UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS. v. C.A. No MLW

Transcription

1 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS IN RE MOLTEN METAL TECHNOLOGY, INC. SECURITIES LITIGATION C.A. No MLW MARILYN AXLER, et al., Plaintiffs, SCIENTIFIC ECOLOGY GROUP, INC. and H.W. BUD ARROWSMITH, v. C.A. No MLW Defendants. NOTICE OF PENDENCY OF CLASS ACTIONS, HEARING ON PROPOSED SETTLEMENTS AND ATTORNEYS FEE PETITIONS AND RIGHT TO SHARE IN SETTLEMENT FUNDS TO: ALL PERSONS WHO PURCHASED THE COMMON STOCK OF MOLTEN METAL TECH- NOLOGY, INC. ( MOLTEN METAL ) IN THE OPEN MARKET DURING THE PERIOD MARCH 28, 1995 THROUGH AND INCLUDING MAY 27, 1997, AND WERE DAMAGED THEREBY. THIS NOTICE EXPLAINS IMPORTANT RIGHTS YOU MAY HAVE AS A RESULT OF SETTLEMENTS OF THESE TWO RELATED CLASS ACTIONS FOR A TOTAL AMOUNT OF $ MILLION PLUS INTEREST. PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL BE AFFECTED BY PRO- CEEDINGS IN THESE ACTIONS. IF YOU ARE A CLASS MEMBER, YOU MAY BE ENTITLED TO RECEIVE BENEFITS PURSUANT TO THE PROPOSED SETTLEMENTS DESCRIBED HEREIN. CLAIMS DEADLINE: TO SHARE IN THE SETTLEMENT PROCEEDS, CLAIMANTS MUST SUBMIT THE ACCOMPANYING PROOF OF CLAIM, POSTMARKED ON OR BEFORE JULY 17, EXCLUSION DEADLINE: REQUESTS FOR EXCLUSION FROM THE CLASS MUST BE FILED SO AS TO BE RECEIVED NO LATER THAN JULY 23, SECURITIES BROKERS AND OTHER NOMINEES: PLEASE SEE INSTRUCTIONS ON PAGE 10 HEREIN. NOTICE IS HEREBY GIVEN, pursuant to Rule 23 of the Federal Rules of Civil Procedure and two Orders for Notice and Hearing of the United States District Court for the District of Massachusetts (the Court ) both dated March 9, 2001, that a hearing will be held before the Honorable Mark L. Wolf in Courtroom No. 10 of the United States Courthouse, One Courthouse Way, Boston, Massachusetts 02210, at 3 p.m., on August 6, 2001 (the Settlement Fairness Hearing ) to determine whether the proposed settlements (the Settlements ) of the above-captioned action (the Actions ), as set forth in a Revised Stipulation of Settlement dated March 7, 2001 (the Molten Metal Stipulation ) and a Stipulation of Settlement dated March 7, 2001 (the SEG Stipulation ), should be approved as fair, reasonable and adequate, and to consider approval of the Plan of Allocation and the application of class counsel for attorneys fees and reimbursement of expenses. The Court, by the Order for Notice and Hearing in the Molten Metal Action, has conditionally certified, for purposes of settlement, a plaintiff class (the Class ) consisting of all persons or entities who purchased the common stock of Molten Metal Technology, Inc. ( Molten Metal ) in the open market during the period March 28, 1995 through and including May 27, 1997 (the Class Period ), and were damaged thereby. Excluded from the Class are the Defendants in the Molten Metal Action, any officer or director of Molten Metal during the Class Period, any entity in which Defendants had a controlling interest prior to such entity s purchase of Molten Metal common stock during the Class

2 Period, any members of their immediate families, heirs, successors or assigns, and any persons who properly request exclusion pursuant to paragraph 47 below. The Court, by the Order for Notice and Hearing in the SEG Action, has conditionally certified, for purposes of settlement, a plaintiff class (the Class ) consisting of all persons or entities who purchased the common stock of Molten Metal in the open market during the period August 22, 1995 through and including October 18, 1996 (the Class Period ), and were damaged thereby. Excluded from the Class are Defendants herein, directors, officers, parents or affiliates of Scientific Ecology Group, Inc. ( SEG ) or Molten Metal during the Class Period, any entity in which any of the foregoing had a controlling interest prior to such entity s purchase of Molten Metal common stock during the Class Period, any members of their immediate families, their heirs, successors or assigns, and any persons who properly request exclusion pursuant to paragraph 47 below. Purpose of this Notice SUMMARY OF SETTLEMENTS AND RELATED MATTERS This Notice is given to inform you of your rights in these Actions and with regard to the proposed Settlements. It describes what steps you may take in relation to these Actions. The Settlements will affect all Class Members rights. This Notice is not an expression of any opinion by the Court as to the merits of any claims or any defenses asserted by any party in these Actions, or the fairness or adequacy of the proposed Settlements. Statement of Plaintiffs Recovery The combined amount of both Settlements proposed to be distributed to the Class is $ million, plus interest earned prior to distribution to the Class. Based on estimates of the number of shares entitled to participate in these Settlements, the average distribution per share will be approximately $.81 plus interest, but before deduction of fees and expenses as may be approved by the Court. 1 This estimate assumes that all eligible Class Members submit claims. A detailed explanation of how each Class Member s claim will be calculated is governed by and is set forth in the Plan of Allocation contained in this Notice. The Plan of Allocation is subject to approval by the Court. Statement of Potential Outcome of Cases The parties disagree on the average amount of damages per share that would be recoverable if either of these Actions had proceeded to trial and the Class had prevailed on every claim and contention asserted. The issues on which the parties disagree include (1) the appropriate economic model for determining the amount by which Molten Metal s common stock was allegedly artificially inflated (if at all) during the Class Period; (2) the extent to which external factors, such as general market and industry conditions, influenced the trading price of Molten Metal s common stock at various times during the Class Period; (3) whether Defendants public statements during the Class Period were materially false or misleading or otherwise actionable under the federal securities laws; and (4) the extent to which the various matters that Plaintiffs alleged were materially false or misleading influenced (if at all) the trading price of Molten Metal s common stock at various times during the Class Period. Reasons for Settlements Lead Plaintiffs believe that the proposed Settlements are in the best interest of the Class because of the risk associated with further litigation and trial and the additional delay in distributing proceeds to Class Members from further litigation. For example, Plaintiffs are required to prove not only that Defendants made statements that were false or misleading, but also that those statements were material to investors and that Defendants made these statements with an intent to defraud investors. Proof of the amount of damages would also be vigorously contested by Defendants. 1 The Plan of Allocation described in this Notice provides several formulas for calculating the Recognized Losses of Class Members depending upon when they purchased and/or sold Molten Metal common stock. Therefore, the estimated amount of the average distribution per share is different depending upon when Class Members purchased and sold Molten Metal shares. For example, for shares purchased during the period from August 22, 1995 until October 18, 1996 (the date that a Molten Metal announcement precipitated a 50% decline in the price of Molten Metal stock) and not sold before October 18, 1996, the average distribution per share is estimated to be approximately $

