<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 1-7170
IMCO RECYCLING INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2008280
(I.R.S. Employer Identification No.)
5215 North O'Connor Blvd., Suite 940
Central Tower at Williams Square
Irving, Texas 75039
(Address of principal executive offices)
(972) 869-6575
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on August 1, 1997.
Common Stock, $0.10 par value, 12,538,043
-----------------------------------------
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,781 $ 5,070
Accounts receivable 46,927 33,655
Inventories 16,596 11,847
Deferred income taxes 1,567 1,462
Other current assets 2,128 1,282
-------- --------
Total Current Assets 69,999 53,316
Property and equipment, net 120,022 86,308
Intangible assets
Goodwill, net of accumulated amortization of
$2,970 and $4,607, respectively 57,148 9,362
Patents, net 140 171
-------- --------
57,288 9,533
Investments in affiliates 14,704 14,187
Other assets, net 5,408 1,363
-------- --------
$267,421 $164,707
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 21,860 $ 14,351
Accrued liabilities 5,157 2,192
Short-term debt - 2,000
Current maturities of long-term debt 7,614 2,124
-------- --------
Total Current Liabilities 34,631 20,667
Long-term debt 115,391 48,202
Other long-term liabilities 6,838 1,647
Deferred income taxes 6,214 5,856
Minority interest 5,459 -
STOCKHOLDERS' EQUITY
Preferred stock; par value $.10; 8,000,000 shares
authorized; none issued - -
Common stock; par value $.10; 20,000,000 shares
authorized; 12,639,744 issued at June 30, 1997;
12,017,914 issued at December 31, 1996 1,264 1,202
Additional paid-in capital 34,605 27,553
Retained earnings 64,296 61,021
Treasury stock, at cost; 105,101 shares at June 30,
1997; 118,551 shares at December 31, 1996 (1,277) (1,441)
-------- --------
Total Stockholders' Equity 98,888 88,335
-------- --------
$267,421 $164,707
-------- --------
-------- --------
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IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share data)
<TABLE>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- ---------------------
1997 1996 1997 1996
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $76,600 $50,465 $159,127 $101,183
Cost of sales 64,460 42,658 136,850 85,486
------- ------- -------- --------
Gross profit 12,140 7,807 22,277 15,697
Selling, general and administrative expense 4,236 2,888 8,799 5,869
Interest expense 1,943 980 3,659 1,590
Interest income (110) (238) (179) (382)
Equity in earnings of affiliates (60) (116) (90) (423)
------- ------- -------- --------
Earnings before provision for income taxes,
minority interest and extraordinary item 6,131 4,293 10,088 9,043
Provision for income taxes 2,450 1,695 4,033 3,482
------- ------- -------- --------
Earnings before minority interest
and extraordinary item 3,681 2,598 6,055 5,561
Minority interest, net of provision for income taxes (114) - (208) -
------- ------- -------- --------
Earnings before extraordinary item 3,567 2,598 5,847 5,561
Extraordinary item - - (1,318) -
------- ------- -------- --------
Net earnings $ 3,567 $ 2,598 $ 4,529 $ 5,561
------- ------- -------- --------
------- ------- -------- --------
Net earnings per common share:
Income before extraordinary item $ 0.28 $ 0.21 $ 0.46 $ 0.45
Extraordinary item - - (0.10) -
------- ------- -------- --------
Net earnings $ 0.28 $ 0.21 $ 0.36 $ 0.45
------- ------- -------- --------
------- ------- -------- --------
Dividends declared per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
------- ------- -------- --------
------- ------- -------- --------
Weighted average common and common
equivalent shares outstanding 12,844 12,377 12,732 12,387
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
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IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1997 1996
-------- -------
OPERATING ACTIVITIES
Income before extraordinary item $ 5,847 $ 5,561
Depreciation and amortization 7,773 5,673
Provision for deferred income taxes 254 448
Equity in earnings of affiliates (90) (423)
Provision for doubtful accounts 590 15
Other noncash charges 483 10
Changes in operating assets and liabilities
(excluding investing and financing transactions):
Accounts receivable 71 (721)
Inventories 32 (6,661)
Other current assets (654) (294)
Accounts payable and accrued liabilities 2,314 (4,424)
Accrued landfill closure costs 250 (286)
-------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 16,870 (1,102)
INVESTING ACTIVITIES
Payments for property and equipment (19,026) (4,480)
Acquisition of IMSAMET, Inc., net of cash acquired (58,272) -
Investment in joint venture - (13,240)
Other (1,722) 450
-------- -------
NET CASH USED BY INVESTING ACTIVITIES (79,020) (17,270)
FINANCING ACTIVITIES
Net repayments of short-term borrowings (8,351) -
Proceeds from issuance of long-term debt 123,591 20,475
Repayments of long-term debt (54,106) (1,061)
Debt issuance costs (2,165) -
Dividends paid (1,253) (1,183)
Other 2,145 538
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 59,861 18,769
-------- -------
Net (decrease) increase in cash and cash equivalents (2,289) 397
Cash and cash equivalents at January 1 5,070 8,678
-------- -------
Cash and cash equivalents at June 30 $ 2,781 $ 9,075
-------- -------
-------- -------
SUPPLEMENTARY INFORMATION
Cash payments for interest $ 4,797 $ 1,355
Cash payments for income taxes $ 1,991 $ 6,398
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IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six month periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1997. The accompanying financial statements include the accounts of IMCO
Recycling Inc. and all of its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996. Certain reclassifications have been made to prior
year statements to conform to the current year presentation.
NOTE B - INVENTORIES
The components of inventories are:
(In thousands)
JUNE 30, DECEMBER 31,
1997 1996
------- -----------
Finished goods $13,477 $ 8,642
Raw materials 2,708 2,974
Supplies 411 231
------- -------
$16,596 $11,847
------- -------
------- -------
NOTE C - ACQUISITIONS
In January 1997, the Company acquired all of the outstanding common stock of
IMSAMET, Inc. ("IMSAMET"), a wholly owned subsidiary of EnviroSource Inc.,
for approximately $58,000,000 in cash, not including acquisition costs.
IMSAMET operates and owns or has a majority interest in three aluminum
recycling plants located in Post Falls, Idaho; Wendover, Utah and Goodyear,
Arizona. In addition, IMSAMET has a 50% interest in a joint venture
facility, adjacent to the Utah plant, which uses a proprietary process to
reclaim materials from salt cake. The acquisition was accounted for using
the purchase method of accounting. Accordingly, the purchase price was
allocated to the net assets acquired based on their estimated fair values.
The estimated excess of the purchase price over the fair value of net assets
acquired is $42,000,000 and is being amortized over forty years on a
straight-line basis.
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The preliminary allocation of the purchase price of IMSAMET is as follows (in
thousands):
Working capital $ 4,674
Property and equipment 19,852
Goodwill 41,976
Other noncurrent assets 914
Noncurrent liabilities (7,176)
-------
Total $60,240
-------
-------
The following table sets forth pro forma results of operations of the
combined entities of the Company and IMSAMET for the three and six month
periods ended June 30, 1996, assuming the acquisition had been consummated on
January 1, 1996. The pro forma combined information is presented for
comparative purposes only and does not purport to represent the actual
results which would have occurred had the acquisition been consummated on
such date or of future results of the combined companies under the ownership
and management of the Company (in thousands, except per share amounts):
JUNE 30, 1996
------------------
THREE SIX
MONTHS MONTHS
ENDED ENDED
------------------
Revenues $60,332 $120,062
Gross profit $ 9,768 $ 19,157
Earnings before extraordinary item $ 2,778 $ 5,365
Earnings per common share before extraordinary item $ 0.22 $ 0.43
The table above reflects certain pro forma adjustments including additional
depreciation expense as a result of the increased basis of the fixed assets
acquired, additional amortization expense related to the goodwill recorded, a
reduction in general and administrative expenses for the elimination of
duplicate corporate offices, additional interest expense related to debt
incurred on the acquisition (see NOTE D) and adjustments for related income
taxes and minority interest.
Also in January 1997, the Company acquired in a privately-negotiated
transaction all of the outstanding common stock of Rock Creek Aluminum, Inc.
("Rock Creek") in exchange for 618,137 shares of the Company's common stock.
The acquisition was accounted for using the purchase method of accounting.
The estimated excess of the purchase price over the fair value of net assets
acquired is $6,000,000 and is being amortized over forty years on a
straight-line basis. Rock Creek owns and operates three Ohio facilities
located in Cleveland, Elyria and Rock Creek. These facilities utilize
milling, blending, testing and packaging equipment to process various types
of raw materials, including aluminum dross and scrap, various minerals and
slags. The historical results of operations of Rock Creek were not material
compared to the Company's results of operations.
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NOTE D - LONG-TERM DEBT AND EXTRAORDINARY LOSS ON EARLY DEBT RETIREMENT
In connection with the January 1997 acquisitions, the Company entered into a
new $125,000,000 syndicated credit agreement ("Credit Agreement") with
certain lenders, including Merrill Lynch & Co., a Merrill Lynch & Co.
affiliate as syndication agent and Texas Commerce Bank National Association
as administrative agent ("TCB"). The Company received $110,000,000 at the
closing and used approximately $61,000,000 in connection with the
acquisitions. The remaining $49,000,000 of the proceeds was used to retire
substantially all of the Company's outstanding debt as of December 31, 1996.
The early debt retirement generated an extraordinary loss of $1,318,000 (net
of income taxes) in the first quarter of 1997.
The Credit Agreement provides for $125,000,000 of senior secured credit
facilities consisting of a $105,000,000 term loan and a $20,000,000 revolving
credit agreement. Of the $20,000,000 revolving credit agreement, $4,000,000
is to be used, as needed, by the Company for standby letters of credit. As
of June 30, 1997, the Company had $97,965,000 in total borrowings outstanding
under the term loan and $13,100,000 under the revolving credit facility. At
June 30, 1997, the Company had $1,752,000 of standby letters of credit
outstanding. The credit facilities bear a fluctuating interest rate based on
LIBOR or the prime rate, plus a credit margin which is based on the Company's
rate of total debt to earnings before interest, taxes, depreciation and
amortization. The term loan has a final maturity of seven years, and the
revolving credit agreement has a final maturity of five years.
The new Credit Agreement imposes certain restrictions, including: (i) certain
prohibitions on additional indebtedness, subject to certain exceptions, (ii)
maintenance of certain financial ratios, and (iii) limitations on
investments, dividends and capital expenditures. The annual limitations on
cash dividends are as follows: $3,500,000 for 1997 and 1998, $4,000,000 for
1999 and 2000 and $6,000,000 after 2000. The Credit Agreement is secured by
substantially all of the Company's assets, a first lien mortgage on seven
plant facilities and a pledge of the capital stock of substantially all of
the Company's subsidiaries.
In April 1997, the Company borrowed net proceeds of $4,450,000 from the
issuance of $4,600,000 principal amount of Solid Waste Disposal Facilities
Revenue Bonds (Series 1997) by the City of Morgantown, Kentucky. These bonds
were issued in connection with the Company's expansion of its landfill in
Morgantown and additional construction costs of its salt cake processing
facility in Morgantown. The bonds bear a 7.45% per annum interest rate and
mature on May 1, 2022.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is in the resource recovery industry and provides recycling
services for primary manufacturers of metal. The Company's principal
activity involves the recycling of aluminum and aluminum scrap and
by-products. The Company also recycles magnesium and zinc. The Company's
financial performance has historically been largely determined by the volume
of metal it processes. The largest portion of the Company's business is the
processing of customer-owned material for a fee (a service called "tolling").
In addition to tolling, the Company also purchases material for processing
and resale ("buy/sell business"). Tolling operations limit the Company's
exposure to the risk of commodity price fluctuations and impose relatively
low working capital demands since the Company does not own the material being
processed. Both the Company's tolling fees per pound recycled and the
selling price of metal it owns, recycles and sells for its own account are
included in revenues. Variations in the mix between these two types of
transactions can cause revenue amounts to change significantly from period to
period while generally not significantly affecting total gross profit,
because both types of transactions have historically had approximately the
same level of profitability.
The following table shows the total pounds of metal melted, the percentage of
total pounds melted represented by tolled metal, total revenues and total
gross profit.
In thousands, except percentages:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
Pounds of metal melted 489,880 372,080 922,314 739,045
Percentage of pounds tolled 84% 81% 83% 84%
Revenues $ 76,600 $ 50,465 $159,127 $101,183
Gross profit $ 12,140 $ 7,807 $ 22,277 $ 15,697
ACQUISITIONS
In January 1997, the Company completed the acquisitions of IMSAMET and Rock
Creek. See NOTE C and NOTE D of "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS"
in PART I. IMSAMET owns or has a majority interest in three aluminum
recycling plants located in Post Falls, Idaho; Wendover, Utah and Goodyear,
Arizona; which together have an annual melting capacity of approximately 440
million pounds. In addition, IMSAMET owns a 50% interest in a joint venture
facility, adjacent to the Utah plant, which uses a proprietary process to
reclaim materials from salt cake.
Rock Creek operates three facilities in Cleveland, Elyria and Rock Creek,
Ohio. These facilities manufacture a variety of aluminum products and
manufacture products that are eventually used as metallurgical additions in
the steel making process such as slag conditioners, deoxidizers, steel
desulfurizers and hot topping compounds. Rock Creek utilizes milling,
shredding,
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blending, testing and packaging equipment to process various types of raw
materials, including aluminum dross and scrap, various minerals and slags.
In addition, Rock Creek manufactures a wide range of proprietary briquetted
products and offers toll briquetting services. Rock Creek's facilities have
a total annual capacity of approximately 150 million pounds.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
PRODUCTION: For the three and six month periods ended June 30, 1997, the
Company melted 32% and 25%, respectively, more metal than it did during the
same periods in 1996. Aluminum processing at the Company's newest plant in
Coldwater, Michigan (which began production in March 1997) and the IMSAMET
facilities (which were acquired in January 1997) were the primary reasons for
the increased production. With the exception of the Bedford, Indiana plant,
the Company's other aluminum plants processed approximately the same amount
of material in the first half of 1997 as compared to the first half of 1996.
The Bedford facility's processing volume declined in the first quarter of
1997 due to a lack of used beverage containers (UBC's) to process at a
profitable level. Bedford's second quarter production improved after the
Company installed and began operating a new furnace in March; in addition,
the Company is currently in the process of modifying Bedford's existing
furnaces. Both of these changes will enable the Bedford facility to process
a wider variety of aluminum scrap such as dross, lessen its dependence on UBC
processing and participate in the auto component market.
