
Debtors entered into a Consent Decree with the Environmental Protection Agency (“EPA”) and
the Department of Justice to conduct Remedial Design/Remedial Action relating to groundwater
contamination of a portion of the aquifer beneath the Hannibal reduction facility, which was
listed on the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980. The Consent Decree arose out of an inquiry in 1984 by
the Ohio Environmental Protection Agency concerning groundwater conditions beneath the
facility. The Consent Decree was entered in the United States District Court in December 1995,
and the Debtors developed the Remedial Design Work Plan and undertook the other activities
required by the Consent Decree. During 1996, the Debtors developed and received approval of


        12
             This facility was sold to Rollex Corporation on October 5, 2004. See Section III(A)(2)(b) herein.



NY1:1514179                                               33
the Work Plan from the EPA and developed and submitted for EPA review the Remedial Design,
which was approved by the EPA in 1997. Construction work began in 1997 and was completed
in 1998, with the EPA completing its remediation inspection in 1999 with subsequent inspections
to take place on a five-year cycle. There was an EPA inspection in 2002 which recommended no
significant changes in the operation of the site. In connection with this remediation, the Debtors
estimated and recorded in prior years remediation costs, including estimated future maintenance
and operating costs, of approximately $17.1 million, of which approximately $12.1 million had
been expended through September 30, 2003.

         On October 8, 2001, the Debtors were required to come into compliance with emission
limits for pollutants regulated under the Primary Aluminum MACT Standard after receiving a
two-year extension. The extension was used to make modifications to improve pot hooding and
to test new work practices to reduce potline fugitive emissions and optimize the performance of
the existing alumina dry scrubber. The Debtors made engineering evaluations for additional
controls for the emissions from their anode forming and anode baking operations. However,
these emissions were eliminated in September 2001 as a result of the Debtors’ decision to curtail
these operations and purchase anodes. The Debtors are currently meeting compliance
requirements under Primary Aluminum MACT and expect to continue to do so with no
anticipated additional capital requirements.

        On March 3, 2003, the Debtors were required to comply with emissions limits for
pollutants regulated under the Secondary Aluminum MACT Standard. The Debtors received a
one-year extension under the Secondary Aluminum MACT Standards for both the Bens Run and
Jackson facilities, effectively extending their compliance deadline to March 3, 2004. At the
Bens Run facility, the Debtors believe that they meet the Secondary Aluminum MACT
Standards under their present product mix, but may be required to make investments in
additional control equipment should they elect to process certain forms of aluminum scrap in the
future. There has been a recent compliance problem involving the temperature of the gases
going into the air pollution control equipment at the Bens Run Facility. The Debtors are in the
process of dealing with this problem and have notified the West Virginia Regulatory Authorities.

        In connection with the Burnside Alumina Facility and the Burnside Terminal Facility, the
Debtors entered into a Settlement Agreement with the Louisiana Department of Environmental
Quality covering alleged water permit violations from January 1997 through the end of
December 2003. The Settlement Agreement also covered alleged air permit violations related to
the barge crane at the Terminal Facility. Without admitting any liability, the Debtors agreed to
pay a penalty of $15,300 in settlement of all alleged violations. The Burnside Facilities are
located in the Baton Rouge Non-Attainment Area as it relates to ozone. This Area has recently
been designated as a severe non-attainment area. As a result, regulations have been enacted in
Louisiana which will require nitrogen oxide controls to be put on the three main boilers at the
Burnside Alumina Facility. These regulations become effective in June 2005 and could result in
additional expenditures related to the boilers.

        In connection with the Hannibal Rolling Mill, the Debtors have received a General
Notice Letter from the EPA related to the Breslub-Penn Superfund Site in Pennsylvania. The
letter was addressed to Consolidated Aluminum Corporation, which had sent material to the site.
The Debtors have sent a letter to the EPA stating that they are not the successors to Consolidated


NY1:1514179                                     34
Aluminum and that there is an ongoing bankruptcy proceeding in which the bar date was June 1,
2004.

        Based on the Debtors’ evaluation of these and other environmental matters, the Debtors
have established environmental accruals, primarily related to ground-water and soil remediation
matters. At December 31, 2002, the balance of such accruals, which are primarily included in
long-term liabilities, was $4.1 million. These environmental accruals represent the Debtors’
estimate of costs reasonably expected to be incurred based on currently enacted laws and
regulations, currently available facts, existing technology, and their assessment of the likely
remediation to be performed. The Debtors charged cash expenditures of $0.4 million during the
nine months ended September 30, 2003, $0.6 million in 2002, $1.3 million in 2001 and $0.7
million in 2000 to previously established accruals relating to environmental costs. The Debtors
recorded an additional $2.5 million to the environmental accruals at the end of 2003. As
additional facts are developed and definitive remediation plans and necessary regulatory
approvals for implementation of remediation are established or alternative technologies are
developed, changes in these and other factors may result in actual costs exceeding the current
environmental accruals.

        10.    Legal Proceedings

        The Debtors are defendants in a number of lawsuits, some of which involve claims of
multiple persons, in which the plaintiffs allege that certain of their injuries were caused by,
among other things, exposure to asbestos during, and as a result of, their employment or
association with the Debtors. For the most part, the Debtors are being defended by their insurers
in these actions.

        In addition, in the ordinary course of their business, the Debtors are involved in a number
of lawsuits and administrative proceedings, including those relating to alleged violations of
federal and state laws prohibiting discrimination on the basis of race and gender, and
proceedings before the National Labor Relations Board for alleged violations of the National
Labor Relations Act.

        While uncertainties are inherent in the final outcome of the matters set forth above,
management believes, after consultation with legal counsel, that the disposition of these
proceedings and those referred to above should not have a material adverse effect on the
Debtors’ financial position, results of operations or liquidity. No assurance can be given,
however, that the disposition of one or more of such suits, claims or actions in a particular
reporting period will not be material in relation to the reported results for such period.

        11.    Competition

        Aluminum competes in many markets with steel, copper, glass, plastic and numerous
other materials. Within the aluminum business, the Debtors compete with both domestic and
foreign producers of alumina, primary aluminum (Alcoa Inc., Alcan, Inc., Century Aluminum,
Inc. and Noranda, Inc.) and fabricated products (Alcoa Inc., Alcan, Inc. and Commonwealth
Industries, Inc.). Many of the Debtors’ competitors have significantly greater financial,
marketing and other resources than the Debtors.



NY1:1514179                                     35
        Primary aluminum and, to some degree, alumina, are commodities with generally
standard qualities, and competition in the sale of these commodities is based primarily upon
price and availability. Competition in the sale of fabricated products is based upon quality,
availability, price and service, including delivery performance.

        12.    Significant Prepetition Obligations

       The significant prepetition debt of the Debtors generally consists of obligations under (i)
the Prepetition Credit Facility, (ii) the Burnside Credit Agreement, (iii) the Chattel Note, (iv) the
Old Notes and (v) the Old Term Loans (each as defined immediately below).

               (a)     Prepetition Credit Facility

        Each of the Debtors was a party to that certain Credit Agreement (the “Prepetition Credit
Facility”), dated as of May 24, 2002, among Fleet Capital Corporation, as administrative agent,
the CIT Group/Business Credit, Inc., as co-syndication agent, Foothill Capital Corporation, as
co-syndication agent, GMAC Business Credit, LLC, as co-documentation agent, PNC Bank,
National Association, as co-documentation agent, and the lenders party thereto (the “Prepetition
Lenders”). As of the Petition Date, there was approximately $105,000,000 outstanding under the
Prepetition Credit Facility. The Debtors’ obligations to the Prepetition Lenders under the
Prepetition Credit Facility were secured by a first priority lien on the Debtors’ cash, accounts
receivable, inventory, machinery and equipment, real property and related assets (including a
floating crane owned by Ormet Primary), and a second priority pledge by Ormet of 100 percent
of the shares of each of Ormet Primary, Ormet Products, Specialty Blanks Holding, Formcast
and Specialty Blanks. Shortly after the Petition Date, the Debtors paid in full and in Cash all of
the obligations owed to the Prepetition Lenders under the Prepetition Credit Facility with the
proceeds of the DIP Senior Credit Facility and the DIP Term Loan Agreement.

               (b)     Burnside Credit Agreement

         Each of the Debtors was a party to that certain Burnside Tranche Credit Agreement (the
“Burnside Credit Agreement”), dated as of May 24, 2002, among the Debtors, Fleet, CIT Group,
Foothill, GMAC and PNC (the “Burnside Lenders”). As of the Petition Date, there was
approximately $15,000,000 outstanding under the Burnside Credit Agreement. The Debtors’
obligations to the Burnside Lenders under the Burnside Credit Agreement were also secured by a
first priority lien on the Debtors’ cash, accounts receivable, inventory, machinery and equipment,
real property and related assets (including a floating crane owned by Ormet Primary), and a
second priority pledge by Ormet of 100 percent of the shares of each of Ormet Primary, Ormet
Products, Specialty Blanks Holding, Formcast and Specialty Blanks. The obligations under the
Burnside Credit Agreement were further secured by a second lien on certain of the Debtors’
assets located at the Burnside marine terminal. Shortly after the Petition Date, the Debtors paid
in full and in Cash all of the obligations owed to the Burnside Lenders under the Burnside Credit
Agreement with the proceeds of the DIP Senior Credit Facility and the DIP Term Loan
Agreement.




NY1:1514179                                      36
               (c)    The Chattel Note

        Debtor Ormet Primary was the maker of that certain Chattel Promissory Note (the
“Chattel Note”), dated as of May 13, 1999, in favor of BancBoston Leasing, Inc., of which
approximately $600,000 was outstanding on December 31, 2003. As of the Petition Date, the
Chattel Note was held by Fleet Capital Leasing Corporation and secured by a first lien on certain
of the Debtors’ assets located at the Burnside marine terminal. On May 19, 2004, the Bankruptcy
Court authorized the Debtors to make the remaining payments due under the Chattel Note and
such indebtedness has now been satisfied in full.

               (d)    The Old Notes

        Ormet is a party to that certain Indenture, dated as of August 18, 1998 between Ormet
and State Street Bank and Trust Company of Missouri, N.A., pursuant to which Ormet issued
$150,000,000 principal amount of 11% Senior Secured Notes due 2008 (the “Old Notes”).
Ormet Primary, Ormet Products, Specialty Blanks Holding and Specialty Blanks are guarantors
of Ormet’s obligations pursuant to the Old Notes. Further, the Old Notes are secured by a first
priority lien upon and security interest in 100 per cent of the issued and outstanding common
stock of each of Ormet Primary, Ormet Products, Specialty Blanks Holding and Specialty
Blanks. As of the Petition Date, $150,000,000 in principal amount of Old Notes remained
outstanding, together with accrued and unpaid interest thereon in the amount of approximately
$25,465,000.

               (e)    The Old Term Loans

        Ormet is a party to that certain Term Loan Agreement, dated as of August 18, 1998,
among BancBoston, N.A., as agent, State Street Bank and Trust Company, as collateral agent,
and the lenders party thereto (the “Term Lenders”), under which Ormet issued $75,000,000
principal amount of floating rate term notes due 2008 (the “Term Notes”; collectively, with the
Old Notes, the “Old Debt”). Ormet Primary, Ormet Products, Specialty Blanks Holding and
Specialty Blanks are guarantors of Ormet’s obligations pursuant to the Term Notes. Further, the
Term Notes are secured by a first priority lien upon and security interest in 100 per cent of the
issued and outstanding common stock of each of Ormet Primary, Ormet Products, Specialty
Blanks Holding and Specialty Blanks. As of the Petition Date, $75,000,000 in principal amount
of Term Notes remained outstanding, together with accrued and unpaid interest thereon in the
amount of approximately $6,580,000.

        13.    Other Prepetition Claims

       In the ordinary course of their businesses, the Debtors incurred obligations for goods and
services used in day to day operations. The Debtors estimate that such obligations aggregated to
approximately $61,700,000 as of the Petition Date. The Debtors are also party to litigation
incidental to its businesses, including a number of product liability cases seeking substantial
damages. Such litigation has been stayed during the pendency of the chapter 11 proceedings.
Additional prepetition general unsecured claims will arise from the rejection of certain of the
Debtors’ executory contracts and unexpired leases.




NY1:1514179                                    37
B.      Events Leading to the Commencement of the Chapter 11 Cases

        In recent years, the domestic U.S. aluminum industry has undergone significant
transformation. This transformation resulted from several trends, most notably depressed
aluminum prices and increases in the costs of production. Aluminum prices decreased from an
average monthly MWTP of 86.4 cents per pound in 1995, to an average monthly MWTP of 68.7
cents per pound in 2003. During this time the aluminum market was under pressure due to
challenging economic conditions created by over-capacity in the industry, which was aggravated
by the effects of global competition and the unprecedented expansion of capacity in China that
resulted in China becoming an exporter of primary aluminum and manufactured aluminum parts.

        At the same time that aluminum prices dropped, production costs for domestic U.S.
aluminum producers, including electricity and natural gas prices, raw material prices for
production components such as bauxite and carbon materials, and wages and benefits payable to
the industry's heavily unionized labor force, increased substantially.

       The combination of low aluminum prices and increased production costs took its toll on
the U.S. domestic aluminum industry. Longview Aluminum, McCook Metals, LLC, Scottsboro
Aluminum, Kaiser Aluminum and Chemical Corporation and Vanalco, Inc. all filed for
bankruptcy protection or liquidated. In addition, the aluminum industry was marked by a series
of consolidations, including the recent combination of Alcan, Inc. and Pechiney, S.A.

        Taking advantage of favorable capital markets, the Debtors issued debt in 1998 to support
needed capital expenditures, including the modernization of the Burnside Refinery. However,
the Debtors were not immune to the factors plaguing the aluminum industry. The Debtors
incurred operating losses in each year from 1999 through the Petition Date. Interest payments
due on this long term debt severely constrained the Debtors’ liquidity while aluminum prices
continued to remain depressed, causing the Debtors to suffer continuing economic losses. This
forced the Debtors to make tactical short term decisions to improve their cash flow, while
sacrificing strategic decision-making that could have benefited their long term operating results
and financial condition. The Debtors’ liquidity needs ultimately reached crisis proportions that
adversely affected their relations with trade creditors and customers as well as severely limiting
their ability to hedge against fluctuations in energy prices, aluminum and other commodity
prices, further affecting their operating results and financial position.

        In response to challenging market conditions, in 2001, 2002 and 2003 the Company
instituted a financial improvement plan to revise its business model to focus on operating cash
flows and liquidity rather than long term profitability. This plan included (i) temporarily exiting
the narrow foil business at the Company’s Jackson Facility (but continuing to produce wide foil
for internal use and selected customers); (ii) ceasing production of alumina at the Burnside
Facility and purchasing alumina from a third party at a considerably lower cost; (iii) reducing
operating costs and imposing headcount reductions at the Facilities; (iv) reducing salaried
employee costs through temporary reductions in salaries and suspension/reduction of certain
benefits; (v) reducing inventory levels to generate working capital; (vi) implementing changes to
retiree’s medical benefits effective as of January 1, 2003 to reduce the projected annual cost of
the program by $4 million; and (vii) reducing the corporate executive office headcount by
approximately 40%.


NY1:1514179                                     38
        Despite the implementation of this plan, the Company continued to experience financial
difficulties due to low LME prices, rising energy costs and the increased credit demands of its
energy suppliers. A decline in demand for aluminum was exaggerated by the destocking of
aluminum inventories at the producer, fabricator, and consumer level. In addition, the demise of
Enron resulted in significant quantities of “off exchange” inventories held by Enron being
returned to the LME warehouses. The protracted drop in prices, escalating health insurance
costs, and extraordinary jumps in the price of electricity and natural gas all had a significant
impact on the Company’s financial condition and its ability to satisfy its obligations to its
creditors.

        The aluminum industry landscape has been changing for the better since the second half
of 2003 (albeit too late to avoid the Debtors’ chapter 11 filing), which has resulted in increased
alumina and aluminum prices. China has become a net importer of aluminum, worldwide
demand has picked up due to more robust economic conditions, exchange rates have made
domestically produced metal prices competitive with imports, and significant domestic capacity
has been shuttered due to power costs and company liquidations. Industry experts predict that
current conditions will be sustained due to the global economic cycle and China’s continued
internal growth projections.

                                       IV.
                       EVENTS DURING THE CHAPTER 11 CASES

        On January 30, 2004, the Debtors commenced the Chapter 11 Cases in the Bankruptcy
Court. The Debtors continue to operate their businesses and manage their properties as Debtors
in Possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. The following is a
brief description of the major events during the Chapter 11 Cases.

A.      Stabilization of Business

        1.     Continuation of Business; Stay of Litigation

        Following the commencement of the Chapter 11 Cases, the Debtors have continued to
operate as Debtors in Possession with the protection and under the jurisdiction of the Bankruptcy
Court. The Bankruptcy Court has certain supervisory powers over the Debtors’ operations
during the pendency of the Chapter 11 Cases. The Debtors are operating in the ordinary course
of business; any transactions that are outside the ordinary course of business require Bankruptcy
Court approval.

        One immediate effect of the filing of the Bankruptcy Cases was the imposition of the
automatic stay under the Bankruptcy Code which, with limited exceptions, enjoined the
commencement or continuation of all litigation against the Debtors. This injunction will remain
in effect until the Effective Date unless modified or vacated by order of the Bankruptcy Court.
From and after the Effective Date, the Claims asserted by the parties prosecuting litigation
against the Debtors will be subject to the terms and conditions of the Plan, including (without
limitation) the discharge provisions of such plan.




NY1:1514179                                     39
         2.       First Day Orders

         On the Commencement Date, the Debtors submitted to the Bankruptcy Court motions for
the entry of certain “first day orders,” along with supporting applications and affidavits. All of
the first day motions were granted by the Bankruptcy Court. The first day orders included,
among others, (i) an order directing the joint administration of the Chapter 11 Cases, (ii) an
emergency order authorizing and directing certain banks to honor certain prepetition payroll
checks issued by the Debtors; (iii) an order authorizing the continued use of the Debtors’
centralized cash management system and maintenance of existing checks, bank accounts and
business forms; (iv) an order authorizing the Debtors to pay certain prepetition obligations owed
to foreign vendors; (v) an administrative order establishing the procedures for the interim
compensation and reimbursement of expenses of professionals; (vi) an order authorizing the
Debtors to pay prepetition sales, use, and franchise taxes; (vii) an order requiring utilities to
maintain services to the Debtors and authorizing the Debtors to provide adequate assurance of
future payment13; (viii) an order authorizing the continuation of the Debtors’ workers’
compensation program and policies; (ix) an order authorizing payment of prepetition wages,
compensation and employee benefits; (x) an order extending the time to file schedules of the
Debtors’ assets and liabilities and statements of financial affairs; and (xi) an interim order
approving a stipulation as to the Debtors’ use of cash collateral.

         3.       DIP Facility

         Upon the commencement of the Chapter 11 Cases, the restoration of trade credit and
support of both vendors and customers was of significant importance to the Debtors. To
facilitate the establishment of normal vendor relations and to provide the Debtors with the Cash
and liquidity necessary to conduct their operations, the Debtors entered into (i) a senior secured,
super-priority $160,000,000 debtor in possession revolving credit facility with a sublimit of
$25,000,000 for the issuance of letters of credit, with General Electric Capital Corporation (“GE
Capital”) and a syndicate of financial institutions (together with GE Capital, the “DIP Senior
Lenders”), with GE Capital serving as Agent (the “DIP Senior Credit Facility”), and (ii) a senior
secured, super-priority $30,000,000 term loan credit facility, which may be increased up to a
maximum amount of $50,000,000, with MatlinPatterson Global Opportunities Partners II L.P.
and MatlinPatterson Global Opportunities Partners (Cayman) II L.P. (together with the DIP
Senior Lenders, the “DIP Lenders”), with MatlinPatterson Global Advisors LLC as Loan Agent
and U.S. Bank National Association as Collateral Agent (the “DIP Term Loan Agreement”, and
together with the DIP Senior Credit Facility, the “DIP Facilities”).




         13
            Several disputes concerning the scope and/or applicability of this order were ultimately resolved by
stipulations between the Debtors and the concerned parties.



NY1:1514179                                              40
        The DIP Facilities were initially approved on an interim basis by an order of the
Bankruptcy Court dated February 4, 2004 and on a final basis by an order dated March 1, 2004.
Pursuant to these orders, the Debtors’ obligations and indebtedness under the DIP Facilities were
granted super-priority administrative expense priority over most other administrative expenses.
Additionally, pursuant to a Security Agreement entered into in connection with each of the DIP
Facilities, the Debtors granted the DIP Lenders a super-priority lien on substantially all of the
Debtors’ assets.

        The DIP Senior Credit Facility is scheduled to expire on the earlier of (x) February 5,
2005, (y) the effective date of a plan of reorganization confirmed by the Bankruptcy Court or (z)
the date of the closing of a sale of all or substantially all of the Debtors’ assets. The DIP Term
Loan Agreement must be repaid on the earlier of January 30, 2005 or the substantial
consummation of a plan of reorganization confirmed by the Bankruptcy Court.

       As of July 31, 2004, there were approximately $92,000,000 of borrowings outstanding
under the DIP Senior Credit Facility14 and outstanding letters of credit in the amount of
$4,575,000, and $30,000,000 of borrowings outstanding under the DIP Term Loan Agreement.
Net availability for additional borrowings under the DIP Senior Credit Facility as of July 31,
2004 was $13,000,000.

        The initial borrowings under the DIP Senior Credit Facility and DIP Term Loan
Agreement were applied to pay in full the Debtors’ obligations under the Prepetition Credit
Facility and the Burnside Credit Agreement.

        4.       Appointment of the Creditors’ Committee

       On February 6, 2004, the United States Trustee appointed the Creditors’ Committee to
represent the interests of the Debtors’ unsecured creditors. The initial members of the Creditors’
Committee were as follows:

        (i)      Alcoa World Alumina LLC/Alcoa Inc.

        (ii)     PPM America High Yield CBO I

        (iii)    CVG Carbones del Orinoco C.A.

        (iv)     Dominion Field Services

        (v)      Northeast Investors Trust

        (vi)     UMB Bank, N.A., as Trustee

        (vii)    United Steelworkers of America


        14
           The Debtors estimate that this amount will be reduced to approximately $76,000,000 by the Effective
Date of the Plan as a result of the receipt of the proceeds from the sale of, among other things, inventory and
accounts receivable in connection with the sale of the Jackson Facility.



NY1:1514179                                             41
        (viii)   Merrill Lynch Investment Managers L.P.

        (ix)     International Converter, Inc.

        On February 10, 2004, the United States Trustee replaced PPM America High Yield
CBO I with Archimedes Funding LLC/Archimedes Funding III Ltd. Following their respective
resignations, on March 22, 2004, the United States Trustee removed Merrill Lynch Investment
Managers L.P. and International Converter, Inc. from the Creditors Committee and no
replacements have been appointed, leaving the Creditors’ Committee with seven members. Since
its formation, the Debtors have consulted with and have provided relevant information to the
Creditors’ Committee and the professionals it retained concerning the administration of the
Chapter 11 Cases.

        Creditors’ Committee’s Professionals

       The Bankruptcy Court entered orders authorizing the Creditors’ Committee to retain the
following Professionals:

        (i)      McGuireWoods LLP, as counsel

                 Dominion Tower, 23rd Floor
                 625 Liberty Avenue
                 Pittsburgh, PA 15222
                 Attn: Robert Sable, Esq.

        (ii)     Bailey Cavalieri LLC, as co-counsel

                 10 W Broad St
                 Suite 2100
                 Columbus, OH 43215-3418
                 Attn: Nick Cavalieri, Esq.

        (iii)    Houlihan Lokey Howard & Zukin Capital, as financial advisors.

                 1930 Century Park West
                 Los Angeles, CA 90067
                 Attn: Amit Patel

        5.       Retention of Professionals

        Since the Commencement Date, the Bankruptcy Court has entered orders authorizing the
Debtors to retain the following Professionals: (i) Dinsmore & Shohl LLP as general bankruptcy
counsel; (ii) O’Melveny & Myers LLP as general corporate and litigation counsel; (iii) Xroads
Solutions Group (formerly Crossroads LLC) as financial advisor and chief restructuring officer;
(iv) Evercore Partners L.P. as investment bankers; (v) Bankruptcy Services LLC as claims,
noticing and balloting agent; (vi) TBG Consulting, Inc. as retirement plan and employee benefits
consultant; (vii) Kekst & Company as public relations and corporate communications consultant;
(viii) Polito & Smock, P.C. as special labor counsel; (ix) Reed Smith LLP as special employee


NY1:1514179                                      42
benefits counsel; (x) Sullivan & Worcester LLP as special energy counsel; (xi) Bryan Cave LLP
as special environmental counsel; (xii) Plante & Moran PLCC as accountants and independent
auditors; (xiii) Whitfield Russell Associates as special utility consultant; (xiv) Charles River
Associates as special electricity procurement strategy consultants; and (xv) certain other
professionals utilized in the ordinary course of business.

        6.     Compliance with Bankruptcy Code, Bankruptcy Rules,
               Local Court Rules and U.S. Trustee Deadlines

        On March 30, 2004, the Debtors filed their Statements of Financial Affairs, Schedules of
Assets and Liabilities, Schedules of Executory Contracts and Unexpired Leases, and Lists of
Equity Security Holders (collectively, and as the same may be amended or modified from time to
time, the “Schedules”).

        On April 13, 2004, the U.S. Trustee conducted a meeting of creditors pursuant to section
341 of the Bankruptcy Code. Additionally, the Debtors have filed all monthly operating reports
required by the Office of the United States Trustee.

        Since the Commencement Date, the Debtors have filed various pleadings seeking
extensions of time to, among other things, assume or reject leases of non-residential real
property, file notices of removal of state court actions, and extend the exclusive periods for filing
the Plan and soliciting acceptances thereof.

        7.     Key Employee Retention and Severance Plan

        By order dated March 26, 2004, the Bankruptcy Court approved the Debtors’ adoption of
a Key Employee Retention and Severance Plan and the continuation of both their existing
severance plan for salaried employees and their existing performance based incentive plan for
senior operations and sales employees (the “Retention Plan”). The Retention Plan covers two
categories of employees:

       Tier I: Four members of senior management, including the President and three vice
presidents.

      Tier II: Approximately 30 senior employees, including key sales personnel and plant
managers.

        Retention: Tier I participants will receive a cash payment equal to 50% of their annual
base salary on the earlier to occur of (a) the effective date of a chapter 11 plan of reorganization
or (b) the consummation of a sale of all or substantially all of the assets of the Debtors. Each
Tier II participant will receive cash payments aggregating 50% of their annual salary in two
installments. The first payment was made on July 30, 2004 in the amount of 25% of each Tier II
participant’s annual salary. Total payments made through July 30, 2004 have been
approximately $725,000. A second payment in the amount of 25% of each Tier II participants’
annual salary will be paid on the earlier to occur of (a) the effective date of a plan of
reorganization or (b) the consummation of a sale of all or substantially all of the Debtors’ assets.




NY1:1514179                                      43
         Severance: Tier I participants who are terminated without cause will receive twelve
equal monthly installments totaling his or her annual base salary; provided however, that if a Tier
I participant obtains comparable new employment while still collecting severance benefits, the
remaining monthly severance payments will be reduced by the amount of the participants’ base
monthly salary from the new job.

        The Debtors’ existing severance plan will continue for all Tier II participants and all
other full-time salaried employees. Pursuant to the existing severance plan, employees who meet
the eligibility criteria set forth therein and who are terminated without cause will receive a lump
sum cash payment equal to two weeks’ base salary for every full year of employment, subject to
a maximum of 30 weeks.

        Incentive Plan: The incentive payments, historically paid out to certain qualifying senior
operations managers and certain sales personnel, range from (a) one half of one percent to two
percent of the applicable employee’s quarterly base salary for meeting the Debtors’ quarterly
financial budget, up to (b) one percent to four percent of quarterly base salary for exceeding such
quarterly budget. If each participant in the incentive plan were to exceed the budget in a given
quarter, the maximum aggregate payment to all such participants would approximate $72,000.

        8.     Disclosure Statement/Confirmation Hearings

        Accompanying this Disclosure Statement is a copy of the order of the Bankruptcy Court
approving this Disclosure Statement and the Debtors’ solicitation of votes, and setting the date
for the hearing to consider confirmation of the Plan.

        See Article VIII., entitled “CONFIRMATION OF THE PLAN.”

B.      Other Significant Court Orders

        1.     Orders Authorizing Assumption of Certain Contracts

        On February 12, 2004, the Bankruptcy Court entered an order authorizing the Debtors to
assume (i) their general liability and excess liability insurance policies with American
International Group through January 31, 2004 and (ii) their workers’ compensation and
automobile insurance policies with Zurich American Insurance Company through January 31,
2004 and authorized the renewal of the AIG and Zurich policies for the 2005 policy year. This
order also authorized the execution and delivery of a premium financing arrangement with
AFCO Premium Credit LLC providing for the financing of the premiums due and to become due
with respect to these policies for the 2004 policy year.

        On March 1, 2004, the Bankruptcy Court entered an order authorizing the assumption of
the Master Power Purchase and Sale Agreement with Entergy-Koch Trading, LP (“EKT”). This
agreement provides the Debtors with the ability to purchase the substantial quantities of power
necessary to conduct its business at fixed prices which are presently below market. Furthermore,
the agreement allows the Debtors to sell any power that it does not need and receive the profit, if
any, from such sale. Based upon the Debtors’ analysis and projections, the ability to purchase
power at the rates set forth in this agreement will provide a benefit to the Debtors of



NY1:1514179                                     44
approximately $7.7 million through the duration of the agreement, which expires on
December 31, 2004, based on savings and profits from resale.