3 Statement of Attorneys Fees and Costs Sought Plaintiffs counsel intend to apply for payment of fees out of the Settlement Funds of up to 30% of the Settlement Funds, and for reimbursement out of the Settlement Funds of expenses incurred in connection with the prosecution of these Actions, excluding costs of notice and settlement administration, in the approximate amount of not more than $350,000. If the amount requested for fees and expenses is approved by the Court, the average cost per share of such fees and expenses would be approximately $.26. Further Information Further information regarding the litigation and this Notice may be obtained by contacting Plaintiffs Co-Lead Counsel: Thomas Shapiro, Esq., Shapiro Haber & Urmy LLP, 75 State Street, Boston, MA 02109; or Norman Berman, Esq., Berman, DeValerio & Pease LLP, One Liberty Square, Boston, MA Questions regarding the Proof of Claim form should be addressed to: Settlement Administrator Molten Metal Technology, Inc. Securities Litigation c/o David Berdon & Co. LLP P.O. Box 9014 Jericho, New York Telephone: Facsimile: Website: A. The Molten Metal Action SUMMARY OF THE ACTIONS 1. Beginning in February 1997, five putative class actions were filed against Molten Metal and seven of its current or former officers and directors, Benjamin T. Downs, William M. Haney, III, Christopher J. Nagel, Victor G. Gatto, Jr., John T. Preston, Maurice F. Strong, and Ian C. Yates (collectively, the Individual Defendants and with Molten Metal, the Defendants ) alleging violations of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the Exchange Act ), 15 U.S.C. 78, et seq., and Rule 10b-5, 17 C.F.R b-5, and asserting various claims for negligent misrepresentation and common law fraud. 2. On May 23, 1997, the Court entered an order granting Plaintiffs motion to consolidate the five pending actions under one case caption identified as In re Molten Metal Technology, Inc. Securities Litigation, Civil Action No MLW (collectively, the Action ); appointing Lead Plaintiffs; appointing Shapiro Haber & Urmy LLP and Berman, DeValerio and Pease LLP as Plaintiffs Co-Lead Counsel ; and designating additional Plaintiffs counsel (collectively, Plaintiffs Counsel ). 3. On October 30, 1997, Lead Plaintiffs filed a Consolidated Class Action Complaint which named Molten Metal and each of the Individual Defendants as Defendants, asserted claims under Sections 10(b), 20(a), and 20A of the Exchange Act and Rule 10b-5, and alleged state law claims for negligent misrepresentation and common law fraud. 4. On December 3, 1997, Molten Metal and several of its affiliated companies filed in the United States Bankruptcy Court for the District of Massachusetts (the Bankruptcy Court ) a petition for reorganization under Section 301 of the Bankruptcy Code. 5. A motion for relief from stay was filed, and an order modifying the stay thereafter was entered by the Bankruptcy Court on December 23, On February 11, 1999, Lead Plaintiffs filed an Amended Consolidated Class Action Complaint (the Second Consolidated Complaint ). 7. All Defendants then moved to dismiss all claims asserted against them. Defendants contended that the statements 3