REVENUES: In the first half of 1997, the Company's revenues increased 57% to
$159,127,000 compared to 1996's first half revenues of $101,183,000. For the
three months ended June 30, 1997, revenues increased 52% to $76,600,000
compared to $50,465,000 for the same period in 1996. The acquisitions of
IMSAMET and Rock Creek and the new Coldwater, Michigan plant accounted for
98% and 86% of this increase in revenues for the three and six month periods
ended June 30, respectively. The remainder of the increase was primarily due
to the combination of higher aluminum selling prices and higher levels of
buy/sell business for the aluminum plants (exclusive of those plants acquired
or built in the first quarter of 1997). As discussed above, increases in
buy/sell business will generally result in a much higher increase in revenue
than would an increase in tolling. The Company's buy/sell business revenues
include the cost of the metal, the processing cost, and the Company's profit
margin in the selling price; whereas, revenues associated with tolling only
include the processing cost and the Company's profit margin. During 1997,
the Company has had additional metal for sale due to operation of its salt
cake processing facilities in Morgantown, Kentucky (built in 1996) and
Goodyear, Arizona (acquired in 1997). The salt cake processing facilities
process much of the Company's salt cake generated from its aluminum recycling
plants and recover additional amounts of aluminum for resale. Tolling
activity represented 84% and 83% of the Company's pounds melted for the three
and six month periods ending June 30, 1997 as compared to 81% and 84% for the
respective periods in 1996. Prior to 1997, materials processed for Rock Creek
at the Company's Uhrichsville, Ohio facility were classified as tolling
business, but because the Company acquired Rock Creek in January 1997, these
pounds are now classified as buy/sell business.
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GROSS PROFIT: Gross profits were $22,277,000 for the first half of 1997, an
increase of $6,580,000 or 42% over the first half of 1996. Gross profits for
the three month period ended June 30, 1997 were $12,140,000, an increase of
$4,333,000 or 56%. The January 1997 acquisitions of IMSAMET and Rock Creek
and the new Coldwater plant accounted for 83% and 80% of the increases for
the three and six month periods ended June 30, 1997 and 1996, respectively.
In addition, the elimination of the operating loss at the Company's Corona,
California plant, which was closed in 1996, and higher aluminum prices, which
improved gross profits from the Company's buy/sell business, also contributed
to the higher gross profit in 1997.
SG&A EXPENSES: Selling, general and administrative expenses were $4,236,000
for the three month period and $8,799,000 for the six month period ended June
30, 1997 compared to $2,888,000 and $5,869,000, respectively, for the same
periods of 1996. The increases of $1,348,000 and $2,930,000, respectively,
are primarily due to higher employee, professional, consulting and goodwill
amortization expenses associated with the 1997 acquisitions.
INTEREST: Interest expense was $3,659,000 and $1,590,000 for the first
halves of 1997 and 1996, respectively, an increase of 130%. Interest expense
for the three month periods ended June 30, 1997 and 1996 was $1,943,000 and
$980,000, respectively, an increase of 98%. The increases in interest
expense were primarily due to the additional debt outstanding (due to
borrowings in January 1997 to fund the IMSAMET acquisition) in the first six
months of 1997 as compared to the same period of 1996. See "LIQUIDITY AND
CAPITAL RESOURCES" below.
EXTRAORDINARY ITEM: In connection with the January 1997 acquisitions, the
Company entered into a new Credit Agreement. A portion of the proceeds
borrowed under this Agreement were used to retire substantially all of the
Company's outstanding debt as of December 31, 1996. The early debt
retirement generated an extraordinary loss of $1,318,000 (net of income taxes
of approximately $850,000) in the first quarter of 1997.
NET INCOME: Income before the provision for income taxes, minority interest
and the extraordinary item increased 43% to $6,131,000 for the three month
period ending June 30, 1997 compared to $4,293,000 for the same period in
1996 and increased 12% to $10,088,000 for the first half of 1997 compared to
$9,043,000 for the first half of 1996. These increases in earnings were
primarily due to higher gross profits which were partially offset by
increases in selling, general and administrative expenses and interest
expense. The Company's effective income tax rate was 40% for the three and
six months ended June 30, 1997 compared to 39% for the same periods in 1996.
As a result, net income increased to $3,567,000 for the three months ended
June 30, 1997 from $2,598,000 for the same period in 1996. Net income
decreased to $4,529,000 for the first half of 1997 compared to $5,561,000 for
the first half of 1996, due principally to the extraordinary item in the
first quarter of 1997 described above.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided $16,870,000 of cash during the first half of 1997 and
used $1,102,000 of cash during the first half of 1996. Changes in the
components of operating assets and liabilities (excluding investing and
financing transactions) accounted for the majority of the difference. In the
first half of 1997, changes in operating assets and liabilities generated
$2,013,000 of cash, while in the first half of 1996, changes in operating
assets and liabilities used $12,386,000 of
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cash. The net change in operating assets and liabilities was primarily due
to an increase in buy/sell activity which resulted in a significant usage of
cash during the first half of 1996. Income before noncash charges increased
$3,573,000 during the first half of 1997 compared to the first half of 1996,
which increased net cash provided from operating activities.
Net cash used by investing activities was $79,020,000 and $17,270,000 for the
first six months of 1997 and 1996, respectively. The increase was primarily
due to the first quarter 1997 acquisition of IMSAMET. In addition, the
Company's total payments for property, plant and equipment in the first half
of 1997 were $19,026,000, compared to $4,480,000 spent in the first half of
1996. Capital expenditures for property, plant and equipment in 1997 are
expected to be approximately $35,000,000. The major projects include the
construction of new aluminum recycling facilities in Coldwater, Michigan and
Swansea, Wales, the relocation of the Company's zinc recycling facility, the
purchase of various environmental equipment and the expansion of an existing
Company-owned landfill.
Net cash provided from financing activities was $59,861,000 in the first half
of 1997 compared to $18,729,000 in the first half of 1996. In connection
with the January 1997 acquisitions, the Company entered into a new
$125,000,000 syndicated credit agreement ("Credit Agreement") with certain
lenders, including Merrill Lynch & Co., a Merrill Lynch & Co. affiliate
(syndication agent) and TCB (administrative agent). The Company received
$110,000,000 at the closing and used approximately $61,000,000 for the
IMSAMET and Rock Creek acquisitions. The remaining $49,000,000 of the
proceeds was used to retire substantially all of the Company's outstanding
debt as of December 31, 1996. The Credit Agreement provides for $125,000,000
of senior secured credit facilities consisting of a $105,000,000 term loan
and a $20,000,000 revolving credit agreement. Of the $20,000,000 revolving
credit agreement, $4,000,000 is to be used, as needed, by the Company for
standby letters of credit. As of June 30, 1997, the Company had $97,965,000
in total borrowings outstanding under the term loan and $13,100,000 in total
borrowings outstanding under the revolving credit facility. In June 1997,
the Company had $1,752,000 of standby letters of credit outstanding.
The credit facilities bear a fluctuating interest rate based on LIBOR or the
prime rate, plus a credit margin which is based on the Company's rate of
total debt to earnings before interest, taxes, depreciation and amortization.
In order to reduce the floating interest rate exposure on the term loan, the
Company entered into an interest rate cap transaction ("Rate Cap
Transaction") agreement with TCB on April 7, 1997. Under the terms of the
Rate Cap Transaction agreement, the floating interest rate for 40% of the
term loan borrowings under the new Credit Agreement is capped at 8% per
annum. The costs associated with this Rate Cap Transaction will be amortized
as interest expense over the four year term of the agreement. The term loan
has a final maturity of seven years, and the revolving credit agreement has a
final maturity of five years.
The new Credit Agreement imposes certain restrictions, including: (i) certain
prohibitions on additional indebtedness, subject to certain exceptions, (ii)
maintenance of certain financial ratios, and (iii) limitations on
investments, dividends, and capital expenditures. The annual limitations on
cash dividends are as follows: $3,500,000 for 1997 and 1998, $4,000,000 for
1999 and 2000 and $6,000,000 after 2000. The Credit Agreement is secured by
substantially all of the Company's assets, a first lien mortgage on seven
plant facilities and a pledge of the capital stock of substantially all of
the Company's subsidiaries.
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Financing activities also included cash payments of $1,253,000 in dividends
during the first half of 1997.
On May 8, 1996, the Company borrowed the net proceeds of approximately
$5,569,000 from the issuance of $5,740,000 principal amount of Solid Waste
Disposal Facilities Revenue Bonds (Series 1996) by the City of Morgantown,
Kentucky. These bonds were issued in connection with the Company's
construction of its salt cake processing plant in Morgantown, which was
completed in January 1996. In April 1997, the Company received additional
net proceeds of $4,450,000 from the issuance of $4,600,000 of Solid Waste
Disposal Facilities Revenue Bonds (Series 1997) by the City of Morgantown,
Kentucky. These bonds were issued in connection with the Company's expansion
of its landfill in Morgantown and additional construction costs of its salt
cake processing facility in Morgantown. The indebtedness under the 1997
bonds bears interest at the rate of 7.45% per annum and matures on May 1,
2022.
In an effort to minimize the effect of volatility of the price of aluminum on
the Company's operations, during the first quarter of 1997, the Company
entered into forward sale contracts and a series of put and call option
contracts with a metals broker. These contracts cover the future selling
prices on a portion of the aluminum to be generated by the Company's salt
cake processing facility, and are settled in the month of the corresponding
production. The contracts did not have a significant impact on the Company's
results of operations for the three and six month periods ended June 30, 1997.
At June 30, 1997, the relationship of current assets to current liabilities,
or current ratio, was 2.02 to 1, compared to 2.58 to 1 at December 31, 1996.
Working capital will fluctuate as the mix of buy/sell business and tolling
business changes relative to the total business, for the reasons discussed
above.
On May 8, 1997, Harvard Industries, Inc. ("Harvard") announced that it had
filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The
Company sells aluminum to Doehler-Jarvis, Inc. ("Doehler-Jarvis"), a
subsidiary of Harvard. As of May 8, 1997, the Company had $3,915,000 of
outstanding unsecured receivables from Doehler-Jarvis ($3,395,000 net of a
$500,000 reserve for collectibility at June 30, 1997). Harvard has indicated
that it intends to pay 100% of all pre-petition claims by vendors. While the
Company currently believes that Harvard's bankruptcy will not have a material
adverse effect on the Company's financial position or results of operations,
no assurance can be given as to the amount and timing of the Company's
ultimate recovery, if any, concerning its claims. The Company's revenues from
Doehler-Jarvis totaled $12,955,000 and $17,490,000 for the six months ended
June 30, 1997 and the year ended December 31, 1996, respectively. The
Company believes that the loss of this customer would not have a material
adverse effect on the Company's financial position or results of operations.
Both the acquisitions and the indebtedness incurred to finance the
acquisitions and refinance the existing Company debt in January 1997 have
resulted in higher working capital requirements and increased debt service
requirements for the Company. In addition, certain covenants contained in
the Company's Credit Agreement restrict the aggregate amounts of expenditures
for acquisitions and investments, as well as future capital expenditures in
any fiscal year, that the Company may incur, which may have the result of
restricting the Company's alternatives for financing and implementing future
growth opportunities. Nonetheless, the Company believes that its cash on
hand, the availability of funds under its credit facilities and its
anticipated
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internally generated funds will be sufficient to fund its current needs and
meet its obligations for the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," which
is required to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of SFAS No. 128 on the calculation of earnings
per share for the quarter and six month periods ended June 30, 1997 and 1996 is
not expected to be material.
CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD-LOOKING STATEMENTS
Certain information contained herein in ITEM 2.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" may be deemed to
be forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995 and are subject to the "Safe Harbor" provision
in that enacted legislation. These statements are based on current
expectations and involve a number of risks and uncertainties. Actual results
could differ materially from those described in the forward-looking
statements as a result of various factors including, but not limited to the
following: expectations of operating levels at the Company's facilities,
expectations of the future mix of buy/sell business as opposed to tolling
business, retention and financial condition of major customers,
collectibility of receivables, effects of future costs, the price of aluminum
on world markets, currency exchange fluctuations and future levels and timing
of capital expenditures. Such statements are qualified by the following:
Estimates of future operating rates at the Company's plants are based
on current expectations by management of the Company of future levels
of volumes and prices for the Company's services or metal, and are
subject to fluctuations in customer demand for the Company's services
and prevailing conditions in the metal markets, as well as certain
components of the Company's cost of operations, including energy
costs. Many of the factors affecting revenues and costs are outside
of the control of the Company, including severe weather conditions
such as those that prevailed in the first quarter of 1996, currency
exchange rates and general economic and financial market conditions.
The future mix of buy/sell vs. tolling business is dependent on
customers' needs and overall demand, world and U.S. market conditions
then prevailing in the respective metal markets, and the operating
levels at the Company's various facilities at the relevant time.
REVIEW BY INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Ernst & Young LLP, have reviewed the
Company's consolidated financial statements at June 30, 1997, and for the
three and six month periods then ended prior to filing, and their report is
included herein.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the period covered by this report, the Company made no unregistered
sales of its equity securities. The Company paid $626,732 in dividends
during the second quarter of 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 13, 1997,
at which the election of two Class II Directors, the appointment of Ernst &
Young LLP as the Company's independent public accountants for 1997 and
amendments to the Company's Annual Incentive Program were considered. John
J. Fleming was re-elected as a director and received 9,160,461 votes for his
election, with 389,086 votes withheld. Don Navarro was re-elected as a
director and received 9,160,861 votes for his election, with 388,686 votes
withheld. In addition to Messrs. Fleming and Navarro, the following
directors continued in office: J.M. Brundrett, Ralph L. Cheek, Thomas A.
James, Don V. Ingram and Jack C. Page. Ernst & Young LLP was ratified as
independent accountants for the Company for 1997 and received 9,509,774 votes
for their ratification, 10,641 votes against and 29,132 votes abstaining.
The amendments to the Company's Annual Incentive Program were approved with
9,107,520 votes in favor of approval, 400,541 votes against and 41,486 votes
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
10.1 IMCO Recycling Inc. 1992 Stock Option Plan, as amended
December 15, 1994; February 28, 1996; February 25, 1997 and
May 13, 1997
10.2 IMCO Recycling Inc. Annual Incentive Program, as amended
February 25, 1997; April 1, 1997 and May 13, 1997
15.1 Acknowledgment letter regarding unaudited financial
information from Ernst & Young LLP
27 Financial Data Schedule
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(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMCO Recycling Inc.
Date: August 11, 1997 By: /s/ Robert R. Holian
------------------------------
Robert R. Holian
Vice President and Controller
(Principal Accounting Officer)
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IMCO RECYCLING INC.
1992 STOCK OPTION PLAN
(AS AMENDED DECEMBER 15, 1994, FEBRUARY 28, 1996,
FEBRUARY 25, 1997 AND MAY 13, 1997)
PURPOSE
The purpose of the Plan is to attract and retain key employees,
consultants, officers and directors of the Company and to provide such persons
with a proprietary interest in the Company through the granting of Incentive
Stock Options and Nonqualified Stock Options which will:
(a) increase the interest of such employees, consultants, officers
and directors in the Company's welfare;
(b) furnish an incentive to such employees, consultants, officers
and directors to continue their services for the Company; and
(c) provide a means through which the Company may attract able
persons to enter its employ or to serve as consultants, officers and
directors.
ARTICLE I
DEFINITIONS
For the purpose of this Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
1.1 "BOARD" means the board of directors of the Company.