        On March 1, 2004, the Bankruptcy Court entered an emergency order authorizing the
amendment and assumption of the Debtors’ agreement with Hydro Aluminum a.s. (“Hydro”) and
Gerald Metals, Inc. Under the agreement, the Debtors contracted to sell 120,000 metric tons of
alumina to Hydro at a price of $265 per metric ton. Prior to the Commencement Date, the
Debtors delivered 60,000 metric tons of alumina to Hydro. As of the Commencement Date, the
market price of alumina had risen to approximately $400 per metric ton. Rather than reject the
agreement with Hydro in order to take advantage of the high market price of alumina, the
Debtors assumed the agreement, as amended such that the Debtors sold the remaining 60,000
metric tons under the agreement to Hydro for $400 per metric ton and Hydro was granted an
allowed prepetition claim against the Debtors for $8.1 million based on the incremental $135 per
metric ton that Hydro was required to pay for the remaining 60,000 metric tons.

        On May 19, 2004, the Bankruptcy Court entered an order authorizing the Debtors to (i)
amend that certain Total Chemical Management Agreement with Houghton Fluidcare Inc.
(“Houghton”) and, (ii) upon either the termination or expiration of such agreement, to assume
Houghton’s obligations under that certain Fluid Purification Services Agreement between
Houghton and Solution Recovery Services, Inc., which agreement provides for the fluid
purification chemicals and services necessary to operate the Hannibal rolling mill for the next
five years.

      On June 24, 2004, the Bankruptcy Court entered an order authorizing the amendment and
assumption of the Debtors’ executory contract with U.S. Magnesium LLC for the purchase of
magnesium metal. Under the amended agreement, U.S. Magnesium will continue to sell
magnesium metal to the Debtors until the end of 2005.

        On June 24, 2004, the Bankruptcy Court entered an order authorizing the Debtors to
assume their executory contract, as amended, with Total Carbon Solutions for the purchase of
approximately 30,000 metric tons of carbon anodes a year for the next five years with the price
to be negotiated each year.

        2.     Orders Authorizing the Sale of Equipment and
               Rejection of Leases of Formcast Development Inc.

        In connection with the Debtors’ determination to discontinue operations of Formcast
Development, Inc. and its facility in Denver, Colorado, on March 23, 2004, the Bankruptcy
Court entered an order authorizing the sale of certain Formcast equipment to Madison-Kipp and
Arthur Jackson pursuant to the terms of the bids received from such buyers for consideration in
the aggregate amount of $244,480. The Bankruptcy Court also authorized the rejection of
certain unexpired personal property leases associated with the Formcast facility. The net
proceeds of these sales were placed in a segregated account pending the Debtors’ investigation of
the validity, amount and perfection of liens asserted against the equipment by General Electric
Capital Corporation, Buhler, Inc. and Wells Fargo Financial Leasing, Inc. By order of the
Bankruptcy Court dated May 3, 2004, the Debtors were authorized to distribute to General
Electric Capital Corporation the sum of $35,000 in satisfaction of their Secured Claim. The


NY1:1514179                                    45
Debtors dispute the validity of the Secured Claim asserted by Buhler Inc. (asserted in the amount
of approximately $197,000) on the grounds that such creditor failed to properly perfect its
security interest in the equipment. A Secured Claim has also been asserted by Wells Fargo
Financial Leasing, Inc. in the amount of $11,900, which the Debtors are reviewing. In addition,
Priority Claims in the aggregate amount of $23,500 have also been filed against Formcast, which
the Debtors are reviewing. Taking into account the foregoing, the Debtors believe that
Remaining Formcast Sale Proceeds should approximate $219,000.

        3.       Orders Authorizing the Sale of the Jackson Facility

         As part of their ongoing efforts to reorganize, the Debtors determined to discontinue
operations at, and to sell, the Jackson Facility and surrounding real property. On June 28, 2004,
the Bankruptcy Court entered an order approving procedures for the marketing and sale of the
Jackson Facility and real property. Under the order, bids by interested parties for the Jackson
Facility and/or the real property were required to be submitted to the Debtors and financial
advisors for the Creditors’ Committee by August 6, 2004. On August 6th, the Debtors received
five bids for the Jackson Facility (including the buildings, underlying real estate, machinery and
equipment, but excluding all current assets) and one bid for the remaining real property.
Pursuant to the procedures approved by the Bankruptcy Court, the Debtors conducted an auction
for the Jackson Facility and remaining real property on August 10, 2004. At the conclusion of
the auction, the Debtors, in consultation with the Creditors’ Committee, concluded that the
highest and best offer for the Jackson Facility had been submitted by Rollex Corporation,
comprised of (i) $13,550,000 cash at closing15 and (ii) reimbursement of any severance or health
care benefit costs incurred by the Debtors upon termination of any employee at the Jackson
Facility in the event such employee is not offered employment by Rollex Corporation. The
Debtors and the Creditors’ Committee further concluded that JW Aluminum Corporation had
submitted the second highest bid for the Jackson Facility (having submitted an offer containing
virtually identical economic terms as Rollex Corporation, except that cash paid at closing would
be $13,000,000 and reimbursement of up to $475,000 on payments on account of workers’
compensation claims made by employees at the Jackson Facility and arising prior to the closing
date), and that the City of Jackson had submitted the highest and best offer for the remaining real
property at $775,000 (together with certain agreements to facilitate the sale of the Jackson
Facility). By order of the Bankruptcy Court dated August 13, 2004, the Debtors were authorized
to sell (a) the Jackson Facility to Rollex Corporation in accordance with the terms and conditions
set forth in the Asset Purchase Agreement which is an exhibit to such Order or, to the extent such
transaction is not consummated, to JW Aluminum Corporation, in accordance with an asset
purchase agreement having terms (other than price) not materially less favorable to the Debtors,
and (b) the remaining real property to the City of Jackson in accordance with the terms and



        15
            Pursuant to an order of the Bankruptcy Court dated October 2, 2004, the purchase price to be paid by
Rollex Corporation was adjusted downward by $610,000 to compensate for the loss of the largest annealing furnace
at the Jackson Facility which exploded following the execution of the purchase agreement with Rollex Corporation
and prior to the closing. Thus, the total cash paid by Rollex Corporation at closing was $12,940,000.00.




NY1:1514179                                            46
conditions of the Real Property Purchase Agreement which is an exhibit to such Order. The
sales each closed on October 5, 2004.

        In addition, the Debtors will retain title to all working capital assets generated by the
Jackson Facility prior to the date of the closing of the sale, including working capital attributable
to the collection of accounts receivable and the liquidation of inventory. The Debtors estimate
that recovery on these working capital assets to generate approximately $10 to $12 million of
Cash, which will be used to reduce the outstanding amounts under the DIP Senior Credit
Facility.

        4.     Orders Authorizing Tax Settlements

        On March 30, 2004, the Bankruptcy Court entered an order authorizing the settlement
between the Debtors and Monroe County, Ohio pursuant to which the Debtors agreed to pay
$598,300.17 in delinquent personal property taxes in exchange for Monroe County’s waiver of
$136,863.83 in personal property tax interest and penalties and $32,317.44 in real property tax
interest and penalties.

       On May 19, 2004, the Bankruptcy Court entered an order authorizing the settlement
between the Debtors and Tyler County, West Virginia pursuant to which the Debtors agreed to
pay $47,798.31 in delinquent personal and real property taxes in exchange for Tyler County’s
waiver of $756.97 in interest and penalties.

        5.     Order Authorizing Creditor Setoff

        On March 17, 2004, the Bankruptcy Court entered an order authorizing limited relief
from the automatic stay to permit certain vendors, that are also customers of the Debtors, to
exercise their right of setoff against the Debtors. To date, ten creditors that both owed money to,
and were owed money by, the Debtors on the Commencement Date have exercised rights of
setoff pursuant to the terms of this order, resulting in an aggregate amount of approximately
$4,500,000 in prepetition claims against the Debtors being eliminated.

        6.     Order Allowing Debtors to Pay Accrued and Unpaid Prepetition Vacation
               Pay

       On May 19, 2004, the Bankruptcy Court entered an order authorizing the Debtors to pay
accrued and unused prepetition vacation time upon the termination or resignation by union and
non-union hourly and salaried employees in accordance with past practice and in the ordinary
course of business.

        7.     Order Authorizing Entry Into Long-Term Shipping Contracts

        On April 19, 2004, the Bankruptcy Court entered an order authorizing the Debtors to
enter into long-term shipping contracts with MUR Shipping and BHP Billiton Marketing AG
(“BHP”) for shipment of bauxite from Brazil to the Burnside Facility. The MUR Shipping
contract provides shipments through the end of 2006, with an option to extend through 2008 and
the BHP contract provides shipments through the end of 2006.



NY1:1514179                                      47
C.      Significant Events Since the Commencement Date

        1.     Elimination of Thixotropic Operations

        In early 2004, Ormet curtailed its Hannibal, Ohio thixotropic, or semi-solid, metal
production. Ormet was the sole U.S. producer of semi-solid metal and this curtailment was due
to a lack of market acceptance for the thixotropic billet in the United States. The curtailment of
the thixotropic casting operation also resulted in the closure of operations and sale of assets of
Formcast in Denver, Colorado.

        2.     Closure of One Cast Pit in Billet Casting House

        In an action aimed at improving the financial performance of its primary aluminum
business, Ormet curtailed half of its extrusion and forging billet casting operation in the second
quarter of 2004. Billet production was reduced from just over 200 million pounds annually to
approximately 100 million pounds. With this level of operation, Ormet is concentrating on the
highest margin billet customers in terms of freight, premiums and production costs to improve
financial results. In addition, with the reduction in billet operations, the Company can provide
the downstream rolling operations with internally produced primary aluminum and is not
required to purchase large amounts of aluminum at today’s high prices.

        3.     Curtailment of One Potline at Hannibal Reduction Facility in Response to
               Ohio River Shutdown

       On May 24, 2004, Ormet was informed by the Army Corp of Engineers that a portion of
the Ohio River would be closed for repairs for at least two weeks beginning on August 9, 2004.
The area of the closure is on the supply route between the Burnside Refinery and the Hannibal
reduction facility and, thus, the closure will prevent barges of alumina and carbon anodes from
being delivered to Hannibal during the closure. In the ordinary course of business, one barge of
alumina per day is delivered to Hannibal from the Burnside Refinery.

        Upon learning of the impending closure, the Debtors performed an assessment to
determine what level of operations could be continued at the Hannibal reduction facility during
the period of the closure. Based upon that assessment, the Debtors determined that existing
inventories of alumina at Hannibal, together with additional inventories shipped to Hannibal
prior to the closure, were insufficient to maintain the operation of four potlines during the river
closure. As a result, on June 1, 2004 the Debtors curtailed the operation of one potline so that it
could conserve alumina and build inventory for use by the remaining three operating potlines
during the closure.

       In connection with the shutdown of the potline, the Debtors sold three months of electric
power relating to the curtailed potline for a profit of approximately $1,500,000.

        The lock repairs were completed substantially on schedule without material interruption
to the Debtors’ business. The Debtors are continuing to evaluate whether to restart the fourth
potline based on prevailing market conditions.




NY1:1514179                                      48
D.       Deadline for Filing Proofs of Claim

       By order dated March 30, 2004 (the “Bar Date Order”), pursuant to Bankruptcy Rule
3003(c)(3), the Bankruptcy Court fixed June 1, 2004 (the “Bar Date”) as the date by which
proofs of claim were required to be filed in the Chapter 11 Cases. In accordance with the Bar
Date Order, on or about April 9, 2004, a proof of claim form, a notice regarding the scheduling
of each Claim and a notice describing the Bar Date Order were mailed to all creditors listed in
the Schedules. The Debtors also published notice of the Bar Date in certain local and trade
publications.

         As of July 31, 2004, a total of approximately 1,626 claims have been filed against the
Debtors. These include a number of duplicate claims and other claims which the Debtors
dispute, including approximately 450 contingent and unliquidated personal injury claims alleging
liability for damages based upon exposure to asbestos or products containing asbestos (which the
Debtors believe are Insured Claims to the extent of any liability).16 The Debtors estimate that the
total amount of Allowed Unsecured Claims not entitled to priority and not based upon notes or
debentures issued by, or term loans incurred by, the Debtors will be approximately $61,700,000.

                                               V.
                                  THE PLAN OF REORGANIZATION

        The Debtors believe that (i) through the Plan, holders of Allowed Claims receiving
distributions under the Plan will obtain a greater recovery from the Estates of the Debtors than
the recovery that they would receive if the assets of the Debtors were liquidated under chapter 7
of the Bankruptcy Code, and (ii) the Plan will afford the Debtors the opportunity to continue in
business as a viable going concern, serving the interests of all of the Debtors’ constituencies,
including creditors, vendors, customers and employees, and preserving going concern value.

     THE PLAN IS ANNEXED HERETO AS EXHIBIT A AND IS AN INTEGRAL PART
OF THIS DISCLOSURE STATEMENT. THE SUMMARY OF THE PLAN SET FORTH
BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE PLAN. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PROVISIONS
OF THE PLAN AND THE SUMMARY CONTAINED HEREIN, THE TERMS OF THE PLAN
WILL GOVERN.

A.       Deemed Partial Substantive Consolidation

        The Plan is premised upon the deemed partial substantive consolidation of the Debtors
(other than Formcast) for Plan treatment and distribution purposes only and the Debtors intend to
request as part of the Plan confirmation process that the Bankruptcy Court authorize the partial
substantive consolidation treatment of the Debtors (other than Formcast) and their estates for


         16
             The Debtors’ maximum liability for Insured Claims, other than asbestos related Claims, is $250,000 per
Claim, which is the amount of the Debtors’ self-insured retention under its insurance policies. With respect to
asbestos related Claims against the Debtors, the Debtors believe that they have either no uninsured liability or have
liability in immaterial amounts.



NY1:1514179                                              49
such limited purposes. The Debtors have determined in their business judgment not to
substantively consolidate Formcast because substantially all of the assets of Formcast have been
sold as a result of the Debtors’ decision to discontinue the Formcast operations. The proceeds
from the sales have been segregated and can easily be allocated to Formcast’s creditors without
additional expense to the Debtors’ estates.

         The partial substantive consolidation treatment of Claims (other than Class 6 - Formcast
Unsecured Claims) proposed by the Debtors involves the pooling and merger of the Debtors’
assets and liabilities and distributions to creditors based upon all pooled assets and liabilities, as
if the Debtors (other than Formcast) were a single economic entity. The purpose of this
consolidation, with respect to all Debtors other than Formcast, is (i) to treat Claims against all
Debtors in the same manner, (ii) to eliminate cross-corporate guaranties by one Debtor of the
liabilities of other Debtors, (iii) to eliminate duplicate Claims against more than one Debtor and
Claims asserting joint and several liability by multiple Debtors, and (iv) to eliminate the effect of
affiliate Claims among the Debtors and between the Debtors, all of which would be dilutive of
the amounts ultimately payable to holders of Allowed Claims against the Debtors, due to a
multiplicity of Claims based upon the same transaction or obligation or based upon
intercompany indebtedness. As a result of the substantive consolidation, the Debtors will not
receive or retain any distributions under the Plan on account of Intercompany Claims and those
claims will pass through the Debtors’ Chapter 11 Cases unaffected; provided, however that
Claims by Formcast against the other Debtors or against Formcast by the other Debtors shall not
be considered Intercompany Claims and shall be cancelled on the Effective Date.

       The Debtors believe partial substantive consolidation is warranted in light of the degree
to which the Debtors and their creditors depend upon the integration of the Debtors’ (other than
Formcast) collective operations and the criteria established by the courts in ruling on the
propriety of substantive consolidation in other cases. For example:

        ●      The officers and directors of each of the Subsidiaries simultaneously have been
               officers and/or directors of Ormet and vice versa, and corporate policy for all of
               the Debtors was established and implemented by Ormet’s officers and board of
               directors. Thus, the Debtors have operated under unified management, direction,
               and control with the goal of a unified profitability of the total enterprise, and
               without regard to the profitability of any individual legal entity in the corporate
               family.

        ●      The Debtors operate under a consolidated cash management system, pursuant to
               which the Debtors’ funds are collected and transferred on a daily basis to three
               main concentration accounts and funds required by the operating subsidiaries to
               cover disbursements and other operating expenses are transferred on a daily basis
               from the main concentration accounts to disbursement accounts.

        ●      Ormet has been responsible for the payment of the day-to-day operating expenses
               of the operating subsidiaries and performance of numerous business, professional,
               and financial services and functions for them. As a general matter, such charges
               are not allocated among the Debtors. Failure to substantively consolidate could
               require an allocation of such charges among Ormet and its Subsidiaries and the


NY1:1514179                                      50
               reconstruction and reallocation of those charges would take months, the costs of
               such an effort would be enormous and, possibly, prohibitive, and there is no
               certainty that any such effort would be successful in producing a precise, or even
               meaningful, allocation of such costs and expenses.

        ●      By reason of the interrelationship and dependency of the Debtors upon the
               operations of each other and Ormet, it is not realistic to expect that a feasible,
               confirmable plan of reorganization could be formulated unless the Plan
               encompassed all the Debtors (other than Formcast) as though they were a single
               economic unit.

        As a result of the Debtors’ integrated and interdependent operations, substantial
intercompany guaranties, common officers and directors, common control and decision making,
reliance on a consolidated cash management system, and dissemination of principally
consolidated financial information to third parties, the Debtors believe that they operated, and
creditors dealt with the Debtors, as a single, integrated economic unit. Further illustrative of
creditors’ reliance upon the consolidated credit and creditworthiness of the Debtors as a single
economic unit is the fact that the parties to the Prepetition Credit Facility required Ormet to
pledge the stock in its Subsidiaries, including the other Debtors, and such Subsidiaries, including
the other Debtors, to guarantee the obligations under the Prepetition Credit Facility and to pledge
substantially all of their assets as collateral to secure the guarantees. See Article III. Section
A.12(a), entitled “Prepetition Credit Facility.” Additionally, the Subsidiaries guaranteed all of
the obligations of Ormet under the Old Notes and the Old Term Loans. See Article III. Section
A. 12(d) & (e), entitled “The Old Notes” and “The Old Term Loans”, respectively.

         In view of the foregoing, the Debtors believe that creditors would not be prejudiced to
any significant degree by the Debtors’ partial substantive consolidation treatment which is
consistent with creditors’ having dealt with the Debtors as a single economic entity, and further
believe that partial substantive consolidation will best utilize the Debtors’ assets and potential of
all of the Debtors to pay to the creditors of each entity the distributions provided under the Plan.

B.      Classification and Treatment of Claims Against All Debtors

        The Plan classifies Claims and Equity Interests separately and provides different
treatment for different Classes of Claims and Equity Interests in accordance with the Bankruptcy
Code. As described more fully below, the Plan provides, separately for each Class, that holders
of certain Claims will receive various amounts and types of consideration based on the different
rights of the holders of Claims in each Class.

        1.     Administrative Expense Claims

        Administrative Expense Claims are Claims constituting a cost or expense of the
administration of the Chapter 11 Cases allowed under sections 503(b) and 507(a)(1) of the
Bankruptcy Code. Such Claims include Claims arising under or in respect to the DIP Senior
Credit Facility, the DIP Term Loan Agreement and the DIP Financing Order, any actual and
necessary costs and expenses of preserving the Estates of the Debtors, any actual and necessary
costs and expenses of operating the business of the Debtors in Possession, any indebtedness or



NY1:1514179                                      51
obligations incurred or assumed by the Debtors in Possession in connection with the conduct of
their business, including, without limitation, for the acquisition or lease of property or an interest
in property or the rendering of services, all compensation and reimbursement of expenses to the
extent Allowed by the Bankruptcy Court under section 330, 331 or 503 of the Bankruptcy Code,
all costs associated with the cure of any executory contracts and unexpired leases between the
Debtors and any Person, and any fees or charges assessed against the Estates of the Debtors
under section 1930 of title 28 of the United States Code.

         Except to the extent that any entity entitled to payment of any Allowed Administrative
Expense Claim agrees to a different treatment, each holder of an Allowed Administrative
Expense Claim shall receive Cash in an amount equal to such Allowed Administrative Expense
Claim on the later of the Effective Date and the date such Administrative Expense Claim
becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable;
provided, however, that Allowed Administrative Expense Claims representing liabilities incurred
in the ordinary course of business by the Debtors in Possession or liabilities arising under loans
or advances to or other obligations incurred by the Debtors in Possession, shall be paid in full
and performed by the Reorganized Debtors in the ordinary course of business consistent with
past practices and in accordance with the terms and subject to the conditions of any agreements
governing, instruments evidencing, or other documents relating to such transactions; provided
further, however, that on the Effective Date, (i) the principal amount of, and all accrued and
unpaid interest, fees and expenses on, the loans outstanding under the DIP Senior Credit Facility,
shall be indefeasibly paid in full in Cash pursuant to the terms of the DIP Senior Credit Facility
and the Final Order approving the DIP Senior Credit Facility, and (ii) all DIP Letters of Credit
shall either (x) be (a) returned to the issuer undrawn and marked cancelled, or (b) cash
collateralized with Cash in an amount equal to 105% of the face amount of the outstanding DIP
Letters of Credit, or (y) the issuer will be provided with back-to-back letters of credit in an
amount equal to 105% of the face amount of the outstanding DIP Letters of Credit, and in form
and substance and from a financial institution acceptable to the issuer. Upon payment or
satisfaction in full of all obligations under the DIP Senior Credit Facility, in accordance with the
terms thereof and Section 2.1(a) of the Plan, all Liens and security interests granted to secure
such obligations shall be terminated and shall be of no further force and effect.

        On the Effective Date, the principal amount of the loans outstanding under the DIP Term
Loan Agreement shall be indefeasibly satisfied and the obligations thereunder discharged
through the issuance by Reorganized Parent and purchase by MatlinPatterson of an aggregate
principal amount of $30,000,000 of New Term Notes pursuant to the terms of the Commitment
Agreement, and all accrued and unpaid interest, fees and expenses outstanding under the DIP
Term Loan Agreement shall be paid in full in Cash in accordance with the terms of the DIP Term
Loan Agreement and the Final Order approving the DIP Term Loan Agreement. Assuming an
Effective Date of December 31, 2004, the Debtors estimate that aggregate amount of accrued and
unpaid interest, fees and expenses outstanding under the DIP Term Loan Agreement will be
$100,000. Upon payment or satisfaction in full of all obligations under the DIP Term Loan
Agreement, in accordance with the terms thereof and Section 2.1(b) of the Plan, all Liens and
security interests granted to secure such obligations shall be terminated and shall be of no further
force and effect.




NY1:1514179                                       52
        2.     Professional Fees and Expense Claims

       Compensation and reimbursement Claims are Administrative Expense Claims for the
compensation of professionals and reimbursement of expense incurred by such professionals
pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4) and 503(b)(5) of the Bankruptcy Code (the
Professional Fees and Expenses Claims”). All payments to professionals for Professional Fees
and Expenses 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.

        Section 503(b) of the Bankruptcy Code provides for payment of compensation to
creditors, indenture trustees and other entities making a “substantial contribution” to a
reorganization case, and to attorneys for and other professional advisors to such entities. The
amounts, if any, which may be sought by entities for such compensation, are not known by the
Debtors at this time. Requests for compensation must be approved by the Bankruptcy Court
after a hearing on notice at which the Debtors and other parties in interest may participate and, if
appropriate, object to the allowance of any compensation and reimbursement of expenses.

        Pursuant to the Plan, no later than five days prior to the Effective Date, each entity
seeking an award by the Bankruptcy Court of their Professional Fees and Expenses Claim shall
submit to the Debtors a written estimate of its fees and expenses incurred, or expected to be
incurred, through and including the Effective Date for which it has not already been paid
(including any holdback on fees pending final allowance of such fees by the Bankruptcy Court).
On the Effective Date, the Debtors shall deposit an amount equal to the total estimated
Professional Fees and Expenses in the Professional Fee Reserve Account. All Professional Fees
and Expenses that are Allowed as Administrative Expense Claims shall be paid out of the
Professional Fee Reserve Account, provided, however, that no such entity shall receive payment
from the Professional Fee Reserve Account in excess of the estimate submitted by such entity. If
the amounts on deposit in the Professional Fee Reserve Account shall be insufficient to pay the
amount of Professional Fees and Expenses awarded to any entity, the balance shall be paid by
the Reorganized Debtors as an Allowed Administrative Expense Claim. After payment of all
Allowed Professional Fees and Expenses, any balance remaining in the Reserve Account shall
vest in the Reorganized Debtors.

         All entities seeking an award by the Bankruptcy Court of Professional Fees and Expenses
(i) shall file their respective final applications for allowance of compensation for services
rendered and reimbursement of expenses incurred through the Effective Date by the date that is
sixty (60) days after the Effective Date or such other date as may be fixed by the Bankruptcy
Court and, (ii) if granted such an award by the Bankruptcy Court, shall be paid in full in such
amounts as are Allowed by the Bankruptcy Court a) on the date such Administrative Expense
Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable
or b) upon such other terms as may be mutually agreed upon between such holder of an Allowed
Administrative Expense Claim and the Debtors in Possession or, on and after the Effective Date,
the Reorganized Debtors. The time for filing objections to applications for allowance and
payment of Professional Fees and Expenses, and the date and time for a hearing in respect of


NY1:1514179                                      53
such applications and the related objections, if any, shall be set forth in the Confirmation Order
or other order of the Bankruptcy Court.

        3.     Priority Tax Claims

       Priority Tax Claims are Claims for taxes entitled to priority in payment under section
507(a)(8) of the Bankruptcy Code.

        Except to the extent that a holder of an Allowed Priority Tax Claim has been paid by the
Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed
Priority Tax Claim shall receive, at the sole option of the Reorganized Debtors, (a) Cash in an
amount equal to such Allowed Priority Tax Claim on the later of the Effective Date and the date
such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is
practicable, or (b) equal annual Cash payments in an aggregate amount equal to such Allowed
Priority Tax Claim (commencing on the first anniversary of the Effective Date), together with
interest at a fixed annual rate equal to the rate applicable to underpayments of federal income tax
on the Effective Date determined pursuant to section 6621 of the Internal Revenue Code, without
regard to subsection (c) thereof, over a period through a date not later than the sixth anniversary
of the date of assessment of such Allowed Priority Tax Claim, or upon such other terms
determined by the Bankruptcy Court to provide the holder of such Allowed Priority Tax Claim
deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Priority
Tax Claim.

        4.     Class 1 - Other Priority Claims

        Other Priority Claims are Claims which are entitled to priority in accordance with section
507(a) of the Bankruptcy Code (other than Administrative Expense Claims and Priority Tax
Claims). Such Claims include (i) unsecured claims for accrued employee compensation earned
within 90 days prior to the Commencement Date to the extent of up to $4,650 per employee and
(ii) contributions to employee benefit plans arising from services rendered within 180 days prior
to the Commencement Date, but only for each such plan to the extent of (a) the number of
employees covered by such plan multiplied by $4,650, less (b) the aggregate amount paid to such
employees from the Estates for wages, salaries or commissions.

         Pursuant to the Plan, each holder of an Other Priority Claim, if any exist, shall receive, in
full satisfaction, release and exchange for such Claim, Cash in an amount equal to the amount of
such Allowed Other Priority Claim on the later of the Effective Date and the date such Other
Priority Claim becomes an Allowed Other Priority Claim, or as soon thereafter as is practicable.

        5.     Class 2 – Secured Claims

        The Secured Claims are Claims, to the extent reflected in the Schedules or a proof of
claim as a Secured Claim, the payment or performance of which is secured by a Lien on
Collateral to the extent of the value of the Debtors’ interest in such Collateral, as determined in
accordance with section 506(a) of the Bankruptcy Code, including, in the event that such Claim
is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the amount of such
setoff.



NY1:1514179                                       54
        Except to the extent that a holder of an Allowed Secured Claim agrees to a different
treatment, at the sole option of the Reorganized Debtors, (i) each Allowed Secured Claim shall
be reinstated and rendered unimpaired in accordance with section 1124(2) of the Bankruptcy
Code, notwithstanding any contractual provision or applicable non-bankruptcy law that entitles
the holder of an Allowed Secured Claim to demand or receive payment of such Allowed Secured
Claim prior to the stated maturity of such Allowed Secured Claim from and after the occurrence
of a default, or (ii) each holder of an Allowed Secured Claim shall receive Cash payments having
a present value equal to the amount of such Allowed Secured Claim, including any interest on
such Allowed Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy
Code, on the later of the Effective Date and the date such Allowed Secured Claim becomes an
Allowed Secured Claim, or as soon thereafter as is practicable. Notwithstanding the foregoing,
each such holder receiving the treatment specified in clause (ii) of the preceding sentence shall
have an Old Debt Claim in Class 4, a General Unsecured Claim in Class 5, or a Formcast
Unsecured Claim in Class 6, as applicable, for the amount by which the amount of its Allowed
Claim exceeds the value of its Collateral.

        6.     Class 3 – Convenience Claims

       Convenience Claims include any Claim against the Debtors which (a) would otherwise be
an Allowed General Unsecured Claim, and (b) is in the principal amount of $30,000 or less, or as
to which the holder elects on its Ballot to reduce the principal amount thereof to $30,000.

        Pursuant to the Plan, on the Initial Distribution Date, each holder of an Allowed
Convenience Claim shall receive, in full satisfaction, release and exchange for such Claim, a
payment in Cash in an amount equal to thirteen percent (13%) of the amount of such Allowed
Convenience Claim, provided, however that any Person that holds more than one General
Unsecured Claim and/or Convenience Claim that in the aggregate exceed $30,000.00 may elect,
by so indicating on such holder’s Ballot, to have its Claims treated as a single Class 5 General
Unsecured Claim.