4 in question were accurate when made, and, if not accurate, were not made with the requisite fault to support liability. Plaintiffs opposed these motions, and reply briefs were filed. The motions to dismiss remain pending. 8. On July 19, 1999, representatives of the Settling Parties and their counsel met to mediate the claims asserted in the Litigation. The mediation resulted in an agreement in principle. 9. The Chapter 11 Trustee in Bankruptcy for Molten Metal ( Trustee ) objected to the settlement and to the use of the proceeds of certain insurance policies that named as insureds Molten Metal and its directors and officers to pay the settlement consideration. The Trustee filed a motion in the Bankruptcy Court to vacate the earlier Bankruptcy Court Order lifting the stay of this proceeding and the Trustee filed an objection to the settlement in the District Court. On November 29, 2000, the Bankruptcy Court denied the Trustee s motion to vacate on the grounds that it had not been timely filed. The Trustee filed an appeal from that order which remains pending. The Trustee s objection to the settlement filed in the District Court is also pending. 10. In January 2001, Plaintiffs and the Trustee reached a compromise of the Trustee s objection to the settlement and the use of the insurance proceeds, pursuant to which Plaintiffs have agreed to pay the Trustee $1.325 million out of the $11.91 million settlement of this action. This leaves a net settlement amount of $ million plus interest earned to date. Interest will continue to be earned on the settlement amount from the present time until distribution to the Class. 11. Counsel for the Lead Plaintiffs have conducted informal discovery and investigation. The investigation has included, inter alia, (i) inspection of the licensing files of the Tennessee Department of Environment and Conservation and the Massachusetts Department of Environmental Protection; (ii) review of the public documents and press releases of Molten Metal; (iii) review of documents of the United States Department of Energy; (iv) interviews with witnesses; and (v) consultations with experts. 12. Lead Plaintiffs, by their counsel, have conducted discussions and arms-length negotiations with counsel for the Individual Defendants with respect to a compromise and settlement of the Litigation with a view to settling the issues in dispute and achieving the best relief possible consistent with the interests of the Class. 13. Based upon their investigation as set forth above, Co-Lead Counsel have concluded that the terms and conditions of the Settlement are fair, reasonable and adequate to the Class, and have agreed to settle the claims raised in the Litigation pursuant to the terms and provisions of this Settlement, after considering (a) the substantial benefits that the members of the Class will receive from the Settlement, (b) the attendant risks of litigation, and (c) the desirability of permitting the Settlement to be consummated. B. The Scientific Ecology Group Action 14. On January 28, 1998, this punitive class action was filed against Scientific Ecology Group, Inc. ( SEG ) and its former president, H.W. Bud Arrowsmith ( Arrowsmith ) (collectively, the SEG Defendants ) alleging violations of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (the Exchange Act ), 15 U.S.C. 78, et seq., and Rule 10b-5, 17 C.F.R b-5 and a claim for common law fraud. In particular, the complaint alleged that the SEG Defendants issued false and misleading statements concerning a waste processing plant in Tennessee constructed by a joint venture of SEG and Molten Metal, which statements allegedly inflated the price of Molten Metal stock. 15. On June 4, 1998, an Amended Complaint was filed. 16. The SEG Defendants moved to dismiss all claims asserted against them. Plaintiffs opposed the motion which was fully briefed and argued orally before the Court. 17. By Memorandum and Order dated May 21, 1999, the Court denied the motion to dismiss. However, the Court observed that one of the grounds of the motion for dismissal that the complaint had not been timely filed within the period allowed by law (the statute of limitations defense ) raised a substantial issue, but that the issue had to be decided by summary judgment rather than by a motion to dismiss the complaint. In its Memorandum and Order denying the motion to d ismiss, the Court limited discovery to the statute of limitations defense and established a schedule for presentation and decision of a motion by Defendants for summary judgment on the statute of limitations defense. 18. The SEG Defendants then commenced discovery of plaintiffs with respect to the statute of limitations defense. That discovery was ongoing at the time a settlement was agreed upon. 4

5 19. Prior to filing this Action, counsel for the Lead Plaintiffs conducted informal discovery and investigation. The investigation has included, inter alia, (i) inspection of the licensing files of the Tennessee Department of Environment and Conservation; (ii) review of the public documents and press releases of Molten Metal and SEG; (iii) interviews with witnesses; and (iv) consultations with experts. 20. Lead Plaintiffs, by their counsel, have conducted discussions and arms-length negotiations with counsel for the SEG Defendants with respect to a compromise and settlement of the litigation with a view to settling the issues in dispute and achieving the best relief possible consistent with the interests of the Class. 21. Based upon their investigation as set forth above, Co-Lead Counsel have concluded that the terms and conditions of the Settlement are fair, reasonable and adequate to the Class, and have agreed to settle the claims raised in the litigation pursuant to the terms and provisions of this Settlement, after considering (a) the substantial benefits that the members of the Class will receive from the Settlement, (b) the attendant risks of litigation, and (c) the desirability of permitting the Settlement to be consummated. BACKGROUND TO THE SETTLEMENTS 22. After informing themselves as to the strengths and weaknesses of their cases, Plaintiffs Co-Lead Counsel entered into separate settlement discussions at different times with the Defendants in both actions. In determining to enter into settlement discussions, Plaintiffs Co-Lead Counsel took into consideration the substantial expense and length of time necessary to prosecute the Actions through trial, post-trial motions and likely appeals, and the fact of Molten Metal s bankruptcy filing, and the significant uncertainties in predicting the outcome in these complex Actions. 23. The parties engaged in extensive armslength settlement negotiations over many months, including mediation of the Molten Metal Action before a professional mediator, before agreeing to the proposed Settlements contained herein. 24. Plaintiffs Co-Lead Counsel also took into consideration the uncertainty as to the Trustee s claim that the proceeds of the insurance policies were an asset of the bankruptcy estate and could not be used to pay the settlement of the Molten Metal Action, as well as the length of time necessary to litigate the Trustee s objections in the Bankruptcy Court, the District Court, and on appeal. 25. Lead Plaintiffs recognized the uncertainty and risk of the outcome of any litigation, especially complex litigation such as this, and the difficulty and risks inherent in the trial of such an action. Based upon their consideration of all of these factors, Lead Plaintiffs and Plaintiffs Counsel have concluded that the Settlements are fair, reasonable and adequate to, and in the best interests of, the Members of the Class. 26. The Defendants in both actions, while continuing to deny all allegations of wrongdoing or liability whatsoever, desired to settle and terminate all existing or potential claims against them, without in any way acknowledging any fault or liability in order to avoid the costs and uncertainty of continued litigation. TERMS OF THE SETTLEMENTS 27. In full and complete settlement of the claims which have or could have been asserted in the Molten Metal Action, and subject to the terms and conditions of the Stipulation, $11.91 million has been paid or will be paid into an interest-bearing Escrow Account for the benefit of Lead Plaintiffs and the Class (the Settlement Fund ). If the settlement is approved, $1.325 million (without interest) of this amount will be paid to the Trustee, leaving a settlement amount of $ million plus interest. 28. In full and complete settlement of the claims which have or could have been asserted in the SEG Action, and subject to the terms and conditions of the SEG Stipulation, $1.25 million has been paid or will be paid into an interestbearing Escrow Account for the benefit of Lead Plaintiffs and the Class (the Settlement Fund ). 29. Pursuant to the Settlements, and on the Effective Date, Lead Plaintiffs and Members of the Class on behalf of themselves, their heirs, executors, administrators, successors and assigns, and any persons they represent, shall release and forever discharge, and shall forever be enjoined from prosecuting the Released Parties in both Actions (defined below) with respect to each and every Settled Claim in both Actions (defined below). The text of the releases is set forth in the accompanying Proof of Claim. 5