1.2 "CHANGE IN CONTROL" means the occurrence of any of the following
events: (i) there shall be consummated any merger or consolidation pursuant to
which shares of the Company's Common Stock would be converted into cash,
securities or other property, or any sale, lease, exchange or other disposition
(excluding disposition by way of mortgage, pledge or hypothecation), in one
transaction or a series of related transactions, of all or substantially all of
the assets of the Company (a "Business Combination"), in each case unless,
following such Business Combination, all or substantially all of the holders of
the outstanding Common Stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50.1% of the outstanding
common stock or equivalent equity interests of the corporation or entity
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the outstanding Common Stock,
(ii) the stockholders of the Company approve any plan or proposal for the
complete liquidation or dissolution of the Company, (iii) any "person" (as such
term is defined in Section 3(a)(9) or Section 13(d)(3) under the 1934 Act) or
any "group" (as such term
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is used in Rule 13d-5 promulgated under the 1934 Act), other than the Company
or any successor of the Company or any Subsidiary of the Company or any
employee benefit plan of the Company or any Subsidiary (including such plan's
trustee), becomes a beneficial owner for purposes of Rule 13d-3 promulgated
under the 1934 Act, directly or indirectly, of securities of the Company
representing 50.1% or more of the Company's then outstanding securities having
the right to vote in the election of directors, or (iv) during any period of
two consecutive years, individuals who, at the beginning of such period
constituted the entire Board, cease for any reason (other than death) to
constitute a majority of the directors, unless the election, or the nomination
for election, by the Company's stockholders, of each new director was approved
by a vote of at least a majority of the directors then still in office who
were directors at the beginning of the period.
1.3 "CODE" means the Internal Revenue Code of 1986, as amended.
1.4 "COMMON STOCK" means the common stock which the Company is currently
authorized to issue or may in the future be authorized to issue.
1.5 "COMPANY" means IMCO Recycling Inc., a Delaware corporation.
1.6 "DATE OF GRANT" means the effective date on which an option is awarded
to a Participant as set forth in the stock option agreement.
1.7 "ELIGIBLE PARTICIPANT" shall have the meaning set forth in Section 6.1
hereof.
1.8 "FAIR MARKET VALUE" of the Company's shares of Common Stock means (i)
the closing sale price per share on the principal securities exchange on which
the Common Stock is traded (or if there is no sale on the relevant date, then on
the last previous day on which a sale was reported), or (ii) the mean between
the closing or average (as the case may be) bid and asked prices per share of
Common Stock on the over-the-counter market, whichever is applicable.
1.9 "INCENTIVE STOCK OPTION" means an option to purchase shares of Common
Stock granted to an Eligible Participant pursuant to Article V and which is
intended to qualify as an incentive stock option under Section 422 of the Code.
1.10 "1934 ACT" means the Securities Exchange Act of 1934, as amended.
1.11 "NONQUALIFIED STOCK OPTION" means an option to purchase shares of
Common Stock granted to a Participant pursuant to Article IV or Article V and
which is not intended to qualify as an incentive stock option under Section 422
of the Code.
1.12 "PARTICIPANT" means any employee of the Company or any Subsidiary of
the Company or any non-employee director, officer or consultant of the Company
who is, or who is proposed to be, a recipient of a Stock Option.
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1.13 "PLAN" means the IMCO Recycling Inc. 1992 Stock Option Plan, as it
may be amended from time to time.
1.14 "RELOAD STOCK OPTION" means a Nonqualified Stock Option or an
Incentive Stock Option granted pursuant to Section 7.2 hereof.
1.15 "RESTRICTED STOCK" shall have the meaning set forth in Section 7.3
hereof.
1.16 "RESTRICTION PERIOD" shall have the meaning set forth in Section 7.3
hereof.
1.17 "SPREAD" shall have the meaning set forth in Article XIII hereof.
1.18 "STOCK DIVIDEND" means a dividend or other distribution declared on
the shares of Common Stock payable in (i) capital stock of the Company or any
Subsidiary of the Company, or (ii) rights, options or warrants to receive or
purchase capital stock of the Company or any Subsidiary of the Company, or (iii)
securities convertible into or exchangeable for capital stock of the Company or
any Subsidiary of the Company, or (iv) any capital stock received upon the
exercise, or with respect to, the foregoing.
1.19 "STOCK OPTIONS" shall mean any and all Incentive Stock Options,
Nonqualified Stock Options and Reload Stock Options granted pursuant to the
Plan.
1.20 "SUBSIDIARY" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of the Stock
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain, and
"Subsidiaries" means more than one of any such corporations.
ARTICLE II
ADMINISTRATION
Subject to the terms of this Article II, the Plan shall be administered by
the Compensation Committee (the "Committee") of the Board, which shall consist
of at least two members. Any member of the Committee may be removed at any
time, with or without cause, by resolution of the Board. Any vacancy occurring
in the membership of the Committee may be filled by appointment by the Board.
Each member of the Committee, at the time of his appointment to the Committee
and while he is a member thereof, must be an "outside director" as that term is
defined under Section 162(m) of the Code.
The Board shall select one of its members to act as the Chairman of the
Committee, and the Committee shall make such rules and regulations for its
operation as it deems appropriate. A majority of the Committee shall constitute
a quorum, and the act of a majority of the members of the Committee present at a
meeting at which a quorum is present shall be the act of the Committee. Subject
to the terms hereof, the Committee shall designate from time to time the key
employees, directors, consultants, or officers of the Company to whom Stock
Options will be
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granted, interpret the Plan, prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, and
make such other determinations and take such other action as it deems
necessary or advisable. In this regard, the Committee may consider and give
appropriate weight to input from representatives of management of the Company
regarding the contributions or potential contributions to the Company or a
Subsidiary of certain of the employees, officers or consultants, or potential
employees, officers or consultants, of the Company or any Subsidiary.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Stock Options issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. The Committee may, in its
absolute discretion (except with respect to Stock Options granted to the
Company's non-employee directors pursuant to Article IV hereof) (i) accelerate
the date on which any Stock Option granted under the Plan becomes exercisable,
(ii) extend the date on which any Stock Option granted under the Plan ceases to
be exercisable or (iii) remove, suspend or alter the restrictions imposed under
Section 7.3 of the Plan. Except as provided below, any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding, and conclusive on all interested parties, including the Company and all
Participants.
ARTICLE III
SHARES SUBJECT TO PLAN
Subject to the provisions of Articles XII and XIII of the Plan, the
aggregate number of shares which may be issued to Participants under grants of
Stock Options made by the Committee under the Plan shall be:
a. 1,150,000 shares of Common Stock; plus
b. the number of shares that are delivered or tendered, or withheld from
any exercise, by a Participant as full or partial payment made to the
Company in connection with the exercise price of any Stock Option or in
connection with satisfying the Participant's tax withholding obligations
pursuant to Section 15.7 of the Plan, to the extent that a Reload Stock
Option is granted to purchase such number of shares so delivered to or
withheld by the Company.
The aggregate number of shares of Common Stock that may be represented by
grants of Stock Options made to any Participant under the Plan during any fiscal
year during which the Plan is in effect, may not exceed 100,000 shares. Shares
to be distributed and sold may be made available from either authorized but
unissued Common Stock or Common Stock held by the Company in its treasury.
Shares that by reason of the expiration or unexercised termination of a Stock
Option are no longer subject to purchase may be reoffered under the Plan.
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ARTICLE IV
NON-EMPLOYEE DIRECTORS' STOCK OPTIONS
The provisions of this Article IV shall apply only to Nonqualified Stock
Options granted under the Plan to non-employee directors of the Company.
4.1 ELIGIBILITY. Only non-employee directors of the Company shall be
eligible to receive grants of Nonqualified Stock Options under this Article IV.
4.2 GRANT OF STOCK OPTIONS. On December 15 of each year during the term
of this Plan (or if such date is not a business day, then on the next succeeding
business day thereafter), the Company shall grant to each non-employee director
of the Company a Nonqualified Stock Option to purchase that number of shares of
Common Stock determined by dividing the annual director's fee paid or accrued to
be paid to that director with respect to the 12-month period immediately
preceding such Date of Grant, by the Fair Market Value per share of the Common
Stock on the Date of Grant. Each grant of Nonqualified Stock Options under this
Article IV shall be evidenced by a stock option agreement setting forth the
total number of shares subject to the Nonqualified Stock Option, the option
exercise price, the term of the Nonqualified Stock Option and such other terms
and provisions as are consistent with the Plan.
4.3 EXERCISE PRICE. The exercise price for a Nonqualified Stock Option
granted under this Article IV shall be equal to the Fair Market Value per share
of Common Stock on the Date of Grant. Notwithstanding anything to the contrary
contained in this Section 4.3, the exercise price of each Nonqualified Stock
Option granted pursuant to this Article IV shall not be less than the par value
per share of the Common Stock.
4.4 OPTION PERIOD. All Nonqualified Stock Options granted under this
Article IV shall automatically vest and be exercisable in full after the
expiration of six months from the Date of Grant. The period during which a
Nonqualified Stock Option granted under this Article IV may be exercised shall
expire ten years from the Date of Grant, unless sooner terminated pursuant to
Article VIII. No Nonqualified Stock Option granted under this Article IV may be
exercised at any time after its term.
ARTICLE V
STOCK OPTIONS FOR EMPLOYEES, CONSULTANTS AND OFFICERS
The provisions of this Article V shall apply only to Stock Options granted
under the Plan to key employees, consultants and officers of the Company or any
of its Subsidiaries, including directors who are employees of the Company and/or
any of its Subsidiaries and non-employee officers of the Company and/or any of
its Subsidiaries:
5.1 ELIGIBILITY. The Committee shall, from time to time, select the
particular key employees, consultants and officers of the Company and its
Subsidiaries to whom the Stock Options provided under this Article V are to be
granted and/or distributed in recognition of each such Participant's
contribution to the Company's or the Subsidiary's success.
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<PAGE>
5.2 GRANT OF STOCK OPTIONS. All grants of Stock Options under this
Article V shall be awarded by the Committee. Each grant of Stock Options shall
be evidenced by a stock option agreement setting forth the total number of
shares subject to the Stock Option, the option exercise price, the term of the
Stock Option, and such other terms and provisions as are approved by the
Committee, but, except to the extent permitted herein, are not inconsistent with
the Plan. In the case of an Incentive Stock Option, the stock option agreement
shall also include provisions that may be necessary to assure that the option is
an incentive stock option under the Code. The Company shall execute stock
option agreements upon instructions from the Committee.
5.3 EXERCISE PRICE. The exercise price for a Nonqualified Stock Option
shall be equal to the Fair Market Value per share of the Common Stock on the
Date of Grant. The exercise price for an Incentive Stock Option shall be
determined by the Committee and shall be an amount not less than the Fair Market
Value per share of the Common Stock on the Date of Grant; the Committee shall
determine the Fair Market Value of the Common Stock on the Date of Grant, and
shall set forth the determination in its minutes. Notwithstanding anything to
the contrary contained in this Section 5.3, the exercise price of each Stock
Option granted pursuant to the Plan shall not be less than the par value per
share of the Common Stock.
5.4 OPTION PERIOD. The option period will begin and terminate on the
respective dates specified by the Committee, but may not terminate later than
ten years from the Date of Grant. No Stock Option granted under the Plan may be
exercised at any time after its term. The Committee may provide for the
exercise of Stock Options in installments and upon such terms, conditions and
restrictions as it may determine. The Committee shall have the right to
accelerate the time at which any Stock Option granted to an employee, consultant
or officer (including an employee director) shall become exercisable. In the
event of the retirement of an employee of the Company or a Subsidiary in
accordance with the standard retirement policies of the Company or the
Subsidiary, as the case may be, all unmatured installments of Stock Options
outstanding shall automatically be accelerated and exercisable in full in
accordance with the provisions of Article VIII.
ARTICLE VI
LIMITS ON INCENTIVE STOCK OPTIONS
6.1 OPTION PERIOD. Notwithstanding the provisions of Sections 5.4 and 7.2
hereof, if a Participant eligible to receive a grant of an Incentive Stock
Option under Section 422 of the Code (an "Eligible Participant") owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company (or any Subsidiary of the Company) and an Incentive Stock Option is
granted to such Eligible Participant, the term of such Incentive Stock Option
(to the extent required by the Code at the time of grant) shall be no more than
five years from the Date of Grant. In addition, the option price of any such
Incentive Stock Option granted to any such Eligible Participant owning more than
10% of the combined voting power of all classes of stock of the Company (or any
Subsidiary of the Company) shall be at least 110% of the Fair Market Value of
the Common Stock on the Date of Grant.
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6.2 LIMITATION ON EXERCISES OF SHARES SUBJECT TO INCENTIVE STOCK OPTIONS.
To the extent required by the Code for incentive stock options, the exercise of
Incentive Stock Options granted under the Plan shall be subject to the $100,000
calendar year limit as set forth in Section 422(d) of the Code.
6.3 DISQUALIFYING DISPOSITION. If stock acquired upon exercise of an
Incentive Stock Option is disposed of by an Eligible Participant prior to the
expiration of either two years from the Date of Grant of such option or one year
from the transfer of shares to such Eligible Participant pursuant to the
exercise of such option, or in any other disqualifying disposition within the
meaning of Section 422 of the Code, such Eligible Participant shall notify the
Company in writing of the date and terms of such disposition. A disqualifying
disposition by an Eligible Participant shall not affect the status of any other
option granted under the Plan as an incentive stock option within the meaning of
Section 422 of the Code.
6.4 TERMINATION. Notwithstanding the provisions of Article VIII, an
Eligible Participant's Incentive Stock Options shall terminate no later than
ninety (90) days after termination of such Participant's employment with the
Company and its Subsidiaries; provided that if such employment terminates by
reason of the death or total and permanent disability (as defined in Section
22(e) of the Code) of the Participant, then such Participant's Incentive Stock
Options shall terminate no later than one hundred eighty (180) days after such
termination by reason of death or disability.
ARTICLE VII
EXERCISE OF STOCK OPTIONS; RELOAD STOCK OPTIONS; RESTRICTED STOCK
7.1 PAYMENT. Full payment for shares purchased upon exercise of a Stock
Option shall be made in cash or by the Participant's delivery to the Company of
shares of Common Stock which have a Fair Market Value equal to the exercise
price (or in any combination of cash and shares of Common Stock having an
aggregate Fair Market Value equal to the exercise price). No shares may be
issued until full payment of the purchase price therefor has been made, and a
Participant will have none of the rights of a stockholder until shares are
issued to him. Additionally, shares covered by a Stock Option may be purchased
upon exercise, in whole or in part, by authorizing a third party to sell the
shares (or a sufficient portion thereof) acquired upon exercise of a Stock
Option, and assigning the delivery to the Company of a sufficient amount of the
sale proceeds to pay for all the shares acquired through such exercise and any
tax withholding obligations resulting from such exercise.
