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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Exchange on Which Registered
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Common Stock, $0.10 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 2, 1998, the aggregate market value of voting and non-voting common
equity held by nonaffiliates of the Registrant was $227,153,088.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of March 2, 1998.
Common Stock, $0.10 par value, 16,486,111
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement relating to its 1998
Annual Meeting of Stockholders are incorporated by reference into Part III
hereof.
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<TABLE>
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ITEM PAGE
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PART I
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Item 1. Business 3
Item 2. Properties 15
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 4A. Executive Officers of the Registrant 18
PART II
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Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 19
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 30
Item 8. Financial Statements and Supplementary Data 32
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 54
PART III
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Item 10. Directors and Executive Officers of the Registrant 54
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners and
Management 54
Item 13. Certain Relationships and Related Transactions 54
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 55
Signatures 59
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PART I
This Annual Report on Form 10-K contains forward-looking statements as defined
by the Private Securities Litigation Reform Act of 1995. Forward-looking
statements should be read with the cautionary statements and important factors
included in this Form 10-K. See Item 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CAUTIONARY STATEMENTS FOR
PURPOSES OF FORWARD-LOOKING STATEMENTS." Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which are other than
statements of current or historical facts. Such forward-looking statements may
be identified, without limitation, by the use of the words "anticipates,"
"estimates," "expects," "intends," "plans," "predicts," "projects," and similar
expressions. The Company's expectations, beliefs and projections are expressed
in good faith and are believed by the Company to have a reasonable basis,
including without limitation, management's examination of historical operating
trends, data contained in the Company's records and other data available from
third parties, but there can be no assurance that management's expectations,
beliefs or projections will result or be achieved or accomplished.
ITEM 1. BUSINESS
GENERAL
IMCO Recycling Inc. (the "Company") is the largest aluminum recycler in the
United States and believes that it is the largest aluminum recycler in the
world. The Company's principal business is the processing of aluminum, which
includes used aluminum beverage cans ("UBCs"), scrap, and dross (a by-product of
aluminum production). The Company converts UBCs, scrap and dross into molten
metal in furnaces at facilities owned and/or operated by the Company. While the
aluminum is in molten form, the Company may blend in other metals to prepare a
precise aluminum alloy mixture. The Company then delivers the processed aluminum
to customers in molten form or ingots. The Company recovers magnesium in a
similar process and also recycles zinc. Most of the Company's processing
capacity is utilized to recycle customer-owned materials, for which the Company
charges a fee (a service called "tolling"). During 1997, approximately 81% of
the Company's total pounds of metal melted involved tolling of aluminum. The
balance of the Company's business involves the purchase of scrap and dross for
processing and recycling by the Company for subsequent resale ("buy/sell"
business). Except where the context otherwise requires, the term "Company" as
used herein refers to IMCO Recycling Inc. and its subsidiaries.
The Company's business has benefited from the trend to include recycled
materials in finished products, the growth in the production and recycling of
UBCs and the increasing utilization of aluminum in automotive components.
According to industry statistics, over the past 25 years, U.S. production of
recycled aluminum has more than tripled to 3.3 million tonnes from 1.0 million
tonnes. In addition, recycled aluminum in the U.S. currently represents 35% of
the total domestic aluminum supply, compared to 19% in 1972.
The Company's customers include some of the world's major aluminum producers and
aluminum fabricators, diecasters, extruders, automotive companies and other
processors. Most of the metal processed by the Company is used to produce
products for the transportation, packaging and construction industries, which
constitute the three largest aluminum markets.
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Much of the Company's recent growth has been directed toward serving the
transportation sector, which has been the largest and fastest-growing aluminum
market in recent years due to the increasing use of aluminum in automotive
components. The Company's principal customers include Aluminum Company of
America ("Alcoa"), Alumax Inc., Commonwealth Aluminum Corporation
("Commonwealth"), Kaiser Aluminum Corporation ("Kaiser"), Wise Metals Company
("Wise Metals") and Ravenswood Aluminum Inc. ("Ravenswood"), all of whom use
aluminum recycled by the Company to produce can sheet, building construction
materials or automotive products.
The Company was organized in 1985 as Frontier Texas Corporation under the
corporate laws of Delaware. In September 1986, the Company acquired its aluminum
and magnesium recycling business through its purchase of International Metal
Co., an Oklahoma corporation. In September 1988, International Metal Co. merged
with and into the Company, and the Company changed its name to IMCO Recycling
Inc.
STRATEGY
The Company's strategy is to participate in sectors of the nonferrous metals
recycling industry in which it believes it can provide customers with a
technology-based, value-added service and in which it can develop significant
market share. The Company believes that it has been successful in
differentiating its aluminum recycling services from those of its competitors
through (1) operational and design technologies that are designed to produce
higher metal recovery yields, (2) the strategic location of facilities in close
proximity to customers, providing for both stronger ties to its customers and
greater convenience and accessibility for its customers, (3) the ability to
deliver recycled aluminum in molten form for just-in-time delivery, thereby
saving customers the expense of remelting aluminum ingots and (4) its
environmental technologies and practices, including dedicated disposal
facilities and a proprietary process used by the Company to recover aluminum
from by-products of the recycling process. To achieve its objectives, the
Company focuses on internal expansion as well as growth through strategic
acquisitions, vertical integration of its aluminum operations and services, and
operational efficiencies through technological innovation, customer service and
environmental efficiencies.
Expansion. Since 1993, the Company has increased its number of facilities and
capacity through acquisitions of existing facilities, construction of new
facilities and expansion of existing facilities. As of March 31, 1993, the
Company owned and operated five recycling plants, which had an aggregate annual
processing capacity of 735 million pounds of aluminum and 50 million pounds of
other metals. As of December 31, 1997, the Company owned and operated 16
domestic recycling and processing plants, which have an aggregate annual melting
capacity of approximately 2,095 million pounds of metal. The Company anticipates
1998's total annual capacity to be approximately 2,460 million pounds of metal.
In addition, the Company owns a 50% interest in an aluminum recycling joint
venture in Germany, which has an annual melting capacity of 280 million pounds,
and has just commenced operations at its new aluminum recycling facility in
Swansea, Wales, which when fully completed, will have an annual melting capacity
of 100 million pounds. The Company expects that currently planned expansions of
existing facilities will add approximately 195 million pounds of annual
processing capacity during 1998 and 1999. See "GROWTH OF BUSINESS." Expansion of
the Company's network of facilities in the U.S. has enabled the Company to
allocate processing work among its facilities, thereby maximizing utilization of
capacity and absorbing excess demand. The Company intends to continue to
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expand its business by targeting growing markets, such as the
automotive market, constructing additional aluminum recycling facilities,
expanding and improving its existing facilities and acquiring or partnering with
similar recycling businesses or other metals processors. In addition, the
Company plans to continue seeking foreign sites for its recycling facilities
where market conditions warrant.
Vertical Integration. The Company also seeks business opportunities that combine
its traditional recycling services with downstream processing operations that
more directly serve manufacturers and other end-users. For example, the
Company's acquisition of Rock Creek Aluminum, Inc. ("Rock Creek") in January
1997 expanded the Company's scope of activities from solely recycling operations
to include the mechanical processing of aluminum dross and scrap into
deoxidization agents, desulphurizers and slag conditioners to be sold to steel
producers for use in steel production. In addition, with the acquisition of
Alchem Aluminum, Inc. ("Alchem") in November 1997, the Company has begun
manufacturing and selling specification aluminum alloy products for automotive
equipment manufacturers.
Technological Innovation. The Company's facilities and equipment have been
continually improved and updated through plant modernization programs, including
technological advancements designed to improve operational efficiencies. Between
January 1, 1992 and December 31, 1997, the Company made capital expenditures and
joint venture investments totaling $103 million in new plant and equipment
(excluding acquisitions of existing companies or facilities). These investments
have increased the Company's productivity, market share and total processing
capacity.
Customer Service. The Company is dedicated to maintaining customer satisfaction
and seeks to develop new methods and processes to better serve its customers.
The Company emphasizes a strong commitment to customer service by offering (1)
relatively high metal recovery rates, (2) relatively high quality of metal
recovered, (3) more precise specifications for alloyed metals, (4) advanced
environmental technology and practices and (5) conveniently located facilities.
Through long-term relationships with primary producers and other customers, the
Company maximizes its production capabilities while providing customers with a
reliable source for their product requirements.
Environmental Efficiencies. The Company is developing a "closed loop" production
system in which virtually all materials used in the recycling process are
reclaimed or consumed, thus greatly reducing the need for and expense of
landfilling. Management believes that considerable progress has been made in
this area through the operation of its Kentucky salt cake processing plant and
its patented wet-milling process employed to recycle salt cake at both its
Arizona facility and its Solar Aluminum Technology Services ("SALTS") joint
venture in Utah. While no assurances can be given that an economically efficient
closed loop recycling system will ever be developed for all of the Company's
facilities and processes, management believes that continued progress toward
this goal is desirable for the Company's customers due to the opportunities for
cost savings and further assurances of environmental safety. In addition,
customers benefit from the enhanced environmental facilities employed by the
Company, such as the lined landfill at its Morgantown, Kentucky facility, which
was built to hazardous waste standards. See "THE RECYCLING PROCESS."
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GROWTH OF BUSINESS
Since its inception, the Company has increased its number of facilities and
capacity through acquisitions, construction of new facilities and expansion of
existing facilities. See ITEM 2. "PROPERTIES." Beginning in 1995, this growth
strategy was accelerated.
In September 1995, the Company purchased all of the assets of an aluminum
recycling facility in Bedford, Indiana ("Bedford") from Ravenswood. In addition,
in October 1995, the Company acquired Metal Mark, Inc. ("Metal Mark"), which
owned and operated aluminum recycling facilities located in Chicago Heights,
Illinois and Sikeston, Missouri. Metal Mark's principal businesses are
processing aluminum dross for domestic automotive producers and manufacturers of
castings for the automotive industry and recycling aluminum automotive scrap.
In December 1995, the Company formed a joint venture, VAW-IMCO Gu(beta) und
Recycling GmbH ("VAW-IMCO"), with VAW aluminium AG, the largest aluminum company
in Germany. The Company has a 50% interest in this German venture, which owns
and operates two recycling and foundry alloy facilities. The plants principally
serve the European automotive markets.
In January 1996, the Company completed the construction of its salt cake
processing facility, which is located adjacent to the Company's Morgantown,
Kentucky plant. This facility processes salt cake, a by-product generated from
the Company's aluminum recycling plants, through use of materials separation
technology, and recovers additional amounts of aluminum for resale that would
otherwise be landfilled. See "ENVIRONMENTAL MATTERS."
In 1996, the Company began construction of an aluminum recycling facility in
Coldwater, Michigan in a joint venture with Alchem. The Coldwater plant started
production during the first quarter of 1997 and reached full capacity in the
fourth quarter of 1997.
In 1997, the Company commenced construction of an aluminum recycling facility in
Swansea, Wales, U.K., known as IMCO Recycling (UK) Ltd. ("Wales"). Operations at
the Wales facility commenced in December 1997, and the Company expects this
facility to reach full capacity in mid-1998. The plant site is adjacent to a
plant owned by a subsidiary of Alcoa, which is Wales' principal customer under a
long-term tolling agreement.
In January 1997, the Company completed the acquisitions of IMSAMET, Inc.
("IMSAMET"), a wholly owned subsidiary of EnviroSource, Inc., and Rock Creek.