6 30. The Released Parties in the Molten Metal Action are any and all of the Defendants, their past or present subsidiaries, parents, affiliates, successors and predecessors, officers, directors, agents, employees, attorneys, accountants, underwriters, advisers, investment advisers, insurers, co-insurers, re-insurers and any person, firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any Defendant, and the legal representatives, heirs, successors in interest or assigns of Defendants. Released Parties does not include Scientific Ecology Group, Inc. ( SEG ), H.W. Bud Arrowsmith, or securities brokers, brokerage firms or investment advisers to any Members of the Class. 31. Settled Claims in the Molten Metal Action mean any and all direct, individual, derivative, representative, or class claims, rights or causes of action or liabilities whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including all claims, both known and unknown, pleaded or unpleaded, suspected or unsuspected, for compensatory damages, punitive damages, or any other relief, monetary, injunctive, or otherwise, whether at law or in equity, that have been or could have been asserted in any forum by Lead Plaintiffs, Class Members or any of them or the successors and assigns of any of them, whether directly, indirectly, representatively or in any other capacity, against any of the Released Parties or H.W. Bud Arrowsmith which (1) arise out of or relate in any way to the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, referred to or that could have been asserted in the Second Consolidated Complaint, or (2) relate to the purchase, sale or holding of shares of the common stock of Molten Metal Technology Inc. in the open market during the Class Period, provided, however, that the Settled Claims do not include any claims, rights or causes or action or liabilities against SEG s insurers, co-insurers or reinsurers with respect to any insurance policy obtained by SEG, or against H.W. Bud Arrowsmith arising from his acts or omissions before he joined Molten Metal on or about April 25, The Released Parties in the SEG Action are any and all of the Defendants, their past or present subsidiaries, parents, affiliates, successors and predecessors, officers, directors, agents, employees, attorneys, accountants, underwriters, advisers, investment advisers, insurers, co-insurers, re-insurers and any person, firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any Defendant, and the legal representatives, heirs, successors in interest or assigns of Defendants. Released Parties does not include securities brokers, brokerage firms or investment advisers to any Members of the Class. 33. Settled Claims in the SEG Action mean any and all direct, individual, derivative, representative, or class claims, rights or causes of action or liabilities whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including all claims, both known and unknown, pleaded or unpleaded, suspected or unsuspected, for compensatory damages, punitive damages, or any other relief, monetary, injunctive, or otherwise, whether at law or in equity, that have been or could have been asserted in any forum by Representative Plaintiffs, Class Members or any of them or the successors and assigns of any of them, whether directly, indirectly, representatively or in any other capacity, against any of the Released Parties which (1) arise out of or relate in any way to the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, referred to or that could have been asserted in the Amended Complaint, or (2) relate to the purchase, sale or holding of shares of the common stock of Molten Metal in the open market during the Class Period. 34. If either Settlement is approved by the Court, all claims which have or could have been asserted in the Complaint in the Action will be dismissed with prejudice as to all Lead Plaintiffs and Class Members, who shall be forever barred from prosecuting a class action or any other action raising Settled Claims against the Released Parties. 35. The Molten Metal Stipulation provides for issuance of a bar order barring claims, whether for contribution or otherwise, against the Defendants to recover any portion of any judgment, award, liability, or loss arising from the Action and constitutes the final discharge of all obligations of the Released Parties to the Class arising out of the Action. The Judgment serves to bar all claims in the nature of contribution claims by any person against any of the Defendants arising from (a) the SEG Action or any action asserting claims based on the allegations asserted therein; or (b) any action or proceeding in which a Member of the Class seeks to recover based on his purchase, sale, or holding of common stock of Molten Metal Technology, Inc. in the open market between March 28, 1995 and May 27, Both Stipulations provide that the Defendants or Insurers may withdraw from and terminate the Settlement in the event that Class Members who purchased in excess of a certain number of shares of Molten Metal common stock on the open market during the Class Period exclude themselves from the Class. 6