7.2 RELOAD STOCK OPTIONS. Subject to the terms of this Section 7.2, in
the event that shares are delivered by a Participant in payment of all or a
portion of the exercise price of a Stock Option as set forth in Section 7.1
and/or shares are delivered to or withheld by the Company in satisfaction of the
Company's tax withholding obligations upon exercise in accordance with Section
15.7, then, subject to Article XI, a Participant so exercising a Nonqualified
Stock Option shall automatically be granted a replacement Nonqualified Stock
Option and a Participant so exercising an Incentive Stock Option shall
automatically be granted a replacement Incentive
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Stock Option (in either case, a "Reload Stock Option"), to purchase that
number of shares so delivered to or withheld by the Company, as the case may
be, at an option exercise price equal to the Fair Market Value per share of
the Common Stock on the date of exercise of the original Stock Option (subject
to the provisions of Article VI regarding Incentive Stock Options and, in any
event not less than the par value per share of the Common Stock). The option
period for a Reload Stock Option will commence on the Date of Grant and expire
on the expiration date of the original Stock Option it replaces (subject to
the provisions in Article VI regarding Incentive Stock Options and the
provisions of Article VIII), after which the Reload Stock Option cannot be
exercised. The Date of Grant of a Reload Stock Option shall be the date that
the Stock Option it replaces is exercised. A Reload Stock Option shall
automatically vest and be exercisable in full after the expiration of six
months from its Date of Grant. It shall be a condition to the grant of a
Reload Stock Option that promptly after its Date of Grant, a stock option
agreement shall be delivered to, and executed and delivered by the Participant
and the Company which sets forth the total number of shares subject to the
Reload Stock Option, the option exercise price, the term of the Reload Stock
Option and such other terms and provisions as are consistent with the Plan.
7.3 RESTRICTED STOCK. In the event that a Participant exercises a Stock
Option and receives a Reload Stock Option under Section 7.2, the following
restrictions and conditions will apply to that number of the shares of Common
Stock (the "Restricted Stock") issued to the Participant upon exercise of such
original Stock Option, which number of shares is equal to one-half of the sum of
(i) the number of shares of Common Stock delivered by the Participant to the
Company in payment of the exercise price, if any, plus (ii) the number of shares
of Common Stock delivered to, or withheld by, the Company in satisfaction of the
Company's tax withholding obligations under Section 15.7, if any:
(a) RESTRICTION PERIOD. Subject to the other provisions of this
Plan, each Participant shall not be permitted to sell, assign, transfer,
pledge, exercise or place any encumbrance on shares of Restricted Stock
and any Stock Dividends paid on or with respect to such Restricted Stock
until the earliest to occur of any of the following events (such period
of restriction being referred to herein as the "Restriction Period"):
(i) the expiration of five years from the date of issuance of
the Restricted Stock in the name of the Participant;
(ii) in the case of an employee of the Company or a Subsidiary,
the retirement of such Participant from the Company or the
Subsidiary in accordance with the standard retirement policies of
the Company or the Subsidiary, as the case may be;
(iii) in the case of a non-employee director, officer or
consultant of the Company, the cessation of service to the Company
of such Participant in such capacity;
(iv) the death of such Participant;
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(v) the total and permanent disability of such Participant (as
defined in Article VIII hereof); or
(vi) a Change in Control of the Company.
Notwithstanding the foregoing, shares of Restricted Stock, and any
Stock Dividends paid in shares of Common Stock on or with respect to
Restricted Stock, may be used during the Restriction Period in payment of
the exercise price of any Stock Option and/or in satisfaction of the
Company's tax withholding obligations upon any such exercise in
accordance with Section 15.7.
(b) RIGHTS WITH RESPECT TO RESTRICTED STOCK. Except as otherwise
provided in the Plan, the Participant shall have, with respect to his or
her Restricted Stock (and any Stock Dividends payable in Common Stock on
such Restricted Stock), all of the rights of a stockholder of the
Company, including the right to vote the shares and the right to receive
any dividends thereon. Each Participant who is to receive Restricted
Stock shall be issued a stock certificate in respect of such shares of
Restricted Stock, registered in the name of the Participant, which shall
bear an appropriate legend referring to the restrictions applicable to
such Restricted Stock, to read substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions of the
IMCO Recycling Inc. 1992 Stock Option Plan. A copy of such Plan is
on file in the offices of IMCO Recycling Inc., 5215 North O'Connor
Blvd., Suite 940, Irving, Texas 75039."
ARTICLE VIII
TERMINATION OF EMPLOYMENT OR SERVICE
In the event a Participant who is an employee of the Company (including any
employee who is an officer or a director) or any Subsidiary shall cease to be
employed by the Company or a Subsidiary, or a Participant who is a non-employee
director or a non-employee officer or consultant of the Company or any
Subsidiary shall cease to serve in his capacity as a director, officer or
consultant, as the case may be, of the Company or any Subsidiary, for any reason
other than death, disability or retirement, such Participant's Stock Options may
be exercised by the Participant for a period of one hundred eighty (180) days
after the Participant's termination of employment or service, as the case may
be, or until expiration of the applicable Option Period (if sooner) to the
extent of the shares with respect to which such Stock Options could have been
exercised by the Participant on the date of termination, and thereafter to the
extent not so exercised, such Stock Options shall terminate. In addition,
except as provided in Section 6.4 with respect to Incentive Stock Options, a
Participant's Stock Options may be exercised as follows in the event of such
Participant's death, disability or retirement:
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(a) DEATH. In the event of death while employed or while serving as a
(i) non-employee director, (ii) non-employee officer or (iii) consultant, as
the case may be, the Stock Option may be exercised, for a period of one
hundred eighty (180) days after the Participant's death or until expiration
of the Stock Option period (if sooner), to the extent of the shares with
respect to which the Stock Option could have been exercised by the
Participant on the date of the Participant's death, by the Participant's
estate or personal representative, or by the person who acquired the right to
exercise the Stock Option by bequest or inheritance or by reason of the
Participant's death; and
(b) DISABILITY OR RETIREMENT. In the event of termination of
employment of an employee (or termination of service in the case of a (i)
non-employee director, (ii) non-employee officer or (iii) consultant) as the
result of a total and permanent disability (as defined in Section 22(e) of
the Code) or as the result of retirement in accordance with the standard
retirement policies of the Company or the Subsidiary, as the case may be, the
Stock Option may be exercised by the Participant or his guardian for a period
of one hundred eighty (180) days after such termination or until expiration
of the Stock Option period (if sooner), to the extent of the shares with
respect to which the Stock Option could have been exercised by the
Participant on the date of such termination, after taking into account any
acceleration of unmatured installments of Stock Options pursuant to Section
5.4.
Notwithstanding the foregoing, individual grants of Stock Options to
Participants under the Plan may provide, pursuant to the terms of the
particular stock option agreement, more restrictive terms than those
contained in this Plan concerning any exercise of such Stock Options with
respect to any termination of employment or service by such Participants.
ARTICLE IX
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article IX, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided that no amendment which requires stockholder approval in order for
the Plan to continue to comply with Rule 16b-3 under the 1934 Act, including
any successor to such Rule, shall be effective unless such amendment shall be
approved by the requisite vote of the stockholders of the Company entitled to
vote thereon.
Subject to the forgoing, the Board shall have the power to amend the
Plan in any manner advisable in order for Stock Options granted under the
Plan to qualify for the exemption provided by Rule 16b-3 (or any successor
rule relating to exemption from Section 16(b) of the 1934 Act) or to qualify
as "performance-based" compensation under Section 162(m) of the Code
(including amendments as a result of changes to Rule 16b-3 or Section 162(m)
or the regulations thereunder to permit greater flexibility with respect to
Stock Options granted under the Plan), and any such amendment shall, to the
extent deemed necessary or advisable by the Committee, be applicable to any
outstanding Stock Options theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any stock option agreement. In the
event of any such
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amendment to the Plan, the holder of any Stock Option outstanding under the
Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed
by the Committee to any stock option agreement relating thereto within such
reasonable time as the Committee shall specify in such request.
Notwithstanding anything contained in this Plan to the contrary, unless
required by law, no action contemplated or permitted by this Article IX shall
adversely affect any rights of Participants or obligations of the Company to
Participants with respect to any Stock Options theretofore granted under the
Plan without the consent of the affected Participant.
The Board may not amend the provisions of Article IV more than once
during any six-month period unless such amendment is deemed necessary in
order to comply with the provisions of the Code or the treasury regulations
promulgated thereunder.
ARTICLE X
EFFECT OF THE PLAN
Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any director, officer, consultant or
employee any right to be granted a Stock Option to purchase or receive Common
Stock of the Company or any other rights except as may be evidenced by a
stock option agreement, or any amendment thereto, duly authorized by and
executed on behalf of the Company and then only to the extent of and upon the
terms and conditions expressly set forth therein.
ARTICLE XI
TERM
The Plan shall be submitted to the Company's stockholders for their
approval; PROVIDED, HOWEVER, that Stock Options may be granted under the Plan
prior to the time of stockholder approval. Unless sooner terminated by
action of the Board, the Plan will terminate on the 15th day of December,
2002. Stock Options under the Plan may not be granted after that date, but
Stock Options granted before that date will continue to be effective in
accordance with their terms and conditions.
ARTICLE XII
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect or unexercised Stock Options
are outstanding there shall be any increase or decrease in the number of
issued and outstanding shares of Common Stock through the declaration of a
Stock Dividend or through any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, then and in such event:
(a) An appropriate adjustment shall be made in the maximum number
of shares of Common Stock then subject to being awarded under grants
pursuant to the Plan,
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to the end that the same proportion of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being
so awarded;
(b) A similar adjustment shall be made in the maximum number of
shares of Common Stock issuable under Stock Options granted to any
individual Participant during any fiscal year during which the Plan is
in effect pursuant to Article III; and
(c) Appropriate adjustments shall be made in the number of shares
of Common Stock and the exercise price per share thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same proportion of the Company's issued
and outstanding shares of Common Stock in each instance shall remain
subject to purchase at the same aggregate exercise price.
Any fractional shares resulting from any adjustment made pursuant to
this Article XII shall be eliminated for the purposes of such adjustment.
Except as otherwise expressly provided herein, the issuance by the Company of
shares of its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of or exercise price of
shares of Common Stock then subject to outstanding Stock Options granted
under the Plan.
ARTICLE XIII
RECAPITALIZATION, MERGER AND CONSOLIDATION
(a) The existence of this Plan and Stock Options granted hereunder
shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, preferred or prior preference stocks ranking prior to or
otherwise affecting the Common Stock or the rights thereof (or any rights,
options or warrants to purchase same), or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger or
consolidation, any outstanding Stock Option granted hereunder shall pertain
to and apply to the securities or rights (including cash, property or assets)
to which a holder of the number of shares of Common Stock subject to the
Stock Option would have been entitled.
(c) In the event of any reorganization, merger or consolidation
pursuant to which the Company is not the surviving or resulting corporation,
or of any proposed sale of substantially all of the assets of the Company,
there may be substituted for each share of Common Stock subject to the
unexercised portions of such outstanding Stock Option that number of shares
of each class of stock or other securities or that amount of cash, property
or assets of the surviving or
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consolidated company which were distributed or distributable to the
stockholders of the Company in respect of each share of Common Stock held by
them, such outstanding Stock Options to be thereafter exercisable for such
stock, securities, cash or property in accordance with their terms.
Notwithstanding the foregoing, however, the Board, in its sole discretion,
may cancel all such Stock Options as of the effective date of any such
reorganization, merger or consolidation, or of any such proposed sale of
substantially all of the assets of the Company, or of any dissolution or
liquidation of the Company, and either:
(i) give notice to each holder thereof or his personal
representative of its intention to cancel such Stock Options and permit
the purchase during the thirty (30) day period next preceding such
effective date of any or all of the shares subject to such outstanding
Stock Options, including shares as to which such Stock Options would not
otherwise be exercisable; or
(ii) pay the holder thereof an amount equal to a reasonable
estimate of an amount (hereinafter the "Spread") equal to the difference
between the net amount per share payable in such transaction or as a
result of such transaction, less the exercise price of such Stock
Options. In estimating the Spread, appropriate adjustments to give
effect to the existence of the Stock Options shall be made, such as
deeming the Stock Options to have been exercised, with the Company
receiving the exercise price payable thereunder, and treating the shares
receivable upon exercise of the Options as being outstanding in
determining the net amount per share. In cases where the proposed
transaction consists of the acquisition of assets of the Company, the
net amount per share shall be calculated on the basis of the net amount
receivable with respect to shares of Common Stock upon a distribution
and liquidation by the Company after giving effect to expenses and
charges, including but not limited to taxes, payable by the Company
before such liquidation could be completed.
(d) In the event of a Change in Control of the Company, then,
notwithstanding any other provision in the Plan to the contrary, all
unmatured installments of Stock Options outstanding shall thereupon
automatically be accelerated and exercisable in full.
(e) Notwithstanding sub-Section (c) above of this Article XIII, in case
the Company shall, at any time while any Stock Option under this Plan shall
be in force and remain unexpired, (i) sell all or substantially all of its
property or (ii) dissolve, liquidate, or wind up its affairs, then, provided
that the Board so determines in its sole discretion, each Participant may
thereafter receive upon exercise hereof (in lieu of each share of Common
Stock of the Company which such Participant would have been entitled to
receive) the same kind and amount of any securities or assets as may be
issuable, distributable or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company. In the event that the Company shall, at any time prior to the
expiration of any Stock Option, make any partial distribution of its assets
in the nature of a partial liquidation, whether payable in cash or in kind
(but excluding the distribution of a cash dividend payable out of retained
earnings or earned surplus and designated as such), then in such event the
exercise prices then in effect with respect to each option shall be reduced,
as of the payment date of such distribution, in proportion to the
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percentage reduction in the tangible book value of the shares of the
Company's Common Stock (determined in accordance with generally accepted
accounting principles) resulting by reason of such distribution; provided,
that in no event shall any adjustment of exercise prices in accordance with
the terms of the Plan result in any exercise prices being reduced below the
par value per share of the Common Stock.
(f) Upon the occurrence of each event requiring an adjustment of the
exercise price and/or the number of shares purchasable pursuant to Stock
Options granted pursuant to the terms of this Plan, the Company shall mail
forthwith to each Participant a copy of its computation of such adjustment
which shall be conclusive and shall be binding upon each such Participant,
except as to any Participant who contests such computation by written notice
to the Company within thirty (30) days after receipt thereof by such
Participant.
ARTICLE XIV
OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER CORPORATIONS
Stock Options may be granted under the Plan from time to time in
substitution for such stock options held by employees of a corporation who
become or are about to become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by either of the foregoing of
stock of the employing corporation as the result of which it becomes a
Subsidiary. The terms and conditions of the substitute options so granted
may vary from the terms and conditions set forth in this Plan to such extent
as the Committee at the time of grant may deem appropriate to conform, in
whole or in part, to the provisions of the options in substitution for which
they are granted.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 EXERCISE OF STOCK OPTIONS. Stock Options granted under the Plan
may be exercised during the option period, at such times and in such amounts,
in accordance with the terms and conditions and subject to such restrictions
as are set forth herein and in the applicable stock option agreements.
Notwithstanding anything to the contrary contained herein, Stock Options may
not be exercised, nor may shares be issued pursuant to a Stock Option if any
necessary listing of the shares on a stock exchange or any registration under
state or federal securities laws required under the circumstances has not
been accomplished.
