<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7170
IMCO RECYCLING INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2008280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
5215 North O'Connor Blvd., Suite 940, Irving, Texas 75039
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 869-6575
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Exchange on Which Registered
------------------- ----------------------------
Common Stock, $0.10 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
As of March 15, 1996, the aggregate market value of voting stock held by
nonaffiliates of the Registrant was $222,547,762
Shares of Common Stock outstanding at March 15, 1996: 11,786,430
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement relating to its 1996
Annual Meeting of Stockholders are incorporated by reference into Part III
hereof.
<PAGE>
<TABLE>
<CAPTION>
PART I
ITEM PAGE
- ---- ----
<S> <C> <C>
Item 1. Business (including Executive Officers)...................... 3
Item 2. Properties................................................... 12
Item 3. Legal Proceedings............................................ 13
Item 4. Submission of Matters to a Vote of Security
Holders...................................................... 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... 13
Item 6. Selected Financial Data...................................... 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 15
Item 8. Financial Statements and Supplementary Data.................. 19
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure....................... 34
PART III
Item 10. Directors and Executive Officers of the
Registrant.................................................. 34
Item 11. Executive Compensation....................................... 34
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 34
Item 13. Certain Relationships and Related Transactions............... 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K......................................... 34
Signatures.............................................................. 40
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
The principal business of IMCO Recycling Inc. (the "Company") is owning and
operating aluminum recycling plants. The Company believes it is the world's
largest recycler of secondary aluminum, which includes used aluminum beverage
cans ("UBCs"), scrap and dross (a by-product of aluminum production). The
Company converts UBCs, scrap and dross into molten metal in furnaces which it
then delivers to customers in molten form or ingots. The Company recovers
magnesium via a relatively similar process and also recycles zinc. Except
where the context otherwise requires, the term "Company" as used herein
refers to IMCO Recycling Inc. and its subsidiaries.
The Company's strategy is to participate in sectors of the nonferrous metals
recycling industry in which it believes it can provide customers with a
technology-based, value-added service and in which it can develop significant
market share. A large percentage of the Company's processing capacity is
utilized to recycle scrap material and charge a fee for this service (a
service called "tolling"). The Company intends to continue to expand its
business both in the United States and abroad (i) by establishing additional
aluminum recycling facilities which would be dedicated to one or more major
customers, (ii) by expanding its existing facilities and (iii) by acquiring
or partnering with other similar recycling businesses. There can be no
assurance, however, that any such expansions or acquisitions will be
accomplished. See "SALES AND MARKETING."
The Company's business has benefited from the trend to include recycled
materials in finished products, and in particular from the growth in the
production and use of aluminum beverage cans and their recycling. The
recycling of UBCs in the United States has increased because of economic,
legislative and environmental factors. The number of aluminum beverage cans
produced has increased from approximately 34.7 billion in 1979 to 101 billion
in 1995, and the number of UBCs recycled increased from approximately 8.5
billion to 63 billion during the same period, according to industry estimates.
The Company's principal customers include Aluminum Company of America
("Alcoa"), Barmet Aluminum Corporation ("Barmet"), a subsidiary of CasTech
Aluminum Group Inc., Alcan Aluminum Corporation, Ravenswood Aluminum
Corporation ("Ravenswood"), Commonwealth Aluminum Corporation, ACX
Technologies, Inc., Alumax Aluminum Company, Rock Creek Aluminum Inc. and
Logan Aluminum Co., all of whom use aluminum recycled by the Company to
produce can sheet, building, automotive and other products.
For the year ended December 31, 1995, approximately 93.6% of the Company's
total pounds of metal processed involved tolling. Tolling operations do not
expose the Company to the risk of commodity price fluctuations and impose
relatively low working capital demands; consequently, the Company prefers to
utilize as much of its capacity as possible for tolling. The balance of the
Company's processing is principally derived from dross and scrap purchased,
recycled and then sold by the Company ("buy/sell" business). See
"OPERATIONS."
3
<PAGE>
BACKGROUND
The Company was organized in 1985 as Frontier Texas Corporation under the
corporate laws of Delaware. In September 1986, the Company acquired its
aluminum and magnesium recycling business through its purchase of
International Metal Co., an Oklahoma corporation. In September 1988,
International Metal Co. merged with and into the Company, and the Company
changed its name to IMCO Recycling Inc.
In January 1992, the Company purchased Interamerican Zinc, Inc. ("IZI"), a
processor and recycler of zinc dross for U.S. steel galvanizers. In March
1992, the Company entered into a long-term supply agreement with Barmet and
constructed an aluminum recycling facility adjacent to Barmet's rolling mill
in Uhrichsville, Ohio See ITEM 2. "PROPERTIES". In December 1993, the
Company purchased substantially all of the assets of a Corona, California
aluminum recycling facility, and, in September 1994, the Company purchased
Phoenix Smelting Corporation ("Phoenix") and its wholly owned subsidiary,
Metal Resources, Inc., which owns and operates an aluminum recycling facility
in Loudon, Tennessee ("Loudon").
In September 1995, the Company purchased all of the assets of an aluminum
recycling facility in Bedford, Indiana ("Bedford"). In addition, in October
1995, the Company acquired all of the stock of Alumar Associates, Inc.
("Alumar") and its wholly owned subsidiary, Metal Mark, Inc. ("Metal Mark"),
which owned and operated three aluminum recycling facilities located in
Chicago Heights, Illinois, Sikeston, Missouri, and Pittsburg, Kansas, and
also owned 50 percent of another aluminum recycling facility located in East
Chicago, Indiana. Subsequent to the purchase the Company decided to close
the Pittsburg facility because of economic considerations. See ITEM 2.
"PROPERTIES".
In December 1995, the Company became a 50% owner in a German company named
VAW-IMCO GuB und Recycling GmbH ("VAW-IMCO"). This venture was formed to own
and operate two recycling and foundry alloy facilities which were previously
owned by VAW aluminium AG, the largest aluminum company in Germany. The
plants will principally serve the European automotive markets. This venture
represents the Company's first investment in the international aluminum arena.
At year-end 1995, the Company owned and operated 10 domestic recycling plants
that have an aggregate annual processing capacity of approximately 1.46
billion pounds of aluminum and 50 million pounds of other metals. In
addition to the above wholly owned facilities, the Company is a 50% owner of
(i) the East Chicago facility mentioned above which has the ability to
process 80 million pounds of aluminum, and (ii) VAW-IMCO which will have a
processing capacity of 220 million pounds of aluminum.
In 1996, the Company plans to construct an aluminum recycling facility in
Coldwater, Michigan. The Company will be a 75% owner of the facility,
which will have a long-term supply agreement for the delivery of hot metal to
the 25% partner, Alchem Aluminum, Inc ("Alchem"). Alchem manufactures
specification aluminum alloys that are sold principally to automotive
manufacturers.
PRODUCTS AND SERVICES
The Company recycles aluminum and delivers the recycled metal to customers as
ingot or molten aluminum. The Company's customers include most of the major
United States aluminum
4
<PAGE>
producers, aluminum diecasters, extruders, and other processors of aluminum
products. A principal element of the Company's strategic plan calls for
entering into new markets, specifically the rapidly expanding aluminum
automotive market. In 1995 the Company entered this market with the
acquisition of Metal Mark and the announced construction of the Coldwater,
Michigan plant.
In addition, the Company plans to increase its emphasis on seeking foreign
locales for its recycling facilities where market conditions warrant.
General political and economic conditions in these countries could affect the
overall financial prospects of the Company. Foreign operations are generally
subject to several risks, including foreign currency exchange rate
fluctuations, strict environmental regulations, changes in the methods and
amounts of taxation, foreign exchange controls and government restrictions on
the repatriation of hard currency.
The Company recycles magnesium dross for primary magnesium producers. It
also produces a line of magnesium anodes that are recycled from post-consumer
scrap and sold to end users and independent distributors for corrosion
protection of steel structures.
The Company believes that IZI is the largest recycler of hot-dip zinc dross
for continuous galvanizers in the U.S. IZI's principal customers during 1995
consisted of most of the major U.S. steel companies.
THE RECYCLING PROCESS
The raw material received for aluminum processing is loaded into furnaces
where gas heat is applied along with a flux mixture (salt and potash). Some
of the Company's aluminum facilities operate proprietary rotary furnaces of a
unique design (which are somewhat more flexible than reverberatory furnaces)
and can process UBCs, dross and various types of aluminum scrap. The Company
believes that its uniquely designed rotary furnaces are more efficient and
cleaner than, and provide rates of recovery superior to, conventional rotary
furnaces.
The Loudon, Bedford and Metal Mark facilities operate conventional rotary
furnaces which are somewhat larger than the Company's proprietary rotary
furnaces. The Bedford facility's rotary furnace is unique in that it also
features automated material charging mechanisms. The Corona plant operates
reverberatory type furnaces which are specifically designed for UBCs and can
plant scrap. In 1995, the Company installed additional environmental
equipment in order to be able to process other types of clean scrap through
Corona's reverberatory furnaces.
Materials are melted in the furnaces, and the recovered metal is poured
directly into an ingot mold or hot metal crucible for delivery to customers.
Some of the Company's plants make deliveries of molten aluminum in crucibles
transported by trucks to customers' plants. The molten aluminum is poured
directly into the customer's furnace, saving the customer the time and
expense of remelting aluminum ingot. The Company normally charges an
additional fee for transportation and handling of molten aluminum. The
Bedford plant has the ability to deliver molten aluminum, but has not yet
developed the customer base to take advantage of this capability. The
Corona, Sapulpa, and Metal Mark plants are restricted by the geographical
location of their customers to delivering the aluminum in ingot form.
Magnesium is recycled by the same method in a rotary furnace at the Sapulpa,
Oklahoma plant.
5
<PAGE>
The Company's principal type of aluminum and magnesium rotary furnace was
developed by a former shareholder of International Metal Co. The Company has
a nonexclusive right to use this furnace, subject only to the Company's
maintaining the confidentiality of the furnace design. The Company requires
its key operational employees to enter into agreements to meet this
confidentiality requirement. There can be no assurances that others will not
purchase or develop similar furnaces, that the process will not be
transferred to or obtained by others, or that other metal producers will not
develop a similar metal recovery process.
The aluminum recycling process from the Company's rotary furnaces produces a
by-product called "salt cake," which is formed from the contaminants and
coatings on aluminum scrap and dross and the salts added during the aluminum
recycling process. (The by-product of the reverberatory furnaces is dross.)
Salt cake is composed of salts, metallic aluminum, aluminum oxide and small
amounts of other materials.
The Company disposes of its salt cake and certain airborne contaminants
("baghouse dust") in landfills with cells dedicated for use exclusively by
the Company or that separately encapsulate the Company's material. Salt cake
is not currently listed as a "hazardous waste" under the Resource
Conservation and Recovery Act of 1976 ("RCRA") or as a "hazardous substance"
under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"). The Company has built and operates a lined landfill
at its Morgantown Plant in 1989 meeting RCRA Subchapter "C" hazardous waste
standards.
In May 1994 the Company announced that it had developed a patented technology
that produces fertilizer as a by-product instead of salt cake. This process,
if proven commercially feasible, would allow for "closed loop" recycling of
many of the materials used in the aluminum recycling process. In 1995 the
Company constructed a facility adjacent to its Morgantown plant to further
process the salt cake and extract whatever aluminum is left after the melting
process. This salt cake processing facility is the first step needed for
closed loop recycling. The process involves crushing of the salt cake and
separation of a portion of the aluminum contained in the salt cake. The
residual product is then landfilled in the Company's Morgantown landfill. The
plant began processing salt cake in January 1996 and is in the initial
start-up phase. See "ENVIRONMENTAL MATTERS". The Company has not
previously attempted this large scale crushing of its salt cake and the
efficiency of this process has not yet been determined.
In the zinc recycling process, dross is first melted in an electric induction
furnace and then transferred to a reactor which removes the impurities (iron
and zinc oxide, which are sold as a by-product). The remaining molten zinc
is poured into a reverberatory holding furnace from which it is blended and
cast into ingots which are returned to the customer. IZI holds patent rights
to its process in the United States and 13 other countries.
OPERATIONS
In its aluminum tolling operations, the Company accepts UBCs, dross and scrap
owned by its customers and processes this material for a tolling charge per
pound of incoming weight. In order to retain control of their metal
supplies, customers have desired to toll, rather than sell, their scrap
materials. Tolling requires no metal inventory to be purchased or held by
the Company. In addition, tolling does not expose the Company to the risk of
fluctuating metal prices since the Company does not own the material being
processed. The Metal Mark acquisition will change somewhat the Company's
historical ratio of tolling to buy/sell business because only about 50% of
6
<PAGE>
Metal Mark's business has traditionally involved tolling. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
When purchasing metals in the open market for its buy/sell business, the
Company attempts to reduce the risk of fluctuating metal prices by arranging
for the sale of the aluminum anticipated to be recovered and by avoiding
large inventories of ingot or scrap material except to the extent necessary
to allow its plants to operate without interruption.
SALES AND MARKETING
The Company's principal customers (see "GENERAL" above) all use recycled
aluminum to produce can sheet and building, automotive and other products.
The Company provides products and services to a number of primary and
fabricating facilities of Alcoa. During 1993, 1994 and 1995, Alcoa accounted
for approximately 39%, 30% and 23%, respectively, of revenues. Barmet
accounted for approximately 14%, 12% and 9% of revenues in 1993, 1994 and
1995, respectively. The loss of either Alcoa or Barmet as customers would
have a material adverse effect upon the business of the Company and its
future operating results. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".
Agreements with customers in the recycling industry have customarily been
short-term agreements. These usually result from a bidding process where
aluminum producers and metal traders offer to sell materials or to have
materials tolled. Consequently, the Company historically has maintained no
significant backlog of orders. However, the Company has secured some longer
term commitments for its recycling services with Alcoa, Barmet, Rock Creek
and Ravenswood.
In 1992 the Company was successful in obtaining a 10 year contract with
Barmet to process all of Barmet's scrap aluminum, UBCs and dross at the
Company's Uhrichsville plant. See "BACKGROUND" above and ITEM 2. "PROPERTIES
- - ALUMINUM RECYCLING" below.
In early 1994 the Company entered into a three-year processing agreement with
Alcoa whereby the Company's Rockwood plant will provide secondary metal for
its Alcoa, Tennessee facility. This agreement was modified in 1995 to
reflect greater volumes and to include Loudon as an approved supplier under
the terms of the contract. This agreement will extend for additional one
year terms at the end of each contract year unless terminated by either
party. If terminated by either party, the agreement will continue in effect
until the second anniversary date of the last day of the contract year during
which the termination notice was given. The agreement obligates the Company
to indemnify Alcoa for certain environmental liabilities which Alcoa may
incur in connection with the transactions contemplated by the agreement.
The Barmet and Alcoa agreements contain escalation provisions which are
intended to cover increases in certain of the Company's processing costs.
The Company may seek similar dedicated long-term arrangements with customers
in the future. See "GENERAL". Increased emphasis on dedicated facilities to
customers and dedicated contracts with customers carries the inherent risk of
increased dependence on a single or few customers with respect to a
particular Company facility. In such cases, the loss of such a customer
could have a material adverse affect on the Company's financial condition and
results of operation, and any timely replacement of volumes attributable to
such a customer could prove difficult.
7
<PAGE>
The primary metals industry and the metals recycling industry are subject to
cyclical fluctuations, depending upon the availability and price of
unprocessed scrap metal and demand in the metal consuming industries.
Temporary reductions in can stock production by one of the Company's
customers have previously affected the Company's revenues. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
COMPETITION
The aluminum recycling industry is fragmented and highly competitive. The
principal factors of competition in the industry are price, recovery rates,
environmental and safety regulatory compliance, and services (e.g., the
ability to deliver molten aluminum). Freight costs also limit the geographic
areas in which the Company can effectively compete.
The major aluminum producers, some of which are the Company's largest
customers, have generally discontinued processing dross, instead focusing
their resources on other aspects of aluminum production. UBCs and other
scrap are processed by both the secondary recycling industry and the major
producers. The Company competes with both other secondary recyclers and
their customers when purchasing and processing scrap for the buy/sell
business.
The amount of the Company's tolling business can also vary depending upon the
extent that the major aluminum producers' used metal materials are internally
recycled. The aluminum producers generally vary their rate of internal
recycling depending upon furnace availability, inventory levels, the price of
aluminum, and their own internal demand for metal. The major aluminum
producers are larger and have greater financial resources than the Company.
A decision by these producers to expand their recycling operations could
reduce demand for certain of the Company's products and services.
SOURCE AND AVAILABILITY OF RAW MATERIALS AND ENERGY
The Company has historically not had, and does not anticipate having,
difficulties in obtaining raw materials for its operations. In the case of
buy/sell business, the primary sources of aluminum and magnesium for
recycling are dross and scrap, which are purchased from both the major
aluminum producers and metal traders.
Generally, fluctuations in market prices for both aluminum and magnesium have
not affected the availability of these metals to the Company. The
availability of zinc dross is dependent upon the demand for galvanized steel,
which has historically paralleled fluctuations in customer demand in the
automotive, appliance and construction industries.
The Company's operations are fueled by natural gas, which represents the
second largest component of operating costs. In 1993 the Company experienced
increases in its natural gas cost at two of its plants. In response to this
increase in natural gas cost, the Company, in 1994, secured 12 month
commitments of gas at a fixed rate for the majority of its gas needs at these
two plants. Natural gas prices declined in 1995, and the Company decided in
most instances to not renew its fixed price natural gas contracts. Due to
unseasonably cold weather, natural gas prices increased in early 1996. All of
the Company's long term contracts contain natural gas price escalators. See
ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS". The Company understands that most of its
competitors' operations also are fueled by natural gas; therefore, it
believes that increases in the prices for natural gas do not adversely affect
8
<PAGE>
the Company's competitive position. The Company believes it will continue to
have access to adequate energy supplies to meet its needs for the foreseeable
future.
SEASONALITY
UBC collections have historically been highest in the summer months and lower
in the winter months. Therefore, the Company has at times experienced lower
volumes during the winter. In recent years, however, the Company's
processing volumes have fluctuated mostly due to its startup of additional
capacity rather than the seasonality of UBC collections.
TRANSPORTATION
The Company receives UBCs, dross and scrap, and ships its recycled aluminum
by both rail and truck. Most of the Company's plants own their own rail
siding or have access to rail lines nearby. IZI receives zinc dross and ships
recycled zinc by truck. The Company owns and leases various trucks and
trailers to support its business. Customarily, the transportation costs of
scrap materials to be tolled are paid by the customer, while the
transportation costs of aluminum and magnesium purchased and sold by the
Company may be paid either by the customer or the Company. The Company
contracts with third-party transportation firms for the hauling for disposal
of some of its solid waste.
EMPLOYEES
As of December 31, 1995, the Company had 984 employees, consisting of 186
employees engaged in administrative and supervisory activities and 798
employees engaged in production and maintenance. The production and
maintenance employees at the Rockwood plant are represented by the United
Steelworkers of America under a five-year collective bargaining agreement
that expires in August 2000. The production and maintenance workers at the
Uhrichsville plant are represented by the United Mine Workers of America.
This contract expires on November 30, 1998. The production and maintenance
workers at the Corona plant are represented by the International Brotherhood
of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers. This
agreement expires on November 30, 1996. The production and maintenance
workers at the Bedford plant are represented by the International Brotherhood
of Electrical Workers. This agreement expires in April 1997. The production
and maintenance workers at the Sikeston plant are also represented by the
United Steelworkers of America union under an agreement which expires in
March 1997. Labor relations with employees have been satisfactory.
ENVIRONMENTAL MATTERS
The processing of UBCs, dross and scrap generates solid waste in the form of
salt cake and baghouse dust. At the Sapulpa and Morgantown plants, the
Company disposes of its solid waste at its own permitted disposal sites. The
Rockwood, Loudon, and Bedford plants currently dispose of their solid waste
by transporting it to the Morgantown plant where the Company, in 1996, began
operating a salt cake processing facility which prepares salt cake for
landfilling. See ITEM 2. "PROPERTIES - SOLID WASTE DISPOSAL". Under the
supply agreement with Barmet, the disposal of all salt cake generated by the
Company as a result of its processing for Barmet is the responsibility of
Barmet. Salt cake from all other material processed at the Uhrichsville
plant is either shipped to the Morgantown plant for disposal or landfilled
with a local solid waste management firm. The by-product generated at the
Corona plant is in the form of dross. This dross is processed as an input
9
<PAGE>
material at one of the Company's other plants. The Chicago Heights and
Sikeston plants currently dispose of most of their salt cake with third party
landfills; however, the Company is currently evaluating the disposal of these
two plants' salt cake at Morgantown.
If salt cake were ever classified as a hazardous waste or substance under
RCRA or CERCLA, the Company's handling and disposal of salt cake would be
required to be modified. To dispose of its salt cake, the Company may then
be required to take other actions including obtaining a RCRA Subchapter "C"
permit for its Morgantown landfill, obtaining other permits (including
transportation permits), and consider landfilling additional amounts of salt
cake with third parties not under the Company's direct control. Based on
current annual processing volumes and remaining landfill capacity, the
estimated remaining lives of the landfills currently used by the Sapulpa and
Morgantown plants are two years and three years, respectively. The Company
recently built additional landfill space at its Morgantown plant. Landfill
closure costs for the Company-owned landfills are currently estimated to
exceed $4,000,000. The Company is currently providing for this expenditure
by accruing, on a current basis, these estimated costs as the landfills are
used. See ITEM 2. "PROPERTIES".
In recent years, the Company's operations, like those of other basic
industries, have become subject to stringent legislation and regulations
regarding the protection of human health and the environment. It can be
anticipated that more rigorous laws and regulations will be enacted that
could require the Company to make substantial expenditures in addition to
those referred to herein.
The Clean Air Act provides for federal, state and local regulation of the
emission of air pollutants. As a result of the Clean Air Act amendments in
1990, the Company may have to obtain additional permits, install additional
pollution control equipment and otherwise incur additional capital
expenditures. The Company does not currently believe that foreseeable costs
of compliance will have a material adverse effect on the Company's financial
position.
The Company believes that it is in material compliance with applicable
environmental regulations. Due to relatively high costs and limited coverage,
the Company does not carry environmental impairment liability insurance. The
Company made capital expenditures for environmental control facilities of
approximately $6,344,000 in 1995, most of which was for landfill capacity
additions, and it is currently estimated that such expenditures will be
approximately $5,250,000 in 1996 and $5,500,000 in 1997.
EXECUTIVE OFFICERS
The executive officers of the Company are listed below, together with brief
accounts of their experience and certain other information. Executive
officers are appointed by the Board of Directors.
10
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Frank H. Romanelli 51 President and Chief Executive Officer
Richard L. Kerr 53 Executive Vice President and Chief Operating
Officer; President of Metals Division
Paul V. Dufour 56 Executive Vice President - Finance and
Administration, Chief Financial Officer
and Secretary
Thomas W. Rogers 49 Senior Vice President, Marketing
C. Lee Newton 52 Senior Vice President, Operations
</TABLE>
Frank H. Romanelli was appointed President and Chief Executive Officer
effective January 1, 1995. He was previously Executive Vice President -
Commercial at Occidental Chemicals Company in Dallas, Texas, responsible for
long-term strategy, acquisitions and divestitures and had served in various
other capacities at Occidental over the last 12 years including managing the
$1.8 billion petrochemical business.
Richard L. Kerr has served as Executive Vice President since July 1988. In
1991, he was promoted to Chief Operating Officer of the Company and in 1994
became President of the Company's Metals Division. Mr. Kerr joined
International Metal Co. in April 1984, and became Executive Vice President of
International Metal Co. in April 1987.
Paul V. Dufour has served as Vice President, Chief Financial Officer and
Secretary of the Company since March 1987. He was promoted to Senior Vice
President in May 1988 and to Executive Vice President in October 1994. He is
principally responsible for the Company's financial and administrative
functions.
Thomas W. Rogers has served as Senior Vice President of the Company since
July 1988. Mr. Rogers was employed as Plant Manager of the Sapulpa, Oklahoma
plant in October 1986 and became Senior Vice President of International Metal
Co. in April 1987.
C. Lee Newton was promoted to Senior Vice President of the Company in 1993.
Mr. Newton was named Vice President in 1990 and was the General Manager of
the Morgantown, Kentucky plant from 1989 to 1993. He was originally employed
by the Company as Plant Manager of its Rockwood, Tennessee plant in 1987.
11
<PAGE>
ITEM 2. PROPERTIES
ALUMINUM RECYCLING.
The Company owns and operates the following processing plants as detailed below:
<TABLE>
<CAPTION>
ESTIMATED
NUMBER ANNUAL MOLTEN
OWNED OF CAPACITY YEAR YEAR MATERIALS DELIVERY
PLANT ACREAGE FURNACES (MILLION LBS) BUILT ACQUIRED PROCESSED CAPABILITY
----- ------- -------- ------------- ----- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alum,
Sapulpa, OK. 64 7 145 1962 -- Mag No
Rockwood,TN. 238 6 200 1985 -- Alum Yes
Morgantown, KY. 454 6 200 1989 -- Alum Yes
Uhrichsville, OH. 42 10 335 1992 -- Alum Yes
Corona, CA. 20 3 100 -- 1993 Alum No
Loudon, TN. 173 3 180 -- 1994 Alum Yes
Bedford, IN. 19 2 150 -- 1995 Alum Yes
Chicago Hts., IL. 13 2 100 -- 1995 Alum No
Sikeston, MO. 24 3 60 -- 1995 Alum No
Adrian, MI. * 2 40 -- 1992 Zinc No
</TABLE>
___________________________
* - The 50,000 sq. ft. Adrian facility is leased by IZI. This lease, which
includes both the operations and office space, expires in May 1997 and is
presently not expected to be renewed.
The Company also owns 50% of a recycling facility located in East Chicago,
Indiana. This facility has annual capacity to process 80 million pounds of
aluminum.
Barmet has an option to acquire up to a 49% equity interest in the
Uhrichsville plant at a price equal to that equity percentage multiplied by
the depreciated book value of the plant or the subsidiary owning the plant,
plus a premium to compensate the Company for its recycling technology. The
option price may be above or below the fair value of the Uhrichsville plant.
Should Barmet exercise its option, there can be no assurance that the
production or earnings attributable to the purchased interest could be
replaced, and the Company's net earnings and cash flow could be adversely
affected.
In 1996, the Company plans to construct a new aluminum recycling facility in
Coldwater, Michigan. This facility, which will be 75% owned by the Company
and 25% owned by the plant's largest customer, Alchem, will have a rated
annual capacity of 150 million pounds and will principally serve the
automotive market. The Company will be the operator of the facility and will
deliver molten aluminum to its customer-partner. Alchem will have certain
rights to purchase additional equity interests not to exceed 40% of the total
joint venture equity if the facility is expanded or if Alchem increases its
supply commitments.
In 1996, the Company began its participation in a 50/50 venture in Germany
known as VAW-IMCO GuB und Recycling GmbH. The venture will operate two
recycling and foundry alloy
12
<PAGE>
facilities located at Grevenbroich and Toging, Germany. Annual capacity for
these two plants is expected to be 220 million pounds.
In 1995, the Sapulpa, Rockwood, Morgantown and Uhrichsville plants all
operated at rates in excess of their stated capacities.
SOLID WASTE DISPOSAL
The Company completed a new landfill cell adjacent to its plant in
Morgantown, Kentucky in 1996. This landfill will be used to deposit all of
the waste generated from the new salt cake processing facility at the
Morgantown site. It is currently anticipated that this new landfill cell,
which is designed to be expanded several times throughout its life, will
serve the Company's landfilling needs for over 80% of the salt cake generated
by facilities currently owned by the Company in the United States for the
next several years. The Company also owns a landfill at its Sapulpa plant
which is estimated to have two years of limited use remaining. See ITEM 1.
"BUSINESS - ENVIRONMENTAL MATTERS".
ADMINISTRATIVE
In Irving, Texas, the Company leases approximately 17,300 square feet of
office space for certain of its executive, financial and management
functions. This lease expires in 2000.
The Company believes that its plants and equipment are maintained in good
operating condition. Substantially all of the properties and equipment at the
Sapulpa, Rockwood and Morgantown plants are mortgaged to secure senior
indebtedness. See NOTE F--LONG TERM DEBT AND CREDIT LINES OF NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings against
the Company or its operations. The Company is party from time to time to
what it believes are routine litigation and proceedings considered as part of
the ordinary course of its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company during
the quarter ended December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on The New York Stock Exchange (trading
symbol: IMR). The following table sets forth, for the fiscal quarters
indicated, the high and low sales prices for the Company's Common Stock, as
reported on The New York Stock Exchange composite tape from January 1, 1994
through December 31, 1995, and the dividends declared per share during the
periods indicated.
13
<PAGE>
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
---- --- ---------
<S> <C> <C> <C>
Calendar Year 1994
First Quarter $15 $12-1/8 $ --
Second Quarter 14-7/8 12-1/2 --
Third Quarter 16-7/8 13-1/2 --
Fourth Quarter 15-3/4 12-1/2 0.10
Calendar Year 1995
First Quarter $16-3/8 $13-3/8 $ --
Second Quarter 19-1/4 15-1/4 0.035
Third Quarter 23-3/4 17-7/8 0.035
Fourth Quarter 24-1/2 20-1/2 0.035
</TABLE>
In late 1994 the Board of Directors declared a special year-end $0.10 per
share cash dividend, payable on January 26, 1995 to holders of record of
Common Stock as of December 29, 1994. This was the first dividend declared
by the Company. The Company subsequently commenced paying a quarterly
dividend of $.035 per share in the second quarter of 1995 and declared a
total of $.105 per share of quarterly dividends in 1995. Dividends as may be
determined by the Board of Directors may be declared and paid on the Common
Stock from time to time out of any funds legally available therefor. The
Company's long-term debt instruments limit the amount of cash dividends the
Company can pay. This amount is determined by reference to a portion of the
Company's "unrestricted net income" accumulated since September 1995 (as
defined in its long-term debt instruments). The Company intends to continue
the payment of dividends on its Common Stock, although future dividend
declarations are discretionary with the Company's Board of Directors and will
depend upon the Company's level of earnings, cash flow, financial
requirements, economic and business conditions and other relevant factors,
including the restrictions contained in the Company's long-term debt
instruments. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND NOTE F--LONG TERM DEBT AND CREDIT
LINES OF NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
On March 15, 1996, the outstanding shares of Common Stock were held of record
by 566 stockholders.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues $49,177 $60,223 $74,216 $101,116 $141,167
Net Earnings 5,594 7,475 8,022 8,471 12,470
Net earnings per
common share 0.52 0.67 0.70 0.73 1.03
Total assets 52,960 68,871 79,427 96,791 139,877
Long-term debt
(excluding current
maturities) 13,000 10,500 8,000 11,860 29,754
Dividends declared
per common share -- -- -- 0.10 0.105
</TABLE>
14
<PAGE>
See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Most of the Company's processing consists of aluminum, magnesium and zinc
tolled for its customers. To a lesser extent, the Company also purchases
scrap metal and dross for processing and resale. Both the Company's tolling
fees and the selling price of metal it buys, recycles and sells for its own
account are included in sales revenue. Accordingly, tolling business
produces a lower amount of revenues and cost of sales than does the buy/sell
business. Variations in the mix of these two businesses can cause revenues
to change significantly from period to period while not significantly
affecting gross profit, because both types of transactions generally have the
same gross profit per pound of metal processed. As a result, the Company
considers processing volume to be a more important determinant of performance
than revenues.
During the early 1990s there was an excess of primary aluminum produced
worldwide, and aluminum inventories on the worldwide commodity exchanges were
at record levels, peaking in January 1994. This glut of aluminum was
primarily responsible for causing aluminum prices to decline throughout this
time period, and prices in January 1994 were at inflation-adjusted historical
lows. This situation impacted the profitability of the major aluminum
producers who are some of the Company's largest customers. This environment
of low profitability for the Company's customers also had a negative impact
on the Company's gross margin, as it had been unable to pass cost increases
through to its customers. In early 1994, worldwide inventories began falling
for a number of reasons, including an increase in demand for aluminum,
particularly in the United States, and prices for aluminum began to rise.
This increase in pricing for aluminum had a positive effect on the Company in
1994 both in its buy/sell business where the Company received increased
prices for the aluminum it owned, and in its tolling business where certain
increases in price for tolling services provided by the Company were
obtained. During 1995, worldwide aluminum prices declined from their 1994
levels, particularly in the fourth quarter. For the year ended December 31,
1995, this decline was more than offset by increased processing volumes.
However, in the first quarter of 1996, the combination of higher energy
costs, lower aluminum prices and weather related disruptions which affected
volumes processed, negatively impacted the Company's results. It is not
possible to predict the future price of aluminum or the level of worldwide
inventories of aluminum and whether, or to what extent, such factors will
affect the Company's future business.
The following table shows the total pounds of material processed (aluminum,
magnesium and zinc), the percentage of total pounds processed represented by
tolled aluminum, purchased aluminum, magnesium and zinc, total revenues,
total gross profits and gross profit percentages:
15
<PAGE>
<TABLE>
<CAPTION>
1993 1994 1995
-------- ---------- ----------
(in thousands, except percentages)
<S> <C> <C> <C>
Pounds processed 787,000 1,012,600 1,323,382
Percent of total pounds processed
Tolled Aluminum 92% 93% 92%
Purchased Aluminum 4% 3% 5%
Magnesium 1% 1% **
Zinc 3% 3% 3%
Revenues $ 74,216 $ 101,116 $ 141,167
Gross Profit $ 16,764 $ 22,638 $ 30,939
Gross Profit % 22.6% 22.4% 21.9%
</TABLE>
__________________________
** less than 1 percent
RESULTS OF OPERATIONS
FISCAL YEAR 1995 VS. FISCAL YEAR 1994
The Company processed 1.3 billion pounds of metal in 1995 which represented
an increase of 31% over the 1.0 billion pounds processed in 1994. Increases
from the Bedford and Metal Mark plants acquired late in 1995, and the Loudon
plant which was acquired in September of 1994 and expanded in 1995, along
with increased volume from all plant locations, accounted for the favorable
variances. Revenues in 1995 were $141,167,000 which represented an increase
of 40% over 1994's revenue of $101,116,000. The percentage increase in
revenues was greater than the increase in volumes processed because the
amount of buy/sell business was greater in 1995 compared to 1994. Assuming
that Metal Mark maintains its approximate one-to-one historical ratio of
tolling to buy/sell business, the Company's revenues are projected to
continue to outpace the relative gains in processing volumes in 1996 because
of the full year's effect of the Metal Mark business.
Gross profit of $30,939,000 was 37% above the $22,638,000 reported in 1995.
Most of this resulted from the increased pounds processed.
Selling, general and administrative costs increased 56% to $10,027,000
compared to the $6,440,000 reported in 1994. This increase occurred because
of the addition of key personnel required to manage the Company's rapid
growth and because of selling, general and administrative costs associated
with acquisitions carried out during the year.
Interest expense was about the same in 1995 as it was in 1994, while interest
income rose to $424,000 compared to $154,000 in 1994. This increase was due
to larger amounts of cash invested.
The Company's income before taxes of $20,363,000 rose 49% compared to 1994.
In 1994 the Company recorded nonrecurring litigation expense related to a
lawsuit which reduced 1994's income before taxes by $1,635,000. Excluding
this item, 1995's increase would have been about 33% or very similar to the
increases recorded in volume processed and gross profits.
16
<PAGE>
The Company's increased income before tax and higher tax rates caused income
tax expense to rise to $7,893,000 compared to $5,232,000 in 1994. The
effective tax rate was about 39% in 1995 compared to 38% in 1994.
FISCAL YEAR 1994 VS. FISCAL YEAR 1993
The Company processed 1.013 billion pounds in 1994, a 29% increase over the
787 million pounds of material it processed in 1993. Most of this increase
was due to increased processing at the Uhrichsville plant, which reached full
capacity during mid-year 1993 and was expanded by 25% in September 1994.
Processing from the Corona plant acquired in December 1993 and Loudon which
was acquired in September of 1994 also were significant contributors to the
increased volume of metal processed in 1994. In addition, all of the
Company's other plants processed more metal in 1994 than they did in 1993.
Revenues of $101,116,000 were 36% higher than 1993 revenues of $74,216,000.
The percentage increase in revenues was somewhat higher than the percentage
increase in processing pounds, mostly because aluminum prices in 1994 were
higher than in 1993, which resulted in higher revenues from the Company's
buy/sell business.
Gross profit of $22,638,000 increased 35% over 1993's amount of $16,764,000.
More than 80% of this increase was due to greater volumes of material
processed. The remainder of the gross profit increase in 1994 compared to
1993 was a result of increases in revenue exceeding increases in costs. The
revenue increase was largely a result of increases in the buy/sell business
which, as noted above, benefited from rising aluminum prices in 1994. The
increased costs were mostly concentrated in workers compensation, medical,
and refuse disposal costs.
Selling, general and administrative costs increased 28% above 1993's amount
to $6,440,000. Most of the increase is attributed to additional employees
required by the Company's growth, and improvements to the operating
information system, which improved efficiency, also increased the costs in
this category.
As reported during 1994, the Company incurred nonrecurring litigation costs
of $1,635,000, which represented the cost of settling certain litigation and
associated legal costs related to a partnership which owned shares of the
Company's stock. The Company agreed to the settlement without admitting
liability in order to avoid prolonged and costly litigation. The plaintiffs
released all claims against the Company and its subsidiaries, and the Company
received the preferred stock of a subsidiary whose ownership had been
disputed.
Interest expense of $1,014,000 was about 13% higher than 1993's amount. Most
of this difference was due to interest on the additional borrowings related
to the acquisition of Loudon.
Interest income of $154,000 decreased over 50% compared to 1993. Lower
levels of cash to invest, principally because of capital spending and
acquisitions, are the reasons for this result.
Income before taxes of $13,703,000 increased 23% above 1993's level of
$11,143,000. The effective tax rate rose to 38% in 1994 compared with 28% in
1993. Increased state income tax amounts in 1994 and an increase in federal
tax rates from 34% to 35% (caused by reaching a threshold level of income
requiring this increase) were the reasons for the increase in the rate.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Operations provided cash of $26,289,000 in 1995, compared with $13,622,000 of
cash provided by operations in 1994. Increased earnings as previously
discussed and increases in other noncash charges (such as depreciation and
deferred taxes) along with a reduction in working capital (excluding that
attributed to acquisitions) in 1995 compared to an increase in 1994 were the
factors leading to the increase in cash provided from operations. Working
capital (excluding that attributed to acquisitions) decreased $2,411,000 in
1995 which represented a source of cash while it increased $5,302,000 in
1994. The decrease in 1995 was principally the result of reductions in
accounts receivable which had increased in 1994. At December 31, 1995, the
Company's current ratio of 2.41 was similar to the December 31, 1994 ratio of
2.64. The Company's working capital requirements may increase in 1996 due to
an anticipated higher level of processing pounds.
Capital spending, excluding acquisitions, amounted to $15,538,000 in 1995 and
$6,646,000 in 1994. The new salt cake processing facility and new landfill
both at the Morgantown facility accounted for the largest items in 1995.
Spending in 1994 was largely related to the expansion of the Uhrichsville
plant. The acquisition of Bedford and Metal Mark required $20,137,000 in
1995 while the acquisition of Loudon required approximately $5,300,000 in
1994.
In order to take advantage of expansion opportunities and in connection with
the acquisition of Bedford and Metal Mark, the Company borrowed $5,000,000 in
September 1995 under terms it had previously negotiated with a commercial
lending institution. This Variable Rate Converting Revolving Loan has an
amortization of five years and bears interest at a fluctuating rate,
currently set at 6.8125%.
In addition, in November 1995 the Company borrowed $15,000,000 of unsecured
debt which represents half of the commitment the Company received from a
private placement of notes. The remaining half, or $15,000,000, is
anticipated to be issued in the second quarter of 1996 to fund the Company's
investment in the VAW-IMCO venture. The notes issued in 1995 have a fixed
interest rate set at 7.28% per annum and require mandatory annual prepayments
of $3,000,000 beginning in 2003. The notes to be issued in 1996 will have
their interest rate set when they are issued. In 1994 the Company also
borrowed $5,000,000 under a five year term note (the "Term Note") to fund the
repayment of certain debt assumed in connection with the Loudon acquisition.
Also in 1995, the Company increased its borrowing limit up to $10,000,000
under a restated revolving credit facility (the "Revolving Facility"). Under
the Revolving Facility, the Company has a subfacility for the issuance of
standby letters of credit, the amount available for borrowing is based on the
Company's working capital as defined. At year end, and at March 25, 1996,
the Company had no borrowings outstanding under the Revolving Facility.
Capital expenditures for property, plant and equipment in 1996 are currently
estimated to total approximately $19,000,000. The Company believes that its
cash on hand, the resources available under the terms of its credit
facilities and anticipated 1996 cash from operations should provide the
financial resources necessary to fund its current needs and to meet its
obligations in 1996 and for the foreseeable future.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX OF FINANCIAL STATEMENTS OF IMCO RECYCLING INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... 20
Consolidated Balance Sheets at December 31, 1995 and 1994................. 21
Consolidated Statements of Earnings for the three years ended
December 31, 1995....................................................... 22
Consolidated Statements of Cash Flows for the three years ended
December 31, 1995....................................................... 23
Consolidated Statements of Changes in Stockholders' Equity for the
three years ended December 31, 1995..................................... 24
Notes to Consolidated Financial Statements................................ 25-33
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.
