<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-7170
IMCO RECYCLING INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
75-2008280
(I.R.S. Employer Identification No.)
5215 NORTH O'CONNOR BLVD.
SUITE 940
CENTRAL TOWER AT WILLIAMS SQUARE
IRVING, TEXAS 75039
(Address of principal executive offices)
(214) 869-6575
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the securities exchange act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of July 31, 1995.
COMMON STOCK, $0.10 PAR VALUE, 11,540,936
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 31,
1995 1994
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,431 $ 2,854
Accounts receivable 17,319 19,239
Inventories 3,818 3,186
Deferred income tax 1,420 1,978
Other current assets 1,205 598
-------- --------
TOTAL CURRENT ASSETS 32,193 27,855
PROPERTY AND EQUIPMENT, NET 62,021 61,046
INTANGIBLE ASSETS
Excess acquisition cost over the fair value of net
assets acquired, net of amortization of $3,474
and $3,219, respectively. 5,810 6,056
Patents 264 296
-------- --------
TOTAL INTANGIBLE ASSETS 6,074 6,352
OTHER ASSETS, NET 714 1,538
-------- --------
$101,002 $ 96,791
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,296 $ 4,150
Accrued liabilities 3,758 4,063
Current maturities of long-term debt 1,000 1,094
Dividends payable -- 1,152
Accrued interest 83 93
-------- --------
TOTAL CURRENT LIABILITIES 9,137 10,552
LONG-TERM DEBT 11,250 11,860
OTHER LONG-TERM LIABILITIES 1,514 1,232
DEFERRED INCOME TAX 5,121 4,857
STOCKHOLDERS' EQUITY
Preferred Stock; par value $.10;8,000,000
shares authorized; none issued -- --
Common Stock; par value $.10;20,000,000
shares authorized; 11,756,698 issued at June
30,1995; and December 31, 1994 1,176 1,176
Additional paid in capital 23,878 23,511
Retained earnings 50,871 45,421
Treasury stock, at cost; 215,762 shares at June
30, 1995; 244,910 shares at December 31, 1994 (1,945) (1,818)
-------- --------
73,980 68,290
-------- --------
$101,002 $ 96,791
======== ========
</TABLE>
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(dollars in thousands, except per share)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES $29,725 $23,070 $60,471 $44,752
Cost of sales 22,410 18,385 45,721 35,248
------- ------- ------- -------
GROSS PROFIT 7,315 4,685 14,750 9,504
Selling, general and
administrative expense 2,252 1,407 4,647 2,684
Litigation expense -- 1,494 -- 1,635
Interest expense 233 221 513 461
Interest income (103) (28) (167) (54)
------- ------- ------- -------
INCOME BEFORE
PROVISION
FOR INCOME TAXES 4,933 1,591 9,757 4,778
Provision for income taxes 1,974 553 3,904 1,708
------- ------- ------- -------
NET EARNINGS $ 2,959 $ 1,038 $ 5,853 $ 3,070
======= ======= ======= =======
Net earnings per common
share $ 0.25 $ 0.09 $ 0.49 $ 0.27
======= ======= ======= =======
Dividends declared per
common share $ .035 -- $ .035 --
======= ========
Weighted average common
and common equivalent
shares outstanding 12,013,776 11,529,673 11,966,317 11,524,860
</TABLE>
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 5,853 $ 3,070
Depreciation and amortization 4,484 3,267
Provision for deferred income taxes 821 451
Other noncash charges 471 280
Loss on sale of property and equipment 2 --
Changes in noncash components of working
capital (excluding investing and
financing transactions)
Accounts receivable 1,896 (1,029)
Inventories (632) (2,097)
Other current assets (606) (405)
Accounts payable and accrued liabilities (170) (340)
------- -------
NET CASH FLOWS FROM OPERATING ACTIVITIES 12,119 3,197
INVESTING ACTIVITIES:
Purchase of property and equipment (4,373) (3,185)
Proceeds from sale of property and equipment 67 10
Other (218) (587)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (4,524) (3,762)
FINANCING ACTIVITIES:
Net decrease in short-term borrowings -- (1,200)
Principal payments of long-term debt (705) --
Dividends paid (1,554) --
Tax benefit from the exercise of stock options 156 155
Treasury stock activity 85 189
------- -------
NET CASH USED BY FINANCING TRANSACTIONS (2,018) (856)
------- -------
Net increase (decrease) in Cash and Cash
Equivalents 5,577 (1,421)
Cash and Cash Equivalents at January 1 2,854 1,665
------- -------
Cash and Cash Equivalents at June 30 $ 8,431 $ 244
======= =======
SUPPLEMENTARY INFORMATION:
Cash payments for interest $ 625 $ 597
Cash payments for income taxes $ 3,610 $ 2,146
</TABLE>
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1995. The accompanying financial statements include
the accounts of IMCO Recycling Inc. and all of its subsidiaries (the
"Company"). All significant intercompany accounts and transactions have
been eliminated. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1994.
Certain reclassifications have been made to prior year statements to
conform to the current year presentation.
NOTE B - INVENTORIES
The components of inventories are:
(dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
<S> <C> <C>
Finished goods $1,703 $1,391
Raw materials 1,727 1,440
Supplies 388 355
------ ------
$3,818 $3,186
====== ======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is in the resource recovery industry and provides recycling
services for primary manufacturers of metal. The Company's principal
activity involves the recycling of aluminum and aluminum scrap and by-
products. The Company also recycles magnesium and zinc. The Company's
financial performance is largely determined by the volume of metal it
processes. The largest portion of the Company's business is the
processing of customer-owned material for a fee (a service called
"tolling"). In addition to tolling, the Company to a lesser extent also
purchases material for processing and resale ("buy/sell business").
Both the Company's tolling fees per pound recycled and the selling price
of metal it owns, recycles and sells for its own account are included in
revenues. Variations in the mix between these two types of
transactions, which have occurred in the past, can cause revenue amounts
to change significantly from period to period while generally not
significantly affecting total gross profit, because both types of
transactions have approximately the same gross profit value per pound of
metal processed.
<PAGE>
The following table shows the total pounds of metal processed, the
percentage of total pounds processed represented by tolled metal, total
revenues and total gross profit in the three and six month periods ended
June 30:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- --------------------
1995 1994 1995 1994
------- -------- -------- --------
<S> <C> <C> <C> <C>
(In thousands, except percentages)
Pounds of Metal Processed 314,998 234,379 619,529 463,748
Percentage of Pounds Tolled 96% 94% 96% 94%
Revenues $ 29,725 $ 23,070 $ 60,471 $ 44,752
Gross Profit $ 7,315 $ 4,685 $ 14,750 $ 9,504
------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THREE MONTHS ENDED JUNE 30,
1994 AND SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED
JUNE 30, 1994
The Company processed 34% more metal in both the three month and six
month periods ending June 30, 1995 than it did in the same periods of
1994. Aluminum processing at the Company's newest facility in Loudon,
Tennessee, which was purchased in September, 1994 along with large
increases in processing at both the Corona, California plant and the
Uhrichsville, Ohio plant were the major factors contributing to these
increases. The Corona plant processing reflected favorable market
conditions for recycling used beverage containers. The Uhrichsville
plant increases are the result of a capacity addition put in place in
the third quarter of 1994 which is being fully utilized. In addition to
these factors, all of the Company's other aluminum plants processed more
material in both the three and six month periods ending June 30, 1995
than they did in the same periods of 1994.