        7.     Class 4 – Old Debt Claims

        The Old Debt Claims are the Claims relating to the Old Notes and the Old Term Loans.
Pursuant to the Plan, the Old Term Loan Claims shall constitute Allowed Claims for purposes of
this Plan in the aggregate amount of $81,580,000, comprised of (a) $75,000,000 in principal
amount, and (b) $6,580,000 in accrued and unpaid interest as of the Commencement Date. The
Old Note Claims shall constitute Allowed Claims for purposes of this Plan in the aggregate
amount of $175,465,000, comprised of (a) $150,000,000 in principal amount, and
(b) $25,465,000 in accrued and unpaid interest as of the Commencement Date.

        On the Initial Distribution Date, subject to the terms of Section 5.4(a) of the Plan, each
holder of an Allowed Old Debt Claim shall receive, in full satisfaction, release and exchange for
such Claim, such holder’s Pro Rata Share of the Creditor New Common Stock Pool. In addition,
each holder of an Allowed Old Debt Claim may be entitled to distributions of additional shares
of New Common Stock on each Subsequent Distribution Date in accordance with Section 5.4(d)
of the Plan.




NY1:1514179                                    55
        8.     Class 5 – General Unsecured Claims

        The General Unsecured Claims are any Claims, including, without limitation, Claims
arising from the rejection of executory contracts and unexpired leases, that are not an
Administrative Expense Claim, a Priority Tax Claim, an Other Priority Claim, a Secured Claim,
an Old Debt Claim, an Insured Claim, a Settled Environmental Claim, a Formcast Unsecured
Claim, an Old Parent Equity Interest or a Subsidiary Equity Interest. Such Claims include (i)
Claims of the Debtors’ trade vendors, suppliers and service providers, (ii) Claims in respect of
the rejection of leases of non-residential real property and executory contracts, and (iii) Claims
relating to personal injury, property damage or products liability or other similar Claims that
have not been compromised and settled or otherwise resolved.

        Pursuant to the Plan, on the Initial Distribution Date, subject to the terms of Section
5.4(a) of the Plan, each holder of an Allowed General Unsecured Claim shall receive, in full
satisfaction, release and exchange for such Claim, such holder’s Pro Rata Share of the Creditor
New Common Stock Pool, provided, however, that each holder of a Class 5 Allowed General
Unsecured Claim may elect on its Ballot to permanently and irrevocably reduce the amount of its
Claim to $30,000 and receive a distribution pursuant to Class 3 (Convenience Claims) of the
Plan. In addition, each holder of an Allowed General Unsecured Claim may be entitled to
distributions of additional shares of New Common Stock on each Subsequent Distribution Date
in accordance with Section 5.4(d) of the Plan.

        9.     Class 6 – Formcast Unsecured Claims

       Formcast Unsecured Claims are any Claim against Formcast that is not secured by a Lien
on Collateral.

        Pursuant to the Plan, on the Initial Distribution Date, subject to the terms of Section
5.5(a) of the Plan, each holder of an Allowed Formcast Unsecured Claim shall receive, in full
satisfaction, release and exchange for such Claim, its Pro Rata Share of the Remaining Formcast
Sale Proceeds. In addition, each holder of an Allowed Formcast Unsecured Claim may be
entitled to receive distributions of additional Remaining Formcast Sale Proceeds on each
Subsequent Distribution Date in accordance with Section 5.5(d) of the Plan. However, to the
extent that any Formcast Unsecured Claims would be Intercompany Claims held by another
Debtor, such claims shall be cancelled on the Effective Date and no distribution shall be made on
account of such Claims.

        10.    Class 7 – Insured Claims

        Insured Claims are any Claim arising from an incident or occurrence that is covered
under the Debtors’ insurance policies, including, without limitation, a workers’ compensation
policy.

        Pursuant to the Plan, the Claim of each holder of an Allowed Insured Claim shall be
satisfied from proceeds payable to such holder under any applicable insurance policies and
applicable law. To the extent that an Allowed Insured Claim is not satisfied in full by available
insurance proceeds, the remaining Claim shall be a Class 5 Allowed General Unsecured Claim.
Generally, the Debtors’ insurance policies have a $250,000 self-insured retention, which will be


NY1:1514179                                     56
treated as General Unsecured Claims, that must be paid by the Debtors before the insurance
coverage begins. However, with respect to asbestos related Claims against the Debtors, the
Debtors believe that they either have no uninsured liability, or that their liability is de minimus
and immaterial with respect to the feasibility of the Plan. Nothing contained in Section 4.7(b) of
the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any
entity may hold against any other entity, including, without limitation, insurers under any
policies of insurance.

        11.    Class 8 – Settled Environmental Claims

         Settled Environmental Claims are any Claim, including, but not limited to, actions, suits,
judgments, or orders under any federal, state, or local environmental law, rule, or regulation for
any damages (including contribution claims and natural resource damages), injunctive relief,
remediation, losses, fines, penalties, fees, expenses (including financial assurance obligations
and reasonable fees and expenses of attorneys and consultants) or costs relating to (a) the release
or threatened release of hazardous materials or substances to the environment, (b) any actual or
alleged violation or non-compliance with any applicable federal, state, or local environmental
statute, rule, regulation, or order, or (c) other similar Claim asserted against any of the Debtors
that has been resolved by entry into a settlement agreement. For the avoidance of doubt, the
Claims arising under the Hannibal Consent Decree shall be Allowed Settled Environmental
Claims.

       The Clams arising under the Hannibal Consent Decree shall be Allowed Settled
Environmental Claims.

       Pursuant to the Plan, holders of Allowed Settled Environmental Claims shall be treated in
accordance with the terms of the settlement, consent decree or similar agreement relating to such
Claim.

        12.    Class 9 – Intercompany Claims

        Intercompany Claims are any Claim of a Debtor against another Debtor.

       Pursuant to the Plan, on the Effective Date, each holder of an Allowed Intercompany
Claim shall receive, in full satisfaction, release and exchange for such Claim, the following
treatment: (i) the legal, equitable and contractual rights of each holder’s Allowed Intercompany
Claim shall remain unaltered by the Plan, or (ii) such other treatment agreed to in writing
between such holder and the Debtors or Reorganized Debtors, as applicable, and
MatlinPatterson, provided, however, that any Claims by Formcast against any other Debtor shall
be cancelled on the Effective Date and shall receive no distributions under the Plan.

        13.    Class 10 – Subordinated Claims

       Subordinated Claims include any Claim that is subject to subordination under Section
510(b) or (c) of the Bankruptcy Code. The Debtors are not aware of any Subordinated Claims.

       Pursuant to the Plan, the holders of Subordinated Claims will not receive or retain any
property on account of such Claims.


NY1:1514179                                     57
        14.    Class 11 – Subsidiary Equity Interest

        The Subsidiary Equity Interests consist of any share of stock or other instrument
evidencing a present ownership interest by any of the Debtors in any of the Subsidiaries, whether
or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such
interest.

      Pursuant to the Plan, the holders of Allowed Subsidiary Equity Interests shall retain
ownership of their Subsidiary Equity Interests in each of the Reorganized Subsidiaries.

        15.    Class 12 – Old Parent Equity Interest

        The Old Parent Equity Interests consist of any share of preferred stock, common stock or
other instrument evidencing an ownership interest in Ormet, whether or not transferable, and any
option, warrant or right, contractual or otherwise, to acquire any such interest.

       Pursuant to the Plan, the holders of Old Parent Equity Interests will not receive or retain
any property on account of such Interest.

C.      Provisions Regarding Voting and Distributions Under the Plan and Treatment of
        Disputed, Contingent and Unliquidated Claims

        1.     Voting of Claims

        Each holder of an Allowed Claim in an impaired Class of Claims that is entitled to vote
on the Plan pursuant to the Bankruptcy Code shall be entitled to vote separately to accept or
reject the Plan as provided in such order as is entered by the Bankruptcy Court establishing
certain procedures with respect to the solicitation and tabulation of votes to accept or reject the
Plan, or any other order or orders of the Bankruptcy Court.

        2.     Nonconsensual Confirmation

       Pursuant to the Plan, Claims in Class 10 (Subordinated Claims) and Equity Interests in
Class 12 (Old Parent Equity Interests) will not receive or retain any property, and are thus
deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Notwithstanding the deemed rejection of the Plan by such Classes, or that any impaired Class of
Claims entitled to vote does not accept the Plan by the statutory majorities required by section
1126(c) of the Bankruptcy Code, the Debtors are requesting confirmation of the Plan under the
cramdown provisions of section 1129(b) of the Bankruptcy Code.

        3.     Method of Distribution Under the Plan

        Subject to Bankruptcy Rule 9010, and except as otherwise provided in Section 5.3 of the
Plan, all distributions under the Plan shall be made by the Reorganized Debtors to the holder of
each Allowed Claim at the address of such holder as listed on the Schedules as of the
Distribution Record Date unless the Debtors or Reorganized Debtors have been notified in
writing of a change of address, including by the filing of a proof of Claim by such holder that
provides an address different from the address reflected on the Schedules; provided, however,


NY1:1514179                                      58
that all distributions on account of Old Note Claims and Old Term Loan Claims shall be made to
the Old Indenture Trustee and the Old Term Loan Agent (as applicable) for the benefit of the
holders of Old Note Claims or Old Term Loan Claims (as applicable).

       Any payment of Cash made by the Reorganized Debtors pursuant to the Plan shall be
made by check drawn on a domestic bank or by wire transfer; provided that all distributions of
Cash to the DIP Senior Lenders or DIP Term Loan Lenders shall be made by the Reorganized
Debtors by wire transfer of immediately available funds.

       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.

         Any shares of New Common Stock to be distributed under the Plan to any entity required
to file a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, shall not be distributed until the notification and waiting
periods applicable under such Act to such entity shall have expired or been terminated.

      No payment of Cash less than one hundred dollars ($100.00) shall be made by the
Reorganized Debtors to any holder of a Claim unless a request therefor is made in writing to the
Reorganized Debtors.

        No fractional shares of New Common Stock or Cash in lieu thereof shall be distributed
pursuant to the Plan. When any distribution on account of an Allowed Claim pursuant to the
Plan would otherwise result in the issuance of a number of shares of New Common Stock that is
not a whole number, the actual distribution of shares of New Common Stock shall be rounded as
follows: (a) fractions of ½ or greater shall be rounded to the next higher whole number and (b)
fractions of less than ½ shall be rounded to the next lower whole number. The total number of
shares of New Common Stock to be distributed pursuant to the Plan shall be adjusted as
necessary to account for the rounding provided in Section 5.3(f) of the Plan.

       Any distributions of Cash, New Common Stock or other property under the Plan that are
unclaimed for a period of one year after the Initial Distribution Date shall be vested in
Reorganized Parent and any entitlement of any holder of any Claim to such distributions shall be
extinguished and forever barred.

        Unless otherwise provided herein, all initial distributions and deliveries to be made
hereunder shall be made on the Initial Distribution Date. Notwithstanding the foregoing,
subsequent distributions shall be made on each Subsequent Distribution Date in accordance with
the terms set forth in the Plan unless the administrative costs of making such distributions would
be excessive in comparison to the amounts to be distributed. Further, no distributions shall be
made to any holder of an Allowed Claim who, after giving effect to the issuance of New
Common Stock pursuant to this Plan, would hold five percent (5%) or more of the New
Common Stock, until such time as such holder has executed and delivered the Shareholdes’
Agreement.

        At the close of business on the Distribution Record Date, the claims register shall be
closed, and there shall be no further changes in the record holders of any Claims. The Debtors,
the Reorganized Debtors and any Disbursing Agent shall have no obligation to recognize any


NY1:1514179                                     59
transfer of any Claims occurring after the Distribution Record Date, provided that the foregoing
will not be deemed to prohibit the sale or transfer of any Claim subsequent to the Distribution
Record Date and prior to the Effective Date. The Debtors, the Reorganized Debtors and any
Distribution Agent shall instead be entitled to recognize and deal for all purposes under the Plan
with only those record holders as of the close of business on the Distribution Record Date.

        4.     Distributions Withheld for Disputed General Unsecured Claims

               (a)     Establishment and Maintenance of Reserve

        On the Initial Distribution Date and each Subsequent Distribution Date, Reorganized
Parent shall reserve from the distributions to be made on such dates to the holders of Allowed
Old Debt Claims and Allowed General Unsecured Claims, an amount of New Common Stock
equal to one-hundred percent (100%) of the distributions to which holders of Disputed General
Unsecured Claims would be entitled under the Plan as of such dates if such Disputed General
Unsecured Claims were Allowed Claims in their Disputed Claim Amounts or as estimated by the
Debtors or the Bankruptcy Court in accordance with Section 5.10 of the Plan (the “Disputed
Claims Reserve”).

               (b)     Property Held in Disputed Claims Reserve

        New Common Stock in the Disputed Claims Reserve shall (together with all dividends or
other accretions or distributions thereon) be held in trust by the Reorganized Debtors for the
benefit of the potential recipients of such New Common Stock and shall not constitute property
of the Reorganized Debtors. Any changes in the New Common Stock, including by merger,
recapitalization, split, reverse split, dividend or otherwise, shall result in an equitable adjustment
for the New Common Stock and any other consideration in the Disputed Claims Reserve as
determined in good faith by the New Board of Directors.

               (c)     Distributions Upon Allowance of Disputed General Unsecured Claims

       The holder of a Disputed General Unsecured Claim that becomes an Allowed Claim
subsequent to the Initial Distribution Date shall receive distributions of New Common Stock and
any other consideration from the Disputed Claims Reserve from the Reorganized Parent on the
next Subsequent Distribution Date that is at least twenty (20) days following the date on which
such Disputed General Unsecured Claim becomes an Allowed Claim pursuant to a Final Order.
Such distributions shall be made in accordance with the Plan based upon such holder’s Pro Rata
Share, calculated as of such Subsequent Distribution Date.

               (d)     Surplus Distributions to Holders of Allowed Old Debt Claims and
                       Allowed General Unsecured Claims

       To the extent that a Disputed General Unsecured Claim is not Allowed or becomes an
Allowed Claim in an amount less than the Disputed Claim Amount, the excess of the New
Common Stock and any other consideration in the Disputed Claims Reserve over the number of
shares of New Common Stock and any other consideration actually distributed on account of
such Disputed General Unsecured Claim shall constitute surplus available for distribution to
holders of Allowed Old Debt Claims and Allowed General Unsecured Claims (the “Surplus


NY1:1514179                                      60
Distributions”). The Surplus Distributions shall be distributed to holders of Allowed Old Debt
Claims and Allowed General Unsecured Claims on each Subsequent Distribution Date and the
Final Distribution Date.

               (e)    Expenses of Disputed Claims Reserve

       Except as otherwise ordered by the Bankruptcy Court, the amount of any reasonable
expenses incurred by the Reorganized Debtors or the Disbursing Agent on or after the Effective
Date with respect to the Disputed Claims Reserve shall be paid by the Reorganized Debtors.

        5.     Distributions Withheld for Disputed Formcast Unsecured Claims

               (a)    Establishment and Maintenance of Reserve

        On the Initial Distribution Date and each Subsequent Distribution Date, the Reorganized
Debtors shall reserve from the distributions to be made on such dates to the holders of Allowed
Formcast Unsecured Claims, an amount of Cash equal to one-hundred percent (100%) of the
distributions to which holders of Disputed Formcast Unsecured Claims would be entitled under
the Plan as of such dates if such Disputed Formcast Unsecured Claims were Allowed Claims in
their Disputed Claim Amounts (the “Formcast Reserve”).

               (b)    Property Held in Formcast Reserve

        Cash in the Formcast Reserve shall be held in trust by the Reorganized Debtors for the
benefit of the potential recipients of such Cash and shall not constitute property of the
Reorganized Debtors. Notwithstanding the foregoing, holders of Formcast Unsecured Claims
shall not be entitled to any interest or other accretions on any Cash held in the Formcast Reserve,
and any such interest or other accretions shall revert to the Reorganized Debtors. The
Reorganized Debtors shall report any such interest or other accretions in their income on a
current basis and pay any taxes attributable thereto.

               (c)    Distributions Upon Allowance of Disputed Formcast Unsecured Claims

        The holder of a Disputed Formcast Unsecured Claim that becomes an Allowed Claim
subsequent to the Initial Distribution Date shall receive distributions of Cash from the Formcast
Reserve on the next Subsequent Distribution Date that is at least twenty (20) days following the
date on which such Disputed Formcast Unsecured Claim becomes an Allowed Claim pursuant to
a Final Order; provided, however, that the aggregate amount of such distributions shall not
exceed the amount held in the Formcast Reserve in respect of such Disputed Formcast
Unsecured Claim. Such distributions shall be made in accordance with the Plan based upon such
holder’s Pro Rata Share, calculated as of such Subsequent Distribution Date.

               (d)    Surplus Distributions to Holders of Allowed Formcast Unsecured Claims

      To the extent that a Disputed Formcast Unsecured Claim is not Allowed or becomes an
Allowed Claim in an amount less than the Disputed Claim Amount, the excess of the Cash in the
Formcast Reserve over the amount of Cash actually distributed on account of such Disputed
Formcast Unsecured Claim shall constitute surplus available for distribution to holders of


NY1:1514179                                     61
Allowed Formcast Unsecured Claims (the “Surplus Distributions”). The Surplus Distributions
shall be distributed to holders of Allowed Formcast Unsecured Claims based on the amount of
then existing Allowed Formcast Unsecured Claims and Disputed Formcast Unsecured Claims;
provided, however, that the Reorganized Debtors shall not be under any obligation to make any
Surplus Distributions of Cash on a Subsequent Distribution Date unless the amount of Cash to be
distributed aggregates $5,000 or more, unless the distribution is the last distribution to such Class
to be made under the Plan.

               (e)     Expenses of Formcast Reserve

       Except as otherwise ordered by the Bankruptcy Court, the amount of any reasonable
expenses incurred by the Reorganized Debtors or the Disbursing Agent on or after the Effective
Date with respect to the Formcast Reserve, shall be paid by the Reorganized Debtors and shall
not reduce the funds held in the Formcast Reserve.

        6.     Procedures for Allowance or Disallowance of Disputed Claims

               (a)     Objections to and Resolution of Administrative Expense Claims, Claims
                       and Equity Interests

        Except as to applications for allowance of compensation and reimbursement of expenses
under sections 330 and 503 of the Bankruptcy Code, the Debtors or the Reorganized Debtors
shall have the exclusive right to make and file objections to Administrative Expense Claims,
Claims and Equity Interests subsequent to the Effective Date. All objections shall be litigated to
Final Order; provided, however, that following the Effective Date, the Reorganized Debtors shall
have the authority to compromise, settle, otherwise resolve or withdraw any of their objections
without approval of the Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court,
the Debtors or the Reorganized Debtors shall file all objections to Claims and Equity Interests
and serve such objections upon the holder of the Claim or Equity Interest as to which the
objection is made as soon as is practicable, but in no event later than one hundred twenty (120)
days after the Effective Date or such later date as may be approved by the Bankruptcy Court.
The Debtors or the Reorganized Debtors reserve the right to object to Administrative Expense
Claims as such claims arise in the ordinary course of business. The Reorganized Debtors shall
bear all costs and expenses relating to the investigation and prosecution of Disputed Claims from
and after the Effective Date.

               (b)     Personal Injury Tort Claims and Environmental Claims

        All personal injury Tort Claims and Environmental Claims (other than Settled
Environmental Claims) are Disputed General Unsecured Claims. Any personal injury Tort
Claim or Environmental Claim as to which a proof of claim was timely filed in the Chapter 11
Cases shall be determined and liquidated in the administrative or judicial tribunal(s) in which it
is pending on the Effective Date or, if no action was pending on the Effective Date, in any
administrative or judicial tribunal of appropriate jurisdiction, or in accordance with any
alternative dispute resolution or similar proceeding as the same may be approved by order of the
Bankruptcy Court. Any personal injury Tort Claim or Environmental Claim determined and
liquidated (i) pursuant to a judgment obtained in accordance with Section 5.6(b) of the Plan and



NY1:1514179                                      62
applicable nonbankruptcy law which is no longer appealable or subject to review, or (ii) in any
alternative dispute resolution or similar proceeding as the same may be approved by order of the
Bankruptcy Court, shall be deemed an Allowed General Unsecured Claim in such liquidated
amount and satisfied in accordance with the Plan (provided, that, to the extent an Allowed Tort
Claim or Allowed Environmental Claim is a Claim covered by an insurance policy, such claim
shall be paid from the insurance proceeds available to satisfy such liquidated amount). Nothing
contained in Section 5.6(b) of the Plan shall impair the Debtors’ right to seek estimation of any
and all personal injury Tort Claims and Environmental Claims in a court or courts of competent
jurisdiction or constitute or be deemed a waiver of any Cause of Action that the Debtors may
hold against any entity, including, without limitation, in connection with or arising out of any
personal injury Tort Claim or Environmental Claim.

               (c)    No Distribution Pending Allowance

       Notwithstanding any other provision of the Plan, if any portion of a Claim is disputed, the
full amount of such Claim shall be treated as a Disputed Claim for purposes of this Plan, and no
payment or distribution provided under the Plan shall be made on account of such Claim unless
and until such Disputed Claim becomes an Allowed Claim (in whole or in part).

               (d)    Disallowed Claims

        All Claims held by Persons against whom any Debtor or Reorganized Debtor has
commenced a proceeding asserting a cause of action under sections 542, 543, 544, 545, 547, 548,
549, and/or 550 of the Bankruptcy Code, shall be deemed “disallowed” Claims pursuant to
section 502(d) of the Bankruptcy Code and holders of such Claims shall not be entitled to vote to
accept or reject the Plan of Reorganization. Claims that are deemed disallowed pursuant Section
5.6(d) of the Plan shall continue to be disallowed for all purposes until the avoidance action
against such party has been settled or resolved by Final Order and any sums due to the Debtors
or the Reorganized Debtors from such party have been paid.

        7.     Disbursing Agent

        The Reorganized Debtors, or such Person(s) as the Reorganized Debtors may designate,
will act as Disbursing Agent under the Plan with respect to all distributions to holders of Claims,
and will make all distributions required to be distributed under the applicable provisions of the
Plan; provided, however, that all distributions to (i) the Old Note Holders shall be made by the
Reorganized Debtors (or their Disbursing Agent) to the Old Indenture Trustee for disbursement
to the Old Note Holders, (ii) the Old Term Loan Holders shall be made by the Reorganized
Debtors (or their Disbursing Agent) to the Old Term Loan Agent for disbursement to the Old
Term Loan Holders, (iii) the DIP Senior Lenders shall be made by the Reorganized Debtors (or
their Disbursing Agent) to the DIP Senior Loan Agent for disbursement to the DIP Senior
Lenders and (iv) the DIP Term Loan Lenders shall be made by the Reorganized Debtors (or their
Disbursing Agent) to the DIP Term Loan Agent for disbursement to the DIP Term Loan Lenders.
Any Disbursing Agent may employ or contract with other entities to assist in or make the
distributions required by the Plan. Each Disbursing Agent will serve without bond, and each
Disbursing Agent, other than the Reorganized Debtors, will receive, without further Bankruptcy
Court approval, reasonable compensation for distribution services rendered pursuant to the Plan


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and reimbursement of reasonable out-of-pocket expenses incurred in connection with such
services from the Reorganized Debtors on terms acceptable to the Reorganized Debtors. The
Reorganized Debtors shall hold all reserves and accounts pursuant to the Plan, including the
Professional Fee Reserve Account, the Disputed Claims Reserve and the Formcast Reserve.

        8.     Setoffs and Recoupment

         The Debtors may, but shall not be required to, set off (pursuant to the provisions of
sections 553 and 362 of the Bankruptcy Code or other applicable law) against or recoup from
any Claim and the payments to be made pursuant to the Plan in respect of such Claim, any
Claims of any nature whatsoever that the Debtors may have against the claimant, but neither the
failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by
the Debtors of any setoff or recoupment right it may have against the holder of such Claim.

        9.     Allocation of Plan Distributions Between Principal and Interest

        Other than in respect of the distributions to be made to the DIP Senior Lenders and the
DIP Term Loan Lenders under the Plan, 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 be allocated to the principal amount (as determined for federal income tax
purposes) of the Claim first, and then to accrued but unpaid interest.

        10.    Estimations of Claims

        For purposes of calculating and making distributions under the Plan, the Debtors or
Reorganized Debtors, as applicable, shall be entitled to estimate, in good faith and with due
regard to litigation risks associated with Disputed Claims, the maximum dollar amount of
Allowed and Disputed Claims, inclusive of contingent and/or unliquidated Claims in a particular
Class. The Debtors and the Reorganized Debtors may at any time request that the Bankruptcy
Court estimate any contingent or unliquidated Claim pursuant to section 502(c) of the
Bankruptcy Code or otherwise regardless of whether the Debtor or Reorganized Debtor
previously objected to such Claim or whether the Bankruptcy Court has ruled on any such
objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time
during litigation concerning such objection to any claim, including without limitation, during the
pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court
estimates any contingent or unliquidated claim, the amount so estimated shall constitute either
the Allowed amount of such Claim or a maximum limitation on the amount of such Claim, as
determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation
on the amount of such Claim, the Debtors or the Reorganized Debtors may pursue
supplementary proceedings to object to the allowance of such Claim. All of the aforementioned
objection, estimation, and resolution procedures are intended to be cumulative and not exclusive
of one another. Claims may be estimated and subsequently compromised, settled, withdrawn, or
resolved by any mechanism approved by the Bankruptcy Court.

        11.    No Recourse

       Notwithstanding that the Allowed amount of any particular Disputed Claim is
reconsidered under the applicable provisions of the Bankruptcy Code and Bankruptcy Rules or is


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Allowed in an amount for which after application of the payment priorities established by the
Plan there is insufficient value to provide a recovery equal to that received by other holders of
Allowed Claims in the respective Class, no Claim holder shall have recourse against the
Disbursing Agent, the Debtors, the Reorganized Debtors, the Creditors' Committee (or any
member thereof), the DIP Senior Lenders, the DIP Term Loan Lenders, MatlinPatterson, or any
of their respective professionals, consultants, officers, directors or Affiliates or their respective
successors or assigns, or any of their respective property. However, nothing in the Plan shall
modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. THE
ESTIMATION OF CLAIMS AND ESTABLISHMENT OF RESERVES UNDER THE PLAN
MAY LIMIT THE DISTRIBUTION TO BE MADE ON INDIVIDUAL DISPUTED CLAIMS,
REGARDLESS OF THE AMOUNT FINALLY ALLOWED ON ACCOUNT OF SUCH
DISPUTED CLAIMS.

        12.    Amendments to Claims

       A Claim may be amended prior to the Confirmation Date only as agreed upon by the
Debtors and the holder of such Claim, or as otherwise permitted by the Bankruptcy Court, the
Bankruptcy Rules or applicable law. After the Confirmation Date, a Claim may not be amended
without the authorization of the Bankruptcy Court. Any amendment to a Claim filed after the
Confirmation Date shall be deemed disallowed in full and expunged without any action by the
Debtors, the Reorganized Debtors or the Estates, unless the Claim holder has obtained prior
Bankruptcy Court authorization for the filing of such amendment.

        13.    Postpetition Interest on Claims

       Unless expressly provided in the Plan, the Confirmation Order, the Commitment Order,
the DIP Financing Order, or any contract, instrument, release, settlement, or other agreement
entered into in connection with the Plan or required by applicable law, postpetition interest shall
not accrue on or after the Commencement Date on account of any Claim.

        14.    Distributions Relating to Allowed Insured Claims

        Distributions under the Plan to each holder of an Allowed Insured Claim shall comply with
the treatment provided under the Plan for the Class in which such Allowed Insured Claim is
classified, but solely to the extent that such Allowed Insured Claim is not satisfied from proceeds
payable to the holder thereof under any pertinent insurance policies and applicable law. Nothing
contained in the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors
or any entity may hold against any other entity, including, without limitation, insurers under any
policies of insurance.

       Many of the personal injury Tort Claims, which are General Unsecured Claims, are
unliquidated and, in accordance with the Plan, will be liquidated in the tribunal in which they are
pending on the Effective Date or, if no action was pending on the Effective Date, in any tribunal
of appropriate jurisdiction or in accordance with any alternative dispute resolution or similar
proceeding as the same may be approved by order of the Bankruptcy Court. The resolution of
Tort Claims could result in Allowed General Unsecured Claims in amounts greater than those
estimated by the Debtors for purposes of this Disclosure Statement.



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D.      Treatment of Executory Contracts and Unexpired Leases Under the Plan

        1.     Assumption or Rejection of Executory Contracts and Unexpired Leases

               (a)     Executory Contracts and Unexpired Leases

       The Bankruptcy Code grants the Debtors the power, subject to the approval of the
Bankruptcy Court, to assume or reject executory contracts and unexpired leases. If an executory
contract or unexpired lease is rejected, the other party to the agreement may file a claim for
damages incurred by reason of the rejection. In the case of rejection of leases of real property,
such damage claims are subject to certain limitations imposed by the Bankruptcy Code.

        Pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory
contracts and unexpired leases between the Debtors and any Person shall be deemed assumed by
the Reorganized Debtors as of the Effective Date, except for any executory contract or unexpired
lease (i) which previously has been assumed or rejected pursuant to an order of the Bankruptcy
Court entered prior to the Effective Date, (ii) as to which a motion for approval of the
assumption or rejection of such executory contract or unexpired lease has been filed and served
prior to the Effective Date or (iii) which is listed in Schedule 6.1(a)(x) (executory contracts) or
Schedule 6.1(a)(y) (unexpired leases), which schedules shall be filed with the Bankruptcy Court
and served on the affected parties by no later than twenty (20) days prior to the Balloting
Deadline; provided, however, that the Debtors or Reorganized Debtors shall have the right, on or
prior to the Confirmation Date, to amend Schedules 6.1(a)(x) or 6.1(a)(y) to delete any executory
contract or unexpired lease therefrom or add any executory contract or unexpired lease thereto,
in which event such executory contract(s) or unexpired lease(s) shall be deemed, respectively,
assumed or rejected. The Debtors or Reorganized Debtors shall provide notice of any
amendments to Schedules 6.1(a)(x) or 6.1(a)(y) to the non-debtor parties to the executory
contracts and unexpired leases affected thereby. The listing of a document on Schedules
6.1(a)(x) and 6.1(a)(y) shall not constitute an admission by the Debtors or Reorganized Debtors
that such document is an executory contract or an unexpired lease or that the Debtors or
Reorganized Debtors have any liability thereunder.

               (b)     Schedules of Rejected Executory Contracts and Unexpired Leases;
                       Inclusiveness

        Each executory contract and unexpired lease listed or to be listed on Schedules 6.1(a)(x)
or 6.1(a)(y) that relates to the use or occupancy of real property shall be deemed to include (i) all
modifications, amendments, supplements, restatements, or other agreements made directly or
indirectly by any agreement, instrument, or other document that in any manner affects such
executory contract or unexpired lease, without regard to whether such agreement, instrument or
other document is listed on Schedules 6.1(a)(x) or 6.1(a)(y) and (ii) all executory contracts or
unexpired leases appurtenant to the premises listed on Schedules 6.1(a)(x) or 6.1(a)(y),
including, without limitation, all easements, licenses, permits, rights, privileges, immunities,
options, rights of first refusal, powers, uses, usufructs, reciprocal easement agreements, vault,
tunnel or bridge agreements or franchises, and any other interests in real estate or rights in rem
relating to such premises, unless any of the foregoing agreements previously have been assumed.




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               (c)     Insurance Policies

        Each of the Debtors’ insurance policies and any agreements, documents or instruments
relating thereto, including without limitation, any retrospective premium rating plans relating to
such policies, shall be treated as executory contracts under the Plan. Notwithstanding the
foregoing, distributions under the Plan to any holder of a Claim covered by any insurance
policies and related agreements, documents or instruments that are assumed hereunder, shall
comply with the treatment provided under Section 4.7 of the Plan. Nothing contained in Section
6.1(c) of the Plan shall constitute or be deemed a waiver or release of any Cause of Action that
the Debtors may hold against any entity, including, without limitation, the insurers under any of
the Debtors’ policies of insurance. See Article V. Section C.14, entitled “Distributions Relating
to Allowed Insured Claims.”

               (d)     Approval of Assumption or Rejection of Executory Contracts and
                       Unexpired Leases

        Subject to the occurrence of the Effective Date, entry of the Confirmation Order shall
constitute (i) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code,
of the assumption of the executory contracts and unexpired leases assumed pursuant to Section
6.1(a) of the Plan and (ii) the approval, pursuant to sections 365(a) and 1123(b)(2) of the
Bankruptcy Code, of the rejection of the executory contracts and unexpired leases rejected
pursuant to Section 6.1(a) of the Plan.

               (e)     Cure of Defaults

        To the extent that cure payments are due with respect to an executory contract or
unexpired lease to be assumed pursuant to Section 6.1(a) of the Plan, the amount of such cure
payment shall be listed on Schedule 6.1(e) in the Plan Supplement. To the extent that the non-
debtor party to any executory contract or unexpired lease disagrees with the cure amount listed in
the Plan Supplement, such party must file a notice of dispute with the Bankruptcy Court and
serve such notice on the Debtors by no later than five (5) days prior to the Confirmation Hearing.
Except as may otherwise be agreed to by the parties, within sixty (60) days after the Effective
Date, the Reorganized Debtors shall cure any and all undisputed defaults under any executory
contract or unexpired lease assumed pursuant to the Plan in accordance with section 365(b)(1) of
the Bankruptcy Code. All disputed defaults that are required to be cured shall be cured either
within thirty (30) days of the entry of a Final Order determining the amount, if any, of the
Debtors’ or Reorganized Debtors’ liability with respect thereto, or as may otherwise be agreed to
by the parties. If there are any objections filed, the Bankruptcy Court shall hold a hearing. In the
event the Bankruptcy Court determines that the cure amount is greater than the cure amount
listed by the Debtors, the Reorganized Debtors may elect to reject the contract or unexpired lease
and not pay such greater cure amount. The Debtors estimate that the total amount of cure costs
payable in connection with the assumption of executory contracts and unexpired leases will be
approximately $1.5 million and the total amount of rejection damage claims as a result of the
rejection of executory contracts and unexpired leases will be approximately $2.5 million.




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               (f)    Bar Date for Filing Proofs of Claim Relating to Executory Contracts and
                      Unexpired Leases Rejected Pursuant to the Plan

        Claims arising out of the rejection of an executory contract or unexpired lease pursuant to
Section 6.1(a) of the Plan must be filed with the Bankruptcy Court and/or served upon the
Debtors or Reorganized Debtors or as otherwise may be provided in the Confirmation Order, by
no later than thirty (30) days after the later of (i) notice of entry of an order approving the
rejection of such executory contract or unexpired lease, (ii) notice of entry of the Confirmation
Order and (iii) notice of an amendment to Schedule 6.1(a)(x) or 6.1(a)(y). Any Claim not filed
within such time will be forever barred from assertion against the Debtors, their Estates, the
Reorganized Debtors and their property. Unless otherwise ordered by the Bankruptcy Court, all
Claims arising from the rejection of executory contracts and unexpired leases shall be treated as
General Unsecured Claims under the Plan.

        2.     Indemnification Obligations

        For purposes of the Plan, the obligations of the Debtors to defend, indemnify, reimburse,
or limit the liability relating to any claims or obligations against their present and former
directors, officers or employees who served as directors, officers and employees, respectively, on
or after the Commencement Date, pursuant to the Debtors’ certificates of incorporation or
bylaws, applicable state law or specific agreement, or any combination of the foregoing, shall
survive confirmation of the Plan, remain unaffected thereby, and not be discharged, irrespective
of whether indemnification, defense, reimbursement or limitation is owed in connection with an
event occurring before, on or after the Commencement Date.

        3.     Compensation and Benefit Programs

        Except as provided in Section 6.1(a) of the Plan, and other than stock option or similar
plans which will be cancelled as part of the treatment of any Class of Claims under the Plan, all
employment and severance practices and policies, and all compensation and benefit plans,
policies, and programs of the Debtors applicable to their directors, officers, and employees who
served as directors, officers and employees, respectively, on or after the Commencement Date,
including, without limitation, all savings plans, retirement plans (exclusive of defined benefit
plans), health care plans, severance benefit plans, incentive plans, workers’ compensation
programs and life, disability and other insurance plans, including the Key Employee Retention
Plan approved by the Bankruptcy Court by an order dated March 26, 2004, are treated as
executory contracts under the Plan and are hereby assumed pursuant to sections 365(a) and
1123(b)(2) of the Bankruptcy Code; provided, however, that the Reorganized Debtors reserve the
right to modify any and all such compensation and benefit practices, plans, policies, and
programs in accordance with the terms thereof. Furthermore, on and after the Effective Date the
Debtors will continue as plan sponsor to meet their obligations under their defined benefit plans,
including making contributions required to meet the minimum funding obligations required by
applicable law.




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        4.     Defined Benefit Plans

        The Debtors intend, and the Plan contemplates, that the Reorganized Debtors will
continue to be the contributing sponsors of the Ormet Corporation Pension Plan, the Ormet
Aluminum Mill Products Corporation Jackson Hourly Employees’ Pension Plan and the Ormet
Aluminum Mill Products Corporation Iuka Hourly Employees’ Pension Plan (the “Pension
Plans”). Each of the Pension Plans is a defined benefit plan insured by the Pension Benefit
Guaranty Corporation (“PBGC”) under Title IV of the Employee Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. §§ 1301-1461, et seq. The Pension Plans are subject to
minimum funding requirements of ERISA and § 412 of the Internal Revenue Code. No
provision of the Debtors’ Plan, the Confirmation Order or § 1141 of the Bankruptcy Code will
discharge, release, or relieve the Debtors or any other parties, in any capacity, from any liability
with respect to the Pension Plans under any law, governmental policy, or regulatory provision.
Neither the PBGC nor the Pension Plans shall be enjoined from enforcing such liability as a
result of the Plan’s provisions relating to satisfaction, release and discharge of Claims.

        The PBGC believes that the Pension Plans are underfunded on a termination basis in the
amount of $215,100,000 for the Ormet Corporation Plan, $4,800,000 for the Jackson Hourly
Plan and $400,000 for the Iuka Hourly Plan. An underfunded pension plan can terminate only
by either a distressed termination or a PBGC-initiated termination under Title IV of ERISA.
Should the Pension Plans be terminated under either of these scenarios, the PBGC could assert
claims for the underfunding against the Debtors for any unpaid minimum funding contributions
owed the Pension Plans, and for any unpaid premiums owed to the PBGC. The PBGC believes
that a portion of those claims would be entitled to priority under the Bankruptcy Code.

        5.     Retiree Benefits

        Pursuant to section 1114 of the Bankruptcy Code, payments, if any, due to any person for
the purpose of providing or reimbursing payments for retired employees and their spouses and
dependents for medical, surgical, or hospital care benefits, or benefits in the event of sickness,
accident, disability or death under any plan, fund or program (through the purchase of insurance
or otherwise) maintained or established in whole or in part by the Debtors prior to the
Commencement Date shall be continued for the duration of the period the Debtors have
obligated themselves to provide such benefits; provided, however, that the Reorganized Debtors
reserve the right to modify any and all such plans, funds and programs in accordance with the
terms thereof and applicable law. In furtherance of the restructuring, and in an effort to reduce
and control overall costs associated with the continuing operations of the Debtors’ businesses,
the Debtors intend to modify certain retiree health benefits commencing January 1, 2005 to
achieve annual cost savings of approximately $7 million. These modifications will require
retirees to pay a portion of the monthly premiums associated with their health care benefits, and
may (in some instances) require a change in health care providers.




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E.      Partial Consolidation of Ormet and the Subsidiaries Other than Formcast

        1.      Partial Substantive Consolidation Treatment

        Substantive consolidation is an equitable remedy which a bankruptcy court may be asked to
apply in chapter 11 cases involving affiliated debtors. Substantive consolidation involves the
pooling and merging of the assets and liabilities of the affected debtors. All of the debtors in a
substantively consolidated group are treated as if they were a single corporate and economic
entity. Consequently, a creditor of one substantively consolidated debtor is treated as a creditor
of a substantively consolidated group of debtors and issues of individual corporate ownership of
property and individual corporate liability on obligations are ignored.

        Substantive consolidation of two or more debtors’ estates generally results in the deemed
consolidation of the assets and liabilities of such debtors, the deemed elimination of
intercompany claims, subsidiary equity or ownership interests, multiple and duplicative creditor
claims, joint and several liability claims and guarantees, and the payment of allowed claims from a
common fund.

        Other than Claims against Formcast, entry of the Confirmation Order shall constitute the
approval, pursuant to sections 105(a) and 1123(a)(5)(C) of the Bankruptcy Code, effective as of
the Effective Date, of the substantive consolidation of the Debtors for all purposes related to the
Plan, including for purposes of voting, confirmation and distribution. Pursuant to such order, (i)
no distributions shall be made under the Plan on account of Intercompany Claims between or
among the Debtors, (ii) no distributions shall be made under the Plan on account of Subsidiary
Equity Interests, (iii) all guarantees of any Debtors of the obligation of any other Debtors shall be
deemed eliminated so that any claim against any Debtor and any guarantee thereof by any other
Debtor and any joint or several liability of any of the Debtors shall be deemed one obligation of
the consolidated Debtors, (iv) each and every Claim filed or to be filed in the Chapter 11 Case of
any Debtor shall be deemed filed against the consolidated Debtors (excluding Formcast), and
shall be deemed one Claim against and obligation of the consolidated Debtors, and (v) all
duplicative claims (identical in both amount and subject matter) filed against more than one of
the Debtors (excluding Formcast) shall be automatically expunged so that only one Claim
survives against the consolidated Debtors (excluding Formcast) but in no way should such Claim
be deemed Allowed by reason of Section 7.1 of the Plan, provided, however, that any Claim of
Formcast against any of the other Debtors shall not be included as an Intercompany Claim, shall
be cancelled on the Effective Date and shall receive no distribution under the Plan. Such partial
substantive consolidation treatment shall not affect (i) the separate legal status and corporate
structures of the Reorganized Debtors to effect restructurings as provided in the Plan, (ii)
Intercompany Claims by and among the Debtors or Reorganized Debtors (excluding Formcast),
(iii) Subsidiary Equity Interests, (iv) any defenses to any Causes of Action or requirements for
any third party to establish mutuality in order to assert a right of setoff, or (v) distributions out of
any insurance policies or proceeds of such policies.

        2.      Merger or Dissolution of Corporate Entities

       On or as of the Effective Date, as determined by the New Board of Directors and the
applicable Reorganized Debtor, each Subsidiary may be merged into another of the Debtors or


NY1:1514179                                       70
Reorganized Debtors or dissolved. On or as of the Effective Date, Formcast shall be dissolved.
Upon the occurrence of any such merger, all assets of the merged entities shall be transferred to
and become the assets of the surviving corporation, and all liabilities of the merged entities,
except to the extent discharged, released or extinguished pursuant to the Plan and the
Confirmation Order, shall be assumed by and shall become the liabilities of the surviving
corporation. All mergers and dissolutions on or prior to the Effective Date shall be effective as
of the Effective Date pursuant to the Confirmation Order, without the taking of any further action
by the stockholders or directors of any of the Debtors, the Debtors in Possession or the
Reorganized Debtors.

F.      Provisions Regarding Corporate Governance and Management of the Reorganized
        Debtors

        On the Effective Date, the management, control and operation of the Reorganized
Debtors shall become the general responsibility of the respective boards of directors of the
Reorganized Debtors, which shall, thereafter, have the responsibility for the management,
control and operation of the Reorganized Debtors.

        1.     Meetings of Stockholders

        In accordance with the Amended Reorganized Parent Certificate of Incorporation and the
Amended Reorganized Parent Bylaws, as the same may be amended from time to time, the first
annual meeting of the stockholders of Reorganized Parent shall be held on a date in 2005
selected by the New Board of Directors.

        2.     Bylaws and Certificates of Incorporation

        On the Effective Date, the adoption of the Amended Reorganized Parent Certificate of
Incorporation, the Amended Reorganized Parent Bylaws, Amended Reorganized Subsidiaries
Certificates of Incorporation, and the Amended Reorganized Subsidiaries Bylaws shall be
authorized and approved in all respects to be effective as of the Effective Date, in each case
without further action under applicable law, regulation, order, or rule, and including without any
further action by the stockholders or directors of the Debtors, the Debtors in Possession or the
Reorganized Debtors. The Reorganized Certificate of Incorporation and the certificates of
incorporation of each of the Reorganized Subsidiaries shall prohibit the issuance of nonvoting
equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further
amendment of such certificates of incorporation as permitted by applicable law and the
applicable organizational documents. The Amended Reorganized Parent Bylaws shall include
the corporate governance provisions set forth in Section 8.4 of the Plan, and the Amended
Reorganized Subsidiaries Bylaws shall include provisions enabling the application of the
corporate governance provisions set forth in Section 8.4 of the Plan to such Reorganized
Debtors. In addition, the Amended Reorganized Parent Bylaws shall include provisions to
permit the terminations as described in Section 8.8 of the Plan of officers under certain
circumstances, including the termination of officers of the Reorganized Subsidiaries. Any
amendments, modifications or supplements to the bylaws of any Reorganized Debtor shall be
subject to the consent of MatlinPatterson and the vote of the majority of the Non-MatlinPatterson
Board Designees.


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        3.     Boards of Directors

               (a)       Selection of Board Members

        In accordance with the Reorganized Parent Certificate of Incorporation and the
Shareholders Agreement, as of the Effective Date, the New Board of Directors shall initially be
comprised of seven (7) members, three (3) of whom shall be designated by MatlinPatterson,
three (3) of whom shall be designated by the Creditors’ Committee and one (1) of whom shall be
the chief executive officer of the Reorganized Parent, in each case until their respective
resignations or removal in accordance with applicable law, the applicable organizational
documents, the New Term Note Facility and the Shareholders Agreement, and subject to the
rights of MatlinPatterson to appoint a replacement director for one of the Non-MatlinPatterson
Board Designees under certain circumstances as set forth in the New Term Note Facility and the
Shareholders Agreement, provided that the replaced director shall be determined by the Non-
MatlinPatterson Board Designees. A schedule setting forth the identities of the New Board of
Directors shall be filed on or before the date of the Confirmation Hearing. For so long as
MatlinPatterson is the beneficial owner (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of at least 25% of the outstanding New Common Stock,
MatlinPatterson shall continue to have the right to designate a number of directors which,
together with the chief executive officer, shall constitute a majority of the New Board of
Directors. Any amendments, modifications or supplements to the bylaws of any Reorganized
Debtor shall be subject to the consent of MatlinPatterson and the vote of the majority of the Non-
MatlinPatterson Board Designees. The New Board of Directors shall, and shall cause each of the
Reorganized Subsidiaries to, comply with the corporate governance provisions set forth in
Section 8.4 of the Plan. Elections, removal and terms of directors will be in accordance with
standard Delaware General Corporate Law, provided that only the Non-MatlinPatterson Board
Designees will be entitled to remove and replace their successors for so long as the supermajority
vote provisions described in Section 8.4(c) of the Plan remain in effect.

               (b)       Reorganized Subsidiaries

       The initial boards of directors for each of the Reorganized Subsidiaries shall be selected
by the New Board of Directors.

               (c)       Corporate Governance

       The business and affairs of Reorganized Parent and the other Reorganized Debtors shall
be managed by majority vote of the New Board of Directors; provided that authorization of the
following issues shall require a Supermajority Vote of the New Board of Directors:

                     •   Any decision by the Reorganized Debtors to make capital expenditures
                         (not included pot relining costs) in excess of $20 million in 2005 or in
                         excess of $10 million in each of 2006 and 2007; provided however that all
                         permitted capital expenditures under these limits shall be used for
                         integrity, safety and environmental projects; provided further that the
                         Committee shall have the right to engage a consultant, at the Debtors’
                         expense, to review the Debtors’ capital expenditures plan before



NY1:1514179                                      72
                       confirmation of the Plan and reserves its right to modify its position on
                       this issue based on the consultant’s report and the Company’s reply to
                       such report;

                   •   Acquisitions in excess of $5 million in aggregate consideration;

                   •   Material amendments of the New Term Notes;

                   •   Material amendments of employment agreements with any of the
                       Reorganized Debtors’ senior management team or Management Incentive
                       Plans;

                   •   Transactions with Affiliates;

                   •   Entry into hedging agreements requiring cash reserves or the issuance of
                       letters of credit that exceed, in the aggregate, $5 million;

                   •   Amendment, modification or refinancing of the New Working Capital
                       Facility, the result of which would be to have a material adverse effect on
                       the Reorganized Debtors’ net borrowing availability and the Reorganized
                       Debtors’ ability to pay cash interest on the New Term Notes; and

                   •   Amendments to the Amended Reorganized Parent Bylaws or the
                       Amended Reorganized Subsidiaries Bylaws;

        provided, further, that such restrictions shall expire upon the earliest of (1) two and one
        half (2 ½ ) years after the Effective Date, (2) a Qualified Offering,(3) a change of control
        transaction, provided that control of the board of directors of the resulting entity is not
        possessed by any holder(s) of New Term Notes, (4) a shareholder holds 90% or more of
        the New Common Stock, or (5) such other events as may be agreed by the Debtors, the
        Creditors’ Committee and MatlinPatterson. These matters of corporate governance shall
        be included in the Amended Reorganized Parent Bylaws and the Shareholders
        Agreement, which agreement shall contain terms and conditions substantially as set forth
        on Exhibit E annexed hereto. Notwithstanding the foregoing, a Non-MatlinPatterson
        Board Designee shall remain on the New Board of Directors consistent with the
        Reorganized Parent’s requirement to report pursuant to Rule 15c2-11 and the
        enforcement rights contained in Section 8.8 of the Plan.

        4.     Officers

        The officers of the respective Debtors immediately prior to the Effective Date shall serve
as the initial officers of the respective Reorganized Debtors on and after the Effective Date and
in accordance with any employment agreement with the Reorganized Debtors, the applicable
organizational documents, the Shareholders Agreement and applicable nonbankruptcy law.
After the Effective Date, the officers of the respective Reorganized Debtors shall be determined
by their respective new boards of directors, in each case until their respective resignations or




NY1:1514179                                      73
removal in accordance with applicable law, the applicable organizational documents and the
Shareholders Agreement.

        5.      Authorization of New Securities

       Without the need for any further corporate action and pursuant to section 303 of the
Delaware General Corporation Law, Reorganized Parent shall be authorized to issue 5,000,000
shares of the New Common Stock (including the issuance of any equity interests specified in the
Management Incentive Plan) and the New Term Notes.

        6.      Issuance of New Securities

        The issuance and distribution of approximately 1,000,000 shares of New Common Stock
and the New Term Notes by Reorganized Parent is hereby authorized and directed without the
need for any further corporate act or action under applicable law, regulation, order or rule, and
without any further action by the stockholders or directors of the Debtors, the Debtors in
Possession or the Reorganized Debtors. The Confirmation Order shall provide that the issuance
of New Common Stock and New Term Notes on account of Claims shall be exempt from the
registration requirements of the Securities Act to the extent provided by section 1145 of the
Bankruptcy Code.

        Because the holders of (old debt claims and general unsecured claims in classes 4 and 5,
respectively), will receive New Common Stock pursuant to the Plan, you should be aware that
Section 1145 of the Bankruptcy Code provides certain exemptions from the securities
registration requirements of federal and state securities laws with respect to the distribution of
securities under a Plan.

        Issuance and Resale of Plan Securities. Under Section 1145(a) of the Bankruptcy Code,
the issuance of the New Common Stock and the subsequent resale of such securities by entities
which are not “underwriters” (as defined in Section 1145(b) of the Bankruptcy Code), are not
subject to the registration requirements of Section 5 of the Securities Act. In addition, such
securities generally may be resold without registration under state securities or “blue sky” laws
pursuant to various exemptions provided by the respective laws of the several states. However,
recipients of securities issued under the Plan are advised to consult with their own legal advisors
as to the availability of any such exemption from registration under state law in any given
instance and as to any applicable requirements or conditions to such availability.

        Section 1145(b)(1) of the Bankruptcy Code defines “underwriter” for purposes of the
Securities Act as one who, except with respect to “ordinary trading transactions” of an entity that
is not an “issuer”, (A) purchases a claim against, equity interest in, or claim for an administrative
expense, with a view to distribution of any security to be received in exchange for the claim or
equity interest, or (B) offers to sell securities issued under a plan to the holders of such securities,
or (C) offers to buy securities issued under a plan from the holders of such securities, if the offer
to buy is made with a view to distribution of such securities and under an agreement made in
connection with the plan, the consummation of the plan, or the offer or sale of securities under
the plan, or (D) is an issuer of the securities within the meaning of Section 2(11) of the Securities
Act.



NY1:1514179                                       74
        The term “issuer” is defined in Section 2(4) of the Securities Act; however, the reference
contained in Section 1145(b)(1)(D) of the Bankruptcy Code to Section 2(11) of the Securities
Act purports to include as statutory underwriters 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. “Control” (as defined in Rule 405 under the Securities Act) means the
possession, direct or indirect, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by contract or
otherwise. Accordingly, an officer or director of a reorganized debtor or its successor under a
Plan may be deemed to be a “control person” of such debtor or successor, particularly if the
management position or directorship is coupled with ownership of a significant percentage of the
reorganized debtor’s or its successor’s voting securities. Moreover, the legislative history of
Section 1145 of the Bankruptcy Code suggests that a creditor who owns ten percent or more of
the securities of a reorganized debtor may be presumed to be a “control person.”

        To the extent that persons deemed to be “underwriters” receive New Common Stock
pursuant to the Plan, resales by such persons would not be exempted by Section 1145 of the
Bankruptcy Code from registration under the Securities Act or other applicable law. Persons
deemed to be “underwriters” for purposes of Section 1145 of the Bankruptcy Code may,
however, be able to sell securities pursuant to a registration statement (see discussion of
registration rights below) or, under certain conditions described below, without registration
pursuant to the resale provisions of Rule 144 under the Securities Act or any other exemption
from registration requirements.

        Pursuant to Rule 144 under the Securities Act, “affiliates” of the issuer who resell
securities which are not restricted, will be deemed not to be engaged in a distribution of such
securities and therefore not to be “underwriters” of such securities as defined in Section 2(11) of
the Securities Act, if they comply with certain conditions including, in general terms: (a) the
availability of adequate current public information with respect to the issuer, (b) limiting the
amount of securities sold within any three-month period to the greater of one percent of the
shares outstanding or the average weekly trading volume and (c) selling the securities only
through “brokers’ transactions”.

        Certificates evidencing shares of the New Common Stock or the New Term Notes that
are received by holders of ten percent (10%) or more of the outstanding New Common Stock
calculated on a fully diluted basis or by holders that are otherwise “underwriters” within the
meaning of section 1145(b) of the Bankruptcy Code with respect to the securities will bear a
legend substantially in the form below:

        THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
        ORIGINALLY ISSUED ON [__________], 2004 PURSUANT TO THE
        JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE
        BANKRUPTCY         CODE   OF  ORMET    CORPORATION    (THE
        “COMPANY”) AND CERTAIN OF ITS SUBSIDIARIES, DATED AS OF
        [__________], 2004 AND CONFIRMED BY THE BANKRUPTCY COURT
        FOR THE SOUTHERN DISTRICT OF OHIO, EASTERN DIVISION, ON
        [__________], 2004. THESE SECURITIES WERE ISSUED PURSUANT
        TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF


NY1:1514179                                     75
        SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED, (THE
        “ACT”) PROVIDED BY SECTION 1145 OF THE BANKRUPTCY CODE,
        11 U.S.C. § 1145, AND HAVE NOT BEEN REGISTERED UNDER THE
        ACT, AND TO THE EXTENT THAT THE HOLDER OF THESE
        SECURITIES IS AN “UNDERWRITER” AS DEFINED IN SECTION
        1145(b)(1) OF THE BANKRUPTCY CODE, THESE SECURITIES MAY
        NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
        EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
        EXEMPTION FROM REGISTRATION THEREUNDER

        Any holder that would receive legended securities as provided above may instead receive
certificates evidencing New Common Stock or New Term Notes, as applicable, without such
legend if, prior to the Effective Date, such entity delivers to the Reorganized Debtors (i) an
opinion of counsel reasonably satisfactory to the Reorganized Debtors and the New Board of
Directors to the effect that the shares of New Common Stock or New Term Notes to be received
by such entity should not be subject to the restrictions applicable to “underwriters” under section
1145(b) of the Bankruptcy Code and may be sold, free of any volume limitations imposed by
Rule 144 under the Securities Act, without registration under the Securities Act and (ii) a
certification that it is not an “underwriter” within the meaning of section 1145(b) of the
Bankruptcy Code. Any holder receiving securities so legended may subsequently deliver the
opinion and certification referred to in (i) and (ii) above and the Reorganized Debtors will
remove such legend from all such certificates held by such holder.

      All certificates evidencing shares of New Common Stock that are received by holders of
Allowed Claims will bear a legend substantially in the form below:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT DATED
AS OF [ ], 2004, AS AMENDED FROM TIME TO TIME, TO WHICH ORMET
CORPORATION IS A PARTY, A COPY OF WHICH IS ON FILE AT THE OFFICES
OF THE ORMET CORPORATION AND MAY BE OBTAINED ON REQUEST.

        Subsequent Transfers Under State Law. The state securities laws generally provide
registration exemptions for subsequent transfers by a bona fide owner for his or her own account
and subsequent transfers to institutional or accredited investors. Such exemptions are generally
expected to be available for subsequent transfers of New Common Stock.

       Any person intending to rely on these exemptions is urged to consult his or her own
counsel as to their applicability to his or her circumstances.

        7.     Management Incentive Plan

        The Management Incentive Plan will become effective on the Effective Date or as soon
thereafter as is reasonably practicable and shall be in substantially in the form included in the
Plan Supplement, which form shall be reasonably acceptable to MatlinPatterson and the
Creditors’ Committee, with any grants, options or other consideration thereunder being subject to




NY1:1514179                                     76
approval of the New Board of Directors. Entry of the Confirmation Order shall constitute such
approval of the Management Incentive Plan.

G.      Implementation and Effect of Confirmation of the Plan

       Upon confirmation of the Plan, in accordance with the Confirmation Order, the Debtors
or Reorganized Debtors, as the case may be, will be authorized to take all necessary steps, and
perform all necessary acts, to consummate the terms and conditions of the Plan and the
Commitment Agreement. In addition to the provisions set forth elsewhere in the Plan, the
following shall constitute the means for implementation of the Plan.