19
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have audited the accompanying consolidated balance sheets of IMCO
Recycling Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of IMCO Recycling Inc. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
February 5, 1996
20
<PAGE>
CONSOLIDATED BALANCE SHEETS
- ---------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
-------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,678 $ 2,854
Accounts receivable 27,442 19,239
Inventories 9,146 3,186
Deferred income taxes 1,298 1,978
Other current assets 1,353 598
-------- -------
TOTAL CURRENT ASSETS 47,917 27,855
PROPERTY AND EQUIPMENT, net 78,769 61,046
INTANGIBLE ASSETS
Excess of acquisition cost over the fair value of net assets
acquired, net of accumulated amortization of $3,866 and
$3,219 at December 31, 1995 and 1994, respectively 10,968 6,056
Patents, net 233 296
-------- -------
TOTAL INTANGIBLE ASSETS 11,201 6,352
OTHER ASSETS, net 1,990 1,538
-------- -------
$139,877 $96,791
-------- -------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,691 $ 4,150
Accrued liabilities 7,059 4,156
Dividends payable -- 1,152
Current maturities of long-term debt 2,169 1,094
-------- -------
TOTAL CURRENT LIABILITIES 19,919 10,552
LONG-TERM DEBT 29,754 11,860
DEFERRED INCOME TAXES 5,516 4,857
OTHER LONG-TERM LIABILITIES 1,412 1,232
STOCKHOLDERS' EQUITY
Preferred Stock; par value $.10; 8,000,000 shares authorized;
none issued -- --
Common Stock; par value $.10; 20,000,000 shares authorized,
11,964,911 issued at December 31, 1995; 11,756,698 issued
at December 31, 1994 1,196 1,176
Additional paid in capital 27,282 23,511
Retained earnings 56,672 45,421
Treasury stock, at cost; 207,972 shares at December 31, 1995;
244,910 shares at December 31, 1994 (1,874) (1,818)
-------- -------
83,276 68,290
-------- -------
$139,877 $96,791
-------- -------
-------- -------
</TABLE>
See notes to consolidated financial statements
21
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
- -----------------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES $ 141,167 $ 101,116 $ $74,216
Cost of sales 110,228 78,478 57,452
---------- ---------- ----------
GROSS PROFIT 30,939 22,638 16,764
Selling, general and administrative
expense 10,027 6,440 5,023
Nonrecurring litigation expense -- 1,635 --
Interest expense 1,073 1,014 897
Interest and other (income) (524) (154) (299)
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 20,363 13,703 11,143
Provision for income taxes 7,893 5,232 3,121
---------- ---------- ----------
NET EARNINGS $ 12,470 $ 8,471 $ 8,022
---------- ---------- ----------
NET EARNINGS PER COMMON SHARE $ 1.03 $ .73 $ .70
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 12,108,216 11,643,846 11,524,223
</TABLE>
See notes to consolidated financial statements
22
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 12,470 $ 8,471 $ 8,022
Depreciation and amortization 9,353 7,367 6,201
Other noncash items 888 1,227 586
Provision for deferred taxes 1,167 1,859 654
Changes in noncash components of working capital
(excluding investing and financing transactions):
Accounts receivable 3,330 (5,829) (7,369)
Inventories (1,756) 95 (874)
Other current assets (546) (121) (31)
Accounts payable and accrued liabilities 1,383 553 (140)
-------- -------- --------
NET CASH FROM OPERATING ACTIVITIES 26,289 13,622 7,049
INVESTING ACTIVITIES:
Purchase of property and equipment (15,538) (6,646) (11,939)
Purchase of other businesses (20,137) (5,325) (5,103)
Other (1,304) (1,005) 58
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (36,979) (12,976) (16,984)
FINANCING ACTIVITIES:
Net (decrease) increase in short-term borrowings -- (1,800) 1,800
Proceeds from issuance of long-term debt 20,000 5,000 --
Principal payments of long-term debt (1,477) (2,751) (2,500)
Proceeds from issuance of common stock -- -- 332
Dividends paid (2,371) -- --
Other 362 94 (239)
-------- -------- --------
NET CASH FROM (USED BY) FINANCING ACTIVITIES 16,514 543 (607)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 5,824 1,189 (10,542)
BEGINNING CASH AND CASH EQUIVALENTS 2,854 1,665 12,207
-------- -------- --------
ENDING CASH AND CASH EQUIVALENTS $ 8,678 $ 2,854 $ 1,665
-------- -------- --------
SUPPLEMENTARY INFORMATION:
Cash payments for interest $ 1,357 $ 1,271 $ 1,440
Cash payments for taxes $ 6,440 $ 3,411 $ 2,535
</TABLE>
See notes to consolidated financial statements
23
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- ----------------------------------------------------------
IMCO RECYCLING INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
-------------------- ---------------------
PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
---------- ------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992 11,458,708 $1,146 $19,617 $30,080 (315,367) $(1,933)
Net earnings 8,022
Exercise of stock options 43,000 4 328 -- 5,000 31
Net treasury stock activity -- -- -- -- (24,170) (353)
Tax benefit from the
exercise of nonqualified
stock options -- -- 114 -- -- --
BALANCE AT
DECEMBER 31, 1993 11,501,708 1,150 20,059 38,102 (334,537) (2,255)
Net earnings -- -- -- 8,471 -- --
Cash dividend ($.10 per
share) -- -- -- (1,152) -- --
Litigation agreement -- -- 67 -- 25,000 185
Exercise of stock options -- -- 20 -- 19,735 (81)
Purchase of Phoenix Smelting 254,990 26 3,207 -- 44,892 333
Tax benefit from the
exercise of nonqualified
stock options -- -- 158 -- -- --
BALANCE AT
DECEMBER 31, 1994 11,756,698 1,176 23,511 45,421 (244,910) (1,818)
Net earnings -- -- -- 12,470 -- --
Cash dividend ($.105 per
share) -- -- -- (1,219) -- --
Exercise of stock options -- -- 234 -- 36,938 (56)
Purchase of Alumar
Associates, Inc. 208,213 20 3,354 -- -- --
Tax benefit from the
exercise of nonqualified
stock options -- -- 183 -- -- --
BALANCE AT
DECEMBER 31, 1995 11,964,911 $1,196 $27,282 $56,672 (207,972) $(1,874)
</TABLE>
See notes to consolidated financial statements
24
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(dollars in tables are in thousands, except per share)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION:
The accompanying consolidated 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 upon
consolidation. Investments in affiliated companies, owned 50% or less, are
recorded by the Company on the equity method. The Company's principal
business involves the owning and operating of aluminum recycling facilities.
The Company recycles scrap material for a fee and returns the material to its
customers, some of whom are the world's largest aluminum companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS:
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount
approximates fair value because of the short maturity of those instruments.
INVENTORIES:
Inventories are stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Major renewals and improvements
are capitalized, while maintenance and repairs are expensed when incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
Landfill closure costs are currently estimated to be in excess of $4,000,000
and are being accrued over the estimated useful lives of the landfills.
Landfill costs are depreciated as space in the landfill is used.
Interest is capitalized in connection with the construction of major
facilities. In 1995, 1994 and 1993, $438,000, $309,000, and $525,000 of
interest costs were capitalized, respectively.
25
<PAGE>
NET EARNINGS PER SHARE:
Earnings per common share are based upon the weighted average number of
common and common equivalent shares outstanding in each period. Common
equivalent shares relate solely to outstanding warrants and stock options.
Warrants to purchase 50,000 shares of stock were outstanding at December 31,
1995. The warrants were issued in 1986 at an exercise price of $.10 per
share and have a 10-year life. Shares have been reserved relating to these
warrants.
AMORTIZATION OF INTANGIBLES:
The excess of original acquisition cost over the fair value of net assets
acquired is amortized on a straight-line basis over their expected life,
currently from 7-40 years. Management regularly reviews the remaining
goodwill with consideration toward recovery through future operating results.
Goodwill is evaluated by the Company on an undiscounted basis. Deferred debt
issuance costs, included in other assets, are being amortized over the term
of the long-term debt based upon the average amount of debt outstanding.
Patents are amortized over their remaining legal lives.
CREDIT RISK:
A majority of the Company's accounts receivable are due from companies in the
aluminum industry. Credit is extended based on evaluation of the customers'
financial condition and, generally, collateral is not required. Credit
losses are within management's expectations and historically have been very
low.
NOTE B -- ACQUISITIONS
In September 1995, the Company purchased all of the assets of an aluminum
recycling facility located in Bedford, Indiana from a private aluminum
company. The value of the transaction, which was accounted for as a
purchase, was approximately $8,500,000. Goodwill of about $2,000,000 related
to this acquisition is being amortized over 15 years. Had the acquisition
occurred on January 1, 1995, it would not have had a material impact on
either the revenues or net earnings of the Company.
In October 1995, the Company acquired all of the outstanding stock of Alumar
Associates, Inc. which owned Metal Mark, Inc. Metal Mark owned and operated
three aluminum recycling plants located in Chicago Heights, Illinois,
Sikeston, Missouri, and Pittsburg, Kansas and owned 50% of a fourth facility
in East Chicago, Indiana. The value of the transaction, which was accounted
for as a purchase, was about $8,500,000, with $4,000,000 paid in cash and the
balance consisting of 208,213 shares of the Company's common stock. In
addition, the Company repaid long-term debt of Alumar of about $8,245,000.
Goodwill related to the acquisition of about $2,000,000 is being amortized
over 15 years.
The following unaudited, summarized pro forma results of operations of the
combined entities of IMCO and Metal Mark, for the years ended December 31,
1994 and 1995, assuming the acquisition occurred as of the beginning of the
respective periods is as presented below:
26
<PAGE>
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues $204,734 $168,288
Net Earnings $ 13,917 $ 9,637
Earnings per share $ 1.14 $ .81
</TABLE>
This pro forma information does not purport to be indicative of what would
have occurred had the acquisition been made as of those dates or of results
which may occur in the future.
In September 1994, the Company purchased the stock of Phoenix Smelting
Corporation which operated an aluminum recycling facility in Loudon,
Tennessee through its wholly owned subsidiary, Metal Resources, Inc.
("Loudon"). The value of the transaction was approximately $10,000,000
including the Company's repayment of about $5,100,000 of Loudon debt and the
issuance of approximately 300,000 shares of common stock. Loudon had, and
the Company thereby acquired, a net operating loss carryforward ("NOL") of
about $1,100,000. The use of this NOL is subject to certain limitations and
will expire in the year 2009. The Company recorded a valuation allowance of
approximately $600,000 reducing the value of this NOL at the acquisition
date. Goodwill related to this purchase was about $250,000, which is being
amortized over 15 years. Had the acquisition occurred on January 1, 1994, it
would not have had a material impact on either revenues or net earnings of
the company.
In December 1993, a subsidiary of the Company acquired all of the assets of
an aluminum recycling plant in Corona, California from a private aluminum
company. The purchase cost was about $5,000,000. The Company recorded
goodwill of approximately $1,000,000 related to the purchase, which is being
amortized over 15 years.
NOTE C -- INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------ ------
<S> <C> <C>
Finished Goods $6,839 $1,391
Raw Materials 1,986 1,440
Supplies 321 355
------ ------
$9,146 $3,186
------ ------
</TABLE>
NOTE D -- PROPERTY AND EQUIPMENT
The components of property and equipment are:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
-------- --------
<S> <C> <C>
Land, Buildings and Improvements $ 58,280 $ 45,329
Production Equipment and Machinery 49,236 37,278
Office Furniture, Equipment and Other 4,242 3,363
-------- --------
111,758 85,970
Accumulated Depreciation (32,989) (24,924)
-------- --------
$ 78,769 $ 61,046
-------- --------
</TABLE>
27
<PAGE>
In March 1992, the Company entered into an agreement with Barmet Aluminum
Corporation ("Barmet"), a subsidiary of CasTech Aluminum Group Inc., to
construct, own and operate the Uhrichsville plant adjacent to Barmet's
rolling mill in Uhrichsville, Ohio and to supply Barmet with all of its
secondary aluminum needs. The Uhrichsville plant, including costs for
capitalized interest and for the 1994 expansion, cost approximately
$20,750,000. Barmet has an option to acquire up to a 49% equity interest in
the Uhrichsville plant at a price equal to such equity percentage multiplied
by depreciated book value of the plant plus a premium to compensate the
Company for its recycling technology.
In 1996 the Company is planning to invest about $12,000,000 for a 50%
interest in a German joint venture to be called VAW-IMCO. This venture was
formed to own and operate two recycling facilities previously owned by VAW,
the largest aluminum company in Germany. The plants will serve the European
automotive market. In addition, the Company is planning to construct and
operate a new aluminum recycling facility in Coldwater, Michigan during
1996. The total cost is currently projected at approximately $12,000,000.
The Company will own 75% of this facility and it is intended to serve the
U.S. automotive market.
NOTE E -- INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
CURRENT:
Federal $5,241 $2,690 $2,017
State 1,485 683 450
------ ------ ------
6,726 3,373 2,467
DEFERRED:
Federal $1,678 $1,955 $ 649
State (511) (96) 5
------ ------ ------
1,167 1,859 654
------ ------ ------
$7,893 $5,232 $3,121
------ ------ ------
------ ------ ------
</TABLE>
The tax expense computed by applying the statutory federal income tax rate to
earnings before taxes differed from the provision for taxes as follows:
28
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Tax at statutory rates $7,127 $4,659 $3,789
Goodwill amortization,
nondeductible 91 59 61
State income taxes, net 633 387 292
Recognition of credit
carryforwards -- -- (699)
Other, net 42 127 (322)
------ ------ ------
Provision $7,893 $5,232 $3,121
------ ------ ------
------ ------ ------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------ ------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Accelerated depreciation $7,902 $6,534
Federal effect of state income taxes 516 169
Other 199 167
------ ------
Total Deferred Tax Liabilities 8,617 6,870
DEFERRED TAX ASSETS:
Net operating loss carryforwards 919 2,159
Tax credit carryforwards 1,709 1,334
Accruals 1,758 1,066
Federal effect of state income taxes 473 290
Other 230 105
------ ------
Gross Deferred Tax Assets 5,089 4,954
Valuation Allowance (690) (963)
------ ------
Net Deferred Tax Assets 4,399 3,991
------ ------
Net Deferred Tax Liability $4,218 $2,879
------ ------
</TABLE>
At December 31, 1995, the Company had a $690,000 valuation allowance to
reduce certain deferred tax assets to amounts that are more likely to be
realized. The allowance includes $473,000 in related net operating loss
assets generated by Loudon, prior to its acquisition by the Company. The
remaining $217,000 relates to the Company's ability to utilize certain state
tax credits.
At December 31, 1995, the Company had $1,709,000 of unused tax credit
carryforwards, $168,000 of which expire in 1998, $69,000 of which expire in
2010, and $1,472,000 of which do
29
<PAGE>
not expire. State investment tax credits total $1,077,000. However, due to
annual limitations on credit utilization, the Company has included $217,000
of this amount in the valuation allowance.
At December 31, 1995, the Company had approximately $1,511,000 of unused net
operating loss carryforwards for federal purposes which expire in the years
2001 and 2009, and had approximately $5,574,000 for state purposes which
expire in 2008 and 2009. The issuance of Common Stock in a public offering
on May 19, 1989 produced an "ownership change" under Section 382 of the
Internal Revenue Code of 1986, as amended, and subjects the Company's use of
the historic net operating loss carryforwards to certain limitations. Under
Section 382, the total amount of the Company's net operating loss
carryforwards remain unchanged. However, the net operating loss
carryforwards utilized to offset income earned in tax years subsequent to
1989 is limited to $3,877,000 per year. The 1994 acquisition of Loudon
resulted in an "ownership change" for Loudon. As a result of the change,
Loudon's net operating loss carryfowards will be subject to an annual
limitation of approximately $300,000 per year.
NOTE F -- LONG-TERM DEBT AND CREDIT LINE
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------- -------
<S> <C> <C>
11.18% MONY Senior Notes $ 8,000 $ 8,000
Variable Rate Term Loan 3,750 4,750
Variable Rate Converting Revolving Loan 4,750 --
7.28% MONY Senior Notes 15,000 --
Other 423 204
------- -------
Subtotal 31,923 12,954
Less current maturities 2,169 1,094
------- -------
Total $29,754 $11,860
------- -------
</TABLE>
The 11.18% MONY Senior Notes are collateralized by the Company's Sapulpa,
Rockwood, and Morgantown property and equipment carried at a net amount of
approximately $27,600,000. The notes mature December 1, 1998.
The 7.28% MONY Senior Notes are unsecured. The Company can prepay the notes
at any time subject to a make-whole provision. The notes mature October 31,
2007 with mandatory annual prepayments of $3,000,000 scheduled for each
October 31 beginning in 2003.
The Senior Notes Agreements contain restrictive covenants concerning plant
maintenance, disposition and replacement of assets, insurance coverage,
financial reporting, and internal and external financing, investing, and
operating activities. There are also provisions limiting the payment of cash
dividends on and purchases of the Company's Common Stock; however, at
December 31, 1995, retained earnings of $6,234,000 were not restricted under
these provisions.
The Variable Rate Term Loan has an amortization schedule of five years and
bears interest at a fluctuating rate based on the Company's ratio of total
debt to earnings before interest, tax, depreciation and amortization. The
Company has the option to choose either the bank's prime rate,
30
<PAGE>
the bank's cost of funds plus 1%, or the appropriate Eurodollar rate plus 1%.
At December 31, 1995, the rate was 6.8125%
The Variable Rate Converting Revolving Loan has an amortization schedule of
four years and bears interest at a fluctuating rate based on the Company's
ratio of total debt to earnings before interest, tax, depreciation and
amortization. The Company has the option to choose either the bank's prime
rate, the bank's cost of funds plus 1%, or the appropriate Eurodollar rate
plus 1%. At December 31, 1995, the rate was 6.875%.
The fair value of the Company's debt approximates its carrying value due to
its recent issuance, floating rate or relatively short maturity.
NOTE G -- RETIREMENT PLANS
The Company has a profit-sharing retirement plan covering most of its
employees who meet defined service requirements. Contributions are
determined annually by the Board of Directors and may be as much as 15% of
covered salaries. Contributions for 1995, 1994 and 1993 were $1,331,000,
$1,039,000, and $738,000, respectively.
Pursuant to the terms of the asset purchase agreement for the Bedford,
Indiana facility, the Company assumed the obligation to continue to provide a
pension plan for eligible hourly employees at this location. Pension
payments are determined by a premium factor times the number of years of
service for each employee. Pension payments for 1995 were $ 24,000.
NOTE H -- STOCK OPTION PLANS
In 1992 the Company adopted the 1992 Stock Option Plan, which provides for
the granting of nonqualified and incentive stock options to employees,
officers, consultants and nonemployee members of the Board of Directors.
Options granted to employees under this plan have various vesting periods.
Annually, nonemployee directors will be granted nonqualified stock options
exercisable after six months from the date of grant, equal to that number of
shares determined by dividing the annual director fee amount by the fair
market value of a share of common stock as of the date of grant. All options
granted under this plan, once vested, are exercisable for a period of up to
10 years from the date of grant, although options may expire earlier because
of termination of employment or service.
The 1992 Stock Option Plan allows for the payment of all or a portion of the
exercise price and tax withholding obligations in shares of the Company's
common stock delivered and/or withheld. Such payment or withholding will be
valued at fair market value as of the date of exercise. Participants making
use of this feature will automatically be granted a reload stock option to
purchase a number of shares equal to the number of shares delivered and/or
withheld. When a reload stock option is granted, a portion of the shares
issued to the participant will be designated as restricted stock for a period
of five years, although the restriction may be removed earlier under certain
circumstances. Reload stock options have an exercise price equal to the fair
market value as of the date of exercise of the original options and will
expire on the same date as the original options.
In 1995, 1994, and 1993 the Company acquired from employees and placed in the
treasury, 40,652, 27,665 and 24,170 shares, respectively, pursuant to
provisions of the Company's stock option plan. Such shares were tendered or
withheld in satisfaction of those employees' federal and
31
<PAGE>
state withholding taxes on compensation resulting from the exercise of
nonqualified stock options and for the aggregate exercise cost of certain of
the options.
In 1990 the Company adopted an amended and restated stock option plan. This
plan provides for the granting of nonqualified and incentive stock options.
The number of shares of common stock authorized for issuance under the plan
is 1,200,000 shares. Options granted under the plan have various vesting
periods and are exercisable for a period of 10 years from the date of grant,
although options may expire earlier because of termination of employment.
Transactions under the option plans are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
Options outstanding January 1, 1,172,402 833,555 725,425
Options granted 200,473 389,847 157,130
Options exercised (77,590) (47,400) (48,000)
Options canceled (3,921) (3,600) (1,000)
Options outstanding at
December 31, 1,291,364 1,172,402 833,555
Option price range at
December 31, $.10-$22.75 $.10-$13.75 $.10-$13.75
Option price exercise range $4.89-$13.75 $4.57-$13.63 $4.89-$7.55
Options exercisable at
December 31, 714,991 580,355 383,525
Options available for grant at
December 31, 391,646 38,198 424,445
</TABLE>
NOTE I -- RELATED PARTY TRANSACTIONS
An agreement exists with one of the members of the Board of Directors for
consulting on Company operations on a month-to-month basis. This agreement,
which may be terminated on thirty days' notice, was previously paid at a
rate of $10,000 per month and for 1996 will be paid at the rate of $15,000
per month. Payment of $120,000 was made under this consulting agreement
during each of the three years ended December 31, 1995.
NOTE J -- SIGNIFICANT CUSTOMERS
During 1995, sales to Aluminum Company of America ("Alcoa") totaled
$32,400,000 or 23% of revenues. No other customer accounted for more than 10%
of revenues in 1995.
During 1994, sales to Alcoa totaled $30,382,000 or 30% of revenues. Sales to
Barmet Aluminum totaled $12,476,000 or 12% of revenues. No other customer
accounted for more than 10% of revenues in 1994.
During 1993, sales to Alcoa totaled $28,585,000 or 39% of revenues. Sales to
Barmet Aluminum totaled $10,569,000 or 14% of revenues. No other customer
accounted for more than 10% of revenues in 1993.
32
<PAGE>
NOTE K -- QUARTERLY FINANCIAL DATA (Unaudited)
Quarterly financial results for 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH TOTAL
1995 QUARTER QUARTER QUARTER QUARTER YEAR
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $30,746 $29,725 $32,105 $48,591 $141,167
Gross Profit $ 7,435 $ 7,315 $ 7,783 $ 8,406 $ 30,939
Income before tax $ 4,824 $ 4,933 $ 5,543 $ 5,063 $ 20,363
Net earnings $ 2,894 $ 2,959 $ 3,327 $ 3,290 $ 12,470
Earnings per share $ .24 $ .25 $ .27 $ .27 $ 1.03
1ST 2ND 3RD 4TH TOTAL
1994 QUARTER QUARTER QUARTER QUARTER YEAR
- --------------------------------------------------------------------------
Revenues $21,682 $23,070 $26,206 $30,158 $101,116
Gross Profit $ 4,819 $ 4,685 $ 6,065 $ 7,069 $ 22,638
Income before tax $ 3,187 $ 1,591 $ 4,070 $ 4,855 $ 13,703
Net earnings $ 2,032 $ 1,038 $ 2,589 $ 2,812 $ 8,471
Earnings per share $ .18 $ .09 $ .22 $ .24 $ .73
</TABLE>
33
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the
Company appears under the caption "Election of Directors" in the definitive
Proxy Statement (herein so called) of the Company relating to the Company's
1996 Annual Meeting of Stockholders, to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A of the
Securities Exchange Act of 1934, which information is incorporated herein by
reference. It is currently anticipated that the Proxy Statement will be
publicly available and mailed to stockholders in April 1996. Certain
information as to executive officers is included herein under Part I,
ITEM 1. "BUSINESS - EXECUTIVE OFFICERS."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears under the caption "Remuneration
of Directors and Officers" in the Proxy Statement, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the caption "Voting and
Principal Stockholders" in the Proxy Statement, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the captions
"Compensation Committee Report to Stockholders - Compensation Committee
Interlocks and Insider Participation" and "Remuneration of Directors and
Officers -- Directors Compensation" in the Proxy Statement, which
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Consolidated Financial Statements: See index to Consolidated
Financial Statements and Financial Statement Schedules on Page 19
hereof.
2. Consolidated Financial Statement Schedules: See index to
Consolidated Financial Statements and Financial Statement Schedules
on Page 19 hereof.
3. EXHIBITS:
34
<PAGE>
3.1 Certificate of Incorporation of IMCO Recycling Inc., as amended,
filed as Exhibit 4.6 to the Company's Registration Statement on
Form S-2 (No. 33-48571) and incorporated herein by reference.
3.2 By-laws of IMCO Recycling Inc., as amended, filed as Exhibit 4.7
to the Company's Registration Statement on Form S-2 (No.
33-48571) and incorporated herein by reference.
4.1 Specimen Stock Certificate of the Common Stock, $0.10 par value,
of IMCO Recycling Inc., filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-2 (No. 33-48571) and
incorporated herein by reference.
10.1 Note Purchase Agreement, dated as of December 15, 1988, by and
among IMCO Recycling Inc., The Mutual Life Insurance Company of
New York, and MONY Life Insurance Company of America, filed as
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (the "1993 Form 10-K"), and
incorporated herein by reference.
10.2 Amendment, dated as of May 3, 1990, to Note Purchase Agreements
by and among IMCO Recycling Inc., The Mutual Life Insurance
Company of New York, MONY Life Insurance Company of America, and
MONY Legacy Life Insurance Company, filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (the "1994 Form 10-K"), and incorporated
herein by reference.
10.3 Second Amendment, dated as of October 1, 1990, to Note Purchase
Agreements by and among IMCO Recycling Inc., The Mutual Life
Insurance Company of New York, MONY Life Insurance Company of
America, and MONY Legacy Life Insurance Company, filed as
Exhibit 10.3 to the Company's 1994 Form 10-K and incorporated
herein by reference.
10.4 Third Amendment, dated as of May 10, 1991, to Note Purchase
Agreements, by and among IMCO Recycling Inc., The Mutual Life
Insurance Company of New York, and MONY Life Insurance Company
of America, filed as Exhibit 10.4 to the Company's 1994 Form
10-K and incorporated herein by reference.
10.5 Fourth Amendment, dated as of November 27, 1991, to Note
Purchase Agreements by and among IMCO Recycling Inc., The Mutual
Life Insurance Company of New York, and MONY Life Insurance
Company of America, filed as Exhibit 10.5 to the Company's 1994
Form 10-K and incorporated herein by reference.
10.6 Amended and Restated Registration Agreement, dated September 30,
1988, among IMCO Recycling Inc., Merrill Lynch Interfunding
Inc., Don V. Ingram, Larry Thrasher, and PTX Partners, filed as
Exhibit 10.6 to the Company's 1993 Form 10-K and incorporated
herein by reference.
35
<PAGE>
10.7 Amendment No. 1 to Amended and Restated Registration Agreement,
dated as of December 30, 1988, filed as Exhibit 10.7 to the
Company's 1994 Form 10-K and incorporated herein by reference.
10.8 Amendment, dated as of September 5, 1990, to Registration
Agreement between Merrill Lynch Interfunding Inc. and Don V.
Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K
and incorporated herein by reference.
10.9 IMCO Recycling Inc. Amended and Restated Stock Option Plan,
filed as Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992 (the
"1992 Form 10-K") and incorporated herein by reference.
10.10 Employment Agreement, effective as of April 1, 1991, by and
between IMCO Recycling Inc. and Richard L. Kerr, filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991 (the "1991 Form
10-K") and incorporated herein by reference.
10.11 Addendum to Employment Agreement-Stock Option, dated as of
April 1, 1987, by and among International Metal Co., Frontier
Texas Corporation, and Richard L. Kerr, filed as Exhibit
10.11 to the Company's 1994 Form 10-K and incorporated herein
by reference.
10.12 Employment Agreement, effective as of April 1, 1991, by and
between IMCO Recycling Inc. and Thomas W. Rogers, filed as
Exhibit 10.17 to the Company's 1991 Form 10-K and incorporated
herein by reference.
10.13 Employment Agreement, effective as of March 1, 1990 by and
between IMCO Recycling Inc. and Paul V. Dufour, filed as
Exhibit 10.15 to the Company's 1993 Form 10-K and incorporated
herein by reference.
10.13A Amendment to Employment Agreement, dated February 19, 1993,
by and between IMCO Recycling Inc. and Paul V. Dufour, filed as
Exhibit 10.18 to the Company's 1992 Form 10-K and incorporated
herein by reference.
10.14 Employment Agreement, effective as of April 1, 1991, by and
between IMCO Recycling Inc., and C. Lee Newton, filed as
Exhibit 10.17 to the Company,s 1993 Form 10-K and incorporated
herein by reference.
10.15 Employment Agreement, effective as of January 13, 1995, by
and between IMCO Recycling Inc. and Frank H. Romanelli, filed
as Exhibit 10.15 to the Company's 1994 Form 10-K and
incorporated herein by reference.
10.16 Assignment, dated September 16, 1986, from Clarence W. Haack
and Genevieve Haack to International Metal Co., filed as
Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated
herein by reference.
*10.17 Agreement, dated as of August 26, 1995, between IMCO
Recycling Inc., Rockwood, Tennessee Facility, and
International Union, United Steelworkers of America.
36
<PAGE>
10.18 Form of Stock Purchase Warrant between IMCO Recycling Inc.
and Don V. Ingram for the purchase of 50,000 shares of Common
Stock, filed as Exhibit 10.18 to the Company's 1994 Form 10-K
and incorporated herein by reference.
10.19 Split-Dollar Life Insurance Agreement, dated as of November
5, 1990, between Thomas W. Rogers and IMCO Recycling Inc.,
filed as Exhibit 10.19 to the Company's 1994 Form 10-K and
incorporated herein by reference (The Company is a party to
two virtually identical Split-Dollar Life Insurance Agreements
with Paul V. Dufour, C. Lee Newton, Richard L. Kerr and Frank
Romanelli. These agreements have been omitted since they are
substantially identical to Mr. Rogers' in all material
respects).
10.20 Stock Purchase Agreement among the former shareholders of
Interamerica Zinc, Inc. and IZI Acquisition Co., effective as
of January 1, 1992, filed as Exhibit (1) to the Company's
Current Report on Form 8-K, dated January 13, 1992, and
incorporated herein by reference.
10.21 Escrow Agreement, dated January 13, 1992, among IZI
Acquisition Company, Society Bank Michigan, and the former
shareholders of Interamerica Zinc, Inc., filed as Exhibit (2)
to the Company's Current Report on Form 8-K dated January 13,
1992, and incorporated herein by reference.
10.22 Supply Agreement between Barmet Aluminum Corporation and the
Company, dated March 2, 1992, filed as Exhibit 10.25 to the
Company's 1991 Form 10-K and incorporated herein by reference.
10.23 Right of First Refusal Agreement between Barmet Aluminum
Corporation and the Company, dated March 2, 1992, relating to
Barmet's Indiana recycling plant, filed as Exhibit 10.23 to
the Company's 1994 Form 10-K and incorporated by reference.
*10.24 Agreement, effective as of December 1, 1995, between IMCO
Recycling of Ohio Inc. and the United Mine Workers of America.
10.25 Consulting Agreement, dated as of May 31, 1985, between Don V.
Ingram and Frontier Texas Corporation, filed as Exhibit 10.25
to the Company's 1994 Form 10-K and incorporated herein by
reference.
10.26 IMCO Recycling Inc. 1992 Stock Option Plan, as amended December
15, 1994, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1995, and incorporated herein by reference.
10.27 IMCO Recycling Inc. 1992 Bonus Participation Plan filed as
Exhibit 10.32 to the 1992 Form 10-K and incorporated herein by
reference.
10.28 Agreement, dated as of March 29, 1994, between IMCO Recycling
of California, Inc. and the International Brotherhood of
Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and
Helpers, filed as Exhibit 10.33 to the Company's 1993
37
<PAGE>
Form 10-K and incorporated herein by reference.
10.29 Agreement, effective as of January 1, 1994, between IMCO
Recycling Inc. and Aluminum Company of America, filed as Exhibit
10.34 to the Company's 1993 Form 10-K and incorporated herein by
reference.
10.30 Agreement and Plan of Merger, dated September 20, 1994, among
IMCO Recycling Inc., IMCO Recycling of Tennessee, Inc., Phoenix
Smelting Corporation, and the shareholders of Phoenix Smelting
Corporation, filed as Exhibit 1 to the Company's Current Report
on Form 8-K, dated September 20, 1994, and incorporated herein
by reference.
10.31 Registration Rights Agreement, dated September 20, 1994, among
IMCO Recycling Inc. and the shareholders of Phoenix Smelting
Corporation, filed as Exhibit 2 to the Company's Current Report
on Form 8-K dated September 20, 1994, and incorporated herein by
reference.
10.32 Loan Agreement, dated September 20, 1994, between IMCO Recycling
Inc. and Texas Commerce Bank, National Association, filed as
Exhibit 3 to the Company's Current Report on Form 8-K, dated
September 20, 1994, and incorporated herein by reference.
10.33 Negative Pledge Agreement, dated September 20, 1994, between
IMCO Recycling Inc. and Texas Commerce Bank, National
Association, filed as Exhibit 4 to the Company's Current Report
on Form 8-K, dated September 20, 1994, and incorporated herein
by reference.
*10.34 First Amendment to Loan Documents, dated as of May 31, 1995, by
and between IMCO Recycling Inc. and Texas Commerce Bank National
Association.
10.35 First Amendment to processing agreement by and among the Rigid
Packaging division of Aluminum Company of America, the Company
and Metal Resources Inc., filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1995, and incorporated herein by reference.
10.36 Agreement and Plan of Merger, dated as of October 1, 1995, among
IMCO Recycling Inc., IMCO Recycling of Illinois Inc., Alumar
Associates, Inc. and the Shareholders, filed as Exhibit 1 to
the Company's Current Report on Form 8-K, dated October 3,
and incorporated herein by reference.
10.37 Registration Rights Agreement, dated as of October 1, 1995,
among IMCO Recycling Inc. and the Shareholders, filed as
Exhibit 2 to the Company's Current Report on Form 8-K, dated
October 3, 1995, and incorporated herein by reference.
*10.38 Second Amendment to Loan Documents, dated as of November 3,
1995, by and between IMCO Recycling Inc. and Texas Commerce
National Association.
*10.39 Note Purchase Agreement, dated as of November 29, 1995, by
and between IMCO Recycling Inc. and The Mutual Life Insurance
Company of New York.
38
<PAGE>
*10.40 Fifth Amendment, dated as of November 29, 1995, to Note
Purchase Agreements by and among IMCO Recycling Inc., The
Mutual Life Insurance Company of New York, and MONY Life
Insurance Company of America.
*21 Subsidiaries of IMCO Recycling Inc., as of March 15, 1996.
*23 Consent of Ernst & Young LLP.
*27 Financial Data Schedule.
*Filed herewith
(b) Reports on Form 8-K filed in fourth quarter 1995:
1. The Company filed a current report on Form 8-K dated October 3,
1995, under "Item 2 - Acquisition or Disposition of Assets,"
reporting the Company's acquisition of Alumar Associates, Inc.
and under "Item 5 - Other Events," reporting the acquisition of
the Bedford, Indiana assets.
(c) See sub-item (a) above.
(d) See sub-item (a) above.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 25, 1996 IMCO Recycling Inc.
By: /s/ Robert R. Holian
---------------------------
Robert R. Holian
Vice President and
Controller, Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, This
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Don V. Ingram Director, Chairman of the Board March 25, 1996
- -----------------------
Don V. Ingram
/s/ Jack M. Brundrett Director March 25, 1996
- -----------------------
Jack M. Brundrett
/s/ Ralph L. Cheek Director March 25, 1996
- -----------------------
Ralph L. Cheek
/s/ John J. Fleming Director March 25, 1996
- -----------------------
John J. Fleming
/s/ Richard Hanselman Director March 25, 1996
- -----------------------
Richard Hanselman
/s/ Thomas James Director March 25, 1996
- -----------------------
Thomas James
/s/ Don Navarro Director March 25, 1996
- -----------------------
Don Navarro
/s/ Jack C. Page Director March 25, 1996
- -----------------------
Jack C. Page
/s/ Frank H. Romanelli Director, President & Chief March 25, 1996
- ----------------------- Executive Officer
Frank H. Romanelli
/s/ Paul V. Dufour Executive Vice President March 25, 1996
- ----------------------- Finance and Administration
Paul V. Dufour (Principal Financial Officer)
40
<PAGE>
/s/ Robert R. Holian Vice President and Controller March 25, 1996
- ----------------------- (Principal Accounting Officer)
Robert R. Holian
41
<PAGE>
AGREEMENT BY AND BETWEEN
IMCO RECYCLING INC.
ROCKWOOD, TENNESSEE
AND
INTERNATIONAL UNION
UNITED STEELWORKERS OF AMERICA
LOCAL NO. 9147
AUGUST 26, 1995
<PAGE>
Table of Contents
Page
Purpose and Intent . . . . . . . . . . . . . . . . . 1
Article I - Recognition. . . . . . . . . . . . 1
Article II - Management Rights. . . . . . . . . 1
Article III - Check-Off Authorization. . . . . . 2
Article IV - Creation of New Jobs . . . . . . . 2
Article V - Overtime . . . . . . . . . . . . . 2
Article VI - Holiday Pay. . . . . . . . . . . . 3
Article VII - Seniority. . . . . . . . . . . . . 4
Article VIII - Temporary Transfers and
Job Assignments. . . . . . . . . . 5
Article IX - Permanent Vacancies. . . . . . . . 6
Article X - Temporary Reduction in Force . . . 7
Article XI - Reduction in Force . . . . . . . . 7
Article XII - Restoration of Forces. . . . . . . 7
Article XIII - Production Work by
Non-Bargaining Unit Personnel. . . 8
Article XIV - Leave of Absence . . . . . . . . . 8
Article XV - Plant Closing or Relocations . . . 8
Article XVI - Grievance Procedure. . . . . . . . 9
Article XVII - No Strike/No Lockout . . . . . . .10
Article XVIII - Discharge and Discipline . . . . .11
Article XIX - Safety . . . . . . . . . . . . . .11
Article XX - Contractual Benefits . . . . . . .11
Article XXI - Credit Union . . . . . . . . . . .11
Article XXII - Duration . . . . . . . . . . . . .11
Schedule A . . . . . . . . . . . . . . . . . . . . .14
Schedule B . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
This Agreement by and between IMCO Recycling, Inc., Rockwood, Tennessee,
facility, (hereinafter called "Company") and International Union, United
Steelworkers of America (hereinafter called "Union") is entered into this
25th day of August, 1995.
PURPOSE AND INTENT
It is the purpose and intent of the parties to set forth certain
Agreements pertaining to wages, hours, and working conditions to be observed
by the parties during the life of this Agreement and to provide procedures
for the prompt and equitable adjustment of grievances. The Union, Company,
and employees agree they will work together in harmony toward turning out a
quality product and will abide by the terms and conditions set forth in this
Agreement.
ARTICLE I
RECOGNITION
The Company recognizes the Union as the exclusive bargaining agent for
employees of the Company at its Rockwood, Tennessee, facility in the
below-described unit certified by the National Labor Relations Board on
January 16, 1986:
INCLUDED: All production and maintenance employees employed by the
Employer at its Rockwood, Tennessee, facility, including lead persons.
EXCLUDED: Laboratory technicians, all office clerical employees,
professional employees, guards and supervisors as defined by the Act.
All other employees not specifically listed above as included or
excluded shall be excluded.
ARTICLE II
MANAGEMENT RIGHTS
The Company has, retains, and shall continue to possess and exercise
each and every management right, right to function, privilege, authority;
only except, as specifically limited, relinquished, modified, or restricted
by this Agreement. Illustrative, but not all inclusive of the rights of
management retained, are the right to manage the Company; to direct the work
force; to make and enforce rules of conduct; to subcontract; to change hours
and days of work; to assign work to other of the Company's employees and
facilities; to make and change work duties and assignments; to determine the
quality and quantity of
<PAGE>
productivity required; to change or adjust the hours and numbers of shifts
and assignments thereto; to hire employees; to classify, promote, discipline,
demote, and discharge employees for just cause; to lay off and recall
employees; to select and make technological state of the art changes in
processes, tools, equipment, and facilities; to determine the number of
employees to be employed; to determine the number of employees to be employed
in each department, shift, classification; to determine the number of
employees to be employed in any particular work function or assignment; to
decide the methods, equipment, processes, and means of production; to
determine the utilization of labor-saving devices which may result in a
reduction of the work force; to establish new departments, job
classifications, and initial rates of pay; to transfer and assign employees
to duties without regard to titles, job classifications, departments, etc.;
(subject to the terms of this contract) and to exercise the right not
specifically set forth in this Agreement upon which the parties negotiated or
had the opportunity to negotiate whether or not such rights have been
exercised by the Company in the past.
ARTICLE III
CHECK-OFF AUTHORIZATION
The Company will check-off monthly dues, assessments and initiation fees
each as designated by the Union, as membership dues in the Union, on the
basis of individually signed voluntary checkoff authorization cards. The
cards and forms will be mutually agreed upon by the Company and the Union.
ARTICLE IV
CREATION OF NEW JOBS
At such time as the Company establishes a new classification, it will
notify the Union of the duties and the proposed wage for that classification
and will be subject to the grievance procedure only to the extent the duties
are unreasonable.
ARTICLE V
OVERTIME
SECTION 1. The Company will make a good faith effort to fairly and
equitably distribute overtime in a consistent manner as practical among
qualified employees. The Company will make every effort to minimize the
amount of overtime worked, but when the need arises, those employees who are
designated by the Company for overtime must perform the work. The least
senior employees must perform the work.
2
<PAGE>
SECTION 2. Overtime will be paid at time and one-half the regular rate
and will apply only after forty (40) hours have been worked during the
workweek. Hours not actually worked will not count toward overtime (e.g.,
holiday, vacation, sick leave, etc.).
SECTION 3. The Company will pay, on a trial basis, overtime pay to those
individuals who work on major equipment outages (i.e. , rebricking a rotary
furnace) for all hours over eight (8) hours worked (twelve (12) hours for
those on a twelve (12) hour schedule) when they work more than sixteen (16)
hours. This type of special overtime pay will be scheduled and not be the
normal type incidental-scheduled overtime which occurs during the normal
workweek.
SECTION 4. At the option of the supervisor and the employee, the
employee who has been called in to work may leave and receive a minimum of
two (2) hours pay. However, if the employee chooses to accept the four (4)
hour pay provision (at the employee's option), he will perform any and all
work available for the remaining portion of the four (4) hour call-in period.
SECTION 5. The practice of distributing overtime will be done in a
consistent manner on a plantwide basis. The Union will review the overtime
records at least on a weekly basis.
ARTICLE VI
HOLIDAY PAY
Holidays recognized in the Agreement are:
New Year's Day Labor Day
Easter Thanksgiving Day
Memorial Day Day after Thanksgiving
Flag Day Christmas Eve
Fourth of July Christmas Day
Employees shall receive Holiday Pay for these holidays, provided they
work their scheduled workdays immediately prior and immediately after the
Holiday, unless absent for a good cause as determined by the Company.
1. Employees not working the Holiday shall receive eight (8) hours
straight-time pay.
2. If the Plant is scheduled closed for a Holiday, those employees
scheduled to work the Holiday will receive Holiday pay equal to
their scheduled hours.