Revenues increased 29% in 1995's second quarter ending June 30, 1995
compared to 1994 and increased 35% for the six month period ending the
same date. These increases in revenues are substantially the same as
the increases in processing volume as discussed above. Tolling activity
represented 96% of the Company's processing for both the three month
and six month periods ending June 30, 1995.
Magnesium revenues and volumes processed were about equal in both the
second quarter and for the first half of 1995 compared to 1994. Zinc
revenues on the other hand increased 157% on a volume increase of 50%
for the three months ending June 30, 1995, while year-to-date June 1995
increases were 115% for revenues and 28% for processing volume, both
periods compared to like periods in 1994. The increases in processing
volumes reflected record levels of dross receipts during the first half
of 1995. The increases in zinc revenues for both of the periods in 1995
compared to 1994 were due to the increased processing volumes as well as
increases in buy/sell business. Some customers which were previously
tolling their material opted to change to a buy/sell basis. This has the
effect of increasing revenues as discussed above.
<PAGE>
Gross profit increased to $7,315,000 for the three months and
$14,750,000 for the six months, both ending June 30, 1995. Compared to
$4,685,000 and $9,504,000, these represented 56% and 55% increases,
respectively, versus the same periods of 1994. These increases were
mostly due to the increased volume as previously discussed. In
addition, gross profit was negatively impacted in 1994 by the California
plant, which operated at a loss due to both low volume and an equipment
failure in the second quarter. As noted above, the California plant's
processing rates increased in 1995, and the plant was profitable.
Selling, general and administrative expenses were $2,252,000 for the
three month period and $4,647,000 for the six month period ending June
30, 1995. These compared to $1,407,000 and $2,684,000 for similar
periods of 1994. Increased employee costs due to additional staff hired
at the Company's headquarters location necessitated by the Company's
recent rapid growth, and travel costs were the principal contributors to
this increase.
In the second quarter of 1994 the Company incurred $1,494,000
($1,635,000 year-to-date) of litigation expense related to a lawsuit it
settled.
Interest expense of $233,000 for the second quarter and $513,000 year-
to-date 1995 was very similar to 1994 amounts of $221,000 and $461,000
respectively. Interest income of $103,000 for the three months and
$167,000 for the six months both ending June 30, 1995 were higher than
comparable periods of 1994 because of higher levels of cash to invest
in 1995 compared to 1994.
Income before the provision for tax of $4,933,000 in 1995's second
quarter was $3,342,000 above 1994's second quarter, while year-to-date
income before tax of $9,757,000 was $4,979,000 above 1994's amounts.
The Company's effective income tax rate was 40% for both the three and
six month periods of 1995 which was about 4-5% higher than for similar
periods in 1994, due mostly to higher effective state income tax rates.
As a result of all of the above, the Company reported net earnings of
$2,959,000 for the second quarter of 1995, and $5,853,000 year-to-date
1995, or 185% and 91%, respectively, more than the comparable 1994
periods.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided cash of $12,119,000 during the first half of 1995,
compared to $3,197,000 in the same period of 1994. Increases in
earnings as discussed above, and non-cash charges such as depreciation
and deferred income taxes along with a positive contribution to cash
provided by working capital items accounted for the variance between the
two periods. Working capital other than cash decreased
$488,000 in the first half of 1995 and increased $3,871,000 during
1994's first half. A decrease in working capital is a source of cash.
The main reason for the working capital decline (other than cash) was a
reduction in accounts receivable.
The Company's total capital spending in the first half of 1995 was
$4,373,000, compared to $3,185,000 spent in the first half of 1994.
Capital expenditures for 1995 are expected to be approximately
$14,000,000. A capacity expansion and facility improvements at Loudon
and the construction of a new cell at the Morgantown landfill have been
the largest uses of capital so far in 1995. An aluminum recovery
facility at Morgantown is expected to be the largest single expenditure
in 1995. This facility, which is expected to cost $6,300,000, received
its construction permit in July 1995. Construction is expected to be
completed in early 1996.
<PAGE>
Financing activities in the first half of 1995 included the repayment of
$705,000 in long-term debt and the payment of $1,554,000 in dividends.
The Company announced in June 1995 that it had signed a letter of intent
to acquire all outstanding shares of Alumar Associates, Inc., a
privately owned firm headquartered in Chicago Heights, Illinois. Alumar
owns Metal Mark which operates three aluminum recycling facilities
located in Chicago Heights, Pittsburg, Kansas, and Sikeston, Missouri.
It also owns a 50% interest in an aluminum recycling plant in East
Chicago, Indiana. These four facilities have an annual capacity net to
Metal Mark of 240 million pounds. The purchase price is $10,000,000,
with $4,000,000 in cash and $6,000,000 in new IMCO stock. IMCO will
also to assume debt outstanding under a working capital line of credit
at the time of closing the transaction.
In July 1995 the Company announced that it had signed a letter of intent
to purchase a Bedford, Indiana aluminum recycling facility from
Ravenswood Aluminum, a privately owned firm. The Bedford facility is
designed to process used beverage cans and has a rated annual capacity
of 150 million pounds.
The Company feels that its cash on hand, the availability of funds under
its lines of credit and its anticipated internally generated funds will
be sufficient to fund its current needs and meet its obligations.
At June 30, 1995, the relationship of current assets to current
liabilities, or current ratio, was 3.52 to 1, compared to 2.64 to 1 at
December 31, 1994. Working capital will fluctuate as the mix of
buy/sell business and tolling business changes relative to the total
business, for the reasons discussed above.
REVIEW BY INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Ernst & Young LLP, have reviewed
the Company's consolidated financial statements at June 30, 1995, and
for the six months then ended prior to filing and their report is
included herein.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In April 1995, the Company reached a settlement in a lawsuit
it had filed in 1991 against Garney Scott and Scepter Industries Inc.
("Scepter") regarding the Company's recycling process. The settlement
agreement dismisses all claims in the litigation each party had against
the other parties, and contains mutual releases. The order of dismissal
was entered by the Court on May 2, 1995.
ITEM 4 . SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Stockholders of the Company was
held on May 12, 1995, at which the election of three Class I
directors, the appointment of Ernst & Young LLP as the Company's
independent accountants for 1995 and amendments to the Company's
1992 Stock Option Plan. Don V. Ingram was re-elected as a
director, and received 8,501,500 votes for his election with
467,641 votes withheld. Thomas A. James was elected as a
director, and received 8,500,825 votes for his election with
468,316 votes withheld. Frank H. Romanelli was re-elected as a
director, and received 8,501,300 votes
<PAGE>
for his election with 467,841 votes withheld. Ernst & Young
was ratified as independent accountants for 1995 with 8,676,255
votes for their ratification, 258,198 votes against and 34,688
votes abstaining. The amendments to the Company's 1992 Stock
Option Plan were approved with 7,254,562 votes approving, 913,488
against, and 801,091 votes abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein:
10.1 Amendment to the Company's 1992 Stock Option Plan as
amended December 15, 1994
10.2 First amendment to processing agreement by and among
the Rigid packaging division of Aluminum Company of America,
The Company and Metal Resources Inc.
15.1 Acknowledgment letter regarding unaudited financial
information from Ernst & Young LLP.
27 Financial Data Schedule
(b) Reports on Form 8-K - None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMCO Recycling Inc.