IMSAMET owns or has a majority interest in three aluminum recycling plants
located in Idaho, Arizona and Utah and owns a 50% interest in SALTS, which is a
Utah facility that uses a proprietary process to reclaim materials from salt
cake. IMSAMET's recycling facilities together have an annual melting capacity of
approximately 420 million pounds. Rock Creek operates two facilities in Ohio
that utilize milling, shredding, blending, testing and packaging equipment to
process various types of raw materials, including aluminum dross and scrap, into
aluminum products used as metallurgical additions in the steel making process.
Rock Creek's facilities have a total annual processing capacity of approximately
150 million pounds.
In 1997, the Company commenced expansion programs at its Sapulpa, Oklahoma
facility and the VAW-IMCO facilities in Germany. The Sapulpa expansion, when
completed in 1998, is expected to increase the facility's processing capacity by
40 million pounds per year.
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VAW-IMCO recently signed a long-term agreement to process dross for a major
rolling mill in Germany and installed a newly designed IMCO furnace, which began
melting dross in December 1997. Also during 1997, the Company entered into a
commitment to construct a facility at the Company's Loudon, Tennessee site to
supply molten metal to an automobile brake component manufacturer under a
long-term scrap management, tolling and supply agreement. This facility is
expected to be completed in late 1998. Construction related to this contract
will increase the Loudon plant's capacity by 40 million pounds.
In November 1997, the Company acquired Alchem. Alchem is a producer of
specification aluminum alloys for automotive manufacturers and their suppliers
and has been operating its facility located in Coldwater, Michigan since 1972.
Alchem's facility has an annual melting capacity of 200 million pounds. With the
acquisition of Alchem, the Company has increased its participation in the
automotive industry, broadened its customer base and expanded its product range
to include specification alloys.
CERTAIN FACTORS
For descriptions of certain factors affecting the Company, including commitments
and contingencies, which subject the Company to certain continuing risks, see
(i) "ENVIRONMENTAL MATTERS" below, (ii) ITEM 3. "LEGAL PROCEEDINGS," (iii) ITEM
7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CAUTIONARY STATEMENTS FOR PURPOSES OF FORWARD-LOOKING STATEMENTS"
and (iv) NOTE L--"OPERATIONS" of Notes to Consolidated Financial Statements,
respectively.
PRODUCTS AND SERVICES
The Company recycles aluminum and delivers the recycled metal to customers as
molten aluminum or ingots. The Company's customers include most of the major
United States aluminum producers and aluminum diecasters, extruders, automotive
companies and other processors of aluminum products. A principal element of the
Company's strategic plan calls for entering into new markets, specifically the
expanding aluminum automotive components market. The Company entered this market
with the acquisition of the Chicago Heights and Sikeston plants in 1995 and the
formation of the VAW-IMCO joint venture in 1996. In the fourth quarter of 1997,
the Company completed construction of the Coldwater, Michigan plant and acquired
Alchem, which also serve this market.
In addition, the Company plans to increase its emphasis on seeking foreign sites
for its facilities where market conditions warrant. General political and
economic conditions in these countries could affect the overall financial
prospects of the Company. Foreign operations are generally subject to several
risks, including foreign currency exchange rate fluctuations, distinct
environmental regulations, changes in the methods and amounts of taxation,
foreign exchange controls and government restrictions on the repatriation of
hard currency.
The Company's business has benefited from the trend to include recycled
materials in finished products, and in particular, from the growth in the use
and recycling of UBCs. The recycling of UBCs in the United States has increased
because of numerous economic, legislative and environmental factors. According
to industry estimates, the number of aluminum beverage cans produced has
increased from 34.7 billion in 1979 to an annual average of approximately 100
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billion for each of 1995, 1996 and 1997 and the number of UBCs recycled
increased from 8.5 billion in 1979 to approximately 62.8 billion in 1996.
The Company's metal alloying plant in Coldwater, Michigan manufactures
specification aluminum alloy products for automotive equipment manufacturers and
their suppliers.
The Company also recycles magnesium dross for primary magnesium producers. In
addition, it produces a line of magnesium anodes that are recycled from
post-consumer scrap and sold to end-users and independent distributors for
corrosion protection of steel structures.
The Company believes that its zinc recycling facility in Coldwater is the
largest recycler of hot-dip zinc dross for continuous galvanizers in the U.S.
This facility's principal customers during 1997 consisted of most of the major
U.S. steel companies.
The Company's Rock Creek and Elyria, Ohio facilities manufacture a variety of
aluminum products that are ultimately used as metallurgical additions in the
steel making process, such as slag conditioners, deoxidizers, steel
desulfurizers and hot topping compounds. These facilities utilize milling,
shredding, blending, testing and packaging equipment to process various types of
raw materials, including aluminum dross and scrap, into aluminum products for
the steel industry. In addition, these facilities manufacture a wide range of
proprietary briquetted products and offers toll briquetting services.
SALES AND LONG-TERM CONTRACTS
The Company's principal customers (see "GENERAL" above) use recycled aluminum to
produce can sheet, building, automotive and other products. The Company provides
products and services to a number of primary and fabricating facilities of
Alcoa. During 1997, 1996 and 1995, Alcoa accounted for approximately 9%, 13% and
23%, respectively, of the Company's revenues. The loss of Alcoa as a customer
would have a material adverse effect upon the business of the Company and its
future operating results.
Customarily, agreements with customers in the aluminum recycling industry have
been short-term. These usually result from a bidding process where aluminum
producers and metal traders offer to sell materials or to have materials tolled.
Consequently, the Company historically has maintained no significant backlog of
orders. However, the Company has secured some long term commitments for its
recycling services with Alcoa, Commonwealth, Aluminium Norf GmbH ("AluNorf"),
Kaiser, Wise Metals, PBR Automotive USA LLC and Ravenswood. For the year ended
December 31, 1997 the Company melted 928 million pounds of aluminum pursuant to
multi-year contracts with its customers, which represented approximately 47% of
the Company's total 1997 annual aluminum melting volume.
In 1992, the Company entered into a 10-year supply contract with Commonwealth's
Uhrichsville plant to process all of that facility's scrap aluminum, UBCs and
dross at the Company's Uhrichsville plant. See ITEM 2. "PROPERTIES--RECYCLING
AND PROCESSING FACILITIES." In 1994, the Company entered into a three-year
processing agreement with Alcoa under which the Company's Rockwood plant
provides secondary metal for Alcoa's Alcoa, Tennessee facility. This agreement
was modified in 1995 to reflect greater volumes and to include the Company's
Loudon plant as an approved supplier under the terms of the contract. This
agreement will extend for additional one-year terms at the end of each contract
year unless
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terminated by either party. If terminated by either party, the agreement will
continue in effect until the second anniversary date of the last day of the
contract year during which the termination notice was given.
The Company has also entered into a similar supply agreement with an English
subsidiary of Alcoa pursuant to which the Company's Wales facility will provide
Alcoa's adjacent facility with secondary tolled aluminum. The agreement has a
five-year primary term, expiring in 2002, with provisions for automatic
three-year extensions. In September 1997, the VAW-IMCO joint venture entered
into a five-year agreement with AluNorf to process 22,000 metric tons of dross
per year.
In July 1997, the Company entered into a five and one-half year agreement with
Wise Metals to deliver ten million pounds of molten aluminum per month to supply
a Kentucky rolling mill. In January 1998, the Company and Wise Metals agreed to
temporarily reduce these volume delivery amounts until the Company completes
installation of a new reverberatory furnace and delacquering equipment. The
Company expects to have this equipment installed by mid-1998, after which it
expects to resume delivery at the ten million pound level.
The Company's Post Falls, Idaho facility has a processing contract to supply, on
a tolling basis, molten and ingot aluminum deliveries of aluminum to Kaiser's
nearby Trentwood, Washington aluminum fabrication mill. The term of this
agreement expires in September 2000.
Certain of these agreements contain cross-indemnity provisions, including
provisions obligating the Company to indemnify the supplier for certain
environmental liabilities that the supplier may incur in connection with the
transactions contemplated by the agreements.
These agreements also typically contain escalation provisions that are intended
to cover changes in certain of the Company's processing costs. The Company may
seek similar dedicated long-term arrangements with customers in the future.
Increased emphasis on dedicated facilities to customers and dedicated contracts
with customers carries the inherent risk of increased dependence on a single or
few customers with respect to a particular Company facility. In such cases, the
loss of such a customer could have a material adverse effect on the Company's
financial condition and results of operation, and any timely replacement of
volumes attributable to such a customer could prove difficult.
The primary metals industry and the metals recycling industry are subject to
cyclical fluctuations, depending upon the availability and price of unprocessed
scrap metal and the level of demand in the metal consuming industries. Temporary
reductions in can stock production by one of the Company's customers have
previously affected the Company's results of operations, and no assurances can
be given that such conditions will not recur. See ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
THE RECYCLING PROCESS
The raw material received for aluminum processing is loaded into furnaces where
natural gas heat is applied along with a flux mixture (salt and potash). Some of
the Company's aluminum facilities operate rotary furnaces, which feature
significantly more flexible capabilities than reverberatory furnaces and can
process UBCs, dross and various types of aluminum scrap. The
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Company believes that its rotary furnaces are more efficient and cleaner than,
and provide rates of recovery superior to, conventional rotary furnaces.
Materials are melted in the furnaces, and the recovered metal is poured directly
into an ingot mold or hot metal crucible for delivery to customers. Magnesium is
recycled by the same method in a rotary furnace at the Sapulpa, Oklahoma plant.
Some of the Company's plants deliver molten aluminum in crucibles directly to
their customers' manufacturing facilities. As of December 1997, the Company had
the capacity to provide approximately 70% of its processed aluminum in molten
form. The molten aluminum is poured directly into the customer's furnace, saving
the customer the time and expense of remelting aluminum ingots. The Company
normally charges an additional fee for transportation and handling of molten
aluminum. The Oklahoma, Arizona, Utah, Illinois and Missouri facilities are
restricted, due to the geographical locations of their customers, to delivering
aluminum in ingot form. See ITEM 2. "PROPERTIES."
At the Company's metal alloying facility in Coldwater, Michigan, additional
materials are blended with molten aluminum to produce a metal alloy. The alloyed
aluminum is shipped in either molten or ingot form to its customers. This
facility generates dross, which is recycled at the Company's adjacent aluminum
recycling plant in Coldwater.
The aluminum recycling process from the Company's rotary furnaces produces a
by-product called "salt cake," which is formed from the contaminants and
coatings on aluminum scrap and dross and the salts added during the aluminum
recycling process. Salt cake is composed of salts, metallic aluminum, aluminum
oxide and small amounts of other materials. The by-product of processing
materials through the reverberatory furnaces is dross.
The Company disposes of its salt cake and certain airborne contaminants
("baghouse dust") in landfills that are used exclusively by the Company or that
are permitted specifically to handle the types of materials generated by the
Company. Salt cake is not currently listed as a "hazardous waste" under the
Resource Conservation and Recovery Act of 1976 ("RCRA") or as a "hazardous
substance" under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"). The Company has built and operates a lined
landfill at its Morgantown facility, the design of which exceeds current
requirements for disposal of salt cake and meets RCRA Subchapter "C" hazardous
waste standards.
In 1996, the Company completed the construction of a facility adjacent to its
Morgantown plant to further process the salt cake through the use of materials
separation technology and extract additional aluminum that is left after the
melting process. This salt cake processing facility is a critical step needed
for "closed loop recycling," which would involve no or minimal waste disposal.