7 PLAN OF ALLOCATION OF SETTLEMENT PROCEEDS AMONG CLASS MEMBERS 37. Class Members need to file only one Proof of Claim form to participate in both Settlements. The Net Settlement Fund resulting from the Molten Metal Settlement will be distributed among Class Members in the Molten Metal Action, which includes persons who purchased the common stock of Molten Metal in the open market between March 28, 1995 and May 27, 1997 and who were damaged thereby. The Net Settlement Fund resulting from the SEG Settlement will be distributed among Class Members in the SEG Action, which includes persons who purchased the common stock of Molten Metal in the open market between August 22, 1995 and October 18, Purchasers of Molten Metal stock during the period August 22, 1995 through October 18,1996 will participate in both Settlements. 38. The Settlement Funds, less all taxes, approved costs, fees and expenses (the Net Settlement Funds ) shall be distributed to Members of the Class who file valid acceptable Proofs of Claim ( Authorized Claimants ). Class Members who do not file acceptable Proofs of Claim will not share in the settlement proceeds. 39. The provisions of the Plan of Allocation described herein apply to the distribution of both Settlements, except for the calculation of Recognized Loss as described below. 40. In order to distribute the settlement proceeds fairly among the members of the Class, Co-Lead Counsel have determined, in consultation with experts, that the Net Settlement Funds shall be distributed to Authorized Claimants according to the following formula. a. Payments to Authorized Claimants shall be proportional, based upon each Authorized Claimant s Recognized Loss (as defined below) as compared to the total amount of Recognized Losses of all Authorized Claimants. b. Purchases of Molten Metal common stock during the Class Period to box or cover short positions will not be considered purchases for the purpose of recognizing claims. c. In processing claims, the first-in, first-out basis ( FIFO ) will be applied to both purchases and sales. Sales will be matched in chronological order, first against the shares held on March 28, 1995 (or August 22, 1995 for the SEG Settlement Fund), and then against the purchases during the Class Period. d. The date of purchase or sale is the contract or trade date as distinguished from the settlement date. e. Notwithstanding any other provision of this Plan of Allocation, the Court may reject any claim or adjust the value of the Recognized Loss of any Authorized Claimant on equitable grounds. f. For purposes of distributing the Net Settlement Fund in the Molten Metal Action, the Recognized Loss of each Authorized Claimant with respect to each purchase of Molten Metal common stock during the Class Period shall be determined as follows: i. For all shares of Molten Metal common stock purchased between March 28, 1995 and October 18, 1996 and that were sold on or before October 18, 1996, the Recognized Loss will be equal to 50% of the difference between the price paid per share and the sale price per share. ii. For all shares of Molten Metal common stock purchased between March 28, 1995 and October 18, 1996 and that were sold between October 21, 1996 and May 27, 1997, the Recognized Loss will be equal to (a) the difference between the price paid per share and $14 per share, plus (b) 10% of the difference between $14 per share and the sale price per share. iii. For all shares of Molten Metal common stock purchased between March 28, 1995 and October 18, 1996 and that were not sold before May 27, 1997, the Recognized Loss will be equal to (a) the difference between the price paid per share and $14 per share plus (b) $ iv. For all shares of Molten Metal common stock purchased between October 21, 1996 and May 27, 1997 and that were sold on or before May 27, 1997, the Recognized Loss will be equal to 10% of the difference between the purchase price per share and the sale price per share. 2 $.75 represents 10% of the difference between $14 per share (the approximate price of Molten Metal stock on October 21, 1996) and $6.50 per share (the approximate price of Molten Metal stock on May 28, 1997). 7

8 v. For all shares of Molten Metal common stock purchased between October 21, 1996 and May 27, 1997 and that were not sold on or before May 27, 1997, the Recognized Loss will be equal to 10% of the difference between the purchase price per share and $6.50 per share. g. For purposes of distributing the Net Settlement Fund in the SEG Action, the Recognized Loss of each Authorized Claimant with respect to each purchase of Molten Metal common stock during the Class Period shall be determined as follows: i. For all shares of Molten Metal common stock purchased between August 22, 1995 and October 18, 1996 and that were sold on or before October 18, 1996, the Recognized Loss will be equal to 50% of the difference between the price paid per share and the sale price per share. ii. For all shares of Molten Metal common stock purchased between August 22, 1995 and October 18, 1996 and that were not sold on or before October 18, 1996, the Recognized Loss will be equal to the difference between the price paid per share and $14 per share. h. Each Authorized Claimant s total Recognized Loss will equal the total of the Recognized Losses for each purchase he/she/it made during the Class Period. In the event that the Authorized Claimant sustained a profit on any purchase of Molten Metal common stock during the Class Period, such gain will reduce his/her/its total Recognized Loss. i. The computation of Recognized Losses will be performed by the Settlement Administrator. j. The Plan of Allocation is subject to the approval of the Court as fair, reasonable and adequate. THE RIGHTS OF CLASS MEMBERS 41. The Court has certified each of these Actions to proceed as a class action for purposes of the Settlements. Class Members have the following options with respect to each of the Actions pursuant to Rule 23 (c) (2) of the Federal Rules of Civil Procedure: a. If you wish to remain a Member of the Class, you may share in the proceeds of the Settlements, provided that you submit an acceptable Proof of Claim. Class Members will be represented by the Class Representatives and their counsel, unless they enter an appearance through counsel of their own choice at their own expense. You are not required to retain your own counsel, but if you choose to do so such counsel must file an appearance on your behalf on or before July 17, 2001, and must serve copies of such appearance on the attorneys listed in paragraph 49 below. b. If you do not wish to remain a member of the Class, you may exclude yourself from the Class by following the instructions in paragraph 47 below. Persons who exclude themselves from the Class will NOT receive any share of the settlement proceeds and will NOT be bound by the Settlements. c. If you object to the Settlement or any of its terms, including the Plan of Allocation, or to Plaintiffs Counsels application for fees and expenses, and if you do not exclude yourself from the Class, you may present your objections by following the instructions in paragraph 49 below. FILING AND PROCESSING OF PROOFS OF CLAIM 42. TO BE ELIGIBLE TO RECEIVE ANY DISTRIBUTION FROM THE SETTLEMENT FUNDS, YOU MUST COMPLETE AND SIGN THE ATTACHED PROOF OF CLAIM AND RELEASE FORM AND SEND IT BY PRE- PAID FIRST CLASS MAIL POST-MARKED ON OR BEFORE JULY 17, 2001, ADDRESSED AS FOLLOWS: Settlement Administrator Molten Metal Technology, Inc. Securities Litigation c/o David Berdon & Co. LLP P.O. Box 9014 Jericho, New York PLEASE NOTE: YOU NEED TO SUBMIT ONLY ONE PROOF OF CLAIM TO PARTICIPATE IN BOTH SETTLEMENTS. 8