Date: August 11, 1995 By: /s/ Robert R. Holian
____________________________
Robert R. Holian
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
[Letterhead]
Independent Accountant's Review Report
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have reviewed the accompanying consolidated balance sheet of IMCO
Recycling Inc. as of June 30, 1995, and the related consolidated statements
of earnings for three-month and six-month periods ended June 30, 1995, and
1994, and the consolidated statements of cash flows for the six-month periods
ended June 30, 1995, and 1994. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of IMCO Recycling Inc. as of
December 31, 1994, and the related consolidated statements of earnings,
stockholders' equity, and cash flows, [not presented herein], and in our
report dated February 9, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
July 28, 1995
<PAGE>
EXHIBIT 10.1
IMCO RECYCLING INC.
1992 STOCK OPTION PLAN
(As amended December 15, 1994)
PURPOSE
The purpose of the Plan is to attract and retain key employees,
consultants, officers and directors of the Company and to provide such
persons with a proprietary interest in the Company through the granting of
Incentive Stock Options and Nonqualified Stock Options which will:
(a) increase the interest of such employees, consultants, officers
and directors in the Company's welfare;
(b) furnish an incentive to such employees, consultants, officers
and directors to continue their services for the Company; and
(c) provide a means through which the Company may attract able
persons to enter its employ or to serve as consultants, officers and
directors.
ARTICLE I
DEFINITIONS
For the purpose of this Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
1.1 "Board" means the board of directors of the Company.
1.2 "Change in Control" means the occurrence of any of the following
events: (i) there shall be consummated (x) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of the Company's Common Stock would be converted
into cash, securities or other property, other than a merger of the Company
in which the holders of the Company's Common Stock immediately prior to the
merger have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (excluding transfer by way of pledge or hypothecation), in one
transaction or a series of related transactions, of all, or substantially
all, of the assets of the Company, (ii) the stockholders of the Company
approve any plan or proposal for the liquidation or dissolution of the
Company, (iii) any "person" (as such term is defined in Section 3(a)(9) or
Section 13(d)(3) under the 1934 Act) or any "group" (as such term is used in
Rule 13d-5 promulgated under the 1934 Act), other than the Company or any
successor of the Company or any Subsidiary of the Company or any employee
benefit plan of the Company or any Subsidiary (including such plan's
trustee), becomes a beneficial owner for purposes of Rule 13d-3 promulgated
under the 1934 Act, directly or indirectly, of securities of the Company
representing 50.1% or more of the Company's then outstanding securities
having the right to vote in the election of directors, or (iv) during any
period of two consecutive years, individuals who, at the beginning of such
period constituted the entire Board, cease for any reason (other than death)
to constitute a majority of the directors, unless the election, or the
nomination for election, by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Common Stock" means the common stock which the Company is
currently authorized to issue or may in the future be authorized to issue.
1.5 "Company" means IMCO Recycling Inc., a Delaware corporation.
<PAGE>
1.6 "Date of Grant" means the effective date on which an option is
awarded to a Participant as set forth in the stock option agreement.
1.7 "Eligible Participant" shall have the meaning set forth in
Section 6.1 hereof.
1.8 "Fair Market Value" of the Company's shares of Common Stock means
(i) the closing price per share on any stock exchange on which the Common
Stock is traded, or (ii) the mean between the closing or average (as the case
may be) bid and asked prices per share of Common Stock on the
over-the-counter market, whichever is applicable.
1.9 "Incentive Stock Option" means an option to purchase shares of
Common Stock granted to an eligible Participant pursuant to Article V and
which is intended to qualify as an incentive stock option under Section 422
of the Code.
1.10 "1934 Act" means the Securities Exchange Act of 1934, as amended.
1.11 "Nonqualified Stock Option" means an option to purchase shares of
Common Stock granted to a Participant pursuant to Article IV or Article V and
which is not intended to qualify as an incentive stock option under Section
422 of the Code.
1.12 "Participant" means any employee of the Company or any Subsidiary
of the Company or any non-employee director, officer or consultant of the
Company who is, or who is proposed to be, a recipient of a Stock Option.
1.13 "Plan" means the IMCO Recycling Inc. 1992 Stock Option Plan, as it
may be amended from time to time.
1.14 "Reload Stock Option" means a Nonqualified Stock Option or an
Incentive Stock Option granted pursuant to Section 7.2 hereof.
1.15 "Restricted Stock" shall have the meaning set forth in Section
7.3 hereof.
1.16 "Restriction Period" shall have the meaning set forth in
Section 7.3 hereof.
1.17 "Spread" shall have the meaning set forth in Article XIII hereof.
1.18 "Stock Dividend" means a dividend or other distribution declared
on the shares of Common Stock payable in (i) capital stock of the Company or
any Subsidiary of the Company, or (ii) rights, options or warrants to receive
or purchase capital stock of the Company or any Subsidiary of the Company, or
(iii) securities convertible into or exchangeable for capital stock of the
Company or any Subsidiary of the Company, or (iv) any capital stock received
upon the exercise, or with respect to, the foregoing.
1.19 "Stock Options" shall mean any and all Incentive Stock Options,
Nonqualified Stock Options and Reload Stock Options granted pursuant to the
Plan.
1.20 "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of the
Stock Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain,
and "Subsidiaries" means more than one of any such corporations.
2
<PAGE>
ARTICLE II
ADMINISTRATION
Subject to the terms of this Article II, the Plan shall be administered
by the Compensation Committee (the "Committee") of the Board, which shall
consist of at least two members. Any member of the Committee may be removed
at any time, with or without cause, by resolution of the Board. Any vacancy
occurring in the membership of the Committee may be filled by appointment by
the Board. Each member of the Committee, at the time of his appointment to
the Committee and while he is a member thereof, must be a "disinterested
person", as that term is defined in Rule 16b-3 promulgated under the 1934 Act.
The Board shall select one of its members to act as the Chairman of the
Committee, and the Committee shall make such rules and regulations for its
operation as it deems appropriate. A majority of the Committee shall
constitute a quorum, and the act of a majority of the members of the
Committee present at a meeting at which a quorum is present shall be the act
of the Committee. Subject to the terms hereof, the Committee shall designate
from time to time the key employees, consultants, or officers of the Company
to whom Stock Options will be granted, interpret the Plan, prescribe, amend,
and rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and make such other determinations and take such
other action as it deems necessary or advisable. In this regard, the
Committee shall consider and give appropriate weight to input from
representatives of management of the Company regarding the contributions or
potential contributions to the Company or a Subsidiary of certain of the
employees, officers or consultants, or potential employees, officers or
consultants, of the Company or any Subsidiary.
The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and
the terms of any Stock Options issued under it and to adopt such rules and
regulations for administering the Plan as it may deem necessary. The
Committee may, in its absolute discretion (except with respect to Stock
Options granted to the Company's non-employee directors pursuant to Article
IV hereof) accelerate the date on which any Stock Option granted under the
Plan becomes exercisable. Except as provided below, any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding, and conclusive on all interested parties, including the Company and
all Participants.
ARTICLE III
SHARES SUBJECT TO PLAN
The Committee may not grant Stock Options under the Plan for more than
1,150,000 shares of Common Stock of the Company (as may be adjusted in
accordance with Article XII or XIII hereof). Shares to be distributed and
sold may be made available from either authorized but unissued Common Stock
or Common Stock held by the Company in its treasury. Shares that by reason
of the expiration or unexercised termination of a Stock Option are no longer
subject to purchase may be reoffered under the Plan.