The facility's process involves crushing the salt cake and separating the
aluminum out of the salt cake. The residual product is then landfilled in the
Company's Morgantown landfill. See "ENVIRONMENTAL MATTERS."
Certain of the Company's facilities also recycle salt cake and other by-products
from the aluminum recycling process. The Goodyear, Arizona facility processes
aluminum scrap and turnings and recycles concentrates from purchased dross and
salt cake. These concentrates are first treated in the facility's patented wet
milling process, which reduces the volume of material handled, thus allowing for
more efficient utilization of capacity. Aluminum oxide, a by-product of the wet
milling process, is further treated and sold for use in the production of
cement.
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Located near the Bonneville Salt Flats, the Company's Wendover, Utah facility
processes aluminum concentrates from the adjacent 50%-owned SALTS joint venture
and produces ingots. The SALTS facility recycles salt cake from the Company's
Idaho and Utah plants into aluminum concentrates, aluminum oxide and salt brine.
The clear brine is delivered to the venture's partner, where its chemical
content is recycled for multiple uses, including reuse as a flux.
In the Company's zinc recycling subsidiary's process, dross is first melted in
an electric induction furnace and then transferred to a reactor which removes
the impurities (iron and zinc oxide, which are sold as a by-product). The
remaining molten zinc is poured into a reverberatory holding furnace from which
it is blended and cast into ingots, which are returned to the customer. This
subsidiary holds patent rights to its process in several countries.
OPERATIONS
In its aluminum tolling operations, the Company accepts UBCs, dross and scrap
owned by its customers and processes this material for a tolling charge per
pound of incoming weight. In order to retain control of their metal supplies,
customers have typically desired to toll, rather than sell, their scrap
materials. Tolling requires no metal inventory to be purchased or held by the
Company. In addition, tolling limits the Company's exposure to the risk of
fluctuating metal prices since the Company does not own the material being
processed. For the year ended December 31, 1997, approximately 81% of the
Company's total pounds of metal processed involved aluminum tolling. The
acquisitions of the Chicago Heights and Sikeston plants, the Rock Creek and
Elyria processing plants and Coldwater metal alloying plant and the operation of
the Morgantown salt cake processing facility have changed the Company's
historical ratio of tolling to buy/sell business (formerly, aluminum tolling
represented more than 90% of the Company's total annual melting volumes). Only
about 50% of the Chicago Heights and Sikeston plants' production and
approximately 12% of the Coldwater metal alloying plant's production have
traditionally involved tolling; the remainder has been buy/sell business. See
ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
When purchasing metals in the open market for its buy/sell business, the Company
attempts to reduce the risk of fluctuating metal prices by arranging for the
sale of the aluminum anticipated to be recovered and by avoiding large
inventories of ingot or scrap material, except to the extent necessary to allow
its plants to operate without interruption. See ITEM 7A. "QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK."
The Company constantly seeks improvements in operational efficiencies at its
existing plants and at its acquired facilities through technological
advancements, automation of its operational procedures, and modifications in
processing and material throughput methods.
The Company's production network of plants have generally achieved high overall
operating rates due to strong demand for the Company's recycling services and
the strategic location of many of the Company's plants near major customers'
production facilities. Expansion of the Company's network of facilities in the
U.S. has enabled the Company to allocate processing work among its facilities,
thereby maximizing utilization of available capacity and taking advantage of
excess demand.
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The Company believes that its advanced scrap preparation equipment and recycling
technologies have also increased the demand for its services by producing higher
recovery rates for the aluminum processed and better quality of its recycled
aluminum than many of its competitors.
COMPETITION
The aluminum recycling industry is fragmented and highly competitive. The
Company believes that its position as the largest U.S. recycler of secondary
aluminum is a positive competitive factor. The principal factors of competition
in the industry are price, recovery rates, environmental and safety regulatory
compliance, and services (e.g., the ability to deliver molten aluminum). Freight
costs also limit the geographic areas in which the Company can compete
effectively.
The major aluminum producers, some of which are the Company's largest customers,
have generally discontinued processing dross, instead focusing their resources
on other aspects of aluminum production. UBCs and other scrap are processed by
both the secondary recycling industry and the major producers. The Company
competes both with other secondary recyclers and their customers when purchasing
and processing scrap for the buy/sell business.
The amount of the Company's tolling business can also vary depending upon the
extent that the major aluminum producers' used metal materials are internally
recycled. The aluminum producers generally vary their rate of internal recycling
depending upon furnace availability, inventory levels, the price of aluminum and
their own internal demand for metal. The major aluminum producers are larger and
have greater financial resources than the Company. A decision by these producers
to expand their recycling operations could reduce demand for certain of the
Company's products and services.
SOURCE AND AVAILABILITY OF RAW MATERIALS AND ENERGY
Except as noted below, the Company has historically not had, and does not
anticipate having, difficulties in obtaining raw materials for its operations.
In the case of buy/sell business, the primary sources of aluminum and magnesium
for recycling are dross and scrap, which are purchased from both the major
aluminum producers and metal traders.
Prior to 1996, fluctuations in market prices for both aluminum and magnesium had
not significantly affected the availability of these metals to the Company.
However, during 1996, the Company had difficulty obtaining a significant
quantity of UBCs to operate at a profitable level at its Corona, California and
Bedford, Indiana facilities, since these plants were then designed to process
only UBC material. As a result, management decided to close the Corona facility
in 1996. At the Bedford facility, the Company modified one of the existing
furnaces and installed an additional furnace which has enabled it to process a
greater variety of aluminum scrap, including processing for the automotive
industry. Also during 1996, one of the Company's major customers stockpiled
inventories in anticipation of a strike, which negatively impacted the Company
until the threat of a strike uncertainty was resolved and the excess inventories
were returned to their customary levels later that year.
The availability of zinc dross is dependent upon the demand for galvanized
steel, which has historically paralleled fluctuations in customer demand in the
automotive, appliance and construction industries.
12
<PAGE> 13
The Company's operations are fueled by natural gas, which represents the second
largest component of operating costs. Higher fuel prices in 1996 negatively
impacted the Company's results of operations for that year. In an effort to
acquire the most favorable natural gas costs, the Company has, at times, secured
long-term commitments for its natural gas requirements. Occasionally, when
deemed necessary, the Company purchases its natural gas on a spot-market basis.
Most of the Company's long-term supply contracts with its customers contain
provisions to reflect fluctuations in natural gas prices. See ITEM 7A.
"QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK." The Company
understands that most of its competitors' operations are also fueled by natural
gas; therefore, it believes that increases in the prices for natural gas do not
adversely affect the Company's competitive position. The Company believes it
will continue to have access to adequate energy supplies to meet its needs for
the foreseeable future.
SEASONALITY
UBC collections have historically been highest in the summer months and lowest
in the winter months. Therefore, the Company has, at times, experienced lower
volumes at certain facilities during the winter. In recent years, however, the
Company's total processing volumes have fluctuated mostly due to the startup of
additional capacity rather than the seasonality of UBC collections.
A portion of the Company's business that serves the automotive industry has
historically experienced a decline in molten metal deliveries during periods
when its automotive customers cease production to perform new model changeovers
and during the holidays in December.
TRANSPORTATION
The Company receives UBCs, dross and scrap, and ships its recycled metal by both
rail and truck. Most of the Company's plants own their own rail siding or have
access to rail lines nearby. The Company owns and leases various trucks and
trailers to support its business. Customarily, the transportation costs of scrap
materials to be tolled are paid by the Company's customers, while the
transportation costs of aluminum and magnesium purchased and sold by the Company
may be paid either by customers or the Company. The Company contracts with
third-party transportation firms for hauling some of its solid waste for
disposal.
EMPLOYEES
As of January 31, 1998, the Company had 1,586 employees, consisting of 326
employees engaged in administrative and supervisory activities and 1,260
employees engaged in production and maintenance. The production and maintenance
employees at the Rockwood plant are represented by the United Steelworkers of
America under a five-year collective bargaining agreement that expires in August
2000. The production and maintenance workers at the Uhrichsville plant are
represented by the United Mine Workers of America under an agreement that
expires on November 30, 1998. The production and maintenance workers at the
Bedford plant are represented by the International Brotherhood of Electrical
Workers under an agreement that expires in April 2000. The production and
maintenance workers at the Sikeston plant are represented by the United
Steelworkers of America under an agreement which expires in March 2001. Labor
relations with employees have been satisfactory.
13
<PAGE> 14
ENVIRONMENTAL MATTERS
The Company's operations, like those of other basic industries, are subject to
federal, state, local and foreign laws, regulations and ordinances that (1)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (2) impose liability for costs of cleaning
up, and certain damages resulting from, past spills, disposals, or other
releases of hazardous substances (together, "Environmental Laws"). It can be
anticipated that more rigorous Environmental Laws will be enacted that could
require the Company to make substantial expenditures in addition to those
referred to herein, including future regulations, under the Federal Clean Air
Act ("CAA") and otherwise, which are expected to impose stricter emission
requirements on the aluminum industry. While the Company believes that current
pollution control measures at most of the emission sources at its facilities
will meet these anticipated future requirements, additional measures at some of
the Company's facilities may be required.
The Company's operations may generate certain discharges and emissions,
including in some cases off-site dust and odors, which are subject to the CAA
and other Environmental Laws. From time to time, operations of the Company have
resulted or may result in certain noncompliance with applicable requirements
under Environmental Laws. The Company may also incur liabilities for off-site
disposals of salt cake and other materials. In addition, historical or current
operations at, or in the vicinity of, the Company's facilities, may have
resulted in soil or groundwater contamination. However, based on environmental
investigations conducted by the Company and its consultants and certain
indemnities associated with the Company's acquisitions, the Company believes
that any such noncompliance or liability under current Environmental Laws would
not have a material adverse effect on the Company's financial position. See ITEM
3. "LEGAL PROCEEDINGS."
The processing of UBCs, dross and scrap generates solid waste in the form of
salt cake and baghouse dust. Currently, such material is either disposed of at
off-site landfills or at the Company's permitted Sapulpa and Morgantown disposal
sites. For example, the Rockwood, Loudon, Bedford and Sikeston plants currently
dispose of the majority of their solid waste by transporting it to the
Morgantown plant where the Company, in 1996, began operating a salt cake
processing facility which prepares salt cake for landfilling. See ITEM 2.
"PROPERTIES--SOLID WASTE DISPOSAL." At the Uhrichsville plant, under the
Company's supply agreement with Commonwealth, the disposal of all salt cake
generated by the Company as a result of its processing for Commonwealth is the
responsibility of Commonwealth. Salt cake from all other material processed at
the Uhrichsville plant is either shipped to the Morgantown plant for disposal or
landfilled with a local solid waste management firm. In 1996, the Chicago
Heights and Sikeston plants disposed of the majority of their salt cake with
third-party landfills; however, a portion of their salt cake was shipped to
Morgantown for processing and disposal. The IMSAMET Arizona facility recycles
its own salt cake and sells the by-products to third parties, and the Oklahoma,
Utah and Idaho facilities ship their salt cake to the 50%-owned SALTS joint
venture for further processing. See "THE RECYCLING PROCESS."