9 43. IF YOU DO NOT FILE A PROPER PROOF OF CLAIM FORM YOU WILL NOT BE ENTITLED TO ANY SHARE OF THE SETTLEMENT FUNDS. 44. IF YOU ARE A CLASS MEMBER AND YOU DO NOT PROPERLY REQUEST EXCLUSION FROM THE CLASS, YOU WILL BE BOUND BY THE SETTLEMENTS AND THE FINAL JUDGMENTS OF THE COURT DIS- MISSING THESE ACTIONS, EVEN IF YOU DO NOT FILE A PROOF OF CLAIM. IF YOU REQUEST EXCLU- SION, YOU WILL NOT BE BOUND BY THE JUDGMENTS BUT YOU WILL NOT BE ENTITLED TO ANY SHARE OF THE SETTLEMENT FUNDS. 45. All Proofs of Claim must be submitted by the date specified in this Notice unless such period is extended by Order of the Court. 46. Each Claimant shall be deemed to have submitted to the jurisdiction of the United States District Court for the District of Massachusetts with respect to his, her, or its claims. EXCLUSION FROM THE SETTLEMENTS 47. With respect to each of these two Actions, each Member of the Class shall be bound by all determinations and judgments in the Action concerning the Settlement, whether favorable or unfavorable, unless such person shall mail, by first class mail, a written request for exclusion from the Class, addressed to Shapiro Haber & Urmy, LLP, Attention: Molten Metal Technologies Securities Litigation, P.O. Box 4539, Boston, MA The request must be received no later than July 23, No person or entity may exclude himself, herself or itself from the Settlement Class after that date. In order to be valid, each such request for exclusion must set forth the name and address of the person or entity requesting exclusion, must state that such person or entity: requests exclusion from the Class in the Molten Metal Technology, Inc. Securities Litigation, Civil Action No MLW ; and/or requests exclusion from the Class in the Scientific Ecology Group, Inc. Securities Litigation, Civil Action No MLW The request for exclusion must be signed by such person or entity. Persons and entities requesting exclusion must provide the following information: Social Security or Taxpayer Identification Number, the number(s) of shares of Molten Metal common stock purchased during the Class Period and the price(s) paid therefor, and the number(s) of shares of Molten Metal common stock sold during the class period and the amount(s) received therefor, and the number of shares still owned as of the close of trading on May 27, SETTLEMENT FAIRNESS HEARING 48. At the Settlement Fairness Hearing, the Court will determine whether to finally approve either or both of these Settlements and dismiss either or both of the Actions and the claims of the Class. The Court will also determine whether the Plan of Allocation for the Net Settlement Funds is fair, reasonable, adequate and in the best interests of the Class. The Settlement Fairness Hearing may be adjourned from time to time by the Court without further written notice to the Class. 49. You are not required to attend the Settlement Fairness Hearing unless you wish to be heard. At the Settlement Fairness Hearing, any Class Member who has not properly filed a request for exclusion from the Class may appear in person or by counsel and be heard to the extent allowed by the Court in support of, or in opposition to the fairness, reasonableness and adequacy of the Settlements, the Plan of Allocation or the application for an award of attorneys fees and reimbursement of expenses, provided, however, that in no event shall any person be heard in support of or in opposition to the Settlements, Plan of Allocation or Plaintiffs Counsels application for attorneys fees and reimbursement of expenses, and in no event shall any paper or brief submitted by any such person be accepted or considered by the Court, unless, on or before July 23, 2001, such person (a) files with the Clerk of the Court notice of such person s intention to appear, together with a statement that indicates the basis for such support or opposition, along with any documentation in support of such objection, and (b) simultaneously serves copies of such notice, statement and documentation, together with copies of any other papers or briefs such person files with the Court, in person or by mail upon the following counsel: Thomas Shapiro, Esq., Shapiro Haber & Urmy LLP, 75 State Street, Boston, MA 02109; and Norman Berman, Esq., Berman, DeValerio & Pease LLP, One Liberty Square, Boston, MA Any Class Member who wishes to be heard 9