3
<PAGE>
3. Employees scheduled to work shall receive double their
straight-time hourly rate for each hour actually worked.
4. Employees scheduled to work less than a regular eight (8) hour
shift shall be paid for time worked in addition to eight (8)
hours Holiday pay.
5. Employees scheduled to work the Holiday who are absent without
good cause will not be entitled to Holiday pay.
6. Probationary employees are not eligible for Holiday pay.
ARTICLE VII
SENIORITY
SECTION 1. The seniority as recognized in this Agreement shall run from
an employee's date of last hire. It is understood that the term "seniority"
as used in this Agreement only refers to such length of service.
SECTION 2. A probationary employee is any employee whose continuous
length of service is less than sixty (60) calendar days. When a probationary
employee has accumulated sixty (60) calendar days of continuous service,
he(1) will become a regular employee and have his seniority established as
set forth in the paragraph above. During an employee's probationary period,
the Company shall not be restricted in its right to discharge or discipline
such employee for any cause, except as limited by state and federal law. The
discipline or discharge of a probationary employee shall not be subject to
the grievance procedure of this Agreement. Further, no contractual terms or
entitlements of this Agreement shall be available to any probationary
employee. The probationary period of any employee may be extended an
additional thirty (30) calendar days at the discretion of the Company.
When an employee's probationary period is to be extended, the Local
Union President will be notified at the time of the extension.
SECTION 3. An employee who is transferred outside the bargaining unit
into a permanent supervisory position shall have the right to return to the
bargaining unit within sixty (60)
_________________________
(1) The masculine pronouns refer to both genders and are simply used for
ease of reading.
4
<PAGE>
calendar days of such transfer. There shall be no break in seniority.
SECTION 4. An employee shall lose seniority rights when any of the
following occur:
a. The employee quits;
b. The employee is properly or justly discharged and not reinstated;
c. The employee is absent from work for three (3) consecutive workdays
without notifying the Company of a legitimate reason for such absence
on a daily basis, unless such notification is not possible;
d. The employee has not been recalled from layoff for a period of two (2)
years;
e. The employee fails to return from a leave of absence within three
(3) workdays following the expiration thereof;
f. The employee fails to respond to a notice of recall to work on the
day set forth in the notice. (The Company shall send a written notice
of recall to the employees' last known address. It shall be the
employees' responsibility to keep the Company advised of its current
address and telephone number.);
g. The employee retires.
SECTION 5. The Company will furnish the senior Union Officer/employee
a list of bargaining unit employees ranked in seniority order. Such list shall
be furnished every six (6) months.
SECTION 6. The Company and Union shall discuss modifications of this
collective bargaining agreement to permit the Company to comply with the
Americans with Disabilities Act.
ARTICLE VIII
TEMPORARY TRANSFERS
AND JOB ASSIGNMENTS
The Company reserves the right to transfer an employee to a temporary
job and/or classification for a period of ninety (90) days. The Union
recognizes the Company's need to have employees work at any job for the
successful operation of the Company so long as the employee maintains his
rate of pay. When the Company
5
<PAGE>
temporarily transfers an employee, consideration will be given to seniority,
qualifications and the operating requirements of the plant. When the
temporary transfer is over, an employee shall be returned to the job and
shift from which he was transferred.
In the event of a Leadman Operator temporary vacancy that is filled by
an Equipment Operator from that crew, the senior qualified employee will be
temporarily upgraded to the position and pay rate. Similarly, the senior
qualified Maintenance employee will be upgraded to the Maintenance Leadman,
if a temporary vacancy occurs and (at the discretion of the Company) the
position is filled.
Employees who are transferred to another job classification will be paid
fifty percent (50%) of the difference between the higher job classification
rate of pay and their present rate of pay.
ARTICLE IX
PERMANENT VACANCIES
Permanent Vacancies are those which have been created by an employee
leaving the Company or by the creation of a new job or increased workload.
SECTION 1. When it becomes necessary to fill a permanent vacancy as
defined above, notification shall be placed on the bulletin board for a
period of five (5) calendar days. Employees who seek to bid on the job shall
sign the posting. If a posting goes up during an employee's vacation, the
local Union President may bid for that person if so requested. The posting
shall include the job classification, shift and, if a new job, the rate and a
brief description of the duties. The Company shall advise the Union
President of the successful bidders as soon as the posting comes down.
Employees shall be permitted to select shift preference to an open job
if the employee has a shift preference form on file. Such forms must be
renewed on January lst on an annual basis. After two (2) shift preference
moves have occurred or made available, the open position shall be bid.
During the term of this Agreement, employees will be permitted one (1)
lateral bid per year and one (1) downward bid per contract.
SECTION 2. Promotions and filling of permanent vacancies shall be made
on the basis of an employee's overall qualifications. If overall
qualifications are relatively equal, then seniority will prevail.
SECTION 3. If an employee fails to demonstrate within thirty (30) working
days that he can perform the job, then he shall
6
<PAGE>
be returned to his former job. An employee who wishes to disqualify himself
from the position during the first sixty (60) workdays may, with the
agreement of the Company, do so at which time he may go to an open position
or return to his former position at the option of the Company.
SECTION 4. If there are no qualified or successful bidders, the Company
reserves the right to hire from a list of job applicants.
ARTICLE X
TEMPORARY REDUCTION IN FORCE
The Company may select persons for temporary reductions in force without
regard to job classification, seniority, or any other contractual provisions
for periods of up to ten (10) calendar days.
ARTICLE XI
REDUCTION IN FORCE
SECTION 1. When a reduction in force is necessary, the Company will
notify the employees and the Union at least five (5) calendar days in
advance, unless an unforeseen circumstance arises, in which case Article X
will be applied. Selection for reduction in force shall be made on the basis
of seniority, with one exception, that being when the skills and/or
qualifications of the junior employees are necessary for the efficient and
productive operation of the plant.
ARTICLE XII
RESTORATION OF FORCES
SECTION 1. Recall to employment from layoff shall be according to the
jobs needed to be performed and seniority. Employees will be returned to
their former positions (or other positions for which they are qualified) and
pay rates on the basis of seniority. Employees whose skills and/or
qualifications are necessary for the efficient and productive operation of
the plant may be recalled without consideration of their seniority.
7
<PAGE>
ARTICLE XIII
PRODUCTION WORK BY
NON-BARGAINING UNIT PERSONNEL
Non-bargaining unit personnel have the right to perform bargaining unit
work, at the discretion of the Company, which does not result in the layoff
of an employee (as distinguished from a continued layoff).
It is the intent of the Company that supervisors will not routinely
perform work that is normally performed by bargaining unit employees.
However, there are situations whereby supervisors are required to and/or do
accomplish bargaining unit work. Such situations are for work that is of
short duration, work required by emergency conditions, work that requires
special skills, work that is related to special projects, demonstration work,
development work, and work that is applicable to both the supervisory duties
and bargaining unit.
ARTICLE XIV
LEAVE OF ABSENCE
An employee may be granted a Leave of Absence for up to three (3) months.
Extensions of the leave may be granted for good cause. Leaves will be granted
for employees to perform work for the union in an official capacity.
Leaves of absence greater than five (5) days (and extensions of the leave)
must be in writing.
At the discretion of the Company all leaves of absence will be granted
depending upon the operating requirements of the plant.
The Company will comply with the terms of the Tennessee statute covering
maternity leave.
The company will comply with the Family and Medical Leave Act to the
extent it exceeds the provisions of this contract.
ARTICLE XV
PLANT CLOSING OR RELOCATIONS
If the Company decides to sell, close, or relocate its Rockwood,
Tennessee, facility, it shall comply with its statutory obligations.
8
<PAGE>
ARTICLE XVI
GRIEVANCE PROCEDURE
A grievance is defined as any charge or claim by the Union or an
employee(s) that the Company has breached the precise and specific terms of
this Agreement. Such grievance signed by the employee and a committeeman
shall clearly state the particular article and language claimed to have been
violated. Any grievance not filed within three (3) days of the occurrence of
the alleged violation shall be deemed null and void. Failure of the employee
or union to timely process the grievance shall result in the grievance being
deemed null and void. Failure of the Company to timely respond to the
grievance at any step shall result in the grievance being moved to the next
step. However, the Company and the Union may mutually agree to extend the
response periods for steps two through five of this procedure. The procedure
shall be as follows:
STEP ONE. The employee shall present the grievance orally to, and
discuss the grievance with, his immediate supervisor with or without a Union
committeeman present. The first level supervisor shall orally advise the
employee of his decision on the grievance within five (5) days thereafter.
STEP TWO. The employee and the committeeman may appeal the Step One
decision within seventy-two (72) hours after receiving the answer. Such
appeal shall be in writing identifying the precise Agreement article and
language claimed to have been violated, signed by the employee and the
committeeman. It shall be presented to the Superintendent, who shall discuss
the grievance with the employee, with a Union committeeman present. Such
discussion will take place within three (3) days of the filing of the written
grievance. The Superintendent will give this decision within five (5) days
thereafter.
NOTE: IN THOSE CASES WHERE THERE IS NOT A SECOND LEVEL OF MANAGEMENT
(I.E., MAINTENANCE DEPT.) THE STEP TWO PROCEDURE WILL BE BYPASSED AND MOVED TO
STEP THREE IN THE PROCEDURE.
STEP THREE. The Union may appeal the decision of the Superintendent
within five (5) days of the date of the answer. A meeting shall take place
with the Superintendent and the Plant Manager within five (5) days thereafter.
The Company will answer the grievance within five (5) days after such meeting.
STEP FOUR. The Union may appeal the decision of the Plant Manager
within five (5) days of the date of the answer. A meeting shall take place
with the Plant Managers from two (2) of the Company facilities within seven
(7) days thereafter. The Company will answer the grievance within seven (7)
days after such meeting.
9
<PAGE>
STEP FIVE. The Union may appeal the Company's decision to the Executive
Vice President of the Company within ten (10) days after the date of the
Company's final answer. The response of Step Five will be rendered in writing
within ten (10) days after the receipt of the appeal.
In the event the grievance concerns a discipline case whereby more than
five (5) days off have been administered to an employee, then the Company and
the Union will agree to settlement by arbitration. The parties shall request
FMCS to provide a panel of seven (7) arbitrators. The parties will strike
alternately until one (1) arbitrator is left, with the Union striking first.
In the event the issue is other than one involving more than a five (5)
day disciplinary case and the Company denies the grievance at the last step,
the parties may contact the Federal Mediation and Conciliation Service,
Knoxville, Tennessee office and request a Federal Mediator who will meet with
the parties to make one final effort to resolve the grievance. The request
for federal mediation involvement must be made within ten (10) calendar days
of the Step 5 written answer. Such request must be in writing. The meeting
between the parties and the Federal Mediator must occur within ten (10)
calendar days after the date of the requesting letter. No later than the
conclusion of the meeting with the Federal Mediator, the grievance will be
resolved or the Union has the right to strike the Rockwood, Tennessee
facility only after written notification of five (5) days of an intent to
engage in such a work stoppage. Such strike shall be commenced within sixty
(60) calendar days following the five (5) days referenced hereinbefore or
such right shall be lost. The sixty (60) days may be extended by mutual
agreement. Any such strike shall be deemed an economic strike, and the
Company shall have all rights reserved by law in an economic strike.
Work stoppages or strikes shall be limited to the Rockwood, Tennessee,
facility. Any work stoppage or strike actually engaged in by the Union or
employees away from the Rockwood, Tennessee, facility shall result in
immediate discharge of such employees. The written notification of work
stoppage shall be sent by registered mail to Rockwood, Tennessee. Failure of
the Union to send such notification within ten (10) days after the receipt of
the Fifth Step response shall void any right to strike pursuant to Article
XVI of the Agreement.
ARTICLE XVII
NO STRIKE/NO LOCKOUT
During the term of this Agreement, subject to Article XVI, the Union
agrees it will not engage in any strike, work stoppage, slow down, or other
interference with work. Failure of an employee to comply with this provision
shall result in his
10
<PAGE>
immediate termination. Proof of an employee(s) engaging in conduct violative
of this Article shall be just cause for permanent discharge and not subject to
Article XVI. The Company agrees it will not lock out its employees.
ARTICLE XVIII
DISCHARGE AND DISCIPLINE
No employee will be discharged or disciplined without proper or just
cause. When an employee is to be discharged or disciplined, he may ask for a
committeeman to be present.
ARTICLE XIX
SAFETY
The Company and the Union will jointly work on the objective of eliminating
accidents and health hazards in the work place. This joint effort may take the
form of joint safety committees, special groups working on safety projects,
safety training, and/or other activities which will improve the overall safety
effort of the Plant. It is the intent of the Company that all safety problems
will be dealt with immediately by an employee's supervisor.
ARTICLE XX
CONTRACTUAL BENEFITS
Any and all contractual benefits, rights, or entitlements under this
Agreement are predicated on actual hours worked.
ARTICLE XXI
CREDIT UNION
There will be a payroll deduction credit union option for all bargaining
unit employees with a local credit union.
ARTICLE XXII
DURATION
1. This Agreement constitutes the complete contractual relationship
between the parties hereto.
2. This Agreement shall become effective as of 12: 01 AM August 26, 1995,
and shall continue in full force and effect until
11
<PAGE>
midnight August 25, 2000. It shall automatically be renewed for successive
periods of one (1) year thereafter unless either party notifies the other in
writing at least sixty (60) days prior to August 25, 2000, or sixty (60) days
prior to any succeeding August 25th, that the Agreement will terminate on
such specified date.
3 . Written notices required under Section 2 above shall be made by
Certified Mail. Such notice shall be addressed to: IMCO Recycling Inc., P.O.
Box 268, Rockwood, Tennessee 37854, if to the Company and to United Steelworkers
of America, AFL-CIO-CLC, 269 Cusick Road, Suite D, Alcoa, Tennessee 37701, if
to the Union. Either party may, by written notice to the other, effect a
change of the addresses given above.
IN WITNESS WHEREOF, this Agreement has been signed on behalf of both
parties on the day of September, 1995.
UNITED STEELWORKERS OF AMERICA IMCO INC.
By: By:
- ---------------------------------- ----------------------------------
George Becker Richard L. Kerr
International President Executive Vice President
- ---------------------------------- ----------------------------------
Leo Gerard F. Robert Hubbard
International Sec./Treasurer General Manager, Rockwood Plant
- ---------------------------------- ----------------------------------
Richard Davis J. B. Walburg
International V.P. (Admin.) Treasurer
- ----------------------------------
Leon Lynch
International V.P. (Human Affairs)
- ----------------------------------
Joe Kiker
Director, District 9
- ----------------------------------
Staff Representative
USWA LOCAL UNION 9147 COMMITTEE
- ----------------------------------
Virgil McNelly, President
- ----------------------------------
Terry Hall, Vice President
12
<PAGE>
- ----------------------------------
George Kirkland
- ----------------------------------
Archie Cook
- ----------------------------------
Doug Young
13
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
8/26/95 8/26/96 8/26/97 8/26/98 8/26/99
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Maintenance
Leadman 12.00 12.30 12.60 13.00 13.50
Maintenance
Mechanic 11.40 11.70 12.00 12.40 12.90
Furnace
Operator 10.90 11.20 11.50 11.90 12.40
Equipment
Operator 10.15 10.45 10.75 11.15 11.65
Janitor 8.45 8.75 9.05 9.45 9.95
Truck Driver 10.90 11.20 11.50 11.90 12.40
Electrician 11.55 11.85 12.15 12.55 13.05
Leadman
Operator 10.90 11.20 11.50 11.90 12.40
Leadman Furnace
Operator 11.50 11.80 12.10 12.50 13.00
Mobile Vehicle
Maintenance
Mechanic 11.40 11.70 12.00 12.40 12.90
Scheduled premium of $.15/hr. for those employees working on eight (8)
or twelve (12) hour rotating shift schedule.
</TABLE>
Commencing on August 26, 1994 through August 26, 1999, the following annual
increases will be given: $.35 (8/26/95); $.30 (8/26/96); $.30 (8/26/97); $.40
(8/26/98); and $.50 (8/26/99).
14
<PAGE>
SCHEDULE B
I. JURY DUTY - Employees who are selected for jury duty will be made
"whole" for their normal scheduled hours missed. The appropriate
documentation will be required for reimbursement.
II. BEREAVEMENT PAY - Employees will be given time off with their normal
scheduled pay up to three (3) days for the following relatives:
spouse, son, daughter, mother, father, sister, brother,
mother-in-law, father-in-law, grandmother, grandfather. One (1) day
will be allowed for current brother or sister-in-law funerals. In
the case of brother and sister-in-law funerals, the employee may ask
for and shall be granted two (2) additional days off without pay or
attendance points. The employee must attend the funeral.
III. VACATION ACCRUAL:
After 1 year . . . . . . . . . . 1 week
After 2 years. . . . . . . . . . 2 weeks
After 10 years . . . . . . . . . 3 weeks
After 20 years . . . . . . . . . 4 weeks
IV. Employees and dependents shall be covered under health, life and
dental insurance after the employee ends his or her probationary
period.
V. The Company will buy each bargaining unit employee a pair of safety
shoes upon ratification of the contract. Thereafter, the Company
will repair the shoes of bargaining unit employees but if in its
opinion the shoe is not repairable, it will purchase a new pair for
the employee. The cost thereof will be split 50/50 with the employee.
In no event will the Company purchase more than one (1) pair per year.
VI. The Company shall pay up to One Hundred Fifty Dollars ($150.00) for
the cost of a welder receiving his welding certification (AWS).
VII. Employees shall be furnished term life insurance in the amount of
Twenty-Five Thousand Dollars ($25,000.00). Spouses and dependent
children of employees shall be furnished term life insurance in the
amount of Ten Thousand Dollars ($10,000.00) and Five Thousand Dollars
($5,000.00) respectively.
15
<PAGE>
CONTRACT
BETWEEN
IMCO RECYCLING OF OHIO INC.
UNITED MINE WORKERS, AFL-CIO
Effective 12/1/95 Through Midnight 11/30/98
<PAGE>
TABLE OF CONTENTS
Purpose and Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article I - Recognition . . . . . . . . . . . . . . . . . . . . . . 1
Article II - Management Rights . . . . . . . . . . . . . . . . . . . 1
Article III - Probationary Employees. . . . . . . . . . . . . . . . . 2
Article IV - Union Security. . . . . . . . . . . . . . . . . . . . . 2
Article V - Seniority . . . . . . . . . . . . . . . . . . . . . . . 3
Article VI - Permanent Vacancies . . . . . . . . . . . . . . . . . . 4
Article VII - Temporary Vacancy . . . . . . . . . . . . . . . . . . . 5
Article VIII - Temporary Reduction In Force . . . . . . . . . . . . . 7
Article IX - Reduction in Force . . . . . . . . . . . . . . . . . . 7
Article X - Grievance Committee . . . . . . . . . . . . . . . . . . 8
Article XI - Permanent Job Classification Elimination . . . . . . . 8
Article XII - Working Hours and Overtime Pay and Payday . . . . . . . 8
Article XIII - Call Back Pay . . . . . . . . . . . . . . . . . . . . . 9
Article XIV - Grievance Procedure . . . . . . . . . . . . . . . . . . 9
Article XV - Leaves of Absence . . . . . . . . . . . . . . . . . . . 11
Article XVI - Suspension and Discharge. . . . . . . . . . . . . . . . 11
Article XVII - No Strike/No Lockout. . . . . . . . . . . . . . . . . . 12
Article XVIII - Health and Safety . . . . . . . . . . . . . . . . . . . 12
Article XIX - Supervisory Employees . . . . . . . . . . . . . . . . . 14
Article XX - Contracting Out . . . . . . . . . . . . . . . . . . . . 14
Article XXI - Bulletin Boards . . . . . . . . . . . . . . . . . . . . 14
Article XXII - Voting Place. . . . . . . . . . . . . . . . . . . . . . 15
Article XXIII - Jury Duty . . . . . . . . . . . . . . . . . . . . . . . 15
i
<PAGE>
Article XXIV - Bereavement Pay . . . . . . . . . . . . . . . . . . . . 15
Article XXV - Holiday Pay . . . . . . . . . . . . . . . . . . . . . . 15
Article XXVI - Profit Sharing. . . . . . . . . . . . . . . . . . . . . 16
Article XXVII - Accident and Sickness Benefits. . . . . . . . . . . . . 16
Article XXVIII - Insurance . . . . . . . . . . . . . . . . . . . . . . . 17
Article XXIX - Basic Workday . . . . . . . . . . . . . . . . . . . . . 17
Article XXX - Plant Closing or Relocation . . . . . . . . . . . . . . 17
Article XXXI - Duration of Agreement and Responsibilities of
the Parties. . . . . . . . . . . . . . . . . . . . . . 17
MEMORANDUM OF UNDERSTANDING - CHECKOFF. . . . . . . . . . . . . . . . . . 19
SCHEDULE A - . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE B - . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ii
<PAGE>
This Agreement by and between IMCO Recycling of Ohio Inc. (hereinafter
called "Company") and United Mine Workers Union (hereinafter "Union") is
entered into this 1st day of December, 1995.
PURPOSE AND INTENT
It is the purpose and intent of the parties to set forth certain
agreements pertaining to wages, hours, and working conditions to be observed
by the parties during the life of this Agreement and provide the procedures
for the prompt and equitable adjustment of grievances. The Union, Company
and employees agree they will work together in harmony toward turning out a
quality product and will abide by the terms and conditions set forth in this
Agreement.
ARTICLE I
RECOGNITION
The Company recognizes the Union as the exclusive bargaining agent for
its employees at its Uhrichsville, Ohio facility in the below-described unit:
INCLUDED: All production and maintenance employees employed
by the Employer at its Uhrichsville, Ohio facility, including
leadpersons.
EXCLUDED: Laboratory and plant technicians, all office
clerical employees, professional employees, janitorial
employees, guards, and supervisors as defined in the Act.
All other employees not specifically listed above as included or excluded
shall be excluded.
ARTICLE II
MANAGEMENT RIGHTS
The Company retains and shall possess every management right, right to
function, privilege, authority; except as specifically limited or restricted
by this Agreement. Illustrative, but not all-inclusive of the rights of
management retained, are the right to manage the Company; to direct the work
force; to make and enforce rules of conduct; to subcontract; to change hours
and days of work; to assign work to other of the
<PAGE>
Company's employees and facilities; to make and change work duties and
assignments; to determine the quality and quantity of productivity required;
to change or adjust the hours and numbers of shifts and assignments thereto;
to hire employees; to classify, promote, discipline, demote, and discharge
employees for just cause; to lay off and recall employees; to select and make
technological state of the art changes in processes, tools, equipment, and
facilities; to determine the number of employees to be employed; to determine
the number of employees to be employed in each department, shift,
classification; to determine the number of employees to be employed in any
particular work function or assignment; to decide the methods, equipment,
processes, and means of production; to determine the utilization of
labor-saving devices which may result in a reduction of the work force; to
establish new departments, job classifications, and initial rates of pay; to
transfer and assign employees to duties without regard to titles, job
classifications, departments, etc.; (subject to the terms of this contract)
and to exercise the right not specifically set forth in this Agreement upon
which the parties negotiated or had the opportunity to negotiate whether or
not such rights have been exercised by the Company in the past.
ARTICLE III
PROBATIONARY EMPLOYEES
A newly hired or rehired employee of the Company will be considered a
new employee on a probationary basis for the first sixty (60) calendar days
of his employment. Thereafter, if kept on the Company payroll, his name will
be placed on the Company's seniority list and his seniority shall date back
to his most recent date of hire.
Employees terminated and rehired within a one (1) year period will
maintain credit for any days previously worked.
ARTICLE IV
UNION SECURITY
All present employees who have concluded their probationary period of at
least sixty (60) calendar days, must become and remain members of the Union
in good standing as a continuing condition of employment on and after the
sixtieth (60th) calendar day following their beginning of such employment or
sixty (60) calendar days after the effective date of their contract,
whichever is the later.
2
<PAGE>
ARTICLE V
SENIORITY
SECTION 1. In all cases of increase or decrease of the work force,
length of plant wide continuous service in years, months and days shall
govern.
Seniority shall be counted from the employee's date of last hire.
Seniority shall govern in all circumstances unless set forth to the contrary
herein.
SECTION 2. A probationary employee is any employee whose continuous
length of service is less than sixty (60) calendar days. When a probationary
employee has accumulated sixty (60) calendar days of continuous service,
he (1) will become a regular employee and have his seniority established as set
forth in the paragraph above. During the probationary period the employee
shall be paid thirty cents ($.30) less per hour than the entry level rate.
During an employee's probationary period, the Company shall not be restricted
in its right to discharge or discipline such employee for any cause, except
as limited by state and federal law. The discipline or discharge of a
probationary employee shall not be subject to the grievance procedure of this
Agreement. Further, no contractual terms or entitlements of this Agreement
shall be available to any probationary employee. The probationary period of
any employee may be extended an additional thirty (30) calendar days at the
discretion of the Company.
However, when the probationary period of an employee is to be extended,
Management shall notify the Local Union President, in writing, of the reason
for the extension.
SECTION 3. An employee shall lose seniority rights when any of the
following occurs:
a) The employee quits;
b) The employee is properly or justly discharged and not reinstated;
c) The employee is absent from work for three (3) consecutive workdays
without notifying the Company of a legitimate reason for such absence
on a daily basis unless such notification is not possible;
d) The employee has not been recalled from layoff for a period of two (2)
years;
_______________
(1) The masculine pronouns refer to both genders and are simply used for
ease of reading.
3
<PAGE>
e) The employee fails to return from a leave of absence within three (3)
workdays following the expiration thereof;
f) The employee fails to respond within five (5) postal service days after
receiving a notice of recall to work on the day set forth in the
notice. (The Company shall send a written notice of recall, via
Certified Mail, to the employees' last known address. It shall be the
employees' responsibility to keep the Company advised of his current
address and telephone number);
g) The employee retires;
h) When an employee accepts a position outside of the bargaining
unit. (2)
The Company will furnish the Local Union's Recording Secretary an
up-to-date seniority list of employees stating the name, social security
number, address, telephone number, and date of hire thereof every three (3)
months, or whenever additions, deletions, or corrections are made to said
roster.
ARTICLE VI
PERMANENT VACANCIES
Permanent vacancies are created by a union member's termination of
employment or by the creation of a new job or increased work load.
SECTION 1. ROTATING CREW MOVES. Prior to any vacancy being posted for
bid, the Company will determine if any employee currently in that job
classification has elected to change rotating crews. If an employee desires
another crew, he may sign a form indicating the crew to which he desires to
move. The resulting vacancy after such rotating crew move will be the job
posted for bid.
SECTION 2. A permanent vacancy notification shall be posted on the
bulletin board for a period of six (6) calendar days. Employees seeking to
bid on the job shall sign the posting on the list provided at the Security
Guard/Scale House. If a posting goes up during an employee's absence from
work, the employee may show his desire to be considered for the job by
signing the appropriate vacation bid posting sheet provided at the Security
Guard/Scale
_______________
(2) Subject to sixty (60) calendar day return to the bargaining unit for
persons promoted to supervisory positions. An employee shall have one (1)
such right during the term of this contract.
4
<PAGE>
House. Postings shall include the job classification, shift, and if a new
classification, the rate and a brief description of the duties. The Company
shall advise the Union President, in writing, of the successful bidder as
soon as practical but no later than seven (7) calendar days after the posting
goes down. The successful employee shall be awarded the bid position on or
before fourteen (14) calendar days from the advisement of the Union President.
Employees may bid laterally or downward four (4) times during the life
of the contract. They may bid upward without limitation; however, if such
bid is to a job previously held, one of the four (4) bids will be used. Bids
on new classifications (not included in the Wage Schedule) and bids to the
day shift shall not be subject to the limitations set forth hereinbefore.
SECTION 3. All permanent job vacancies shall be awarded to the senior
most employee bidding for such job. Maintenance Employees, including
lubricators and electricians, must pass a maintenance test before being
considered for such jobs.
SECTION 4. If an employee fails to demonstrate within thirty (30)
calendar days that he can perform the job or if the employee desires to
decline the job within the same period of time, then he shall be returned to
his former job. An employee who desires to decline the job during the period
from the thirty-first (31st) to the sixtieth (60th) calendar day may, with
the agreement of the Company, do so at which time he will be assigned to an
open position unless his previous position has not been awarded to another
employee in which case the employee may be returned to his former position.
If an employee declines the job within thirty (30) calendar days, the job
will be awarded to the next employee entitled to the job from the list of
bidders. Employees whose names appear on the list of bidders who
subsequently successfully bid on other jobs will be deemed to have their
names removed from such list. If an employee declines the job or leaves the
position after thirty (30) calendar days, said position shall be posted as a
permanent vacancy.
SECTION 5. If there are no successful bidders or employees on layoff
status, the Company reserves the right to hire from the street.
ARTICLE VII
TEMPORARY VACANCY
SECTION 1. Every reasonable effort shall be made to keep an employee at
work on the job duties normally and customarily a part of his regular job and
to minimize to the extent practicable the amount of temporary assignments to
other jobs.
5
<PAGE>
SECTION 2. This section shall apply to temporary vacancies in excess of
eight (8) or ten (10) working days (rotating and day shift respectively)
where management determines a need to fill a job on a temporary basis. The
following procedures will apply:
1) Between January 1st and January 15th of each year employees will
elect job classifications they desire to be considered for on
temporary transfers in excess of ten (10) and eight (8) working days.
Any employee not listing his name and selections during such period
will not be considered for temporary transfers under this provision
until he so indicates in the succeeding January 1st through 15th.
Employees hired during the calendar year in question shall have eight
(8) or ten (10) working days (rotating and day shifts respectively)
following their exhaustion of the probationary period in which to
elect job classifications. Such transfers will be only to another
classification or department. The senior employee on the list will
be called for a temporary transfer which he may accept or reject.
Until the contacted employee has accepted or rejected the offer, the
Company reserves the right to select as though the assignment were ten
(10) or eight (8) days or less. Employees who may not be selected on
the basis of their seniority may not grieve the failure to be selected
if a bargaining unit employee is awarded the temporary transfer. (3)
2) In the event no employee is listed for the job, the junior employee
on the shift and department will be required to fill the vacancy.
3) If the Company is unable to fill the vacancy by the above means, the
classified employee with the lowest overtime hours may be called out.
SECTION 3. Employees who are awarded a temporary vacancy shall be required
to fill that job until such time as the Employee completes that assignment in
accordance with the above procedures.
_______________
(3) The Company reserves the right under this provision to not transfer
employees from critical positions. If the transferee's vacated position must
be staffed, the Company reserves the right to do so through overtime or
utilize the procedure hereinbefore or a second temporary transfer. Any
position filled after the second temporary transfer shall be filled as though
they are transfers of less than ten (10) or eight (8) working days.
6
<PAGE>
SECTION 4. When an employee is assigned to a job other than his own on a
temporary daily basis, he shall be compensated for the entire shift at the
higher rate of pay for either his job or the job to which he is temporarily
assigned.
ARTICLE VIII
TEMPORARY REDUCTION IN FORCE
When it is determined by the Company that there will be a temporary
reduction in force in the work force for extraordinary reasons, employees may
be sent home for four (4) days without regard to other provisions of this
collective bargaining agreement.
ARTICLE IX
REDUCTION IN FORCE
SECTION 1. When it is determined by the Company that a reduction in
force is necessary, the Company will notify the Union as soon as practicable
but no less than five (5) working days in advance of the layoff.
As soon as practicable, the Company will meet with the officers and one
(1) member of the Grievance Committee of the Local Union to discuss how many
employees are to be reduced, what jobs must be filled, and which employees
must be realigned. In the event of a layoff or reduction in force, employees
with the greatest seniority at the plant shall be retained if qualified
(Maintenance Department). The senior employees in each job shall be retained
in their job classification. Those employees who are displaced from their
job classification shall be offered open jobs based on their seniority. If
within twenty-four (24) hours of the meeting required by this Section an
employee advises the Company that he wishes to waive the opportunity for an
open job in favor of an open day shift job, such employee will be granted
such request, seniority permitting. An employee who is not retained in his
job classification and who is not successfully assigned to an open job shall,
seniority permitting, displace the last person hired. No bumps shall be
permitted under this Section with the exception of the one referenced
immediately hereinbefore.
SECTION 2. Employees who are laid off will be recalled in order of
seniority and assigned to jobs by the Company. At the point in time when all
employees have been recalled or when the Company determines further recalls
are not likely, all jobs from which employees have been laid off, or jobs
they occupied during such layoff period, shall be posted for bid according to
the procedures set forth in Article VII. During the recall process, laid off
employees who earlier had been recalled or who during the layoff occupied a
position resulting from the layoff, and resultant
7
<PAGE>
moves, may be assigned or reassigned to their pre-layoff position prior to
the job posting referenced immediately hereinbefore.
ARTICLE X
GRIEVANCE COMMITTEE
There shall be a Grievance Committee consisting of at least three (3)
employees employed at the plant and selected by the Local Union. The
Grievance Committee shall assist members in the processing of grievances and
shall participate at Step 1, if requested, by the Grievant. They shall refer
and process Grievances at Step 2 and may participate in Steps 3 and 4 of the
Grievance Procedure.
ARTICLE XI
PERMANENT JOB CLASSIFICATION ELIMINATION
If the Company determines that jobs at the plant are to be eliminated,
the following procedures will be followed:
1) Five (5) days prior to any action being taken, the Company shall meet
with the local union president and the grievance committee to discuss:
A. the reasoning for elimination of said jobs;
B. the number of employees affected by said elimination; and
C. the job classifications affected by said elimination.
2) The employees who are to be displaced from such jobs shall, to the
extent their seniority (and qualifications in regard to maintenance jobs)
permits, be entitled to displace the junior employee in a job of their
choosing.
3) Any employee displaced under No. 2 above shall also be entitled to
exercise their seniority in the same manner.
ARTICLE XII
WORKING HOURS AND OVERTIME PAY AND PAYDAY
SECTION 1. The Company will make a good faith effort to fairly and
equitably distribute overtime among qualified employees. The Company will
make every effort to minimize the amount of overtime worked, but when the
need arises, those employees who are
8
<PAGE>
designated by the Company for overtime must perform the work. The least
senior employee must perform the work.
SECTION 2. Overtime will be paid at time and one-half the regular rate
and will apply only after forty (40) hours have been worked during the
workweek. Hours not actually worked will not count toward overtime (e.g.,
holiday, vacation, sick leave, etc.).
SECTION 3. The Company will pay overtime pay to all those employees who
work on major equipment outages (i.e., worked on five (5) eights (8) and all
hours worked over twelve (12) on four (4) twelves (12). This type of special
overtime pay will be scheduled and not be the normal type
incidentally-scheduled overtime which occurs during the normal workweek.
SECTION 4. The payday for all employees shall be on a weekly basis.
SECTION 5. As soon as practicable the Company will implement a wage
equalization pay system as proposed in a letter dated January 3, 1996.
ARTICLE XIII
CALL BACK PAY
In the event an employee is called back to work and no work is
available, the employee leaves and receives a minimum of two (2) hours of pay
at the applicable rate. If the employee performed the work he/she was called
back to do, the employee leaves and receives a minimum of four (4) hours of
pay at the applicable rate. If the work performed by the employee called
back exceeds four (4) hours, the employee will leave and be paid for the
actual hours worked.
ARTICLE XIV
GRIEVANCE PROCEDURE
SECTION 1. Should any difference arise between the Company and its
employees as to the meaning or application of the provision of this
Agreement, an earnest effort shall be made to settle such grievance
immediately in accordance with the following procedure.
STEP 1. Any employee with the belief that there is a complaint shall
discuss the issue with his immediate supervisor within three (3) working days
of the incident prompting the complaint. If the employee desires that a
representative of the Union be present during the discussion with his
immediate supervisor, he shall notify the supervisor of his desire and the
9
<PAGE>
immediate supervisor shall arrange to have the requested representative of
the Union present while the employee is discussing the grievance with his
supervisor. The supervisor shall have the authority to settle the matter.
The supervisor will answer the aggrieved employee within two (2) working days
of the original discussion.
STEP 2. If the supervisor's answer is not acceptable, or if the
answer is not given within two (2) working days of the original discussion,
the aggrieved employee may submit a written grievance, within five (5)
working days to the Plant Superintendent. A meeting with the Grievant, Plant
Superintendent, supervisor, and two (2) members of the Grievance Committee
shall be held within ten (10) working days of receipt of the written
grievance to review the facts and contract provisions in an effort to resolve
the grievance. (4) If the complaint is not settled, the grievance will be
referred to a representative of the UMWA District and the General Manager or
his designee.
STEP 3. Within ten (10) working days of the time the grievance is
referred to them, the District Representative and General Manager or his
designee shall meet in an effort to reach an agreement. No more than two (2)
members of the Grievance Committee shall have the right to be present.
STEP 4. In cases where the UMWA District Representative and the
General Manager or his designee fail to reach an agreement, the matter shall,
within ten (10) calendar days after referral to them, be referred to an
arbitrator.
Such arbitrator may be selected by mutual consent between the parties,
or failing to reach consent, by applying for a panel of arbitrators from the
American Arbitration Association or the Federal Mediation and Conciliation
Service; the parties shall alternately strike names from the panel until one
(1) arbitrator is named. The salary and expenses of the arbitrator shall be
borne equally by the Company and the Union.
SECTION 2. The time limits contained in this Grievance Procedure must
be strictly adhered to. The time limits may be waived by mutual consent of
the parties in writing. Should the grievance not be timely responded to by
the Company, it shall be automatically moved to the next stage. The Company
will make every good faith effort to timely process grievances.
SECTION 3. Settlements reached at Steps 1, 2 or 3 of the Grievance
Procedure shall be without precedent and not referred to nor used by either
party in the processing of any other grievance, unless agreed to in a signed
writing by both parties.
_______________
(4) In Step 2 and Step 3 two (2) committee persons shall remain on the
clock.
10
<PAGE>
SECTION 4. The grievant shall have the right to be present at each step
of the grievance procedure until such time as all evidence is taken.
ARTICLE XV
LEAVES OF ABSENCE
Leaves of absence will be granted to local union officers and committee
members to perform duties for the local union without any loss of contractual
benefits not to include wages. Forty-eight (48) hours notice shall be given
to the Company prior to the commencement of such leave, absent extraordinary
circumstances.
Employees who request a leave of absence to serve as District or
International union officers or representatives shall be granted such leave
and shall retain their seniority and continue to accrue seniority while on
such leave. While on such leave, employees shall be entitled to no benefits
under the contract. Employees who are appointed or elected to District or
International union positions shall, upon expiration of their term(s), be
entitled to return to the job held immediately prior to such leave.
Written notice of such leaves shall be presented to the Company as soon
as practicable but no less than forty-eight (48) hours before the
commencement of such leave.
Employees who are eligible shall be granted military leave, and family
and medical leave.
The Company and Union will discuss contractual adjustments in the case
of persons covered under the Americans with Disabilities Act.
ARTICLE XVI
SUSPENSION AND DISCHARGE
SECTION 1. No employee covered by this Agreement may be disciplined or
discharged, except for just cause. The burden shall be on the employer to
establish grounds for discipline or discharge in all proceedings under this
Agreement.
SECTION 2. Where management concludes that the conduct of an employee
justifies suspension or discharge, the employee shall first be suspended
without pay and shall be given written notice stating the reason(s), with a
copy to be furnished to the Grievance Committee. Within seventy-two (72)
hours the employee may be afforded the right to meet with the General Manager
or his designee.
11
<PAGE>
At such meeting, no more than two (2) members of the Grievance Committee
shall be present and, if requested by the employee or the Grievance
Committee, a representative of the District UMWA shall also be present.
SECTION 3. If the General Manager or his designee informs the employee
at the meeting between the Employer and the employee, that discharge or
suspension is still intended (or if no meeting is requested), the employee
may within five (5) calendar days file a grievance directly to Step 4 of the
Grievance Procedure.
SECTION 4. In all cases where it is determined that just cause did not
exist for discharge or suspension, the arbitrator has full authority to
fashion an appropriate remedy.
ARTICLE XVII
NO STRIKE/NO LOCKOUT
During the term of this Agreement, subject to Article XII, the Union
agrees it will not engage in any strike, work stoppage, slow down, or other
interference with work. Failure of an employee to comply with this provision
shall result in his immediate termination. Proof of an employee(s) engaging
in conduct violative of this Article shall be just cause for permanent
discharge and not subject to Articles XII or XIII. The Company agrees it
will not lock out its employees.
ARTICLE XVIII
HEALTH AND SAFETY
SECTION 1. The Company and the Union shall cooperate in the objective
of eliminating accidents and health hazards.
The Company will make reasonable provisions for the safety and health of
its employees at the plant during the hours of their employment.
SECTION 2. There will be a Joint Health and Safety Committee consisting
of at least three (3) bargaining unit employees employed at the facility and
selected by the Local Union and an equal number of management/supervisory
employees, at the Company's option. The Joint Health and Safety Committee
shall at all times be deemed to be acting within the scope of their
employment in the plant within the meaning of the applicable worker's
compensation law.
SECTION 3. The Joint Health and Safety Committee, or in the absence of
the entire Joint Health and Safety Committee, a member or members may inspect
any portion of the plant and related
12
<PAGE>
facilities. If the Committee finds conditions which need correcting, they
shall report their findings to the Company for APPROPRIATE attention.
In those special instances where the Joint Health and Safety Committee
believes a situation endangers the lives and bodies of employees and poses an
imminent danger, they may remove employees from that area or job until the
situation is corrected.
SECTION 4. No Joint Health and Safety Committee member may be
disciplined or discharged for his actions as a member of the Joint Health and
Safety Committee as long as his activities are in good faith and in
compliance with applicable OSHA (state and federal) rules and guidelines and
Company safety policies and standards.
SECTION 5. A representative of the Company and a Joint Health and
Safety Committee member may accompany the federal and/or state Safety and
Health Inspectors when they make their examinations of the plant. The
employee of the Joint Health and Safety Committee shall suffer no loss of pay
while on such inspection.
SECTION 6. In the event of an injury or illness on the job, where
appropriate, the Company will transport the employee to a place where medical
services can be obtained (hospital, doctor's office, etc.). (If applicable,
the Company will also provide the employee transportation for a return ride.)
The employee, if able, may request the facility to which he wishes to be
transported.
Each month the Company will furnish the Joint Health and Safety
Committee a list of all accidents which occurred during the previous month.
SECTION 7. The Joint Health and Safety Committee and management shall
investigate all serious or potentially serious accidents with the sole
purpose to find ways to eliminate or reduce such accidents.