ARTICLE IV
NON-EMPLOYEE DIRECTORS' STOCK OPTIONS
The provisions of this Article IV shall apply only to Nonqualified Stock
Options granted under the Plan to non-employee directors of the Company.
4.1 ELIGIBILITY. Only non-employee directors of the Company shall be
eligible to receive grants of Nonqualified Stock Options under this Article IV.
4.2 GRANT OF STOCK OPTIONS. On December 15 of each year during the
term of this Plan (or if such date is not a business day, then on the next
succeeding business day thereafter), the Company shall grant to each
non-employee director of the Company a Nonqualified Stock Option to purchase
that number of shares of Common Stock determined by dividing the annual
director's fee paid or accrued to be paid to that director with respect to
the 12-month period immediately preceding such Date of Grant, by the Fair
Market Value per share of the Common Stock on the Date of Grant. Each grant
of Nonqualified Stock Options under this Article IV shall be evidenced by a
stock option agreement setting forth the
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total number of shares subject to the Nonqualified Stock Option, the option
exercise price, the term of the Nonqualified Stock Option and such other
terms and provisions as are consistent with the Plan.
4.3 OPTION PRICE. The option exercise price for a Nonqualified Stock
Option granted under this Article IV shall be equal to the Fair Market Value
per share of Common Stock on the Date of Grant. Notwithstanding anything to
the contrary contained in this Section 4.3, the option exercise price of each
Nonqualified Stock Option granted pursuant to this Article IV shall not be
less than the par value per share of the Common Stock.
4.4 OPTION PERIOD. All Nonqualified Stock Options granted under this
Article IV shall automatically vest and be exercisable in full after the
expiration of six months from the Date of Grant. The period during which a
Nonqualified Stock Option granted under this Article IV may be exercised
shall expire ten years from the Date of Grant, unless sooner terminated
pursuant to Article VIII. No Nonqualified Stock Option granted under this
Article IV may be exercised at any time after its term.
ARTICLE V
STOCK OPTIONS FOR EMPLOYEES, CONSULTANTS AND OFFICERS
The provisions of this Article V shall apply only to Stock Options
granted under the Plan to key employees, consultants and officers of the
Company or any of its Subsidiaries, including directors who are employees of
the Company and/or any of its Subsidiaries and non-employee officers of the
Company and/or any of its Subsidiaries:
5.1 ELIGIBILITY. The Committee shall, from time to time, select the
particular key employees, consultants and officers of the Company and its
Subsidiaries to whom the Stock Options provided under this Article V are to
be granted and/or distributed in recognition of each such Participant's
contribution to the Company's or the Subsidiary's success. In this regard,
the Committee shall consider and give appropriate weight to input from
representatives of management of the Company regarding the contributions or
potential contributions to the Company or a Subsidiary of certain of the
employees, officers or consultants or potential employees, officers or
consultants of the Company or a Subsidiary.
5.2 GRANT OF STOCK OPTIONS. All grants of Stock Options under this
Article V shall be awarded by the Committee. Each grant of Stock Options
shall be evidenced by a stock option agreement setting forth the total number
of shares subject to the Stock Option, the option exercise price, the term of
the Stock Option, and such other terms and provisions as are approved by the
Committee, but, except to the extent permitted herein, are not inconsistent
with the Plan. In the case of an Incentive Stock Option, the stock option
agreement shall also include provisions that may be necessary to assure that
the option is an incentive stock option under the Code. The Company shall
execute stock option agreements upon instructions from the Committee.
5.3 OPTION PRICE. The option price for a Nonqualified Stock Option
shall be equal to the Fair Market Value per share of the Common Stock on the
Date of Grant. The option price for an Incentive Stock Option shall be
determined by the Committee and shall be an amount not less than the Fair
Market Value per share of the Common Stock on the Date of Grant; the
Committee shall determine the Fair Market Value of the Common Stock on the
Date of Grant, and shall set forth the determination in its minutes.
Notwithstanding anything to the contrary contained in this Section 5.3, the
exercise price of each Stock Option granted pursuant to the Plan shall not be
less than the par value per share of the Common Stock.
5.4 OPTION PERIOD. The option period will begin and terminate on the
respective dates specified by the Committee, but may not terminate later than
ten years from the Date of Grant. No Stock Option granted under the Plan may
be exercised at any time after its term. The Committee may provide for the
exercise of Stock Options in installments and upon such terms, conditions and
restrictions as it may determine. The Committee shall have the right to
accelerate the time at which any Stock Option granted to an employee,
consultant or officer (including an employee director) shall become
exercisable. In the event of the retirement of an employee of the Company or
a Subsidiary in accordance with the standard
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retirement policies of the Company or the Subsidiary, as the case may be, all
unmatured installments of Stock Options outstanding shall automatically be
accelerated and exercisable in full in accordance with the provisions of
Article VIII.
ARTICLE VI
LIMITS ON INCENTIVE STOCK OPTIONS
6.1 OPTION PERIOD. Notwithstanding the provisions of Sections 5.4 and
7.2 hereof, if a Participant eligible to receive a grant of an Incentive
Stock Option under Section 422 of the Code (an "Eligible Participant") owns
or is deemed to own (by reason of the attribution rules of Section 424(d) of
the Code) more than 10% of the combined voting power of all classes of stock
of the Company (or any Subsidiary of the Company) and an Incentive Stock
Option is granted to such Eligible Participant, the term of such Incentive
Stock Option (to the extent required by the Code at the time of grant) shall
be no more than five years from the Date of Grant. In addition, the option
price of any such Incentive Stock Option granted to any such Eligible
Participant owning more than 10% of the combined voting power of all classes
of stock of the Company (or any Subsidiary of the Company) shall be at least
110% of the Fair Market Value of the Common Stock on the Date of Grant.
6.2 LIMITATION ON EXERCISES OF SHARES SUBJECT TO INCENTIVE STOCK
OPTIONS. To the extent required by the Code for incentive stock options, the
exercise of Incentive Stock Options granted under the Plan shall be subject
to the $100,000 calendar year limit as set forth in Section 422(d) of the
Code.
6.3 DISQUALIFYING DISPOSITION. If stock acquired upon exercise of an
Incentive Stock Option is disposed of by an Eligible Participant prior to the
expiration of either two years from the Date of Grant of such option or one
year from the transfer of shares to such Eligible Participant pursuant to the
exercise of such option, or in any other disqualifying disposition within the
meaning of Section 422 of the Code, such Eligible Participant shall notify
the Company in writing of the date and terms of such disposition. A
disqualifying disposition by an Eligible Participant shall not affect the
status of any other option granted under the Plan as an incentive stock
option within the meaning of Section 422 of the Code.
6.4 TERMINATION. Notwithstanding the provisions of Article VIII, an
Eligible Participant's Incentive Stock Options shall terminate no later than
ninety (90) days after termination of such Participant's employment with the
Company and its Subsidiaries; PROVIDED that if such employment terminates by
reason of the death or total and permanent disability (as defined in Section
22(e) of the Code) of the Participant, then such Participant's Incentive
Stock Options shall terminate no later than one hundred eighty (180) days
after such termination by reason of death or disability.