If salt cake were ever classified as a hazardous waste or substance under RCRA
or CERCLA, the Company's handling and disposal of salt cake would be required to
be modified. To dispose of its salt cake, the Company may then be required to
take other actions including obtaining a RCRA Subchapter "C" permit for its
Morgantown landfill, obtaining other permits (including
14
<PAGE> 15
transportation permits), and landfilling additional amounts of salt cake with
third parties not under the Company's direct control. Based on current annual
processing volumes and remaining landfill capacity, the estimated remaining life
of the landfill at the Sapulpa plant is three years. The Company has constructed
a new landfill cell at its Morgantown plant and estimates its remaining useful
life to be approximately one year. The Company has began construction on its
first expansion phase at this landfill cell and estimates that once completed,
this expansion cell will have a remaining useful life of approximately five
years. A planned second expansion is expected to provide an additional ten years
of useful life. Landfill closure costs for the Company-owned landfills are
currently estimated to be approximately $7,000,000. The Company is currently
providing for this expenditure by accruing, on a current basis, these estimated
costs as the landfills are used. See ITEM 2. "PROPERTIES."
Due to relatively high costs and limited coverage, the Company does not carry
environmental impairment liability insurance. The Company made capital
expenditures for environmental control facilities of approximately $5,000,000 in
1997, most of which was for air pollution control equipment and landfill
capacity additions. Estimated environmental expenditures for 1998 and 1999,
which primarily relate to the Company's landfills and air pollution control
equipment, are approximately $9,400,000 and $6,000,000, respectively.
ITEM 2. PROPERTIES
RECYCLING AND PROCESSING FACILITIES
During 1997, the Company owned and/or operated the following facilities as
detailed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED
1997 1997
NUMBER MELTING PROCESSING MOLTEN
OWNED OF CAPACITY CAPACITY YEAR YEAR MATERIALS DELIVERY
PLANT ACREAGE FURNACES (MILLION LBS) (MILLION LBS) BUILT ACQUIRED PROCESSED CAPABILITY
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sapulpa, OK. 64 7 170 -- 1962 -- Alum/Mag. No
Rockwood, TN. 238 6 220 -- 1985 -- Alum Yes
Morgantown, KY. 552(a) 6 220 -- 1989 -- Alum Yes
Coldwater, MI (Zinc) (b) 2 40 -- -- 1992 Zinc No
Uhrichsville, OH. 42 10 360 -- 1992 -- Alum Yes
Loudon, TN. 173 3 180 -- -- 1994 Alum Yes
Bedford, IN. 19 3 175 -- -- 1995 Alum Yes
Chicago Hts., IL. 9 2 100 -- -- 1995 Alum No
Sikeston, MO. 31 2 60 -- -- 1995 Alum No
Morgantown, KY. (a) (c) (c) 400 1996 -- Salt Cake (c)
Post Falls, ID 49 4 280 -- -- 1997 Alum Yes
Goodyear, AZ 40(d) 4 70(e) 168 -- 1997 Al/Salt Cake No
Wendover, UT 160(d) 2 70 -- -- 1997 Alum No
Elyria, OH 12 (f) (f) 50 -- 1997 Alum (f)
Rock Creek, OH 11 (f) (f) 100 -- 1997 Alum (f)
Coldwater, MI 75 3 115 -- 1997 -- Alum Yes
Swansea, Wales 5(d) 1 5 -- 1997 -- Alum Yes
Coldwater, MI(alloys) 41 3 30 -- -- 1997 Alum Yes
---------------------------
CONSOLIDATED CAPACITY 2,095 718
===========================
50% OWNED FACILITIES:
VAW-IMCO, Germany 29 13 280(g) -- -- 1996 Alum Yes
SALTS, Wendover, UT 40 (c) (c) 168 -- 1997 Salt Cake (c)
---------------------------
TOTAL CAPACITY 2,375 886
===========================
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
NOTES:
(a) The acreage in Morgantown, Kentucky includes both the aluminum and salt
cake processing facilities as well as landfill cells.
(b) The Company's former Adrian, Michigan facility had been leased by IZI. This
lease expired in September 1997. This facility was relocated to a
Company-owned site adjacent to the Coldwater, Michigan facility in
September 1997.
(c) These facilities process salt cake only.
(d) This acreage is leased.
(e) Represents 100% of the capacity of this facility--the facility is 70% owned
by the Company.
(f) These facilities process aluminum products for use in the steel industry.
(g) Represents 100% of the capacity of the two VAW-IMCO facilities.
The average operating rates for all of the Company's facilities for 1997, 1996
and 1995 were 95%, 92% and 106%, respectively, of stated capacity. The
less-than-full capacity operating rate during 1997 was due primarily to the
delay in the start-up of the Swansea, U.K. facility, and the Coldwater, Michigan
facility reaching full capacity in the fourth quarter of 1997. The operating
rate during 1996 was negatively impacted due to the effect of the closure of the
Company's Corona, California facility during the third quarter of 1996. See ITEM
7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
Commonwealth has a currently exercisable option to acquire up to a 49% equity
interest in the Uhrichsville plant at a price equal to the equity percentage
amount to be specified by Commonwealth, multiplied by the depreciated book value
of the plant, or the subsidiary owning the plant, plus a premium to compensate
the Company for its recycling technology. The option price may be above or below
the fair value of the Uhrichsville plant. Should Commonwealth exercise its
option, there can be no assurance that the production or earnings attributable
to the purchased interest could be replaced, and the Company's net earnings and
cash flow could be adversely affected. See NOTE D--PROPERTY AND EQUIPMENT of
Notes to Consolidated Financial Statements.
In 1996, the Company began its 50% participation in its VAW-IMCO joint venture
in Germany. The joint venture owns and operates two recycling and foundry alloy
facilities located at Grevenbroich and Toging, Germany. Annual melting capacity
for these two plants is approximately 280 million pounds.
In the first quarter of 1997, the Company began operation of a new aluminum
recycling facility in Coldwater, Michigan, which reached full capacity in the
fourth quarter of 1997. The facility contains three furnaces with a total annual
capacity of 150 million pounds and primarily serves the automotive market. This
facility delivers molten aluminum to Alchem, its primary customer, which became
a wholly owned subsidiary of the Company in November.
16
<PAGE> 17
In December 1997, the Company completed the construction of its aluminum
recycling facility in Wales and began production with one furnace. The second
furnace is expected to begin production in the second quarter of 1998. Once this
facility is complete, its two furnaces will have an annual melting capacity of
100 million pounds, approximately 53 million of which are dedicated to a
multi-year contract with Alcoa. See ITEM 1. "BUSINESS--SALES AND LONG-TERM
CONTRACTS."
SOLID WASTE DISPOSAL
The Company completed a new landfill cell adjacent to its plant in Morgantown,
Kentucky in 1996. All of the waste generated from the salt cake processing
facility at the Morgantown site is deposited in this landfill. Management
anticipates that this new landfill cell, which is designed to be expanded
several times throughout its life, will serve the Company's landfilling needs
for the majority of the salt cake generated by facilities currently owned by the
Company in the Eastern United States. The Company has begun construction on the
first expansion phase of this landfill cell. The Company also owns a landfill at
its Sapulpa, Oklahoma plant which is estimated to have three years useful life
remaining. The Arizona facility recycles its own salt cake and sells the
by-products to third parties, and the Oklahoma, Utah and Idaho facilities ship
their salt cake to the 50%-owned SALTS joint venture for further processing. See
ITEM 1. "BUSINESS--ENVIRONMENTAL MATTERS."
ADMINISTRATIVE
In Irving, Texas, the Company leases approximately 21,704 square feet of office
space for certain of its executive, financial and management functions. This
lease expires in January 2000.
The Company believes that its plants and equipment are maintained in good
operating condition. Substantially all of the properties and equipment at the
Company's plants are mortgaged to secure senior indebtedness. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--LIQUIDITY AND CAPITAL RESOURCES" and NOTE H--"LONG TERM DEBT AND
EXTRAORDINARY LOSS ON EARLY DEBT RETIREMENT" of Notes to Consolidated Financial
Statements.
ITEM 3. LEGAL PROCEEDINGS
In 1996, the Company entered into a settlement agreement with the Missouri
Department of Natural Resources ("MDNR") pertaining to certain air violations at
its Sikeston facility. Since entering into the settlement agreement, the Company
has received additional notices of violation from the MDNR, which relate to
fugitive dust emissions from its truck loading and unloading operations and
certain other air compliance matters. In addition, the Company recently
responded to a request for information from the United States Environmental
Protection Agency regarding air issues at the Sikeston facility. Since
purchasing the Sikeston facility in 1995, the Company has made significant
upgrades to the air pollution control equipment located at the facility. There
can be no assurance, however, that future violations will not occur or that the
violations identified by the MDNR will not result in enforcement action against
the Company.
17
<PAGE> 18
In 1997, the Illinois Environmental Protection Agency ("IEPA") notified IZI that
it is a potentially responsible party ("PRP") pursuant to the Illinois
Environmental Protection Act for the cleanup of contamination at a site in
Marion County, Illinois to which IZI, among others, in the past sent zinc oxide
for processing and resale. IZI has joined a group of PRPs that is planning to
negotiate with the IEPA regarding the cleanup of the site. Although the site has
not been fully investigated and final cleanup costs not yet determined, based on
current cost estimates and information regarding the amount and type of
materials sent to the site by IZI, the Company does not believe, although there
can be no assurance, that its liability at this site will have a material
adverse effect on its financial position or its results of operations.
The Company is also a party from time to time to what it believes are routine
litigation and proceedings considered part of the ordinary course of its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company during
the quarter ended December 31, 1997.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are listed below, together with brief
accounts of their experience and certain other information. Executive officers
are appointed by the Board of Directors.
Name Age Position
- ---- --- --------
Don V. Ingram 62 Chairman of the Board and
Chief Executive Officer
Richard L. Kerr 55 President and Chief Operating
Officer
Paul V. Dufour 58 Executive Vice President--Finance
and Administration, Chief Financial
Officer and Secretary
Thomas W. Rogers 51 Senior Vice President, Marketing
and Sales
C. Lee Newton 54 Senior Vice President, Engineering,
Technology and Environmental
Don V. Ingram has served as a director of the Company since 1988 and as Chairman
of the Board since 1994. He was elected Chief Executive Officer of the Company
in February 1997. Mr. Ingram played the major role in the formation of the
Company in 1986. Mr. Ingram has also been owner and President since 1984 of
Summit Partners Management Co., a private investment management company in
Dallas, Texas.
Richard L. Kerr was elected President of the Company in February 1997.
Previously, he served as Executive Vice President (commencing in July 1988) and
has been Chief Operating Officer since 1991. In 1994, he became President of the
Company's Metals Division. Mr. Kerr joined
18
<PAGE> 19
International Metal Co., a predecessor of the Company, in April 1984, and became
Executive Vice President of International Metal Co. in April 1987.
Paul V. Dufour has served as Vice President, Chief Financial Officer and
Secretary of the Company since March 1987. He was promoted to Senior Vice
President in May 1988 and to Executive Vice President in October 1994. He is
principally responsible for the Company's financial and administrative
functions.
Thomas W. Rogers has served as Senior Vice President of the Company since July
1988. Mr. Rogers was employed as Plant Manager of the Sapulpa, Oklahoma plant in
October 1986.