        1.     Effectiveness of Securities, Instruments and Agreements

        On the Effective Date, all documents described in the Plan Supplement and all other
agreements entered into or documents issued pursuant to the Plan, including, without limitation,
the Commitment Agreement, the New Working Capital Facility, the New Common Stock, the
New Term Notes, the New Term Note Facility, the Shareholders Agreement, the Management
Incentive Plan and/or any agreement entered into or instrument or document issued in connection
with any of the foregoing, as applicable, shall become effective and binding upon the parties
thereto in accordance with their respective terms and conditions and shall be deemed to become
effective simultaneously.

        2.     Corporate Action

        On the Effective Date, all matters provided for under the Plan that would otherwise
require approval of the stockholders, directors or members of one or more of the Debtors or
Reorganized Debtors or their successors in interest under the Plan, including, without limitation,
the authorization to issue or cause to be issued the New Common Stock and documents relating
thereto, the New Working Capital Facility and documents relating thereto, the New Term Note
Facility and documents relating thereto, the adoption of the Amended Reorganized Parent
Certificate of Incorporation, the Amended Reorganized Parent Bylaws, the Amended
Reorganized Subsidiaries Certificates of Incorporation and the Amended Reorganized
Subsidiaries Bylaws, corporate mergers or dissolutions effectuated pursuant to the Plan, and the
election or appointment, as the case may be, of directors and officers of the Debtors pursuant to
the Plan, shall be deemed to have occurred and shall be in full force and effect from and after the
Effective Date pursuant to section 303 of the General Corporation Law of the State of Delaware
and other applicable general corporation law of the jurisdictions in which the Reorganized
Subsidiaries are incorporated, without any requirement of further action by the stockholders or
directors of the Debtors or Reorganized Debtors. On the Effective Date or as soon thereafter as
is practicable, the Reorganized Debtors shall, if required, file their amended certificates of
incorporation with the secretary of state of the state in which each Reorganized Debtor is
incorporated, in accordance with the applicable general corporation law of such states.

        3.     Approval of Agreements

       The solicitation of votes on the Plan shall be deemed a solicitation for the approval of the
Plan Documents and all transactions contemplated by the Plan. Entry of the Confirmation Order



NY1:1514179                                     77
shall constitute approval of the Plan Documents and all such transactions, subject to the
occurrence of the Effective Date.

        4.     Cancellation of Existing Securities and Agreements

        On the Effective Date, the Old Notes and the Old Term Loans shall be canceled and
extinguished, and the holders thereof shall not retain any rights thereunder and such instruments
shall evidence no rights, except the right to receive the distributions, if any, to be made to holders
of such instruments pursuant to the Plan. Except with respect to the performance by the Old
Indenture Trustee and the Old Term Loan Agent (or their respective agents) of their obligations
under the Plan or in connection with any distribution to be made under the Plan, effective as of
the Effective Date, the Old Indenture Trustee and the Old Term Loan Agent (and their respective
agents, successors and assigns) shall be discharged of all of their obligations.

        5.     No Change of Control

        Any acceleration, vesting or similar change of control rights of any Person under
employment, benefit or other arrangements with the Debtors that could otherwise be triggered by
the entry of the Confirmation Order or the consummation of the Plan or any of the transactions
contemplated thereby shall be deemed to be waived and of no force or effect.

        6.     Restructuring Transactions

         On and after the Effective Date, the applicable Reorganized Debtors may enter into such
transactions and may take such actions as may be necessary or appropriate to effect a corporate
restructuring of their respective businesses, to otherwise simplify the overall corporate structure
of the Reorganized Debtors, or to reincorporate certain of the Reorganized Subsidiaries under the
laws of jurisdictions other than the laws of which the applicable Reorganized Subsidiaries are
presently incorporated, in each case subject to the terms, conditions and restrictions set forth in
the Bylaws of, or otherwise applicable to, each of the Reorganized Debtors, and/or the
Shareholders Agreement. Such restructuring may include one or more mergers, consolidations,
restructures, dispositions, liquidations, or dissolutions, as may be determined by the Debtors or
the Reorganized Debtors to be necessary or appropriate (collectively, the “Restructuring
Transactions”). The actions to effect the Restructuring Transactions may include: (i) the
execution and delivery of appropriate agreements or other documents of merger, consolidation,
restructuring, disposition, liquidation, or dissolution containing terms that are consistent with the
terms of the Plan and that satisfy the applicable requirements of applicable state law and such
other terms to which the applicable entities may agree; (ii) the execution and delivery of
appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property,
right, liability, duty, or obligation on terms consistent with the terms of the Plan and having such
other terms to which the applicable entities may agree; (iii) the filing of appropriate certificates
or articles of merger, consolidation, or dissolution pursuant to applicable state law; and (iv) all
other actions that the applicable entities determine to be necessary or appropriate, including
making filings or recordings that may be required by applicable state law in connection with
such transactions. The Restructuring Transactions may include one or more mergers,
consolidations, restructures, dispositions, liquidations, or dissolutions, as may be determined by
the Reorganized Debtors to be necessary or appropriate to result in substantially all of the


NY1:1514179                                      78
respective assets, properties, rights, liabilities, duties, and obligations of certain of the
Reorganized Debtors vesting in one or more surviving, resulting or acquiring corporations. In
each case in which the surviving, resulting, or acquiring corporation in any such transaction is a
successor to a Reorganized Debtor, such surviving, resulting, or acquiring corporation will
perform the obligations of the applicable Reorganized Debtor pursuant to the Plan to pay or
otherwise satisfy the Allowed Claims against such Reorganized Debtor, except as provided in
any contract, instrument, or other agreement or document effecting a disposition to such
surviving, resulting, or acquiring corporation, which may provide that another Reorganized
Debtor will perform such obligations. Notwithstanding anything in the Plan to the contrary, any
Restructuring Transaction as contemplated by the Plan shall be subject to the restrictions and/or
the provisions in Section 8.4 and 8.8 of the Plan.

        7.     Termination of DIP Agreements

        On the Effective Date, upon the payment and satisfaction of all obligations incurred
under or pursuant to the DIP Senior Credit Facility and DIP Term Loan Agreement as provided
in Section 2.1 of the Plan, the DIP Senior Credit Facility and DIP Term Loan Agreement shall be
deemed terminated. Upon payment and satisfaction in full of all obligations under or pursuant to
the DIP Senior Credit Facility and DIP Term Loan Agreement, all Liens and security interests
granted to secure such obligations shall be deemed terminated and of no further force or effect.

        8.     Cancellation of Old Parent Equity Interests

        On the Effective Date, all Equity Interests, other than the Subsidiary Equity Interests,
shall be cancelled and extinguished, and the holders thereof shall not retain any rights thereunder
and such Equity Interests shall evidence no rights.

        9.     New Common Stock and New Term Notes

       The New Common Stock shall have such rights with respect to dividends, liquidation,
voting and other matters as are provided for by applicable nonbankruptcy law or in the Amended
Reorganized Parent Certificate of Incorporation. The New Term Notes shall have such rights as
are provided for therein and in the New Term Note Facility.

        10.    Shareholders Agreement

         The Reorganized Debtors and each holder of an Allowed Claim who, after giving effect
to the issuance of the New Common Stock pursuant to the Plan would hold five percent (5%) or
more of the New Common Stock, will enter into the Shareholders Agreement as of the Effective
Date. All other holders of Allowed Claims receiving New Common Stock pursuant to the Plan
shall be deemed to be parties to the Shareholders’ Agreement to the extent enforceable under
applicable law, and shall be intended third party beneficiaries of the Shareholders Agreement to
the extent set forth therein. Notwithstanding the foregoing, in order for a holder of New
Common Stock to be the beneficiary of the Tag Along Rights and Drag Along Rights set forth in
the Shareholders Agreement, such holder must execute a counterpart signature page to the
Shareholders Agreement and deliver such signature page to the Reorganized Parent. Signature
pages may be obtained from the Reorganized Parent at the address for giving notices set forth in
the Plan.


NY1:1514179                                     79
        11.    Operation of the Debtors in Possession Between the Confirmation Date and
               the Effective Date

       The Debtors shall continue to operate as debtors in possession in the ordinary course,
consistent with past practice and the terms of the Commitment Agreement, subject to the
supervision of the Bankruptcy Court and pursuant to the Bankruptcy Code and the Bankruptcy
Rules during the period from the Confirmation Date through and until the Effective Date, and
any obligation incurred by the Debtors in Possession during that period shall constitute an
Administrative Expense Claim.

        12.    Administration After the Effective Date

        After the Effective Date, the Reorganized Debtors may operate their businesses, and may
use, acquire, and dispose of their property, free of any restrictions of the Bankruptcy Code and
Bankruptcy Rules.

        13.    Term of Bankruptcy Injunction or Stays

        All injunctions or stays provided for in the Chapter 11 Cases under sections 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.

        14.    Revesting of Assets

       The property of the Estate of each of the Debtors, including, without limitation, the
Causes of Action listed on Schedule 9.16 to the Plan Supplement, shall revest in the respective
Reorganized Debtor on the Effective Date.

        As of the Effective Date, pursuant to section 1141 of the Bankruptcy Code, all property
of the Debtors and Reorganized Debtors shall be free and clear of all Liens, Claims and interests
of holders of Claims and Equity Interests, except as otherwise provided in the Plan or the
Confirmation Order.

        15.    Causes of Action

        As of the Effective Date, pursuant to section 1123(b)(3)(B) of the Bankruptcy Code, any
and all Causes of Action accruing to the Debtors and Debtors in Possession, including, without
limitation, actions under sections 510, 542, 544, 545, 547, 548, 549, 550, 551 and 553 of the
Bankruptcy Code, shall become assets of the Reorganized Debtors, and the Reorganized Debtors
shall have the authority to commence and prosecute such Causes of Action for the benefit of the
Estates of the Debtors; provided however, that the Debtors and the Reorganized Debtors shall be
deemed to have waived any such actions as described above against MatlinPatterson and its
Affiliates (including, without limitation, avoidance or recovery actions). Specifically, the
Reorganized Debtors shall continue to prosecute any cause of action pending on the Effective
Date. Further, Section 547 of the Bankruptcy Code enables a debtor in possession to avoid
transfers to a creditor, based upon an antecedent debt, made within ninety (90) days of the
petition date, which enables the creditor to receive more than it would under a liquidation.
Creditors have defenses to the avoidance of such preferential transfers based upon, among other


NY1:1514179                                    80
things, the transfers having occurred as part of the debtor’s ordinary course of business, or that
subsequent to the transfer the creditor provided the debtor with new value. The Reorganized
Debtors will analyze payments made by the Debtors to creditors within ninety (90) days (or in
the case of insiders, one year) before the Commencement Date (as set forth in item 3(a) in each
of the Debtors Statement of Financial Affairs) to determine which such payments may be
avoidable as preferential transfers under the Bankruptcy Code and, if appropriate, prosecute such
actions.

        After the Effective Date, the Reorganized Debtors shall have the authority to compromise
and settle, otherwise resolve, discontinue, abandon or dismiss all such Causes of Action without
approval of the Bankruptcy Court.

        16.    Discharge of Debtors

        The rights afforded herein and the treatment of all Claims and Equity Interests herein
shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity
Interests of any nature whatsoever, including any interest accrued on such Claims from and after
the Commencement Date, against the Debtors and the Debtors in Possession, their Estates, or
any of their assets or properties under the Plan. Except as otherwise provided herein, (i) on the
Effective Date, all such Claims against and Equity Interests in the Debtors shall be satisfied,
discharged and released in full, and (ii) all Persons shall be precluded and enjoined from
asserting against the Reorganized Debtors, their successors, or their assets or properties any other
or further Claims or Equity Interests based upon any act or omission, transaction or other activity
of any kind or nature that occurred prior to the Confirmation Date, whether or not such holder
has filed a proof of Claim or proof of Equity Interest and whether or not such holder has voted to
accept or reject the Plan. Notwithstanding the foregoing, nothing in the Plan shall release,
discharge, enjoin or preclude any Claim that has not arisen as of the Effective Date that any
governmental unit may have against the Debtors and nothing in the Plan shall release, nullify or
enjoin the enforcement of any liability to a governmental unit under environmental statutes or
regulations that any entity would be subject to as the owner or operator of property after the date
of entry of the Confirmation Order.

        17.    Injunction Related to Discharge

        Except as otherwise expressly provided in the Plan, the Confirmation Order or a separate
order of the Bankruptcy Court, all Persons who have held, hold or may hold Claims against or
Equity Interests in any or all of the Debtors, are permanently enjoined, on and after the Effective
Date, from (i) commencing or continuing in any manner any action or other proceeding of any
kind with respect to any such Claim or Equity Interest, (ii) enforcing, attaching, collecting or
recovering by any manner or means of any judgment, award, decree or order against the Debtors
on account of any such Claim or Equity Interest, (iii) creating, perfecting or enforcing any Lien
or asserting control of any kind against the Debtors or against the property or interests in
property of the Debtors on account of any such Claim or Equity Interest and (iv) asserting any
right of setoff, subrogation or recoupment of any kind against any obligation due from the
Debtors or against the property or interests in property of the Debtors on account of any such
Claim or Equity Interest. Such injunctions shall extend to successors of the Debtors (including,



NY1:1514179                                     81
without limitation, the Reorganized Debtors) and their respective properties and interests in
property.

        18.    Injunction Against Interference with the Plan

        Upon the entry of a Confirmation Order with respect to the Plan, all holders of Claims
and Equity Interests and other parties in interest, along with their respective present or former
employees, agents, officers, directors, or principals, shall be enjoined from taking any actions to
interfere with the implementation or consummation of the Plan, except with respect to actions
any such entity may take in connection with the pursuit of appellate rights.

        19.    New Working Capital Facility

        On the Effective Date, the transactions contemplated by the New Working Capital
Facility shall be consummated and thereupon become effective.

        20.    The New Term Notes

       On the Effective Date, the issuance of the New Term Notes, on terms and conditions
substantially similar to those set forth on Exhibit F annexed hereto, by Reorganized Parent to
MatlinPatterson shall be consummated in accordance with the terms of the Commitment
Agreement.

H.      Confirmation and Effectiveness of the Plan

        1.     Conditions Precedent to Confirmation

       The Plan shall not be confirmed by the Bankruptcy Court unless and until the following
conditions shall have been satisfied or waived pursuant to Section 10.4 of the Plan:

               (a)     The proposed Confirmation Order shall (i) be in form and substance
                       reasonably acceptable to the Debtors, MatlinPatterson and the Creditors’
                       Committee, and (ii) include, among other things, a finding of fact that the
                       Debtors, the Reorganized Debtors, and MatlinPatterson, and their
                       respective present and former members, officers, directors, employees,
                       advisors, attorneys, and agents acted in good faith within the meaning of
                       and with respect to all of the actions described in section 1125(e) of the
                       Bankruptcy Code and are therefore not liable for the violation of any
                       applicable law, rule or regulation governing such actions;

               (b)     All exhibits to the Plan, including those to be contained in the Plan
                       Supplement, shall be in form and substance reasonably acceptable to the
                       Debtors, MatlinPatterson and the Creditors’ Committee;




NY1:1514179                                     82
              (c)     The Debtors shall have (i) entered into new collective bargaining
                      agreements or obtained relief under section 1113 of the Bankruptcy Code
                      or other applicable law, and (ii) implemented certain modifications to their
                      retiree benefits, in each case in form and substance reasonably acceptable
                      to the Debtors, MatlinPatterson and the Creditors’ Committee; and

              (d)     The Debtors shall have received a commitment for the New Working
                      Capital Facility, subject to customary closing conditions, including,
                      without limitation, the occurrence of the Effective Date, from a financial
                      institution, and in form and substance, reasonably acceptable to the
                      Debtors, MatlinPatterson and the Creditors’ Committtee.

        2.    Conditions Precedent to Effectiveness

        The Plan shall not become effective unless and until the following conditions have been
satisfied or waived pursuant to Section 10.4 of the Plan:

              (a)     The Confirmation Order shall have been entered and shall be a Final Order
                      (with no modification or amendment thereof), and there shall be no stay or
                      injunction that would prevent the occurrence of the Effective Date;

              (b)     The Commitment Agreement shall not have been terminated, shall be in
                      full force and effect, and all conditions precedent to the consummation of
                      the transactions contemplated by the Commitment Agreement shall have
                      been satisfied or properly waived;

              (c)     The statutory fees owing to the United States Trustee shall have been paid
                      in full;

              (d)     All Plan Documents and exhibits to the Plan, including those to be
                      contained in the Plan Supplement, shall be in a form and substance
                      satisfactory to the Debtors, MatlinPatterson and the Creditors’ Committee;

              (e)     Each of the Amended Reorganized Parent Certificate of Incorporation, the
                      Amended Reorganized Subsidiaries Certificate of Incorporation, the
                      Amended Reorganized Parent Bylaws, and the Amended Reorganized
                      Subsidiaries Bylaws, shall have been filed, effected, or executed, as
                      required, in form and substance satisfactory to the Debtors,
                      MatlinPatterson and the Creditors’ Committee;

              (f)     All other actions, authorizations, filings consents and regulatory approvals
                      required (if any) shall have been obtained, effected or executed in a
                      manner acceptable to the Debtors and remain in full force and effect or, if
                      waivable, waived by the Person or Persons entitled to the benefit thereof;




NY1:1514179                                    83
               (g)     All amounts owed under the DIP Senior Credit Facility shall have been
                       indefeasibly paid in full in Cash by wire transfer of immediately available
                       funds and the commitments, Liens and security interests granted
                       thereunder terminated;

               (h)     All amounts owed under the DIP Term Loan Agreement shall have been
                       indefeasibly paid in full in Cash by wire transfer of immediately available
                       funds or the issuance of the New Term Notes in accordance with the
                       Commitment Agreement, and the commitments, Liens and security
                       interests granted thereunder terminated;

               (i)     The sum of (x) all Allowed General Unsecured Claims plus (y) all
                       Disputed General Unsecured Claims, as of the Effective Date, shall not
                       exceed $80,000,000; and

               (j)     The New Working Capital Facility shall have been entered into by all
                       parties thereto and all conditions to the initial draw thereunder shall have
                       been satisfied in accordance with the terms thereof such that the
                       Reorganized Debtors shall have credit available to them to provide
                       financing sufficient to meet their Cash obligations under the Plan and have
                       sufficient borrowing capacity to satisfy their working capital requirements
                       as of and after the Effective Date.

        3.     Effect of Failure of Conditions

        If each condition to the Effective Date specified in Section 10.2 of the Plan has not been
satisfied or duly waived within ninety (90) days after the Confirmation Date, then (unless the
period for waiver or satisfaction of such conditions has been extended with the consent of the
Debtors, MatlinPatterson, and the Creditors’ Committee (to the extent that the Creditors’
Committee has such rights to consent in Section 10.4)) upon the filing of a motion by the
Debtors made before the time that all conditions have been satisfied or duly waived, the
Confirmation Order will be vacated by the Bankruptcy Court; provided, however, that
notwithstanding the filing of such a motion, the Confirmation Order shall not be vacated if each
of the conditions to the Effective Date is either satisfied or duly waived before the Court enters
an order granting the relief requested in such motion. If the Confirmation Order is vacated, the
Plan shall be deemed null and void in all respects, including without limitation the discharge of
Claims pursuant to section 1141 of the Bankruptcy Code and the assumptions or rejections of
executory contracts and unexpired leases as provided by the Plan, and nothing contained herein
shall (1) constitute a waiver or release of any Causes of Action by, or Claims against, the
Debtors or (2) prejudice in any manner the rights of the Debtors.

        4.     Waiver of Conditions

        The Debtors may, with the written consent of MatlinPatterson and the Creditors’
Committee, waive one or more of the conditions precedent to confirmation of the Plan set forth
in Section 10.1 of the Plan, or the condition precedent to the effectiveness of the Plan set forth in
Section 10.2(d), 10.2(e) or 10.2(i) of the Plan (provided that with respect to any waiver of the



NY1:1514179                                      84
condition precedent to effectiveness set forth in Section 10.2(i), the consent of the Creditors’
Committee will not be unreasonably withheld). The Debtors, with the written consent of
MatlinPatterson and upon three (3) Business Days prior notice to the Creditors’ Committee, may
waive in writing one or more of the other conditions precedent to effectiveness of the Plan
specified in Section 10.2 of the Plan, without further notice to parties in interest or the
Bankruptcy Court without a prior hearing.

I.      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.      Retention of Jurisdiction

         The Bankruptcy Court shall have exclusive jurisdiction over all matters arising out of,
and related to, the Chapter 11 Cases and the Plan pursuant to, and for the purposes of, sections
105(a) and 1142 of the Bankruptcy Code and for, among other things, the following purposes:
(i) to hear and determine pending applications for the assumption or rejection of executory contracts or
unexpired leases, if any are pending, and the allowance of Claims resulting, therefrom; (ii) to
determine any and all adversary proceedings, motions, applications and contested matters, and other
litigated matters pending on the Confirmation Date; (iii) to hear and determine all actions commenced
or to be commenced by the Debtors or any other party in interest with standing to do so, pursuant to
sections 505, 542, 543, 544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code, collection
matters related thereto, and settlements thereof; (iv) to hear and determine any objections to or the
allowance, classification, priority, compromise, estimation or payments of any Administrative
Expense Claims, Claims or Equity Interests; (v) to ensure that distributions to holders of
Allowed Claims are accomplished as provided in the Plan; (vi) to enter and implement such
orders as may be appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified or vacated; (vii) to issue such orders in aid of execution and consummation of
the Plan, to the extent authorized by section 1142 of the Bankruptcy Code; (viii) to consider any
amendments to or modifications of the Plan, to cure any defect or omission, or to reconcile any
inconsistency in the Plan, the Plan Documents, or any order of the Bankruptcy Court, including,
without limitation, the Confirmation Order; (ix) to hear and determine all applications for
compensation and reimbursement of expenses of Professionals under sections 330, 331, and
503(b) of the Bankruptcy Code; (x) to hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan (other than disputes relating to documents
evidencing the New Working Capital Facility, the New Term Note Facility or any post-Effective
Date issue of corporate governance); (xi) to recover all assets of the Debtors and property of the
Debtors’ Estates, wherever located; (xii) to determine any Claim of or any liability to a
governmental unit that may be asserted as a result of the transactions contemplated herein;
(xiii) to enforce the Plan, the Confirmation Order and any other order, judgment, injunction or
ruling entered or made in the Chapter 11 Cases, including, without limitation, the discharge,
injunction, exculpation and releases provided for in the Plan; (xiv) to take any action and issue
such orders as may be necessary to construe, enforce, implement, execute, and consummate the
Plan or to maintain the integrity of the Plan following consummation; (xv) to hear and determine
matters concerning state, local and federal taxes in accordance with sections 346, 505, and 1146 of
the Bankruptcy Code (including, but not limited to, an expedited determination under section


NY1:1514179                                       85
505(b) of the Bankruptcy Code of the tax liability of the Debtors for all taxable periods through
the Effective Date, and in the event the Restructuring Transactions described in Section 9.7 of
the Plan are implemented, for all taxable periods of Ormet through the liquidation and
dissolution of such entity); (xvi) to hear any other matter not inconsistent with the Bankruptcy
Code; and (xvii) to enter a final decree closing the Chapter 11 Cases; provided however, that
nothing in the Plan shall divest or deprive any other court or agency of any jurisdiction it may
have over the Reorganized Debtors under applicable environmental laws.

        2.     Effectuating Documents and Further Transactions

        Each of the Debtors or Reorganized Debtors, as the case may be, 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 implement, effectuate and further
evidence the terms and conditions of the Plan and any notes or securities issued pursuant to the
Plan.

        3.     Exemption from Transfer Taxes

        Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of
notes or equity securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the making or delivery of
any instrument of transfer under, in furtherance of, or in connection with the Plan, including,
without limitation, any merger agreements or agreements of consolidation, deeds, bills of sale or
assignments executed in connection with any of the transactions contemplated by the Plan, shall
not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.

        4.     Authorization to Request Prompt Tax Determinations

       Reorganized Parent is 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 through the Effective Date.

        5.     Exculpation

        Subject to the occurrence of the Effective Date, neither the Debtors nor the Reorganized
Debtors, the Creditors’ Committee, the DIP Senior Lenders, the DIP Term Loan Lenders, the
DIP Senior Loan Agent, the DIP Term Loan Agent, MatlinPatterson, or any of their respective
members, officers, directors, agents, financial advisors, attorneys, employees, equity holders,
partners, Affiliates and representatives (the “Exculpated Parties”) shall have or incur any liability
to any holder of a Claim or Equity Interest for any act or omission in connection with, related to,
or arising out of, the Chapter 11 Cases, the Commitment Agreement and the Plan, 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, and, with respect to the DIP Senior Lenders, the DIP
Term Loan Lenders, the DIP Senior Loan Agent and the DIP Term Loan Agent (and their
respective members, officers, directors, agents, financial advisors, attorneys, employees, equity
holders, partners, Affiliates and representatives), any act or omission related to the Debtors and
any extensions of credit or other financial services or accommodations made or not made to the
Debtors prior to the Effective Date; provided, that the foregoing shall not operate as a waiver or


NY1:1514179                                      86
release for (i) any express contractual obligation owing by any such Person or (ii) willful
misconduct or gross negligence, and, in all respects, the Exculpated Parties shall be entitled to
rely upon the advice of counsel with respect to their duties and responsibilities under the Plan;
provided further that nothing in the Plan shall, or shall be deemed to, release the Exculpated
Parties, or exculpate the Exculpated Parties with respect to, their respective obligations or
covenants arising pursuant to the Plan; provided further that the foregoing shall not operate as a
waiver or release of Claims by governmental entities arising under environmental laws.

        6.     Releases

        Subject to the occurrence of the Effective Date, on and as of the Effective Date, and in
consideration of: (a) the services provided by the present and former directors, officers,
employees, Affiliates, agents, financial advisors, attorneys, and representatives of the Debtors to
the Debtors who acted in such capacities after the Commencement Date; (b) the services of the
Creditors’ Committee, the DIP Senior Lenders, the DIP Term Loan Lenders, the DIP Senior
Loan Agent, the DIP Term Loan Agent, and their respective professionals in connection with the
Chapter 11 Cases; and (c) the commitment of MatlinPatterson pursuant to the Commitment
Agreement, (x) the Debtors and the Reorganized Debtors; (y) each holder of a Claim or Equity
Interest that votes to accept the Plan (or is deemed to accept the Plan); and (z) to the fullest
extent permissible under applicable law, as such law may be extended or integrated after the
Effective Date, each holder of a Claim or Equity Interest that does not vote to accept the Plan,
shall release unconditionally and forever each present or former director, officer, or employee of
the Debtors, each member of the Creditors’ Committee, the DIP Senior Lenders, the DIP Term
Loan Lenders, the DIP Senior Loan Agent, the DIP Term Loan Agent, MatlinPatterson, and each
of their respective members, officers, directors, agents, financial advisors, attorneys, employees,
equity holders, parent corporations, subsidiaries, partners, Affiliates and representatives from any
and all Causes of Action whatsoever arising on or prior to the Effective Date; provided, however,
that the foregoing shall not operate as a waiver of or release from any Causes of Action arising
out of (i) any express contractual obligation owing by any such Person or (ii) the willful
misconduct or gross negligence of any such Person; provided further that the foregoing shall not
operate as a waiver or release of Claims by governmental entities arising under environmental
laws. The Debtors are not aware of any Causes of Action against any of the parties receiving a
release under the Plan.

        7.     Injunction Relating to Exculpation and Release

         The Confirmation Order will contain an injunction, effective on the Effective Date,
permanently enjoining the commencement or prosecution by the Debtors, the Reorganized
Debtors and any other Person, whether derivatively or otherwise, of any Cause of Action
exculpated, released or discharged pursuant to this Plan against the released and Exculpated
Parties.

        8.     Termination of Creditors’ Committee

        The appointment of the Creditors’ Committee and its professionals shall terminate on the
Effective Date, except (a) for purposes of seeking compensation and reimbursement of expenses
as permitted by Section 2.2 of the Plan, and (b) so long as (i) the sum of (x) all Allowed General


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Unsecured Claims plus (y) all Disputed General Unsecured Claims exceeds $80,000,000, or
(ii) in the event that the condition to effectiveness in Section 10.2(i) of the Plan is waived, for
purposes of participating in the resolution of Disputed General Unsecured Claims.
Notwithstanding the foregoing, the Creditors’ Committee shall have the right to dissolve, amend
its composition (including to reduce the number of members) or designate a subcommittee of the
current Creditors’ Committee to carry out the purposes described in this section.

        9.     Post-Effective Date Fees and Expenses

         From and after the Effective Date, the Reorganized Debtors shall, in the ordinary course
of business and without the necessity for any approval by the Bankruptcy Court, pay the
reasonable fees and expenses of Professional persons thereafter incurred by the Reorganized
Debtors and MatlinPatterson, including, without limitation, those fees and expenses incurred in
connection with the implementation and consummation of the Plan, and the fees and expenses of
the Creditors’ Committee Professionals, so long as (i) the sum of (x) all Allowed General
Unsecured Claims plus (y) all Disputed General Unsecured Claims exceeds $80,000,000, or
(ii) in the event that the condition to effectiveness in Section 10.2(i) of the Plan is waived for
purposes of participating in the resolution of Disputed General Unsecured Claims.

        10.    Payment of Statutory Fees

        The Reorganized Debtors shall be responsible for timely payment of fees incurred
pursuant to 28 U.S.C. § 1930(a)(6). After confirmation, the Reorganized Debtors shall file with
the Bankruptcy Court and serve on the U.S. Trustee a quarterly financial report regarding all
income and disbursements, including all plan payments, for each quarter (or portion thereof) the
cases remain open.