10 in opposition in the Molten Metal Action must also serve copies of any papers on William Paine, Hale and Dorr, 60 State Street, Boston, MA 02109, Michael Tuteur, Esq., 75 State Street, Boston, MA 02109, Rory Fitzpatrick, Esq., Kirkpatrick & Lockhart LLP, 75 State Street, Boston, MA 02109, Ian Crawford, Esq., Todd & Weld, 28 State Street, Boston, MA 02109, and Richard Heidlage, Esq., Prince, Lobel & Tye, LLP, 585 Commercial Street, Boston, MA Any Class Member who wishes to be heard in opposition in the SEG Action must also serve copies of any papers on Dennis J. Block, Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, NY ATTORNEYS FEES AND DISBURSEMENTS 50. At the Settlement Fairness Hearing, or at such other time as the Court may direct, Plaintiffs Counsel intend to apply to the Court for an award of attorneys fees from the Settlement Funds in an amount not greater than 30% of the Settlement Consideration. In addition, Plaintiffs Counsel intend to apply to the Court for reimbursement out of the Settlement Funds of their reasonable expenses in litigating these Actions. Plaintiffs Co-Lead Counsel, without further notice to the Class, may subsequently apply to the Court for expenses incurred in connection with administering and distributing the Settlement proceeds to the Members of the Class. SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES 51. If you purchased common stock of Molten Metal Technology, Inc. during the Class Period of March 28, 1995 through May 26, 1997 for the beneficial interest of a person or organization other than yourself, the Court has directed that within 14 days of your receipt of this Notice, you either (a) provide to the Settlement Administrator the name and last known address of each person or organization for whom or which you purchased such stock during such time period, or (b) you request additional copies of this Notice and the Proof of Claim form, which will be provided to you free of charge, and within seven days mail the Notice and Proof of Claim form directly to the beneficial owners of the securities referred to herein. If you choose to follow this alternative procedure (b), the Court has ordered that you must, upon such mailing, send a statement to the Settlement Administrator confirming that the mailing was made as directed. You are entitled to reimbursement from the Settlement Funds of your reasonable out-of-pocket expenses actually incurred in connection with the foregoing, including reimbursement of postage expense and the cost of ascertaining the names and addresses of beneficial owners. Those expenses will be paid upon request and submission of appropriate supporting documentation. All communications concerning the foregoing should be addressed to: Settlement Administrator Molten Metal Technology, Inc. Securities Litigation c/o David Berdon & Co. LLP P.O. Box 9014 Jericho, New York Facsimile: Website: FURTHER INFORMATION 52. For a more detailed statement of the matters involved in these Actions, reference is made to the pleadings, to the Stipulations, to the Orders entered by the Court and to the other papers filed in the Actions, which may be inspected at the Office of the Clerk of the United States District Court for the District of Massachusetts, United States Courthouse, One Courthouse Way, Boston, Massachusetts during regular business hours. 53. ALL INQUIRIES CONCERNING THIS NOTICE OR THE PROOF OF CLAIM FORM BY CLASS MEM- BERS SHOULD BE MADE TO THE SETTLEMENT ADMINISTRATOR IN WRITING. NO INQUIRIES SHOULD BE DIRECTED TO THE COURT. Dated: Boston, Massachusetts By Order of the Court April 9, 2001 CLERK OF THE COURT 10

11 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS IN RE MOLTEN METAL TECHNOLOGY, INC. SECURITIES LITIGATION C.A. No MLW MARILYN AXLER, et al., Plaintiffs, v. C.A. No MLW SCIENTIFIC ECOLOGY GROUP, INC. and H.W. BUD ARROWSMITH, Defendants. DETACH HERE PROOF OF CLAIM, ASSIGNMENT AND RELEASE TO BE ELIGIBLE FOR ANY SETTLEMENT BENEFITS, CLASS MEMBERS MUST COMPLETE AND SIGN THIS PROOF OF CLAIM AND MAIL IT BY PREPAID, FIRST CLASS MAIL, POSTMARKED NO LATER THAN JULY 17, 2001 TO THE FOLLOWING ADDRESS: Settlement Administrator Molten Metal Technology, Inc. Securities Litigation c/o David Berdon & Co. LLP P.O. Box 9014 Jericho, New York Telephone: YOUR FAILURE TO MAIL YOUR CLAIM BY JULY 17, 2001 MAY SUBJECT YOUR CLAIM TO REJECTION AND PRECLUDE YOUR RECEIVING ANY MONEY IN CONNECTION WITH THE SETTLEMENTS OF THESE LITIGATIONS. I. STATEMENT OF CLAIMANT A. I believe in good faith that I am a Class Member, as defined above and in the Notice Of Pendency Of Class Actions, Hearing on Proposed Settlements and Attorneys Fee Petition And Right To Share In Settlement Funds (the Notice ), or am acting for such person. I have read and understand the Notice. I believe that I am entitled to receive a share of the Net Settlement Funds and elect to participate in the proposed Settlements described in the Notice. I have not filed a request for exclusion from the Class. B. I understand that the information contained in this Proof of Claim is subject to such verification as the Court may direct, and I agree to cooperate in any such verification. C. I agree and understand that if the proposed Settlements are approved by the Court and become effective, all Settled Claims shall be released as against the Released Parties. Released Parties in the Molten Metal Action are any and all of the Defendants, their past or present subsidiaries, parents, affiliates, successors and predecessors, officers, directors, agents, employees, attorneys, accountants, underwriters, advisers, investment advisers, insurers, co-insurers, re-insurers and any person, 11