SECTION 8. Hard hats, gloves, safety glasses or one (1) pair
prescription safety glasses per year, hearing protection, long-sleeve cotton
jackets (molten metal area) and metatarsal shoes shall be furnished by the
Company and worn at all times. Items referenced above will be replaced upon
presentation of the item sought to be replaced.
SECTION 9. At the request of the Joint Health and Safety Committee,
Union officials, District and International officers and representatives of
the UMWA Department of Occupational Safety and Health shall be granted access
to the plant to inspect the facility or to investigate serious accidents.
Such request shall be made in writing, copy to the Company, after a verbal
advisement of such action. The letter shall state the reason for the visit
which
13
<PAGE>
should not take place before five (5) days from receipt, absent unusual
circumstances.
SECTION 10. An employee injured during his shift shall be paid for the
entire shift, if he cannot reasonably be expected to complete his shift.
SECTION 11. Union members of the Joint Health and Safety Committee
shall be compensated by management for all time spent on official Joint
Health and Safety Committee business and meetings, as requested by the
Company.
ARTICLE XIX
SUPERVISORY EMPLOYEES
Any supervisor may, as a part of that person's regular duties, perform
work in emergencies, in training of other employees, in improving or checking
the quality of production, in experimental or research and development
assignments, to assist a regular worker or in order to prevent harm to
employees or equipment. Such supervisor shall not regularly perform
bargaining unit work so as to cause a layoff or displacement or loss of a
full day's work opportunity for an employee who is in the bargaining unit.
It is understood that the Company will make every reasonable effort to secure
a replacement, if needed, for those employees who fail to report to work.
ARTICLE XX
CONTRACTING OUT
Contracting out of repair and maintenance work or work which can be
performed by classified employees shall not be permitted when classified
employees are on a layoff status or when such contracting out knowingly will
result in the layoff of classified employees.
ARTICLE XXI
BULLETIN BOARDS
The Company will furnish and maintain one (1) bulletin board locked and
under glass in a conspicuous place in the shop which shall be for the sole
use of the Union. A key to the board shall be furnished to the General
Manager.
14
<PAGE>
ARTICLE XXII
VOTING PLACE
The Company shall make available space within the shop for the purpose
of holding Union elections and contract ratification votes for oncoming and
off going crews only.
ARTICLE XXIII
JURY DUTY
Employees who are summoned for jury duty and serve in such capacity
shall receive for each day of service, the difference between the amount
received for such service and, in the case of hourly workers, eight (8) times
his regular rate or in the case of incentive or piece workers, eight (8)
times his average hourly earnings, for a period not to exceed thirty (30)
working days.
Such payments are to be made for only the days upon which the employee
would have worked because of being scheduled to work.
ARTICLE XXIV
BEREAVEMENT PAY
In the event of the death of an employee's spouse, children,
stepchildren, father, mother, current mother-in-law, current father-in-law,
brother or sister, and the employee has been in the employ of the Company for
sixty (60) calendar days or more, he shall receive up to but not in excess of
three (3) days' pay while off prior to and while attending funeral services.
Payment of bereavement pay will only be made after the employee
furnishes his employer with acceptable proof of death by copy of the death
certificate or newspaper clipping of the funeral notice or other proof
acceptable to the Employer.
The pay for time off shall be the amount of eight (8) times the
employee's hourly rate.
In addition to the above, two (2) days without pay or attendance points
shall be granted as leave for the day of the funeral for any other family
member.
ARTICLE XXV
HOLIDAY PAY
Holidays recognized in the Agreement are:
15
<PAGE>
New Year's Day Thanksgiving Day
Easter Day after Thanksgiving
Memorial Day Christmas Eve
Fourth of July Christmas Day
Labor Day Floating Holiday
Employees shall receive holiday pay for holidays on the following basis:
A) Employees scheduled to work the Holiday shall be paid at double
time rates for all hours worked, which includes the holiday pay.
B) Employees scheduled to work who do not complete the full shift shall
be paid double time rates for all hours worked.
C) Employees who do not accrue any attendance policy discipline and
have no OSHA recordable injuries during a given calendar year will be
entitled to one (1) personal day to be taken in the following year.
ARTICLE XXVI
PROFIT SHARING
If the Company maintains its profit sharing plan, employees will
participate if and when the profit sharing to employees occurs. Employees
shall be eligible for profit sharing after one (1) year of continuous
employment.
ARTICLE XXVII
ACCIDENT AND SICKNESS BENEFITS
Accident and sickness benefits will be provided under the terms as set
forth under the corporate policy. (5) However, the benefits will be modified
to reflect thirty (30) weeks and Two Hundred Eighty Dollars ($280.00) per
week. In all other respects the corporate policy will be followed.
ARTICLE XXVIII
INSURANCE
Employees will be covered under the corporate insurance plans for
medical and life insurance and such documents are incorporated herein by
reference.
_______________
(5) Group Health Benefits for Employees of IMCO Recycling Inc.
16
<PAGE>
ARTICLE XXIX
BASIC WORKDAY
The Company shall fairly distribute overtime. Overtime scheduling
system shall be determined by the parties and communicated to employees.
ARTICLE XXX
PLANT CLOSING OR RELOCATION
If the Company decides to sell, close, or relocate its Uhrichsville,
Ohio facility, it shall comply with its statutory obligations.
ARTICLE XXXI
DURATION OF AGREEMENT AND
RESPONSIBILITIES OF THE PARTIES
This Agreement shall become effective as of December 1, 1995, and shall
continue in full force and effect until November 30, 1998.
It shall automatically be renewed for successive periods of one (1) year
thereafter, unless either party notifies the other, in writing, at least
sixty (60) days prior to December 1, 1995 that the Agreement will terminate
on such specified date.
The written notice required under the immediately preceding paragraph
shall be made by certified mail. Such notice shall be addressed to: United
Mine Workers of America (UMWA), District Six, 56000 Dilles Bottom, Shadyside,
Ohio 43947 if to the Union; and to IMCO Recycling of Ohio Inc., P.O. Box 151,
Uhrichsville, OH 44683 if to the Company.
Either party may, by written notice to the other, effect a change of the
addresses given above.
The Company and its managers and supervisors at all levels shall be
bound to observe the provisions of this Agreement.
The Union and its officers and representatives at all levels and all
employees shall be bound to observe the provisions of this Agreement.
It is the continuing policy of the Company and the Union that the
provisions of this Agreement shall be applied equally to all employees
without regard to race, color, religious creed, national origin, veteran
status, sex, age or union activity in accordance with state and/or federal
laws. Should any provision of
17
<PAGE>
this Agreement be found to be in violation of any state or federal law, the
parties will attempt to renegotiate that provision. The remainder of the
contract shall remain in effect whether the renegotiation is successful or
not.
IN WITNESS WHEREOF, this Agreement has been signed on behalf of the
parties only upon the condition that it has been ratified and approved by the
members covered hereby to become effective this lst day of December, 1995.
18
<PAGE>
MEMORANDUM OF UNDERSTANDING
Checkoff
The membership dues, including initiation fees, and assessments of the
United Mine Workers of America and its various subdivisions, credit union,
voluntary COMPAC contributions, and Union-sponsored group auto insurance, as
authorized and approved by the International Union, United Mine Workers of
America, shall be checked off the wages of the employees by the Employer
covered by this contract and shall be remitted by the Employer to the
properly designated officers of the Union for distribution to its various
branches. Such remittance shall be made within 30 days of the date such
amount has been checked off. The Employer shall also submit an itemized
statement showing the name of each employee, his social security number,
hours worked, and the amount checked off for dues, initiation fees, and
assessments. Such itemized statement shall be made within 60 days of the
date the checkoff has been made, and shall include a list of employees from
whom dues, initiation fees and assessments have not been collected.
In order that this section may become effective and operate within the
limitations of the Labor-Management Relations Act of 1947, the Union hereby
agrees to furnish, with all reasonable dispatch to the respective Employer,
and the Employer agrees to aid, assist and cooperate in obtaining, written
authorizations from each employee so employed. Upon the presentation to the
Employer of such authorizations in such reasonable form as time and
circumstances, looking to continuous and uninterrupted production, may allow,
said Employer shall make deductions so authorized and deliver the same to the
designated District Officer of the Union or to such authorized representative
as may be designated by the Union.
19
<PAGE>
/s/ LARRY WARD 2-14-96
- ------------------------------------
Larry Ward, President
U.M.W.A. District Six
/s/ VINCE LUCIDO 2-14-96 **
- ------------------------------------
Vince Lucido I.E B.
United Mine Workers of America
/s/ GERALD K. REICHELT 3-2-96 *
- ------------------------------------
Gerald K. Reichelt,
General Manager, IMCO Recycling
/s/ JAMES B. WALBURG 3-5-96
- ------------------------------------
James B. Walburg
Vice President and Treasurer
/s/ JAMES A. MADDEN
- ------------------------------------
James A. Madden
Manager Human Resources
/s/ DEBORAH J. VANDALL
- ------------------------------------
Deborah J. Vandall
Production Superintendent
_______________
* Subject to the issue of whether employees are required to work the
scheduled workday before and after a holiday to qualify, i.e., whether the
first full paragraph in the 1992-95 contract, Article XXIII, p. 12, was
omitted due to inadvertence or clerical error.
** BY SIGNING THIS AGREEMENT, THE PARTIES AGREE THAT:
1) The Company will immediately make provisions to pay the retroactive pay
increases for classified employees for all hours worked since December 1,
1995.
2) That Management and the Local Union will immediately draft and post the
overtime procedure required in Article XXIX.
3) That the Company and Local Union shall equally share the costs of printing
the new contract.
4) The Company will immediately post for bid, according to Article VI, __, a
shipping/ receiving (Dock) job whose primary duties are to operate the John
Deere Loader.
5) That the Union maintains its position regarding the John Deere loader in
any subsequent job bid. The Company disagrees and the issue may be referred
to a third party for resolution.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
SCHEDULE A
- -----------------------------------------------------------------------------
CURRENT
CLASSIFICATION RATE 12/01/95 12/01/96 12/01/97
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PAY GRADE ONE
Electrician $10.80 $11.30 $11.70 $12.10
- -----------------------------------------------------------------------------
PAY GRADE TWO
Maintenance Mechanic $10.50 $11.00 $11.40 $11.80
Maintenance Mechanic, Rotating
Shift 10.50 11.00 11.40 11.80
Maintenance Mechanic, Truck
Shop 10.50 11.00 11.40 11.80
Baghouse Mechanic 10.50 11.00 11.40 11.80
- -----------------------------------------------------------------------------
PAY GRADE THREE
Furnace Operator $ 9.85 $10.35 $10.75 $11.15
Shredder Operator 9.85 10.35 10.75 11.15
De-Ox Operator 9.85 10.35 10.75 11.15
Cruc. Truck Driver 9.20 10.35 10.75 11.15
Dayshift CDL Truck Driver 9.20 10.35 10.75 11.15
Lubricator 9.80 10.35 10.75 11.15
- -----------------------------------------------------------------------------
PAY GRADE FOUR
Furnace Equipment Operator $ 9.20 $ 9.70 $10.10 $10.50
Shredder Equipment Operator 9.20 9.70 10.10 10.50
De-Ox Equipment Operator 9.20 9.70 10.10 10.50
Cruc. Cleaner 9.20 9.70 10.10 10.50
Ship & Receiving Equipment
Operator (Dock & Bar Handlers) 9.20 9.70 10.10 10.50
Parts Runner 9.20 9.70 10.10 10.50
Mud Room 9.20 9.70 10.10 10.50
- -----------------------------------------------------------------------------
Scheduled premium of $.15 per hour shall be paid for those employees working
on rotating shifts.
Production lead persons will get $.60 per hour in addition to their regular
hourly rate.
- -----------------------------------------------------------------------------
</TABLE>
21
<PAGE>
SCHEDULE B
1. Vacation Accrual:
After 1 year . . . . . . . . . . . . 1 week
After 2 years . . . . . . . . . . . 2 weeks
After 10 years . . . . . . . . . . . 3 weeks
After 20 years . . . . . . . . . . . 4 weeks
22
<PAGE>
FIRST AMENDMENT TO LOAN DOCUMENTS
This First Amendment to Loan Documents (this "AGREEMENT") is made and
entered into as of May 31, 1995, by and between TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association, with an office located at 2200
Ross Avenue, Dallas, Texas 75201 ("LENDER") and IMCO RECYCLING INC., a
Delaware corporation, with its principal business address located at 5215
North O'Connor Blvd., Suite 940, Irving, Texas 75039 ("BORROWER").
R E C I T A L S:
A. On September 20, 1994, Lender and Borrower entered into that certain
Loan Agreement (the "LOAN AGREEMENT") pursuant to which Lender agreed to make
loans and advances (collectively the "LOANS") to Borrower in accordance with
the terms thereof. The Loans are evidenced by (i) a Revolving Promissory Note
of even date with the Loan Agreement, in the stated principal amount of
$5,000,000.00, bearing interest and being payable to the order of Lender as
therein provided (as amended, the "REVOLVING NOTE"), (ii) a Term Promissory
Note of even date with the Loan Agreement, in the stated principal amount of
$5,000,000.00, bearing interest and being payable to Lender as therein
provided (as amended, the "TERM NOTE") and (iii) a Converting Promissory Note
of even date with the Loan Agreement, in the stated principal amount of
$5,000,000 bearing interest and being payable to Lender as therein provided
(as amended, the "CONVERTING NOTE") (the Revolving Note, the Term Note and
the Converting Note are collectively, the "NOTES"). The Loan Agreement, the
Notes and the documents, instruments and agreements executed in connection
therewith are collectively referred to herein as the "Loan DOCUMENTS".
B. The total outstanding indebtedness of Borrower to Lender under each
of the Revolving Note, the Term Note and the Converting Note as of May 24,
1995 was $0, $4,500,000 and $0, respectively; and
C. Borrower has requested Lender to extend the term of certain of the
Loan Documents, and Lender, as the legal and equitable owner and holder of
the Loan Documents, at the request of Borrower, for good and valuable
consideration, is willing to enter into this Agreement upon the terms and
conditions set forth below:
A G R E E M E N T:
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby
covenant and agree as follows:
1
<PAGE>
1. Capitalized terms used but not otherwise defined herein shall have
the meanings given to them in the Loan Agreement.
2. SECTION 1 of the Loan Agreement is hereby amended by deleting the
term "REVOLVING COMMITMENT TERMINATION DATE" in its entirety and inserting
the following in lieu thereof.
"'REVOLVING COMMITMENT TERMINATION DATE' means the earlier of (i) May 31,
1996, or (ii) any date on which the Revolving Commitment terminates
pursuant to the terms hereof."
3. Each of PARAGRAPH 2 and PARAGRAPH 8 of the Revolving Note are hereby
amended by deleting each reference therein to "May 31, 1995" and inserting
"May 31, 1996" in lieu thereof.
4. Borrower hereby expressly promises to pay to the order of Lender, the
principal sum of the Notes, as modified by this Agreement, and all accrued
and unpaid interest now due and payable or hereafter to become due and
payable under the Notes, and Borrower expressly promises to perform all of
its obligations under the Loan Agreement and other Loan Documents, as
modified by this Agreement.
5. Lender may elect, in its sole discretion, on behalf of and without
notice to Borrower, to make and use Revolving Loans and/or Converting
Revolving Loans to pay Lender for any amounts due to Lender pursuant to the
Loan Documents, including without limitation any and all costs and expenses
incurred by Lender pursuant to the Loan Documents and/or to cure any Default
or Event of Default.
6. Borrower hereby agrees to reimburse Lender for Lender's costs and
expenses, including, but not limited to, attorney's fees and legal expenses,
incurred by Lender in connection with (a) the preparation of this Agreement
and the Loan Documents executed in connection herewith and in connection with
the negotiation and consummation of the transaction contemplated hereby; and
(b) the enforcement of the Loan Documents (including reasonable, actual
attorneys fees if collected by or through an attorney) and all such expense
incurred in the defense of legal proceedings involving any claim made against
Lender arising out of the Loan Documents. The obligations of Borrower
hereunder shall survive the final payment of all Obligations of Borrower and
the resulting termination of this Agreement.
7. All Loan Documents are hereby amended and modified in a manner
consistent with the modifications contained herein. All references to the
Notes in the Loan Agreement and any other Loan Documents shall be deemed to
be the Notes as modified hereby and all references to the Loan Agreement or
any other Loan Documents in the Loan Documents shall be deemed to be the Loan
Agreement and the other Loan Documents, as modified hereby.
8. Borrower hereby renews the Notes and the indebtedness evidenced
thereby and promises to pay to the order of Lender the unpaid principal
balance of the Notes and interest thereon as specified in the Loan Agreement
and the Notes, as amended hereby.
2
<PAGE>
9. Borrower hereby acknowledges and agrees that (a) Lender is not in
default in the performance of its obligations under the Loan Documents; (b)
Borrower has no claims, counterclaims, offsets, credits or defenses to the
Loan Documents and the performance of its obligations thereunder, or if
Borrower has any such claims, counterclaims, offsets, credits or defenses to
the Loan Documents or any transaction related to the Loans and/or the Loan
Documents, same are hereby waived, relinquished and released in consideration
of Lender's execution and delivery of this Agreement; (c) all of the
provisions of the Loan Documents, except as amended hereby, are in full force
and effect; (d) upon the execution hereof, the Loan Agreement, the Notes, and
the other Loan Documents are not in default; and (e) no granting of a lien or
security interest or assignment has been or will be executed affecting the
assets of Borrower without Lender's prior written consent.
10. Except as expressly modified and amended in this Agreement, all of
the terms, provisions and conditions of the Loan Agreement, the Notes, and
all other Loan Documents are and shall remain in full force and effect and
are incorporated herein by reference.
11. Borrower agrees and acknowledges that upon the maturity of the Loans
as amended hereby, Lender shall have no obligation to renew, extend, modify
or rearrange the Loans and shall have the right to require all amounts due
and owing under the Loans to be paid in full upon the maturity thereof.
12. Borrower acknowledges that the execution of this Agreement by Lender
is not intended nor shall it be construed as (a) an actual or implied waiver
of any default under the Loan Agreement, the Notes or any other Loan
Documents or (b) an actual or implied waiver of any condition or obligation
imposed upon Borrower pursuant to the Loan Agreement, the Notes or any other
Loan Documents, except to the extent expressly set forth herein.
13. This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original, and all of which taken
together shall constitute but one and the same instrument.
14. The parties intend that Chapter 15 of Texas Consumer Credit Code
(Tex. Civ. Stat. Ann. art. 5069-15.01, ET SEQ.) not apply to the
transactions covered by the Loan Documents.
15. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Loan Documents as of the day and year first above written.
LENDER:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association
By: /s/ Joe Watford
-----------------------------
Name: Joe Watford
Title: Vice President
BORROWER:
IMCO RECYCLING INC.,
a Delaware corporation
By: /s/ Paul V. Dufour
-----------------------------
Name: Paul V. Dufour
Title: Executive Vice President
4
<PAGE>
SECOND AMENDMENT TO LOAN DOCUMENTS
This SECOND AMENDMENT TO LOAN DOCUMENTS (this "AMENDMENT"), dated AS OF
NOVEMBER 3, 1995, is entered into by and between IMCO RECYCLING INC., a
Delaware CORPORATION (the "BORROWER"), and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION (the "LENDER").
WHEREAS, the Borrower and the Lender entered into a loan agreement, dated
as of September 20, 1994, as amended by the First Amendment to Loan
Documents, dated as of May 31, 1995 (the "FIRST AMENDMENT") (said agreement,
as amended by the First Amendment and by this Amendment, being the "LOAN
AGREEMENT"; the terms defined in the Loan Agreement are used herein as
therein defined), pursuant to which the Lender agreed to make loans and
advances (collectively, the "LOAN") to the Borrower in accordance with the
terms thereof,
WHEREAS, the Loan is evidenced by that certain (i) Revolving Promissory
Note, (ii) Term Promissory Note and (iii) Converting Promissory Note
(collectively, the "ORIGINAL NOTES"), each dated as of September 20, 1994,
each in the stated principal amount of $5,000,000, bearing interest and being
payable to the order of the Lender as therein provided;
WHEREAS, in connection with the execution of the Loan Agreement, the
Borrower and the Lender entered into a Negative Pledge Agreement, dated as of
September 20, 1994 (herein called the same);
WHEREAS, the Borrower and the Lender wish to amend certain provisions of
the Loan Agreement, the Original Notes and the Negative Pledge Agreement as
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT.
(a) AMENDMENT TO THE DEFINITIONS OF "EBITDA", "MONY DOCUMENTS",
"REVOLVING COMMITMENT", "REVOLVING COMMITMENT TERMINATION DATE" AND "TERM
COMMITMENT" IN SECTION 1 OF THE LOAN AGREEMENT.
(1) Effective as of the date hereof, the definition of "EBITDA"
contained in SECTION I of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"EBITDA means, for any period without duplication, the
total of the following for Borrower and its Subsidiaries
on a consolidated basis, calculated quarterly for the
most recently completed four (4) quarters: (i) net income
determined in accordance with GAAP; PLUS, to the extent
included in the calculation of net income, (ii) the sum
of (a) taxes paid or accrued; (b) interest expenses, net
of interest income, paid or accrued; (c) amortization and
depreciation; and (d) other
1
<PAGE>
non-cash charges (excluding accruals for cash expenses
made in the ordinary course of business); LESS, to the
extent included in the calculation of net income, (iii)
the sum of (a) the earnings of any Person that Borrower
(or a Subsidiary of Borrower) has a minority ownership
interest in unless such earnings are irrevocably received
by Borrower (or such Subsidiary) in the form of a cash
dividend or cash distribution, (b) extraordinary or
non-recurring items other than extraordinary or
non-recurring "cash" losses, in each case for the four
fiscal quarters immediately preceding the date of
calculation and (c) the earnings derived, directly or
indirectly, from joint ventures between Borrower and any
Person whose income and/or losses are not consolidated
with those of Borrower for tax or other reporting
purposes."
(2) Effective as of the date hereof, the definition of "MONY
Documents" contained in SECTION 1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"MONY Documents" means those certain Note Purchase
Agreements dated as of December 15, 1988 and on or about
November 15, 1995, respectively (as ended from time to
time) and any and all notes, instruments, contracts and
agreements executed in connection therewith, pursuant to
which Borrower (or a Subsidiary of Borrower) is indebted
to MONY in the aggregate principal amount of $38,000,000."
(3) Effective as of the date hereof, the definition of
"Revolving Commitment" contained in SECTION 1 of the Loan Agreement
is hereby amended by deleting therefrom the figure of $5,000,000
and substituting therefor the figure of "$10,000,000."
"(4) Effective as of the date hereof, the definition of "Term
Commitment" contained in SECTION 1 of the Loan Agreement is hereby
amended by deleting therefrom the figure of $5,000,000 and
substituting therefor the figure of "$4,000,000."
(b) ADDITION OF THE DEFINITION OF "CURRENT MATURITIES" TO SECTION 1 OF
THE LOAN AGREEMENT. Effective as of the date hereof, a new definition
"Current Maturities" is hereby added to SECTION 1 of the Loan Agreement as
follows:
"CURRENT MATURITIES means, at any date of determination, the sum of (i)
current maturities of long term indebtedness of Borrower as at such date, in
accordance with GAAP; (ii) accrued and unpaid taxes; and (iii) accrued and
unpaid interest expense."
(c) DELETION OF THE DEFINITION OF "ACCELERATION DATE" TO SECTION 1 OF
THE LOAN AGREEMENT. Effective as of the date hereof, the definition of
"Acceleration Date" contained in SECTION 1 of the Loan Agreement is hereby
deleted in its entirety.
2
<PAGE>
(d) DELETION OF SECTION 2.9(b) TO THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 2.9(b) of the Loan Agreement is hereby deleted in
its entirety.
(e) DELETION OF SECTION 2.9(c) TO THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 2.9(c) of the Loan Agreement is hereby deleted in
its entirety.
(f) AMENDMENT TO SECTION 2.13 TO THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 2.13 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"2.13 USE OF PROCEEDS. Borrower shall use the proceeds of the
Loan to fund capital projects, acquisitions and investments and to
finance the working capital needs of Borrower. All loan proceeds
shall be used by Borrower only for legal and proper corporate
purposes which are consistent with all applicable laws and
statutes."
(g) ADDITION OF SECTION 2.16 TO THE LOAN AGREEMENT. Effective as of the
date hereof, a new SECTION 2.16 is hereby added to the Loan Agreement as
follows:
"2.16. COMMITMENT FEE. In consideration for Lender's
commitment to make the Revolving Loans available to Borrower,
Borrower agrees to pay to Lender a quarterly loan commitment fee in
an amount equal to three-sixteenths of one percent (.1875%) per
annum (calculated on the basis of a year of 360 days) of the
average daily amount of the unused portion of the Revolving
Commitment in excess of the first $5,000,000 available to be
advanced thereunder by Lender to Borrower for such quarter.
Borrower and Lender agree that (i) Borrower shall have no
obligation to pay to Lender a commitment fee on any unused portion
of the first $5,000,000 available to be advanced by Lender to
Borrower under the Revolving Commitment during any fiscal quarter,
and (ii) any advance under the Revolving Commitment will first be
applied to the first $5,000,000 available to be advanced that is
not subject to the commitment fee. Such loan commitment fee is due
and payable in arrears on the last Business Day of each quarter,
commencing on December 31, 1995, during the term of this Agreement,
and upon the termination hereof."
(h) DELETION OF SECTION 5.1(l) TO THE LOAN AGREEMENT. Effective as
of the date hereof, SECTION 5.1(l) of the Loan Agreement is hereby
deleted in its entirety.
(i) AMENDMENT TO SECTION 5.2(a) TO THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 5.2(a) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"(a) DEBT. Create, incur or suffer to exist any direct,
indirect, fixed or contingent liability for any Debt, other than,
without duplication, and solely with respect to Borrower (i) the
Obligations, (ii) the obligations of Borrower to MONY under the
MONY Documents, (iii) additional secured Debt for borrowed money in
an amount not to exceed $250,000 in the aggregate at any time to be
used solely for purchases by
3
<PAGE>
Borrower made in the ordinary course of business, (iv) unsecured
Debt, (v) Debt secured by Permitted Liens, (vi) secured
indebtedness to the Commonwealth of Kentucky, any municipality,
political subdivision, department, agency or instrumentality
thereof in a principal amount not to exceed $10,000,000 in the
aggregate, and (vii) Debt incurred by VAW-IMCO Guss and Recycling
GmbH, a German limited liability company ("GMBH"); PROVIDED,
HOWEVER, that the lender of any such Debt shall not have any
contractual recourse against the Borrower or its Subsidiaries
(other than GmbH) if GmbH defaults in the payment of such Debt.
Notwithstanding the foregoing, Borrower shall not permit any of its
Subsidiaries (other than GmbH) to create, incur or suffer to exist
any direct, indirect, fixed or contingent liability for any debt
for borrowed money. Nothing contained in this SECTION 5.2(a) shall
in any way affect Borrower's obligations under SECTION 5.2(g) or
(m) to maintain the financial covenants set forth therein.
(j) AMENDMENT TO SECTION 5.2(k) TO THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 5.2(k) to the Loan Agreement is hereby amended and
restated in its entirety as follows:
"(k) NEW BUSINESSES. Engage in any business other than
business related to nonferrous metal recovery."
(k) ADDITION OF SECTION 5.2(m) TO THE LOAN AGREEMENT. Effective as of the
date hereof, a new SECTION 5.2(m) to the Loan Agreement is hereby added to the
Loan Agreement as follows:
"(m) RATIO OF EBITDA TO CURRENT MATURITIES. Permit the ratio
of (i) EBITDA to (ii) Current Maturities to be or become less than
1.2 to 1.0 at any time during the term hereof."
(l) RESTATEMENT OF CERTAIN SCHEDULES. Effective as of the date hereof,
Schedules 4.6, 4.9, 4.11, 4.13, 4.14 and 4.15 to the Loan Agreement are
amended and restated in their entirety in the form attached hereto.
(m) AMENDMENT TO SECTION 5.2(c) OF LOAN AGREEMENT. Effective as of the
date hereof, Section 5.2(c) is hereby amended and restated in its entirety as
follows: "Sponsor or contribute to, or create or suffer to exist any
contractual or other obligation to contribute to, any Plan or Multiemployer
Plan except such Plans or Multiemployer Plans as described on Schedule 4.9.
(n) AMENDMENT TO FIRST AMENDMENT. Effective as of the date hereof,
Section 5 of the First Amendment is hereby amended and restated in its entirety
as follows:
"Upon the occurrence of any Default or Event of Default, Lender
may elect, in its sole discretion, on behalf of and without notice
to Borrower, to make and use Revolving Loans and/or Converting
Revolving Loans to pay Lender for any amounts due to Lender
pursuant to the Loan Documents, including without limitation any
and all costs and
4
<PAGE>
expenses incurred by Lender pursuant to the Loan Documents and/or
to cure any Default or Event of Default."
SECTION 2. AMENDMENTS TO NEGATIVE PLEDGE AGREEMENT.
(a) AMENDMENT TO THE PREAMBLE OF THE NEGATIVE PLEDGE AGREEMENT. Effective
as of the date hereof, the preamble of the Negative Pledge Agreement is
hereby amended by deleting therefrom the figure of "$15,000,000" and
substituting therefor the figure of "$19,000,000."
(b) AMENDMENTS TO SECTION 4(iii) OF THE NEGATIVE PLEDGE AGREEMENT.
Effective as of the date hereof, the first sentence of SECTION 4(iii) is
hereby amended and restated in its entirety as follows:
"The execution and delivery by the Company of this Agreement,
the Loan Agreement, and the Amended and Restated Revolving
Promissory Note in the stated principal amount of $10,000,000, the
Amended and Restated Term Promissory Note in the stated principal
amount of $4,000,000, and the Amended and Restated Converting
Promissory Note in the stated principal amount of $5,000,000
(individually and collectively, the "NOTE"), each Note executed as
of November 3, 1995 and payable to the order of Lender evidencing
the Loan and the performance of the obligations hereunder and
thereunder have been duly authorized."
SECTION 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by the Lender:
(a) The Lender shall have received this Amendment, duly
executed by Borrower, and such additional documents, instruments
and information as the Lender or its legal counsel may request;
(b) The Lender shall have received the Amended and Restated
Revolving Promissory Note (the "AMENDED REVOLVING NOTE"), duly
executed by Borrower, and payable to the order of Lender in the
original principal amount of $10,000,000;
(c) The Lender shall have received the Amended and Restated
Term Promissory Note (the "AMENDED TENDER NOTE"), duly executed by
Borrower, and payable to the order of Lender in the original
principal amount of $4,000,000;
(d) The Lender shall have received the Amended and Restated
Converting Promissory Note (the "AMENDED CONVERTING NOTE"), duly
executed by Borrower, and payable to the order of Lender in the
original principal amount of $5,000,000;
5
<PAGE>
(e) The Lender shall have received a true, correct and complete
copy of presently effective resolutions of the Borrower's board of
directors, authorizing the execution, delivery and performance of
this Amendment and any and all other Loan Documents executed and/or
delivered in connection herewith, certified by the Secretary or an
Assistant Secretary of the Borrower; and
(f) Each of the representations and warranties contained herein
shall be true and correct on the date hereof.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation.
(b) The execution, delivery and performance by the Borrower of
this Amendment, the Loan Agreement, as amended hereby, the Notes,
as amended and restated in connection herewith, and the Loan
Documents are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action and do not
contravene the Borrower's charter or bylaws, or any law or
contractual restriction binding on or affecting the Borrower, or
result in, or require, the creation of any lien, security interest
or other charge or encumbrance (other than in favor of the Lender)
on or upon or with respect to any of its properties.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by
the Borrower of this Amendment or the Loan Agreement, as amended
hereby, the Notes, as amended and restated in connection herewith,
or any of the Loan Documents.
(d) This Amendment and the Loan Agreement, as amended hereby,
the Notes, as amended and restated in connection herewith, and the
Loan Documents to which Borrower is a party, constitute legal,
valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms (except as
enforcement thereof may be limited by bankruptcy reorganization,
insolvency, moratorium or other laws affecting the enforcement of
creditors' rights generally).
(e) There is no pending or threatened action or proceeding
affecting the Borrower or any of its affiliates before any court,
governmental agency or arbitrator, which may result in a Material
Adverse Effect.
(f) The representations and warranties contained in SECTION 4
of the Loan Agreement are true and correct on and as of the date of
this Amendment.
6
<PAGE>
(g) No event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
(h) There has been no material adverse change in the condition,
financial or otherwise, or operations of the Borrower since June 30,
1995, nor has there otherwise occurred a Material Adverse Effect.
(i) There has been no material adverse change with respect to
any document, instrument or other information supplied by the
Borrower to the Lender prior to the date hereof.
(j) Borrower hereby acknowledges and agrees that Borrower has
no claims, counterclaims, offsets, credits or defenses to the Loan
Documents and the performance of its obligations thereunder, or if
Borrower has any such claims, counterclaims, offsets, credits or
defenses to the Loan Documents or any transaction related to the
Loans and/or the Loan Documents, same are hereby waived,
relinquished and released in consideration of Lender's execution
and delivery of this Agreement.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Loan Agreement to "this Agreement", "hereunder",
"hereof', "herein" or words of like import shall mean and be a reference to
the Loan Agreement as amended hereby, and each reference in the other Loan
Documents to the Loan Agreement shall mean and be a reference to the Loan
Agreement, as amended hereby.
(b) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Loan Documents to (i) "Revolving Note" shall
mean and be a reference to Amended Revolving Note, (ii) "Term Note" shall
mean and be a reference to Amended Term Note, (iii) "Converting Revolving
Note" shall mean and be a reference to Amended Converting Note, and (iv)
"Notes" shall collectively mean and be a reference to the Amended Revolving
Note, the Amended Term Note and the Amended Converting Note.
(c) Except as specifically amended above, the Loan Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(d) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Lender under the Loan Agreement or the other Loan
Documents nor constitute a waiver of any provision of any thereof.
7
<PAGE>
SECTION 6. COSTS, FEES AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses of the Lender in connection with the
preparation, execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel (who
may be in-house counsel) for the Lender with respect thereto and with respect
to advising the Lender as to its rights and responsibilities hereunder and
thereunder.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
SECTION 8. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Texas.
SECTION 9. FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT
IS EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED
HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE
OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A
WRITTEN AGREEMENT SIGNED BY BORROWER AND LENDER.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ Bill Stroope
-----------------------------------
Bill Stroope, Senior Vice President
IMCO RECYCLING INC.
By: /s/ James B. Walburg
-----------------------------------
James B. Walburg
Vice President and Treasurer
8
<PAGE>
============================================================================
IMCO RECYCLING INC.
----------
NOTE PURCHASE AGREEMENT
Dated As of November 29, 1995
----------
Unsecured Promissory Notes Due October 31, 2007
============================================================================
<PAGE>
TABLE OF CONTENTS*
SECTION PAGE
------- ----
1. ISSUE OF NOTES............................ 1
1.1 Authorization............................. 1
1.2 Purchase and Sale of Notes; Closings...... 2
1.3 Use of Proceeds........................... 3
1.4 Notes Not Secured......................... 3
2. PREPAYMENTS............................... 4
2.1 Optional Prepayments...................... 4
2.2 Mandatory Prepayments..................... 5
2.3 Other Prepayments Prohibited.............. 5
2.4 Allocation of Prepayments................. 5
2.5 Surrender of Notes on Prepayment.......... 5
2.6 Interest After Date Fixed for
Prepayment.............................. 6
3. REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT OF NOTES.................... 6
3.1 Registration of Registered Notes;
Ownership of Notes...................... 6
3.2 Replacement............................... 7
3.3 Delivery Expenses......................... 7
3.4 Method and Place of Payment of Principal,
Premium and Interest.................... 7
4. GENERAL REPRESENTATIONS AND WARRANTIES.... 8
4.1 Condition - Financial and otherwise....... 8
(a) Business; Financial Statements.... 8
(b) NO Material Change................ 9
4.2 Capital Stock............................. 9
4.3 Due Corporate Organization and Authority.. 9
4.4 Title to Properties....................... 10
4.5 Patents, Trademarks, Licenses and
Permits................................. 11
* This Table of Contents is not part of the Note Purchase
Agreement.
i
<PAGE>
SECTION PAGE
------- ----
4.6 Taxes .................................... 11
4.7 Pending Litigation ....................... 11
4.8 Compliance with Contractual Obligations
and Requirements of Law ................ 12
4.9 Environmental Matters .................... 12
4.10 Insurance ................................ 13
4.11 Full Disclosure .......................... 14
4.12 Status under Federal Laws
and Regulations ........................ 14
4.13 Compliance with ERISA..................... 15
4.14 Descriptive Materials..................... 17
4.15 Investment Company Act.................... 17
4.16 Subsidiaries.............................. 17
4.17 Insolvency................................ 18
5. REPRESENTATIONS AND WARRANTIES RELATING TO
SECURITIES ACT AND SOURCES OF FUNDS18
5.1 By the Purchaser.......................... 18
5.2 By the Company............................ 18
5.3 Source of Funds........................... 18
6. CLOSING CONDITIONS OF THE PURCHASER....... 19
6.1 Opinion of Company Counsel................ 19
6.2 Opinion of Special Counsel................ 21
6.3 Representations True...................... 22
6.4 No Event of Default....................... 23
6.5 Officers' Certificate..................... 23
6.6 Legality of Investment.................... 23
6.7 Proceedings, Instruments, etc. ........... 23
6.8 Private Placement Number.................. 24
7. BUSINESS COVENANTS........................ 24
7.1 Payment of Notes and Maintenance of
Offices................................. 24
7.2 Payment of Taxes, Claims and
Indebtedness............................ 24
7.3 Maintenance of Properties and Corporate
Existence............................... 25
7.4 Limitation on Indebtedness................ 27
7.5 Limitation on Liabilities for Obligations
of Others............................... 30
7.6 Limitation on Liens....................... 30
7.7 Limitation on Restricted Payments
and Restricted Investments.............. 33
ii
<PAGE>
SECTION PAGE
------- ----
7.8 Maintenance of Current Assets, Consolidated
Working Capital, Net Worth and
Fixed Charge Coverage.................... 34
7.9 Limitation on Leases....................... 34
7.10 Merger or Consolidation or Transfer
of Assets................................ 35
7.11 Issue or Disposition of Securities......... 36
7.12 Limitation on Transactions with Affiliates. 38
7.13 Limitation on Investments.................. 38
7.14 Tax Consolidation.......................... 40
7.15 Auditors................................... 40
7.16 Acquisition of Notes....................... 41
7.17 Limitation on Prior Claims................. 41
7.18 Sale or Discount of Receivables............ 41
7.19 ERISA...................................... 41
7.20 Foreign Pension Liability.................. 43
7.21 Speculation in Commodities and
Inventory Levels......................... 43
7.22 Environmental Covenants.................... 43
7.23 Pari Passu................................. 44
8. REPORTS, ETC. ............................. 44
8.1 Financial Statements and Other Reports..... 44
8.2 Officers' Certificates..................... 48
8.3 Accountants' Certificate................... 48
8.4 Inspection................................. 48
9. EVENTS OF DEFAULT.......................... 49
9.1 Nature of Events........................... 49
9.2 Default Remedies........................... 53
9.3 Notice of Default.......................... 54
10. INTERPRETATION OF AGREEMENT AND NOTES...... 55
10.1 Definitions................................ 55
10.2 Accounting Terms........................... 75
10.3 New York Law............................... 75
10.4 Headings................................... 75
11. MISCELLANEOUS.............................. 75
11.1 Communications............................. 75
11.2 Amendment and Waiver....................... 76
iii
<PAGE>
SECTION PAGE
------- ----
11.3 Expenses................................... 77
11.4 Counterparts............................... 78
11.5 Survival of Warranties and
Representations.......................... 78
11.6 Successors and Assigns..................... 78
11.7 Severability............................... 78
Signatures................................. 79
Schedule I -- Purchaser's Addresses for
Payment and Other Communications
Exhibit A -- Form of Note
Exhibit B -- Description of the Company
Exhibit C -- Form of Report to Management
iv
<PAGE>
IMCO RECYCLING INC.
NOTE PURCHASE AGREEMENT
$30,000,000 Unsecured Promissory Notes
Due October 31, 2007
As of November 29, 1995
To the Purchaser Listed on Schedule I
Ladies and Gentlemen:
IMCO RECYCLING INC., a Delaware corporation (herein called the
"Company"), hereby agrees with you (herein referred to as the 'Purchaser') as
follows:
SECTION 1. ISSUE OF NOTES.
Section 1.1. AUTHORIZATION. (a) The Company has duly authorized the
issuance and sale, on the terms hereinafter provided and on the date hereof,
of $15,000,000 aggregate principal amount of its Unsecured Promissory Notes
due October 31, 2007 (herein collectively called the "Twelve Year Notes' and
individually called a "Twelve Year Note"). Each Twelve Year Note will be in
registered form and in a denomination of $50,000 or any larger integral
multiple of $1,000, will mature on October 31, 2007, will be substantially in
the form set forth in Exhibit A to this Agreement, appropriately completed,
and will bear interest on the unpaid portion of the principal amount thereof,
payable in semiannual installments on April 30 and October 31 in each year
beginning with the April 30 next following the date thereof, at the rate of
7.28% per annum, from the date of the Note until such unpaid portion of such
principal amount shall have become due and payable (whether at maturity, by
acceleration or otherwise).
(b) The Company has duly authorized'-the issuance and sale, on
the terms hereinafter provided, of $15,000,000 aggregate principal amount of
its Unsecured Promissory Notes due October 31, 2007 (herein collectively
called the "Eleven and One-Half Year Notes" and individually called an
'Eleven and One-Half Year Note"). Each Eleven and One-Half Year Note will be
in registered form and in a denomination of $50,000 or any larger integral
multiple of $1,000, will
<PAGE>
mature on October 31, 2007, will be substantially in the form set forth in
Exhibit A to this Agreement, appropriately completed, and will bear interest
on the unpaid portion of the principal amount thereof, payable in semiannual
installments on April 30 and October 31 in each year beginning with the first
such date next following the date thereof, at the rate per annum equal to the
sum of (i) 1.15% per annum plus (ii) the yield at 10:00 a.m., New York City
time, on actively traded U.S. Treasury securities having a constant 10-year
maturity determined by reference to the display designated as "Page 678" on
the Telerate Access Service (or such other display as may replace Page 678 on
the Telerate Access Service) determined on a date which is no more than five
Business Days prior to the Second Closing Date, from the date of the Note
until such unpaid portion of such principal amount shall have become due and
payable (whether at maturity, by acceleration or otherwise).