        11.    Amendment or Modification of Plan

        Alterations, amendments or modifications of the Plan may be proposed in writing by the
Debtors, with the consent of the Creditors’ Committee, MatlinPatterson and the DIP Term Loan
Agent which consent shall not be unreasonably withheld, at any time prior to the Confirmation
Date in conformity with section 1127(a) of the Bankruptcy Code, provided that the Plan, as
altered, amended or modified, satisfies the conditions of sections 1122, 1123 and 1129 of the
Bankruptcy Code, and the Debtors shall have complied with section 1125 of the Bankruptcy
Code. The Plan may be altered, amended or modified by the Debtors with the consent of the
Creditors’ Committee, MatlinPatterson and the DIP Term Loan Agent, which consents shall not
be unreasonably withheld, at any time after the Confirmation Date in conformity with section
1127(b) of the Bankruptcy Code, provided that the Plan, as altered, amended or modified,
satisfies the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy
Court, after notice and a hearing, confirms the Plan, as altered, amended or modified, under
section 1129 of the Bankruptcy Code and the circumstances warrant such alterations,
amendments or modifications. A holder of a Claim 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 of such
holder.




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       Prior to the Effective Date, the Debtors may make appropriate technical adjustments and
modifications to the Plan without further order or approval of the Bankruptcy Court.

        12.    Severability

        In the event that the Bankruptcy Court determines, prior to the Confirmation Date, that
any provision in the Plan is invalid, void or unenforceable, such provision shall be invalid, void
or unenforceable with respect to the holder or holders of such Claims or Equity Interests as to
which the provision is determined to be invalid, void or unenforceable. The invalidity, voidness
or unenforceability of any such provision shall in no way limit or affect the enforceability and
operative effect of any other provision of the Plan. The Bankruptcy Court, at the request of the
Debtors, shall 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 shall then be
applicable as altered or interpreted. The Confirmation Order shall constitute a judicial
determination and shall 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.

        13.    Revocation or Withdrawal of the Plan

        The Debtors reserve the right to revoke or withdraw the Plan prior to the Confirmation
Date. If the Debtors revoke or withdraw the Plan prior to the Confirmation Date, then the Plan
shall be deemed null and void. In such event, nothing contained herein shall constitute or be
deemed a waiver or release of any Claims by or against the Debtors or any other Person, an
admission against interests of the Debtors, nor shall it prejudice in any manner the rights of the
Debtors or any Person in any further proceedings involving the Debtors.

        14.    Binding Effect Notices

        The Plan shall be binding upon and inure to the benefit of the Debtors, the holders of
Claims and Equity Interests, and their respective successors and assigns, including, without
limitation, the Reorganized Debtors.

        15.    Notices

        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 in the Plan, 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:

        if to the Debtors or Reorganized Debtors, to:

               Ormet Corporation
               1233 Main Street
               Suite 4000
               Wheeling, West Virginia 26003
               Attn: Chief Executive Officer


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               Telephone:       304-234-3900
               Facsimile:       304-234-3929

        with copies to:

               O’Melveny & Myers LLP
               Times Square Tower
               7 Times Square
               New York, New York 10036
               Attn: Adam Harris
               Telephone:   (212) 326-2000
               Facsimile:   (212) 326-2061

                          and

               Dinsmore & Shohl LLP
               1900 Chemed Center
               255 East Fifth Street
               Cincinnati, Ohio 45202
               Attn: Kim Martin Lewis
               Telephone:     (513) 977-8200
               Facsimile:     (513) 977-8141

        if to MatlinPatterson, to:

               MatlinPatterson Global Advisers LLC
               520 Madison Avenue, 35th Floor
               New York, New York 10022
               Attn: Robert H. Weiss, General Counsel
               Telephone:    (212) 651-9500
               Facsimile:    (212) 651-4011

        with a copy to:

               Linklaters
               1345 Avenue of the Americas
               New York, NY 10105
               Attn: Mark E. Palmer
                      Martin N. Flics
               Telephone:    (212) 424-9000
               Facsimile:    (212) 424-9100

        if to Creditors’ Committee, to:

               McGuireWoods, LLP
               Dominion Tower



NY1:1514179                                    90
               625 Liberty Avenue, 23rd Floor
               Pittsburgh, Pennsylvania 15222
               Attn: Robert Sable
               Telephone:     (412) 667-6000
               Facsimile:     (412) 667-6050

        16.    Governing Law

        Except to the extent the Bankruptcy Code, Bankruptcy Rules or other federal law is
applicable, or to the extent the Plan or any agreement entered into pursuant to the Plan provides
otherwise, the rights and obligations arising under the Plan shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law of such jurisdiction.

        17.    Withholding and Reporting Requirements

        In connection with the consummation of the Plan, the Debtors or 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.

        18.    Plan Supplement

        In addition to Schedule 6.1(e) (cure amounts) and Schedule 9.16 (Causes of Action), the
forms of the Amended Reorganized Parent Certificate of Incorporation, the Amended
Reorganized Subsidiaries Certificates of Incorporation, Amended Reorganized Parent Bylaws,
the Amended Reorganized Subsidiaries Bylaws, the Management Incentive Plan, any
employment agreements entered into with the Debtors’ senior executives, the Shareholders
Agreement and the New Term Note Facility shall be contained in the Plan Supplement, filed
with the Clerk of the Bankruptcy Court and served upon the Office of the United States Trustee,
the Creditors’ Committee and the DIP Term Loan Agent, at least ten (10) days prior to the
Balloting Deadline. Upon filing with the Bankruptcy Court, the Plan Supplement may be
inspected in the office of the Clerk of the Bankruptcy Court during normal court hours. Holders
of Claims or Equity Interests may obtain a copy of the Plan Supplement by written request to
Ormet at the address provided in Section 12.14 of the Plan.

        19.    Section 1125(e) of the Bankruptcy Code

        As of the Confirmation Date, the Debtors, the Creditors’ Committee, and MatlinPatterson
shall be deemed to have solicited acceptances of the Plan in good faith and in compliance with
the applicable provisions of the Bankruptcy Code. As of the Confirmation Date, the Debtors, the
Creditors’ Committee, and the DIP Term Loan Lenders and MatlinPatterson and each of their
respective members, officers, directors, agents, financial advisors, attorneys, employees, equity
holders, partners, Affiliates and representatives shall be deemed to have participated in good
faith and in compliance with the applicable provisions of the Bankruptcy Code in the offer and
issuance of the new securities hereunder, and therefore are not, and on account of such offer,
issuance and solicitation shall not be, liable at any time for the violation of any applicable law,



NY1:1514179                                     91
rule or regulation governing the solicitation of acceptances or rejections hereof or other offer and
issuance of new securities under the Plan.

        20.    Rights of Old Indenture Trustee Under the Old Indenture and Old Term
               Loan Agent and Old Term Loan Collateral Agent Under the Old Term Loan
               Agreement, Respectively

         The Old Indenture Trustee, the Old Term Loan Agent and the Old Term Loan Collateral
Agent shall be entitled to Administrative Expense Claims as provided for in, and subject to the
restrictions of, Section 12.21 of the Plan, and no Reorganized Debtor shall have any obligations
to any indenture trustee, including the Old Indenture Trustee, the Old Term Loan Agent, the Old
Term Loan Collateral Agent, agent or servicer (or to any Disbursing Agent replacing such
indenture trustee, agent or servicer) for any fees, costs or expenses except as expressly set forth
in Section 12.21 of the Plan. Within ten (10) days of the Confirmation Date, the Old Indenture
Trustee, the Old Term Loan Agent and the Old Term Loan Collateral Agent shall provide the
Debtors, the Creditors’ Committee and MatlinPatterson with a statement of the Old Indenture
Trustee’s, the Old Term Loan Agent’s and the Old Term Loan Collateral Agent’s actual
expenses through the Confirmation Date and projected expenses through the Effective Date.
Upon the timely receipt of one or more invoices in accordance with the preceding sentence, the
Reorganized Debtors shall, on the Effective Date, pay the Old Indenture Trustee’s, the Old Term
Loan Agent’s and the Old Term Loan Collateral Agent’s expenses, in full, in Cash.
Notwithstanding the foregoing, to the extent that the Reorganized Debtors dispute any portion of
the Old Indenture Trustee’s, Old Term Loan Agent’s or the Old Term Loan Collateral Agent’s
expenses, the Reorganized Debtors shall reserve Cash on the Effective Date in such disputed
amount and such dispute shall be consensually resolved by the parties or presented to the
Bankruptcy Court for adjudication, provided that the Old Indenture Trustee shall have an
Allowed Administrative Expense Claim in an amount not to exceed $125,000, with the amount
to be specifically determined based on the Old Indenture Trustee’s submission of invoices
pursuant to the terms of this section. On the Effective Date, subject to the payment of the non-
disputed portion of the Old Indenture Trustee’s, the Old Term Loan Agent’s and the Old Term
Loan Collateral Agent’s expenses and the establishment of the reserve set forth in the preceding
sentence with respect to any disputed portion of the Indenture Trustee’s, the Old Term Loan
Agent’s and the Old Term Loan Collateral Agent’s expenses, all Liens of the Indenture Trustee,
the Old Term Loan Agent and the Old Term Loan Collateral Agent in any distributions shall be
forever released and discharged. Once the Old Indenture Trustee, the Old Term Loan Agent and
the Old Term Loan Collateral Agent have completed performance of all of their duties set forth
in the Plan or in connection with any distributions to be made under the Plan, if any, the Old
Indenture Trustee, the Old Term Loan Agent and the Old Term Loan Collateral Agent (and their
respective successors and assigns) shall be relieved of all obligations.

        21.    Filing of Additional Documents

       On or before Substantial Consummation of the Plan, the Debtors shall file with the
Bankruptcy Court such agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan.




NY1:1514179                                     92
        22.    No Admissions

        Notwithstanding anything in the Plan to the contrary, nothing contained in the Plan shall
be deemed as an admission by any Person with respect to any matter set forth in the Plan or
herein.

        23.    Inconsistency

        In the event of any inconsistency between the Plan and the Disclosure Statement, any
Exhibit to the Plan or the Disclosure Statement or any other instrument or document created or
executed pursuant to the Plan, the Plan shall govern. In the event of any inconsistency between
the Plan and any Plan Document or the New Working Capital Facility, the Plan Document or the
New Working Capital Facility, as applicable, shall govern (unless such inconsistency is the result
of any amendment or modification not otherwise permitted or authorized by the Plan). In the
event of any inconsistency between the Plan and the Confirmation Order, the Confirmation
Order shall govern.

        24.    Waiver of Bankruptcy Rule 3020(e) and 7062

       The Debtors may request that the Confirmation Order include (a) a finding that
Bankruptcy Rules 3020(e) and 7062 shall not apply to the Confirmation Order; and (b)
authorization for the Debtors to consummate the Plan immediately after entry of the
Confirmation Order.

        25.    Time

        In computing any period of time prescribed or allowed by the Plan, unless otherwise set
forth herein or determined by the Bankruptcy Court, the provisions of Bankruptcy Rule 9006
shall apply.

        26.    Substantial Consummation

       On the Effective Date, the Plan shall be deemed to be substantially consummated under
sections 1101 and 1127(b) of the Bankruptcy Code.

        27.    Post-Confirmation Conversion/Dismissal

        A creditor or party in interest may bring a motion to convert or dismiss the Chapter 11
Cases under section 1112(b)(7) of the Bankruptcy Code after entry of the Confirmation Order if
there is a default in performing the conditions to effectiveness of the Plan. If the Bankruptcy
Court orders the Chapter 11 Cases converted to chapter 7 after the entry of the Confirmation
Order, this Plan provides that property of the Debtors’ estates that have not been disbursed
pursuant to the provisions herein will revest in the chapter 7 estate and that the automatic stay
will be reimposed upon the revested property to the extent that relief from the stay was not
previously authorized by the Bankruptcy Court during the pendency of the Chapter 11 Cases.
The Confirmation Order may also be revoked under certain limited circumstances. The
Bankruptcy Court may revoke the Confirmation Order if and only if such order was procured by



NY1:1514179                                     93
fraud and if a party in interest brings a motion to revoke such Confirmation Order within 180
days after the entry of the Confirmation Order.

        28.    Final Decree

         Once there has been Substantial Consummation of the Plan, the Reorganized Debtors
shall file a motion with the Bankruptcy Court to obtain a final decree to close the Chapter 11
Cases.

                                     VI.
                    CERTAIN RISK FACTORS TO BE CONSIDERED

     HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE
DEBTORS SHOULD READ AND CONSIDER CAREFULLY THE FACTORS 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. THESE RISK FACTORS SHOULD NOT,
HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN
CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.

A.      Risk that Distributions Will be Less than Estimated by the Debtors

        The ultimate recoveries under the Plan to holders of Claims (other than those holders who
are paid solely in Cash or New Term Notes under the Plan) depend upon the realizable value of
the New Common Stock. The New Common Stock to be issued pursuant to the Plan is subject
to a number of material risks, including, but not limited to, those specified below. The factors
specified below assume that the Plan is approved by the Bankruptcy Court and that the Effective
Date occurs on or prior to December 31, 2004.

       To the extent that Administrative Claims, Secured Claims, DIP Senior Lender Claims,
DIP Term Loan Claims, Professional Fee Claims, Priority Tax Claims, Other Priority Claims or
other Claims entitled to be paid in Cash in full under the Plan materially exceed the Debtors’
estimates, this would have a negative impact on the value of the New Common Stock, and
thereby adversely impact creditors’ recoveries. In addition, if the Allowed amount of General
Unsecured Claims is ultimately higher than the Debtors’ estimates set forth herein, the
percentage recoveries described herein could be lower, and possibly materially lower.

        The Debtors reserve the right to object to the amount or classification of any Claim or
Interest. Thus, the estimates set forth in this Disclosure Statement cannot be relied upon by any
creditor whose Claim or Interest is subject to a successful objection. Any holder of such Claim
or Interest may not receive the estimated Distributions set forth herein.

     A SUBSTANTIAL AMOUNT OF TIME MAY ELAPSE BETWEEN THE
EFFECTIVE DATE AND THE RECEIPT OF A FINAL DISTRIBUTION UNDER THE
PLAN, BECAUSE: (I) THE VARIOUS CLASSES OF CLAIMS, AS WELL AS THE
CATEGORIES OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS, MAY HAVE
SUBSTANTIAL AND/OR COMPLICATED DISPUTED CLAIMS; AND (II) THE


NY1:1514179                                     94
DEBTORS’ ESTIMATE OF ALLOWABLE CLAIMS COULD BE CONTESTED AT AN
ESTIMATION HEARING. FURTHER, ANY DISTRIBUTION MADE IN RESPECT OF
ALLOWED CLAIMS IN CLASSES 4 AND 5 ON THE INITIAL DISTRIBUTION DATE
MAY BE SIGNIFICANTLY LESS THAN THE ULTIMATE DISTRIBUTION TO BE
RECEIVED BY THE HOLDER OF SUCH CLAIM OVER TIME ON SUBSEQUENT
DISTRIBUTION DATES AND THE FINAL DISTRIBUTION DATE.

B.      Additional Risks Related to the New Common Stock

        1.     No Anticipated Payment of Dividends

       The Reorganized Parent does not anticipate paying any dividends on the New Common
Stock in the foreseeable future. In addition, the covenants in certain debt instruments to which
the Reorganized Debtors will be a party may limit the ability of the Reorganized Parent to pay
dividends. Certain institutional investors may only invest in dividend-paying equity securities or
may operate under other restrictions which may prohibit or limit their ability to invest in New
Common Stock.

        2.     The New Common Stock Has No Anti-Dilution Protection

        The holders of New Common Stock will have no anti-dilution protection. Accordingly,
equity issuances the Debtors may make in the future may cause substantial dilution with respect
to the shares of the New Common Stock. As a result, the value of the shares of the New
Common Stock may be subject to significant reduction. Further, if interest on the New Term
Notes is not paid in Cash, under certain circumstances, such interest may be paid through the
issuance of shares of New Common Stock in accordance with the terms of the New Term Notes.
Any such issuance of New Common Stock could have a significant adverse affect on the value of
the shares of New Common Stock distributed to holders of Allowed Claims pursuant to the Plan.

        3.     No Assurance that a Public Market for the New Common Stock Will Develop

        The New Common Stock will not be registered under the Securities Act or under any
other securities laws. Accordingly, in the absence of such registration, the New Common Stock
may be offered or sold only pursuant to an exemption from the registration requirements of the
Securities Act and similar provisions of applicable state securities laws or pursuant to an
effective registration statement.

         There is currently no public market for the New Common Stock and the Debtors cannot
predict the extent to which investor interest in the Reorganized Debtors will lead to the
development of a trading market for the New Common Stock or how liquid that market might
become. The New Common Stock will not been registered under the Securities Act or under any
other securities laws and will not be listed on any stock exchange, Nasdaq or other public trading
market, and the Debtors cannot predict whether the New Common Stock will be so listed or, if
listed, whether Reorganized Debtors will be able to satisfy the applicable listing criteria to
remain listed on an ongoing basis in the future. The Debtors therefore can give no assurance as
to the liquidity of any market that may develop for the New Common Stock.




NY1:1514179                                    95
        The Debtors have analyzed the costs and benefits associated with becoming a reporting
company under the Securities Act of 1934 and has determined that the costs would be excessive
and would not provide the Debtors or other parties in interest with any benefits that cannot be
realized through other means. Notwithstanding the fact that the Reorganized Debtors will not be
a reporting company under the Securities Act of 1934, the Reorganized Debtors have agreed to
provide certain information to broker dealers as required under Rule 15c2-11 of the Securities
Act of 1934, which will allow such broker dealers to submit and publish quotations of the New
Common Stock and facilitate over-the-counter trading thereof. The Rule sets forth in detail the
information that the broker dealer must have in its records in order to submit or publish a
quotation. For non-reporting companies, such as the Reorganized Debtors, the information
requirement can be satisfied by the broker-dealer having possession of sixteen (16) specified
items of information that are reasonably current in relation to the date of the quotation. These
items include the following:

              •   Issuer’s name
              •   Issuer’s address
              •   Issuer’s state of incorporation
              •   Nature of business
              •   Title, class par or stated value and number of shares, or total amount of the
                  security outstanding as of the end of the issuer’s latest fiscal year
              •   Name of the transfer agent
              •   Nature of products or services offered by the issuer and the nature and extent of
                  the issuer’s facilities
              •   Names of the issuer’s CEO and members of the board of directors
              •   Specified financial statements and information (including, without limitation, (a)
                  audited annual financial statements (together with MD&A and other material
                  information normally included in a 10K), (b) quarterly unaudited financial
                  statements (together with MD&A and other material information normally
                  included in a 10Q), and (c) periodic additional information to the extent it would
                  otherwise be required to be disclosed in an 8K filing if the Company were subject
                  to reporting under the Securities and Exchange Act of 1934). All financial
                  statements will be certified by the CEO and CFO of the Reorganized Debtors as
                  being true, correct and complete to the best of their knowledge and, to the extent
                  of the audited financial statements, prepared in accordance with GAAP
              •   Nature of any affiliation between the broker-dealer and the issuer.

         The Reorganized Debtors will provide the foregoing information to broker-dealers
(initially as identified in conjunction with the Creditors’ Committee, and thereafter to any
broker-dealer who requests it or as the New Board of Directors may direct) and keep such
information current on a quarterly basis, commencing promptly after the end of the first fiscal
quarter after the occurrence of the Effective Date. In addition, the Reorganized Debtors will
hold quarterly investor/analyst calls after the distribution of its financial statements..




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        In order to enforce compliance with Rule 15c2-11:

              •   The CFO of the Reorganized Debtors shall be responsible for preparation of
                  financial statements and related information identified and required by Section 8.8
                  of the Plan;
              •   The CFO and CEO of the Reorganized Debtors shall be jointly responsible for
                  certifying financial reports as identified and required in Section 8.8 of the Plan;
              •   The CEO of the Reorganized Debtors shall be responsible for the timely filing of
                  financial reports as identified and required in Section 8.8 of the Plan;
        If the CEO and/or CFO should fail to comply with their responsibilities as set forth
above, a majority vote of the Non-MatlinPatterson Board Designees may terminate (or cause the
Reorganized Debtors to terminate) the CEO and/or CFO (in their respective capacities as both
CEO and/or CFO of the Reorganized Parent and/or any of the Reorganized Debtors), as
appropriate, for “cause” and such officer shall not be entitled to any benefits, severance or other
benefits from and after the date of termination and the employment agreement for the CEO and
CFO shall similarly include within the definition of “cause” failure to comply with the
responsibilities for preparation, certification or filing of the reports as described above, after five
(5) Business Days prior written notice from a majority of the Non-MatlinPatterson Board
Designees; and
        Any shareholder of the Reorganized Parent shall have the power to take action to seek to
compel the CEO and/or CFO to perform their responsibilities for preparation, certification or
filing of the reports as described above, including, without limitation, by commencing legal or
equitable proceedings, and nothing shall be deemed to impair or limit the right of such
shareholders to pursue any claim under any applicable law that would include a right to recover
fees, costs and other expenses incurred in connection with such proceedings or to assert a claim
against a director or officer.
         On and after the expiration or termination of the Supermajority Vote provisions and for
so long as the Reorganized Parent is subject to the requirement to report pursuant to Rule 15c2-
11 within the meaning hereunder, the Reorganized Parent will maintain a mechanism to assure
the continued nomination and election of an independent director by stockholders who are not
affiliates of the Reorganized Parent or affiliated with any stockholder beneficially owning more
than 10% of the New Common Stock who will have the power and sole authority to enforce
these provisions. Furthermore, such independent director shall have the sole authority and
absolute right to veto or otherwise prevent any proposed amendment of any provision of the
Amended Reorganized Parent Bylaws regarding the Rule 15c2-11 reporting requirements and
related enforcement rights.
        The Reorganized Parent, and any successor thereto, shall be required to report pursuant to
Rule 15c2-11 until the earlier of (a) a Qualified Offering, or other event by which the
Reorganized Parent or its successor becomes a reporting company under the Securities Exchange
Act of 1934, (b) a stockholder holds 90% or more of the New Common Stock, (c) a change of
control, or (d) such other event as agreed to by the Debtors, the Creditors’ Committee and
MatlinPatterson, provided in the case of clause (c), that (i) a majority of the non-MatlinPatterson
holders of New Common Stock have agreed to sell their shares of New Common Stock in such
change of control transaction, or (ii) a majority of the non-MatlinPatterson holders of New


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Common Stock actually voting in respect of such change of control transaction shall have
approved a waiver of the requirement to report pursuant to Rule 15c2-11. The Drag Along
Rights set forth in the Shareholders Agreement shall not affect the non-MatlinPatterson
stockholder’s right to vote against the waiver of reporting requirements under Rule 15c2-11 as
provided herein and in the Plan.
     The foregoing provisions shall be included in the Shareholders Agreement and the
Amended Reorganized Parent Bylaws, unless otherwise agreed by the Debtors, the Creditors’
Committee and MatlinPatterson.
       Such provisions are outlined in the Shareholders Agreement term sheet contained in
Exhibit E annexed hereto.
        4.     Uncertainty of and Fluctuations in Trading Prices

        As there is currently no public market for the New Common Stock, there can be no
assurance as to the development of any market or liquidity of any market that may develop for
the New Common Stock or the ability of the holders to sell their New Common Stock. The
prices at which these securities trade in any public market that may develop cannot be predicted
and will not necessarily be related to Reorganized Debtor’s book value, net worth or any other
established criteria of value. Furthermore, Reorganized Debtors’ financial results and the trading
prices of the New Common Stock may fluctuate substantially in the future. These fluctuations
may be caused by several factors including pricing competition for Reorganized Debtors’
products and Reorganized Debtors’ ability to make sales. Other factors which may cause
significant price fluctuations include Reorganized Debtors’ actual or anticipated operating results
and growth rates, changes in analysts’ estimates, competitors’ announcements, regulatory
actions, availability for future sale of significant amounts of Reorganized Parent’s securities,
industry conditions and general economic conditions. Further, the stock market has experienced
extreme price and volume volatility that have often been unrelated or disproportionate to the
operating performance of particular companies. Events such as those described above can lead
to significant fluctuations in the trading prices of the New Common Stock and the trading prices
may from time to time be below investors’ expectations.

       The Debtors do not intend to apply for registration of the New Common Stock.
Additionally, the Debtors do not intend to apply for listing of the New Common Stock on any
national securities exchange or for quotation on any automated quotation system.

        5.     Liquidity Risks – Restrictions on Transfer

        Holders of New Common Stock who are deemed to be “underwriters” as defined in
subsection 1145(b) of the Bankruptcy Code, or who are otherwise deemed to be “affiliates” of
Reorganized Parent within the meaning of Rule 144 of the Securities and Exchange Commission
will be unable to offer or sell their New Common Stock except pursuant to an effective
registration statement or an available exemption from registration under the Securities Act and
under equivalent state securities or “blue sky” laws. The New Common Stock will also be
subject to certain Drag Along Rights and Tag Along Rights, as outlined in the Shareholders
Agreement term sheet contained in Exhibit E annexed hereto.




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C.       Industry Conditions and Financial Condition of Reorganized Debtors

         1.       Operating Losses

        The Debtors incurred operating losses of approximately $8.5 million in 2000, $43.1
million in 2001, $9.1 million in 2002 and $155 million in 2003.17 The Debtors expect to
continue to incur losses in the future, which may limit their ability to execute their business
strategy, satisfy their debt obligations and meet their other financial obligations.

         2.       Indebtedness

      The degree to which the Reorganized Debtors are leveraged could have important
consequences to holders of the New Common Stock, including the following:

      (i)         the Reorganized Debtors’ ability to obtain additional financing in the future for
                  working capital, capital expenditures, general corporate purposes or other
                  purposes may be impaired or such financing may not be available on favorable
                  terms;

      (ii)        a substantial portion of the Reorganized Debtors’ cash flow from operations may
                  be dedicated to the payment of principal and interest on indebtedness, thereby
                  reducing the funds available to them for their operations;

      (iii)       without an improvement in the Reorganized Debtors’ net operating cash flows,
                  the Reorganized Debtors may experience some difficulty in meeting their debt
                  service requirements as they become due and force the Reorganized Debtors to
                  modify their operations;

      (iv)        the Reorganized Debtors may be restricted in their ability to utilize asset sales as a
                  means to create liquidity as, with certain exceptions, the proceeds of asset sales
                  may be required to be utilized for the re-payment of debt under the New Working
                  Capital Facility;

      (v)         the Reorganized Debtors may be more highly leveraged than certain of their
                  competitors, which may place them in a competitive disadvantage; and

      (vi)        the Reorganized Debtors may be more vulnerable to a further downturn in general
                  economic conditions or their business.

       Even if the Plan is consummated, the Reorganized Debtors’ business may not be able to
generate sufficient cash flow from operations in the future to service their debt, including
principal and interest payments on the New Working Capital Facility, make necessary capital
expenditures or meet other cash needs. If the Reorganized Debtors are unable to service their


         17
           Including a $60 million asset impairment charge, a $9.8 million impairment charge to goodwill, a $16.6
million charge for the maintenance and restart of the Burnside alumina refinery, $6 million in restructuring costs and
expenses, and $9 million in write-offs of deferred financing fees.



NY1:1514179                                              99
indebtedness or to obtain additional financing, as needed, it would have a material adverse effect
on their business and financial condition.

        3.     Downturns in the United States and Worldwide Aluminum Industry

         Historically, the aluminum industry has been cyclical in nature as a result of the markets
that it serves. Excess worldwide aluminum production capacity, fueled in part by the rapid
increase in primary aluminum capacity in China, has further contributed to the destabilization of
aluminum markets, especially during periods of reduced demand. The United States aluminum
industry is affected by changes in economic conditions that are outside of the Debtors’ control,
including currency exchange rates, and international, national, regional and local slowdowns in
customer markets. These conditions include the level of economic growth, employment levels,
financing availability, consumer confidence and housing demand. For example, a decline in
demand for the Debtors’ products or in the general financial condition of the industries to which
the Debtors supply their products would have a material adverse affect on their business,
financial condition, results of operations or prospects. In addition, during periods of economic
slowdown the Debtors’ credit losses may increase. The Debtors’ operating results may also be
adversely affected by increases in interest rates that may lead to a decline in the economic
activity of their customers, while simultaneously resulting in higher interest payments under the
New Working Capital Facility.

        4.     Price Fluctuations

        The Debtors’ operating results are sensitive to changes in the prices of primary aluminum
and fabricated and laminated aluminum products, and also depend to a significant degree upon
the volume and mix of products sold. Primary aluminum prices have historically been subject to
significant cyclical price fluctuations. See Article III. Section A. 6., entitled “Pricing.” Such
prices have historically fluctuated widely and are affected by numerous factors beyond the
Debtors’ control, including the overall demand for, and worldwide supply of, primary aluminum,
the availability and price of competing commodities, international economic trends, currency
exchange fluctuations, expectations of inflation, actions of commodity market participants,
consumption and demand patterns and political events in major producing countries.

        Historically, in the ordinary course of business, the Debtors have entered into hedging
transactions or forward sale or purchase transactions to provide price risk management in respect
of their net exposure resulting from purchases and sales of alumina, primary aluminum and
fabricated aluminum products. Many of the Debtors’ hedging activities with financial partners
required them to post margin collateral (typically in the form of cash or a letter of credit) in the
event that the market price of the hedged commodity was “out of the money” from the Debtors’
hedged price during the term of the hedging contract and/or it was deemed likely that the market
price of the hedged commodity could move “out of the money.” However, the Debtors’ liquidity
crisis during the Chapter 11 Cases has not allowed them to post margin collateral and, therefore,
engage in any effective hedging activities beyond fixed price forward sales with the Debtors’
physical customers. Even after the Debtors enter into the New Working Capital Facility, there is
a significant risk that their liquidity will continue to be so limited that they will not be able to
engage in effective hedging activities beyond fixed price forward sales with their customers.
Thus, the Reorganized Debtors’ operating profit and cash flow will remain dependent on, and


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subject to fluctuations in, prices in the aluminum market. The Reorganized Debtors’ inability to
hedge, if combined with any significant decline in aluminum prices, could have a material
adverse effect on the Reorganized Debtors’ business.