C. Lee Newton became Senior Vice President of the Company in 1993. Mr. Newton
was named Vice President in 1990 and was the General Manager of the Morgantown,
Kentucky plant from 1989 to 1993. He was originally employed by the Company as
Plant Manager of its Rockwood, Tennessee plant in 1987.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on The New York Stock Exchange (trading
symbol: IMR). The following table sets forth, for the fiscal quarters indicated,
the high and low sales prices for the Company's Common Stock, as reported on The
New York Stock Exchange composite tape from January 1, 1996 through December 31,
1997, and the dividends declared per share during the periods indicated.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRICE RANGE DIVIDENDS
-----------------------
HIGH LOW DECLARED
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Calendar Year 1997
First Quarter $17 $13 5/8 $ 0.05
Second Quarter 18 7/8 13 3/4 0.05
Third Quarter 20 1/16 17 3/8 0.05
Fourth Quarter 21 15 1/4 0.05
Calendar Year 1996
First Quarter $24 5/8 $18 1/2 $ 0.05
Second Quarter 24 3/8 17 5/8 0.05
Third Quarter 18 1/4 15 0.05
Fourth Quarter 17 3/4 14 3/8 0.05
- --------------------------------------------------------------------------------
</TABLE>
Dividends as may be determined by the Board of Directors may be declared and
paid on the Common Stock from time to time out of any funds legally available
therefor. In November 1997, the Company amended and restated its senior credit
facilities with its lenders, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated as arranger and syndication agent, and Texas Commerce Bank
National Association as administrative agent ("TCB") for the lenders, pursuant
to the terms of an Amended and Restated Credit Agreement. See NOTE
19
<PAGE> 20
H--LONG TERM DEBT AND EXTRAORDINARY LOSS ON EARLY DEBT RETIREMENT of Notes to
Consolidated Financial Statements and ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." The Amended and
Restated Credit Agreement contains limitations on the Company's ability to
declare and pay dividends in cash or property; however, if there is no default
under the agreement, then the Company is permitted to make cash dividend
payments in an aggregate amount of up to $4,000,000 in 1997, $5,000,000 in 1998,
$6,000,000 in 1999 and in 2000, and $8,000,000 in any year thereafter.
No assurances can be given as to future levels of dividends, if any, which may
be declared and paid. The Company intends to continue paying dividends on its
Common Stock, although future dividend declarations are at the discretion of the
Company's Board of Directors and will be based upon the Company's level of
earnings, cash flow, financial requirements, and economic and business
conditions then prevailing, as well as other relevant factors, including the
restrictions contained in the Company's long-term debt instruments.
On March 2, 1998, the outstanding shares of Common Stock were held of record by
485 stockholders.
During the fourth quarter of 1997, the Company made no unregistered sales of its
securities, other than on November 14, 1997, the Company issued, in a
privately-negotiated transaction, 1,208,339 shares of its Common Stock in
connection with the Company's acquisition of Alchem. The Common Stock was
issued, along with approximately $9,600,000 in cash, as consideration for such
acquisition, to the former shareholders of Alchem in a statutory merger of
Alchem with and into a wholly-owned subsidiary of the Company. The issuance of
the Common Stock was effected in a transaction exempt from registration pursuant
to the provisions of Section 4(2) of the Securities Act of 1933. See NOTE
B--"ACQUISITIONS AND INVESTMENTS" of Notes to Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 339,381 $ 210,871 $ 141,167 $ 101,116 $ 74,216
Earnings before extraordinary item 14,127 6,720 12,470 8,471 8,022
Earnings per common share before
extraordinary item:
Basic (a) 1.08 0.57 1.08 0.75 0.72
Diluted (a) 1.06 0.55 1.05 0.74 0.70
Total assets 332,536 164,707 139,877 96,791 79,427
Long-term debt (excluding current maturities) 109,194 48,202 29,754 11,860 8,000
Dividends declared per common share $ 0.200 $ 0.200 $ 0.105 $ 0.100 --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
NOTE:
(a) The earnings per share amounts prior to 1997 have been restated, as
required, to comply with Statement of Financial Accounting Standards No.
128, Earnings per Share. See NOTE A--"SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES" of Notes to Consolidated Financial Statements.
See also ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and Notes to Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Most of the Company's processing consists of aluminum, magnesium and zinc tolled
for its customers. To a smaller but increasing extent, the Company's processing
also consists of buy/sell business, which involves purchasing scrap metal and
dross for processing and resale. 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. Tolling revenues reflect only the processing cost
and the Company's profit margin. Accordingly, tolling business generally
produces lower revenues and costs of sales than does the buy/sell business.
Variations in the mix of these two businesses can cause revenues to change
significantly from period to period while not significantly affecting gross
profit, since both types of business generally produce approximately the same
gross profit per pound of metal processed. As a result, the Company considers
processing volume to be a more important determinant of performance than
revenues.
The Company's cold water alloying facility (acquired in November 1997) is
primarily engaged in buy/sell business, as opposed to tolling; therefore, the
Company expects to experience higher levels of buy/sell business relative to
tolling during 1998. Accordingly, the higher level of buy/sell business is
expected to increase the Company's working capital requirements and subject the
Company to greater risks associated with price fluctuations in the aluminum
market. For 1998, the Company currently anticipates that its total aluminum
pounds tolled will decrease from 81% in 1997 to approximately 75%; however,
unforeseen circumstances could cause this percentage amount to vary.
During the 1990's, aluminum inventories on the worldwide commodity exchanges
fluctuated from severe excesses to relatively balanced positions. In times of
excess, aluminum prices declined, negatively impacting the profitability of the
major aluminum producers who are some of the Company's largest customers.
Environments of low profitability for the Company's customers have inhibited,
during those times, the Company's ability to pass cost increases through to its
customers. In early 1994, worldwide inventories of aluminum began falling for a
number of reasons, including an increase in demand for aluminum, particularly in
the United States, and consequently, prices for aluminum began to rise. During
1995, worldwide aluminum prices declined from their 1994 levels, particularly in
the fourth quarter, and continued to fall until the end of 1996. During 1997,
the U.S. domestic aluminum industry benefited from increases in aluminum prices
and an increase in demand. However, during the fourth quarter of 1997, aluminum
prices declined, which negatively impacted the Company's selling prices of
aluminum, especially at its salt cake processing facility in Kentucky. It is not
possible to predict
21
<PAGE> 22
the future price of aluminum, or the level of worldwide inventories of aluminum
and whether, or to what extent, such factors will affect the Company's future
business.
The following table sets forth, for the periods indicated, the total pounds of
material processed (aluminum, magnesium and zinc); the percentage of total
pounds processed represented by (1) tolled aluminum, (2) purchased aluminum and
(3) magnesium and zinc; total revenues; total gross profits and gross profits as
a percentage of revenues.
(In thousands, except percentages)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Pounds Processed 1,988,796 1,451,408 1,323,282
Percent of Total Pounds Processed:
Tolled Aluminum 81% 82% 92%
Purchased Aluminum 17% 15% 5%
Zinc and Magnesium 2% 3% 3%
Revenues $ 339,381 $ 210,871 $ 141,167
Gross Profits $ 47,854 $ 25,538 $ 30,939
Gross Profit % * 14.1% 12.1% 21.9%
- --------------------------------------------------------------------------------
</TABLE>
* See NOTE L--"OPERATIONS" of Notes to Consolidated Financial Statements
and RESULTS OF OPERATIONS--Fiscal Year 1997 vs. Fiscal Year 1996 below.
RESULTS OF OPERATIONS
FISCAL YEAR 1997 VS. FISCAL YEAR 1996
Production. During 1997, the pounds of metal processed by the Company increased
37% to 1,989 million pounds, compared to 1,451 million pounds processed in 1996.
Increases in aluminum processing from the Idaho, Utah and Arizona facilities
(which were acquired in January 1997), the Coldwater, Michigan aluminum facility
(which began production during the first quarter of 1997) and the Coldwater
alloying facility (which was acquired in November 1997) were the primary reasons
for the increased production.
Revenues. During 1997, revenues increased 61% to $339,381,000, compared to
revenues of $210,871,000 in 1996. The acquisitions of the Idaho, Utah and
Arizona plants, the Rock Creek and Elyria, Ohio processing plants and the
Coldwater, Michigan alloying facility, and the operations at the new Coldwater
aluminum plant, accounted for virtually all of the increase in revenues. During
1997, higher revenues from the combination of higher aluminum selling prices
(relative to 1996 prices), higher levels of buy/sell business at the Company's
remaining aluminum plants and additional metal for sale from its Kentucky salt
cake processing facility were partially offset by the elimination of revenues at
the Company's Corona, California plant (which was closed in the third quarter of
1996). The percentage increase in revenues was greater than the relative
increase in volumes processed due to higher levels of buy/sell business during
1997 as compared to 1996.
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<PAGE> 23
As discussed above, an increase in buy/sell business generally results in a much
higher increase in revenue than would be generated by a similar increase in
tolling business. The increased levels of buy/sell business was principally
attributable to the Coldwater alloying facility acquired in 1997. Tolling
activity for aluminum represented 81% of the Company's total pounds melted
during 1997, as compared to 82% in 1996. The increase in buy/sell activity in
1997 also resulted in higher inventory levels. Additionally, revenues increased
due to the January 1997 acquisitions of the Rock Creek and Elyria, Ohio plants.
Gross Profits. During 1997, gross profits increased 87% to $47,854,000, compared
to gross profits of $25,538,000 in 1996. Approximately 60% of the increase in
gross profits was due to (1) the January 1997 acquisitions of the Idaho, Utah
and Arizona plants, and the Rock Creek and Elyria, Ohio facilities, (2) the
operations at the new Coldwater, Michigan plant and (3) the November 1997
acquisition of the Coldwater, Michigan alloying facility. In addition, 1997's
gross profits were higher due to (1) the elimination of the losses at the
Company's Corona, California plant (which was closed in the third quarter of
1996), (2) higher aluminum prices, which increased margins from the Company's
buy/sell business and (3) strengthened plant operating efficiencies.
SG&A Expenses. During 1997, selling, general and administrative costs increased
50% to $17,612,000, compared to $11,774,000 in 1996. This increase was due
principally to higher employee, professional, consulting and goodwill
amortization expenses associated with the January and November 1997 plant
acquisitions.
Interest. During 1997, interest expense increased 114% to $7,331,000, compared
to interest expense of $3,421,000 in 1996. The increase in interest expense was
primarily attributable to the additional debt outstanding during 1997 to fund
the January and November acquisitions. See "LIQUIDITY AND CAPITAL RESOURCES"
below.
Extraordinary Item. In connection with the plant acquisitions in January 1997,
the Company borrowed funds under a new Credit Agreement. See "LIQUIDITY AND
CAPITAL RESOURCES" below. A portion of the sums borrowed under the Credit
Agreement was used to retire substantially all of the Company's outstanding
indebtedness prior to its stated maturity. This early debt retirement generated
an extraordinary loss of $1,318,000 (net of income tax benefit of $878,000) for
the first quarter of 1997. There was no extraordinary item in 1996.
Net Earnings. During 1997, the Company's earnings before provision for income
taxes, minority interests and extraordinary item increased 117% to $23,506,000,
compared to $10,852,000 in 1996. This increase in earnings was primarily the
result of higher gross profits, which were in turn partially offset by the
increases in selling, general and administrative expenses and interest expense.
The Company's higher earnings before income taxes caused the tax provision to
increase to $9,086,000 in 1997, compared to $4,132,000 in 1996. The effective
tax rate was approximately 39% in 1997 compared to 38% in 1996. During 1997, net
earnings increased 91% to $12,809,000, compared to $6,720,000 in 1996.
FISCAL YEAR 1996 VS. FISCAL YEAR 1995
Production. During 1996, the pounds of metal processed by the Company increased
10% to 1,451 million pounds, compared to 1,323 million pounds processed in 1995.
Increases from the
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<PAGE> 24
Bedford, Chicago Heights and Sikeston facilities (which were acquired during the
fourth quarter of 1995) were the principal reasons for the increase in
production volumes.