(c) The Twelve Year Notes and Eleven and One-Half Year Notes
are sometimes herein collectively called the "Notes" and individually called
a "Note".
(d) Each Note will bear interest on any overdue portion of the
principal amount thereof and premium, if any, thereon at a rate equal to 2%
per annum above the then prevailing interest rate per annum thereon until
paid, and will bear interest, to the extent permitted by applicable law, on
any overdue installment of interest thereon at a rate equal to 2% per annum
above the then-prevailing interest rate per annum thereon.
Section 1.2. PURCHASE AND SALE OF NOTES; CLOSINGS. Subject to the
terms and conditions herein set forth, the Company hereby agrees to sell to
you, and, in reliance on representations, warranties and agreements of the
Company herein contained, you agree to purchase from the Company, Notes in
the aggregate principal amount set forth opposite your name in Schedule I
hereto at the purchase price of 100% of each such principal amount. The
aggregate loan made under this Agreement will be advanced by you as set forth
in Schedule I on a date not later than November 30, 1995 (the "First Closing
Date") and a date, to be mutually agreed between you and the Company, on or
before April 30, 1996 (the "Second Closing Date") (each such date a "Closing
Date").
Execution and delivery of the Notes shall take place at the offices
of Seward & Kissel, New York, New York,
2
<PAGE>
at 10:00 A.M. New York City time on each Closing Date, by the delivery by the
Company to you (x) on the First Closing Date, of a single Twelve Year Note
and (y) on the Second Closing Date, of a single Eleven and One-Half Year Note
(or, if you shall have so requested in writing prior to such Closing Date,
multiple Notes in denominations authorized by Section 1.1), in each case
dated such Closing Date, and in an aggregate principal amount equal to the
principal amount of the relevant Notes to be purchased by you on such Closing
Date as set forth in Schedule I. Each Note shall be registered in the name of
the Purchaser or in such other name or names as the Purchaser may have
designated in writing to the Company prior to such Closing Date.
The purchase price of Notes to be purchased by you on each Closing
Date shall be paid by you by wire transferring funds to IMCO Recycling Inc.,
c/o Texas Commerce Bank National Association, Dallas, Texas, ABA 113000609,
Account No. 08500216028.
Section 1.3. USE OF PROCEEDS. (a) The Company shall use the
proceeds of the sale of the Notes to fund capital projects, acquisitions and
investments in 1995 and 1996.
Section 1.4. NOTES NOT SECURED. Any provision herein, or in any
other document executed or delivered in connection herewith, or in any other
agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, the Notes shall be unsecured and are
specifically not secured by the Mortgages or the Mortgaged Properties,
including, but not limited to the following: (i) Mortgage, Security
Agreement, Assignment of Rents and Financing Statement dated October 31,
1986, from International Metal Co. to MONY Pension Insurance Corporation,
MONY Life Insurance Company of America and MONY Legacy Life Insurance
Company, filed October 31, 1986 at 2:20 P.M. and recorded in Book 212, Pages
926 through 950 of the Real Property Records of Creek County, Oklahoma; (ii)
Deed of Trust executed by International Metal Co. to Robert L. Badger,
Trustee, dated October 31, 1986, recorded October 31, 1986 at 3:00 P.M. and
recorded in Trust Book 413, page 334, Register's Office for Roane County,
Tennessee, in favor of MONY Pension Insurance Corporation; MONY Life
Insurance Company of America; and MONY Legacy Life Insurance Company, as
their interests may appear; (iii) Deed of Trust, Assignment of Rents and
Security Agreement executed by IMCO Recycling Inc., a Delaware corporation,
to Joseph B. Pitt, Jr., Trustee, dated December 15, 1988 and
3
<PAGE>
recorded December 28, 1988 at 4:15 P.M. in Trust Book 441, Page 237
Register's Office for Roane County, Tennessee, in favor of The Mutual Life
Insurance Company of New York and MONY Life Insurance Company of America;
(iv) Mortgage, Security Agreement, Assignment of Rents and Financing
Statement dated December 15, 1988 from IMCO Recycling Inc. to The Mutual Life
Insurance Company of New York and MONY Life Insurance Company of America, as
co-mortgagees, filed for record in the office of the County Clerk of Creek
County, Oklahoma, December 28, 1988 at 3:45 P.M. and recorded in Book 243,
Pages 1016 thru 1048 inclusive; or (v) Mortgage, Security Agreement,
Assignment of Rents and Financing Statement from IMCO Recycling Inc. to The
Mutual Life Insurance Company of New York and MONY Life Insurance Company of
America, and MONY Legacy Life Insurance Company, dated December 15, 1988 and
recorded December 24, 1988 at 3:25 P.M. of record in Book 65, Page 540 of the
Office of the Clerk of the County Court of Butler County, Kentucky.
SECTION 2. PREPAYMENTS.
Section 2.1. OPTIONAL PREPAYMENTS. (a) Upon notice given as
provided in Section 2.1(b) and otherwise as provided in Section 2.4 the
Company shall have the right to prepay the Notes in whole at any time, or in
part in multiples of $100,000 from time to time. Each prepayment pursuant to
this 52.1(a) shall be at 100% of the principal amount of the Notes so to be
prepaid, plus accrued interest thereon to the date fixed for such prepayment,
plus a premium equal to the applicable Make-Whole Amount on the date of such
prepayment.
(b) NOTICE OF PREPAYMENT AND OTHER NOTICES. The Company shall
give written notice of prepayment of any Note or any portion thereof pursuant
to Section 2.1(a), not less than 30 nor more than 60 days prior to the date
fixed for such prepayment in such notice, which notice shall specify the
amount so to be prepaid and the date fixed for such prepayment. Such notice
of prepayment and all other notices to be given to any holder of any Note
shall be given by registered or certified mail to the registered holder
thereof at its address designated on the register maintained by the Company
on the date fixed for such notice of prepayment or other notice. Upon notice
of any prepayment pursuant to Section 2.1(a) being given as provided in this
Section 2.1(b), the Company covenants and agrees that it will prepay on the
date therein fixed for prepayment the principal amount of Notes so to be
prepaid as specified in such notice at the principal amount thereof, together
with interest accrued
4
<PAGE>
thereon to such date fixed for prepayment, plus the applicable premium. The
principal amount of all Notes so to be prepaid as specified in such notice at
the principal amount thereof, together with accrued interest thereon to such
date plus the applicable premium shall be due and payable on the date
specified in such notice. The applicable premium shall be computed on the
second Business Day Prior to the applicable prepayment date, and notice of
such amount together with the calculation thereof shall be promptly given to
the Company. Any such computation of premium shall be conclusive and binding
on the Company absent manifest error.
Section 2.2 MANDATORY PREPAYMENTS. The Company covenants and
agrees that on October 31, 2003 and on each October 31 thereafter, to and
including October 31, 2006, it will prepay $6,000,000 aggregate principal
amount of the Notes. Each such prepayment shall be made at 100% of the
principal amount so to be prepaid together with accrued interest thereon to
the date fixed for such prepayment, without premium, and otherwise as
provided in Section 2.4.
Section 2.3. Other PREPAYMENTS PROHIBITED. Except as provided in
Section 2.1 and Section 2.2, the principal of the Notes shall not be subject
to prepayment in whole or in part at any time.
Section 2.4. ALLOCATION OF PREPAYMENTS. In the event of any
prepayment of less than all of the outstanding Notes, the Company will
allocate the principal amount so to be prepaid (but only in units of $1,000)
among the holders of Notes in proportion, as nearly as may be, to the
respective principal amounts of such Notes, not theretofore called for
prepayment, of which they shall be holders.
Section 2.5. SURRENDER OF NOTES ON PREPAYMENT. Subject to Section
3.4, upon any partial prepayment of a Note, such Note shall, at the option of
the holder thereof, be either (a) surrendered to the Company pursuant to
Section 3.1(b) in exchange for a new Note in a principal amount equal to the
principal amount remaining unpaid on the surrendered Note, or (b) made
available to the Company for notation thereon of the portion of the principal
so prepaid. In case the entire principal amount of any Note is prepaid, such
Note shall be surrendered to the Company for cancellation and shall not be
reissued, and no Note shall be issued in lieu of the prepaid principal amount
of any Note.
5
<PAGE>
Section 2.6. INTEREST AFTER DATE FIXED FOR PREPAYMENT. Each Note,
or the portion hereof called for prepayment as herein provided, shall cease
to bear interest on and after the date fixed for such prepayment, unless,
upon presentation for such purpose, the Company shall fail to pay each such
Note or such portion, as the case may be, in which event each such Note or
such portion, as the case may be, shall bear interest thereafter and until
paid at a rate equal to 2% per annum above the then-prevailing interest rate
per annum thereon until paid and, so far as may be lawful, any overdue
installment of interest shall bear interest at a rate equal to 2% per annum
above the then prevailing interest rate per annum thereon until paid.
SECTION 3. REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT OF NOTES.
Section 3.1. REGISTRATION OF REGISTERED NOTES; OWNERSHIP OF NOTES.
(a) The Company will keep at its office maintained pursuant to Section 7.1 a
register for the registration of registered Notes and transfers thereof. The
names and addresses of the holders of Notes in registered form, the transfer
thereof and the names and addresses of the transferees of such Notes shall be
registered in the register. No transfer of any such Note shall be registered
unless such Note is duly endorsed or accompanied by a written instrument of
transfer, in form reasonably satisfactory to the Company, duly executed by
the registered holder or by his duly authorized attorney, and unless such
transfer is made on the aforesaid register. Subject to 53.4, the Company may
treat the Person in whose name any registered Note is registered as the
holder of such Note for the purpose of receiving payment of principal of (and
premium, if any) and interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue.
(b) Upon surrender of any Note or Notes at its office
maintained pursuant to Section 7.1, the Company shall execute and, in
exchange therefor and upon cancellation thereof, shall deliver, at the
Company's expense (except as provided below), a new Note or Notes in such
denominations of $50,000 or any larger integral multiple of $1,000 as may be
requested and in the same aggregate principal amount as, and dated as of the
interest payment date to which interest has been paid on, or, if no interest
has yet been so paid, then dated the date of, the Note or Notes so
surrendered. Such new Note shall, as a registered Note, be made payable
6
<PAGE>
to such Person as such holder or transferee may request. The Company may
require payment of a sum sufficient to cover any stamp tax or Governmental
charge imposed in respect of any transfer.
Section 3.2. REPLACEMENT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of any Note and (a) in the case of loss, theft or destruction, upon receipt
by the Company of indemnity or security reasonably satisfactory to it (except
that if the holder of such Note is an insurance company or other financial
institution of recognized financial responsibility, the holder's own
agreement of indemnity shall be deemed to be satisfactory), or (b) in the
case of mutilation, upon surrender to the Company of such mutilated Note and
cancellation thereof, the Company at its expense will execute and deliver in
lieu thereof a new Note of like tenor, executed by the Company and in the
same unpaid principal amount as the Note being replaced and dated as of the
date to which interest has been paid on such Note, or, if no interest has yet
been so paid, then dated the date of such Note.
Section 3.3. DELIVERY EXPENSES. If any Note shall be presented to
the Company pursuant to this Agreement, the Company will pay the cost of
delivering to or from the holder's home office from or to the Company,
insured to the holder's satisfaction, the Note so presented and any Note
issued in substitution or replacement for the Note so presented.
Section 3.4. METHOD AND PLACE OF PAYMENT OF PRINCIPAL, PREMIUM AND
INTEREST. Notwithstanding any provision to the contrary in this Agreement or
the Notes, the Company will punctually pay all amounts payable with respect
to any Notes held by you, your nominee or any other holder or its nominee
(without any presentment thereof and without any notation of such payment
being made thereon) (a) to the address and in the manner specified in
Schedule I or in such other manner as may be agreed to in writing by you or
such holder and the Company or (b) if no other manner of payment has been
agreed to pursuant to clause (a), by check drawn upon New York Clearing House
or other funds of comparable availability duly mailed and addressed to the
address specified with respect to you or such holder pursuant to Section
11.1. If you or any other holder sells or transfers any Note, you or such
holder, as the case may be, will notify the Company of the name and address
of the transferee, on which the Company may
7
<PAGE>
rely, and will, prior to the delivery of such Note, make a notation on such
Note of the date to which interest has been paid thereon and of the amount of
any prepayments made on account of the principal thereof.
SECTION 4. GENERAL REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants as follows:
Section 4.1. CONDITION -- FINANCIAL AND OTHERWISE.
(a) BUSINESS; FINANCIAL STATEMENTS. Exhibit B to this Agreement
correctly describes in all material respects the business operations and
principal properties of the Company and each Subsidiary.
(ii) The Company has heretofore delivered to you (A) the audited
consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 1990, December 31, 1991, December 31, 1992, December 31, 1993
and December 31, 1994, and the related statements of earnings, changes in
stockholders' equity and cash flows for the fiscal years ended on those
dates, together with reports thereon by Ernst & Young LLP, certified public
accountants, and (B) the unaudited consolidated balance sheets of the Company
and its Subsidiaries as of March 31, 1995 and June 30, 1995, and the related
statements of earnings and cash flows for the fiscal period ended on March 31,
1995 and June 30, 1995, respectively, together with reports thereon by
Ernst & Young LLP, certified public accountants. All of said financial
statements, including in each case the related schedules and notes, are true,
complete (in the case of year-end financial statements) and correct in all
material respects, have been prepared in accordance with generally accepted
accounting principles consistently applied and present fairly the financial
position of the Company and its Subsidiaries as of the respective dates of
said balance sheets and the results of their operations for the respective
periods covered thereby, subject (in the case of interim statements) to
period-end audit adjustments.
(iii) The Company does not know of any fact relating to its
business and the business of each Subsidiary (other than matters of a general
economic nature) which the Company has not disclosed in Exhibit B to this
Agreement, or in the financial statements referred to in this Section 4.1(a)
which individually or in the aggregate materially and adversely
8
<PAGE>
affects or is reasonably likely to materially and adversely affect the
business, operations, properties or prospects, or the condition, financial or
otherwise, of the Company and its Restricted Subsidiaries taken as a whole or
the ability of the Company to perform this Agreement or of the Company to pay
when due, in accordance with the terms of the Notes and this Agreement, the
principal of, and premium, if any, .and interest on the Notes.
(b) NO MATERIAL CHANGE. Except as disclosed in the financial
statements and reports referred to in Section 4.1(a), in Exhibit B, or in
documents delivered pursuant hereto, since December 31, 1994 there have been
no changes in the condition, financial or otherwise, of the Company and its
Restricted Subsidiaries taken as a whole which, individually or in the
aggregate, have been materially adverse, nor any changes in such condition
occurring otherwise than in the ordinary course of business.
Section 4.2. CAPITAL STOCK. At the close of business on the
Business Day immediately preceding the First Closing Date and after giving
effect to the transactions contemplated by this Agreement, the authorized
stock of the Company consists of: 20,000,000 shares of Common Stock, $.10 par
value, of which 11,964,911 shares are issued and outstanding; and 8,000,000
shares of Preferred Stock, $.10 par value, of which no shares are issued and
outstanding.
Section 4.3. DUE CORPORATE ORGANIZATION AND AUTHORITY. The
Company and each Restricted Subsidiary (a) is a corporation or other business
entity duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, (b) has all requisite
power and authority (corporate or otherwise) to own, or hold under lease, its
properties and assets, to operate its properties and assets and to conduct
its business as now conducted and as currently proposed to be conducted, and
has in full force and effect all necessary franchises, licenses, permits,
consents or approvals from or by, and has made all necessary filings with,
every Government having jurisdiction and required for such ownership,
operation and conduct of its business, except for those approvals set forth
in Exhibit B or except where the failure to have in effect such items or the
failure to make such filings would not have a Material Adverse Effect, (c) in
the case of the Company only, has all requisite corporate power and authority
to execute, deliver and perform this Agreement and to issue, sell and deliver
the
9
<PAGE>
Notes to the Purchaser and (d) has duly qualified and is authorized to
transact business and is in good standing as a foreign corporation or other
entity in each jurisdiction wherein the character of the properties or assets
owned or held under lease by it or the nature of the business transacted by
it makes such qualification necessary, except where such failure to qualify
would not have a Material Adverse Effect.
Section 4.4. TITLE TO PROPERTIES. The Company and each Restricted
Subsidiary has good and indefeasible title to all of its properties purported
to be owned by it, including all property reflected in the most recent
audited balance sheet of the Company and its Restricted Subsidiaries referred
to in Section 4.1(a) (except property sold or otherwise disposed of in the
ordinary course of business since the date thereof), free from any Liens
other than those permitted by Section 7.6. None of the assets or property the
value of which is reflected in said most recent balance sheet of the Company
and its Restricted Subsidiaries is held by the Company or any Restricted
Subsidiary as lessee, conditional vendee or under any other title retention
agreement, except as set forth in said balance sheet or the notes relating
thereto or as otherwise disclosed pursuant hereto. Other than Uniform
Commercial Code financing statements disclosed to you on Exhibit B, no
financing or continuation statement which names the Company or any Restricted
Subsidiary as debtor has been filed with respect to property of the Company
or any Restricted Subsidiary under the Uniform Commercial Code in any United
States jurisdiction and neither the Company nor any Restricted Subsidiary has
agreed or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien, except in each case as permitted by
Section 7.6. Each real estate lease to which the Company or any Restricted
Subsidiary is a party as lessee is not in default unless such default would
not have a Material Adverse Effect, and is valid, binding and enforceable by
the lessee in all material respects in accordance with its terms and entitles
the lessee to undisturbed possession of the real estate covered thereby
during the full term thereof, except as such enforceability and undisturbed
possession may be affected by condemnation or other acts of Governmental
bodies or by bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally.
10
<PAGE>
Section 4.5. PATENTS, TRADEMARKS, LICENSES AND PERMITS. The
Company and each Restricted Subsidiary owns or possesses all patents,
trademarks, service marks, trade names, copyrights, licenses, permits,
franchises and other Governmental and private authorizations, or rights with
respect to the foregoing, necessary or advisable for the present and
currently proposed future conduct of its business (except for the permits set
forth on Exhibit B), without any known conflict with the rights of others,
except where the failure to so own or possess any of the above would not have
a Material Adverse Effect.
Section 4.6. TAXES. (a) All tax returns required to be filed by the
Company and each Subsidiary in any jurisdiction have been filed, and all
taxes, assessments, fees and other Governmental charges or levies imposed
upon the Company or any Subsidiary or upon any of their properties, assets,
income, profits or franchises, which are due and payable, have been paid,
except those which are due and payable but not yet delinquent. Except as
disclosed in Exhibit B, the Company does not know of any proposed additional
tax assessment against it or any Subsidiary or any basis for one. The
federal income tax liability of the Company and its Subsidiaries has been
finally determined by the Internal Revenue Service for all fiscal years up to
and including the year ended December 31, 1989, and there are no waivers or
agreements by the Company or its Subsidiaries for the extension of time for
the assessment of any tax.
(b) The provisions for taxes on the books of the Company and its
Subsidiaries are adequate in all material respects for all open years and for
its current fiscal period. The amount of the reserves for income taxes
reflected in the most recent audited consolidated balance sheet of the
Company and its Subsidiaries referred to in Section 4.1(a) is an adequate
provision for such income taxes as may be payable by the Company and its
Subsidiaries.
Section 4.7. PENDING LITIGATION. Except as set forth on Exhibit B,
there are no actions, suits, proceedings, inquiries or investigations
pending, or, to the knowledge of the Company, threatened against or directly
affecting the Company or its Restricted Subsidiaries, or, to the knowledge of
the Company, any basis therefor, in any court or before any arbitrator or
Government which, if adversely determined against the Company or any
Restricted Subsidiary, would have a Material Adverse Effect.
11
<PAGE>
Section 4.8. COMPLIANCE WITH CONTRACTUAL OBLIGATIONS AND
REQUIREMENTS OF Law. (a) Except where such breach, default or violation would
not have a Material Adverse Effect, the Company and each Restricted
Subsidiary:
(i) is not in default in the performance,
observance or fulfillment of any Contractual Obligation,
and no event has occurred which constitutes, or but for
any requirement of notice or lapse of time, or both,
would constitute, an event of default by the Company or
such Subsidiary under any Contractual Obligation; or
(ii) is not in breach or violation of, or in default
under, any Requirement of Law.
(b) Neither the execution and delivery of this Agreement or the
Notes, nor the consummation of the transactions herein or therein
contemplated, nor compliance with the terms, conditions and
provisions hereof or thereof, by the Company:
(i) will conflict with, or result in a breach or
violation of, or constitute a default under, any
Requirement of Law on the part of the Company or any
Restricted Subsidiary or will conflict with, or result in
a breach or violation of, or constitute a default in the
performance, observance or fulfillment of any obligation,
covenant or condition contained in, or constitute, or but
for any requirement of notice or lapse of time, or both,
would constitute an event of default by the Company or
any Restricted Subsidiary under, any Contractual
Obligation;
(ii) will result in the creation or imposition
of any Lien upon any of the properties or assets of the
Company or any Restricted Subsidiary; or
(iii) will require any filing with or approval
by any Government other than informational filings which
may be made, subsequent to each Closing Date, with
respect to this Agreement.
12
<PAGE>
(c) Neither the Company nor any Restricted Subsidiary is a
party to any Contractual Obligation or subject to any Requirement
of Law which has a Material Adverse Effect. Neither the Company
nor any Restricted Subsidiary is a party to any Contractual
Obligation which restricts its right or ability to incur Current
Liabilities or Funded Indebtedness other than:
(i) this Agreement;
(ii) the 1988 Note Purchase Agreement; and
(iii) the Bank Loan Agreement.
Section 4.9. ENVIRONMENTAL MATTERS. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any
claim, and no proceeding has been instituted raising any claim against the
Company or any of its Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to
result in a Material Adverse Effect. Except as set forth in Exhibit B,
(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or private, of violation
of Environmental Laws or damage to the environment emanating from, occurring
on or in any way related to real properties now or formerly owned, leased or
operated by any of them or to other assets or their use, except, in each
case, such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them, except in compliance in all material.-respects with
applicable laws, regulations and permits, and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case in any
manner that could reasonably be expected to result in a Material Adverse
Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its
13
<PAGE>
Subsidiaries are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to result in a
Material Adverse Effect.
Section 4.10. INSURANCE. All of the properties, assets and
operations of the Company and each Restricted Subsidiary of a character
usually insured by Persons of established reputation engaged in the same or a
similar business similarly situated are adequately insured, by financially
sound and reputable insurers, against loss or damage of the kinds and in
amounts customarily insured against by such Persons, and the Company and each
Restricted Subsidiary carries, with such insurers in customary amounts, such
other insurance, including without limitation public and product liability
insurance and workers compensation insurance (except that the Company and
each Restricted Subsidiary may self-insure workers compensation liability to
the extent permitted by applicable state law), as is usually carried by
Persons of established reputation engaged in the same or a similar business
similarly situated.
Section 4.11. FULL DISCLOSURE. Neither the financial statements
referred to in Section 4.1(a), any report referred to in Section 4.1(a), this
Agreement, or any certificate or written statement furnished by or on behalf
of the Company to you in connection with the negotiation of this Agreement
and the sale to you of the Notes contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which the
Company has not disclosed to you in writing prior to the date of this
Agreement which would have a Material Adverse Effect.
Section 4.12. STATUS UNDER FEDERAL LAWS AND REGULATIONS. (a)
Neither the execution, delivery and performance of this Agreement, nor any
transactions contemplated by this Agreement, nor the Company nor any
Restricted Subsidiary is in violation of, or is, controls or is acting on
behalf of, for the benefit of, or pursuant to the direction of, any person
with whom any transaction is prohibited by the Trading with the Enemy Act of
1917, as amended, or any order, regulation or other Governmental action
issued or taken pursuant thereto, including Executive Order 9193, as amended,
of the President of the United States issued pursuant to such Act and the
following regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended): the Transaction Control Regulations, the
Foreign Assets Control Regulations, the
14
<PAGE>
Cuban Assets Control Regulations, the Iranian Assets Control Regulations, the
Libyan Sanctions Regulations, the Iraqi Sanctions Regulations, the Federal
Republic of Yugoslavia Sanctions Regulations and the Angola Sanctions
Regulations; and (b) neither the Company nor any Restricted Subsidiary will,
directly or indirectly, use or apply any portion of the proceeds of the sale
of the Notes so as to violate or otherwise take or permit any action which
would subject the acquisition of the Notes to any penalty or tax provided for
in or by such Trading with the Enemy Act, any of such Regulations or any of
such orders, regulations, or other Governmental actions issued or taken
pursuant thereto by an authorized Governmental authority; and none of the
transactions contemplated in this Agreement (including without limitation
thereof, the use of the proceeds of the sale of the Notes) will violate or
result in a violation on the part of the Company or any Restricted Subsidiary
or you of Section 7 of the 1934 Act, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T and X of the Board
of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. Neither
Company nor any Restricted Subsidiary owns or intends to carry or purchase
any 'margin stock' within the meaning of said Regulation G. None of the
proceeds from the sale of Notes will be used to purchase, or refinance any
borrowing the proceeds of which were used to purchase, any "margin stock"
within the meaning of said Regulation G.
Section 4.13. COMPLIANCE WITH ERISA. (a) The Company, each Related
Person and each Plan (other than a multiemployer Plan), including any trust
created under or forming a part thereof, is in compliance in all material
respects with the applicable provisions of ERISA and the regulations and
published official interpretations thereunder. Neither the Company nor any
Related Person has engaged in any transaction or failed to take any action in
connection with which the Company or any Related Person could be subjected to
either a material civil penalty assessed pursuant to section 502 of ERISA or
a tax in a material amount imposed by section 4975 of the Code. No Plan, or
trust created under or forming a part of any Plan, has been terminated since
September 2, 1974. No liability in a material amount to the Pension Benefit
Guaranty Corporation has been or, based on existing or anticipated
circumstances, is expected by the Company or any Related Person to be
incurred by the Company or any Related Person in connection, with any Plan,
and the Pension Benefit Guaranty Corporation has not instituted any
proceeding to terminate any Plan or to
15
<PAGE>
appoint a trustee to administer any Plan. No Reportable Event has occurred
or is currently under consideration by the Pension Benefit Guaranty
Corporation in connection with any Plan, and no event has occurred nor does
any condition exist, which presents a substantial risk of termination of any
Plan by the Pension Benefit Guaranty Corporation. There has been no
"complete withdrawal" or "partial withdrawal" by the Company or any Related
Person from any Multiemployer Plan within the meaning of Subtitle E of Title
IV of ERISA with respect to which the Company or any Related Person has
incurred or will incur any liability. There do not exist any conditions, nor
are any circumstances anticipated, which could result in any such withdrawal;
and neither the Company nor any Related Person has incurred, or based on
existing or anticipated circumstances may incur, any liability in a material
amount with respect to any Multiemployer Plan under that Title IV.
(b) The Company and each Related Person have paid all
contributions or other amounts required of them under the provisions of each
Plan or pursuant to any applicable collective bargaining agreement, and no
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
section 412 of the Code), whether or not waived, exists with respect to any
Plan (other than a Multiemployer Plan). There is no proceeding by a
fiduciary of any Multiemployer Plan against the Company or any Related Person
to enforce Section 515 of ERISA.
(c) The actuarial present value of all benefit liabilities under
all Plans (other than Multiemployer Plans) did not, as of the end of the most
recently ended fiscal year of the Company, exceed the fair market value of
the assets of such Plans by more than $250,000, with such benefit liabilities
determined based on the actuarial assumptions which would be used by the
Pension Benefit Guaranty Corporation with respect to plans terminating that
year.
(d) Neither the execution and delivery of this Agreement, the
issue and sale of the Notes under this Agreement, nor the purchase by you of
the Notes, will involve any Prohibited Transaction that could have a Material
Adverse Effect or that could have a material adverse effect on the financial
condition or operation of any Plan, it being understood that, in order for
the Company to make such representation and warranty, the Company is
16
<PAGE>
relying on your representation and warranty set forth in Section 5.3.
Section 4.14. DESCRIPTIVE MATERIALS. Exhibit B hereto correctly
sets forth in all material respects, or incorporates by reference documents
setting forth, (1) a brief description of the business (as conducted and
presently proposed to be conducted) and the approximate physical dimensions
of the operating facilities (including leaseholds under real property leases
and the location, the annual rentals payable and the term of such leaseholds)
of the Company and its Restricted Subsidiaries, (2) the jurisdiction or
jurisdictions in which each of the Company and its Restricted Subsidiaries is
organized and in which the Company and each Restricted Subsidiary is
qualified to conduct its business, (3) a statement of the Indebtedness for
Money Borrowed of the Company and its Restricted Subsidiaries outstanding as
of the First Closing Date, setting forth, in each case, the amount and the
obligee of such Indebtedness and whether or not such Indebtedness is secured,
and (4) Investments of the Company and its Restricted Subsidiaries existing
on the First Closing Date.
Section 4.15. INVESTMENT COMPANY Act. The Company is not, nor is
it directly or indirectly controlled by, affiliated with, or acting on behalf
of any Person which is, an investment company within the meaning of the
Investment Company Act of 1940, as amended.
Section 4.16. SUBSIDIARIES. Exhibit B hereto sets forth a list of
all of the Company's Subsidiaries. Each Restricted Subsidiary is designated
as such on said Exhibit B. Each of the Company's Restricted Subsidiaries is
duly organized and validly existing and is in good standing under the laws of
the jurisdiction in which it is organized and which is specified in Exhibit
B, with powers (corporate or otherwise) adequate for the carrying on of the
business now conducted by it. All outstanding capital stock of each
Restricted Subsidiary listed in Exhibit B which is a corporation is validly
issued, fully paid and nonassessable, and all partnership and other interests
in each Restricted Subsidiary which is not a corporation are fully paid for
and validly created. Except as set forth in Exhibit B, the Company owns,
directly or indirectly, all of the outstanding capital stock or equity
interest of each Restricted Subsidiary. Except as set forth in Exhibit B to
this Agreement, the Company does not own, directly or indirectly, any capital
stock of or equity interest in any Person.
17
<PAGE>
Section 4.17. INSOLVENCY. The Company is not insolvent (as such
term is defined in Section 101(29) of the Bankruptcy Code of 1978, as
amended) and will not be rendered insolvent (as such term is defined in
Section 101(29) of the Bankruptcy Code of 1978, as amended) by execution of
this Agreement or any other loan document in connection therewith to which it
is a party or by the consummation of the transaction contemplated hereby or
thereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES RELATING
TO SECURITIES ACT AND SOURCES OF FUNDS.
Section 5.1. BY THE PURCHASER. You hereby represent: that you are
purchasing the Notes for your own account or a separate account maintained by
you for investment and not with a view to or in connection with any
distribution thereof, subject, nevertheless, to any requirements of law that
the disposition thereof by you shall at all times be within your control; and
you further represent that each acquisition of Notes by you shall be deemed
to be a reaffirmation as of the time of purchase of the representations made
by you under this Section 5.1.
Section 5.2. BY THE COMPANY. The Company hereby represents that
(a) it has not, either directly or through any agent, sold or disposed of,
or attempted or offered to sell or dispose of, any of the Notes or any
similar securties of the Company to, or solicited offers to buy any such
Notes or similar securities from, or otherwise approached or negotiated with
respect to such Notes or similar securities with, any Person or Persons other
than you; and (b) neither the Company nor any Person acting on its behalf
will hereafter take any action with respect to the Notes or any similar
securities of the Company which would adversely affect the exemption of the
Notes from the registration provisions of the Securities Act.
Section 5.3. SOURCE OF FUNDS. You hereby represent: either (i)
none of the funds to be used by you to acquire the Notes are assets of an
employee benefit plan (or, if such funds would be deemed assets of an
employee benefit plan as a consequence of the United States Supreme Court's
holding in JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY V. HARRIS TRUST &
SAVINGS BANK, then you represent that all of the transactions contemplated
herein are fully exempted under Department of Labor Prohibited Transaction
Class Exemption 95-60), or (ii) you have previously disclosed in
18
<PAGE>
writing to the Company the names of all employee benefit plans the assets of
which exceed 5% of the total assets in any separate account providing funds
for the purchase of the Notes. As used in this Section 5.3, the term
"employee benefit plan" shall have the meaning assigned to such term in
Section 3(3) of ERISA.
SECTION 6. CLOSING CONDITIONS OF THE PURCHASER.
Your obligation to purchase and pay for the Notes to be delivered
on each Closing Date shall be subject to the satisfaction on such Closing
Date of the following conditions precedent:
Section 6.1. OPINION OF COMPANY COUNSEL. You shall have received
on each Closing Date from the Company's counsel, Haynes and Boone, L.L.P., a
favorable opinion dated such Closing Date addressed to, and in form, scope
and substance satisfactory to, you, to the effect that:
(a) the Company and each Restricted Subsidiary is a duly
incorporated (or organized in the case of partnerships) and validly existing
entity in good standing under the laws of the state of its incorporation or
organization and has all requisite corporate or partnership power and
authority to own, or hold under lease, its properties and assets, to operate
its properties and assets, to conduct its business, and (in the case of the
Company) to execute, deliver and perform this Agreement and to issue, sell
and deliver the Notes to you;
(b) the Company and each Restricted Subsidiary is duly qualified
and is authorized to transact business and is in good standing as a foreign
corporation or entity in each jurisdiction wherein the character of the
properties or assets owned or held under lease by the Company or such
Restricted Subsidiary or the nature of the business transacted by the Company
or such Restricted Subsidiary as described in Exhibit B to this Agreement
makes such qualification necessary;
(c) to the knowledge of such counsel, there are no actions,
suits, proceedings, inquiries or investigations pending or threatened against
or affecting the Company or any of its Restricted Subsidiaries of a character
referred to in Section 4.7;
19
<PAGE>
(d) this Agreement and the Notes being purchased by you on such
Closing Date have been duly authorized by all necessary corporate action on
the part of the Company (no action by the stockholders of the Company having
been required by law, by the certificate of incorporation or bylaws of the
Company or otherwise), each have been duly executed and delivered, and
constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except insofar as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws or equitable principles affecting the enforcement
of creditors' rights generally;
(e) neither the execution and delivery of this Agreement or the
Notes being purchased by you on such Closing Date, nor the consummation of
the transactions herein or therein contemplated, nor compliance with the
terms, conditions and provisions hereof or thereof by the Company will
conflict with, or result in a breach or violation of, or constitute a default
under, any Requirement of Law on the part of the Company, or, to the
knowledge of such counsel after due inquiry, will conflict with, or result in
a breach or violation of, or constitute a default in the performance,
observance or fulfillment of any obligation, covenant or condition contained
in, or constitute, or but for any requirement of notice or lapse of time, or
both, would constitute, an event of default by the Company under any
Contractual Obligation or, to the knowledge of such counsel after due
inquiry, will result in the creation or imposition of any Lien upon any of
the properties or assets of the Company;
(f) no filing with, or other action involving, any Government is
required on the part of the Company in connection with the execution or
delivery of this Agreement or the offer, issuance, sale or delivery of the
Notes being purchased by you other than informational filings which may be
required to be made, subsequent to the Closing Date, with respect to this
Agreement;
(g) it is not necessary, in connection with the offer,
issuance, sale and delivery of the Notes being purchased by you, to register
the Notes under the Securities Act or to qualify an indenture under the Trust
Indenture Act of 1939, as amended (it being understood that the opinion
called for by this paragraph (g) shall assume the existence of the facts and
circumstances contemplated by this
20
<PAGE>
Agreement, including the accuracy of the representations set forth in
Section 5); and
(h) none of the transactions contemplated in this Agreement
(including without limitation thereof, the use of the proceeds of the sale of
the Notes) will violate or result in a violation of Section 7 of the 1934
Act, or any regulations issued pursuant thereto, including without
limitation, Regulations G, T and X of the Board of Governors of the Federal
Reserve System, 12 CFR, Chapter II and, to the knowledge of such counsel
after due inquiry, none of the proceeds of the sale of the Notes will be used
to purchase, or refinance any borrowing the proceeds of which were used to
purchase, any 'margin stock' within the meaning of such Regulation G.
Such opinion shall also cover such other legal matters incident to
the transactions contemplated by this Agreement as you or your special
counsel may reasonably request. In giving the foregoing opinion counsel may
rely, as to questions of fact material thereto, upon certificates of public
officials and specified certificates of appropriate officers of the Company
and its Restricted Subsidiaries, copies of which shall have been received by
you.
Section 6.2. OPINION OF SPECIAL COUNSEL. You shall have received
on each Closing Date from Messrs. Seward & Kissel of New York, New York,
your special counsel in connection with the transactions contemplated by this
Agreement, a favorable opinion dated such Closing Date, addressed to, and in
form, scope and substance satisfactory to, you to the effect that:
(a) the Company is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, or hold under lease, its
properties and assets and to conduct business of the type described in
Exhibit B and to execute, deliver and perform.-this Agreement, and to issue,
sell and deliver the Notes to you;
(b) neither the execution and delivery of this Agreement or
the Notes being purchased by you on such Closing Date, nor the consummation
of the transactions herein or therein contemplated, nor compliance with the
terms, conditions and provisions hereof or thereof by the Company will
conflict with, or result in a breach or
21
<PAGE>
violation of the provisions of the certificate of incorporation or bylaws of
the Company;
(c) it is not necessary, in connection with the offer,
issuance, sale and delivery of the Notes being purchased by you, to register
the Notes under the Securities Act or to qualify an indenture under the Trust
Indenture Act of 1939, as amended (it being understood that the opinion
called for by this paragraph (c) shall assume the existence of the facts and
circumstances contemplated by this Agreement, including the accuracy of the
representations set forth in Section 5);
(d) this Agreement and the Notes being purchased by you on
such Closing Date have been duly authorized by all necessary corporate action
on the part of the Company (no action by the stockholders of the Company
being required by law or by the certificate of incorporation or bylaws of the
Company), have been duly executed and delivered, and constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except insofar as the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws or equitable principles affecting the enforcement of creditors' rights
generally; and
(e) while said special counsel have not independently
considered the additional matters covered by the legal opinion referred to in
Section 6.1, such legal opinion is satisfactory in form and scope to said
special counsel and nothing has come to the attention of said special counsel
that leads them to believe that you or they are not justified in relying
thereon.
The opinion of such special counsel shall also cover such other
legal matters incident to the transactions contemplated by this Agreement as
you may reasonably request. in giving the foregoing opinion said special
counsel may rely, as to questions of fact material thereto, upon certificates
of public officials and of appropriate officers of the Company and its
Restricted Subsidiaries, copies of which shall have been received by you.
Section 6.3. REPRESENTATIONS TRUE. All representations, warranties
and statements by or on behalf of the Company contained in this Agreement or
in any certificate, statement or document furnished by or on behalf of the
Company to you in connection with the negotiation of this Agreement, the
22
<PAGE>
sale of the Notes or the Company's performance of its obligations hereunder
or thereunder or otherwise furnished to you in compliance with this
Agreement, shall be true as and to the extent set forth therein in all
material respects on and as of each Closing Date with the same effect as
though such representations, warranties and statements had been made on and
as of each Closing Date (or, to the extent that any such representations and
warranties expressly relate solely to a specific date, as of that date).
Section 6.4. NO EVENT OF DEFAULT. (a) Neither the Company nor any
Restricted Subsidiary shall have taken any action which it would have been
prohibited from taking, or omitted or permitted the omission of any action
which it would have been required to take, if the Notes had been outstanding
at all times since the date of this Agreement, and the Company will not upon
the execution of the Notes to be delivered on each Closing Date be in default
in the performance of any of the covenants and agreements hereunder and no
Event of Default, or event which after notice or lapse of time or both would
constitute an Event of Default, shall have occurred.
(b) No "Event of Default" under the 1988 Note Purchase
Agreement shall have occurred or be continuing.
Section 6.5. OFFICERS' CERTIFICATE. The Company shall have
delivered to you on each Closing Date a certificate or certificates, signed
by the President or an Executive Vice President and the Vice President
Finance of the Company, to the effect that the conditions specified in
Section 6.3 and Section 6.4 required to be fulfilled on such Closing Date
have been fulfilled.
Section 6.6. LEGALITY OF INVESTMENT. The acquisition of the Notes
shall qualify as of each Closing Date as a legal investment for you under all
laws applicable to investments by you (exclusive, in any case, of section
1405(a)(8) of the New York Insurance Law).
Section 6.7. PROCEEDINGS, INSTRUMENTS, ETC. All proceedings to be
taken in connection with the transactions contemplated by this Agreement, and
all documents incidental thereto, shall be satisfactory in form, scope and
substance to you and your special counsel, and you shall have received copies
of all documents which you may reasonably request in connection with said
transactions and copies of the records of all corporate proceedings in
connection therewith in
23
<PAGE>
form, scope and substance satisfactory to you and your special counsel.
Section 6.8. PRIVATE PLACEMENT NUMBER. A Private Placement number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for the Notes.
SECTION 7. BUSINESS COVENANTS.
The Company covenants and agrees that so long as any Note shall be
outstanding:
Section 7.1. PAYMENT OF NOTES AND MAINTENANCE OF OFFICES. The
Company will punctually pay or cause to be paid the principal and interest
(and premium, if any) to become due in respect of the Notes according to the
terms thereof and will maintain an office at 5215 North O'Connor Boulevard,
Suite 940, Central Tower at Williams Square, Irving, Texas 75039, or such
other place as it may from time to time specify by written notice to all
holders of the Notes, where notices, presentations and demands in respect of
this Agreement or the Notes may be made upon it and will notify each holder
of a Note of any change of location of such office.
Section 7.2. PAYMENT OF TAXES, CLAIMS AND INDEBTEDNESS. The
Company and its Restricted Subsidiaries will each pay and discharge promptly:
(a) all taxes, assessments, fees and other Governmental
charges or levies imposed upon it or upon any of its properties,
assets, income, profits or franchises before the same shall become
delinquent;
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar persons for
labor,.materials, supplies and rentals which, if unpaid, might by
law become a Lien or charge upon its properties or assets; and
(c) any liability imposed upon it pursuant to Section 4062, 4063
or 4064 of ERISA;
24
<PAGE>
PROVIDED, HOWEVER, that neither the Company nor any Restricted Subsidiary,
shall be required to pay any of the foregoing if (w) the aggregate of such items
referred to above does not exceed $500,000 at any one time outstanding, (x) in
the case of items referred to above aggregating in excess of $500,000, the
amount, applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings, (y) the Company or such Restricted Subsidiary,
as the case may-be, shall have set aside on its books reserves which in the
opinion of the Firm of Certified Public Accountants employed by the Company in
accordance with Section 7.15 are adequate with respect thereto (as evidenced in
the auditor's reports referred to in Section 8.1(b)) and (z) the title of the
Company or such Restricted Subsidiary, as the case may be, to, and its right to
use, a material portion of its property shall not be materially and adversely
affected thereby.