ARTICLE VII
EXERCISE OF STOCK OPTIONS; RELOAD
STOCK OPTIONS; RESTRICTED STOCK
7.1 PAYMENT. Full payment for shares purchased upon exercise of a
Stock Option shall be made in cash or by the Participant's delivery to the
Company of shares of Common Stock which have a Fair Market Value equal to the
option price (or in any combination of cash and shares of Common Stock having
an aggregate Fair Market Value equal to the option price). No shares may be
issued until full payment of the purchase price therefor has been made, and a
Participant will have none of the rights of a stockholder until shares are
issued to him.
7.2 RELOAD STOCK OPTIONS. Subject to the terms of this Section 7.2, in
the event that shares are delivered by a Participant in payment of all or a
portion of the exercise price of a Stock Option as set forth in Section 7.1
and/or shares are delivered to or withheld by the Company in satisfaction of
the Company's tax withholding obligations upon exercise in accordance with
Section 15.7, then a Participant so exercising a Nonqualified Stock Option
shall automatically be granted a Nonqualified Stock Option and a Participant
so exercising an Incentive Stock Option shall automatically be granted an
Incentive Stock Option (in either case, a "Reload Stock Option"), to purchase
that number of shares so delivered to or withheld by the Company, as the case
may be, at an option exercise price equal to the Fair Market Value per share
of the Common Stock on
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the date of exercise (subject to the provisions of Article VI regarding
Incentive Stock Options and, in any event not less than the par value per
share of the Common Stock). The option period for a Reload Stock Option will
expire on the expiration date of the Stock Option it replaces (subject to the
provisions in Article VI regarding Incentive Stock Options and the provisions
of Article VIII), after which the Reload Stock Option cannot be exercised.
The Date of Grant of a Reload Stock Option shall be the date that the Stock
Option it replaces is exercised. A Reload Stock Option shall automatically
vest and be exercisable in full after the expiration of six months from its
Date of Grant. It shall be a condition to the grant of a Reload Stock Option
that promptly after its Date of Grant, a stock option agreement shall be
delivered to, and executed and delivered by the Participant and the Company
which sets forth the total number of shares subject to the Reload Stock
Option, the option price, the term of the Reload Stock Option and such other
terms and provisions as are consistent with the Plan.
7.3 RESTRICTED STOCK. In the event that a Participant exercises a
stock option and receives a Reload Stock Option under Section 7.2, the
following restrictions and conditions will apply to that number of the shares
of Common Stock (the "Restricted Stock") issued to the Participant upon such
exercise, which is equal to one-half of the sum of (i) the number of shares
of Common Stock delivered by the Participant to the Company in payment of the
exercise price, if any, plus (ii) the number of shares of Common Stock
delivered to, or withheld by, the Company in satisfaction of the Company's
tax withholding obligations under Section 15.7, if any:
(a) RESTRICTION PERIOD. Subject to the other provisions of this
Plan, each Participant shall not be permitted to sell, assign,
transfer, pledge, exercise or place any encumbrance on shares of
Restricted Stock and any Stock Dividends paid on or with respect to
such Restricted Stock until the earliest to occur of any of the
following events (such period of restriction being referred to herein as
the "Restriction Period"):
(i) the expiration of five years from the date of issuance of
the Restricted Stock in the name of the Participant;
(ii) in the case of an employee of the Company or a Subsidiary,
the retirement of such Participant from the Company or the
Subsidiary in accordance with the standard retirement
policies of the Company or the Subsidiary, as the case may
be;
(iii) in the case of a non-employee director, officer or
consultant of the Company, the cessation of service to the
Company of such Participant in such capacity;
(iv) the death of such Participant;
(v) the total and permanent disability of such Participant (as
defined in Article VIII hereof); or
(vi) a Change in Control of the Company.
(b) RIGHTS WITH RESPECT TO RESTRICTED STOCK. Except as otherwise
provided in the Plan, the Participant shall have, with respect to his or
her Restricted Stock (and any Stock Dividends paid on such Restricted
Stock), all of the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive any dividends thereon.
Each Participant who is to receive Restricted Stock shall be issued a
stock certificate in respect of such shares of Restricted Stock,
registered in the name of the Participant, which shall bear an appropriate
legend referring to the restrictions applicable to such Restricted Stock,
to read substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions of the
IMCO Recycling Inc. 1992 Stock Option Plan. A copy of such Plan
is on file in the offices of IMCO Recycling Inc., 5215 North
O'Connor Blvd., Suite 940, Irving, Texas 75039."
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ARTICLE VIII
TERMINATION OF EMPLOYMENT OR SERVICE
In the event a Participant who is an employee of the Company (including
any employee who is an officer or a director) or any Subsidiary shall cease
to be employed by the Company or a Subsidiary, or a Participant who is a
non-employee director or a non-employee officer or consultant of the Company
or any Subsidiary shall cease to serve in his capacity as a director, officer
or consultant, as the case may be, of the Company or any Subsidiary, for any
reason other than death, disability or retirement, such Participant's Stock
Options may be exercised by the Participant for a period of one hundred
eighty (180) days after the Participant's termination of employment or
service, as the case may be, or until expiration of the applicable Option
Period (if sooner) to the extent of the shares with respect to which such
Stock Options could have been exercised by the Participant on the date of
termination, and thereafter to the extent not so exercised, such Stock
Options shall terminate. In addition, except as provided in Section 6.4 with
respect to Incentive Stock Options, a Participant's Stock Options may be
exercised as follows in the event of such Participant's death, disability or
retirement:
(a) DEATH. In the event of death while employed or while serving
as a (i) non-employee director, (ii) non-employee officer or (iii)
consultant, as the case may be, the Stock Option may be exercised,
for a period of one hundred eighty (180) days after the
Participant's death or until expiration of the Stock Option period
(if sooner), to the extent of the shares with respect to which the Stock
Option could have been exercised by the Participant on the date of
the Participant's death, by the Participant's estate or personal
representative, or by the person who acquired the right to exercise
the Stock Option by bequest or inheritance or by reason of the
Participant's death; and
(b) DISABILITY OR RETIREMENT. In the event of termination of
employment of an employee (or termination of service in the case of
a (i) non-employee director, (ii) non-employee officer or (iii)
consultant) as the result of a total and permanent disability (as
defined in Section 22(e) of the Code) or as the result of
retirement in accordance with the standard retirement policies of the
Company or the Subsidiary, as the case may be, the Stock Option may
be exercised by the Participant or his guardian for a period of one
hundred eighty (180) days after such termination or until
expiration of the Stock Option period (if sooner), to the extent of
the shares with respect to which the Stock Option could have been
exercised by the Participant on the date of such termination, after
taking into account any acceleration of unmatured installments of
Stock Options pursuant to Section 5.4.
Notwithstanding the foregoing, individual grants of Stock Options to
Participants under the Plan may provide, pursuant to the terms of the
particular stock option agreement, more restrictive terms than those
contained in this Plan concerning any exercise of such Stock Options
with respect to any termination of employment or service by such
Participants.
ARTICLE IX
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article IX, the Board may
at any time, without the consent of the Participants, alter, amend, revise,
suspend, or discontinue the Plan, provided that such action shall not,
without obtaining the approval of the stockholders of the Company, (i)
materially increase the benefits accruing to Participants under the Plan,
(ii) materially increase the number of securities which may be issued under
the Plan, or (iii) materially modify the requirements as to eligibility for
participation in the Plan. Subject to the foregoing limitations, the Board
may amend the Plan or modify the agreements evidencing same in order to
comply with Section 16(b) of the 1934 Act and the rules and regulations
promulgated thereunder, as amended from time to time. The Board may not
amend the provisions of Article IV more than once during any six-month period
unless such amendment is deemed necessary in order to comply with the
provisions of the Code or the treasury regulations promulgated thereunder.