Revenues. During 1996, revenues increased 49% to $210,871,000, compared to
revenues of $141,167,000 in 1995. The percentage increase in revenues was
greater than the relative increase in volumes processed due to higher levels of
buy/sell business during 1996 as compared to 1995. The increased levels of
buy/sell business were principally attributable to the Chicago Heights and
Sikeston facilities acquired in October 1995.
Gross Profits. During 1996, gross profits decreased 17% to $25,538,000, compared
to gross profits of $30,939,000 in 1995. During the third quarter of 1996, the
Company recorded charges in cost of sales totaling $4,177,000, resulting from
management's decision to close the Company's Corona, California recycling
facility and to accelerate the closure of the first cell of the Company's
dedicated solid waste landfill in Morgantown, Kentucky. The Corona facility had
operated far below its capacity and had recorded losses throughout 1996, due to
a precipitous decline in demand for aluminum from the Far East, the plant's
largest market.
Before these third quarter charges to cost of sales, 1996's gross profits of
$29,715,000 were 4% lower than 1995's gross profits. The decline was due to
higher energy and salt cake disposal costs and because the Company's Corona and
Bedford plants experienced lower operating rates than anticipated. In addition,
gross profits were negatively affected by a decline in industry conditions
during 1996.
SG&A Expenses. During 1996, selling, general and administrative costs increased
17% to $11,774,000, compared to $10,027,000 in 1995. This increase occurred as a
result of the addition of key personnel required to manage the Company's
accelerated growth since 1994 and because of the added selling, general and
administrative costs associated with acquisitions in 1995.
Interest. During 1996, interest expense increased 219% to $3,421,000, compared
to interest expense of $1,073,000 in 1995. The increase was the result of
additional long-term debt outstanding during 1996 which was incurred to fund the
Company's fourth quarter 1995 acquisitions of the Chicago Heights, Sikeston and
Bedford facilities, the first quarter 1996 investment in the Company's joint
venture in Germany and the 1996 construction of the new Coldwater, Michigan
facility. Interest income rose to $623,000 compared to $424,000 in 1995. This
increase was due to higher average balances of invested cash during 1996.
Net Earnings. During 1996, the Company's earnings before income taxes decreased
47% to $10,852,000, compared to $20,363,000 in 1995. As discussed above,
approximately 44% of this decrease was due to the additional third quarter
charges to cost of sales of $4,177,000, resulting from management decisions to
close the Company's Corona, California facility and to accelerate the closure of
the first cell of the Company's landfill in Morgantown, Kentucky. Excluding
these items, 1996's net earnings before income taxes would have been
$15,029,000, or 26% lower than 1995's net earnings before income taxes. This 26%
decline was greater than the 4% decline in gross profits (excluding the third
quarter charges to cost of sales) due to the higher selling, general and
administrative expenses and higher interest expense.
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<PAGE> 25
The Company's lower earnings before income taxes caused the tax expense
provision to fall to $4,132,000 in 1996 compared to $7,893,000 in 1995. The
effective tax rate was approximately 38% in 1996 compared to 39% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations, capital expenditures and
certain capacity expansions from internally generated cash and its working
capital credit facilities. Acquisitions and the balance of its capacity
expansions have been financed from a combination of internally generated funds,
long-term borrowings and public stock offerings.
Cash Flows from Operations. During 1997, operations provided cash of
$30,368,000, compared to $6,744,000 in 1996. Earnings before noncash charges
increased 110% or $7,407,000, and depreciation, amortization and deferred taxes
increased 57% or $6,535,000, compared to 1996. These increases were primarily
due to plant acquisitions during 1997. Changes in the components of operating
assets and liabilities (excluding those attributable to investing and financing
transactions) used $2,832,000 in cash in 1997, compared to $15,291,000 in cash
used during 1996. As of December 31, 1997, the Company's current ratio increased
to 2.71, compared to 2.58 as of December 31, 1996.
For the reasons discussed above, working capital fluctuates as the mix of
buy/sell business and tolling business changes. The Company's working capital
requirements are expected to increase in 1998 due to anticipated higher levels
of buy/sell business and increased processing volumes due to the acquisition of
the Coldwater, Michigan alloying facility and the operations at the new Wales
facility.
Cash Flows from Investing Activities. During 1997, net cash used by investing
activities increased 310% to $124,461,000, compared to $30,345,000 in 1996. The
increase was primarily a result of the first quarter 1997 acquisition of the
Idaho, Utah and Arizona facilities and the fourth quarter 1997 acquisition of
the Michigan alloying facility. In addition, the Company's total payments for
property, plant and equipment (excluding acquisitions) in 1997 increased 122% to
$37,159,000, compared to $16,711,000 spent in 1996. During 1997, major projects
included the construction of new aluminum recycling facilities in Coldwater,
Michigan and Swansea, Wales, the relocation of the Company's zinc recycling
facility and the purchase of various environmental equipment.
Capital expenditures for property, plant and equipment in 1998 are expected to
total approximately $34,500,000. Major projects include the installation of a
reverberatory furnace and delacquering equipment at the Morgantown, Kentucky
facility, purchases of environmental equipment, the expansion of the Company's
landfill in Morgantown, Kentucky and upgrades to various furnaces.
Cash Flows from Financing Activities. During 1997, net cash provided from
financing activities increased 347% to $89,434,000, compared to $19,993,000 in
1996. In connection with its January 1997 acquisitions, the Company entered into
its Credit Agreement with certain lenders, borrowing $110,000,000 at the closing
and using approximately $61,000,000 to fund the acquisitions and $49,000,000 to
retire substantially all of the Company's outstanding debt as of December 31,
1996. Financing activities also included cash payments of $2,702,000 in
dividends during 1997 compared to $2,371,000 in 1996.
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<PAGE> 26
In November 1997, the Company issued and sold 2,645,000 (inclusive of 345,000
shares from the exercise of the underwriters' over-allotment option) shares of
its Common Stock through an underwritten public offering (the "Offering") at a
price to public of $18.00 per share. The Company received net proceeds of
approximately $44,799,000, after deducting underwriting discounts and
commissions and Offering expenses. The Company used the net proceeds to reduce
outstanding indebtedness originally incurred under the Credit Agreement in
January 1997. See NOTE H--"LONG-TERM DEBT AND EXTRAORDINARY LOSS ON EARLY DEBT
RETIREMENT" of Notes to Consolidated Financial Statements.
On November 5, 1997, the Company renegotiated the terms of the Credit Agreement
with its lenders, entering into the Amended and Restated Credit Agreement. The
Amended and Restated Credit Agreement provides for a reducing revolving credit
facility of up to $200,000,000, which allowed the Company to consolidate the
unpaid amount of the outstanding indebtedness of $96,755,000 and $15,100,000
under the original Credit Agreement's term loan and revolving credit facilities,
respectively, and permitted the Company to acquire Alchem. The Company funded
the cash portion of the consideration to acquire Alchem and repaid a portion of
Alchem's outstanding indebtedness from borrowings under the Amended and Restated
Credit Agreement. Indebtedness under the Amended and Restated Credit Agreement
will mature in December 2003. The Amended and Restated Credit Agreement provides
that the maximum amount of commitments under the facility will be reduced on an
annual basis beginning in December 1999, so that by December 31, 2002, the
maximum amount of aggregate commitments may not exceed $100,000,000. As of
December 31, 1997, the Company had $96,225,000 in indebtedness outstanding under
the Amended and Restated Credit Agreement and had $102,023,000 available for
borrowings. The Amended and Restated Credit Agreement bears interest, at the
Company's option, at fluctuating interest rates based upon an alternate base
rate (which may be the prime rate), or a rate based upon the applicable LIBOR
rate plus a credit margin which is based upon the Company's ratio of total debt
to total capitalization. In addition, the Company pays a commitment fee for
unborrowed amounts available under the reducing revolving facility, initially in
the amount of 0.30% of the aggregate nonutilized revolving credit commitments,
and after March 31, 1998, an amount based upon the Company's ratio of debt to
total capitalization.
At December 31, 1997, the Company had standby letters of credit outstanding with
TCB and American National Bank and Trust Company in the amounts of $1,752,000
and $1,044,000, respectively. The Company has also entered into an interest rate
cap transaction agreement with TCB. See ITEM 7A. "QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK."
The Amended and Restated Credit Agreement is secured by a first lien mortgage
and security interest on seven plant facilities owned by the Company, as well as
security interests in equipment, accounts receivable, inventories and certain
intellectual property and general intangibles. The facilities are additionally
secured by a pledge of the capital stock and equity interests of substantially
all of the Company's wholly-owned subsidiaries and certain joint ventures in
which the Company is directly or indirectly a joint venturer. Additionally,
substantially all of the Company's wholly-owned subsidiaries have guaranteed the
Company's obligations under the credit facilities. The Amended and Restated
Credit Agreement provides that if (i) the Company's senior unsecured long-term
indebtedness for borrowed money is rated at least BBB- or Baaa3 by Standard &
Poor's and Moody's, or (ii) during four consecutive fiscal quarters the
Company's leverage ratio and debt to capitalization ratio meet certain
requirements,
26
<PAGE> 27
then the lenders' liens in the collateral may be released upon the request and
at the expense of the Company. See NOTE H--"LONG-TERM DEBT AND EXTRAORDINARY
LOSS ON EARLY DEBT RETIREMENT" of Notes to Consolidated Financial Statements.
The Amended and Restated Credit Agreement contains certain covenants,
representations and warranties by the Company and its subsidiary guarantors,
including (i) limitations on the ability to dispose of assets of the Company and
its subsidiaries or equity interests of subsidiaries, (ii) limitations on
acquisitions of unaffiliated businesses other than certain scheduled specified
transactions, and additional unscheduled acquisitions and investments not to
exceed $75,000,000 in the aggregate (excluding the Alchem acquisition), (iii)
restrictions on liens and indebtedness permitted to be incurred or assumed by
the Company and its subsidiaries, other than as otherwise scheduled or permitted
under the Amended and Restated Credit Agreement, and (iv) restrictions on
investments by the Company and its subsidiaries.
The Amended and Restated Credit Agreement also contains limitations on the
Company's ability to declare and pay dividends in cash or property; however, if
there is no default under the agreement, then the Company is permitted to make
cash dividend payments in an aggregate amount of up to $4,000,000 in 1997,
$5,000,000 in 1998, $6,000,000 in 1999 and in 2000, and $8,000,000 in any year
thereafter (see ITEM 5. "MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS"). The Amended and Restated Credit Agreement further
contains provisions restricting the amount of capital expenditures that the
Company and its subsidiaries may make in any fiscal year ($38,000,000 in fiscal
1997 and $35,000,000 for each fiscal year thereafter, not including capital
expenditures for the acquisition of Alchem and certain other permitted
acquisitions). Finally, the agreement requires the Company to maintain and
comply with certain financial covenants and ratios, including a maximum debt to
capitalization ratio, a minimum interest coverage ratio and a covenant requiring
that certain minimum net worth amounts be maintained.
In May 1996, the Company borrowed $5,740,000 from the issuance 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. The indebtedness under the 1996 bonds bears interest at the rate of 7.65%
per annum and matures on May 1, 2016. On April 15, 1997, the Company borrowed an
additional $4,600,000 from the issuance 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 second landfill
cell and to fund 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.
Contingencies. On May 8, 1997, Harvard Industries, Inc. ("Harvard") announced
that it and its wholly-owned subsidiary, Doehler-Jarvis, Inc.