Section 7.3. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The
Company and its Restricted Subsidiaries will each:
(a) do or cause to be done all things necessary to maintain its
properties and assets (including properties and assets leased by
it) in good condition, and make all renewals, replacements,
additions, betterments and improvements to its properties and
assets (including properties and assets leased by it and the leases
relating thereto);
(b) keep adequately insured, by financially sound and reputable
insurers, all of its properties,.assets and operations of a
character usually insured by Persons of established reputation
engaged in the same or a similar business similarly situated
against loss or damage of the kinds and in the amounts customarily
insured against by such Persons and carry, with such insurers in
customary amounts, such other insurance, including without
limitation public and product liability insurance, business
interruption insurance (if available at commercially reasonable
rates) and workers compensation insurance (except that the Company
or any Restricted Subsidiary may self-insure workers compensation
liability to the extent permitted
25
<PAGE>
by applicable state law), as is usually carried by
Persons of established reputation engaged in the same or
a similar business similarly situated;
(c) keep proper books of record and account in which
full, true and correct entries will be made of all its business
transactions in accordance with generally accepted accounting principles;
(d) set aside on its books from its earnings for each
fiscal year in amounts deemed adequate in the opinion of the
Company or such Restricted Subsidiary, as the case may be, all
proper accruals and reserves which, in accordance with
generally accepted accounting principles, should be set
aside from such earnings in connection with its business,
including, without limitation, provisions for
depreciation, depletion, obsolescence and/or amortization
and accruals for taxes for such period, including all
taxes based on or measured by income or profits;
(e) except as otherwise permitted by Sections 7.10 and
7.11, do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence,
and all rights, licenses, permits, franchises and other
authorizations;
(f) not enter into, or allow any Restricted Subsidiary
to enter into, the ownership, active management or operation of
any business which is not a business related to the
recovery of non-ferrous metals; and
(g) not be in default, in any respect, in the
performance, observance or fulfillment of any obligation, covenant
or condition contained in any Contractual Obligation or be
in breach or violation of, or in default under, any
Requirement of Law to which it is subject, which breach,
violation or default would have a Material Adverse Effect;
26
<PAGE>
PROVIDED, HOWEVER, that nothing in subsections (a), (e) or (f) above shall
prevent the Company or any of its Restricted Subsidiaries from (i) abandoning
any of its properties or assets, or abandoning or terminating any right,
license, permit, franchise or other authorization (including its qualification
to transact business in any jurisdiction wherein neither the character of the
properties or assets owned or held under lease by it nor the nature of the
business transacted by it makes such qualification or licensing necessary), or
(ii) liquidating or dissolving any Restricted Subsidiary of the Company, if in
any case such abandonment, termination, liquidation or dissolution is in the
best interest of the Company, is not detrimental in any material respect to the
ability of the Company to pay when due, in accordance with the terms of the
Notes and this Agreement, the principal of, and premium, if any, and interest
on, the Notes and is not prohibited by Section 7.10 or Section 7.11 or any other
provisions of, and would not result in the occurrence of any Event of Default
(or an event which with notice or lapse of time or both would constitute an
Event of Default) under, this Agreement.
Section 7.4. LIMITATION ON INDEBTEDNESS. Neither the Company nor any
Restricted Subsidiary shall create, incur, assume, or in any manner become or be
liable, contingently or otherwise, in respect of any Indebtedness, except:
(a) Indebtedness represented by the Notes and the 1988 Notes;
(b) Current Liabilities of the Company constituting
Indebtedness for Money Borrowed not overdue and not at the time
of incurrence thereof in the aggregate principal amount
outstanding in excess of $10,000,000, PROVIDED that
during the 14-month period ending on October 31, 1995,
and each consecutive 14month period ending on the last
day of each month thereafter, the Company will eliminate
and be free of all such Current Liabilities for a period
of at least 60 consecutive days;
(c) Funded Indebtedness of the Company outstanding on the First
Closing Date and listed on Exhibit B, provided that such Funded
Indebtedness shall be paid in accordance with the terms thereof in
effect on the First Closing Date;
27
<PAGE>
(d) Current Liabilities of the Company or any Restricted
Subsidiary (other than Current Liabilities constituting
Indebtedness for Money Borrowed and Current Liabilities
in respect of taxes, assessments, fees or other
Governmental charges or levies or the claims of
materialmen, mechanics, carriers, warehousemen, landlords
and other similar persons) incurred in the ordinary
course of business and not more than 45 days overdue
unless the amount, applicability or validity thereof
shall then currently be contested in good faith;
(e) Current Liabilities of the Company or any Restricted
Subsidiary in respect of taxes, assessments, fees or other
Governmental charges or levies or the claims of materialmen,
mechanics, carriers, warehousemen, landlords and other
similar persons to the extent the payment thereof is not, at the
time, required by Section 7.2;
(f) Indebtedness of any Restricted Subsidiary owing to the
Company or to any other Wholly-Owned Restricted
Subsidiary and Indebtedness of the Company owing to its
Restricted Subsidiary, IMCO Management Partnership L.P.,
a Texas limited partnership;
(g) Indebtedness of the Company or any Restricted Subsidiary not
otherwise permitted by the provisions of this Section 7.4
secured by Liens as and to the extent permitted by Section 7.6;
(h) Indebtedness in respect of Guaranties of the Company and any
Restricted Subsidiary as and to the extent permitted by Section 7.5;
(i) Indebtedness represented by amounts declared, payable as,
or set apart for, dividends as and to the extent permitted by Section 7.7;
(j) additional Funded Indebtedness of the Company or any
Restricted Subsidiary,
28
<PAGE>
PROVIDED, HOWEVER, that immediately after giving effect to the creation,
incurrence or assumption of such additional Funded Indebtedness and to the
application of any proceeds thereof:
(i) Consolidated Funded Indebtedness shall not
exceed 45% of Consolidated Net Tangible Assets at any time prior to
December 1, 1998; and from and after December 1, 1998, Consolidated
Funded Indebtedness shall not exceed 40% of Consolidated Net
Tangible Assets;
(ii) the ratio of the aggregate Consolidated Cash Make for the
immediately preceding four fiscal quarters of the Company
to Pro Forma Consolidated Debt Service shall not be less
than 1.2 to 1; and
(iii) in the case of Funded Indebtedness of Restricted
Subsidiaries, the sum of (A) such Funded Indebtedness,
together with all other Funded Indebtedness of Restricted
Subsidiaries then outstanding, plus, without duplication,
(B) the outstanding principal amount of all Indebtedness
permitted by Section 7.4(k), shall not exceed 10% of
Consolidated Net Tangible Assets at such time of
determination; and
(k) Indebtedness of the Company or any Restricted Subsidiary to the
seller of property in respect of the purchase by the Company or
such Restricted Subsidiary of such property to be used in the
ordinary course of the Company's or such Restricted Subsidiary's
business, provided that the sum of (i) such Indebtedness, together
with all other Indebtedness permitted by this Section 7.4(k) then
outstanding, plus, without duplication, (ii) the outstanding
principal amount of Funded Indebtedness of Restricted Subsidiaries,
shall not exceed 10% of Consolidated Net Tangible Assets at such
time of determination and provided, further, that
29
<PAGE>
in the event such Indebtedness shall by its terms mature more than
one year from the incurrence thereof, immediately after giving
effect to the incurrence thereof, the Company can incur an
additional $1.00 of Funded Indebtedness pursuant to Section 7.4(j).
Notwithstanding any provisions of this Section 7.4 to the contrary,
neither IMCO Investment Company nor IMCO Management Partnership, L.P. will
create, incur, assume, or in any manner become liable, contingently or
otherwise, in respect of any Indebtedness for Money Borrowed other than
Indebtedness for Money Borrowed owing to the Company or another Restricted
Subsidiary.
Section 7.5. LIMITATION ON LIABILITIES FOR OBLIGATIONS OF OTHERS.
Neither the Company nor any Restricted Subsidiary will become or be liable in
respect of any Guaranty other than (i) endorsements in the ordinary course of
business of negotiable instruments for deposit or collection, (ii) Guaranties by
the Company and Restricted Subsidiaries pertaining to obligations not exceeding
in the aggregate the greater of (x) $5,000,000 and (y) 5% of Consolidated
Tangible Net Worth as of such date, and (iii) Guaranties by the Company or by
any Wholly-Owned Restricted Subsidiary of Indebtedness of any Wholly-owned
Restricted Subsidiary or of the Company, as the case may be; provided that all
such Indebtedness described in clauses (ii) and (iii) above is permitted to be
incurred under this Agreement at the date of the making of such Guaranty and
provided, further, that in the event that any Restricted Subsidiary shall
guarantee any Indebtedness of the Company, such Restricted Subsidiary shall also
deliver a Guaranty, in form and substance reasonably satisfactory to each holder
of the Notes, to each such holder of the obligations of the Company under the
Notes, but any such Guaranty to such holder(s) shall not be included in any
computation of outstanding Guaranties for purposes of this Section 7.5.
Section 7.6. LIMITATION ON LIENS. Neither.-the Company nor any
Restricted Subsidiary shall create, assume, incur or suffer to exist, or agree
or consent to cause or permit in the future (upon the happening of a contingency
or otherwise) to be created, assumed, incurred or to exist, any mortgage, lien,
charge, security interest or encumbrance of any kind upon, or pledge of, any of
its properties or assets (including, without limitation, accounts receivable,
inventory and cash and deposits), whether now owned or
30
<PAGE>
hereafter acquired, or acquire or agree to acquire any property or assets
subject to any conditional sale agreement or other title retention agreement, or
as lessee under a Capitalized Lease (the foregoing mortgages, liens, charges,
security interests, encumbrances, pledges and the rights of others under
conditional sale agreements and other title retention agreements and Capitalized
Leases being herein collectively called "Liens"); PROVIDED, however, that the
foregoing restriction shall-not apply to the following Liens so long as (in the
case of Liens other than those Liens set forth in clauses (e), (g) and (h)
below) such Liens do not in the aggregate materially and adversely affect the
conduct of the business of the Company and its Restricted Subsidiaries:
(a) Liens securing taxes, assessments, fees or other
Governmental charges or levies or the claims of materialmen,
mechanics, carriers, warehousemen, landlords and other similar
persons, the payment of which is not overdue under the provisions
of Section 7.2;
(b) Liens incurred or deposits made in the ordinary course of
business not involving Indebtedness for Money Borrowed,
including Liens (i) in connection with workers
compensation, unemployment insurance, social security and
other similar laws, or (ii) to secure the performance of
letters of credit, bids, tenders, sales, contracts, leases,
public or statutory obligations, surety, customs, appeal
and performance bonds and other similar obligations not
incurred in connection with the. borrowing of money, the
obtaining of advances or the payment of the deferred
purchase price of property;
(c) attachment, judgment and other similar Liens arising in
connection with court proceedings, PROVIDED that the
execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are currently being
contested in good faith by appropriate proceedings;
(d) easements, rights of way, restrictions, leases and other
similar encumbrances affecting real or tangible
31
<PAGE>
personal property, which do not in the aggregate materially detract
from the value of such property or materially impair its use in the
operation of the business of the Company or any Restricted Subsidiary;
(e) Liens created in connection with Indebtedness permitted under
Section 7.4(k), provided that such Liens are taken or
retained by the seller of the property being acquired to
secure all or part of its price and such Liens do not cover
any property of the Company or any Restricted Subsidiary
other than the property being so acquired;
(f) the Liens on the Mortgaged Property created by the Mortgages
and all Uniform Commercial Code financing statements, Liens
and other matters affecting the Mortgaged Property that are
described in Exhibit B of the 1988 Note Purchase Agreement;
(g) Liens on the real and personal property subject (as of the
First Closing Date) to the Kentucky Mortgage and Security
Agreement (as defined in the 1988 Note Purchase Agreement)
which may be created to secure certain revenue bonds issued
or to be issued in an aggregate principal amount not
exceeding $10,000,000 in connection with a salt cake
processing facility and landfill expansion constructed or
to be constructed on such property;
(h) Liens outstanding on the First Closing Date and listed on
Exhibit B with respect to property then owned by the
Company securing Indebtedness permitted by Section 7.4(c),
PROVIDED that such Liens are not renewed or extended and do
not at any time extend to property other than property that
was subject to such Liens on the First Closing Date; and
(i) (i) Liens on any shares of the capital stock of an Unrestricted
Subsidiary and (ii) the Barmet Option.
32
<PAGE>
In case any Lien arises in violation of this Section 7.6, the Company
shall make or cause to be made provisions whereby the Notes will be secured
equally and ratably with all other obligations secured thereby, and in any case,
the Notes shall have the benefit to the full extent that the holders may be
entitled thereto under applicable law of an equitable Lien so equally and
ratably securing the Notes. Any violation of this Section 7.6 shall constitute
an Event of Default pursuant to Section 9.1(c) whether or not any such provision
is made pursuant to the preceding sentence.
Section 7.7. LIMITATION ON RESTRICTED PAVMENTS AND RESTRICTED
INVESTMENTS. The Company will not directly or indirectly, through any of its
Subsidiaries or otherwise, declare or make, or incur any liability to make, any
of the following (such actions as are hereinafter described in subsections (a)
and (b) being called 'Restricted Payments"):
(a) any payment in cash, property or other assets (other than
shares of any class of capital stock of the Company or any rights,
warrants or options to purchase such shares) as dividends or other
distributions upon, for the purpose of purchasing, retiring,
redeeming or otherwise acquiring for value, directly or indirectly,
or otherwise in respect of, any shares of any class of capital
stock (or any warrants or options evidencing a right to purchase
any such shares of stock) of the Company, except to the extent
permitted below; or
(b) any Restricted Investment;
PROVIDED, HOWEVER, that the provisions of this Section 7.7 shall not prohibit
the making of any Restricted Payment if, immediately after, and after giving
effect to, the making of such Restricted Payment (i) no Event of Default (or
event which with notice or lapse of time or both would constitute an Event of
Default) would exist and (ii) the Net Amount of Restricted Payments made after
September 30, 1995 would not exceed the sum of (x) $5,000,000 plus (y) 50% of
Consolidated Net Income (minus 100% of any consolidated net loss) for the period
commencing October 1, 1995 and ending on the last day of the fiscal quarter of
the Company most recently ended at the time such Restricted Payment is made plus
(z) the sum of the aggregate net cash proceeds, determined by reference to the
net cash received by the
33
<PAGE>
Company (after deducting all underwriting discounts and commissions and all
other expenses of such issuance), from the sale of Company capital stock made
after September 30, 1995.
For purposes of this Section 7.7, "Net Amount of Restricted Payments"
means for any period (i) the aggregate amount of cash, property and other assets
(at the greater of net book value or fair market value) distributed during, and
liabilities outstanding at the end of, such period in respect of Restricted
Payments of the type described in subsection (a) above, and (ii) in respect of
Restricted Investments, the cost thereof less any actual return of capital in
respect thereof (it being understood that any dividends and interest payments
received in respect of Restricted Investments shall not reduce the cost
thereof).
Section 7.8. MAINTENANCE OF CURRENT ASSETS, CONSOLIDATED WORKING
CAPITAL, NET WORTH AND FIXED CHARGE COVERAGE.
(a) The Company and its Restricted Subsidiaries shall at all
times maintain Consolidated Working Capital equal to or greater
than $5,000,000 and shall not permit Consolidated Current Assets to
be less than 125% of Consolidated Current Liabilities.
(b) The Company shall not at any time permit its Consolidated Net
Worth to be less than the sum of $60,000,000 plus the greater of
(i) zero and (ii) 50% of cumulative Consolidated Net Income from
and after October 1, 1995.
(c) The Company shall not at any time permit the sum of (i)
Consolidated Cash Make plus (ii) the aggregate Rentals attributable to the
Company and its Restricted Subsidiaries to be less than 250% of the sum of
Consolidated Interest Expense plus Rentals attributable to the Company
and its Restricted Subsidiaries for the four immediately preceding
consecutive fiscal quarters.
Section 7.9. LIMITATION ON LEASES. Neither the Company nor any
Restricted Subsidiary shall, directly or indirectly, become or be liable for any
payment of Rentals with respect to any lease of real or personal property having
a remaining
34
<PAGE>
term in excess of five years, including extensions and renewals at the option
of the lessor, if the aggregate Rentals payable by the Company and its
Restricted Subsidiaries under all such leases for all future periods shall
exceed $2,000,000, unless the amount in excess of $2,000,000 is included, when
capitalized, as Consolidated Funded Indebtedness; PROVIDED, HOWEVER, that this
limitation shall not apply to (i) any lease of data processing, office,
communication, mobile or transportation equipment having aggregate annual
Rentals not to exceed $150,000, (ii) that certain Lease dated as of June 1,
1981, between Valjo Corporation and Interamerican Zinc, Inc., as amended by that
certain Amendment to Lease dated November 4, 1988, between Anderson Development
Company and Interamerican Zinc, Inc., providing for aggregate annual Rentals not
to exceed $100,000, as it may be extended from time to time, and (iii) that
certain Rental Agreement dated December 1, 1983, between Anderson Development
Company and Interamerican Zinc, Inc., as amended by that certain Amendment to
Rental Agreement dated as of November 4, 1988, between Anderson Development
Company and Interamerican Zinc, Inc., providing for aggregate annual Rentals not
to exceed $7,000, as it may be extended from time to time.
Section 7.10. MERGER OR CONSOLIDATION OR TRANSFER OF ASSETS. Neither
the Company nor any Restricted Subsidiary will merge into or consolidate with
any other Person, or permit any other Person to merge into or consolidate with
it, or directly or indirectly convey, sell, lease, transfer, abandon or
otherwise dispose of or suffer to be conveyed, sold, leased, transferred,
abandoned or otherwise to be disposed of (whether voluntarily or involuntarily)
all or any part of its properties or assets; PROVIDED, HOWEVER that so long as
no Event-of Default (or event which with notice or lapse of time or both would
become an Event of Default) exists immediately before, or would exist
immediately after and after giving effect to, such transaction:
(a) any Wholly-Owned Restricted Subsidiary may be consolidated
with or merged into the Company or another Wholly-O@ed Restricted
Subsidiary;
(b) any Wholly-Owned Restricted Subsidiary may make dispositions
of any of its property or assets to the Company or another
Wholly-Owned Restricted Subsidiary, whether by dissolution,
liquidation or otherwise;
35
<PAGE>
(c) the Company may be consolidated with or merged into any other
Person, and the Company may convey, sell, lease, transfer or
otherwise dispose of all or substantially all of its properties and
assets to any Person, and any Person may consolidate with or merge
into the Company or convey or transfer its properties or assets
substantially as an entirety to the Company, if the resulting
Person or the transferee of such assets, as the case may be, is a
corporation organized and existing under the laws of a State in the
United States which (i) will assume the obligations of the Company
under this Agreement and the Notes and (ii) can incur an additional
$1.00 of Funded Indebtedness pursuant to Section 7.4(j); and
(d) the Company and any Restricted Subsidiary may convey, sell,
lease, transfer, abandon or otherwise dispose of or suffer to be
conveyed, sold, leased, transferred, abandoned or otherwise to be
disposed of (whether voluntarily or involuntarily) any of its
assets constituting not more than 10% of Consolidated Total Assets
in any transaction or series of related transactions during any
consecutive twelve-month period, PROVIDED that not more than 15% of
Consolidated Total Assets are disposed of on a cumulative basis
from the date hereof.
The sale or other disposition of assets in the ordinary and usual conduct of
business and the disposition of worn-out or obsolete equipment shall not be
deemed to be dispositions of assets for the purposes of this Section 7.10.
Section 7.11. ISSUE OR DISPOSITION OF SECURITIES. No Restricted
Subsidiary shall issue, sell, assign, transfer or otherwise dispose of any
shares (or other ownership interests) of any class of its capital stock or
equity ownership interests or of any options or warrants to purchase its capital
stock or equity ownership interests or of other securities exchangeable for or
convertible into its capital stock or equity ownership interests except (a) to
the Company or a Wholly-Owned Restricted Subsidiary or (b) directors'
qualifying shares as required by law.
36
<PAGE>
Neither the Company nor any Restricted Subsidiary shall sell, assign, transfer
or otherwise dispose of (except to the Company or a Wholly-Owned Restricted
Subsidiary) any shares of capital stock (or other ownership interests) of any
class of any Restricted Subsidiary, or any other security of, or any
Indebtedness owing to it by, any Restricted Subsidiary, unless:
(i) the greater of the consideration received therefor and the
value thereof as stated on the books of the Company or such
Restricted Subsidiary of (A) the stock (or other ownership
interests) and other securities of such Restricted Subsidiary and
of each other Restricted Subsidiary disposed of pursuant to this
Section 7.11 in the fiscal year of the Company in which such sale
shall occur and (B) the other properties and assets of the Company
and its Restricted Subsidiaries disposed of pursuant to Section
7.10(d) does not exceed 10% of Consolidated Total Assets during any
consecutive twelve-month period, PROVIDED that not more than 15% of
Consolidated Total Assets are disposed of on a cumulative basis
from the date hereof;
(ii) ll of the capital stock (or other ownership interests)
and other securities and the entire Indebtedness of such Restricted
Subsidiary owned by the Company and each other Restricted
Subsidiary shall be sold, assigned, transferred or otherwise
disposed of (other than to the Company or a Wholly-Owned Restricted
Subsidiary) at the same time;
(iii) such Restricted Subsidiary shall not, at the time of such
sale, assignment, transfer or other disposition, own either (A) any
shares of capital stock (or other ownership interests) of any class
or any other security or any Indebtedness of any other Restricted
Subsidiary which is not being simultaneously disposed of as
permitted by this Section 7.11 or (B) any Indebtedness of the
Company;
(iv) immediately before and after giving effect to such sale,
assignment, transfer or
37
<PAGE>
other disposition, no Event of Default (or event which with notice or
lapse of time or both would constitute an Event of Default) will have
occurred and be continuing; and
(v) the consideration received for such shares of capital stock
(or other ownership interests), other security or Indebtedness is
not less than the fair market value thereof as determined by the
Board of Directors of the Company.
For purposes of clause (i) of this Section 7.11, the value of capital
stock of any Restricted Subsidiary issued or sold in connection with the Barmet
Option shall be included as capital stock of a Restricted Subsidiary that was
sold for a consideration of $8,417,000 and shall be included in the computation
of Consolidated Total Assets for purposes of such clause (i) as though such sale
took place on the date immediately following the date hereof.
Section 7.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the
Company nor any Restricted Subsidiary shall enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
assets or the rendering of any service, with any Affiliate unless in the
ordinary and usual conduct of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 7.13. LIMITATION ON INVESTMENTS. Neither the Company nor any
Restricted Subsidiary will acquire or hold any stock, bond, note, or other
evidence of Indebtedness or any other security of, or make any loan, advance,
capital contribution or extension of credit (except for current trade and
customer accounts receivable for merchandise, products, materials and supplies
sold) to, any Person (herein called "Investments") except:
(a) obligations of the United States of America or the Dominion
of Canada or any agency or instrumentality thereof, unconditionally
guaranteed by the United States of America or the Dominion of
Canada, as the case may be, PROVIDED that such securities have a
final maturity not in excess
38
<PAGE>
of one year from the date of acquisition thereof;
(b) time deposits or certificates of deposit maturing within one
year from the date of acquisition thereof issued by any bank or trust
company which (i) is a member of the Federal Reserve System or has
been organized under the laws of the Dominion of Canada, (ii) has
capital stock, surplus and undivided profits of not less than
$100,000,000, and (iii) has been assigned an investment rating of
"A-2' or higher by Moody's Investors Service, Inc. or "A" or higher
by Standard & Poor's Corporation (or the successors thereof);
(c) commercial paper which has a final maturity not
in excess of 270 days from the date of issuance thereof and which
is rated "Prime 1" (or such other equivalent rating as signifies
the highest investment quality) by Moody's Investors Service, Inc.
or 'A-I+' (or such other equivalent rating as signifies the highest
investment quality) by Standard & Poor's Corporation (or the
successors thereof);
(d) Investments in a corporation, limited liability company,
partnership, trust or other similar entity which is, or immediately
after the making of such Investment will be, a Restricted Subsidiary;
(e) Investments in a corporation, limited liability company,
partnership, trust or other similar entity which is, or immediately
after the making of such Investment will be, an Unrestricted
Subsidiary, PROVIDED that Investments in respect of such
Unrestricted Subsidiary, together with Investments in respect of
all other Unrestricted Subsidiaries (the amount of each such
Investment being the cost thereof determined as of the time such
Investment is actually made), do not exceed either $1,000,000
during any one fiscal year of the
39
<PAGE>
Company or $5,000,000 in the aggregate at any time;
(f) only in respect of Investments made by the Company,
Investments as permitted under the PROVISO to Section 7.7;
(g) an Investment constituting the initial investment in a joint
venture solely to conduct activities as permitted by Section
7.3(f), to be entered into between the Company or a Restricted
Subsidiary and VAW aluminum AG, a German corporation, or an
affiliate thereof, such initial Investment not to exceed
$16,000,000 (U.S.);
(h) Investments in a foreign subsidiary in which all of the
capital stock and voting power will be 100% owned, directly or
indirectly, by the Company, to be organized solely to conduct
activities as permitted by Section 7.3(f) at a plant to be located
in Swansea, Wales, United Kingdom, with such Investments not to
exceed, in the aggregate, $9,000,000 (U.S.); and
(i) Investments by the Company or a Restricted Subsidiary in
Marport Smelting, L.L.C., an Indiana limited liability company, to
conduct business solely as permitted by Section 7.3(f), with such
Investments not to exceed $1,000,000.
Section 7.14. TAX CONSOLIDATION. Neither the Company nor any
Restricted Subsidiary will file or consent to the filing of any consolidated
income tax return with any Person other than the Company and/or one or more
Subsidiaries.
Section 7.15. AUDITORS. The Company will employ, or cause to be
employed, a Firm of Certified Public Accountants. Such Firm of Certified Public
Accountants will examine the consolidated financial statements of the Company
and its Restricted Subsidiaries referred to in Section 8.1(b) in accordance with
generally accepted auditing standards and accordingly will include in such
examination such tests of the accounting records and such other procedures as
they consider necessary in the circumstances. Such Firm of Certified Public
Accountants will express an opinion on such
40
<PAGE>
consolidated financial statements without reliance upon the opinion of any
other accountants. Such consolidated financial statements will present fairly,
in accordance with generally accepted accounting principles applied on a basis
consistent with that of the preceding fiscal year, the consolidated financial
position of the Company and its Restricted Subsidiaries at the end of, and their
consolidated results of operations, changes in stockholders' equity and cash
flows for, the periods specified in Section 8.1(b). The opinion to be expressed
by such Firm of Certified Public Accountants shall be without qualification.
Section 7.16. ACQUISITION OF Notes. Neither the Company nor any of
its Restricted Subsidiaries or Affiliates will, directly or indirectly, purchase
or otherwise acquire any outstanding unpaid Notes except pursuant to an offer
made PRO rata and on the same terms to the holders of all of the Notes at the
time outstanding; and any Notes so acquired pursuant to such offer shall
forthwith be canceled and no Notes shall be issued in substitution therefor.
Section 7.17. LIMITATION ON PRIOR CLAIMS. Except as permitted
hereunder and except as otherwise provided by statute, neither the Company nor
any Restricted Subsidiary will in any manner become or remain liable,
contingently or otherwise, in respect of any Indebtedness to any Person
(including any Person who guarantees or otherwise becomes surety for the whole
or any part of such Indebtedness or acquires any right or incurs any obligation
to become, either immediately or upon the occurrence of some future contingency,
the owner of all or any part thereof) who shall either immediately or upon the
occurrence of insolvency or some other contingency, have any right by reason of
any statute or otherwise to have any claim in respect of such Indebtedness first
satisfied out of the general assets of the Company or such Restricted Subsidiary
in priority to claims of its general creditors.
Section 7.18. SALE OR DISCOUNT OF RECEIVABLES. Neither the Company
nor any Restricted Subsidiary will discount or sell with recourse, or sell for
less than the-greater of the face value or market value thereof, any of its
notes, trade acceptances, accounts or bills receivable.
Section 7.19. ERISA. (a) The Company will maintain, and cause each
Related Person to maintain, each Plan (other than a Multiemployer Plan) in
compliance with the applicable provisions of ERISA and the regulations and
published
41
<PAGE>
official interpretations thereunder, the failure to comply with which could
subject the Company or any Related Person to tax in a material amount or to a
material penalty.
(b) The Company will not, and will not permit any Related
Person to,
(i) engage in any transaction or fail to take any action in
connection with which the Company or any Related Person could be subject
to either a material civil penalty assessed pursuant to Section 502 of
ERISA or a tax in a material amount imposed by section 4975 of the
Code;
(ii) terminate any Plan in a manner, or permit to be taken or take
any other action, which could result in any liability of the Company or
any Related Person in a material amount to the Pension Benefit Guaranty
Corporation or with respect to any Multiemployer Plan under Title IV of
ERISA;
(iii) fail to make full payment when due of all contributions and
other amounts which the Company or any Related Person is required to pay
under the provisions of any Plan or pursuant to any applicable
collective bargaining agreement, or, with respect to any Plan
(other than a Multiemployer Plan), permit to exist any "accumulated
funding deficiency", whether or not waived, with respect to such
Plan;
(iv) permit the actuarial present value of all benefit
liabilities under all Plans (other than Multiemployer Plans) to
exceed the fair market value of the assets of such Plans by more
than $250,000, with such benefit liabilities determined based on
the actuarial assumptions which would be used by the Pension
Benefit Guaranty Corporation with respect to Plans terminating at
the time of determination; or
(v) adopt any amendment to a Plan to which Section 307 of
ERISA applies.
42
<PAGE>
As used in this Section 7.19, the term 'accumulated funding deficiency' has the
meaning indicated for such term in Section 4.13.
Section 7.20. FOREIGN PENSION LIABILITY. The Company will not, and
will not permit any Related Person to, incur any liability under the laws of any
applicable jurisdiction outside of the United States to or in respect of any
employee benefit plan or other plan mandated by law or established or maintained
for the benefit of employees of the Company or of any Related Person which could
have a Material Adverse Effect.
Section 7.21. SPECULATION IN COMMODITIES AND INVENTORY LEVELS.
Neither the Company nor any Restricted Subsidiary will buy or sell aluminum or
futures contracts or options for futures contracts with respect thereto for
speculation (i.e., buying or selling in expectation of profiting from market
fluctuation), nor will it sell forward recycled aluminum unless it owns or has
under firm contract the raw materials (e.g., dross, used aluminum beverage cans,
or aluminum scrap) sufficient to produce such recycled aluminum. At any one
time, the Company and its Restricted Subsidiaries will not exceed 5% of their
consolidated yearly capacity in inventory owned by the Company and its
Restricted Subsidiaries that is not presold to an established customer or the
sale of which is not supported by a letter of credit.
Section 7.22. ENVIRONMENTAL COVENANTS. Neither the Company nor any of
its Subsidiaries shall use any of their respective properties to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer,
produce, process or in any manner deal with, Hazardous Materials except as may
be necessary to conduct the Company's or its Subsidiaries' business and in
accordance in all material respects with all Requirements of Law, and neither
the Company nor any Subsidiary shall cause or permit, as a result of any
intentional or unintentional act or omission on the part of the Company or any
Occupant, the installation or placement of Hazardous Materials in or on any of
its properties or a release of Hazardous Materials onto any of its properties or
suffer the presence of Hazardous Materials on any of its properties except as
aforesaid. The Company and each Subsidiary shall not fail to comply with, and
shall ensure that all Occupants not fail to comply with, all applicable
Requirements of Law with respect@to Hazardous
43
<PAGE>
Materials, to the extent such failure would result in a Material Adverse
Effect, and shall keep all of their respective properties free and clear of any
Liens imposed pursuant to such Requirements of Law. In the event that the
Company or any Subsidiary receives any notice or advice from any governmental
agency, or any Occupant with regard to Hazardous Materials on, from or affecting
any of its properties, which notice relates to a violation by the Company, any
Subsidiary or any Occupant of any Environmental Law, the Company shall
immediately notify the Noteholders. The Company and each Subsidiary shall, and
shall cause all Occupants to, maintain their properties and business in a manner
and condition in accordance with all Requirements of Law in all material
respects.
Section 7.23. PARI PASSU. The Company shall ensure that its
obligations under the Notes shall at all times rank at least PARI PASSU in
priority of payment with all unsecured and unsubordinated Indebtedness of the
Company.
SECTION 8. REPORTS, ETC.
Section 8.1. FINANCIAL STATEMENTS AND OTHER REPORTS. The Company will
deliver to the Purchaser from the date of this Agreement and so long as it holds
any Note, and to each holder of Notes:
(a) as soon as practicable after the end of each of the first,
second and third fiscal quarters of each fiscal year, and in any
event within 45 days thereafter, duplicate copies of the
consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries, as at the end of such fiscal quarter,
and consolidated and consolidating statements of earnings and
consolidated statements of cash flows of the Company and its
Restricted Subsidiaries for such fiscal quarter and (in the case of
the second and third fiscal quarters) for the portion of the fiscal
year ending with such fiscal 'quarters setting forth in each case
in comparative form the figures for the corresponding periods one
year earlier, all in reasonable detail and certified as having been
prepared in accordance with generally accepted accounting
principles, consistently applied (except for inconsistencies
specifically disclosed in such
44
<PAGE>
certificate), and fairly presenting the financial position of the
Company and its Restricted Subsidiaries and the results of its and
their operations, subject to changes resulting from year-end audit
adjustments, by the principal financial officer of the Company,
PROVIDED, that so long as any of the Company's Restricted Subsidiaries
as of the date of this Agreement shall not be engaged in any active
operations, the Company shall not be required to deliver consolidating
balance sheets and statements of income and such other statements for
such Restricted Subsidiary;
(b) as soon as practicable after the end of their respective
fiscal years, and in any event within 90 days thereafter, duplicate
copies of:
(i) consolidated and consolidating balance sheets of the
Company and its Restricted Subsidiaries as at the end of such
year, and
(ii) consolidated and consolidating statements of earnings
and consolidated statements of changes in stockholders' equity and
cash flows of the Company and its Restricted Subsidiaries, for
such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and, in the case of the consolidated
statements of the Company, certified and accompanied by the report of the Firm
of Certified Public Accountants, and, in the case of the consolidating
statements and the separate statements of the Company, certified by the
principal financial officer of the Company, such certifications and reports to
state that such financial statements fairly present the matters covered-thereby
in accordance with generally accepted accounting principles consistently applied
(except for inconsistencies, if any, which are specifically disclosed and with
which such Firm of Certified Public Accountants concurs), PROVIDED, that so long
as any of the Company's Restricted Subsidiaries as of the date of this Agreement
shall not be engaged in any active
45
<PAGE>
operations, the Company shall not be required to deliver consolidating balance
sheets and statements of income and such other statements for such Restricted
Subsidiary;
(c) together with the delivery of the financial statements
referred to in Section 8.1(a) and (b) (or, in the case of clause
(i) below, if quarterly or annual reporting requirements for such
entities differ from those set forth in Section 8.1(a) or (b), as
soon as the same are available), (i) separate financial statements
of substantially the same type referred to in Section 8.1(a) and
(b) for each of the entities described in Section 7.13(g), (h) and
(i), together with, to the extent any such fiscal year-end
financial statements are audited, a copy of the auditor's report
with respect to such financial statements, and (ii) a copy of a
report to management of the Company on a plant-by-plant,
year-to-date, basis, substantially in the form attached hereto as
Exhibit C;
(d) promptly upon receipt thereof, one copy of each other report
submitted to the Company or any Restricted Subsidiary by any
certified public accountants in connection with any annual, interim
or special audit made by them of the books of the Company or any
Restricted Subsidiary;
(e) promptly upon their becoming available, one copy of each
financial statement, report, notice or proxy statement sent by the
Company or any Restricted Subsidiary to stockholders generally, and
of each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal
letters) in respect thereof filed by the Company or any Restricted
Subsidiary with, or received by such Person in connection therewith
from, any securities exchange or the Securities and Exchange
Commission or any successor agency;
(f) as soon as possible (but in any event within ten days) after
the Company or
46
<PAGE>
any Related Person knows or has reason to know with respect to any
Plan (or any trust created under or forming a part of any Plan) of any
Reportable Event, Prohibited Transaction, Termination or Withdrawal
Event or other occurrence which could result in liability in a
material amount to the Pension Benefit Guaranty Corporation or with
respect to any Multiemployer Plan under Title IV of ERISA, a statement
of the chief financial officer of the Company describing the details
of such Reportable Event, Prohibited Transaction, Termination or
Withdrawal Event or other occurrence and the action which the Company
or any Related Person proposes to take with respect thereto, together
with a copy of any notice, report, return or other papers filed or
received by the Company or any Related Person with respect to, or
otherwise pertaining to, the Reportable Event, Prohibited Transaction,
Termination or Withdrawal Event or other occurrence; and
(g) with reasonable promptness, such other data and information
as to the business, operations, properties, assets or prospects, or
the condition, financial or otherwise, of the Company or any
Restricted Subsidiary or the ability of the Company to perform this
Agreement or to pay when due in accordance with the terms of the
Notes and this Agreement, the principal of, premium, if any, and
interest on, the Notes, as from time to time may be reasonably
requested by the Purchaser or any holder of the Notes.
Recipients of any financial statements or other reports or documents
delivered by the Company pursuant to this Section 8.1 may furnish such
statements and reports to any regulatory authority having jurisdiction over them
and the National Association of Insurance Commissions and to such other Persons
as they in their discretion may deem appropriate; provided, however, that
neither you nor any subsequent holder of Notes shall be permitted to, and the
Company shall not be required to, furnish any financial statements or other
reports or documents delivered or to be delivered by the Company pursuant to
this Section 8.1, or disclose any information obtained pursuant to Section 8.4,
unless (i) such
47
<PAGE>
information is publicly available or (ii) otherwise required under applicable
law, to any Person who at the time is known to you, such holder or the Company,
as the case may be, to be in direct competition with the Company. The Company
agrees to furnish to the Purchaser and each other holder of the Notes (except as
provided in the preceding sentence) additional copies of the materials referred
to in this Section 8.1 upon its request.
Section 8.2. OFFICERS' CERTIFICATES. Each set of financial statements
relating to the Company delivered to the Purchaser or any other holder of the
Notes pursuant to Section 8.1(a) or (b) will be accompanied by a certificate of
the President or an Executive Vice President and of the chief financial officer
of the Company setting forth (i) the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of SS 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11,
7.13, 7.14 and 7.21 during the period covered by the income statements then
being furnished and a certification as to insurance in force at the close of the
fiscal year covered by such, financial statements meeting the requirements of
57.3(b); and (ii) whether there exists on the date of the certificate any
condition or event which then constitutes, or which after lapse of time would
constitute an Event of Default, and, if any such condition or event then exists,
specifying the nature and period of existence thereof and the action being taken
and proposed to be taken with respect thereto.
Section 8.3. ACCOUNTANTS' CERTIFICATE. Each set of annual financial
statements relating to the Company delivered to the Purchaser or any other
holder of the Notes pursuant to Section 8.1(b) will be accompanied by a report
of the Firm of Certified Public Accountants who examined such financial
statements, which report shall state that, in making their examination necessary
to express an opinion on such financial statements, such accountants have
obtained no knowledge of any condition or event which then constitutes, or which
after notice or lapse of time or both would constitute, an Event of Default or,
if any such condition or event then exists, specifying the nature and period of
existence thereof.
Section 8.4. INSPECTION. The Company will permit the representatives
of the Purchaser, so long as the Purchaser holds any Note, or the
representatives of any other holder of the Notes (other than a holder which at
the time is in
48
<PAGE>
direct competition with the Company), at the Purchaser's or such holder's
expense (unless an Event of Default shall have occurred and is continuing, in
which event at the Company's expense), to visit and inspect any of the
properties of the Company or any of its Restricted Subsidiaries, to examine all
their books of account and other financial records and reports related thereto,
to make copies and extracts therefrom and to discuss their respective affairs,
finances and accounts with their respective employees, officers and certified
public accountants, all at such reasonable times and as often as may reasonably
be requested, PROVIDED, that any information concerning the Company's internal
operations or financial condition which is not public knowledge and which is so
designated by the Company in writing and disclosed hereafter by the Company
pursuant to this Section 8.4 shall be kept confidential by the Purchasers, the
other holders of the Notes and their respective representatives in accordance
with such Purchaser's or holder's usual internal procedures and shall not be
used otherwise than in connection with the administration of the loans
contemplated hereby, except to the extent (a) it was known to the Purchaser or
such holder when received or (b) it is or hereafter becomes public knowledge or
becomes lawfully obtainable from other sources, or (c) the Purchaser or such
holder is compelled to disclose such information by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, or (d)
such information is required by attorneys or accountants of such Purchaser or
holder or is to be disclosed to the National Association of Insurance
Commissioners, or (e) such duty as to confidentiality and non-use is waived by
the Company.
SECTION 9. EVENTS OF DEFAULT.