        5.     Price of Raw Materials

               (a)     Electricity

         The Debtors consume substantial amounts of energy in the aluminum production process,
and energy costs accounted for approximately 21% of their 2002 total cost of sales. Of this
amount, electricity consumed at the Hannibal reduction plant represented the largest portion,
approximately 96% of total energy costs in 2002. In July 2003, the Debtors executed an
electrical energy supply agreement with Entergy-Koch Trading, L.P. that provides for
approximately 95% of their electrical energy requirements for the Hannibal facilities at a fixed
price through December 31, 2004. This power supply is in addition to the Company’s other
utility needs to meet demands apart from the reduction process.

        Given the pending expiration of their energy supply contract, the Debtors have issued
requests for proposals to approximately 40 parties seeking proposals to satisfy their needs for
electrical energy for 2005 and thereafter. Responses received by the Debtors to date indicate that
the Debtors’ cost to obtain electrical energy to meet their operating needs in 2005 could increase
by approximately 30%. This increased cost will have a material adverse effect on the Debtors’
financial performance in future years. Every one dollar increase in the Debtors’ cost of
electricity on a per megawatt hour basis results in an approximately $3.2 million decrease in the
Debtors’ EBITDA, assuming an operational configuration of four potlines at the Debtors’
Hannibal reduction facility.

       The Debtors are continuing discussions with numerous parties in an effort to obtain
reasonably priced electrical energy sufficient to meet their operating needs. However, there can
be no assurance that the Debtors will be able to obtain a contract that will allow them to avoid a
substantial increase in their costs.

        In recent years, the electrical power market has begun to utilize many of the same margin
requirements as the primary aluminum hedging market. The Debtors’ ability to post collateral to
meet such margin requirements is currently prevented by their liquidity crisis. Even after the
Debtors enter into the New Working Capital Facility, there is a significant risk that their liquidity
will continue to be so limited that they may not be able to engage in effective hedging activities.
The Reorganized Debtors’ inability to hedge, when combined with a dramatic increase in the
price of electricity, could have a negative impact on their financial position, operating results and
cash flow.

               (b)     Natural Gas

         The Debtors receive natural gas via physical delivery to the Hannibal facilities under
various contracts that run through October 31, 2004 and to the Burnside Refinery under various
contracts that run through December 31, 2005. When liquidity permits, the Debtors have the
ability to hedge their exposure to gas prices by buying forward. At present, only a portion of the
Debtors’ gas requirements are set at a fixed price though November, 2004.


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         In recent years, and as a result of the upheaval in the natural gas market caused in part by
the collapse of Enron Corporation, the natural gas market has begun to utilize many of the same
margin requirements as the primary aluminum hedging market. The Debtors’ current liquidity
crisis does not allow them to post collateral and, therefore, engage in effective hedging
programs. Even after the Debtors enter into the New Working Capital Facility, there is a
significant risk that their liquidity will continue to be so limited that they may not be able to
engage in effective hedging activities. The Reorganized Debtors’ inability to hedge, when
combined with a dramatic increase in the price of natural gas, could have a negative impact on
their financial position, operating results and cash flow.

               (c)     Bauxite

       When the Debtors operate their Burnside alumina refinery, they purchase large quantities
of bauxite, the principal ore from which alumina is refined. The Debtors have historically
purchased bauxite originating from the Mineracao Rio do Norte (“MRN”) mine in Brazil and
occasionally the Bauxilum mine in Venezuela; however, with the recent modernization of the
Burnside Refinery, bauxite from certain other mines can now be used in the Debtors’ production
process. Since the idling of the Burnside Refinery in December, 2001, the Debtors did not
purchase any Venezuelan bauxite, and have only recently taken the first delivery of MRN
bauxite since 2001. In connection with the restart of the Burnside Refinery, the Debtors have a
contract with Itabira International Company, LTD to purchase bauxite from the Trombetas
region which runs through 2006. This contract covers approximately 80% of the annual bauxite
required to support full scale operations of the Burnside Refinery. The Debtors purchase the
remaining bauxite requirements on a spot basis from various sources.

         Many of the Debtors’ competitors own or have interests in bauxite mines throughout the
world and thus have fixed bauxite raw material costs. The Debtors, however, do not have a
captive source of bauxite and, accordingly, their operating results are normally more affected by
the price of bauxite than many of their competitors. Historically, market prices for bauxite have
fluctuated, sometimes significantly, in response to a number of factors, including the political
stability of producing countries. No assurance can be given that a prolonged shortage of bauxite
would not have a material adverse affect on the Reorganized Debtors. In addition, freight
charges required to deliver bauxite to the Burnside Refinery have increased significantly in
recent months.

               (d)     Alumina

        Alumina, a commodity for which there is a global market, is obtained by refining bauxite
ore. The Burnside Refinery provides the Debtors with the flexibility to internally source their
alumina requirements or, depending on market prices for alumina, to purchase their alumina
requirements on the open market. For the two-year period ending December 31, 2003, the
Company purchased 100 percent of its alumina requirements from a major alumina producer
under a fixed price contract. However, due to significant increases in the market price of
alumina in 2003, the Company re-started the Burnside Refinery during the second half of 2003
and is producing alumina to support its operations.




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               (e)     Carbon Anodes

        The Debtors’ production of primary aluminum consumes approximately 168,000 metric
tons of carbon anodes on an annual basis. As discussed above, the Debtors discontinued
producing carbon anodes at the Hannibal reduction facility when faced with substantial increased
costs for compliance with stringent environmental standards that became effective in 2001. The
purchase of the carbon anodes from third parties has provided the Company with a reduction in
electrical consumption, an increase in metal production, a reduction in headcount and a reduction
in other operating and maintenance costs. The purchase price of carbon anodes from such third
party vendors can increase or decrease based on formulas tied to the price of calcined petroleum
coke, pitch and freight.

        The Debtors presently have in place a long-term contract with a broker for the acquisition
of carbon anodes from a third party producer in China and they are currently seeking Bankruptcy
Court approval for the modification and extension of their long-term contract with another
broker for the acquisition of carbon anodes from third party producers in Venezuela, Egypt and
the United States. In the event of political disruptions in any of these countries or disruptions in
production at any of the suppliers' facilities or disruptions in transportation, the Debtors would be
forced to seek alternative sources of supply or seek waivers from the new environmental
standards to enable them to temporarily restart the production of carbon anodes at their Hannibal
reduction facility. In the event that the Debtors cannot find such alternative sources of supply, or
restart production of anodes at the Hannibal reduction facility, the Debtors could be forced to
curtail all or part of their Hannibal reduction facility, which is their largest operating facility.
Such a curtailment could also adversely affect the Debtors’ fabricated and laminated product
operating facilities as such facilities would be forced to seek an alternative supply of primary
aluminum which could result in higher operating costs.

        6.     Competition

        Aluminum competes in many markets with steel, copper, glass, plastic and numerous
other materials. Within the aluminum industry, the Debtors compete with both domestic and
foreign producers, some of which are government controlled, of alumina and primary aluminum,
and with domestic and foreign fabricators. Primary aluminum and, to some degree, alumina are
commodities with generally standard qualities, and competition in the sale of these commodities
is based primarily upon price and availability. The Debtors also compete with a wide range of
domestic and international fabricators in the sale of fabricated and laminated aluminum products.
Competition in the sale of fabricated and laminated products is based primarily upon quality,
availability, price and service, including delivery performance. The increasing consolidation in
the aluminum industry has led to larger competitors that have significantly greater financial,
marketing and other resources than the Debtors. That consolidation could materially adversely
affect the Reorganized Debtors’ business and results of operations.

        7.     Environmental and Government Regulation

        The Debtors are subject to various federal, state and local environmental laws and
regulations which regulate, among other things, air and waste emissions and discharges; the
generation, storage, treatment, transportation and disposal of solid and hazardous substances and


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waste; the release of hazardous or toxic substances, pollutants and contaminants into the
environment; in certain instances, the environmental condition of industrial property prior to
transfer or sale; and local workplace health and safety (together, “Environmental Laws”).

        The Debtors believe that they currently conduct their operations, and in the past have
conducted their operations, in substantial compliance with applicable Environmental Laws.
However, such Environmental Laws have in recent years become increasingly stringent, and this
trend is expected to continue. Compliance with future Environmental Laws and regulations could
require the Reorganized Debtors to make substantial expenditures, and there can be no assurance
that future capital expenditures and costs for compliance with such laws and regulations will not
have a material adverse effect on the Reorganized Debtors’ financial condition, results of
operations or liquidity.

        From time to time, the Debtors are subject, with respect to their operations, to fines or
penalties assessed for alleged breaches of the Environmental Laws and to claims and litigation
brought by federal, state or local agencies and by private parties, remedial or other enforcement
action under the Environmental Laws for damages relating to alleged injuries to health or to the
environment, including claims with respect to certain waste disposal sites and the remediation of
sites operated or used by the Debtors. There can be no assurance that such fines, penalties,
claims and litigation will not have a material adverse effect on the business of the Reorganized
Debtors.

        8.     Need for Certain Capital Expenditures

       Many of the Debtors’ principal operating facilities are over 40 years old. As a result, the
Debtors may be required to make significant capital investments in such facilities in order to
maintain the facilities and may be required to incur significant additional expenditures in order to
upgrade and expand their facilities in order for the Debtors to improve their operating
performance. The Debtors’ capital expenditure plan contemplates projects relating to
maintenance of integrity, safety and compliance with environmental laws.

         Covenants in the New Working Capital Facility may significantly restrict the
Reorganized Debtors’ ability to make such capital expenditures and there can be no assurance
that they can comply with those covenants without jeopardizing the integrity of their operating
facilities. There can also be no assurance that the Reorganized Debtors will have sufficient
resources available to make any capital expenditures that may be required or that additional
financing, if needed, will be available to them on acceptable terms.

        9.     Cyclicality of End-Use Markets

        Many of the Debtors’ end-use markets, such as the building and construction and
transportation industries, are cyclical and are significantly affected by changes in international,
domestic and local economic conditions. These conditions include the level of economic
growth, employment levels, financing availability, interest rates, consumer confidence and
housing demand. Decreases in demand resulting from current economic conditions in the
Debtors’ principal markets in the United States, as well as internationally, have adversely
affected demand for, and prices of, many of the Debtors’ products and may continue to do so in



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the future. A prolonged recession in the Debtors’ principal markets could have a material
adverse effect on their business, financial condition and results of operations.

        10.     Limited Net Operating Loss Carry-Forwards

        The Debtors currently have significant net operating loss tax carry-forwards. As a
consequence of a successful consummation of the Plan, the Debtors will utilize all or
substantially all of their net operating loss tax carry-forwards to offset cancellation of
indebtedness income. In addition, the Debtors will undergo an ownership change, and therefore
the use of any remaining net operating loss tax carry-forwards to offset any income generated in
years following the year of the Restructuring will be limited. See Article X., entitled “Federal
Income Tax Consequences of Plan”.

        11.     Key Personnel

        The success of the Debtors depends in large part upon the abilities and continued service
of the Debtors’ executive officers and other key employees, including R. Emmett Boyle, the
Debtors’ Chairman and Chief Executive Officer. There can be no assurance that the
Reorganized Debtors will be able to retain the services of such officers and employees, including
substantially all of their salaried work force. The Reorganized Debtors’ failure to retain the
services of Mr. Boyle or of other key personnel could have a material adverse effect. In
connection with the consummation of the Plan, Mr. Boyle and other key executives identified by
MatlinPatterson will execute an employment agreement with the Reorganized Debtors, a copy of
which will be included in the Plan Supplement.

        12.     Collective Bargaining Agreements

        The Debtors are party to nine separate collective bargaining agreements with bargaining
units at the various facilities. While the Debtors generally consider their relationships with their
employees to be satisfactory, there can be no assurance that new collective bargaining
agreements can be negotiated upon the expiration of the current agreements, or that the terms
thereof will not be materially less favorable to the Reorganized Debtors. Further, there can be no
assurance that the Reorganized Debtors will not be subject to work stoppages in connection with
any future collective bargaining negotiation. Finally, it is a condition to the effectiveness of the
Commitment Agreement and the Plan that, prior to the Effective Date, the Debtors shall have
entered into new collective bargaining agreements with each of the USWA Local 5760 and
USWA Local 5724. There can be no assurance that such agreements will be reached, or if
reached, that the terms thereof will not be materially less favorable than those assumed in the
financial projections contained in Exhibit C hereto.

D.      Bankruptcy Risks

        1.      Objections to Classifications

        Section 1122 of the Bankruptcy Code provides that a plan may place a claim or an
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 the classification of Claims and



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Interests under the Plan complies with the requirements set forth in the Bankruptcy Code.
However, there can be no assurance that the Bankruptcy Court would reach the same conclusion.

        2.     Risk of Nonconfirmation of the Plan

         Even if all Voting Classes accept the Plan, the Plan might not be confirmed by the
Bankruptcy Court. Section 1129 of the Bankruptcy Code sets forth the requirements for the
confirmation and requires, among other things, that the confirmation of a plan of reorganization
is not likely to be followed by the liquidation or the need for further financial reorganization of
the debtor, and that the value of distributions to dissenting creditors and equity security holders
not be less than the value of distributions such creditors and equity holders would receive if the
debtor were liquidated under chapter 7 of the Bankruptcy Code. There can be no assurance,
however, that the Court would also conclude that the requirements for confirmation of the Plan
have been satisfied. See Article VIII., entitled “Confirmation of the Plan”.

        If no plan can be confirmed, the Chapter 11 Case may be converted to a case under
Chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be appointed or elected to
liquidate the Debtors’ assets for distribution in accordance with the priorities established by the
Bankruptcy Code. See Article IX. Section A., entitled “Liquidation Under Chapter 7”, for a
discussion of the effects that a Chapter 7 liquidation would have on the recoveries of holders of
claims and interests. The Debtors believe that liquidation under Chapter 7 would result in
smaller distributions being made to creditors than those provided for in the Plan because of (i)
the likelihood that the Debtors’ assets would have to be sold or otherwise disposed of in a less
orderly fashion over a short period of time, (ii) the additional administrative expenses involved
in the appointment of a trustee, and (iii) the additional expenses and claims, some of which
would be entitled to priority, which would be generated during the liquidation and from the
rejection of leases and other executory contracts in connection with a cessation of the Debtors’
operations.

        3.     Potential Effect of Bankruptcy on Certain Relationships

        The effect, if any, which the Chapter 11 Cases may have upon the operations of the
Reorganized Debtors cannot be accurately predicted or quantified. The Debtors believe the
Chapter 11 Cases and consummation of the Plan will have a minimal future effect on
relationships with their customers, employees and suppliers. If confirmation and consummation
of the Plan do not occur expeditiously, the Chapter 11 Cases could adversely affect the Debtors’
relationships with their customers, suppliers and employees, resulting in a material adverse
impact on the operations of the Debtors. Moreover, even the expedited Chapter 11 Cases could
have a detrimental impact on future sales and patronage due to the possibility that the Chapter 11
Cases may have created a negative image of the Debtors in the eyes of their customers.

E.      Ability to Refinance Certain Indebtedness

        Following the Effective Date of the Plan, the Reorganized Debtors’ seasonal working
capital borrowings and letters of credit requirements are anticipated to be funded under the New
Working Capital Facility. There can be no assurance that the Reorganized Debtors, upon
expiration of the New Working Capital Facility, will be able to obtain replacement financing to



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fund future seasonal borrowings and letters of credit, or that such replacement financing, if
obtained, would be on terms equally favorable to the Reorganized Debtors.

       In addition, pursuant to the Plan, Reorganized Parent will issue the New Term Notes.
While the New Term Notes provide the Reorganized Debtors with the right to pay interest in
shares of New Common Stock under certain circumstances, in other instances the Reorganized
Debtors will be required to pay such interest in Cash. There can be no assurance that the
Reorganized Debtors will be able to make such Cash interest payments as and when they become
due. Further, there can be no assurance that the Reorganized Debtors, upon the maturity of the
New Term Notes, will be able to obtain replacement financing for, or otherwise pay the amounts
due under, the New Term Notes.

F.      Significant Holders

        Upon the consummation of the Plan, certain holders of Claims, including Old Debt
Holders and MatlinPatterson, will receive distributions of shares of the New Common Stock
representing in excess of five percent of the outstanding shares of the New Common Stock.
Furthermore, as of the Effective Date, MatlinPatterson will individually own (i) approximately
31% of the outstanding shares of the New Common Stock and, (ii) the New Term Notes, and
will be entitled pursuant to the Shareholders Agreement to appoint three of the seven members of
the board of directors. As such, MatlinPatterson could be in a position to significantly affect the
outcome of actions requiring stockholder approval, including the election of directors. This
concentration of ownership could also facilitate or hinder a negotiated change of control of the
Reorganized Debtors and, consequently, have an impact upon the value of the New Common
Stock.

       Further, the possibility that one or more of the holders of significant numbers of shares of
New Common Stock may determine to sell all or a large portion of their shares of New Common
Stock in a short period of time may adversely affect the market price of the New Common Stock.

G.      Litigation Risks

        The Debtors do not believe there are any litigation risks which would significantly or
materially impact the Plan other than with respect to the allowance or disallowance of Claims or
Interests.

H.      Restrictive Covenants Contained in the New Working Capital Facility

       The New Working Capital Facility will contain, and the terms of any of the Reorganized
Debtors’ future indebtedness may contain, certain covenants that limit the discretion of the
Reorganized Debtors’ management with respect to certain business, financial and operational
matters.

       The covenants, taken as a whole, may place significant restrictions on the Reorganized
Debtors’ ability to, among other things:

        ●      prepay, redeem, purchase or otherwise service debt;



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        ●      incur liens;

        ●      make loans and investments;

        ●      make capital expenditures;

        ●      incur additional indebtedness;

        ●      engage in mergers, acquisitions and asset sales;

        ●      enter into transactions with affiliates; and

        ●      alter the business the Debtors conduct.

       In addition, under the New Working Capital Facility, the Reorganized Debtors will be
required to comply with certain financial covenants and, under the terms of any future
indebtedness, may be required to comply with other financial covenants.

        The Reorganized Debtors’ ability to comply with these and other provisions of the New
Working Capital Facility and other indebtedness may be affected by changes in economic or
business conditions or other events beyond the Reorganized Debtors’ control. A failure to
comply with the obligations contained in the New Working Capital Facility and related
agreements could result in an event of default, which could result in acceleration of the related
debt and the acceleration of debt under other instruments evidencing indebtedness that may
contain cross-acceleration or cross-default provisions. If the indebtedness under the New
Working Capital Facility were to be accelerated, the Reorganized Debtors’ assets may not be
sufficient to repay in full such indebtedness. Also, if the Reorganized Debtors were unable to
borrow under the New Working Capital Facility due to a default or failure to meet certain
specified borrowing base prerequisites for borrowing, they could be left without sufficient
liquidity to conduct their business.

I.      Projected Financial Information

        The financial projections included as Exhibit C to this Disclosure Statement are
dependent upon the successful implementation of the business plan and the validity of the other
assumptions contained therein. The projections were not prepared with a view towards
compliance with guidelines established by the American Institute of Certified Public
Accountants (“AICPA”), the Financial Accounting Standards Board (“FASB”), or the rules and
regulations of the Securities and Exchange Commission (“SEC”). Furthermore, the projections
have not been audited or reviewed by the Debtors’ independent accountants. These projections
reflect numerous assumptions, including confirmation and consummation of the Plan in
accordance with its terms, the anticipated future performance of the Debtors, industry
performance, certain assumptions with respect to the Debtors’ competitors, general business and
economic conditions and other matters, many of which are beyond the control of the Debtors. In
addition, unanticipated events and circumstances occurring subsequent to the preparation of the
projections may affect the actual financial results of the Debtors. Although the Debtors believe
that the projections are attainable, variations between the actual financial results and those
projected may occur and be material.


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                                VII.
         VALUATION OF REORGANIZED DEBTORS AS OF JANUARY 1, 2005

       The Debtors have retained Evercore Restructuring L.P. (“Evercore”) as their investment
bankers to assist Debtors in connection with their restructuring, including (without limitation) the
formulation of the Plan. In furtherance of the Plan, and in an effort to estimate the percentage of
recovery to be received by the holders of the Allowed Claims receiving New Common Stock
pursuant to the Plan, the Debtors have requested that Evercore perform a valuation analysis of
the Reorganized Debtors.

        Estimates of the Reorganized Debtors’ going concern enterprise value do not purport to
be appraisals, nor do they necessarily reflect the values that might be realized if the Reorganized
Debtors were to be sold. Such estimates were developed solely for purposes of formulation and
negotiation of the Plan and analysis of implied relative recoveries to parties-in-interest
thereunder. Such estimates reflect the implied going concern enterprise value of the Reorganized
Debtors based upon the terms of the Plan and do not purport to reflect or constitute appraisals,
liquidation values, or estimates of the actual market value that may be realized through the sale
of any securities to be issued pursuant to the Plan, which may be significantly different 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 going concern
enterprise 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 such estimates are
inherently subject to uncertainties, neither Ormet, nor its officers, directors or advisors assume
responsibility for their accuracy.

        In addition, the valuation of newly issued securities is subject to additional uncertainties
and contingencies, all of which are difficult to predict. Actual market prices of such securities at
issuance will depend upon, among other things, prevailing interest rates, conditions in the
financial markets, the anticipated initial securities holding of prepetition creditors some of whom
may prefer to liquidate their investment rather than hold them on a long-term basis); and the fact
that the securities are subject to the Shareholders Agreement and not listed on any securities
exchange, and other factors that generally influence the prices of securities. Actual prices of
such securities also may be affected by the bankruptcy case or by other factors not possible to
predict. Accordingly, the going concern enterprise value estimated by Evercore does not
necessarily reflect, and should not be construed as reflecting, values that will be attained in the
public or private markets.

        As used in this Article VII. of the Disclosure Statement, (a) “Enterprise Value” means
Evercore's estimate of the intrinsic value of the Reorganized Debtors at January 1, 2005 as
determined as of August 31, 2004 and based upon the assumptions and data identified herein,
Evercore's application of various valuation techniques thereto, and Evercore's independent
professional judgment; and (b) “Reorganized Debtors” means Ormet and its other direct and
indirect wholly-owned subsidiaries following consummation of the Plan.

       In connection with delivering this analysis, Evercore has, among other things: (i)
analyzed certain internal financial statements and other non-public financial and operating data


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relating to the Debtors; (ii) discussed appropriate capital structure requirements with
management; (iii) discussed the past and current operations, financial projections and current
financial condition of the Debtors with management; (iv) compared the financial performance of
the Debtors with the financial performance of a selected group of peer companies, and evaluated
the prices and valuation multiples of such peer companies; (v) compared the financial
performance of the Debtors to the targets of precedent M&A transactions in which Evercore
believed the target to be similar in some respect to the Debtors; and (vi) performed other
examinations and analyses and considered other factors that Evercore deemed appropriate.

        In preparing its analysis, Evercore assumed and relied upon the accuracy and
completeness of all of the financial and other information that was available to it from public
sources and that was provided to Evercore by the Debtors or its representatives and has not
assumed any responsibility for independent verification of any such information. With respect to
the financial projections supplied to Evercore, Evercore assumed the accuracy thereof and
assumed that such projections were reasonably prepared in good faith and on a basis reflecting
the best currently available estimates and judgments of the Debtors as to the future operating and
financial performance of the Debtors. Such projections assume the Debtors will operate the
business reflected in the business plan that it provided to Evercore and that such business will
perform as expected in the business plan. To the extent that the Debtors operate more or fewer
businesses during the projection period and to the extent that all or a portion of the businesses
perform at levels not consistent with those expected in the business plan, such adjustments may
have a material impact on the operating projections and valuations as presented herein. Evercore
did not make or obtain any independent evaluation of the Debtors’ assets, nor did Evercore
verify any of the information it reviewed.

      With respect to the valuation of the Reorganized Debtors, in addition to the foregoing,
Evercore relied upon the following assumptions and/or methodologies:

              !   The enterprise valuation range indicated assumes the pro forma debt levels (as set
                  forth in the Financial Projections attached hereto as Exhibit C) to calculate a
                  range of equity values.

              !   The Debtors will emerge from chapter 11 on or prior to December 31, 2004.

              !   The Debtors will be able to obtain all necessary financing, as described elsewhere
                  herein, and no asset sales will be required to meet the Debtors’ ongoing financial
                  requirements. Evercore has not made and makes no representations as to whether
                  the Debtors will be able to obtain financing or as to the terms upon which such
                  financing may be obtained.

              !   Present senior management of the Debtors will continue following consummation
                  of the Plan and general financial and market conditions as of the assumed
                  Consummation Date of the Plan will not differ materially from those conditions
                  contemplated as of the date of this Disclosure Statement

      As a result of such analyses, reviews, discussions, considerations and assumptions,
Evercore estimates that the enterprise value of the Reorganized Debtors falls in a range between



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approximately $167 million and $198 million and the equity value falls in a range between
approximately $67 million to $98 million. These estimated ranges of values represent
hypothetical values, which reflect the estimated intrinsic value of the Reorganized Debtors
derived through the application of various valuation techniques.

     SUCH ANALYSIS DOES NOT PURPORT TO REPRESENT VALUATION LEVELS,
PURCHASE PRICES, OR TRADING LEVELS, WHICH WOULD BE ACHIEVED IN, OR
ASSIGNED BY, THE CAPITAL MARKETS FOR DEBT AND EQUITY SECURITIES OR IN
A SALE OF ALL OR SUBSTANTIALLY ALL OF THE REORGANIZED DEBTORS’
ASSETS OR OTHER CHANGE-OF-CONTROL TRANSACTION.

        Evercore’s estimate is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to it as of, the date of this
Disclosure Statement. It should be understood that, although subsequent developments may
affect Evercore’s conclusions, Evercore does not have any obligation to update, revise or
reaffirm its estimate.

        The following is a brief summary of certain financial analyses performed by Evercore to
arrive at its estimation of the enterprise value and equity value of the Reorganized Debtors.
Evercore performed certain procedures, including each of the financial analyses described below,
and reviewed with the management the assumptions upon which such analyses were based and
other factors, including the projected financial results of the Reorganized Debtors.

        Analysis of Certain Publicly Traded Companies. To provide contextual data and
comparative market information, Evercore compared selected projected operating and financial
ratios for the Reorganized Debtors to the corresponding data and ratios of a number of selected
public companies (“Selected Companies”) whose securities are publicly traded and which
Evercore believes have operating, market and trading valuations similar in certain respects to
what might be expected of the Reorganized Debtors. Such data and ratios include the enterprise
value of such Selected Companies as multiples of revenues and EBITDA for the projected
periods.

        Although the Selected Companies were used for comparison purposes, none of such
companies is directly comparable to the Reorganized Debtors. Accordingly, an analysis of the
results of such a comparison is not purely mathematical, but instead involves complex
considerations and judgments concerning differences in historical and projected financial and
operating characteristics of the Selected Companies and other factors that could affect the public
trading value of the Selected Companies or the Reorganized Debtors to which they are being
compared.

         Discounted Cash Flow Analysis. To provide information with regard to valuation in
terms of the future potential cash flows of the Reorganized Debtors, Evercore determined a
potential range of enterprise value based on estimated unleveraged free cash flows and terminal
enterprise value achieved through the value of the cash flows in perpetuity. Using this approach,
Evercore derived the present value of such cash flows by discounting the expected cash flows at
a rate that reflects the riskiness of the cash flows. The estimated discount rate is a function of the
expected cost of capital of the Reorganized Debtors, based on the estimated cost of capital for


NY1:1514179                                      111
the Selected Companies and management’s expectation of the potential future borrowing costs of
the Reorganized Debtors, and has been adjusted to account for the expected capital structure of
the Reorganized Debtors.

       As the estimated cash flows, estimated discount rate and expected capital structure of the
Reorganized Debtors are used to derive a potential value, an analysis of the results of such an
estimate is not purely mathematical, but instead involves complex considerations and judgments
concerning potential variance in the projected financial and operating characteristics of the
Reorganized Debtors and other factors that could affect the future prospects and cost of capital
considerations of the Reorganized Debtors.

        Analysis of Certain Precedent Transactions. To provide contextual data and comparative
market information, Evercore reviewed and analyzed the implied transaction multiples paid in
selected acquisition transactions, the targets of which (“Transaction Targets”) Evercore believed
to be similar in certain respects to what might be expected of the Reorganized Debtors. Such
data and ratios include the enterprise value of the Transaction Targets as multiples of revenues
and EBITDA for the projected periods.

        Although the Transaction Targets were used for comparison purposes, none of the
companies are directly comparable to the Reorganized Debtors. Accordingly, an analysis of the
results of such a comparison is not purely mathematical, but instead involves complex
considerations and judgments concerning differences in historical and projected financial and
operating characteristics of the Transaction Targets and other factors that could affect the public
trading value of the Transaction Targets or the Reorganized Debtors to which they are being
compared.