12 firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any Defendant, and the legal representatives, heirs, successors in interest or assigns of Defendants. Released Parties does not include Scientific Ecology Group, Inc. ( SEG ), H.W. Bud Arrowsmith, or securities brokers, brokerage firms or investment advisers to any Members of the Class. Released Parties in the SEG Action means any and all of the Defendants, their past or present subsidiaries, parents, affiliates, successors and predecessors, officers, directors, agents, employees, attorneys, accountants, underwriters, advisers, investment advisers, insurers, co-insurers, re-insurers and any person, firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any Defendant, and the legal representatives, heirs, successors in interest or assigns of Defendants. Released Parties does not include securities brokers, brokerage firms or investment advisers to any Members of the Class. Settled Claims in the Molten Metal Action means any and all direct, individual, derivative, representative, or class claims, rights or causes of action or liabilities whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including all claims, both known and unknown, pleaded or unpleaded, suspected or unsuspected, for compensatory damages, punitive damages, or any other relief, monetary, injunctive, or otherwise, whether at law or in equity, that have been or could have been asserted in any forum by Lead Plaintiffs, Class Members or any of them or the successors and assigns of any of them, whether directly, indirectly, representatively or in any other capacity, against any of the Released Parties or H.W. Bud Arrowsmith which (1) arise out of or relate in any way to the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, referred to or that could have been asserted in the Second Consolidated Complaint, or (2) relate to the purchase, sale or holding of shares of the common stock of Molten Metal Technology Inc. in the open market during the Class Period, provided, however, that the Settled Claims do not include any claims, rights or causes or action or liabilities against SEG s insurers, co-insurers or re-insurers with respect to any insurance policy obtained by SEG, or against H.W. Bud Arrowsmith arising from his acts or omissions before he joined Molten Metal on or about April 25, Settled Claims in the SEG Action means any and all direct, individual, derivative, representative, or class claims, rights or causes of action or liabilities whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including all claims, both known and unknown, pleaded or unpleaded, suspected or unsuspected, for compensatory damages, punitive damages, or any other relief, monetary, injunctive, or otherwise, whether at law or in equity, that have been or could have been asserted in any forum by Representative Plaintiffs, Class Members or any of them or the successors and assigns of any of them, whether directly, indirectly, representatively or in any other capacity, against any of the Released Parties which (1) arise out of or relate in any way to the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, referred to or that could have been asserted in the Amended Complaint, or (2) relate to the purchase, sale or holding of shares of the common stock of Molten Metal in the open market during the Class Period. D. Upon the occurrence of the Effective Date, my signature hereto will constitute a full and complete release, remise and discharge by me or, if I am submitting this Proof of Claim on behalf of a corporation, a partnership, estate or one or more other persons, by it, him, her or them, and by my, its, his, her or their heirs, executors, administrators, successors, and assigns, of each of the Settled Claims. HERE 12 DETACH

13 II. STATEMENT OF CLAIM Name(s) of Beneficial Owner(s): Street Address DETACH HERE City State Zip Code Telephone No. (Day) ( ) Telephone No. (Night) ( ) Tax Identification Number or Social Security Number Check one: Individual Trust Corporation Estate Other (specify) Record Owner s Name (if different from Beneficial Owner listed above) 13

14 A. At the close of business on March 27, 1995, I owned shares of Molten Metal common stock. (attach documentation) B. I made the following purchases of Molten Metal common stock during the period March 28, 1995 through and including May 27, (Persons who received Molten Metal common stock during the Class Period, other than by purchase, are not eligible to file claims for those transactions.) (attach documentation) Date(s) of Purchase Number of Shares Purchase Price Aggregate Cost (list chronologically) of Common Stock Per Share of (excluding commis- Month/Day/Year Purchased Common Stock sion, taxes and fees) $ $ $ $ $ $ $ $ C. I made the following sales of Molten Metal common stock during the period March 28, 1995 through and including May 27, (attach documentation) Date(s) of Sale Number of Shares Sales Price Proceeds (list chronologically) of Common Stock Per Share of (excluding commis- Month/Day/Year Sold Common Stock sion, taxes and fees) $ $ $ $ $ $ $ $ HERE D. At the close of trading on May 27, 1997, I still owned shares of Molten Metal common stock. (attach documentation) If you require additional space, attach extra schedules. Sign and print your name on each additional page. BROKERS CONFIRMATIONS OR MONTHLY ACCOUNT STATEMENTS OR OTHER DOCU- MENTATION OF YOUR TRANSACTIONS AND POSITIONS IN MOLTEN METAL COMMON STOCK MUST BE ATTACHED TO YOUR CLAIM. Failure to provide this documentation could delay the verification of your claim or result in rejection of your claim. 14 DETACH

15 III. REQUEST FOR TAXPAYER IDENTIFICATION NUMBER Enter taxpayer identification number below for the Beneficial Owner(s). For most individuals, this is your Social Security number. The Internal Revenue Service ( I.R.S. ) requires such taxpayer identification number. If you fail to provide this information, your claim may be rejected. Social Security Number (for individuals) or Employer Identification Number (for estates, trusts, corporations, etc.) DETACH HERE IV. CERTIFICATION UNDER THE PENALTIES OF PERJURY, I (WE) CERTIFY THAT ALL OF THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. I (We) certify that I am (we are) NOT subject to backup withholding under the provisions of Section 3406 (a)(1)(c) of the Internal Revenue Code because: (a) I am (We are) exempt from backup withholding, or (b) I (we) have not been notified by the I.R.S. that I am (we are) subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the I.R.S. has notified me (us) that I am (we are) no longer subject to backup withholding. NOTE: If you have been notified by the I.R.S. that you are subject to backup withholding, please strike out the language that you are not subject to backup withholding in the certification above. Signature of Claimant (if this claim is being made on behalf of Joint Claimants, then each must sign) (Signature) (Signature) Date: IF YOU MOVE, OR IF THIS NOTICE WAS SENT TO YOU AT AN OLD OR INCORRECT ADDRESS, PLEASE SEND YOUR NEW ADDRESS TO THE SETTLEMENT ADMINIS- TRATOR. 15