Section 9.1. NATURE OF EVENTS. An "Event of Default" shall exist if
any of the following occurs and is continuing:
(a) any payment or prepayment of principal or premium, if any,
or interest on any Note is not made on or before the date such
payment or prepayment is due, provided that if a payment or
prepayment made by the Company pursuant to wire transfer or similar
means is not received by virtue of a breakdown in such wire
transfer or other system beyond the control of the Company, the
failure of any Noteholder to receive such payment or prepay-
49
<PAGE>
ment when due shall not constitute an Event of Default if and so long as the
Company uses its best efforts to correct such nonpayment;
(b) the Company or any Restricted Subsidiary fails to perform or
observe any covenant applicable to it contained in Sections 7.4 through
7.18 and Section 7.21, and (if capable of cure) such failure shall
continue unremedied for a period of 15 days after the Company knew
or reasonably should have known about such failure;
(c) the Company or any Restricted Subsidiary fails to comply with any
other provision of this Agreement and such failure shall continue
30 days after the earlier of (i) the date the Company has knowledge
of such failure, and (ii) the date you give written notice to the
Company of such failure;
(d) any representation, warranty or statement by or on behalf of the
Company or any Restricted Subsidiary contained in this Agreement or
in any certificate, written statement or document, furnished by or
on behalf of the Company or any Restricted Subsidiary in connection
with the negotiation of this Agreement, the sale of the Notes or
the Company's performance of its obligations hereunder or
thereunder is, when taken together with all such representations,
warranties and statements, false or misleading in any material
respect;
(e) (1) the Company or any Restricted Subsidiary fails to make any
payment due in respect of any Indebtedness for Money Borrowed
(including any of the 1988 Notes) or any other security, which
failure shall continue beyond any applicable period of grace with
respect thereto, or (2) any event shall occur or any condition
shall exist in respect of any such Indebtedness or other security
of the Company or any Restricted Subsidiary, or under any agreement
securing or relating to such Indebtedness or other security, the
effect of which is (i) to cause (or permit any holder of
50
<PAGE>
such indebtedness or other security, or a trustee for any such
holder, to cause) such Indebtedness or other security, or a portion
thereof, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, or (ii) to permit a trustee
or the holder of any security of the Company or any Restricted
Subsidiary (other than the Voting Securities of the Company or such
Restricted Subsidiary) to elect a majority of the directors on the
Board of Directors or other governing body of the Company or such
Restricted Subsidiary;
(f) any default or other event shall occur or any condition shall
exist under any lease entered into by the Company or any Restricted
Subsidiary having aggregate Rentals in excess of $1,000,000, which
default, event or condition continues beyond any applicable period
of grace with respect thereto, and the effect of such default,
event or condition is to cause or permit the lessor under any such
lease to terminate such lease or the rights of possession
thereunder of the Company or a Restricted Subsidiary or to
accelerate the maturity of unaccrued Rentals thereunder;
(g) a receiver, custodian, liquidator, or trustee of the Company or
any Restricted Subsidiary or of any of the property of any of them,
shall be appointed by court order and such order shall remain
unstayed and in effect for more than 60 days; or the Company or any
Restricted Subsidiary shall be adjudicated bankrupt or insolvent,
or any substantial part of the property of any of them shall be
sequestered by court order and such order shall remain unstayed and
in effect for more than 60 days; or a petition shall be filed
against the Company or any Restricted Subsidiary under any
bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed within 60
days after such filing;
51
<PAGE>
(h) the Company or any Restricted Subsidiary shall commence a
voluntary case under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case under any such law;
(i) the Company or any Restricted Subsidiary shall make an
assignment for the benefit of its creditors, or shall be generally
unable to pay its debts as they become due, or shall petition for
or consent to the appointment of a receiver, custodian, trustee or
liquidator of the Company or a Restricted Subsidiary or of all or
any substantial part of the property of any of them;
(j) provided that any of the following actions could result in a
Material Adverse Effect (with respect to the Company or any Related
Person), either (i) the plan administrator of any Plan shall file
notice, required under Section 4041 of ERISA, with the Pension
Benefit Guaranty Corporation of intent to terminate such Plan, (ii)
the Pension Benefit Guaranty Corporation shall institute
proceedings under Section 4042 of ERISA to terminate any Plan,
(iii) the plan administrator of any Plan shall notify the Pension
Benefit Guaranty Corporation that the withdrawal of the Company or
any Related Person is, or is treated as, the withdrawal of a
substantial employer within the meaning of Section 4063 of ERISA,
or (iv) the Company or any Related Person shall withdraw or
partially withdraw from any Multiemployer Plan;
(k) any order, judgment or decree shall be entered in any
proceeding against the Company decreeing the dissolution of the Company
and such order, judgment or decree remains unstayed and in effect for
more than 60 days;
52
<PAGE>
(l) any order, judgment or decree shall be entered in any
proceedings against the Company or any Restricted Subsidiary
decreeing a split-up of the Company or such Restricted Subsidiary
which requires the divestiture of a substantial part, or the
divestiture of the stock of a Restricted Subsidiary whose assets
constitute a substantial part, of the consolidated assets of the
Company and its Restricted Subsidiaries, and such order, judgment
or decree remains unstayed and in effect for more than 60 days;
and/or
(m) a final judgment or judgments for the payment of money
aggregating in excess of $500,000 is or are outstanding against one
or more of the Company and its Restricted Subsidiaries and any one
of such judgments has been outstanding for more than 60 days from
the date of its entry and has not been discharged in full or stayed
by writ of SUPERSEDEAS or otherwise.
Section 9.2. DEFAULT REMEDIES. If an Event of Default referred to in
paragraph (g), (h), (i) or (k) of Section 9.1 exists, automatically, or, in the
case of an Event of Default referred to in paragraph (a), at the option of any
holder of any Note then outstanding exercised by written notice to the Company,
or, in the case of any other Event of Default, at the option of the Directing
Noteholders exercised by written notice to the Company, the entire principal of
and all interest accrued on the Notes shall forthwith be due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived and, in addition to any other right, power or remedy
permitted to it by law, each such holder shall have the right to proceed to
enforce all other remedies available to it under this Agreement. The Company
will forthwith pay to the holder of each such Note the entire principal of and
interest accrued on such Note, and, to the extent permitted by law, a premium
equal to the Make-Whole Amount at the time of such payment. No course of
dealing on the part of any Noteholder nor any delay or failure on the part of
any Noteholder to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. If the Company
fails to pay when due the principal of, premium, if any, or interest on any
Note, or fails to comply with any other
53
<PAGE>
provisions of this Agreement, the Company will pay to the holder of
such Note, to the extent permitted by law, such further amount as
shall be sufficient to cover the costs and expenses, including but not
limited to reasonable attorneys' fees, incurred by such holder in
collecting any sums due on such Note or in otherwise enforcing any of
the holder's rights.
At any time after the principal of, and interest accrued on, any Note
is declared due and payable (except pursuant to an automatic acceleration due to
the occurrence of an Event of Default referred to in paragraph (g), (h), (i) or
(k) of Section 9.1 or an acceleration due to the occurrence of an Event of
Default referred to in Section 9.1(a)), and before a judgment or decree for
payment of the money due has been obtained, the Majority Holders, by written
notice to the Company, may rescind and annul such declaration and its
consequences if (a) the Company has paid (i) all overdue installments of
interest on all the Notes, (ii) the principal of and premium, if any, on any
Notes which have become due otherwise than by such declaration, (iii) interest
on such overdue principal and premium and (to the extent permitted by applicable
law) on any overdue installments of interest in respect of the Notes at the rate
per annum applicable to overdue payments on such Notes set forth in Section 1.1,
and (b) all Events of Default, other than nonpayment of amounts which have
become due solely by such declaration, and all conditions and events which after
notice or lapse of time or both would constitute Events of Default have been
cured or waived as provided in Section 11.2. No such rescission and annulment
shall affect any subsequent declaration or impair any right consequent thereon.
Section 9.3. NOTICE OF DEFAULT. If any one or more of the Events of
Default specified in Section 9.1 shall occur, or if any one or more events which
with notice or lapse of time or both would become one or more Events of Default
shall occur, or if the holder of any Note or of any other evidence of
Indebtedness or other security of the Company or any of its Restricted
Subsidiaries or the lessor under any lease referred to in Section 9.1(f)
gives any notice or takes any other action in respect to a claimed default, the
Company will forthwith, upon becoming aware of same, GIVE written notice thereof
to all holders of Notes then outstanding describing such Event of Default,
event, notice or action, the nature of the Event of Default, event or claimed
default and specifying what action the Company is taking or proposes to take
with respect thereto.
54
<PAGE>
SECTION 10. INTERPRETATION OF AGREEMENT AND NOTES.
Section 10.1. DEFINITIONS. For all purposes of this Agreement and the
Notes, the following definitions shall have the meanings herein specified and
shall include in the singular number the plural and in the plural number the
singular:
"AFFILIATE" means a Person which, directly or indirectly,
through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company; PROVIDED, that the
term Affiliate shall not be deemed to include a Restricted
Subsidiary. The term "control" (including the terms "controlled
by' and 'under common control with') means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership
of Voting Securities, by contract or otherwise.
"AGREEMENT" means this Agreement, as the same may at any time be
amended or modified and in effect.
"APPLICABLE TREASURY YIELD" shall be determined by reference to (i)
the display designated as "Page 678" on the Telerate Access Service
(or such other display as may replace Page 678 on the Telerate
Access Service) as of 10:00 a.m. (New York City time) on the second
Business Day preceding the date fixed for the payment of Notes in
question, or (ii) if not reported as of such time or otherwise
unascertainable, the most recent Federal Reserve Statistical
Release H.15 (519) which has become publicly available at least two
Business Days prior to the date fixed for the payment of Notes in
question (or, if such Statistical Release is no longer published,
any publicly available source of similar market data), and shall
mean the yield reported on such Telerate Access Service, or most
recent weekly average yield, as the case may be, on actively traded
U.S. Treasury securities adjusted to a constant maturity
55
<PAGE>
equal to the then remaining Weighted Average Life to Maturity of such Notes
(the "REMAINING LIFE"); provided that if the Remaining Life of such Notes is not
equal to the contract maturity of a U.S. Treasury security for which a yield or
weekly average yield is given, the Applicable Treasury Yield shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the yield or weekly average yield of U.S. Treasury securities for which such
yields are given.
"BANK LOAN AGREEMENT" means that certain Loan Agreement dated
September 20, 1994, as amended, between the Company and Texas
Commerce Bank National Association.
"BARMET OPTION" means that certain right of Barmet Aluminum
Corporation ("Barmet") to purchase up to a 49% interest in IMCO
Recycling of Ohio Inc., a Restricted Subsidiary, pursuant to the
terms and conditions of that certain Supply Agreement dated
March 2, 1992, as amended, by and between the Company and Barmet.
"BUSINESS DAY" means a day on which banks located in New
York City are not required or authorized by law or executive order
to remain closed.
"CAPITALIZED LEASE" means a lease under which the obligation of the
lessee would, in accordance with generally accepted accounting
principles consistently applied, be included in determining total
liabilities as shown on the liability side of a balance sheet of
the lessee.
"CLOSING DATE" has the meaning set forth in Section 1.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" of the Company means the Company's common stock, $.10
par value.
56
<PAGE>
"COMPANY" means IMCO Recycling Inc., a Delaware corporation.
"CONSOLIDATED CASH MAKE" for any period means the sum of:
(a) Consolidated Net Income for such period (minus, in the event of
any sale or other disposition of the type referred to in S7.10 or
Section 7.11, other than to the Company or a Restricted
Subsidiary, Net Income attributable to any Restricted Subsidiary (or
reasonably attributable to any assets) so sold or otherwise disposed
of for such period) plus expenses of the Company and its Restricted
Subsidiaries in respect of interest on Indebtedness and expenses of
the type set forth in (b)(v) of the definition of Net Income for such
period (except for such expenses which were deducted in calculating
Net Income for such period and were attributable to assets sold or
otherwise disposed of in a transaction of the type referred to in
Section 7.10 or Section 7.11, other than to the Company or a
Restricted Subsidiary, attributable to the assets or securities so
sold); and
(b) (without duplication of any amounts included for such period
pursuant to (a) above) as to any corporation or other entity which
became a Restricted Subsidiary after the beginning of such period,
or part or all of the assets of which were acquired by the Company
or a Restricted Subsidiary after the beginning of such period, its
Net Income during such period prior to the date on which it became
a Restricted Subsidiary or the Net Income reasonably attributable
to such assets during the period prior to the acquisition thereof
without, in either case, any deduction for interest charges on
Indebtedness of such corporation or other entity or for
depreciation and amortization of such acquired assets, provided
that if during such period the
57
<PAGE>
proceeds from any sale or other disposition of the type referred to in
Section 7.10 or Section 7.11 (other than to the Company or a
Restricted Subsidiary) have been utilized to acquire such corporation
or such assets, the Net Income of such corporation or the Net Income
reasonably attributable to such assets included in Consolidated Cash
Make pursuant to this clause (b) shall be reduced by the amount of the
contribution, if any, to Consolidated Net Income made during such
period by such proceeds.
"CONSOLIDATED CURRENT ASSETS" and "CONSOLIDATED CURRENT LIABILITIES"
mean, at any date, the aggregate of the Current Assets and Current
Liabilities, respectively, of the Company and its Restricted
Subsidiaries after eliminating all intercompany items in accordance
with generally accepted accounting principles.
"CONSOLIDATED FUNDED INDEBTEDNESS" means the aggregate of the Funded
Indebtedness of the Company and its Restricted Subsidiaries after
eliminating all inter-company items, and otherwise computed, in
accordance with generally accepted accounting principles; PROVIDED,
that for purposes of computing Consolidated Funded Indebtedness
prior to the Second Closing Date, such term shall be deemed to
include $15,000,000 aggregate principal amount of the Eleven and
One-Half Year Notes as though the same had been issued in full on
the First Closing Date.
"CONSOLIDATED INTEREST EXPENSE" means the aggregate of all
interest charges on Indebtedness of the Company and its Restricted
Subsidiaries after eliminating all intercompany items, and
otherwise computed, in accordance with generally accepted
accounting principles.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate of the
Net Income of the Company and its Restricted Subsidiaries after
58
<PAGE>
eliminating all minority interests and intercompany items and
otherwise computed in accordance with generally accepted accounting
principles, but excluding in any event (i) Net Income of any
Restricted Subsidiary prior to the date it became a Restricted
Subsidiary, (ii) Net Income of any Restricted Subsidiary which by
reason of legal or contractual restrictions is unavailable for
payment of dividends to the Company or any other Restricted
Subsidiary, (iii) Net Income of any Person, other than a Restricted
Subsidiary, in which the Company or one or more Restricted
Subsidiaries has an ownership interest unless such Net Income shall
have actually been received by the Company or such Restricted
Subsidiary in the form of cash dividends or similar cash
distributions or shall represent declared cash dividends
receivable, and (iv) Net Income of any Person, substantially all
the properties and assets of which have been acquired, directly or
indirectly, in any manner by the Company or any Restricted
Subsidiary, realized by such Person prior to such acquisition.
"CONSOLIDATED NET TANGIBLE ASSETS" means, at any date, the aggregate
amount of all assets of the Company and its Restricted Subsidiaries
after deducting therefrom (i) depreciation, depletion,
obsolescence, amortization, valuation, contingency and other proper
reserves in accordance with generally accepted accounting
principles, (ii) Consolidated Current Liabilities, (iii) Restricted
Investments and Investments referred to in Section 7.13(e) and (i),
(iv) that portion of the book amount of all such assets which would
be treated as intangible assets under generally accepted accounting
principles, including without limitation, all such items as
goodwill, trade marks, trade names, brand names, copyrights,
patents, licenses and rights with respect to the foregoing,
write-up of assets subsequent to June 30, 1995 and unamortized debt
discount and expenses, and (v) all long term liabilities other than
Funded Indebtedness; PROVIDED that, solely for
59
<PAGE>
purposes of Section 7.4(j)(i), for purposes of computing
Consolidated Net Tangible Assets prior to the Second Closing Date,
such term shall be deemed to include $15,000,000 aggregate
principal amount of the Eleven and One-Half Year Notes as though
the same had been issued in full on the First Closing Date and that
the Company had received $15,000,000 cash in proceeds from such
issuance.
"CONSOLIDATED NET WORTH" shall mean the amount of the Company's
stockholder's equity (including all preferred stock) determined on
a consolidated basis (excluding Unrestricted Subsidiaries) in
accordance with generally accepted accounting principles
consistently applied.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any date, (a) the
aggregate of all assets (less reserves for depreciation, depletion,
obsolescence, amortization, valuation and any other reserves which
are properly deductible therefrom under generally accepted
accounting principles) which, in accordance with generally accepted
accounting principles, would be included on the asset side of a
balance sheet of the Company and its Restricted Subsidiaries, but
in any event excluding all assets constituting (i) franchises,
licenses, permits, patents, patent applications, copyrights,
trademarks, trade names, goodwill, research development,
experimental and organizational expense and all other assets which
would be classified as intangible assets under generally accepted
accounting principles, (ii) unamortized debt discount and expenses
of issuance of Indebtedness, (iii) write-ups of assets subsequent
to June 30, 1995, (iv) deferred assets, other than prepaid
insurance and prepaid taxes classified as current assets in
accordance with generally accepted accounting principles, (v)
treasury shares, if any, and (vi) Restricted Investments and
Investments referred to in Section 7.13(e) and (i), less (b) the
aggregate of all Indebtedness, liabilities, deferred taxes and
other items which, in
60
<PAGE>
accordance with generally accepted accounting principles, would be
included on the liability side of such balance sheet (except
capital stock (including all Preferred Stock), capital surplus and
retained earnings).
"CONSOLIDATED TOTAL ASSETS" means, at any date and determined in
accordance with generally accepted-accounting principles, the
aggregate of all assets of the Company and its Restricted
Subsidiaries.
"CONSOLIDATED WORKING CAPITAL" means, at any date, the excess of
Consolidated Current Assets over Consolidated Current Liabilities.
"CONTRACTUAL OBLIGATION" means any obligation, covenant or condition
contained in any evidence of Indebtedness or any agreement or
instrument under or pursuant to which such evidence of Indebtedness
has been issued, or any other agreement or instrument to which the
Company or any Restricted Subsidiary is a party or by which they or
any of their properties or assets are bound.
"CURRENT ASSETS" means, at any date, for any Person (i) cash and cash
items in any bank or trust company, on hand or in transit, (ii)
good and collectible notes, trade acceptances, accounts and bills
receivable not more than 59 days overdue taken at their face value,
(iii) inventories, stated at the lower of cost and fair market
value, (iv) prepaid costs and expenses, (v) advances and
prepayments to suppliers and (vi) Investments described in clauses
(a) through (c) of Section 7.13, stated at the lower of cost and
current market value or, if there is no ascertainable current
market value for any such Investment, at the lower of cost and fair
value, but in each case only to the extent that such items would
be classified as current assets in accordance with generally
accepted accounting principles and all after deduction of
appropriate depreciation, depletion, obsolescence, amortization,
valuation, contingency and other proper reserves in accordance with
generally
61
<PAGE>
accepted accounting principles and after deduction of all assets located
outside the United States of America.
"CURRENT LIABILITIES" means, at any date, for any Person (i) all
Indebtedness payable on demand or maturing within one year from the
date as of which Current Liabilities are to be determined, and (ii)
all other items (including taxes accrued as estimated) which in
accordance with generally accepted accounting principles would be
included as current liabilities on the liability side of a balance
sheet of such Person as of the date of such determination, except
all repayments, including final maturities, sinking fund payments,
installment maturities, serial maturities and prepayments required
to be made within one year from such date of determination in
respect of any Funded Indebtedness (including the Notes and the
1988 Notes).
"DIRECTING NOTEHOLDERS" means the holders of not less
than 33-1/3% in aggregate principal amount of the Notes at the time
outstanding.
"DISCOUNT RATE" shall mean an interest rate computed in accordance
with generally accepted financial practice equal to the sum of (i)
the Applicable Treasury Yield and (ii) 0.50% per annum.
"ELEVEN AND ONE-HALF YEAR NOTES" has the meaning set forth in
Section 1.1(b).
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of
any materials into the environment, including but not limited to
those related to hazardous
62
<PAGE>
substances or wastes, air emissions and discharges to waste or
public systems.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"EVENT OF DEFAULT" means one of the Events of Default
enumerated in Section 9.1.
"FIRM OF CERTIFIED PUBLIC ACCOUNTANTS" means Ernst and
Young LLP, Arthur Andersen & Co., Coopers & Lybrand, Deloitte &
Touche LLP, KPMG Peat Marwick LLP, Price Waterhouse & Co., or any
other nationally recognized firm of certified public accountants
satisfactory to the Majority Noteholders, PROVIDED that such firm
is independent with respect to the Person or Persons whose
financial statements it examines in accordance with this Agreement.
"FIRST CLOSING DATE" has the meaning set forth in Section 1.2.
"FUNDED INDEBTEDNESS" means, at any date, for any Person (i) all
Indebtedness of such Person which by its terms matures one year or
more from the date of creation thereof, including all repayments
(including final maturities, sinking fund payments, installment
maturities and serial maturities) and prepayments required to be
made within one year after such date of determination in respect of
such Indebtedness (including the Notes and the 1988 Notes), and
(ii) any Indebtedness maturing within one year from the date of
determination which may be renewed or extended at the option of the
obligor, whether or not theretofore renewed or extended.
"GOVERNMENT" means the government of the United States of America, the
government of any other nation, any political subdivision of the
United States of America or any such other nation (including,
without limitation, any state, province, territory, federal
district, municipality or possession) and any department, agency or
instrumentality thereof;
63
<PAGE>
and "GOVERNMENTAL" means of, by, or pertaining to, any Government.
"GUARANTY" means, at any date, for any Person all obligations of such
Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without in any respect limiting the generality of the
foregoing, obligations incurred through an agreement, contingent or
otherwise, by such particular Person (a) to purchase such
Indebtedness or other obligation or any properties or assets
constituting security therefor, (b) to advance or supply funds (i)
for the purchase or payment of such Indebtedness or other
obligation or (ii) to maintain working capital or equity capital or
any other balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness or
other obligation, (c) to lease property or to purchase property,
securities or services primarily for the purpose of assuring the
owner of such Indebtedness or other obligation of the ability of
the primary obligor to make payment of the Indebtedness or other
obligation or (d) otherwise to assure the owner of the Indebtedness
or obligation against loss in respect thereof.
"HAZARDOUS MATERIALS" means, collectively, all gasoline, petroleum
products, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous or toxic substances, polychlorinated
biphenyls or related or similar materials, asbestos or any
materials containing asbestos, or any other substance or materials
as may be defined or listed as a hazardous or toxic substance by
any Federal, state or local environmental law, ordinance, rule or
regulation including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended (42 U.S.C. Section 9601, et seq.), the Hazardous
64
<PAGE>
Materials Transportation Act, as amended (49 U.S.C. Section 1801,
et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.) and the Clean Air Act
(42 U.S.C. Section 7401 et seq.) or in the regulations promulgated
pursuant thereto.
"INDEBTEDNESS" means, at any date, for any Person all items (other
than capital stock, capital surplus, retained earnings, deferred
taxes and deferred credits) which in accordance with generally
accepted accounting principles would be included in determining
total liabilities as shown on the liability side of a balance sheet
of such Person as at the date on which Indebtedness is to be
determined, but in any event including, without in any respect
limiting the generality of the foregoing, (a) indebtedness,
obligations and liabilities secured by any Lien existing on
property owned by such Person and subject to such Lien whether or
not the indebtedness, obligation or liability secured thereby shall
have been assumed, (b) Capitalized Leases, (c) all Swaps and (d)
all Guaranties in the amounts of the Indebtedness of primary
obligors to which they relate (and such Indebtedness shall
determine for all purposes the classification of the Guaranties
thereof as Funded Indebtedness or Current Liabilities); PROVIDED,
HOWEVER, that in any computation of Indebtedness where Indebtedness
of a primary obligor is included, there shall not be included in
such computation any Guaranty of such Indebtedness.
"INDEBTEDNESS FOR MONEY BORROWED" means, at any date, for any Person
any obligation (a) for borrowed money or (b) evidenced by a
promissory note, debenture or other like written obligation to pay
money or Guaranties of such Person of any such obligations of other
Persons.
"INVESTMENTS" has the meaning set forth in Section 7.13.
65
<PAGE>
"LIENS" has the meaning set forth in Section 7.6.
"MAJORITY NOTEHOLDERS" has the meaning set forth in Section 11.2.
"MAKE-WHOLE AMOUNT" means with respect to any prepayment or payment
of the Notes as to which a Make-Whole Amount is payable, the excess,
if any, and in any case not less than zero, of (i) the present
value, discounted semi-annually at the Discount Rate, of the
required principal payments of such Notes thereafter required to be
made and the remaining scheduled interest payments on and in
respect of such Notes from the respective dates on which such
principal payments and interest payments are payable, with all such
discounts to be computed on the basis of a 360-day year of twelve
30-day months, over (ii) the principal amount of such Notes being
prepaid. The calculations upon which any such Make-Whole Amount
shall be based shall be set forth in a written document submitted
to the Company and shall, absent manifest error, be conclusive and
binding on the Company.
"MATERIAL ADVERSE EFFECT" means any circumstance or event which
individually or in the aggregate (i) has or is reasonably likely to
have an adverse effect upon the validity, performance or
enforceability of this Agreement, (ii) is or is reasonably likely
to be material and adverse to the condition, financial or
otherwise, properties or prospects or business operations of the
Company and its Restricted Subsidiaries, on a consolidated basis,
or (iii) impairs or is reasonably likely to impair the ability of
the Company to fulfill its obligations under this Agreement.
"MORTGAGED PROPERTY" has the meaning set forth in each Mortgage.
"MORTGAGES" means the "Mortgages" as defined in the 1988 Note Purchase
Agreement.
66
<PAGE>
"MULTIEMPLOYER PLAN" means an employee benefit plan (as defined in
Section 3(37) of ERISA) to which contributions are or have been
required to be made by the Company or any Related Person.
"NET INCOME" of any Person means, for any period, the net income (or
the net deficit) of such Person for such period, determined in the
following manner:
(a) The gross revenues and other proper income
credits of such Person shall be computed for such period in
accordance with generally accepted accounting principles, PROVIDED,
HOWEVER, that in any event there shall not be included in such
gross revenues and income credits any of the following items: (i)
any proceeds of any life insurance policy; (ii) any restoration to
income of any contingency or other reserve, except to the extent
that provision for such contingency or other reserve shall have
been made from earnings accrued subsequent to September 30, 1995
(or, in the case of any corporation which becomes a Restricted
Subsidiary after such date, accrued subsequent to the date it
became a Restricted Subsidiary); (iii) any gain arising from any
sale of capital assets or the write-up of any assets or any gain
from the acquisition or retirement or sale of securities of such
Person or any of its Restricted Subsidiaries or any other gain
arising from or represented by items which would be accounted for
as extraordinary items in accordance with generally accepted
accounting principles; and (iv) any deferred credit, or
amortization thereof, arising from the acquisition of any other
Person or arising from the acquisition, directly or indirectly in
any manner, of substantially all of the properties and assets of
any other Person; and
67
<PAGE>
(b) From the amount of such gross revenues and other
proper income credits for such period determined as provided in the
preceding clause (a), there shall be deducted an amount equal to
the aggregate of all expenses and other proper income charges
(exclusive of any losses arising from any write-down or abandonment
of any assets and of any losses arising from the sale of any
capital assets) for such period, determined in accordance with
generally accepted accounting principles, but in any event
including (without in any respect limiting the generality of the
foregoing) the following items: (i) all interest on Indebtedness
and all rental charges; (ii) amortization of debt discount and
expenses of issuance and amortization of all other deferred charges
properly subject to amortization; (iii) provision for all taxes,
whether in respect of property, income, excess profits or
otherwise, accrued in respect of any period subsequent to September
30, 1995 and payments in excess of prior periods' provisions for
taxes applicable to prior periods; (iv) provisions for all
contingency, valuation and other proper reserves; (v) provision for
depreciation, depletion, obsolescence and amortization of the
properties of such Person (including depreciation and amortization
of leasehold improvements and amortization of purchased technology,
patents and the excess of cost over net assets of businesses
purchased) in amounts in the aggregate not less than the greater of
(y) those actually deducted on its books and (z) the amounts which
would be deducted in accordance with generally accepted accounting
principles; and (vi) the excess, if any, of the aggregate amount of
all reductions or savings in income taxes resulting from the Person
having claimed depreciation, depletion, obsolescence and/or
amortization for income tax purposes in
68
<PAGE>
excess of the amounts actually deducted on its books over the
aggregate amount of all increases in income taxes resulting from
the amounts charged by such Person for income tax purposes on
account of depreciation, depletion, obsolescence and/or
amortization being less than the amounts actually deducted on its
books (due to such Person having elected to deduct for income tax
purposes accelerated depreciation, depletion obsolescence and/or
amortization in prior years and having so exhausted or diminished
the amounts otherwise permitted to be deducted on such account);
PROVIDED, HOWEVER, that, except as provided in clause (b)(iii)
above, in determining the amounts to be included in clauses (a) and
(b) above no federal tax adjustments for any period prior to
October 1, 1995 shall be a proper charge or credit to income for
any period subsequent to September 30, 1995, and any federal tax
adjustments for any period subsequent to September 30, 1995 shall
be included as a proper charge or credit to income for the year in
which actually finally determined, except to the extent, if any, to
which the amount of such adjustment is charged to a proper reserve
for federal taxes set up out of income for any period subsequent to
September 30, 1995.
"1934 ACT" means the Securities and Exchange Act of 1934, as amended.
"1988 NOTE PURCHASE AGREEMENT" means each of the Note Purchase
Agreements, dated as of December 15, 1988, as amended, between the
Company and each of The Mutual Life insurance Company of New York
and MONY Life Insurance Company of America.
"1988 NOTES" means the 11.58% secured promissory notes
due December 1, 1998 of the Company issued pursuant to the 1988
Note Purchase Agreement.
69
<PAGE>
"NOTE" and "NOTES" have the respective meanings set forth in Section
1.1.
"NOTEHOLDER" means the person in whose name a Note has been registered
by the Company pursuant to Section 3.1, except that until such Note
has been so registered, the term Noteholder shall mean the person
in whose name any such Note was,issued.
"OCCUPANT" means any tenant, subtenant, occupant, prior tenant, prior
subtenant, prior occupant or other person in possession of or
occupying property owned, leased or otherwise occupied by the
Company or any Subsidiary.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, trust, estate, unincorporated
organization, Government or Governmental body.
"PLAN" means any employee benefit plan or other plan (i) established
or maintained for the benefit of employees of the Company or any
Related Person or to which the Company or any Related Person makes
any contribution and (ii) to which Title IV of ERISA applies.
"PREFERRED STOCK" means capital stock of any class or classes (however
designated) of a corporation which is preferred as to the payment
of dividends, or as to the distribution of assets on any voluntary
or involuntary liquidation or dissolution of such corporation over
shares of stock of any other class of such corporation or which is
subject to any requirement of mandatory redemption by such
corporation (whether through the operation of any sinking fund or
otherwise).
"PREPAYMENTS" has the meaning set forth in Section 2.1.
"PRO FORMA CONSOLIDATED DEBT SERVICE" means the aggregate amount
payable during the period of the next four consecutive fiscal
70
<PAGE>
quarters of the Company and its Restricted Subsidiaries, beginning
subsequent to the date on which such determination is made, in
respect of interest on Indebtedness and in respect of required
payments and prepayments of the principal of, and premium, if any,
on, Indebtedness, PROVIDED that, in the case of any Indebtedness
which provides for the payment of interest thereon at a rate which
fluctuates, the interest in respect thereof which shall be included
in Pro Forma Consolidated Debt Service shall be computed on the
basis of the higher of (x) the interest rate in effect at the time
of any such determination of Pro Forma Consolidated Debt Service
and (y) the maximum interest rate which may be borne by such
Indebtedness, if by its terms such maximum interest rate is
established, except for any maximum interest rate established
solely in order to ensure compliance with applicable usury laws.
"PROHIBITED TRANSACTION" has the meaning assigned to that term in
Title I of ERISA or in Section 4975 of the Code.
"PURCHASER" has the meaning set forth in the introduction to this
Agreement.
"RELATED PERSON" means any corporation or unincorporated trade or
business which is controlled by, or under common control with, the
Company within the meaning of sections 414(b) and (c) of the Code.
"RENTALS" means, for any period, for any Person the aggregate fixed
amounts (other than amounts required to be capitalized and included
in Indebtedness in accordance with generally accepted accounting
principles) payable by such Person as lessee under any lease having
a remaining term in excess of one year from the date of
determination, including extensions and renewals at the option of
the lessor but shall not include any amounts required to be paid by
such lessee (whether or not designated in such lease as rentals or
additional rentals) in respect of maintenance,
71
<PAGE>
repairs, income taxes, property taxes, insurance, assessments,
amortization or other similar charges.
"REPORTABLE EVENT" has the meaning assigned to that term in Title IV
of the Employee Retirement Income Security Act of 1974.
"REQUIREMENT OF LAW" means any applicable term, condition
or provision of any law (including, without limitation, any
Environmental Law), or of any rule, regulation, order, writ,
injunction or decree of any court or Government, domestic or
foreign, or of any decision or ruling of any arbitrator, or of the
certificate of incorporation or by-laws of the Company or any
Restricted Subsidiary.
"RESTRICTED INVESTMENT" means any Investment not permitted pursuant to
Section 7.13(a) through (e) and (g) through (i), inclusive.
"RESTRICTED PAYMENT" has the meaning set forth in Section 7.7.
"RESTRICTED SUBSIDIARY" means any Subsidiary which is not an
Unrestricted Subsidiary. A Subsidiary which becomes a Restricted
Subsidiary shall remain so for all purposes of this Agreement, and
may not be designated an Unrestricted Subsidiary.
"SECOND CLOSING DATE" has the meaning set forth in Section 1.2.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCK OPTION PLAN" means the stock option plans of the Company under
which shares of Common Stock of the Company shall be reserved for
purchase options of officers, directors, employees and agents of
the Company, as the same may be modified and in effect from time to
time.
72
<PAGE>
"SUBSIDIARY" means, at any date, any corporation, partnership, trust,
limited liability company, limited partnership or similar entity
(a) at least a majority of the outstanding capital stock or equity
interests having ordinary voting power of which, except directors'
qualifying shares (as required by law), is directly or indirectly
owned by the Company or one or more Subsidiaries, (b) which is
incorporated or organized, as the case may be, under the laws of
any State of the United States or the District of Columbia or under
the laws of the Dominion of Canada or any province thereof, and (c)
which maintains all or substantially all of its properties and
.assets within the United States or any territory thereof or the
Dominion of Canada.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar
obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For the
purposes of this Agreement, the amount of the obligation under any
Swap shall be the amount determined in respect thereof as of the
end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any
agreement relating to such Swap provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall
be the net amount so determined.
"TERMINATION OR WITHDRAWAL EVENT" means (a) the filing of a notice of
intent to terminate any Plan under Section 4041 of ERISA, (b) any
other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer any Plan, (c) the
institution by the Pension
73
<PAGE>
Benefit Guaranty Corporation of proceedings to terminate any Plan
or to have a trustee appointed to administer any Plan, (d) the
filing of a notice by the plan administrator that the withdrawal of
the Company or any Related Person is, or is treated as, the
withdrawal of a substantial employer within the meaning of Section
4063 of ERISA, (e) the withdrawal of the Company or a Related
Person from any Multiemployer Plan or a "complete withdrawal" or a
"partial withdrawal" within the meaning of Subtitle E of Title IV
of ERISA, or (f) the involvement of the Company or a Related Person
in a situation referred to in Section 4204 of ERISA.
"TWELVE YEAR NOTES" has the meaning set forth in Section 1.1(a).
"UNRESTRICTED SUBSIDIARY" means any Subsidiary designated as such by
the Company to the Noteholders. A Subsidiary designated as an
Unrestricted Subsidiary shall remain so for all purposes of this
Agreement, and may not be designated or become a Restricted
Subsidiary.
"VOTING SECURITIES" means capital stock of any class or classes of a
corporation, or other equity interests in any other Person, having
general voting power under ordinary circumstances to elect a
majority of the board of directors of such corporation, or persons
performing similar functions in such corporation or other Person
(irrespective of whether or not at the time stock or other
securities of any other class or classes shall have or might have
special voting power or rights by reason of the happening of any
contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" of any obligation means as of the
date of the determination thereof the number of years obtained by
dividing the then Remaining Dollar Years of such obligation by the
then outstanding principal amount of such obligation. The term
"Remaining Dollar Years"
74
<PAGE>
of any obligation means as of the date of determination thereof the
amount obtained by (a) multiplying the principal amount of each then
remaining sinking fund, serial maturity, installment maturity or other
required repayment or redemption, including repayment at final
maturity, by the number of years (calculated to the nearest one-
twelfth) which will elapse between such date of determination and the
date of that repayment or redemption and (b) totaling all of the
products obtained in (a).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means, at any
time, any Restricted Subsidiary one hundred percent (100%) of
all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more
of the Company and the Company's other Wholly-owned Restricted
Subsidiaries at such time.
Section 10.2. ACCOUNTING TERMS. All accounting terms used herein
which are not otherwise expressly defined shall have the meanings
respectively given to them in accordance with generally accepted accounting
principles. If because of a change in generally accepted accounting
principles an Event of Default would exist under this Agreement, the Company
and the Purchaser will, in good faith, mutually discuss the effects of such
changes on the covenants contained in this Agreement and the possibility of
amending or modifying such covenants to eliminate such Event of Default.
Section 10.3. NEW YORK LAW. THIS AGREEMENT AND THE NOTES ISSUED
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
Section 10.4. HEADINGS. The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
SECTION 11. MISCELLANEOUS.
Section 11.1. COMMUNICATIONS. Subject to Section 3.4, all
communications provided for under this Agreement or under the Notes shall be
in writing and shall be deemed to have been given or made when delivered or
mailed by registered
75
<PAGE>
or certified mail postage prepaid or, to the extent receipt is confirmed, by
telecopy, telefax or other electronic transmission service:
(a) if to the Purchaser, at the Purchaser's address or telecopy
number set forth in Schedule I to this Agreement, as such address
or telecopy number may be changed from time to time by written
notice to the Company; or
(b) if to the Company at its office at 5215 North O'Connor
Boulevard, Suite 940, Central Tower at Williams Square, Irving,
Texas 75039, marked for attention to Mr. Paul V. Dufour, Telecopy
Number: (214) 869-6556, as such address or telecopy number may be
changed from time to;time in accordance with Section 7.1 by written
notice to the Purchasers and the holders of the Notes; or
(c) if to any holder of a Note, at the address or telecopy number
of such holder as it appears on the register maintained as provided
in Section 3.1 (which address or telecopy number, in the case of a
Purchaser, initially shall be the address or telecopy number of
such Purchaser specified in clause (a) of this Section 11.1) as such
address or telecopy number may be changed by such holder from time
to time by written notice to the Company.
Section 11.2. AMENDMENT AND WAIVER. (a) Any term, covenant, agreement
or condition of this Agreement may, with the consent of the Company, be amended,
or compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by and only by one or more
substantially concurrent written instruments signed by the holders of not less
than 66-2/3% in aggregate principal amount of the Notes at the time outstanding
(the "Majority Noteholders"); PROVIDED, HOWEVER, that no such amendment or
waiver shall, without the consent in writing of the holders of all of the Notes
at the time outstanding, subordinate or change the amount of, or the date of
final maturity of, the principal of any of the Notes, or change the amount of,
or the time of payment of, any installment of principal of any of the Notes, or
change the rate of, or the time of payment of, interest on any of
76
<PAGE>
the Notes, or change the amount of any premium payable upon any prepayment of
the Notes, or amend any provision of 59, or change the percentage of holders of
Notes required to approve any such amendment or effectuate any such waiver. Any
amendment or waiver pursuant to this Section 11.2 shall apply equally to all
holders of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company.
(b) The Company will give prompt notice to all holders of the
Notes of the effectiveness of any amendment or waiver entered into in accordance
with the provisions of this Section 11.2. Such notice shall state the terms of
any such amendment or waiver and shall be accompanied by at least two conformed
copies (which may be composite conformed copies) of each written instrument
which embodies such amendment or waiver.
Section 11.3. EXPENSES. Whether or not the transactions contemplated
by this Agreement shall be consummated, the Company will (a) pay all your
reasonable expenses incident thereto and all reasonable expenses of all holders
of Notes incident to any modification, amendment, waiver or alteration of the
terms or provisions of this Agreement or of the Notes, and to any such
modification, amendment, waiver or alteration proposed or initiated by the
Company, whether or not effected, including in each case, but not limited to,
your or such holders' out-of-pocket expenses, the costs of delivery of your or
such holders' Notes (and insurance with respect to such delivery to your or such
holders' home office or offices or the office or offices of your or such
holders' nominee or nominees, and the fees and disbursements of your or such
holders' special counsel; (b) pay all printing and/or word processing costs in
connection therewith or in connection with any such modification, amendment,
waiver or alteration or any such proposed modification, amendment, waiver or
alteration; and (c) pay any and all taxes in connection with the issuance, sale,
and delivery of the Notes and in connection with any modification, amendment,
waiver or alteration of this Agreement or the Notes and save the Purchaser and
any subsequent holders of the Notes harmless without limitation as to time
against any and all liabilities (including any interest or penalty for non-
payment or delay in payment) with respect to all such taxes (other than transfer
taxes on a transfer thereof). The obligations of the Company under this Section
11.3 shall survive the payment or prepayment of the Notes and the termination of
this Agreement.
77
<PAGE>
Section 11.4. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing one
or more counterparts.
Section 11.5. SURVIVAL OF WARRANTIES AND REPRESENTATIONS. All
covenants, agreements, representations, warranties and statements by or on
behalf of the Company or any Restricted Subsidiary made herein or in any
certificate, written statement, document or other instrument furnished by or on
behalf of the Company or any Restricted Subsidiary to you in connection with the
negotiation of this Agreement, the sale of the Notes or the Company's
performance of its obligations hereunder or thereunder or otherwise furnished to
you in compliance with this Agreement, subject to the following, shall be
considered to have been relied upon by you and shall survive the issuance and
delivery of the Notes to you and the payment therefor regardless of any
investigation made by you or on your behalf. All statements in such
certificates, statements, documents or other instruments shall constitute
warranties and representations of the Company hereunder to the extent set forth
therein.
Section 11.6. SUCCESSORS AND ASSIGNS. All covenants, agreements,
representations and warranties made herein shall bind, and inure to the benefit
of, the successors and assigns of the Company, whether so expressed or not, and
all such covenants, agreements, representations and warranties shall bind, and
inure to the benefit of, your successors and assigns. All provisions of this
Agreement are intended to be for the benefit of all holders, from time to time,
of the Notes issued pursuant hereto and shall be enforceable by any such holder,
whether or not an express assignment to such holder of rights under this
Agreement has been made by you, or any of your successors or assigns.
Section 11.7. SEVERABILITY. Any provision of this Agreement or the
Notes which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
78
<PAGE>
If the foregoing is satisfactory to you, will you please sign the form
of acceptance on the enclosed counterparts of this Agreement and forward the
same to the undersigned, whereupon this Agreement will become a binding
agreement between us.
Very truly yours,
IMCO RECYCLING INC.