("Doehler-Jarvis"), had filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company sells aluminum to Doehler-Jarvis. At December 31,
1997, the Company had $3,492,000 of outstanding unsecured receivables from
Doehler-Jarvis, net of related reserves. 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, of its
claims. The Company's revenues from Doehler-Jarvis totaled $12,350,000 and
$17,490,000 for the years ended December 31, 1997 and 1996, respectively. The
Company
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<PAGE> 28
believes that the loss of this customer would not have a material adverse effect
on the Company's financial position or results of operations.
The Company believes that its cash on hand, the resources available under the
terms of the Amended and Restated Credit Agreement and anticipated 1998 cash
provided by operations should provide the financial resources necessary to fund
its capital requirements and to meet its obligations in 1998 and for the
foreseeable future.
TECHNOLOGY FOR THE YEAR 2000
The Company relies on software technology to deliver its services and has taken
actions to evaluate the nature and extent of the work required to make its
systems and infrastructure "Year 2000" compliant. The Company believes that its
primary operations and accounting software vendors are Year 2000 compliant.
However, the Company has identified potential Year 2000 issues with certain
subsidiaries and a joint venture partner, and is currently developing plans to
convert or modify those systems in order to achieve Year 2000 compliance. Based
on preliminary information, the Company believes that it will be able to manage
its total Year 2000 transition without any material adverse effect on its
business, financial position or results of operations. However, the Company
cannot presently determine the impact on its customers and suppliers in the
event that its customers or suppliers may be Year 2000 non-compliant, and in
such event, whether such non-compliance may have a material adverse effect on
the Company's results of operations or financial position. The Company is in the
process of contacting its customers and suppliers to determine the status of
their respective Year 2000 compliance programs.
CAUTIONARY STATEMENTS FOR PURPOSES OF FORWARD-LOOKING STATEMENTS
Certain information contained in this ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and in ITEM 1.
"BUSINESS" (as well as certain oral statements made by or on behalf of the
Company) 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" provisions in that enacted legislation. This information includes,
without limitation, statements concerning future revenues, future earnings,
future costs, future margins and future expenses; future acquisitions or
corporate combinations, plans for domestic or international expansion, facility
construction schedules and projected completion dates, and anticipated
technological advances; future capabilities of the Company to achieve "closed
loop recycling" on a commercially efficient basis; prospects for the Company's
joint venture partners to purchase a portion of the Company's interests; future
(or extensions of existing) long-term supply contracts with its customers; the
outcome of and any liabilities resulting from any claims, investigations or
proceedings against the Company or its subsidiaries; future levels of dividends
(if any); the future mix of business, future asset recoveries, future
operations, future demand, future industry conditions, future capital
expenditures, future financial condition, and the impact of the "Year 2000"
technology transition on the Company, its customers and suppliers. These
statements are based on current expectations and involve a number of risks and
uncertainties. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct.
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<PAGE> 29
When used in or incorporated by reference into this Annual Report on Form 10-K,
the words "anticipate," "estimate," "expect," "may," "project" and similar
expressions are intended to be among the statements that identify
forward-looking statements. Important factors that could affect the Company's
actual results and cause actual results to differ materially from those results
that might be projected, forecasted, estimated or budgeted by the Company in
such forward-looking statements include, but are not limited to, the following:
fluctuations in operating levels at the Company's facilities, the mix of
buy/sell business as opposed to tolling business, retention and financial
condition of major customers, effects of future costs, collectibility of
receivables, the inherent unpredictability of adversarial or administrative
proceedings, effects of environmental and other governmental regulations,
currency exchange rate fluctuations, trends in the Company's key markets, the
price of and supply and demand for aluminum on world markets and future levels
and timing of capital expenditures.
These statements are further 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 and labor costs. Many of the
factors affecting revenues and costs are outside of the control of the
Company, including weather conditions, general economic and financial
market conditions, and governmental regulation and factors involved in
administrative and other proceedings. 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.
* The price of primary aluminum and other metals is subject to worldwide
market forces of supply and demand and other influences. Prices can be
volatile, which could affect the Company's buy/sell aluminum business. The
Company's use of contractual arrangements including long-term agreements
and forward contracts may reduce the Company's exposure to this volatility
but does not eliminate it.
* The markets for most aluminum products are highly competitive. The major
primary aluminum producers are larger than the Company in terms of total
assets and operations and have greater financial resources. In addition,
aluminum competes with other materials such as steel, vinyl, plastics and
glass, among others, for various applications in the Company's key markets.
Unanticipated actions or developments by or affecting the Company's
competitors and/or willingness of customers to accept substitutions for
aluminum products could affect the Company's financial position and results
of operations.
* Fluctuations in the costs of fuels, raw materials and labor can affect the
Company's financial position and results of operations.
* The Company's key transportation market is cyclical, and sales to that
market in particular can be influenced by economic conditions.
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<PAGE> 30
* A strike at a customer facility or a significant downturn in the business
of a key customer supplied by the Company could affect the Company's
financial position and results of operations.
* The Company spends substantial capital and operating amounts relating to
ongoing compliance with environmental laws. In addition, the Company is
involved in certain investigations and actions in connection with
environmental compliance and past disposals of solid waste. Estimating
future environmental compliance and remediation costs is imprecise due to
the continuing evolution of environmental laws and regulatory requirements
and uncertainties about their application to the Company's operations, the
availability and applicability of technology and the allocation of costs
among principally responsible parties. Unanticipated material legal
proceedings or investigations could affect the Company's financial position
and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risks include (1) floating interest rate risk on its
long-term debt, (2) foreign currency risk from its operations outside the United
States, (3) price risk for natural gas used in its production process, (4) price
risk for aluminum in its buy/sell and by-product processing businesses and (5)
credit risk from customers. The Company uses derivative financial instruments to
manage some of these risks; these financial instruments are not used for
speculative purposes. See NOTE A--"SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES"
of Notes to Consolidated Financial Statements.
In order to reduce the fluctuating interest rate exposure on the term loan under
the January 1997 Credit Agreement (See ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL
RESOURCES"), the Company entered into an interest rate cap transaction ("Rate
Cap Transaction") agreement with TCB on April 7, 1997. The cost associated with
this Rate Cap Transaction is being amortized as interest expense over the four
year term of the agreement. As of December 31, 1997, the floating interest rate
was capped at 8% per annum for 41.4% of the total borrowings under the Amended
and Restated Credit Agreement.
During 1997, the financial impact of gains and losses from foreign currency
exchange rate fluctuations associated with the construction and operation of the
Company's Wales facility and VAW-IMCO was immaterial.
Natural gas is the Company's second largest cost component. In order to manage
its upside price exposure for natural gas purchases, the Company has, at times,
fixed the future price of a portion of its natural gas requirements by entering
into firm-priced physical commitments. In addition, the Company has cost
escalators included in some of its long-term supply contracts with its
customers, which limit the Company's exposure to natural gas price risk. As of
February 28, 1998, approximately 25% of the Company's projected natural gas
requirements were locked-in at firm delivery prices for 24 months.
Aluminum ingot is an internationally priced, sourced and traded commodity, and
its principal trading market is the London Metal Exchange. From time to time,
the Company has entered into
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<PAGE> 31
forward sale contracts and a series of put and call option contracts with metal
brokers to cover the future selling prices on a portion of the aluminum
generated by the Company's salt cake processing facility in Kentucky. These
contracts are settled in the month of the corresponding production. The
contracts did not have a significant effect on the Company's financial position
or results of operations for 1997. Based upon the Company's increased levels of
aluminum buy/sell business in recent years (see ITEM 7. "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"), it is likely
that the degree of the Company's metals hedging activities will increase during
1998 and for the foreseeable future.
In May 1997, one of the Company's customers filed for protection under Chapter
11 of the U.S. Bankruptcy Code--see ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL
RESOURCES" above.
Because the Company is not yet required to provide the disclosures otherwise
mandated under Item 305 of Regulation S-K promulgated by the Securities and
Exchange Commission (pursuant to General Instruction 1. of General Instructions
to Paragraphs 305(a), 305(b), 305(c), 305(d) and 305(e)), the foregoing
disclosures under this ITEM 7A. "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK." do not and are not intended to comply with Item 305.
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ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
INDEX OF FINANCIAL STATEMENTS OF IMCO RECYCLING INC. AND SUBSIDIARIES
PAGE
----
Report of Ernst & Young LLP, Independent Auditors 33
Consolidated Balance Sheets at December 31, 1997 and 1996 34
Consolidated Statements of Earnings for the three years ended
December 31, 1997 35
Consolidated Statements of Cash Flows for the three years ended
December 31, 1997 36
Consolidated Statements of Changes in Stockholders' Equity for the
three years ended December 31, 1997 37
Notes to Consolidated Financial Statements 38-53
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
32
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have audited the accompanying consolidated balance sheets of IMCO Recycling
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of IMCO
Recycling Inc. and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
February 2, 1998
33
<PAGE> 34
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 405 $ 5,070
Accounts receivable 52,163 33,655
Inventories 34,556 11,847
Deferred income taxes 2,782 1,462
Other current assets 1,746 1,282
------------ ------------
Total Current Assets 91,652 53,316
Property and equipment, net 142,100 86,308
Excess of acquisition cost over the fair value of net assets
acquired, net of accumulated amortization of $4,053 and
$4,607 at December 31, 1997 and 1996, respectively 74,658 9,362
Investments in joint ventures 14,271 14,187
Other assets, net 9,855 1,534
------------ ------------
$ 332,536 $ 164,707
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,902 $ 14,351
Accrued liabilities 7,254 2,192
Short-term debt -- 2,000
Current maturities of long-term debt 648 2,124
------------ ------------
Total Current Liabilities 33,804 20,667
Long-term debt 109,194 48,202
Deferred income taxes 11,278 5,856
Other long-term liabilities 9,336 1,647
STOCKHOLDERS' EQUITY
Preferred stock; par value $.10; 8,000,000 shares
authorized; none issued -- --
Common stock; par value $.10; 20,000,000 shares authorized;
16,515,750 issued at December 31, 1997; 12,017,914
issued at December 31, 1996 1,652 1,202
Additional paid-in capital 96,519 27,553
Retained earnings 71,096 61,021
Treasury stock, at cost; 39,354 shares at December 31, 1997;
118,551 shares at December 31, 1996 (343) (1,441)
------------ ------------
Total Stockholders' Equity 168,924 88,335
------------ ------------
$ 332,536 $ 164,707
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
34
<PAGE> 35
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 339,381 $ 210,871 $ 141,167
Cost of sales 291,527 185,333 110,228
------------ ------------ ------------
Gross profits 47,854 25,538 30,939
Selling, general and administrative expense 17,612 11,774 10,027
Interest expense 7,331 3,421 1,073
Interest income (413) (623) (424)
Equity in (earnings) loss of affiliates (182) 114 (100)
------------ ------------ ------------
Earnings before provision for income taxes, minority
interests and extraordinary item 23,506 10,852 20,363
Provision for income taxes 9,086 4,132 7,893
------------ ------------ ------------
Earnings before minority interests and extraordinary item 14,420 6,720 12,470
Minority interests, net of provision for income taxes 293 -- --
------------ ------------ ------------
Earnings before extraordinary item 14,127 6,720 12,470
Extraordinary item, net (1,318) -- --
------------ ------------ ------------
Net earnings $ 12,809 $ 6,720 $ 12,470
============ ============ ============
Net earnings per common share:
Basic:
Earnings before extraordinary item $ 1.08 $ 0.57 $ 1.08
Extraordinary item (0.10) -- --
------------ ------------ ------------
Net earnings $ 0.98 $ 0.57 $ 1.08
============ ============ ============
Diluted:
Earnings before extraordinary item $ 1.06 $ 0.55 $ 1.05
Extraordinary item (0.10) -- --
------------ ------------ ------------
Net earnings $ 0.96 $ 0.55 $ 1.05
============ ============ ============
Weighted average shares outstanding:
Basic 13,066 11,852 11,581
Diluted 13,293 12,130 11,858
Dividends declared per common share $ 0.20 $ 0.20 $ 0.105
</TABLE>
See Notes to Consolidated Financial Statements.