The Committee may also substitute new Stock Options for Stock Options
previously granted to employees of the Company or any of its Subsidiaries,
including previously granted Stock Options having higher exercise prices.
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ARTICLE X
EFFECT OF THE PLAN
Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any director, officer, consultant or
employee any right to be granted a Stock Option to purchase or receive Common
Stock of the Company or any other rights except as may be evidenced by a
stock option agreement, or any amendment thereto, duly authorized by and
executed on behalf of the Company and then only to the extent of and upon the
terms and conditions expressly set forth therein.
ARTICLE XI
TERM
The Plan shall be submitted to the Company's stockholders for their
approval; PROVIDED, HOWEVER, that Stock Options may be granted under the Plan
prior to the time of stockholder approval. Unless sooner terminated by
action of the Board, the Plan will terminate on the 15th day of December,
2002. Stock Options under the Plan may not be granted after that date, but
Stock Options granted before that date will continue to be effective in
accordance with their terms and conditions.
ARTICLE XII
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect or unexercised Stock Options
are outstanding there shall be any increase or decrease in the number of
issued and outstanding shares of Common Stock through the declaration of a
Stock Dividend or through any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, then and in such event:
(i) An appropriate adjustment shall be made in the
maximum number of shares of Common Stock then subject to
being awarded under grants pursuant to the Plan, to the end
that the same proportion of the Company's issued and
outstanding shares of Common Stock shall continue to be
subject to being so awarded; and
(ii) Appropriate adjustments shall be made in the
number of shares of Common Stock and the exercise price per
share thereof then subject to purchase pursuant to each
such Stock Option previously granted and unexercised, to
the end that the same proportion of the Company's issued
and outstanding shares of Common Stock in each instance shall
remain subject to purchase at the same aggregate exercise price.
Any fractional shares resulting from any adjustment made pursuant to this
Article XII shall be eliminated for the purposes of such adjustment. Except
as otherwise expressly provided herein, the issuance by the Company of shares
of its capital stock of any class, or securities convertible into shares of
capital stock of any class, either in connection with direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of or exercise price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan.
ARTICLE XIII
RECAPITALIZATION, MERGER AND CONSOLIDATION
(a) The existence of this Plan and Stock Options granted
hereunder shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stocks ranking prior to or otherwise
affecting the Common Stock or the rights thereof (or any rights,
options or warrants to purchase same), or
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the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger or
consolidation, any outstanding Stock Option granted hereunder shall pertain
to and apply to the securities or rights (including cash, property or assets)
to which a holder of the number of shares of Common Stock subject to the
Stock Option would have been entitled.
(c) In the event of any reorganization, merger or consolidation
pursuant to which the Company is not the surviving or resulting corporation,
or of any proposed sale of substantially all of the assets of the Company,
there may be substituted for each share of Common Stock subject to the
unexercised portions of such outstanding Stock Option that number of shares
of each class of stock or other securities or that amount of cash, property
or assets of the surviving or consolidated company which were distributed or
distributable to the stockholders of the Company in respect of each share of
Common Stock held by them, such outstanding Stock Options to be thereafter
exercisable for such stock, securities, cash or property in accordance with
their terms. Notwithstanding the foregoing, however, the Board, in its sole
discretion, may cancel all such Stock Options as of the effective date of any
such reorganization, merger or consolidation, or of any such proposed sale of
substantially all of the assets of the Company, or of any dissolution or
liquidation of the Company, and either:
(i) give notice to each holder thereof or his personal
representative of its intention to cancel such Stock Options and permit
the purchase during the thirty (30) day period next preceding such
effective date of any or all of the shares subject to such outstanding
Stock Options, including shares as to which such Stock Options would not
otherwise be exercisable; or
(ii) pay the holder thereof an amount equal to a reasonable
estimate of an amount (hereinafter the "Spread") equal to the difference
between the net amount per share payable in such transaction or as a
result of such transaction, less the exercise price of such Stock Options.
In estimating the Spread, appropriate adjustments to give effect to the
existence of the Stock Options shall be made, such as deeming the Stock
Options to have been exercised, with the Company receiving the exercise
price payable thereunder, and treating the shares receivable upon exercise
of the Options as being outstanding in determining the net amount per
share. In cases where the proposed transaction consists of the
acquisition of assets of the Company, the net amount per share shall
be calculated on the basis of the net amount receivable with respect to
shares of Common Stock upon a distribution and liquidation by the Company
after giving effect to expenses and charges, including but not limited to
taxes, payable by the Company before such liquidation could be completed.
(d) In the event of a Change in Control of the Company, then,
notwithstanding any other provision in the Plan to the contrary, all
unmatured installments of Stock Options outstanding shall thereupon
automatically be accelerated and exercisable in full.
(e) Notwithstanding sub-Section (c) above of this Article XIII, in
case the Company shall, at any time while any Stock Option under this
Plan shall be in force and remain unexpired, (i) sell all or substantially
all of its property or (ii) dissolve, liquidate, or wind up its affairs,
then, provided that the Board so determines in its sole discretion, each
Participant may thereafter receive upon exercise hereof (in lieu of each
share of Common Stock of the Company which such Participant would have
been entitled to receive) the same kind and amount of any securities or
assets as may be issuable, distributable or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of
Common Stock of the Company. In the event that the Company shall, at
any time prior to the expiration of any Stock Option, make any partial
distribution of its assets in the nature of a partial liquidation, whether
payable in cash or in kind (but excluding the distribution of a cash
dividend payable out of retained earnings or earned surplus and designated
as such), then in such event the exercise prices then in effect with
respect to each option shall be reduced, as of the payment date of such
distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in
accordance with generally accepted accounting principles) resulting by
reason of such distribution; provided, that in no event shall any
adjustment of exercise prices in accordance with the terms of the Plan
result in any exercise prices being reduced below the par value per share
of the Common Stock.
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(f) Upon the occurrence of each event requiring an adjustment of
the exercise price and/or the number of shares purchasable pursuant to
Stock Options granted pursuant to the terms of this Plan, the Company
shall mail forthwith to each Participant a copy of its computation of such
adjustment which shall be conclusive and shall be binding upon each such
Participant, except as to any Participant who contests such computation by
written notice to the Company within thirty (30) days after receipt
thereof by such Participant.
ARTICLE XIV
OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS
GRANTED BY OTHER CORPORATIONS
Stock Options may be granted under the Plan from time to time in
substitution for such stock options held by employees of a corporation who
become or are about to become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by either of the foregoing of
stock of the employing corporation as the result of which it becomes a
Subsidiary. The terms and conditions of the substitute options so granted
may vary from the terms and conditions set forth in this Plan to such extent
as the Committee at the time of grant may deem appropriate to conform, in
whole or in part, to the provisions of the options in substitution for which
they are granted.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 EXERCISE OF STOCK OPTIONS. Stock Options granted under the Plan
may be exercised during the option period, at such times and in such amounts,
in accordance with the terms and conditions and subject to such restrictions
as are set forth herein and in the applicable stock option agreements.
Notwithstanding anything to the contrary contained herein, Stock Options may
not be exercised, nor may shares be issued pursuant to a Stock Option if any
necessary listing of the shares on a stock exchange or any registration under
state or federal securities laws required under the circumstances has not
been accomplished.