15.2 NON-ASSIGNABILITY. A Stock Option granted to a Participant may
not be transferred or assigned, other than (i) by will or the laws of descent
and distribution or (ii) pursuant to a qualified domestic relations order (as
defined in Section 401(a)(13) of the Code or Section 206(d)(3) of the
Employee Retirement Income Security Act of 1974, as amended), provided, that
in the case of an Incentive Stock Option, such transfer or assignment may
occur only to the extent it will not result in disqualifying such option as
an incentive stock option under Section 422 of the Code, or any successor
provision. Subject to the foregoing, during a Participant's lifetime, Stock
Options granted to a Participant may be exercised only by the
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Participant or, provided the particular stock option agreement so provides,
by the Participant's guardian or legal representative.
15.3 INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any Participant(s) under the Plan, such
evidence as it may deem necessary to establish that the Stock Options granted
or the shares of Common Stock to be purchased or transferred are being
acquired for investment and not with a view to their distribution.
15.4 ALLOTMENT OF SHARES. Except as otherwise set forth in Article IV,
the Committee shall determine the number of shares of Common Stock to be
offered from time to time by grant of Stock Options to Participants under the
Plan. The grant of a Stock Option to a Participant shall not, by itself, be
deemed either to entitle the Participant to, or to disqualify the Participant
from, participation in any other grant of Stock Options under the Plan.
15.5 NO RIGHT TO CONTINUE EMPLOYMENT. This Plan does not constitute a
contract of employment. Nothing in the Plan or in any Stock Option confers
upon any employee the right to continue in the employ of the Company or
interferes with or restricts in any way the right of the Company to discharge
any employee at any time (subject to any contract rights of such employee).
15.6 STOCKHOLDERS' RIGHTS. The holder of a Stock Option shall have
none of the rights or privileges of a stockholder except with respect to
shares which have been actually issued.
15.7 TAX REQUIREMENTS. Any employee who exercises any Stock Option
shall be required to pay the Company the amount of all taxes which the
Company is required to withhold as a result of the exercise of the Stock
Option. With respect to an Incentive Stock Option, in the event of a
subsequent disqualifying disposition of Common Stock within the meaning of
Section 422 of the Code, such payment of taxes may be made in cash, by check
or through the delivery of shares of Common Stock which the employee then
owns, which shares have an aggregate Fair Market Value equal to the required
withholding payment, or any combination thereof. With respect to the
exercise of a Nonqualified Stock Option, the Participant's obligation to pay
such taxes may be satisfied by the following, or by any combination thereof:
(i) the delivery of cash to the Company in an amount necessary to satisfy the
required tax withholding obligation of the Company and/or (ii) the actual
delivery by the exercising Participant to the Company of shares of Common
Stock which the Participant owns and/or the Company's withholding of a number
of shares to be delivered upon the exercise of the Stock Option, which shares
so delivered or withheld have an aggregate Fair Market Value which equals or
exceeds (if necessary to avoid the issuance of fractional shares) the
required tax withholding payment. Any such withholding payments with respect
to the exercise of a Nonqualified Stock Option made by a Participant in cash
or by actual delivery of shares of Common Stock shall be required to be made
within thirty (30) days after the delivery to the Participant of any
certificate representing the shares of Common Stock acquired upon exercise of
the Stock Option.
15.8 INDEMNIFICATION OF BOARD AND COMMITTEE. No current or previous
member of the Board or the Committee, nor any officer or employee of the
Company acting on behalf of the
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Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all such members of the Board or the Committee and each and any
officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such individuals may be entitled under the Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise.
15.9 GENDER AND NUMBER. Where the context permits, words in the
masculine gender shall include the feminine and neuter genders, the plural
form of a word shall include the singular form, and the singular form of a
word shall include the plural form.
ARTICLE XVI
EFFECTIVE DATE
The effective date of the Plan shall be December 15, 1992, that is, the
date on which it was first approved and adopted by the Board.
Notwithstanding the amendments of this Plan effective as of December 15,
1994, February 28, 1996, February 25, 1997 and May 13, 1997 and subject to
the terms of Article IX of the Plan, neither the terms of the Stock Options
outstanding as of such dates nor the stock option agreements entered into by
and between the Company and such relevant Participant in respect of such
Stock Options, shall be deemed to be amended in any way. Following approval
by the stockholders of the Company in accordance with applicable law, the
Plan, as amended and restated herein, will continue in effect until the
expiration of its term or until earlier terminated, amended, or suspended in
accordance with the terms hereof.
* * * * * * * * *
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of the 13th day of May, 1997 by its Chief Executive Officer
pursuant to prior action taken by the Board.
IMCO RECYCLING INC.
By: /s/ Don V. Ingram
-----------------------------------
Don V. Ingram
Chief Executive Officer
Attest:
/s/ Paul V. Dufour
- ----------------------------------
Paul V. Dufour
Secretary
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IMCO RECYCLING INC.
ANNUAL INCENTIVE PROGRAM
(AS AMENDED FEBRUARY 25, 1997, APRIL 1, 1997 AND MAY 13, 1997)
PURPOSE
The purpose of the IMCO Recycling Inc. Annual Incentive Program is to
advance the interests of IMCO Recycling Inc. and its stockholders by
providing certain key employees with annual incentive compensation which is
tied to the achievement of preestablished and objective performance goals.
The Plan is intended to provide Participants with annual incentive compensation
which is not subject to the deduction limitation rules prescribed under
Section 162(m) of the Code, and should be construed to the extent possible as
providing for remuneration which is "performance-based compensation" within
the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. The Plan also provides for the payment of an annual retainer to
the Company's non-employee directors.
ARTICLE I
DEFINITIONS
For the purpose of this Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
"ANNUAL DIFFERENCE" has the meaning assigned to it in Article V.
"ANNUAL ELECTION" has the meaning assigned to it in Section 7.4.
"ANNUAL RETAINER" has the meaning assigned to it in Article XII.
"AVERAGE EPS" has the meaning assigned to it in Article VI.
"BASE SALARY" means the actual base salary of a Participant
(exclusive of Bonuses and any compensation under any other employee
compensation or benefit plans of the Company) paid or to be paid, as the
case may be, to a Participant with respect to the Bonus Year in question,
according to the books and records of the Company and its Subsidiaries.
"BOARD" means the board of directors of the Company.
"BONUS" means either or both, as the context may require, of a ROTA
Bonus or an EPS Bonus actually awarded pursuant to the Plan.
"BONUS YEAR" means the fiscal year of the Company and its Subsidiaries
with respect to which a Bonus is calculated.
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"BONUSABLE AMOUNT" has the meaning assigned to it in Article VI.
"COMMITTEE" has the meaning assigned to it in Article II.
"CHANGE IN CONTROL" means the occurrence of any of the following
events: (i) there shall be consummated any merger or consolidation pursuant
to which shares of the Company's Common Stock would be converted into
cash, securities or other property, or any sale, lease, exchange or other
disposition (excluding disposition by way of mortgage, pledge or
hypothecation), in one transaction or a series of related transactions,
of all or substantially all of the assets of the Company (a "Business
Combination"), in each case unless, following such Business Combination,
all or substantially all of the holders of the outstanding Common Stock
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50.1% of the outstanding common stock or
equivalent equity interests of the corporation or entity resulting from
such Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
outstanding Common Stock, (ii) the stockholders of the Company approve
any plan or proposal for the complete liquidation or dissolution of the
Company, (iii) any "person" (as such term is defined in Section 3(a)(9)
or Section 13(d)(3) under the 1934 Act) or any "group" (as such term is
used in Rule 13d-5 promulgated under the 1934 Act), other than the
Company or any successor of the Company or any Subsidiary of the Company
or any employee benefit plan of the Company or any Subsidiary (including
such plan's trustee), becomes a beneficial owner for purposes of Rule 13d-3
promulgated under the 1934 Act, directly or indirectly, of securities of
the Company representing 50.1% or more of the Company's then outstanding
securities having the right to vote in the election of directors, or
(iv) during any period of two consecutive years, individuals who, at the
beginning of such period constituted the entire Board, cease for any
reason (other than death) to constitute a majority of the directors,
unless the election, or the nomination for election, by the Company's
stockholders, of each new director was approved by a vote of at least a
majority of the directors then still in office who were directors at the
beginning of the period.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock which the Company is currently
authorized to issue or may in the future be authorized to issue.
"COMPANY" means IMCO Recycling Inc., a Delaware corporation.
"DATE OF GRANT" means the effective date on which an option is
awarded to a Participant as set forth in the stock option agreement.
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"DISCRETIONARY OPTION" has the meaning assigned to it in Section
8.1(b).
"EARNINGS PER SHARE" or "EPS" means:
(a) with respect to a Final Payment Date, (i) the sum of (a)
the consolidated net earnings of the Company and its Subsidiaries for
the Bonus Year in question, as reported in the Company's audited
consolidated statement of earnings for such fiscal year prepared in
accordance with GAAP plus (b) the total of all bonus amounts (as tax
affected at the federal statutory rate) for the Participants actually
deducted in determining such amount for such fiscal year divided by
(ii) the number of shares of Common Stock used to calculate the
Company's earnings per share as reported in the Company's audited
consolidated statement of earnings for such fiscal year prepared in
accordance with GAAP; and
(b) with respect to a Preliminary Payment Date, (i) the sum of
(a) the consolidated net earnings of the Company and its Subsidiaries
for the Bonus Year in question to date PLUS (b) the total of all
bonus amounts (as tax affected at the federal statutory rate) for the
Participants accrued to date, in both instances annualized to give
effect to the Bonus Year in question, divided by (ii) the estimated
number of shares of Common Stock to be used to calculate the Company's
earnings per share for the Bonus Year in question. In this regard,
the Committee shall be entitled to rely in good faith upon, and shall
be protected in so relying upon, estimates based upon consolidated
financial statements and other books and records of the Company and
its Subsidiaries.
"ELIGIBLE PARTICIPANT" shall have the meaning set forth in Section 9.1
hereof.
"EPS BONUS" has the meaning assigned to it in Article VI.
"FAIR MARKET VALUE" of the Company's shares of Common Stock means
(i) the closing sale price per share on the principal securities exchange
on which the Common Stock is traded (or if there is no sale on the
relevant date, then on the last previous day on which a sale was reported),
or (ii) the mean between the closing or average (as the case may be) bid
and asked prices per share of Common Stock on the over-the-counter market,
whichever is applicable.
"FINAL PAYMENT DATE" means the business day selected by the Committee
upon which the Committee shall make final Bonus calculations in accordance
with Section 7.3, which shall be a date after the Company's independent
accounting firm issues its audit report on the Company's financial
statements with respect to the Bonus Year in question.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of
Certified Public Accountants acting through the Accounting Principles
Board or by the Financial Accounting Standards
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Board or through other appropriate boards or committees thereof and
which are consistently applied for all periods so as to properly reflect
the financial condition and the results of operations of the Company and
its Subsidiaries, except that any accounting principle or practice required
to be changed by such Financial Accounting Standards Board (or other
appropriate board or committee of such board) in order to continue as a
generally accepted accounting principle or practice may so be changed.
"GUIDELINES" has the meaning assigned to it in Section 7.4.
"INCENTIVE STOCK OPTION" means an option to purchase shares of Common
Stock granted to an Eligible Participant pursuant to Article IX and which
is intended to qualify as an incentive stock option under Section 422 of
the Code.
"JOINT VENTURE" means any joint venture or other corporation,
partnership or other entity or organization, whether incorporated or
unincorporated, in which the Company and/or any of its Subsidiaries own
an equity interest or interests which, in the aggregate, do not constitute
at least a majority of the common equity interests or voting interests
which entitle the holder(s) to elect at least a majority of the members of
the board of directors or equivalent governing body of the corporation,
partnership or organization in question.
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
"NONQUALIFIED STOCK OPTION" means an option to purchase shares of
Common Stock granted to a Participant pursuant to Article VIII and which
is not intended to qualify as an incentive stock option under Section 422
of the Code.
"OPTION AMOUNT" has the meaning assigned to it in Section 8.1.
"PARTICIPANT" means any key employee of the Company or any of its
Subsidiaries that the Committee has determined to be eligible for
participation in the Plan and who, on the particular Payment Date, is,
subject to Article IV of the Plan, then employed by the Company or any of
its Subsidiaries; provided that, solely for the purposes of Section 8.1(b)
of the Plan and the Discretionary Options which may be granted pursuant
thereto, "Participants" shall mean any employee of the Company or any
Subsidiary of the Company or any non-employee director, officer or
consultant of the Company or any Subsidiary who is, or who is proposed to
be, a recipient of a Discretionary Option.
"PAYMENT DATE" means either a Preliminary Payment Date or a Final
Payment Date.
"PLAN" means the IMCO Recycling Inc. Annual Incentive Program, as it
may be amended from time to time.
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"PRELIMINARY PAYMENT DATE" means a business day selected by the
Committee in its sole discretion during the last month of the fiscal year
constituting the Bonus Year in question, upon which date the Committee
shall calculate and declare Bonuses in accordance with Section 7.3.
"PROFITS BEFORE TAXES" or "PBT" means:
(a) with respect to a Final Payment Date, (i) the income
(or loss), before provision for income taxes of the Company and its
Subsidiaries for the Bonus Year in question, determined by reference
to the Company's audited consolidated statement of earnings for such
fiscal year prepared in accordance with GAAP, PLUS (ii) the sum of
all bonus amounts for the Participants actually deducted in
determining such amount for such fiscal year; and
(b) with respect to a Preliminary Payment Date, (i) the income
(or loss) before provision for income taxes of the Company and its
Subsidiaries for the Bonus Year in question to date (determined by
reference to the most recent unaudited consolidated statement of
earnings for such Bonus Year to date, prepared in accordance with
GAAP), and then annualized to give effect to estimated results for
the entire fiscal year, PLUS (ii) the estimated sum of all bonus
amounts for the Participants to be deducted in determining such
estimated annualized amount for the entire fiscal year. In this
regard, the Committee shall be entitled to rely in good faith upon,
and shall be protected in so relying upon, estimates based upon
consolidated financial statements and other books and records of the
Company and its Subsidiaries.
"RELOAD STOCK OPTION" means a Nonqualified Stock Option or an
Incentive Stock Option granted pursuant to Section 10.2.
"RESTRICTED STOCK" shall have the meaning set forth in Section 10.3.
"RESTRICTION PERIOD" shall have the meaning set forth in Section 10.3.
"RETURN ON TOTAL ASSETS" or "ROTA" means, on a Preliminary Payment
Date or a Final Payment Date, as the case may be, the quotient, expressed
as a percentage, derived from (i) PBT with respect to the Bonus Year in
question being divided by (ii) Total Assets as of the beginning of that
Bonus Year.
"ROTA BONUS" has the meaning assigned to it in Article V.
"SPREAD" shall have the meaning set forth in Article XVII hereof.
"STOCK DIVIDEND" means a dividend or other distribution declared on
the shares of Common Stock payable in (i) capital stock of the Company or
any Subsidiary of the Company, or (ii) rights, options or warrants to
receive or purchase capital stock of the
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Company or any Subsidiary of the Company, or (iii) securities convertible
into or exchangeable for capital stock of the Company or any Subsidiary of
the Company, or (iv) any capital stock received upon the exercise, or with
respect to, the foregoing.