By: /s/ JAMES B. WALBURG
----------------------
Title
The foregoing Agreement is
hereby accepted, as of
the date first above written.
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ PETER W. OLIVER
--------------------------
Peter W. Oliver
Managing Director
<PAGE>
FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT
THIS AMENDMENT TO NOTE PURCHASE AGREEMENT is made and entered into
effective as of the 29th day of November, 1995, by and among IMCO Recycling
Inc., a Delaware corporation (the "Company"), The Mutual Life Insurance
Company of New York ("MONY") and MONY Life Insurance Company of America
("MLICA").
W I T N E S S E T H
WHEREAS, the Company, MONY and MLICA are parties to that certain
Note Purchase Agreement, dated as of December 15, 1988, as heretofore amended
(the "1988 Agreement"), pursuant to which the Company sold and MONY and MLICA
collectively purchased $2,500,000 aggregate principal amount of the Company's
10.29% Secured Promissory Notes due December 1, 1993, $2,500,000 aggregate
principal amount of its 10.37% Secured Promissory Notes due December 1, 1994,
and $8,000,000 aggregate principal amount of its 11.58% Secured Promissory
Notes due December 1, 1998 (collectively, the "1988 Notes"); and
WHEREAS, the parties desire to further amend the Agreement in
accordance with Section 11.2 thereof as set forth herein;
NOW THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and
covenants set forth herein and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AMENDMENTS. The following Sections of the Agreement are each
amended as follows:
(A) Section 7.1 is amended by deleting the language "4300-E Texas
Commerce Bank Tower, 2200 Ross Avenue, LB 169, Dallas, Texas 75201," in the
fifth line thereof and substituting in its place the following language:
"5215 North O'Connor Boulevard, Suite 940, Central Tower at Williams
Square, Irving, Texas 75039,".
(B) Section 7.2 is amended by deleting the two references to
"$100,000" in the proviso thereto with the term "$500,000".
<PAGE>
(C) Section 7.3 is amended as follows:
(i) subparagraph (b) is amended in its entirety to read as follows:
"(b) keep adequately insured, by financially sound and reputable
insurers, all of its properties, assets and operations of a character
usually insured by Persons of established reputation engaged in the same
or a similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such Persons and
carry, with such insurers in customary amounts, such other insurance,
including without limitation public and product liability insurance,
business interruption insurance (if available at commercially reasonable
rates) and workers compensation insurance (except that the Company or
any Restricted Subsidiary may self-insure workers compensation liability
to the extent permitted by applicable state law), as is usually carried
by Persons of established reputation engaged in the same or a similar
business similarly situated"; and
(ii) subparagraph (f) is amended in its entirety to read as follows:
"(f) not enter into, or allow any Restricted Subsidiary to enter into,
the ownership, active management or operation of any business which is
not a business related to the recovery of nonferrous metals;".
(D) Section 7.4 is amended as follows:
(i) subparagraph (a) is amended by replacing the term "1986" in the
second line thereof with the term "1995";
(ii) subparagraph (b) is deleted in its entirety and replaced with the
language "[intentionally omitted]";
(iii) subparagraph (c) is amended in its entirety to read as follows:
2
<PAGE>
"Current Liabilities of the Company constituting Indebtedness for Money
Borrowed not overdue and not at the time of incurrence thereof in the
aggregate principal amount outstanding in excess of $10,000,000, PROVIDED
that during the 14-month period commencing on October 31, 1995, and each
consecutive 14-month period commencing on the first day of each month
thereafter, the Company will eliminate and be free of all such Current
Liabilities for a period of at least 60 consecutive days";
(iv) subparagraph (d) is amended by replacing all references to
"September 30, 1988" with November 29, 1995, and by inserting the phrase
"to the 1995 Agreement" after the phrase "Exhibit B" in the third line
thereof;
(v) subparagraph (g) is amended in its entirety to read as follows:
"(g) Indebtedness of any Restricted Subsidiary owing to the Company
or to any other Wholly-Owned Restricted Subsidiary and Indebtedness of
the Company owing to its Restricted Subsidiary, IMCO Management
Partnership L.P., a Texas limited partnership;"
(vi) subparagraph (k) is amended in its entirety to read as follows:
"additional Funded Indebtedness of the Company or any Restricted
Subsidiary, PROVIDED HOWEVER, that immediately after giving effect to
the creation, incurrence or assumption of such additional Funded
Indebtedness and to the application of any proceeds thereof:
(i) Consolidated Funded Indebtedness shall not exceed 45% of
Consolidated Net Tangible Assets at any time prior to December 1, 1998;
and from and after December 1, 1998, Consolidated Funded Indebtedness
shall not exceed 40% of Consolidated Net Tangible Assets;
(ii) the ratio of the aggregate Consolidated Cash Make for the
3
<PAGE>
immediately preceding four fiscal quarters of the Company to PRO
Forma Consolidated Debt Service shall not be less than 1.2 to 1; and
(iii) in the case of Funded Indebtedness of Restricted
Subsidiaries, the sum of (A) such Funded Indebtedness, together with
all other Funded Indebtedness of Restricted Subsidiaries then
outstanding, plus, without duplication, (B) the outstanding principal
amount of all Indebtedness permitted by Section 7.4(l), shall not
exceed 10% of Consolidated Net Tangible Assets at such time of
determination; and"
(vii) subparagraph (l) is amended in its entirety to read as follows:
"(l) Indebtedness of the Company or any Restricted Subsidiary to
the seller of property in respect of the purchase by the Company or
such Restricted Subsidiary of such property to be used in the
ordinary course of the Company's or such Restricted Subsidiary's
business, provided that the sum of (i) such Indebtedness, together
with all other Indebtedness permitted by this Section 7.4(l) then
outstanding, plus, without duplication, (ii) the outstanding
principal amount of Funded Indebtedness of Restricted
Subsidiaries, shall not exceed 10% of Consolidated Net Tangible
Assets at such time of determination and provided, further, that
in the event such Indebtedness shall by its terms mature more
than one year from the incurrence thereof, immediately after
giving effect to the incurrence thereof, the Company can incur an
additional $1.00 of Funded Indebtedness pursuant to Section 7.4(k)."
Section 7.4 is further amended by adding the
4
<PAGE>
following language at the end thereof:
"Notwithstanding any provisions of this Section 7.4 to
the contrary, neither IMCO Investment Company nor IMCO
Management Partnership, L.P. will create, incur, assume
or in any manner become liable, contingently or
otherwise, in respect of any Indebtedness for Money
Borrowed other than Indebtedness for Money Borrowed owing
to the Company or another Restricted Subsidiary."
(E) Section 7.5 is amended by inserting the term "(i)" after the
word "than" in the fourth line thereof and by adding the following language
to the end thereof:
", (ii) Guaranties by the Company and Restricted
Subsidiaries pertaining to obligations not exceeding in
the aggregate the greater of (x) $5,000,000 and (y) 5% of
Consolidated Tangible Net Worth as of such date, and
(iii) Guaranties by the Company or by any Wholly-Owned
Restricted Subsidiary of Indebtedness of any Wholly-Owned
Restricted Subsidiary or of the Company, as the case may
be; provided that all such Indebtedness described in
clauses (ii) and (iii) above is permitted to be incurred
under this Agreement at the date of the making of such
Guaranty and provided, further, that in the event that
any Restricted Subsidiary shall guarantee any
Indebtedness of the Company, such Restricted Subsidiary
shall also deliver a Guaranty, in form and substance
reasonably satisfactory to each holder of the Notes, to
each such holder of the obligations of the Company under
the Notes, but any such Guaranty to such holder(s) shall
not be included in any computation of outstanding
Guaranties for the purposes of this Section 7.5.
(F) Section 7.6 is amended by inserting the language "(including,
without limitation, accounts receivable, inventory and cash and deposits)"
after the language "properties or assets" in the eighth line thereof and by
replacing the phrase "(h), (i) and (j)" after the phrase "clauses (e)," in
the nineteenth line thereof with the phrase "(g) and (h)".
Section 7.6 is further amended by the following changes:
5
<PAGE>
(i) subparagraph (b) is amended to insert the language "not
involving Indebtedness for Money Borrowed, including Liens" after
the language "ordinary course of business" in the second line thereof;
(ii) subparagraph (f) is amended by adding the following language
at the end thereof:
"and all Uniform Commercial Code financing statements, Liens
and other matters affecting the Mortgaged Property that are
described in Exhibit B;"
(iii) subparagraph (g) is amended in its entirety to read as follows:
"(g) Liens on the real and personal property subject (as
of November 29, 1995) to the Kentucky Mortgage and
Security Agreement which may be created to secure certain
revenue bonds issued or to be issued in an aggregate
principal amount not exceeding $10,000,000 in connection
with a salt cake processing facility and landfill
expansion constructed or to be constructed on such
property;";
(iv) subparagraph (h) is amended by deleting all
references to the phrase "September 30, 1988" and
replacing them with the phrase "November 29, 1995" and by
inserting the phrase "to the 1995 Agreement" after the
phrase "Exhibit B" in the second line thereof;
(v) subparagraph (i) is deleted in its entirety and the
language "[intentionally omitted]" is inserted in its place; and
(vi) subparagraph (j) is amended in its entirety to read as follows:
"(j) (i) Liens on any shares of the capital stock of an
Unrestricted Subsidiary and (ii) the Barmet Option."
6
<PAGE>
(G) Section 7.7 is amended in its entirety to read as follows:
Section 7.7. LIMITATION ON RESTRICTED PAYMENTS AND
RESTRICTED INVESTMENTS. The Company will not directly or
indirectly, through any of its Subsidiaries or otherwise,
declare or make, or incur any liability to make, any of
the following (such actions as are hereinafter described
in subsections (a) and (b) being called "Restricted
Payments"):
(a) any payment in cash, property or other assets
(other than shares of any class of capital stock of the
Company or any rights, warrants or options to purchase
such shares) as dividends or other distributions upon,
for the purpose of purchasing, retiring, redeeming or
otherwise acquiring for value, directly or indirectly, or
otherwise in respect of, any shares of any class of
capital stock (or any warrants or options evidencing a
right to purchase any such shares of stock) of the
Company, except to the extent permitted below; or
(b) any Restricted Investment;
PROVIDED, HOWEVER, that the provisions of this Section 7.7
shall not prohibit the making of any Restricted
Payment if, immediately after, and after giving effect
to, the making of such Restricted Payment (i) no Event of
Default (or event which with notice or lapse of time or
both would constitute an Event of Default) would exist
and (ii) the Net Amount of Restricted Payments made after
September 30, 1995 would not exceed the sum of (x)
$5,000,000 plus (y) 50% of Consolidated Net Income (minus
100% of any consolidated net loss) for the period
commencing October 1, 1995 and ending on the last day of
the fiscal quarter of the Company most recently ended at
the time such Restricted Payment is made plus (z) the sum
of the aggregate net cash proceeds, determined by
reference to the net cash received by the Company (after
deducting all underwriting discounts and commissions and
all other expenses of such
7
<PAGE>
issuance), from the sale of Company capital stock
made after September 30, 1995.
For purposes of this Section 7.7, "Net Amount of
Restricted Payments" means for any period (i) the
aggregate amount of cash, property and other assets (at
the greater of net book value or fair market value)
distributed during, and liabilities outstanding at the
end of, such period in respect of Restricted Payments of
the type described in subsection (a) above, and (ii) in
respect of Restricted Investments, the cost thereof less
any actual return of capital in respect thereof (it being
understood that any dividend and interest payments
received in respect of Restricted Investments shall not
reduce the cost thereof."
(H) Section 7.8 is amended in its entirety to read as follows:
"Section 7.8. MAINTENANCE OF CURRENT ASSETS, CONSOLIDATED
WORKING CAPITAL NET WORTH AND FIXED CHARGE COVERAGE.
(a) The Company and its Restricted Subsidiaries shall
at all times maintain Consolidated Working Capital equal
to or greater than $5,000,000 and shall not permit
Consolidated Current Assets to be less than 125% of
Consolidated Current Liabilities.
(b) The Company shall not at any time permit its
Consolidated Net Worth to be less than the sum of
$60,000,000 plus the greater of (i) zero and (ii) 50% of
cumulative Consolidated Net Income from and after October 1,
1995.
(c) The Company shall not at any time permit the sum of
(i) Consolidated Cash Make plus (ii) the aggregate
Rentals attributable to the Company and its Restricted
Subsidiaries to be less than 250% of the sum of
Consolidated Interest Expense plus Rentals attributable
to the Company and its Restricted Subsidiaries for the
four immediately preceding consecutive fiscal quarters."
(I) Section 7.9 is amended by (i) deleting the word "three"
in the fifth line thereof and replacing it with the word "five",
(ii) deleting all references therein to the
8
<PAGE>
term "$500,000" and replacing each of them with the term
"2,000,000", (iii) deleting the word "Senior" in the eleventh line
thereof and (iv) deleting clause (i) of the proviso thereto in its
entirety and replacing it with the language "(i) any lease of data
processing, office, communication, mobile or transportation
equipment having aggregate Rentals not to exceed $150,000."
(J) Section 7.10 is amended by inserting the word "convey"
following the language "directly or indirectly" in the fifth line
thereof and by inserting the word "conveyed" following the language
"suffer to be" in the sixth line thereof.
Section 7.10 is further amended by the following changes:
(i) subparagraphs (a) and (b) are amended by adding the
words "Wholly-Owned" immediately prior to all references
to the language "Restricted Subsidiary" therein; and
(ii) subparagraphs (c) and (d) and the last paragraph of
Section 7.10 are amended in their entirety to read as follows:
"(c) the Company may be consolidated with or merged
into any other Person, and the Company may convey, sell,
lease, transfer or otherwise dispose of all or
substantially all of its properties and assets to any
Person, and any Person may consolidate with or merge into
the Company or convey or transfer its properties or
assets substantially as an entirety to the Company, if
the resulting Person or the transferee of such assets,
as the case may be, is a corporation organized and
existing under the laws of a State in the United States
which (i) will assume the obligations of the Company
under this Agreement and the Notes and (ii) can incur an
additional $1.00 of Funded Indebtedness pursuant to
Section 7.4(k); and
(d) the Company and any Restricted Subsidiary may
convey, sell, lease, transfer, abandon or otherwise
dispose of or suffer to be conveyed, sold, leased,
transferred, abandoned or otherwise to be disposed of
(whether voluntarily or involuntarily) any of its assets
constituting not
9
<PAGE>
more than 10% of Consolidated Total Assets in any
transaction or series of related transactions during any
consecutive twelve-month period, provided that not more
than 15% of Consolidated Total Assets are disposed of on
a cumulative basis from the date hereof.
The sale or other disposition of assets in the ordinary
and usual conduct of business and the disposition of
worn-out or obsolete equipment shall not be deemed to be
dispositions of assets for the purposes of this
Section 7.10."
(K) Section 7.11 is amended in its entirety to read as follows:
"Section 7.11. ISSUE OR DISPOSITION OF SECURITIES.
No Restricted Subsidiary shall issue, sell, assign,
transfer or otherwise dispose of any shares (or other
ownership interests) of any class of its capital stock or
equity ownership interests or of any options or warrants
to purchase its capital stock or equity ownership
interests or of other securities exchangeable for or
convertible into its capital stock or equity ownership
interests except (a) to the Company or a Wholly-Owned
Restricted Subsidiary or (b) directors' qualifying shares
as required by law. Neither the Company nor any
Restricted Subsidiary shall sell, assign, transfer or
otherwise dispose of (except to the Company or a
Wholly-Owned Restricted Subsidiary) any shares of capital
stock (or other ownership interests) of any class of any
Restricted Subsidiary, or any other security of, or any
Indebtedness owing to it by, any Restricted Subsidiary,
unless:
(i) the greater of the consideration received therefor
and the value thereof as stated on the books of the
Company or such Restricted Subsidiary of (A) the stock
(or other ownership interests) and other securities of
such Restricted Subsidiary and of each other Restricted
Subsidiary disposed of pursuant to this Section 7.11 in
the fiscal year of the Company in which such sale shall
occur and (B) the other properties and assets of the
Company and its Restricted Subsidiaries disposed of
pursuant to Section 7.10(d) does not exceed 10% of
Consolidated Total Assets during any consecutive
twelve-month period,
10
<PAGE>
PROVIDED that not more than 15% of Consolidated Total
Assets are disposed of on a cumulative basis from
November 29, 1995;
(ii) all of the capital stock (or other ownership
interests) and other securities and the entire
Indebtedness of such Restricted Subsidiary owned by the
Company and each other Restricted Subsidiary shall be
sold, assigned, transferred or otherwise disposed of
(other than to the Company or a Wholly-Owned Restricted
Subsidiary) at the same time;
(iii) such Restricted Subsidiary shall not, at the time
of such sale, assignment, transfer or other disposition,
own either (A) any shares of capital stock (or other
ownership interests) of any class or any other security
or any Indebtedness of any other Restricted Subsidiary
which is not being simultaneously disposed of as
permitted by this Section 7.11 or (B) any Indebtedness of
the Company;
(iv) immediately before and after giving effect to such
sale, assignment, transfer or other disposition, no Event
of Default (or event which with notice or lapse of time
or both would constitute an Event of Default) will have
occurred and be continuing; and
(v) the consideration received for such shares of
capital stock (or other ownership interests), other
security or Indebtedness is not less than the fair market
value thereof as determined by the Board of Directors of
the Company.
For purposes of clause (i) of this Section 7.11, the
value of capital stock of any Restricted Subsidiary
issued or sold in connection with the Barmet Option shall
be included as capital stock of a Restricted Subsidiary
that was sold for a consideration of $8,417,000 and shall
be included in the computation of Consolidated Total
Assets for purposes of such clause (i) as though such
sale took place on November 30, 1995."
(L) Section 7.13 is amended as follows:
(i) subparagraphs (d) and (e) are amended by
inserting the language", limited liability
11
<PAGE>
company, partnership, trust or other similar entity"
after the word "corporation" in the first line thereof;
(ii) subparagraph (e) is further amended by (x) deleting
the term "$250,000" and replacing it with the term
"$1,000,000", (y) deleting the term "$500,000" and
replacing it with the term "$5,000,000" and (z) deleting
the phrase "the Company's" preceding "Investments" in
each of the fifth and seventh lines thereof; and
(iii) subparagraph (f) is amended in its entirety to read
as follows:
"(f) only in respect of Investments made by the
Company, Investments as permitted under the PROVISO to
Section 7.7;"
Section 7.13 is further AMENDED BY adding the
following language at the END thereof:
"(g) an Investment constituting the initial
investment in a joint venture solely to conduct
activities as permitted by Section 7.3(f), to be entered
into between the Company or a Restricted Subsidiary and
VAW aluminium AG, a German corporation, or an affiliate
thereof, such initial Investment not to exceed
$16,000,000 (U.S.);
(h) Investments in a foreign subsidiary in which
all of the capital stock and voting power will be 100%
owned, directly or indirectly, by the Company, to be
organized solely to conduct activities as permitted by
Section 7.3(f) at a plant to be located in Swansea,
Wales, United Kingdom, with such Investments not to
exceed, in the aggregate, $9,000,000 (U.S.); and
(i) Investments by the Company or a Restricted
Subsidiary in Marport Smelting, L.L.C., an Indiana
limited liability company, to conduct business solely as
permitted by Section 7.3(f), with such Investments not to
exceed $1,000,000."
(M) Section 7.15 is amended by replacing the phrase
"and change in financial position" with the language
12
<PAGE>
", changes in stockholders' equity and cash flows" in the eighteenth and
nineteenth lines thereof.
(N) Section 7.19 is amended as follows:
(i) subparagraph (b), subsection (iv) is amended in its
entirety to read as follows:
"(iv) permit the actuarial present value of all
benefit liabilities under all Plans (other than
Multiemployer Plans) to exceed the fair market
value of the assets of such Plans by more than
$250,000, with such benefit liabilities
determined based on the actuarial assumptions
which would be used by the Pension Benefit
Guaranty Corporation with respect to Plans
terminating at the time of determination; or";
and
(ii) the last sentence at the end thereof is amended in
its entirety to read as follows:
"As used in this Section 7.19, the term
"accumulated funding deficiency" has the
meaning indicated for such term in Section
4.13."
(0) Section 7.20 is amended in its entirety to read as
follows:
"Section 7.20. FOREIGN PENSION LIABILITY. The
Company will not, and will not permit any
Related Person to, incur any liability under
the laws of any applicable jurisdiction outside
of the United States to or in respect of any
employee benefit plan or other plan mandated by
law or established or maintained for the
benefit of employees of the Company or of any
Related Person which could have a Material
Adverse Effect."
(P) Section 8.1 is amended as follows:
(i) subparagraph (a) is amended (w) by replacing the word
"income" with the word "earnings" in the ninth line
thereof, (x) by replacing the phrase "stockholders'
equity and changes in financial position" with the phrase
"cash flows" in the tenth line thereof, (y) by replacing
the word "either"
13
<PAGE>
with the word "any" in the twenty-ninth line thereof, and
(z) by inserting the language "and such other statements"
after the word "income" in the thirty-fourth line thereof;
(ii) subparagraph (b) is amended (v) by replacing the
word "income" with the word "earnings" in the tenth line
thereof, (w) by inserting the phrase "changes in" after
the word "of" in the eleventh line thereof, (x) by
replacing the phrase "changes in financial position" with
the phrase "cash flows" in the twelfth line thereof, (y)
by replacing the word "either" with the word "any" in the
thirty-second line thereof, and (z) by inserting the
language "and such other statements" after the word
"income" in the thirty-seventh line thereof;
(iii) subparagraph (c) is amended in its entirety to read
as follows:
"(c) together with the delivery of the financial
statements referred to in Section 8.1(a) and (b) (or, in
the case of clause (i) below, if quarterly or annual
reporting requirements for such entities differ from
those set forth in Section 8.1(a) or (b), as soon as the
same are available), (i) separate financial statements of
substantially the same type referred to in Section 8.1(a)
and (b) for each of the entities described in Section
7.13(g), (h) and (i), together with, to the extent any
such fiscal year-end financial statements are audited, a
copy of the auditor's report with respect to such
financial statements, and (ii) a copy of a report to
management of the Company on a plant-by-plant,
year-to-date, basis, substantially in the form attached
to the 1995 Note Agreement as Exhibit C;"
(iv) subparagraphs (g) and (h) are deleted in their
entirety and the language "[intentionally omitted]" is
inserted in each of their places; and
(v) the last paragraph is amended by inserting the
language "(i) such information is publicly available or
(ii)" after the word "unless" in the thirteenth line
thereof.
14
<PAGE>
(Q) Section 8.2 is amended by deleting the phrase
"the Chairman of the Board of Directors or" after the
word "of" in the fourth line thereof.
(R) Section 8.4 is amended by inserting the
phrase "(unless an Event of Default shall have occurred
and is continuing, in which event at the Company's
expense)" after the word "expense" in the sixth line
thereof.
(S) Section 9.1 is amended as follows:
(i) subparagraph (e) is amended (x) by deleting the
parenthesized phrase in the fourth and fifth lines
thereof and replacing it with the language "(including
any of the 1995 Notes)", (y) by deleting the phrase ",
except in the case of immaterial defaults relating to the
Bond Documents," in the fourteenth, fifteenth, and
sixteenth lines thereof and (z) by inserting the language
"or other governing body" following the language "Board
of Directors" in the twenty-seventh line thereof;
(ii) subparagraph (f) is amended by replacing the
term "$500,000" in the fifth line thereof with the
term "$1,000,000";
(iii) subparagraph (j) is amended (x) by (i) inserting
the language "provided that any of the following actions
could result in a Material Adverse Effect (with respect
to the Company or any Related Person)," at the beginning
thereof, (y) by deleting the word "or" in the eighth line
thereof, and by (z) inserting the phrase ", or (iv) the
Company or any Related Person shall withdraw or partially
withdraw from any Multiemployer Plan" at the end thereof;
(iv) subparagraph (m) is amended by replacing the phrase
"$200,000" in the third line thereof with the phrase
"$500,000"; and
(v) subparagraph (p) is amended by deleting the phrase
", or the Company or any party thereto shall default in
the performance of its material obligations under the
Bond Documents at the end thereof".
15
<PAGE>
(T) Section 10.1 is amended as follows:
(i) the following definitions are deleted in their
entirety:
"Accounts Receivable", "Consolidated Cash Flow Available
for Debt Service", "Excess Cash Flow", and "Pro Forma
Consolidated Debt Service Requirements".
(ii) the following definitions are hereby added to
Section 10.1:
"'BARMET OPTION' means that certain right of Barmet
Aluminum Corporation ("Barmet") to purchase up to a 49%
interest in IMCO Recycling of Ohio Inc., a Restricted
Subsidiary, pursuant to the terms and conditions of that
certain Supply Agreement dated March 2, 1992, as amended,
by and between the Company and Barmet."
"'CONSOLIDATED CASH MAKE' for any period means the
sum of:
(a) Consolidated Net Income for such period (minus, in
the event of any sale or other disposition of the type
referred to in Section 7.10 or Section 7.11, other than
to the Company or a Restricted Subsidiary, Net Income
attributable to any Restricted Subsidiary (or reasonably
attributable to any assets) so sold or otherwise disposed
of for such period) plus expenses of the Company and its
Restricted Subsidiaries in respect of interest on
Indebtedness and expenses of the type set forth in (b)(v)
of the definition of Net Income for such period (except
for such expenses which were deducted in calculating Net
Income for such period and were attributable to assets
sold or otherwise disposed of in a transaction of the
type referred to in Section 7.10 or Section 7.11, other
than to the Company or a Restricted Subsidiary,
attributable to the assets or securities so sold); and
(b) (without duplication of any amounts included for
such period pursuant to (a) above) as to any corporation
or other entity which became a Restricted Subsidiary
after the beginning of such period, or part or all of the
assets of which were
16
<PAGE>
acquired by the Company or a Restricted Subsidiary after
the beginning of such period, its Net Income during such
period prior to the date on which it became a Restricted
Subsidiary or the Net Income reasonably attributable to
such assets during the period prior to the acquisition
hereof without, in either case, any deduction for
interest charges on Indebtedness of such corporation or
other entity or for depreciation and amortization of such
acquired assets, provided that if during such period the
proceeds from any sale or other disposition of the type
referred to in Section 7.10 or Section 7.11 (other than
to the Company or a Restricted Subsidiary) have been
utilized to acquire such corporation or such assets, the
Net Income of such corporation or the Net Income
reasonably attributable to such assets included in
Consolidated Cash Make pursuant to this clause (b) shall
be reduced by the amount of the contribution, if any, to
Consolidated Net Income made during such period by such
proceeds."
"'CONSOLIDATED INTEREST EXPENSE' means the aggregate of
all interest charges on Indebtedness of the Company and
its Restricted Subsidiaries after eliminating all
inter-company items, and otherwise computed, in
accordance with generally accepted accounting principles."
"'ELEVEN AND ONE-HALF YEAR NOTES' has the meaning
set forth in the 1995 Note Agreement.
"'ENVIRONMENTAL LAWS' means any and all Federal, state,
local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the
protection of the environment or the release of any
materials into the environment, including but not limited
to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems."
"'1995 NOTE AGREEMENT' means the Note Purchase Agreement
dated as of November 29, 1995 between the Company and The
Mutual Life Insurance Company of New York."
17
<PAGE>
"'1995 NOTES' means the unsecured promissory notes due
October 31, 2007 of the Company issued pursuant to the
1995 Note Agreement."
"'PRO FORMA CONSOLIDATED DEBT SERVICE' means the
aggregate amount payable during the period of the next
four consecutive fiscal quarters of the Company and its
Restricted Subsidiaries, beginning subsequent to the date
on which such determination is made, in respect of
interest on Indebtedness and in respect of required
payments and prepayments of the principal of, and
premium, if any, on, Indebtedness, PROVIDED that, in the
case of any Indebtedness which provides for the payment
of interest thereon at a rate which fluctuates, the
interest in respect thereof which shall be included in
Pro Forma Consolidated Debt Service shall be computed on
the basis of the higher of (x) the interest rate in
effect at the time of any such determination of Pro Forma
Consolidated Debt Service and (y) the maximum interest
rate which may be borne by such Indebtedness, if by its
terms such maximum interest rate is established, except
for any maximum interest rate established solely in order
to ensure compliance with applicable usury laws."
"'SWAPS' means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency
swaps and similar obligations obligating such Person to
make payments, whether periodically or upon the happening
of a contingency. For the purposes of this Agreement,
the amount of the obligation under any Swap shall be the
amount determined in respect thereof as of the end of the
then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at
the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap
provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides
for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such
obligation shall be the net amount so determined."
"'WHOLLY-OWNED RESTRICTED SUBSIDIARY' means, at any time,
any Restricted Subsidiary one hundred percent
18
<PAGE>
(100%) of all of the equity interest (except directors'
qualifying shares) and voting interests of which are
owned by any one or more of the Company and the Company's
other Wholly-Owned Restricted Subsidiaries at such time."
(iii) The following definitions are amended as follows:
"APPLICABLE TREASURY YIELD" is amended in its
entirety to read as follows:
"'APPLICABLE TREASURY YIELD' shall be determined by
reference to (i) the display designated as "Page 678" on
the Telerate Access Service (or such other display as may
replace Page 678 on the Telerate Access Service) as of
10:00 a.m. (New York City time) on the second Business
Day preceding the date fixed for the payment of the Notes
in question, or (ii) if not reported as of such time or
otherwise unascertainable, the most recent Federal
Reserve Statistical Release H.15 (519) which has become
publicly available at least two Business Days prior to
the date fixed for the payment of Notes in question (or,
if such Statistical Release is no longer published, any
publicly available source of similar market data), and
shall mean the yield reported on such Telerate Access
Service, or most recent weekly average yield, as the case
may be, on actively traded U.S. Treasury securities
adjusted to a constant maturity equal to the then
remaining Weighted Average Life to Maturity of such Notes
(the "REMAINING LIFE"); provided that if the Remaining
Life of such Notes is not equal to the contract maturity
of a U.S. Treasury security for which a yield or weekly
average yield is given, the Applicable Treasury Yield
shall be obtained by linear interpolation (calculated to
the nearest one-twelfth of a year) from the yield or
weekly average yield of U.S. Treasury securities for
which such yields are given."
"CONSOLIDATED FUNDED INDEBTEDNESS" is amended by adding
the following language to the end thereof:
"PROVIDED, that for purposes of computing Consolidated
Funded Indebtedness prior to the
19
<PAGE>
Second Closing Date (as defined in the 1995 Note
Agreement), such term shall be deemed to include
$15,000,000 aggregate principal amount of the Eleven and
One-Half Year Notes as though the same had been issued in
full on November 29, 1995".
"CONSOLIDATED NET TANGIBLE ASSETS" is amended in its
entirety to read as follows:
"'CONSOLIDATED NET TANGIBLE ASSETS' means, at any date,
the aggregate amount of all assets of the Company and its
Restricted Subsidiaries after deducting therefrom (i)
depreciation, depletion, obsolescence, amortization,
valuation, contingency and other proper reserves in
accordance with generally accepted accounting principles,
(ii) Consolidated Current Liabilities, (iii) Restricted
Investments and Investments referred to in Section
7.13(e) and (i), (iv) that portion of the book amount of
all such assets which would be treated as intangible
assets under generally accepted accounting principles,
including without limitation, all such items as goodwill,
trade marks, trade names, brand names, copyrights,
patents, licenses and rights with respect to the
foregoing, write-up of assets subsequent to June 30, 1995
and unamortized debt discount and expenses, and (v) all
long term liabilities other than Funded Indebtedness;
PROVIDED that, solely for purposes of Section 7.4(k)(i), for
purposes of computing Consolidated Net Tangible Assets
prior to the Second Closing Date (as defined in the 1995
Note Agreement), such term shall be deemed to include
$15,000,000 aggregate principal amount of the Eleven and
One-Half Year Notes as though the same had been issued in
full on November 29, 1995 and that the Company had
received $15,000,000 cash in proceeds from such issuance."
"CONSOLIDATED TANGIBLE NET WORTH" is amended by deleting
the phrase "October 31, 1986" in clause (iii) thereof and
inserting the language "June 30, 1995" in its place and
by adding the language "and Investments referred to in
Section 7.13(e) and (i)" after "Restricted Investments"
in clause (vi) thereof.
"CURRENT LIABILITIES" is amended by replacing the
language "and the 1986 Notes and the Subordinated
20
<PAGE>
Notes" with the phrase "and the 1995 Notes" in the
penultimate and last lines thereof.
"FIRM OF CERTIFIED PUBLIC ACCOUNTANTS" is amended
in its entirety to read as follows:
"'FIRM OF CERTIFIED PUBLIC ACCOUNTANTS' means Ernst and
Young LLP, Arthur Andersen & Co., Coopers & Lybrand,
Deloitte & Touche LLP, KPMG Peat Marwick LLP, Price
Waterhouse & Co., or any other nationally recognized firm
of certified public accountants satisfactory to the
Majority Noteholders, PROVIDED that such firm is
independent with respect to the Person or Persons whose
financial statements it examines in accordance with this
Agreement."
"FUNDED INDEBTEDNESS" is amended by deleting "the 1986
Notes and the Subordinated Notes" in the eleventh and
twelfth lines thereof and replacing such language with
"the 1995 Notes."
"INDEBTEDNESS" is amended by deleting the phase "and (c)"
in the eighteenth line thereof and replacing such
language with ", (c) all Swaps and (d),"
"NET INCOME" is amended by (i) deleting all references to
the phrase "October 31, 1985" and replacing them with the
phrase "September 30, 1995" and (ii) replacing the
reference to "November 1, 1985" therein with "October 1,
1995."
"PERSON" is amended by inserting the language ", limited
liability company" after the word "Partnership" in the
second line thereof.
"REQUIREMENT OF LAW" is amended by inserting the phrase
"(including without limitation, any Environmental Law)"
after the word "law" in the second line thereof.
"RESTRICTED INVESTMENT" is amended in its entirety
to read as follows:
"'RESTRICTED INVESTMENT' means any Investment not
permitted pursuant to Section 7.13(a) through (e) and (g)
through (i), inclusive."
21
<PAGE>
"RESTRICTED SUBSIDIARY" is amended in its entirety to
read as follows:
"'RESTRICTED SUBSIDIARY' means any Subsidiary which is
not an Unrestricted Subsidiary. A Subsidiary which
becomes a Restricted Subsidiary shall remain so for all
purposes of this Agreement, and may not be designated an
Unrestricted Subsidiary."
"STOCK OPTION PLAN" is amended (w) by deleting the word
"non-qualified" in the first line thereof, (x) by
replacing the word "plan" with the word "plans" in the
second line thereof, (y) by inserting the phrase ",
directors" after the word "officers" in the fifth line
thereof, and (z) by inserting the phrase "and agents"
after the word "employees" in the fifth line thereof.
"'SUBSIDIARY" is amended in its entirety to read as
follows:
"'SUBSIDIARY' means, at any date, any corporation,
partnership, trust, limited liability company, limited
partnership or similar entity (a) at least a majority of
the outstanding capital stock or equity interest having
ordinary voting power of which, except directors'
qualifying shares (as required by law), is directly or
indirectly owned by the Company or one or more
Subsidiaries, (b) which is incorporated or organized, as
the case may be, under the laws of any State of the
United States or the District of Columbia or under the
laws of the Dominion of Canada or any province thereof,
and (c) which maintains all or substantially all of its
properties and assets within the United States or any
territory thereof or the Dominion of Canada."
"UNRESTRICTED SUBSIDIARY" is amended in its entirety to
read as follows:
"'UNRESTRICTED SUBSIDIARY' means any Subsidiary
designated as such by the Company to the Noteholders. A
Subsidiary designated as an Unrestricted Subsidiary shall
remain so for all purposes of this Agreement, and may not
be designated or become a Restricted Subsidiary."
22
<PAGE>
"VOTING SECURITIES" is amended by inserting the language
", or other equity interests in any other Person,"
following the word "corporation" in the second line
thereof and by inserting the language "in such
corporation or other Person" following the phrase
"similar functions" in the sixth line thereof.
(U) Section 11.1 is amended in its entirety to read as
follows:
"Section 11.1 COMMUNICATIONS. Subject to Section 3.4,
all communications provided for under this
Agreement or under the Notes shall be in writing and
shall be deemed to have been given or made when delivered
or mailed by registered or certified mail postage prepaid
or, to the extent receipt is confirmed, by telecopy,
telefax or other electronic transmission service:
(a) if to the Purchaser, at the Purchaser's address
or telecopy number set forth in Schedule I to this
Agreement, as such address or telecopy number may be
changed from time to time by written notice to the
Company; or
(b) if to the Company at its office at 5215 North
O'Connor Boulevard, Suite 940, Central Tower at Williams
Square, Irving, Texas 75039, marked for attention to Mr.
Paul V. Dufour, Telecopy Number: (214) 869-6556, as such
address or telecopy number may be changed from time to
time in accordance with Section 7.1 by written notice to
the Purchasers and the holders of the Notes; or
(c) if to any holder of a Note, at the address or
telecopy number of such holder as it appears on the
register maintained as provided in Section 3.1 (which address or
telecopy number, in the case of a Purchaser, initially
shall be the address or telecopy number of such Purchaser
specified in clause (a) of this Section 11.1) as such
address or telecopy number may
23
<PAGE>
be changed by such holder from time to time by written
notice to the Company."
2. RELEASE OF KENTUCKY PROPERTY. The Company has advised
MONY and MLICA that a municipality or subdivision of the
Commonwealth of Kentucky has proposed to the Company that it
provide industrial revenue bond or similar financing (the "New
Kentucky Financing") for the construction of certain saltcake
processing, landfill and related facilities on the property which
is currently subject to the Kentucky Mortgage and Security
Agreement (as defined the 1988 Agreement) (the "Kentucky Property")
and that, in connection therewith, the entity providing the New
Kentucky Financing will require a first mortgage lien on such
property and the new plant and landfill to be constructed thereon.
In order to facilitate such financing, when a final commitment is
received to effect the New Kentucky Financing, the Company desires
to take such action as is necessary to subdivide the Kentucky
Property so that the current plant and facilities located thereon
shall remain subject to the Kentucky Mortgage and Security
Agreement but that a portion of the Kentucky Property on which the
new facilities are to be constructed shall be released from the
Lien of the Kentucky Mortgage and Security Agreement. In
connection therewith, MONY and MLICA agree that, subject to the
delivery to each of them of (i) a release of lien instrument, in
form and substance satisfactory to each of them and their counsel,
and (ii) lien searches of the Mortgaged Property (as defined in the
1988 Agreement) showing no liens having priority over the lien of
the Mortgages (as defined in the 1988 Agreement) other than those
previously permitted in connection with the closing of the
transactions contemplated by the 1988 Agreement, each of them will
execute such documents in order to release the Lien of the Kentucky
Mortgage and Security Agreement from that portion of the Kentucky
Property as is necessary in order to enable the New Kentucky
Financing to be effectuated.
3. MISCELLANEOUS. MONY hereby represents that it is the
holder of the entire outstanding principal amount of the Notes.
Except to the extent amended or modified by this Amendment, or
except as may have been previously waived in writing pursuant to
Section 11.2 of the Agreement, the remaining terms and provisions
of the Agreement shall remain in full force and effect for all
purposes. This Amendment is limited precisely as written and shall
not be deemed to (a) be a waiver of or consent to the modification
or deviation from any other term or condition of the Agreement
24
<PAGE>
or any of the other instruments, agreements or documents referred
to therein or (b) prejudice any right or rights which the holders
of the Notes may have now or may have in the future under or in
connection with the Agreement or any of the other instruments,
agreements or documents referred to therein.
EXECUTED effective as of the day and year first above written.
IMCO RECYCLING INC.
By: /s/ James B. Walburg
------------------------
James B. Walburg
Vice President
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Diane Hom
------------------------
Name: Diane Hom
Title: Managing Director
MONY LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Diane Hom
------------------------
Name: Diane Hom
Title: Authorized Agent
25
<PAGE>
LIST OF SUBSIDIARIES OF
IMCO RECYCLING INC.
1. IMCO Investment Company, a Delaware Corporation
2. Interamerican Zinc, Inc., a Delaware Corporation
3. IMCO Recycling of Ohio Inc., a Delaware Corporation
4. IMCO Management Partnership L.P., a Texas limited partnership
5. IMCO Recycling of California, Inc., a Delaware Corporation
6. IMCO Energy Corp., a Delaware Corporation
7. Phoenix Smelting Corporation, a Georgia Corporation
8. IMCO Recycling of Loudon Inc., a Tennessee Corporation
9. IMCO International, Inc., a Delaware Corporation
10. IMCO Recycling of Indiana Inc., a Delaware Corporation
11. IMCO Recycling of Illinois Inc., a Delaware Corporation
12. Metal Mark, Inc., an Illinois Corporation
13. Columbia Aluminum Processing, Ltd. an Illinois Corporation
14. Marnor Aluminum Processing, Inc., a Missouri Corporation
15. Tropram, Inc., an Indiana Corporation
16. Pittsburg Aluminum, Inc., a Kansas Corporation
17. IMCO Recycling of Michigan L.L.C. a Delaware Limited Liability Company
<PAGE>
EXHIBIT 23
Consent of Independent Auditors
We consent to 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, in the Registration Statement (Form S-8 No.
33-76780) pertaining to the IMCO Recycling Inc. 1992 Stock Option Plan, and
in the Registration Statement (Form S-8 No. 333-00075) pertaining to the IMCO
Recycling Inc. Amended and Restated 1992 Stock Option Plan of our report
dated February 5, 1996, with respect to the consolidated financial statements
of IMCO Recycling Inc. included in the Annual Report (Form 10-K) for the year
ended December 31, 1995.
/s/ Ernst & Young LLP
Dallas, Texas
March 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,678
<SECURITIES> 0
<RECEIVABLES> 27,442
<ALLOWANCES> 0
<INVENTORY> 9,146
<CURRENT-ASSETS> 47,917
<PP&E> 111,758
<DEPRECIATION> (32,989)
<TOTAL-ASSETS> 139,877
<CURRENT-LIABILITIES> 19,919
<BONDS> 29,754
0
0
<COMMON> 1,196
<OTHER-SE> 82,080
<TOTAL-LIABILITY-AND-EQUITY> 139,877
<SALES> 141,167
<TOTAL-REVENUES> 141,167
<CGS> 110,228
<TOTAL-COSTS> 110,228
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,073
<INCOME-PRETAX> 20,363
<INCOME-TAX> 7,893
<INCOME-CONTINUING> 12,470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,470
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