        The summary set forth above does not purport to be a complete description of the
analyses performed by Evercore. The preparation of an estimate involves various determinations
as to the most appropriate and relevant methods of financial analysis and the application of these
methods in the particular circumstances and, therefore, such an estimate is not readily susceptible
to summary description. In performing its analyses, Evercore and the Debtors made numerous
assumptions with respect to industry performance, business and economic conditions and other
matters. The analyses performed by Evercore are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested by such
analyses.

        Evercore relied on the accuracy and reasonableness of the projections and the underlying
assumptions as prepared by the Debtors. Evercore’s valuation assumes that operating results
projected by the Debtors will be achieved in all material respects, including revenue, operating
margins, earnings, cash flow, working capital, expenses and other elements. To the extent that
the valuation is dependent upon the Reorganized Debtors’ achievement of the projections, the
valuation must be considered speculative. For purposes of the valuation analysis, Evercore relied
on the accuracy and reasonableness of the tax assumptions prepared by the Debtors. To the
extent that any tax assumptions indicate that the restructuring or forgiveness of debt would have
a different impact on the operating performance or cash generation of the Debtors than that
assumed herein, it may have a material effect on the valuation range included herein.



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                                         VIII.
                               CONFIRMATION OF THE PLAN

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

A.      The Confirmation Hearing

        The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a confirmation
hearing before a plan of reorganization may be confirmed. The Confirmation Hearing in respect
of the Plan has been scheduled for November 23, 2004 at 2:00 p.m. (Eastern Time), before the
Honorable Barbara J. Sellers, United States Bankruptcy Judge, at the United States Bankruptcy
Court, Southern District of Ohio, Eastern Division, United States Courthouse, 170 North High
Street, Columbus, Ohio, 43215. The Confirmation Hearing may be adjourned from time to time
by the Bankruptcy Court without further notice except for an announcement of the adjourned
date made at the Confirmation Hearing. Any objection to confirmation must be made in writing
and specify in detail the name and address of the objector, all grounds for the objection and the
amount of the Claim or number and type of shares of Equity Interest held by the objector. The
Bankruptcy Court has directed that objections, if any, to confirmation of the Plan be served and
filed so that they are received on or before November 10, 2004 at 5:00 p.m. (Eastern Time) by (i)
Dinsmore & Shohl LLP, 255 E. 5th Street, Suite 1900, Cincinnati, Ohio 45202, attention: Kim
Martin Lewis, Esq., general bankruptcy counsel for the Debtors, (ii) O’Melveny & Myers LLP,
Times Square Tower, 7 Times Square, New York, New York 10036, attention: Adam Harris,
Esq., special corporate and litigation counsel to the Debtors, (iii) McGuireWoods LLP,
Dominion Tower, 625 Liberty Ave, 23rd Floor, Pittsburgh, Pennsylvania 15222, attention: Robert
Sable, Esq., counsel for the Official Committee of Unsecured Creditors, (iv) Linklaters, 1345
Avenue of the Americas, New York, New York 10105, attention: Mark Palmer, Esq. and Martin
N. Flics, Esq., counsel to the DIP Term Loan Agent and (v) Latham & Watkins, 233 South
Wacker Drive, Suite 5800, Chicago, Illinois 60606, attention David Crumbaugh, Esq., counsel to
the DIP Senior Loan Agent. The Confirmation Hearing may be adjourned from time to time by
the Bankruptcy Court without further notice except for the announcement of the adjournment
date made at the Confirmation Hearing or any adjourned Confirmation Hearing.

        Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014.

B.      Requirements for Confirmation of the Plan

        At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of
the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for
confirmation of a plan are that the plan is (i) 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, (ii) feasible and (iii) in the “best interests” of
creditors and stockholders that are impaired under the plan.

        1.     Unfair Discrimination and Fair and Equitable Tests

        To obtain nonconsensual confirmation of the Plan, the Bankruptcy Court must determine
that the Plan “does not discriminate unfairly” and is “fair and equitable” with respect to each
impaired, non-accepting Class. The Bankruptcy Code provides a non-exclusive definition of the


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phrase “fair and equitable.” The Bankruptcy Code establishes “cram down” tests for secured
creditors, unsecured creditors and equity holders, as follows:

               (a)    Secured Creditors. 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)    Unsecured Creditors. Either (i) each non-accepting impaired unsecured
                      creditor class 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)    Equity Interests. 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.

        2.     Feasibility

        The Bankruptcy Code permits a plan to be confirmed if it is not likely to be followed by
liquidation or the need for further financial reorganization. For purposes of determining whether
the Plan meets this requirement, the Debtors have analyzed their ability to meet their obligations
under the Plan. As part of this analysis, the Debtors have prepared projections of their financial
performance for the period 2004 through 2007 (the “Projection Period”). These projections, and
the assumptions on which they are based, are included in the Projected Financial Information
annexed hereto as Exhibit C. Based upon such projections, the Debtors believe that they will be
able to make all payments required pursuant to the Plan and, therefore, that confirmation of the
Plan is not likely to be followed by liquidation or the need for further financial reorganization.
The Debtors further believe that they will be able to repay or refinance all of the then-
outstanding indebtedness under the Plan at or prior to the maturity of such indebtedness.




NY1:1514179                                    114
        3.     Best Interests Test

         With respect to each impaired class of Claims and Equity Interests, confirmation of a
plan requires that each holder of a Claim or Equity Interest either (i) accept the plan or
(ii) 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 were liquidated under chapter 7
of the Bankruptcy Code. To determine what holders of Claims and Equity Interests of each
impaired class would receive if the Debtors were liquidated under chapter 7, the Bankruptcy
Court must determine the dollar amount that would be generated from the liquidation of the
Debtors’ assets and properties in the context of a hypothetical chapter 7 liquidation case. The
cash amount which would be available for satisfaction of Claims and Equity Interests would
consist of the proceeds resulting from the disposition of the unencumbered assets and properties
of the Debtors, augmented by the unencumbered cash held by the Debtors at the time of the
commencement of the hypothetical liquidation case. Such cash amount would be reduced by the
amount of the costs and expenses of the liquidation and by such additional administrative and
priority claims that might result from the termination of the Debtors’ business and the use of
chapter 7 for the purposes of liquidation.

        The Debtors’ costs of liquidation under chapter 7 would include the fees payable to a
trustee in bankruptcy, as well as those that might be payable to attorneys and other professionals
that such a trustee might engage. In addition, Claims would arise by reason of the breach or
rejection of obligations incurred and leases and executory contracts assumed or entered into by
the Debtors during the pendency of the chapter 11 case. The foregoing types of Claims and other
Claims which might arise in a liquidation case or result from the pending chapter 11 case,
including any unpaid expenses incurred by the Debtors during the chapter 11 cases such as
compensation for attorneys, financial advisors and accountants, would be paid in full from the
liquidation proceeds before the balance of those proceeds would be made available to pay
General Unsecured Claims.

        To determine if the Plan is in the best interests of each impaired class, the present value
of the distributions from the proceeds of a liquidation of the Debtors’ unencumbered assets and
properties, after subtracting the amount attributable to the foregoing Claims, are then compared
with the value of the property offered to such classes of Claims and Equity Interests under the
Plan.

        After considering the effects that a chapter 7 liquidation would have on the ultimate
proceeds available for distribution to creditors in the Chapter 11 Cases, including (i) the
increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a
trustee in bankruptcy and professional advisors to such trustee, (ii) the erosion in value of assets
in a chapter 7 case in the context of the expeditious liquidation required under chapter 7 and the
“forced sale” atmosphere that would prevail, and (iii) the substantial increases in Claims that
would be satisfied on a priority basis or on parity with creditors in the Chapter 11 Cases, the
Debtors have determined that confirmation of the Plan will provide each holder of an Allowed
Claim or Equity Interest with a recovery that is not less than such holder would receive pursuant
to liquidation of the Debtors under chapter 7.




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        The Debtors also believe that the value of any distributions to each class of Allowed
Claims in a chapter 7 case, including all Secured Claims, would be less than the value of
distribution under the Plan because such distributions in a chapter 7 case would not occur for a
substantial period of time after such cases were to begin. It is likely that distribution of the
proceeds of the liquidation could be delayed after the completion of such liquidation in order to
resolve Claims and prepare for distributions. In the likely event litigation was necessary to
resolve Claims asserted in the chapter 7 case, the delay could be prolonged.

        The Debtors’ Liquidation Analysis is attached hereto as Exhibit D. The information set
forth in Exhibit D provides a summary of the liquidation values of the Debtors’ assets assuming
a chapter 7 liquidation in which a trustee appointed by the Bankruptcy Court would liquidate the
assets of the Debtors’ Estates. Reference should be made to the Liquidation Analysis for a
complete discussion of the Liquidation Analysis.

        Underlying the Liquidation Analysis are a number of estimates and assumptions that,
although developed and considered reasonable by management, are inherently subject to
significant economic and competitive uncertainties and contingencies beyond the control of the
Debtors and their management. The Liquidation Analysis is also based on assumptions with
regard to liquidation decisions that are subject to change. Accordingly, the values reflected
might not be realized if the Debtors were, in fact, to undergo such a liquidation. The chapter 7
liquidation period is assumed to be more than one year, allowing for, among other things, the
discontinuation of operations, selling of assets and collection of receivables.

                                IX.
     ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN

        The Debtors have evaluated alternatives to the Plan, including the liquidation of the
Debtors. After studying these alternatives, the Debtors have concluded that the Plan is the best
alternative and will maximize recoveries by parties in interest, assuming confirmation of the
Plan. The following discussion provides a summary of the Debtors’ analysis leading to its
conclusion that a liquidation or alternative plan of reorganization would not provide the highest
value to parties in interest.

A.      Liquidation Under Chapter 7

        If no plan of reorganization can be confirmed, the Debtors’ Chapter 11 Cases may be
converted to cases under chapter 7 of the Bankruptcy Code in which one or more trustees would
be elected or appointed to liquidate the assets of the Debtors for distribution to its creditors in
accordance with the priorities established by the Bankruptcy Code. A discussion of the effect
that a chapter 7 liquidation would have on the recovery of holders of Allowed Claims and
Allowed Equity Interests is set forth in Article VIII, Section B. 3., entitled “Best Interests Test”.
The Debtors believe that liquidation under chapter 7 would result in (i) smaller distributions
being made to creditors than those provided for in the Plan, and (ii) the failure to realize the
greater going concern value of the Debtors’ assets.




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B.      Alternative Plan of Reorganization

        If the Plan is not confirmed, the Debtors or any other party in interest could attempt to
formulate a different plan. Such a plan might involve either a reorganization and continuation of
the Debtors’ business or an orderly liquidation of their assets. The Debtors believe that the Plan,
as described herein, enables holders of Claims to realize the greatest recovery under the
circumstances. In a liquidation under chapter 11, the Debtors’ assets would be sold in an orderly
fashion over a more extended period of time than in a liquidation under chapter 7, resulting in
greater proceeds than under chapter 7. Further, if a trustee were not appointed, because one is
not required in chapter 11 cases, the expenses for professional fees would most likely be lower
than in chapter 7 cases. Although preferable to a chapter 7 liquidation, the Debtors believe that a
liquidation under chapter 11 is a much less attractive alternative to holders of Claims than the
Plan because the return to holders of Claims and Equity Interests provided for in the Plan is
likely to be greater than the returns under a chapter 11 liquidation.

                                    X.
               FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

A.      Introduction

        The following discussion summarizes certain federal income tax consequences of the
implementation of the Plan to the Debtors and certain holders of Claims. The following
summary does not address the federal income tax consequences to holders whose Claims are
entitled to reinstatement or payment in full in cash under the Plan (e.g., holders of Administrative
Expense Claims, Other Priority Claims, Secured Claims, DIP Senior Lender Claims, DIP Term
Loan Lender Claims, Insured Claims, Settled Environmental Claims, and Subsidiary Equity
Interests) or holders of Old Parent Equity Interests.

        The following summary is based on the Internal Revenue Code of 1986, as amended (the
“Tax Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published
administrative rules and pronouncements of the Internal Revenue Service (the “IRS”) as in effect
on the date hereof. Changes in such rules or new interpretations thereof may have retroactive
effect and could significantly affect the federal income tax consequences described below.

        The federal income tax consequences of the Plan are complex and are subject to
significant uncertainties. The Debtors have not requested a ruling from the IRS or an opinion of
counsel with respect to any of the tax aspects of the Plan. Thus, no assurance can be given as to
the interpretation that the IRS will adopt. In addition, this summary does not address foreign,
state or local tax consequences of the Plan, nor does it purport to address the federal income tax
consequences of the Plan to special classes of taxpayers (such as foreign taxpayers, broker-
dealers, banks, mutual funds, insurance companies, financial institutions, small business
investment companies, regulated investment companies, tax-exempt organizations, and investors
in pass-through entities).

       This discussion assumes that the various debt and other arrangements to which the
Debtors are a party will be respected for federal income tax purposes in accordance with their
form.


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      ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS
NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON
THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM. ALL
HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR
THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE
UNDER THE PLAN.

B.      Consequences to the Debtors

        1.     Cancellation of Debt

        The Tax Code provides that a debtor in a bankruptcy case must reduce certain of its tax
attributes - such as net operating loss (“NOL”) carryforwards, current year NOLs, tax credits and
tax basis in assets --by the amount of any cancellation-of-indebtedness income (“COD”) realized
by such debt in connection with the bankruptcy case. COD is the amount by which the
indebtedness discharged (reduced by any unamortized discount) exceeds the fair market value of
any consideration given in exchange therefor, subject to certain statutory or judicial exceptions
that can apply to limit the amount of COD (such as where the payment of the cancelled debt
would have given rise to a tax deduction). On August 29, 2003, the IRS issued proposed and
temporary regulations addressing the method for applying the attribute reduction described
above to an affiliated group filing a consolidated federal income tax return. The regulations are
effective with respect to COD occurring after August 29, 2003. Under these regulations, the
attributes of the debtor member are first subject to reduction. These attributes include: (1)
consolidated attributes of the debtor member; (2) attributes that arose in separate return
limitation years of the debtor member; and (3) the basis of property of the debtor member. To
the extent that the excluded COD exceeds the attributes of the debtor member, the regulations
generally require the reduction of attributes of other members. If the attributes of the debtor
member reduced under the above rules is the basis of stock of another member of the group, a
“look-through rule” applies requiring that corresponding adjustments be made to the attributes of
the lower-tier member.

        As a result of the discharge of Claims pursuant to the Plan, the Debtors will realize COD.
The extent of such COD and resulting tax attribute reduction will depend, in part, on the value of
the New Common Stock distributed. Based on the estimated reorganization value of the
Reorganized Debtors, it is anticipated that the Reorganized Debtors will realize a significant
amount of COD. Consequently, there will be material reductions in the attributes (including
consolidated NOL carryforwards and current year NOLs (if any)) of the Debtors. Other tax
attributes may also be reduced. To the extent that asset basis is reduced, depreciation or
amortization of assets would also be reduced, and gain recognized (and therefore tax imposed) in
connection with the disposition of such assets may be increased.

        2.     Limitation on NOL Carryforwards and Other Tax Attributes

       The Debtors expect to report consolidated NOL carryforwards for federal income tax
purposes for the taxable year ending December 31, 2003. In addition, the Debtors expect to




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incur additional losses during the taxable year ending December 31, 2004. The amount of the
Debtors’ losses and NOL carryforwards remains subject to adjustment by the IRS.

        Following the implementation of the Plan, any remaining NOL and tax credit
carryforwards and, possibly, certain other tax attributes of the Reorganized Debtors allocable to
periods prior to the Effective Date (collectively, “pre-change losses”) may be subject to
limitation under section 382 of the Tax Code as a result of the change in ownership of the
Reorganized Debtors.

        Under section 382, if a corporation undergoes an “ownership change” and the corporation
does not qualify for (or elects out of) the special bankruptcy exception discussed below, the
amount of its pre-change losses that may be utilized to offset future taxable income is subject to
an annual limitation. Such limitation also may apply to certain losses or deductions that are
“built-in” (i.e., economically accrued but unrecognized) as of the date of the ownership change
and that are subsequently recognized. The issuance of the New Common Stock pursuant to the
Plan will constitute an ownership change of the Reorganized Debtors.

               (a)     General Section 382 Annual Limitation

        In general, the amount of the annual limitation to which a corporation (or a consolidated
group) that undergoes an ownership change would be subject is equal to the product of (i) the
fair market value of the stock of the corporation (or, in the case of a consolidated group, the
parent corporation) immediately before the ownership change (with certain adjustments)
multiplied by (ii) the “long-term tax-exempt rate” in effect for the month in which the ownership
change occurs. The “long-term tax-exempt rate” is published by the Treasury Department and is
intended to reflect the yield that Treasury bonds would produce if they were tax-exempt (the rate
is 4.72% for ownership changes occurring in July 2004). For a corporation (or consolidated
group) in bankruptcy that undergoes the ownership change pursuant to a confirmed plan, the
stock value generally is determined immediately after (rather than before) the ownership change,
and certain adjustments that ordinarily would apply, do not apply.

        Any unused limitation may be carried forward, thereby increasing the annual limitation in
the subsequent taxable year. However, if the corporation (or the consolidated group) does not
continue its historic business, or use a significant portion of its assets in a new business for two
years after the ownership change, the annual limitation resulting from the ownership change is
zero.

        In addition, any annual limitation resulting from the implementation of the Plan is in
addition to, and not in lieu of, any limitations due to prior ownership changes. Accordingly,
were the Debtors to undergo an ownership change in advance of the consummation of the Plan at
a time when Ormet is still insolvent, all NOL carryforwards incurred through the date of such
change would be subject to an annual limitation of zero, eliminating the general ability of the
Debtors to utilize such NOL carryforwards against future operating income. Under section 382,
the claiming of a worthless stock deduction by a shareholder that, as of the end of the taxable
year for which the deduction is claimed, owns over 50-percent of the corporation’s stock is an
automatic ownership change of the corporation, effective the first day of the shareholder’s
following taxable year. It is the Debtors’ belief that the automatic stay precludes a “50-percent


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shareholder” from claiming a worthless stock deduction (absent Bankruptcy Court approval)
during the pendency of the Chapter 11 cases. Moreover, the Plan would expressly preclude a 50-
percent shareholder of Ormet from claiming a worthless stock deduction with respect to its Old
Parent Equity Interest for any taxable year of such shareholder ending prior to the Effective Date.

        As indicated above, section 382 can operate to limit built-in losses recognized subsequent
to the date of the ownership change. If a loss corporation (or consolidated group) has a net
unrealized built-in loss at the time of an ownership change (taking into account most assets and
items of “built-in” income and deduction), then any built-in losses recognized during the
following five years (up to the amount of the original net built-in loss) generally will be treated
as pre-change losses and similarly will be subject to the annual limitation. Conversely, if the loss
corporation (or consolidated group) has a net unrealized built-in gain at the time of an ownership
change, any built-in gains recognized during the following five years (up to the amount of the
original net built-in gain) generally will increase the annual limitation in the year recognized,
such that the loss corporation (or consolidated group) would be permitted to use its pre-change
losses against such built-in gain income in addition to its regular annual allowance. Although the
rule applicable to net unrealized built-in losses generally applies to consolidated groups on a
consolidated basis; certain corporations that join the consolidated group within the preceding five years
may not be able to be taken into account in the group computation of net unrealized built-in loss.
Such corporations would nevertheless still be taken into account in determining whether the
consolidated group has a net unrealized built-in gain. In general, a loss corporation’s (or
consolidated group’s) net unrealized built-in gain or loss will be deemed to be zero unless it is
greater than the lesser of (i) $10 million or (ii) 15% of the fair market value of its assets (with
certain adjustments) before the ownership change. The Debtors anticipate that it will be in a net
unrealized built-in gain position on the Effective Date.

        3.      Alternative Minimum Tax

        In general, a federal alternative minimum tax (“AMT”) is imposed on a corporation’s
alternative minimum taxable income at a 20% rate to the extent that such tax exceeds the
corporation’s regular federal income tax. For purposes of computing taxable income for AMT
purposes, certain tax deductions and other beneficial allowances are modified or eliminated. In
particular, even though a corporation otherwise might be able to offset all of its taxable income
for regular tax purposes by available NOL carryforwards, only 90% of a corporation’s taxable
income for AMT purposes may be offset by available NOL carryforwards (as computed for
AMT purposes). However, recent legislation provides for a temporary waiver of this limitation
for AMT NOL carrybacks or carryforwards originating in years ending in 2003, 2004, or 2005.

         In addition, if a corporation (or consolidated group) undergoes an “ownership change”
within the meaning of section 382 of the Tax Code and is in a net unrealized built-in loss
position on the date of the ownership change, the corporation’s (or group’s) aggregate tax basis
in its assets would be reduced for certain AMT purposes to reflect the fair market value of such
assets as of the change date.

        Any AMT that a corporation pays generally will be allowed as a nonrefundable credit
against its regular federal income tax liability in future taxable years when the corporation is no
longer subject to the AMT.


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C.      Consequences to Holders of Certain Claims

        1.     Consequences to Holders of General Unsecured Claims

         Pursuant to the Plan, holders of General Unsecured Claims will receive, in satisfaction
and discharge of their Claims, New Common Stock or Cash. The federal income tax
consequences to holders of General Unsecured Claims of receiving New Common Stock depend,
in part, on whether such Claims constitute “securities” for federal income tax purposes. The
term “security” is not defined in the Tax Code or in the regulations issued thereunder and has not
been clearly defined by judicial decisions. The determination of whether a particular debt
constitutes a “security” depends on an overall evaluation of the nature of the debt. One of the
most significant factors considered in determining whether a particular debt is a security is its
original term. In general, debt obligations issued with a weighted average maturity at issuance of
five years or less (trade debt and revolving credit obligations) do not constitute securities,
whereas debt obligations with a weighted average maturity at issuance of ten years or more
constitute securities. The Debtors believe, and the following discussion assumes, that the
General Unsecured Claims do not constitute “securities,” and thus that the exchange of such
Claims for New Common Stock will not constitute a “recapitalization” for federal income tax
purposes.

        Accordingly, in general, each holder of a General Unsecured Claim will recognize gain
or loss (to the extent such loss is not otherwise disallowed) upon receipt of New Common Stock
or Cash. For a discussion of the tax consequences of Claims for accrued interest, see Article X.
Section C. 5., entitled, “Distributions in Discharge of Accrued but Unpaid Interest.” Any gain
recognized by a holder will be treated as ordinary income to the extent of (i) any bad debt
deductions (or additions to a bad debt reserve) claimed with respect to its Claim and any ordinary
loss deductions incurred upon satisfaction of its Claim, and (ii) with respect to a cash-basis
holder, any amounts which would have been included in its gross income if the holder’s Claim
had been satisfied in full but which were not included by reason of the cash method of
accounting. In general, a holder’s aggregate tax basis in any New Common Stock received in
satisfaction of its Claim will equal the holder’s aggregate adjusted tax basis in such Claim plus
any gain or minus any loss recognized on the exchange of its Claims for New Common Stock.
In general, the holder’s holding period for such New Common Stock will not include the holding
period of its prior General Unsecured Claim.

        2.     Consequences to Holders of Old Debt Claims

       Pursuant to the Plan, holders of Old Debt Claims will receive, in satisfaction and
discharge of their Old Debt Claims, New Common Stock.

        Recapitalization Exchange. The federal income tax consequences to holders of Old Debt
Claims of receiving New Common Stock depend, in part, on whether such Claims constitute
“securities” for federal income tax purposes. For a discussion of what constitutes a “security”
for federal income tax purposes, see Article X. Section C. 1., entitled “Consequences to Holders
of General Unsecured Claims,” above. The Debtors believe, and the following discussion
assumes, that the Old Debt Claims constitute “securities,” and thus that the exchange of such
Claims for New Common Stock will constitute a “recapitalization” for federal income tax


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purposes. Accordingly, in general, each holder of a Old Debt Claim will not recognize gain or
loss upon receipt of New Common Stock. For a discussion of the tax consequences of Claims
for accrued interest, see Article X. Section C. 5., entitled, “Distributions in Discharge of Accrued
but Unpaid Interest.”.

        In general, a holder’s aggregate tax basis in the New Common Stock received in
satisfaction of its Old Debt Claim will equal the holder’s aggregate adjusted tax basis in such Old
Debt Claim (including with respect to accrued but unpaid interest). In general, the holder’s
holding period for such consideration will include the holder’s holding period for its Old Debt
Claim, except to the extent that the consideration was issued in respect of an Old Debt Claim for
accrued but unpaid interest.

        Subsequent Sale of New Common Stock. Any gain or loss recognized by a holder upon a
subsequent sale or other taxable disposition of the New Common Stock received pursuant to the
Plan will generally be treated as capital gain or loss equal to the difference between the amount
realized by such holder on the disposition and the holder’s adjusted tax basis in the New
Common Stock. Subject to the market discount rules discussed below, such capital gain or loss
will be long-term if the holder’s holding period for the New Common Stock exceeds one year at
the time of disposition. For taxable years through 2008, net long-term capital gains of non-
corporate holders generally are taxed at a maximum rate of 15%. The deduction of capital losses
is subject to certain limitations. For a discussion of the tax consequences of holders of Old Debt
Claims with accrued market discount, see Article X. Section C. 4., entitled “Tax Treatment of
Market Discount.”

        3.     Consequences to Holders of Formcast Unsecured Claims

        Pursuant to the Plan, each holder of an Allowed Formcast Unsecured Claim will receive
its Pro Rata Share of the proceeds of the sale of the assets of Formcast not subject to a Lien.
Such holder will recognize gain or loss in an amount equal to the difference between (i) the
amount of cash received by such holder in satisfaction of its Claim (other than for accrued but
unpaid interest) and (ii) the holder’s adjusted tax basis in its Claim (other than any Claim for
accrued but unpaid interest). For a discussion of the tax consequences of Claims for accrued
interest, see Article X. Section C. 5., entitled, “ Distributions in Discharge of Accrued but
Unpaid Interest.” Where gain or loss is recognized by a holder, the character of such gain or loss
as long-term or short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the Claim constitutes a
capital asset in the hands of the holder and how long it has been held, whether the Claim was
acquired at a market discount, and whether and to what extent the holder previously had claimed
a bad debt deduction.




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        4.     Tax Treatment of Market Discount

         A holder of Old Debt Claims or Formcast Unsecured Claims that acquired such Claims
after their original issuance at a market discount (generally defined in the case of a debt
obligation, as the amount, if any, by which a holder’s tax basis in a debt obligation immediately
after its acquisition is exceeded by the adjusted issue price of the debt obligation) will be
required to treat any gain recognized upon the exchange of Old Debt Claims or Formcast
Unsecured Claims as ordinary income to the extent of the market discount accrued during the
holder’s period of ownership, unless the holder has elected to include the market discount in
income as it accrues.

       The amount of any market discount accrued on an Old Debt Claim exchanged solely for
New Common Stock should not be recognized on the exchange but would carry-over to the
nonrecognition property received in the exchange. In such case, any gain recognized by the
holder upon a subsequent disposition of such New Common Stock would also be treated as
ordinary income to the extent of any accrued market discount not previously included in income.

        5.     Distributions in Discharge of Accrued but Unpaid Interest

        In general, to the extent that any amount received by a holder of a Claim (including in the
form New Common Stock) is received in satisfaction of accrued interest, such amount will be
taxable to the holder as interest income (if not previously included in the holder’s gross income).
Conversely, a holder generally recognizes a deductible loss to the extent any accrued interest
claimed or amortized original issue discount (“OID”) was previously included in its gross
income and is not paid in full. However, the IRS has privately ruled that a holder of a security,
in an otherwise tax-free exchange, could not claim a current deduction with respect to any unpaid
OID. Accordingly it is also unclear whether, by analogy, a holder of a Claim with previously
included OID that is not paid in full would be required to recognize a capital loss rather than an
ordinary loss.

        Pursuant to the Plan, all distributions in respect of Claims will be allocated first to the
principal amount of such Claims, as determined for federal income tax purposes, and thereafter,
to the portion of such claim, if any representing accrued but unpaid interest. However, there is
no assurance that such allocation will be respected by the IRS.

       Each holder of a Claim is urged to consult its tax advisor regarding the allocation of
consideration and the deductibility of unpaid interest or amortized OID for tax purposes.

        6.     Information Reporting and Withholding

        All distributions to holders of Claims under the Plan are subject to any applicable
withholding (including employment tax withholding). Under federal income tax law, interest,
dividends, and other reportable payments may, under certain circumstances, be subject to
“backup withholding” (currently, at the rate of 28%). Backup withholding generally applies if
the holder (a) fails to furnish its social security number or other taxpayer identification number
(“TIN”), (b) furnishes an incorrect TIN, (c) fails properly to report interest or dividends, or (d)
under certain circumstances, fails to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not subject to backup


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withholding. Backup withholding is not an additional tax but merely an advance payment, which
may be refunded to the extent it results in an overpayment of tax. Certain persons are exempt
from backup withholding, including, in certain circumstances, corporations and financial
institutions.

       The foregoing summary has been provided for informational purposes only. All
holders of Claims are urged to consult their tax advisors concerning the federal, state, local,
and other tax consequences applicable under the Plan.

                        [Remainder of Page Intentionally Left Blank]




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                                     XI.
                      CONCLUSIONS AND RECOMMENDATIONS

        Based upon the foregoing, the Debtors believe that confirmation of the Plan will provide
the greatest recovery for all holders of Allowed Claims against the Debtors, and recommend that
all holders of Allowed Claims in Classes that are Impaired and entitled to vote on the Plan vote
to accept the Plan.



                                            ORMET CORPORATION
                                            (for itself and on behalf of each of the other Debtors
                                            and Debtors In Possession)



                                            By:
                                                    R. Emmett Boyle
                                                    Chairman of the Board and
                                                    Chief Executive Officer




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