"STOCK OPTIONS" shall mean any and all Incentive Stock Options,
Nonqualified Stock Options and Reload Stock Options granted pursuant to
the Plan.
"SUBSIDIARY" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of the
Stock Option, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing more than 50% of the total
combined voting power of all classes of stock in one of the other
corporations in the chain, and "Subsidiaries" means more than one of any
such corporations.
"TOTAL ASSETS" means, on a Preliminary Payment Date or a Final Payment
Date, as the case may be, the total assets of the Company and its
Subsidiaries (exclusive of interests in, or assets attributable to, as the
case may be, Joint Ventures) as of the beginning of the Bonus Year in
question, as reported in the Company's audited consolidated balance sheet
as of the last day of the immediately preceding fiscal year, prepared in
accordance with GAAP.
"TOTAL BONUS" means the aggregate compensation, if any, awarded to a
Participant on the Preliminary Payment Date and the Final Payment Date for
any Bonus Year pursuant to a ROTA Bonus and and/or an EPS Bonus.
ARTICLE II
ADMINISTRATION
Subject to the terms of this Article II, the Plan shall be administered
by the Compensation Committee (the "Committee") of the Board, which shall
consist of at least two members. Any member of the Committee may be removed
at any time, with or without cause, by resolution of the Board. Any vacancy
occurring in the membership of the Committee may be filled by appointment by
the Board. Each member of the Committee, at the time of his appointment to
the Committee and while he is a member thereof, must be an "outside director",
as that term is defined under Section 162(m) of the Code.
The Board shall select one of its members to act as the Chairman of the
Committee, and the Committee shall make such rules and regulations for its
operation as it deems appropriate. A majority of the Committee shall
constitute a quorum, and the act of a majority of the members of the
Committee present at a meeting at which a quorum is present shall be the act
of the Committee. Subject to the terms hereof, the Committee shall designate
from time to time the key employees, directors, consultants, or officers of the
Company to whom Stock Options will be granted, interpret the Plan, prescribe,
amend, and rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and make such other determinations and take such
other action as it deems necessary or advisable. In this regard, the Committee
may consider and
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give appropriate weight to input from representatives of management of the
Company regarding the contributions or potential contributions to the Company
or a Subsidiary of certain of the employees, officers or consultants, or
potential employees, officers or consultants, of the Company or any Subsidiary.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms
of any Stock Options issued under it and to adopt such rules and regulations
for administering the Plan as it may deem necessary. The Committee may, in
its absolute discretion, (i) accelerate the date on which any Stock Option
granted under the Plan becomes exercisable, (ii) extend the date on which any
Stock Option granted under the Plan ceases to be exercisable and (iii) remove,
suspend or alter the restrictions imposed under Section 10.3 of the Plan.
Except as provided below, any interpretation, determination, or other action
made or taken by the Committee shall be final, binding, and conclusive on all
interested parties, including the Company and all Participants.
ARTICLE III
SHARES SUBJECT TO PLAN
Subject to the provisions of Articles XVI and XVII of the Plan, the
aggregate number of shares which may be issued to Participants under grants
of Stock Options and in payment of Bonuses made by the Committee under the
Plan shall be:
(a) 500,000 shares of Common Stock; plus
(b) the number of shares that are delivered or tendered, or withheld
from any exercise, by a Participant as full or partial payment made to the
Company in connection with the exercise price of any Stock Option or in
connection with satisfying the Participant's tax withholding obligations
pursuant to Section 19.6 of the Plan, to the extent that a Reload Stock
Option is granted to purchase such number of shares so delivered to or
withheld by the Company.
The aggregate number of shares of Common Stock that may be represented
by grants of Stock Options made to any Participant under the Plan in any
Bonus Year may not exceed 100,000 shares. Shares to be distributed and sold
under the Plan may be made available from either authorized but unissued
Common Stock or Common Stock held by the Company in its treasury. Shares
that by reason of the expiration or unexercised termination of a Stock Option
are no longer subject to purchase may be reoffered under the Plan. Shares of
Common Stock that are forfeited pursuant to the terms of the Plan shall be
returned to the Plan and made available for future grant.
ARTICLE IV
ELIGIBILITY
The Committee shall, from time to time, but not less often than
annually, select the particular key members of management of the Company and
its Subsidiaries to whom Bonuses
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and Stock Options provided for under the Plan may be granted. Employees who
participate in this Plan may also participate in other incentive or benefit
plans of the Company or any Subsidiary. As used herein, the term "employee"
shall mean any person employed full-time by the Company or Subsidiary on a
salaried basis, and the term "employment" shall mean full-time salaried
employment by the Company or a Subsidiary. In addition, the Committee shall
from time to time select the particular employees, consultants, officers and
directors of the Company and its Subsidiaries to whom Discretionary Options
to be granted pursuant to Section 8.1(b) of the Plan are to be granted.
ARTICLE V
ROTA BONUS
Subject to and in accordance with the terms of this Plan, on each
Payment Date, the Committee shall compute in good faith the Return on Total
Assets by reference to (i) the Total Assets and (ii) the most recent audited,
or, in the case of the Preliminary Payment Date, unaudited consolidated
statement of earnings for the Company and its Subsidiaries for the Bonus Year
in question which unaudited statement of earnings shall reflect (or shall be
annualized to give effect to) results for the entire Bonus Year. In the
event that the Return on Total Assets is greater than ten percent (10%), then
Participants may be eligible for a Bonus to be calculated as follows ("ROTA
Bonus"):
(a) First, there shall be determined the "Bonusable Amount" for each
Participant, which shall be the dollar amount calculated by deducting
$50,000 from such Participant's Base Salary;
(b) Second, the Committee shall calculate the difference between the
ROTA for the relevant Bonus Year and ten percent (10%), which difference
shall be expressed as a percentage (the "Annual Difference"); and
(c) Third, the Annual Difference shall be multiplied by three (3) and
the product thereof, expressed as a percentage, shall be multiplied by the
Participant's Bonusable Amount to yield the maximum ROTA Bonus amount with
respect to such Participant.
ARTICLE VI
EPS BONUS
Subject to and in accordance with the terms of this Plan, on each
Payment Date, the Committee shall compute in good faith the Company's
Earnings Per Share by reference to the most recent audited, or, in the case
of the Preliminary Payment Date, unaudited consolidated statement of earnings
for the Company and its Subsidiaries for the Bonus Year in question which
unaudited statement of earnings shall reflect (or shall be annualized to give
effect to) the results for the entire Bonus Year. Participants may be
eligible for a Bonus to be calculated as follows ("EPS Bonus"):
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(a) First, the Committee shall calculate the average EPS for the
preceding three fiscal years by dividing the sum of EPS for each of the
preceding three fiscal years by three (3) (the "Average EPS"); and
(b) Second, the EPS for the applicable Bonus Year shall be divided
by the Average EPS, which amount shall reduced by 1.0 and shall be
expressed as a percentage; and
(c) Third, if such percentage is a positive number, such percentage
amount shall be multiplied by the Participant's Bonusable Amount to yield
the maximum EPS Bonus amount for such Participant.
ARTICLE VII
PAYMENT OF BONUSES AND GENERAL PROVISIONS
7.1 COMMITTEE DETERMINATION; LIMITATIONS. Subject to the terms of this
Plan, the Committee shall, from time to time, determine the time or times at
which Bonuses will be made, the selection of the Preliminary Payment Date and
the Final Payment Date, the determination and payment of Bonuses to
Participants and all other terms and conditions regarding the Bonuses, which
terms and conditions shall be consistent with this Plan. Notwithstanding
anything to the contrary herein, the value of the maximum Total Bonus payable
to any Participant with respect to any Bonus Year shall not exceed $750,000.
7.2 REDUCTION OF BONUS. The maximum Bonus amounts for any Participant
under the Plan calculated in accordance with Articles V and VI hereof may be
reduced by an amount of up to 50% by the Committee in its sole discretion;
PROVIDED, HOWEVER, that under no circumstances may the amount of a maximum
Bonus so determined in accordance with Articles V and VI to any Participant
be increased. In determining whether a Bonus will be reduced, the Committee
shall consider any extraordinary changes which may occur during the Bonus
Year, such as changes in accounting practices or applicable law, and shall
consider such individual or business performance criteria that it deems
appropriate, including, but not limited to, the Company's net income,
operating earnings, gross margins, return on investment, return on equity and
other relevant operating and strategic business indicia and results
applicable to an individual Participant.
7.3 PAYMENTS ON PRELIMINARY AND FINAL PAYMENT DATES. As a condition to
eligibility for receipt of a Bonus with respect to any particular Bonus Year,
a Participant shall be required to be in the employ of the Company or one of
its Subsidiaries through the applicable Payment Date, UNLESS (i) such
Participant terminated his or her employment during such period due to
retirement from the Company and its Subsidiaries in accordance with the
standard retirement policies of the Company and its Subsidiaries then in
effect, or (ii) the Participant, while in the employ of the Company or one of
its Subsidiaries, became totally and permanently disabled (as that term is
defined in Section 22(e) of the Code) or died during such period.
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On the Preliminary Payment Date, the Committee shall calculate the
Bonuses in accordance with Articles V and VI (and Section 7.2, if applicable)
and award 80% of the aggregate of the ROTA Bonus and the EPS Bonus, if any,
payable to a Participant. The Committee shall instruct the Company, or
instruct the Company to cause any Subsidiary, as applicable, to pay to each
Participant his Bonus in accordance with this Article VII, as promptly as
reasonably practicable after such Preliminary Payment Date.
On the Final Payment Date, the Committee shall calculate the Bonus in
accordance with Articles V and VI (and Section 7.2), and either:
(a) allocate and distribute the portions of the Bonus which had not
been previously awarded to Participants following the Preliminary Payment
Date; PROVIDED, HOWEVER, that subject to Section 7.3, in order for a
Participant to receive a Bonus on the Final Payment Date, it shall be a
requirement that such Participant shall be employed by the Company or its
Subsidiaries on such Final Payment Date; or
(b) if the amount of the Bonus calculated as of the Final Payment
Date is less than the portion of the Bonus which had previously been
awarded to the Participants on the Preliminary Payment Date, the difference
shall be subtracted from the amount of the Bonus or Bonuses payable in
the next succeeding Bonus Year or Bonus Years, if any, until such
difference has been eliminated.
7.4 STOCK OWNERSHIP GUIDELINES. The Committee shall, from time to
time, establish guidelines for the ownership of shares of the Company's
Common Stock for Participants (the "Guidelines"). The Guidelines may be
altered or amended by the Committee at any time and from time to time in its
sole discretion and are to be utilized in determining the portions of a
Participant's Bonus payable in cash and in Common Stock. On June 1 of each
Bonus Year, each Participant shall irrevocably elect, in writing, the
percentages of such Participant's Bonus to be paid in cash and in shares of
Common Stock (the "Annual Election"). On November 30 of each Bonus Year, the
Committee shall determine, by reference to the Guidelines, whether a
Participant's stock ownership then meets or exceeds the Guidelines. If, as
of such November 30, a Participant's Common Stock ownership meets or exceeds
the Guidelines, such Participant's Bonus, after giving effect to deductions
of amounts for applicable tax withholding requirements, shall be paid in
proportions of cash and shares of Common Stock, on the applicable Preliminary
Payment Date and Final Payment Date, in accordance with the allocation set
forth in such Participant's Annual Election. If, on the other hand, such
Participant's Common Stock ownership does not then meet such Guidelines, such
Participant's Bonus shall be paid, after giving effect to deductions of
amounts for applicable tax withholding requirements, on the applicable
Preliminary Payment Date and Final Payment Date, in accordance with
percentages of Common Stock and cash established by the Committee under the
Guidelines from time to time and at any time then in effect with respect to
the applicable Bonus Year. Notwithstanding the foregoing, in the event that
a Participant's Annual Election provides for a GREATER percentage of such
Participant's Bonus to be paid in shares of Common Stock than the percentage
determined by reference to the Guidelines, then such Participant's Annual
Election shall control.
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7.5 PAYMENT OF BONUS IN SHARES OF COMMON STOCK. In the event that all
or any portion of a Participant's Bonus is to be paid in shares of Common
Stock, the number of shares of Common Stock issued to such Participant as of
any Payment Date shall be determined by dividing the dollar amount of the
portion of the Bonus to be payable in Common Stock (after deduction of
amounts for applicable withholding tax requirements) by the Fair Market Value
on the third trading day prior to the Preliminary Payment Date or the Final
Payment Date, whichever is applicable. Fractional shares resulting from such
calculation shall be paid in cash equal to the fractional amount multiplied
by the Fair Market Value on the third trading day prior to the Preliminary
Payment Date or the Final Payment Date, whichever is applicable.
7.6 PARTIAL FISCAL YEARS. In the event that the Company and its
Subsidiaries adopt any different fiscal year which results in a fiscal year
having less than twelve months, the Committee shall, in its sole discretion,
award Bonuses computed as provided in Articles V and VI (and Section 7.2, if
applicable) but reduced by the Committee for such shortened fiscal year, or
defer any awards of Bonuses for such fiscal period until, with respect to a
Preliminary Payment Date, the last month of the first full twelve-month
fiscal year following such shortened fiscal year and to a Final Payment Date
following such full twelve-month fiscal year.
7.7 NO RIGHTS TO BONUS. The prospective recipient of a Bonus shall not
have any rights with respect to any Bonus, or any portion thereof, until the
Preliminary Payment Date or Final Payment Date, as the case may be, to which
the particular Bonus amount relates and only until such Bonus amount is
actually granted by the Committee to such Participant in accordance with the
terms of the Plan.
ARTICLE VIII
STOCK OPTIONS
8.1 GRANTS OF STOCK OPTIONS.
(a) ROTA BONUS OPTIONS. In the event that the ROTA for any Bonus
Year calculated in accordance with Article V exceeds 15%, then the
Committee may grant Stock Options under the Plan to Participants eligible
for ROTA Bonuses thereunder as follows:
(i) On, or as soon as reasonably practicable following, the
Preliminary Payment Date, the Committee shall calculate the number
of shares of Common Stock to be covered by the Stock Options to be
granted by first multiplying the dollar amount of the most recent
Total Bonus actually awarded to each Participant, by 1.5 (the
"Option Amount"); and
(ii) The number of shares of Common Stock issuable upon the
exercise of the Stock Option to be granted to such Participant shall
be determined by dividing the Option Amount by the Fair Market Price
on the Date of Grant.
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(b) DISCRETIONARY OPTIONS. Notwithstanding any provision contained
in this Plan to the contrary, the Committee may, in its sole discretion,
at any time and from time to time, select Participants and grant Stock
Options ("Discretionary Options") to any such Participant in recognition
of such Participant's contributions or potential contributions to the
Company or any Subsidiary. In this regard, the Committee shall consider
and give appropriate weight to input from representatives of management
of the Company regarding the contributions or potential contributions to
the Company or a Subsidiary of particular employees, officers or
consultants, or potential employees, officers or consultants of the
Company or a Subsidiary.