15.2 NON-ASSIGNABILITY. A Stock Option granted to a Participant may
not be transferred or assigned, other than (i) by will or the laws of descent
and distribution or (ii) pursuant to the terms of a qualified domestic
relations order (as defined in Section 401(a)(13) of the Code or Section
206(d)(3) of the Employee Retirement Income Security Act of 1974, as
amended), provided, that in the case of an Incentive Stock Option, such
transfer or assignment may occur only to the extent it will not result in
disqualifying such option as an incentive stock option under Section 422 of
the Code, or any successor provision. Subject to the foregoing, during a
Participant's lifetime, Stock Options granted to a Participant may be
exercised only by the Participant or, provided the particular stock option
agreement so provides, by the Participant's guardian or legal representative.
15.3 INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any Participant(s) under the Plan, such
evidence as it may deem necessary to establish that the Stock Options granted
or the shares of Common Stock to be purchased or transferred are being
acquired for investment and not with a view to their distribution.
15.4 ALLOTMENT OF SHARES. Except as otherwise set forth in Article
IV, the Committee shall determine the number of shares of Common Stock to be
offered from time to time by grant of Stock Options to Participants under the
Plan. The grant of a Stock Option to a Participant shall not, by itself, be
deemed either to entitle the Participant to, or to disqualify the Participant
from, participation in any other grant of Stock Options under the Plan.
15.5 NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any
Stock Option confers upon any employee the right to continue in the employ of
the Company or interferes with or restricts in any way the right of the
Company to discharge any employee at any time (subject to any contract rights
of such employee).
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15.6 STOCKHOLDERS' RIGHTS. The holder of a Stock Option shall have
none of the rights or privileges of a stockholder except with respect to
shares which have been actually issued.
15.7 TAX REQUIREMENTS. Any employee who exercises any Stock Option
shall be required to pay the Company the amount of all taxes which the
Company is required to withhold as a result of the exercise of the Stock
Option. With respect to an Incentive Stock Option, in the event of a
subsequent disqualifying disposition of Common Stock within the meaning of
Section 422 of the Code, such payment of taxes may be made in cash, by check
or through the delivery of shares of Common Stock which the employee then
owns, which shares have an aggregate Fair Market Value equal to the required
withholding payment, or any combination thereof. With respect to the
exercise of a Nonqualified Stock Option by a Participant who is an officer,
director or 10% stockholder of the Company (as determined by reference to
Section 16(b) of the 1934 Act and the rules promulgated thereunder), any
obligation of such Participant to pay such taxes shall only be satisfied by
the Company's withholding of that number of whole shares of Common Stock
otherwise issuable upon such exercise which have an aggregate Fair Market
Value which equals or exceeds (if necessary to avoid the issuance of
fractional shares) the required tax withholding payment. With respect to the
exercise of a Nonqualified Stock Option by any Participant who is not such an
officer, director or 10% stockholder of the Company, such Participant's
obligation to pay such taxes may be satisfied by the following, or any
combination thereof: (i) the delivery of cash to the Company in an amount
necessary to satisfy the required tax withholding obligation of the Company
and/or (ii) the actual delivery by the exercising Participant to the Company
of shares of Common Stock which the Participant owns and/or the Company's
withholding of a number of shares to be delivered upon the exercise of the
Stock Option), which shares so delivered or withheld have an aggregate Fair
Market Value which equals or exceeds (if necessary to avoid the issuance of
fractional shares) the required tax withholding payment. Any such
withholding payments with respect to the exercise of a Nonqualified Stock
Option made by a Participant in cash or by actual delivery of shares of
Common Stock shall be required to be made within thirty (30) days after the
delivery to the Participant of any certificate representing the shares of
Common Stock acquired upon exercise of the Stock Option.
15.8 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board
or the Committee, nor any officer or employee of the Company acting on behalf
of the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Board or the Committee and each and any
officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
ARTICLE XVI
EFFECTIVE DATE
The effective date of the Plan shall be December 15, 1992, that is, the
date on which it was first approved and adopted by the Board.
Notwithstanding the amendment of this Plan effective as of December 15, 1994,
neither the terms of the Stock Options outstanding as of such date nor the
Agreements entered into by and between the Company and such relevant
Participant in respect of such Stock Options, shall be deemed to be amended
in any way.
* * * * * * * * *
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of the 15th day of December, 1994 by its Chief Executive Officer
pursuant to prior action taken by the Board.
IMCO RECYCLING INC.
By:____________________________________
Chief Executive Officer
Attest:
___________________________________
Secretary
12
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT
TO
PROCESSING AGREEMENT
This First Amendment to Processing Agreement (this "Amendment") is
executed and delivered this ___ day of ____________, 1995, but effective as
of the 1st day of March, 1995, by and among the Rigid Packaging Division of
Aluminum Company of America, a Pennsylvania corporation ("Alcoa"), IMCO
Recycling Inc., a Delaware corporation ("IMCO") and Metal Resources, Inc., a
Tennessee corporation ("MRI"). All references herein to "IMCO" shall be
references to both IMCO and MRI, collectively, unless the context otherwise
requires.
WITNESSETH:
WHEREAS, Alcoa and IMCO entered into a Processing Agreement (herein so
called) dated effective as of January 1, 1994 pursuant to which IMCO provides
tolling/converting services at its recycling and processing facility in
Rockwood, Tennessee ("Rockwood Facility") to Alcoa to satisfy Alcoa's
requirements of secondary metal in the form of RSI and Molten Metal, and
Alcoa purchases such services from IMCO; and
WHEREAS, MRI is an indirect wholly owned subsidiary of IMCO which owns
and operates a recycling and processing facility in Loudon, Tennessee, and is
in the process of expanding its facilities with the addition of a new furnace
at its plant ("MRI Facility"); and
WHEREAS, IMCO, MRI and Alcoa desire to expand the scope of the
Processing Agreement to include additional tolling/converting services for
Alcoa by MRI at the MRI Facility; and
WHEREAS, IMCO and Alcoa desire to amend the Processing Agreement to
include the terms and conditions of such additional tolling/converting
services at the MRI Facility, as well as certain other amendments to the
terms and conditions of IMCO's tolling/converting services at the Rockwood
Facility.
NOW, THEREFORE, for Ten and No/100 Dollars ($10.00) and in consideration
of and in reliance upon the mutual covenants and conditions set forth herein,
the sufficiency of which are hereby acknowledged, Alcoa, IMCO and MRI agree
as follows:
1. PROCESSING AGREEMENT. Except to the extent specifically amended by
the terms of this Agreement, all terms, conditions, covenants and agreements
set forth in the Processing Agreement are hereby ratified and confirmed and
shall remain in full force and effect.
2. DEFINED TERMS. All capitalized terms used herein and not expressly
defined herein shall have the same meanings as the identical terms contained
in the Processing Agreement.
3. EXHIBITS "B" AND "C". (a) Exhibit "B" of the Processing Agreement
is hereby deleted and substituted in lieu of thereof is Exhibit "B" which is
attached hereto and made a part hereof.