8.2 STOCK OPTION AGREEMENTS. Each grant of Stock Options shall be
evidenced by a stock option agreement setting forth the total number of
shares subject to the Stock Option, the exercise price, the term of the Stock
Option, whether such Stock Option is an Incentive Stock Option or a
Nonqualified Stock Option, and such other terms and provisions as are
approved by the Committee, but, except to the extent permitted herein, are
not inconsistent with the Plan. In the case of an Incentive Stock Option,
the stock option agreement shall also include provisions that may be
necessary to assure that the option is an incentive stock option under
Section 422 (or any successor provision) of the Code. The Company shall
execute stock option agreements upon instructions from the Committee.
8.3 EXERCISE PRICE. The exercise price for a Nonqualified Stock Option
shall be equal to the Fair Market Value per share of the Common Stock on the
Date of Grant. The exercise price for an Incentive Stock Option shall be
determined by the Committee and shall be an amount not less than the Fair
Market Value per share of the Common Stock on the Date of Grant; the
Committee shall determine the Fair Market Value of the Common Stock on the
Date of Grant, and shall set forth the determination in its minutes.
Notwithstanding anything to the contrary contained in this Section 8.3, the
exercise price of each Stock Option granted pursuant to the Plan shall not be
less than the par value per share of the Common Stock.
8.4 OPTION PERIOD. The option period will begin and terminate on the
respective dates specified by the Committee, but may not terminate later than
ten years from the Date of Grant. No Stock Option granted under the Plan may
be exercised at any time after its term. The Committee may provide for the
exercise of Stock Options in installments and upon such terms, conditions and
restrictions as it may determine. The Committee shall have the right to
accelerate the time at which any Stock Option granted to a Participant shall
become exercisable. In the event of the retirement of an employee of the
Company or a Subsidiary in accordance with the standard retirement policies
of the Company or the Subsidiary, as the case may be, all unmatured
installments of Stock Options outstanding shall automatically be accelerated
and exercisable in full in accordance with the provisions of Article X.
ARTICLE IX
LIMITS ON INCENTIVE STOCK OPTIONS
9.1 OPTION PERIOD. Notwithstanding the provisions of Sections 8.4 and
10.2 hereof, if a Participant eligible to receive a grant of an Incentive Stock
Option under Section 422 of the
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Code (an "Eligible Participant") owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company (or any
Subsidiary of the Company) and an Incentive Stock Option is granted to such
Eligible Participant, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five years
from the Date of Grant. In addition, the option exercise price of any such
Incentive Stock Option granted to any such Eligible Participant owning more
than 10% of the combined voting power of all classes of stock of the Company
(or any Subsidiary of the Company) shall be at least 110% of the Fair Market
Value of the Common Stock on the Date of Grant.
9.2 LIMITATION ON EXERCISES OF SHARES SUBJECT TO INCENTIVE STOCK OPTIONS.
To the extent required by the Code for incentive stock options, the exercise
of Incentive Stock Options granted under the Plan shall be subject to the
$100,000 calendar year limit as set forth in Section 422(d) of the Code.
9.3 DISQUALIFYING DISPOSITION. If Common Stock acquired upon exercise
of an Incentive Stock Option is disposed of by an Eligible Participant prior
to the expiration of either two years from the Date of Grant of such option
or one year from the transfer of shares to such Eligible Participant pursuant
to the exercise of such option, or in any other disqualifying disposition
within the meaning of Section 422 of the Code, such Eligible Participant
shall notify the Company in writing of the date and terms of such disposition.
A disqualifying disposition by an Eligible Participant shall not affect the
status of any other option granted under the Plan as an incentive stock option
within the meaning of Section 422 of the Code.
9.4 TERMINATION. Notwithstanding the provisions of Article XI, an
Eligible Participant's Incentive Stock Options shall terminate no later than
ninety (90) days after termination of such Participant's employment with the
Company and its Subsidiaries; PROVIDED that if such employment terminates by
reason of the death or total and permanent disability (as defined in Section
22(e) of the Code) of the Participant, then such Participant's Incentive
Stock Options shall terminate no later than one hundred eighty (180) days
after such termination by reason of death or disability.
ARTICLE X
EXERCISE OF STOCK OPTIONS; RELOAD STOCK OPTIONS; RESTRICTED STOCK
10.1 PAYMENT. Full payment for shares purchased upon exercise of a
Stock Option shall be made in cash or by the Participant's delivery to the
Company of shares of Common Stock which have a Fair Market Value equal to the
option exercise price (or in any combination of cash and shares of Common
Stock having an aggregate Fair Market Value equal to the option exercise
price). No shares may be issued until full payment of the purchase price
therefor has been made, and a Participant will have none of the rights of a
stockholder until shares are issued to him. Additionally, shares covered by
a Stock Option may be purchased upon exercise, in whole or in part, in
accordance with the applicable stock option agreement, by authorizing a
third party to sell the shares (or a sufficient portion thereof) acquired
upon exercise of a Stock Option, and assigning the delivery to the Company of
a sufficient amount of the sale proceeds to
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pay for all the shares acquired through such exercise and any tax withholding
obligations resulting from such exercise.
10.2 RELOAD STOCK OPTIONS. Subject to the terms of this Section 10.2,
in the event that shares are delivered by a Participant in payment of all or
a portion of the exercise price of a Stock Option and/or shares are delivered
to or withheld by the Company in satisfaction of the Company's tax withholding
obligations upon exercise in accordance with Section 19.6, then a Participant
so exercising a Nonqualified Stock Option shall automatically be granted a
replacement Nonqualified Stock Option and a Participant so exercising an
Incentive Stock Option shall automatically be granted a replacement Incentive
Stock Option (in either case, a "Reload Stock Option"), to purchase that
number of shares so delivered to or withheld by the Company, as the case may
be, at an option exercise price equal to the Fair Market Value per share of
the Common Stock on the date of exercise of the original Stock Option
(subject to the provisions of Article IX regarding Incentive Stock Options
and, in any event not less than the par value per share of the Common Stock).
The option period for a Reload Stock Option will commence on the Date of
Grant and expire on the expiration date of the original Stock Option it
replaces (subject to the provisions in Article IX regarding Incentive Stock
Options and the provisions of Article XI), after which the Reload Stock
Option cannot be exercised. The Date of Grant of a Reload Stock Option shall
be the date that the Stock Option it replaces is exercised. A Reload Stock
Option shall automatically vest and be exercisable in full after the expiration
of six months from its Date of Grant. It shall be a condition to the grant of
a Reload Stock Option that promptly after its Date of Grant, a stock option
agreement shall be delivered to, and executed and delivered by the Participant
and the Company which sets forth the total number of shares subject to the
Reload Stock Option, the option exercise price, the term of the Reload Stock
Option and such other terms and provisions as are consistent with the Plan.
10.3 RESTRICTED STOCK. In the event that a Participant exercises a
Stock Option and receives a Reload Stock Option under Section 10.2, the
following restrictions and conditions will apply to that number of the shares
of Common Stock (the "Restricted Stock") issued to the Participant upon
exercise of such original Stock Option, which number of shares is equal to
one-half of the sum of (i) the number of shares of Common Stock delivered by
the Participant to the Company in payment of the exercise price, if any, plus
(ii) the number of shares of Common Stock delivered to, or withheld by, the
Company in satisfaction of the Company's tax withholding obligations under
Section 19.6, if any:
(a) RESTRICTION PERIOD. Subject to the other provisions of this
Plan, each Participant shall not be permitted to sell, assign, transfer,
pledge, exercise or place any encumbrance on shares of Restricted Stock
and any Stock Dividends paid on or with respect to such Restricted Stock
until the earliest to occur of any of the following events (such period
of restriction being referred to herein as the "Restriction Period"):
(i) the expiration of five years from the date of issuance of
the Restricted Stock in the name of the Participant;
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(ii) in the case of an employee of the Company or a Subsidiary,
the retirement of such Participant from the Company or the Subsidiary in
accordance with the standard retirement policies of the Company or the
Subsidiary, as the case may be;
(iii) in the case of a non-employee director, officer or
consultant of the Company, the cessation of service to the Company of
such Participant in such capacity;
(iv) the death of such Participant;
(v) the total and permanent disability of such Participant
(as defined in Article XI hereof); or
(vi) a Change in Control of the Company.
Notwithstanding the foregoing, shares of Restricted Stock, and any
Stock Dividends paid in shares of Common Stock on or with respect to
Restricted Stock, may be used during the Restriction Period in payment of
the exercise price of any Stock Option and/or in satisfaction of the
Company's tax withholding obligations upon any such exercise in accordance
with Section 19.6.
(b) RIGHTS WITH RESPECT TO RESTRICTED STOCK. Except as otherwise
provided in the Plan, the Participant shall have, with respect to his or
her Restricted Stock (and any Stock Dividends paid on such Restricted
Stock), all of the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive any dividends thereon.
Each Participant who is to receive Restricted Stock shall be issued a
stock certificate in respect of such shares of Restricted Stock, registered
in the name of the Participant, which shall bear an appropriate legend
referring to the restrictions applicable to such Restricted Stock, to
read substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions of the IMCO
Recycling Inc. Annual Incentive Program. A copy of such Plan is on file
in the offices of IMCO Recycling Inc., 5215 North O'Connor Blvd.,
Suite 940, Irving, Texas 75039."
ARTICLE XI
TERMINATION OF EMPLOYMENT OR SERVICE
In the event a Participant shall cease to be employed by the Company or
a Subsidiary, for any reason other than death, disability or retirement, such
Participant's Stock Options may be exercised by the Participant for a period
of one hundred eighty (180) days after the Participant's termination of
employment or service, as the case may be, or until expiration of the
applicable Option Period (if sooner) to the extent of the shares with respect
to which such Stock Options could have been exercised by the Participant on
the date of termination, and thereafter to the
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extent not so exercised, such Stock Options shall terminate. In addition,
except as provided in Section 9.4 with respect to Incentive Stock Options, a
Participant's Stock Options may be exercised as follows in the event of such
Participant's death, disability or retirement:
(a) DEATH. In the event of death while employed, the Stock Option
may be exercised, for a period of one hundred eighty (180) days after the
Participant's death or until expiration of the Stock Option period (if
sooner), to the extent of the shares with respect to which the Stock Option
could have been exercised by the Participant on the date of the
Participant's death, by the Participant's estate or personal
representative, or by the person who acquired the right to exercise the
Stock Option by bequest or inheritance or by reason of the Participant's
death; and
(b) DISABILITY OR RETIREMENT. In the event of termination of
employment of a Participant as the result of a total and permanent
disability (as defined in Section 22(e) of the Code) or as the result of
retirement in accordance with the standard retirement policies of the
Company or the Subsidiary, as the case may be, the Stock Option may be
exercised by the Participant or his guardian for a period of one hundred
eighty (180) days after such termination or until expiration of the Stock
Option period (if sooner), to the extent of the shares with respect to
which the Stock Option could have been exercised by the Participant on the
date of such termination, after taking into account any acceleration of
unmatured installments of Stock Options pursuant to Section 8.4.
Notwithstanding the foregoing, individual grants of Stock Options to
Participants under the Plan may provide, pursuant to the terms of the
particular stock option agreement, more restrictive terms than those
contained in this Plan concerning any exercise of such Stock Options with
respect to any termination of employment or service by such Participants.
ARTICLE XII
NON-EMPLOYEE DIRECTOR FEES
Each non-employee director of the Company shall be entitled to
a retainer determined in accordance with this Article XII. On the
last business day of each quarter in the Company's fiscal year (the
"Stock Award Date"), each non-employee director who has held such
office for the entire three-month period preceding such Stock Award
Date shall be granted (x) a number of shares of Common Stock to be
determined from time to time by the Board (subject to adjustment in
the event of any subsequent increase or decrease in the number of
issued and outstanding shares of Common Stock through the declaration
of a Stock Dividend or through any recapitalization resulting in a
stock split-up, combination or exchange of shares of Common Stock)
(the "Retainer Shares") and (y) a cash payment in an amount equal
to the average of the Fair Market Value of the Retainer Shares over
the five successive trading days ending on the Stock Award Date
("Average Fair Market Value"). If any non-employee director has not
served as a non-employee director for the entire three-month period
preceding the Stock Award Date, such director shall be granted on the
Stock Award Date (a) a number of whole shares of Common Stock
determined by multiplying the number of Retainer Shares by a fraction,
16
<PAGE>
the numerator of which is the number of days which such director has
served as a non-employee director since the previous Stock Award Date
and the denominator of which is the number of days since the last
Stock Award Date, and (b) a cash payment equal to the sum of (i) the
Average Fair Market Value of the shares determined in clause (a) above
and (ii) an amount equal to two times the Average Fair Market Value
of any fractional share of common Stock determined upon the
calculation in clause (a) of this sentence. Notwithstanding the
foregoing, a non-employee director who holds such office at the
beginning of the three-month period preceding a Stock Award Date may
elect, at any time prior to the beginning of such three-month period,
to receive twice the number of Retainer Shares in lieu of the cash
portion of the quarterly retainer. The stock certificate representing
shares of Common Stock issuable on a Stock Award Date and a check for
cash, if any, payable on such date, shall be issued and delivered to
each director within 15 days after such Stock Award Date. In the
event the Board determines to change the number of Retainer Shares
as permitted herein, such change shall only be effective with respect
to a quarterly period subsequent to the quarterly period during which
the Board's determination is made.
ARTICLE XIII
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article XIII, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided that no amendment which requires stockholder approval in order for
the Plan to continue to comply with Rule 16b-3 under the 1934 Act, including
any successor to such Rule, shall be effective unless such amendment shall be
approved by the requisite vote of the stockholders of the Company entitled to
vote thereon.
Subject to the foregoing, the Board shall have the power to amend the
Plan in any manner advisable in order for Stock Options or Bonuses granted
under the Plan to qualify for the exemption provided by Rule 16b-3 (or any
successor rule relating to exemption from Section 16(b) of the 1934 Act) or
to qualify as "performance-based" compensation under Section 162(m) of the
Code (including amendments as a result of changes to Rule 16b-3 or Section
162(m) or the regulations thereunder to permit greater flexibility with
respect to Stock Options or Bonuses granted under the Plan), and any such
amendment shall, to the extent deemed necessary or advisable by the
Committee, be applicable to any outstanding Stock Options theretofore granted
under the Plan, notwithstanding any contrary provisions contained in any
stock option agreement. In the event of any such amendment to the Plan, the
holder of any Stock Option outstanding under the Plan shall, upon request of
the Committee and as a condition to the exercisability thereof, execute a
conforming amendment in the form prescribed by the Committee to any stock
option agreement relating thereto within such reasonable time as the
Committee shall specify in such request. Notwithstanding anything contained
in this Plan to the contrary, unless required by law, no action contemplated
or permitted by this Article XIII shall adversely affect any rights of
Participants or obligations of the Company to Participants with respect to
any Bonuses or Stock Options theretofore granted under the Plan without the
consent of the affected Participant.
17
<PAGE>
ARTICLE XIV
EFFECT OF THE PLAN
Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any Participant any right to be granted a
Bonus or a Stock Option to purchase or receive Common Stock of the Company or
any other rights except, with respect to Stock Options, as may be evidenced by a
stock option agreement, or any amendment thereto, duly authorized by and
executed on behalf of the Company and then only to the extent of and upon the
terms and conditions expressly set forth therein.
ARTICLE XV
TERM
The effective date of this Plan shall be as of February 28, 1996, subject
to stockholder approval. This Plan and any benefits granted hereunder shall be
null and void if stockholder approval is not obtained at the next annual meeting
of stockholders of the Company. Unless sooner terminated by action of the
Board, the Plan will terminate on the 28th day of February, 2006. Bonuses and
Stock Options under the Plan may not be granted after that date, but Bonuses and
Stock Options granted before that date will continue to be effective in
accordance with their terms and conditions.
ARTICLE XVI
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect or unexercised Stock Options are
outstanding there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock through the declaration of a Stock Dividend
or through any recapitalization resulting in a stock split-up, combination, or
exchange of shares of Common Stock, then and in such event:
(i) An appropriate adjustment shall be made in the maximum number
of shares of Common Stock then subject to being awarded under Bonuses or
Stock Options pursuant to the Plan, to the end that the same proportion
of the Company's issued and outstanding shares of Common Stock shall
continue to be subject to being so awarded;
(ii) A similar adjustment shall be made in the maximum number of
shares of Common Stock issuable under Stock Options granted to any
individual Participant in any Bonus Year pursuant to Article III; and
(iii) Appropriate adjustments shall be made in the number of shares
of Common Stock and the exercise price per share thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same
18
<PAGE>
proportion of the Company's issued and outstanding shares of Common
Stock in each instance shall remain subject to purchase at the same
aggregate exercise price.
Any fractional shares resulting from any adjustment made pursuant to this
Article XVI shall be eliminated for the purposes of such adjustment. Except as
otherwise expressly provided herein, the issuance by the Company of shares of
its capital stock of any class, or securities convertible into shares of capital
stock of any class, either in connection with direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number of or exercise price of shares of Common Stock then subject to
outstanding Stock Options granted under the Plan.
ARTICLE XVII
RECAPITALIZATION, MERGER AND CONSOLIDATION
(a) The existence of this Plan and Bonuses and Stock Options
granted hereunder shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or prior
preference stocks ranking prior to or otherwise affecting the Common
Stock or the rights thereof (or any rights, options or warrants to
purchase same), or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
(b) Subject to any required action by the stockholders, if the
Company shall be the surviving or resulting corporation in any merger or
consolidation, any outstanding Stock Option granted hereunder shall
pertain to and apply to the securities or rights (including cash,
property or assets) to which a holder of the number of shares of Common
Stock subject to the Stock Option would have been entitled.
(c) In the event of any reorganization, merger or consolidation
pursuant to which the Company is not the surviving or resulting
corporation, or of any proposed sale of substantially all of the assets
of the Company, there may be substituted for each share of Common Stock
subject to the unexercised portions of such outstanding Stock Option
that number of shares of each class of stock or other securities or that
amount of cash, property or assets of the surviving or consolidated
company which were distributed or distributable to the stockholders of
the Company in respect of each share of Common Stock held by them, such
outstanding Stock Options to be thereafter exercisable for such stock,
securities, cash or property in accordance with their terms.
Notwithstanding the foregoing, however, the Board, in its sole
discretion, may cancel all such Stock Options as of the effective date
of any such reorganization, merger or consolidation, or of any such
proposed sale of substantially all of the assets of the Company, or of
any dissolution or liquidation of the Company, and either:
19
<PAGE>
(i) give notice to each holder thereof or his personal
representative of its intention to cancel such Stock Options and
permit the purchase during the thirty (30) day period next
preceding such effective date of any or all of the shares subject
to such outstanding Stock Options, including shares as to which
such Stock Options would not otherwise be exercisable; or
(ii) pay the holder thereof an amount equal to a reasonable
estimate of an amount (hereinafter the "Spread") equal to the
difference between the net amount per share payable in such
transaction or as a result of such transaction, less the exercise
price of such Stock Options. In estimating the Spread, appropriate
adjustments to give effect to the existence of the Stock Options
shall be made, such as deeming the Stock Options to have been
exercised, with the Company receiving the exercise price payable
thereunder, and treating the shares receivable upon exercise of the
Options as being outstanding in determining the net amount per
share. In cases where the proposed transaction consists of the
acquisition of assets of the Company, the net amount per share
shall be calculated on the basis of the net amount receivable with
respect to shares of Common Stock upon a distribution and
liquidation by the Company after giving effect to expenses and
charges, including but not limited to taxes, payable by the Company
before such liquidation could be completed.
(d) In the event of a Change in Control of the Company, then,
notwithstanding any other provision in the Plan to the contrary, all
unmatured installments of Stock Options outstanding shall thereupon
automatically be accelerated and exercisable in full.
(e) Notwithstanding sub-Section (c) above of this Article XVII, in
case the Company shall, at any time while any Stock Option under this
Plan shall be in force and remain unexpired, (i) sell all or
substantially all of its property or (ii) dissolve, liquidate, or wind
up its affairs, then, provided that the Board so determines in its sole
discretion, each Participant may thereafter receive upon exercise hereof
(in lieu of each share of Common Stock of the Company which such
Participant would have been entitled to receive) the same kind and
amount of any securities or assets as may be issuable, distributable or
payable upon any such sale, dissolution, liquidation, or winding up with
respect to each share of Common Stock of the Company. In the event that
the Company shall, at any time prior to the expiration of any Stock
Option, make any partial distribution of its assets in the nature of a
partial liquidation, whether payable in cash or in kind (but excluding
the distribution of a cash dividend payable out of retained earnings or
earned surplus and designated as such), then in such event the exercise
prices then in effect with respect to each option shall be reduced, as
of the payment date of such distribution, in proportion to the
percentage reduction in the tangible book value of the shares of the
Company's Common Stock (determined in accordance with generally accepted
accounting principles) resulting by reason of such distribution;
provided, that in no event shall any adjustment of exercise prices in
accordance with the terms of the Plan
20
<PAGE>
result in any exercise prices being reduced below the par value per
share of the Common Stock.
(f) Upon the occurrence of each event requiring an adjustment of
the exercise price and/or the number of shares purchasable pursuant to
Stock Options granted pursuant to the terms of this Plan, the Company
shall mail forthwith to each Participant a copy of its computation of
such adjustment which shall be conclusive and shall be binding upon each
such Participant, except as to any Participant who contests such
computation by written notice to the Company within thirty (30) days
after receipt thereof by such Participant.
ARTICLE XVIII
OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER CORPORATIONS
Stock Options may be granted under the Plan from time to time in
substitution for such stock options held by employees of a corporation who
become or are about to become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by either of the foregoing of stock
of the employing corporation as the result of which it becomes a Subsidiary.
The terms and conditions of the substitute options so granted may vary from the
terms and conditions set forth in this Plan to such extent as the Committee at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the options in substitution for which they are granted.
ARTICLE XIX
MISCELLANEOUS PROVISIONS
19.1 EXERCISE OF STOCK OPTIONS. Stock Options granted under the Plan may
be exercised during the option period, at such times and in such amounts, in
accordance with the terms and conditions and subject to such restrictions as are
set forth herein and in applicable stock option agreements. Notwithstanding
anything to the contrary contained herein, Stock Options may not be exercised,
nor may shares be issued pursuant to a Bonus award or Stock Option if any
necessary listing of the shares on a securities exchange or any registration
under state or federal securities laws required under the circumstances has not
been accomplished.
19.2 NON-ASSIGNABILITY. No Stock Option granted to a Participant may be
transferred or assigned, other than (i) by will or the laws of descent and
distribution or (ii) pursuant to the terms of a qualified domestic relations
order (as defined in Section 401(a)(13) of the Code or Section 206(d)(3) of the
Employee Retirement Income Security Act of 1974, as amended), provided, that in
the case of an Incentive Stock Option, such transfer or assignment may occur
only to the extent it will not result in disqualifying such option as an
incentive stock option under Section 422 of the Code, or any successor
provision. Subject to the foregoing, during a Participant's lifetime, Stock
Options granted to a Participant may be exercised only by the Participant or,
provided the particular stock option agreement so provides, by the Participant's
guardian or legal representative. Subject to Section 7.3 hereof, no interest of
a Participant in any
21
<PAGE>
Bonus awarded under the Plan may be transferred, alienated, assigned or
encumbered other than by will or pursuant to the laws of descent and
distribution.
19.3 INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any Participant(s) under the Plan, such
evidence as it may deem necessary to establish that the Stock Options granted
or the shares of Common Stock to be purchased or acquired hereunder are being
acquired for investment and not with a view to their distribution.
19.4 NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any Bonus
or Stock Option confers upon any employee the right to continue in the employ of
the Company or interferes with or restricts in any way the right of the Company
to discharge any employee at any time (subject to any contract rights of such
employee).
19.5 STOCKHOLDERS' RIGHTS. The holder of a Stock Option shall have
none of the rights or privileges of a stockholder except with respect to
shares which have been actually issued.
19.6 TAX REQUIREMENTS - STOCK OPTIONS. The obligations of the Company
under the Plan shall be conditional on compliance with all applicable
withholding tax obligations as required by the Code and under applicable state
and local law and regulation. Any employee who exercises any Stock Option shall
be required to pay the Company the amount of all taxes which the Company is
required to withhold as a result of the exercise of the Stock Option. With
respect to an Incentive Stock Option, in the event of a subsequent disqualifying
disposition of Common Stock within the meaning of Section 422 of the Code, such
payment of taxes may be made in cash, by check or through the delivery of shares
of Common Stock which the employee then owns, which shares have an aggregate
Fair Market Value equal to the required withholding payment, or any combination
thereof. With respect to the exercise of a Nonqualified Stock Option, the
Participant's obligation to pay such taxes may be satisfied by the following, or
any combination thereof: (i) the delivery of cash to the Company in an amount
necessary to satisfy the required tax withholding obligation of the Company
and/or (ii) the actual delivery by the exercising Participant to the Company of
shares of Common Stock which the Participant owns and/or the Company's
withholding of a number of shares to be delivered upon the exercise of the Stock
Option, which shares so delivered or withheld have an aggregate Fair Market
Value which equals or exceeds (if necessary to avoid the issuance of fractional
shares) the required tax withholding payment. Any such withholding payments
with respect to the exercise of a Nonqualified Stock Option made by a
Participant in cash or by actual delivery of shares of Common Stock shall be
required to be made within thirty (30) days after the delivery to the
Participant of any certificate representing the shares of Common Stock acquired
upon exercise of the Stock Option.
19.7 TAX REQUIREMENTS - BONUSES. The Company (and, where applicable, its
Subsidiaries) shall have the power and the right to deduct or withhold, or
require a participant to remit to the Company an amount sufficient to satisfy
applicable taxes required by law to be withheld with respect to any payment of
any Bonus to a Participant.
22
<PAGE>
19.8 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer, employee or agent of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each
and every officer, employee or agent of the Company acting on their behalf
shall, to the fullest extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation. Each member of the Board and the Committee shall, in the
performance of his or her duties under the Plan, be fully protected in relying
in good faith upon the audited and unaudited financial statements of the
Company as contemplated by the terms of the Plan.
19.9 EFFECT ON PARTICIPATION. The grant of a Bonus to a Participant shall
not be deemed either to entitle the Participant to, or to disqualify the
Participant from, as the case may be, participation in any other future grant of
Bonuses under the Plan or otherwise, or in any other compensation or benefit
plan of the Company or in any of its Subsidiaries currently existing or
hereafter established.
19.10 OTHER COMPENSATION AGREEMENTS. Nothing contained in this Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
19.11 GENDER AND NUMBER. Where the context permits, words in the
masculine gender shall include the feminine and neuter genders, the plural form
of a word shall include the singular form, and the singular form of a word shall
include the plural form.
ARTICLE XX
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any Bonuses granted but not yet paid to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver payments with respect to awards of Bonuses;
provided, however, that the creation or existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
* * * * * * * * *
23
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
as of the 13th day of May, 1997 by its Chief Executive Officer pursuant to prior
action taken by the Board.
IMCO RECYCLING INC.
By: /s/ Don V. Ingram
---------------------------------
Don V. Ingram
Chief Executive Officer
Attest:
/s/ Paul V. Dufour
- -----------------------------------
Paul V. Dufour
Secretary
24
<PAGE>
Stockholders and
Board of Directors
IMCO Recycling Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-26641) pertaining to the Nonqualified Stock Option Plan of
IMCO Recycling Inc. and the related Prospectus, in the Registration Statement
(Form S-8 No. 33-34745) pertaining to the IMCO Recycling Inc. Amended and
Restated Stock Option Plan, and in the Registration Statement (Form S-8 No.
33-76780) pertaining to the IMCO Recycling Inc. 1992 Stock Option Plan, in
the Registration Statement (Form S-8 No. 333-00075) pertaining to the IMCO
Recycling Inc. Amended and Restated 1992 Stock Option Plan, and in the
Registration Statement (Form S-8 No. 333-07091) pertaining to the IMCO
Recycling Inc. Annual Incentive Plan of our report dated July 29, 1997
relating to the unaudited consolidated interim financial statements of IMCO
Recycling Inc. which are included in its Form 10-Q for the quarter ended
June 30, 1997.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a
part of the registration statements prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ ERNST & YOUNG LLP
August 11, 1997
Dallas, Texas
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have reviewed the accompanying consolidated balance sheet of IMCO
Recycling Inc. as of June 30, 1997, and the related consolidated statements
of earnings for the three-month and six-month periods ended June 30, 1997,
and 1996 and the consolidated statement of cash flows for the six-month
periods ended June 30, 1997, and 1996. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of IMCO Recycling Inc. as of
December 31, 1996, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year ended December 31, 1996,
(not presented herein), and in our report dated January 30, 1997, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 1996, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
/s/ ERNST & YOUNG LLP
Dallas, Texas
July 29, 1997
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,781
<SECURITIES> 0
<RECEIVABLES> 47,698
<ALLOWANCES> (771)
<INVENTORY> 16,596
<CURRENT-ASSETS> 69,999
<PP&E> 168,887
<DEPRECIATION> (48,866)
<TOTAL-ASSETS> 267,421
<CURRENT-LIABILITIES> 34,631
<BONDS> 115,391
0
0
<COMMON> 1,264
<OTHER-SE> 97,624
<TOTAL-LIABILITY-AND-EQUITY> 267,421
<SALES> 159,127
<TOTAL-REVENUES> 159,127
<CGS> 136,850
<TOTAL-COSTS> 136,850
<OTHER-EXPENSES> 8,799
<LOSS-PROVISION> 590
<INTEREST-EXPENSE> 3,659
<INCOME-PRETAX> 10,088
<INCOME-TAX> 4,033
<INCOME-CONTINUING> 5,847
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<EXTRAORDINARY> (1,318)
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<NET-INCOME> 4,529
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