(b) Exhibit "C" is hereby amended by adding a new paragraph (f) to
read as follows:
<PAGE>
"(f) Notwithstanding any provision to the contrary herein,
effective January 1, 1995, any fee adjustment required to be
made on a quarterly basis hereunder shall be made in the
second Contract Quarter immediately following the
particular Contract Quarter in which the cost changes took
place; for example, cost increases or decreases in the first
Contract Quarter of 1995 will be calculated and resolved
during the second Contract Quarter of 1995, but will not be
implemented until the third Contract Quarter of 1995. This
provision is implemented in order to eliminate the need for
retroactive price changes."
4. MRI AS A PARTY. Effective as of March 1, 1995, MRI shall be a
party to the Processing Agreement. All references to "IMCO" in the
Processing Agreement shall be references to both IMCO and MRI, collectively,
unless the context otherwise requires. References to "Facility" in the
Processing Agreement shall mean either the Rockwood Facility or the MRI
Facility, as the context requires; provided, however, all references to
"Facility" in Exhibit "C" of the Processing Agreement shall mean only the
Rockwood Facility.
5. APPROVALS. Unless otherwise provided in the Processing Agreement,
whenever approval or consent is required of IMCO or MRI, the approval or
consent by IMCO shall be deemed to be the approval and/or consent by both
IMCO and MRI.
6. ASSIGNMENT. Notwithstanding the provisions contained in SECTION
23.01 of the Processing Agreement, IMCO and MRI shall have the right to
assign the Processing Agreement to any of their parents or direct or indirect
wholly owned subsidiaries.
7. WORK COVERED BY PROCESSING AGREEMENT. The Processing Agreement
shall govern the terms and conditions of performance by IMCO of its
tolling/converting services at the Rockwood Facility and the MRI Facility and
the rights and obligations of Alcoa in connection with the payment therefor
and the deliveries of product thereto from the Alcoa Plant and from Alcoa's
Warrick, Indiana facility. Effective as of March 1, 1995 (except as
otherwise expressly set forth therein), the amounts to be paid by Alcoa for
such services are set forth in Exhibit "B" hereto, subject to adjustment
pursuant to SECTION 5.02 of the Processing Agreement. The parties
acknowledge that Exhibit "B" contains base charges for such services and that
some of these charges have previously been adjusted pursuant to SECTION 5.02
of the Processing Agreement.
8. TARGET MONTHLY VOLUME. All references in the Processing Agreement
(including but not limited to those contained in SECTIONS 2.01 and 2.02
thereof) to a target monthly volume of 15 million pounds of Product are
hereby revised to mean a target monthly volume of 20 million pounds. Such
monthly volume shall be allocated between the Rockwood Facility and the MRI
Facility at the sole discretion of IMCO. All references contained in SECTION
2.06 of the Processing Agreement to the 15 million pounds of Product to be
delivered monthly by Alcoa in order to avoid a Deficiency is hereby revised
to mean 20 million pounds.
All references to a monthly volume of 9 million pounds of Product during
the final Contract Year, such as those contained in SECTIONS 2.02, 2.06(c)
and 3.03 of the Processing Agreement, are hereby revised to refer to a
monthly volume of 12 million pounds.
9. DEFAULT VOLUMES. The reference to 12 million pounds of Product per
month contained in the first sentence of SECTION 2.04 of the Processing
Agreement is hereby revised to mean 16 million pounds of Product per month.
The reference to Exhibit "C" in the seventh line of SECTION 2.04 is hereby
revised to mean Exhibit "B." The reference to 12 million pounds of Product
per month contained in the first sentence of SECTION 2.05 of the Processing
Agreement is hereby revised to mean 16 million pounds of Product per month.
10. EXPANSION. The second, third and fourth sentences of SECTION 3.02
are hereby deleted in their entirety.
-2-
<PAGE>
11. TERMINATION. Section 3.01 is hereby amended by adding a new
paragraph to follow the existing paragraph in such section, to read as
follows:
"Notwithstanding any provision contained herein to the contrary,
after January 1, 1996, Alcoa shall have a one-time right and option to
reduce the target monthly volume referred to in Sections 2.01 and 2.02
to an amount to be specified by Alcoa of less than 20 million pounds, but
in no event less than 15 million pounds. This one-time right and option
shall be exercisable by Alcoa at any time during the remaining term of
the Agreement by Alcoa's giving written notice of such exercise to IMCO,
specifying the reduced target monthly volume so chosen by Alcoa. In
such event,the target monthly volume shall nonetheless remain in effect
at 20 million pounds, and the provisions of the Agreement concerning
such reduced target monthly volume chosen by Alcoa will not become
effective, until the first anniversary date of the last day of the
particular Contract Year in which such Alcoa notice of exercise is given.
In such event, the provisions of this Agreement concerning volumes
required to avoid a Deficiency, final Contract Year monthly volumes,
default volumes, and any and all provisions regarding similar amounts
which have been modified by the terms of this Amendment, shall be
appropriately reduced on a pro rata basis by the relative amount of such
reduction in target monthly volume. In addition, commencing on the first
of January following Alcoa's notice of exercise, the Fixed Charge Payment
attributable to the Expanded Commitment shall be reduced on a pro rata
basis by the relative amount of such reduction in target monthly volume;
provided, however, during the first Contract Year commencing on such
January 1st (the "Intervening Year"), the Fixed Charge Payment
attributable to the Expanded Commitment shall not be reduced to less
than $120,000. Additionally, if requested by Alcoa in the notice of
exercise, during the Intervening Year the Fixed Charge Payment
attributable to the Expanded Commitment shall be reduced to less than
$120,000 to the extent that IMCO is able to recover the remaining
volume attributable to the Expanded Commitment with third-party
business. Within 30 days after the exercise of such option by Alcoa, the
parties will enter into a further amendment to the Agreement reflecting
the reduced target monthly volume and the other reductions necessitated
thereby."
12. SECTION 1.02. The first sentence of Section 1.02 is hereby deleted
in its entirety, and substituted in lieu thereof is the following: "It is
intended that Alcoa shall be the principal customer of the Facility and shall
always receive priority scheduling and toll conversion pricing over IMCO's
other customers of the Facility, up to an aggregate maximum of 24 million
pounds per month."
13. CAPTIONS. Captions of the sections of this Amendment are for
convenience and reference only and the words contained therein shall in no
way be held to explain, modify, amplify, or aid in the interpretation,
construction, or meaning of the provisions of this Amendment.
14. MULTIPLE COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first written above.
-3-
<PAGE>
ALUMINUM COMPANY OF AMERICA
By:____________________________________
Name:______________________________
Title:_____________________________
IMCO RECYCLING INC.
By:____________________________________
Name:______________________________
Title:_____________________________
METAL RESOURCES, INC.
By:____________________________________
Name:______________________________
Title:_____________________________
-4-
<PAGE>
Exhibit 15.1
We are aware of the incorporation by reference in the Registration
Statement (Form S-8 No. 33-26641) pertaining to the Nonqualified
Stock Option Plan of IMCO Recycling Inc. and the related
Prospectus, in the Registration Statement (Form S-8 No. 33-34745)
pertaining to the IMCO Recycling Inc. Amended and Restated Stock
Option Plan, and in the Registration Statement (Form S-8 No.
33-76780) pertaining to the IMCO Recycling Inc. 1992 Stock Option
Plan of our report dated July 28, 1995 relating to the unaudited
condensed consolidated interim financial statements of IMCO
Recycling Inc. which are included in its Form 10-Q for the quarter
ended June 30, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report
is not a part of the registration statements prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
Ernst & Young LLP
August 10, 1995
Dallas, Texas
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