35
<PAGE> 36
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995
-------------- -------------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Earnings before extraordinary item $ 14,127 $ 6,720 $ 12,470
Depreciation and amortization 16,511 11,316 9,353
Provision for deferred income taxes 1,516 176 1,167
Other noncash charges 1,046 246 135
Provision for plant closure -- 3,577 --
Changes in operating assets and liabilities:
Accounts receivable 12,256 (6,282) 3,330
Inventories 2,594 (3,728) (1,756)
Other current assets 379 72 (546)
Accounts payable and accrued liabilities (18,061) (5,353) 1,563
------------ ------------ ------------
NET CASH FROM OPERATING ACTIVITIES 30,368 6,744 25,716
INVESTING ACTIVITIES
Payments for property and equipment (37,159) (16,711) (15,538)
Acquisition of IMSAMET, Inc., net of cash acquired (59,882) -- --
Acquisition of Alchem Aluminum, Inc., net of cash acquired (25,430) -- --
Acquisitions of other businesses and investments in joint
ventures 163 (13,681) (20,137)
Other (2,153) 47 (731)
------------ ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (124,461) (30,345) (36,406)
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term borrowings (8,351) 2,000 --
Proceeds from issuance of long-term debt 236,525 20,517 20,000
Principal payments of long-term debt (181,372) (2,162) (1,477)
Net proceeds from public stock offering 44,799 -- --
Dividends paid (2,702) (2,371) (2,371)
Other 535 2,009 362
------------ ------------ ------------
NET CASH FROM FINANCING ACTIVITIES 89,434 19,993 16,514
Effect of exchange rate differences on cash and cash equivalents (6) -- --
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (4,665) (3,608) 5,824
Cash and cash equivalents at January 1 5,070 8,678 2,854
------------ ------------ ------------
Cash and cash equivalents at December 31 $ 405 $ 5,070 $ 8,678
============ ============ ============
SUPPLEMENTARY INFORMATION
Cash payments for interest $ 9,087 $ 3,083 $ 1,357
Cash payments for income taxes $ 5,940 $ 7,440 $ 6,440
Fair value of the shares issued in the acquisition of Alchem
Aluminum, Inc. $ 17,250 -- --
Fair value of the shares issued in the acquisition of Rock
Creek Aluminum, Inc. $ 7,125 -- --
</TABLE>
See Notes to Consolidated Financial Statements.
36
<PAGE> 37
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
-------------------------- PAID-IN RETAINED -------------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
---------- ----------- --------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1994 11,756,698 $ 1,176 $ 23,511 $ 45,421 (244,910) $ (1,818)
Net earnings -- -- -- 12,470 -- --
Cash dividend -- -- -- (1,219) -- --
Exercise of stock options -- -- 234 -- 36,938 (56)
Purchase of Alumar Associates 208,213 20 3,354 -- -- --
Tax benefit from the exercise of
nonqualified stock options -- -- 183 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT
DECEMBER 31, 1995 11,964,911 1,196 27,282 56,672 (207,972) (1,874)
Net earnings -- -- -- 6,720 -- --
Cash dividend -- -- -- (2,371) -- --
Issuance of common stock for
services 3,003 1 51 -- -- --
Exercise of stock options -- -- (586) -- 89,421 433
Tax benefit from the exercise of
nonqualified stock options -- -- 806 -- -- --
Exercise of warrants 50,000 5 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT
DECEMBER 31, 1996 12,017,914 1,202 27,553 61,021 (118,551) (1,441)
Net earnings -- -- -- 12,809 -- --
Cash dividend -- -- -- (2,702) -- --
Net proceeds from public
stock offering 2,645,000 264 44,535 -- -- --
Purchase of Rock Creek Aluminum 618,137 62 7,063 -- -- --
Purchase of Alchem Aluminum 1,208,339 121 17,129 -- -- --
Issuance of common stock for
services 7,493 1 127 -- -- --
Exercise of stock options 18,867 2 (212) -- 79,197 1,098
Tax benefit from the exercise of
nonqualified stock options -- -- 324 -- -- --
Foreign currency translation
adjustment -- -- -- (32) -- --
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT
DECEMBER 31, 1997 16,515,750 $ 1,652 $ 96,519 $ 71,096 (39,354) $ (343)
========== ========== ========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
37
<PAGE> 38
IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(DOLLARS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of IMCO
Recycling Inc. and all of its majority owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated upon
consolidation. Investments in affiliated companies, owned 50% or less, are
accounted for using the equity method.
The Company's principal business involves the ownership and operation of
aluminum recycling and alloying facilities. Scrap material is recycled for a fee
and then the material is returned to its customers, some of whom are the world's
largest aluminum and automotive companies. Scrap is also purchased on the open
market, recycled and sold.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS:
All highly liquid investments with a maturity of three months or less when
purchased are considered cash equivalents. The carrying amount approximates fair
value because of the short maturity of those instruments.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined using
the specific identification method and includes an allocation of average
manufacturing labor and overhead costs to finished goods. Certain inventories of
an acquired business in 1997 were valued using the last-in, first-out (LIFO)
method, which approximated specific identification values as of December 31,
1997.
CREDIT RISK:
The majority of the Company's accounts receivable are due from companies in the
aluminum industry. Credit is extended based on evaluation of the customers'
financial condition and, generally, collateral is not required.
Credit losses historically have been immaterial.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Major renewals and improvements are
capitalized, while maintenance and repairs are expensed when incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets.
38
<PAGE> 39
Landfill closure costs are currently estimated to be approximately $7,000,000
and are being accrued as space in the landfills are used. Landfill costs are
depreciated as space in the landfill is used.
The Company reviews its property and equipment for impairment when changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment is measured as the amount by which the carrying amount
of the asset exceeds the estimated fair value of the asset less disposal costs.
Interest is capitalized in connection with the construction of major facilities.
Capitalized interest costs for 1997, 1996 and 1995 were $1,386,000, $237,000 and
$438,000 respectively.
AMORTIZATION OF INTANGIBLES:
The excess of original acquisition cost over the fair value of net assets
acquired (goodwill) is amortized on a straight-line basis over their expected
life, currently from 15-40 years. Management regularly reviews the remaining
goodwill with consideration toward recovery through future operating results.
Goodwill is valued on an undiscounted basis. Deferred debt issuance costs,
included in other assets, are being amortized over the term of the long-term
debt. Organizational costs are being amortized on a straight-line basis from
5-15 years. Patents are amortized over their remaining legal lives.
NET EARNINGS PER SHARE:
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been restated, as
required, to conform to Statement 128.
STOCK-BASED COMPENSATION:
The Company follows Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and related interpretations in accounting
for its employee stock options. Under APB 25, if the exercise price of employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recorded.
MARKET RISK MANAGEMENT USING FINANCIAL INSTRUMENTS:
In order to reduce the floating interest rate risk on its long-term debt, the
Company entered into an interest rate cap transaction in 1997 (see NOTE H).
In order to manage its price exposure for natural gas purchases, the Company
has, at times, fixed the future price of a portion of its natural gas
requirements by entering into firm-priced physical commitments. In addition, the
Company has cost escalators included in some of its long-term supply contracts
with its customers, which limit the Company's exposure to natural gas price
39
<PAGE> 40
risk. As of December 31, 1997, approximately 29% of the Company's projected 1998
annual natural gas requirements were locked-in at firm delivery prices.
From time to time, the Company has entered into forward sale contracts and a
series of put and call option contracts with metal brokers to cover the future
selling prices on a portion of the aluminum generated by the Company's salt cake
processing facility in Kentucky. These contracts are settled in the month of the
corresponding production. The contracts did not have a significant effect on the
Company's financial position or results of operations for 1997.
FOREIGN CURRENCY TRANSLATION:
The Company's U.K. subsidiary uses the British Pound Sterling as their
functional currency. Adjustments resulting from the translation into U.S.
dollars are reflected as a separate component of Stockholders' Equity, and
foreign currency transaction gains and losses are reflected in the Statement of
Earnings. The gains and losses on foreign currency exchange rate fluctuations
and the translation adjustments for 1997 were immaterial.
NEW ACCOUNTING STANDARDS:
In 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income," which is effective for periods beginning after
December 31, 1997. Statement 130 establishes standards for reporting and display
of comprehensive income and its components. The Company will adopt Statement 130
in the first quarter of 1998, and the impact is not expected to be material.
In 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information," which is
effective for periods beginning after December 15, 1997. Statement 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
will adopt the new requirement retroactively in 1998. Management has not
completed its review of the impact of Statement 131, but anticipates that the
adoption of this statement will not affect the number of segments the Company is
required to report.
PRIOR YEAR RECLASSIFICATIONS:
Certain reclassifications have been made to prior year statements to conform to
the current year presentation.
NOTE B--ACQUISITIONS AND INVESTMENTS
In November 1997, the Company acquired all of the capital stock of Alchem
Aluminum, Inc. ("Alchem") in exchange for approximately $26,000,000 cash and the
assumption of debt and 1,208,339 shares of the Company's Common Stock. The
shares of Common Stock that were issued to the Alchem shareholders are
contractually restricted from resale for periods of up to three years, and the
Alchem shareholders have certain registration rights with respect to such
40
<PAGE> 41
shares of 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 approximately $17,000,000 and is being amortized
over forty years on a straight-line basis. Alchem is a producer of specification
aluminum alloys for automotive manufacturers and their suppliers and has been
operating its facility located in Coldwater, Michigan since 1972. Alchem and the
Company had been operating under a joint venture agreement entered into in
October 1995 to construct and operate an aluminum recycling plant adjacent to
Alchem's processing facility in Coldwater.
The preliminary allocation of the purchase price of Alchem is as follows:
<TABLE>
<S> <C>
Working capital $ 14,938
Property and equipment 10,959
Goodwill 16,852
Other noncurrent assets 4,228
Noncurrent liabilities (18,819)
--------
Total $ 28,158
========
</TABLE>
During 1997, the Company and Alchem completed the construction of a $17,000,000
aluminum recycling facility in Coldwater, Michigan. This facility, which
delivers molten metal to the Company's Alchem subsidiary, commenced operations
in the first quarter of 1997 and reached full capacity in the fourth quarter of
1997.
In January 1997, the Company acquired all of the capital 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 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. 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 fair values. The
excess of the purchase price over the fair value of net assets acquired is
approximately $42,000,000 and is being amortized over forty years on a
straight-line basis.
The allocation of the purchase price of IMSAMET is as follows:
<TABLE>
<S> <C>
Working capital $ 4,674
Property and equipment 19,852
Goodwill 41,976
Other noncurrent assets 914
Noncurrent liabilities (7,176)
----------
Total $ 60,240
==========
</TABLE>
Also in January 1997, the Company acquired, in a privately-negotiated
transaction, all of the capital 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
41
<PAGE> 42
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 two Ohio facilities located in
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 Company's results of operations include the results of IMSAMET and Rock
Creek from January 1, 1997 and the results of Alchem from November 1, 1997.
The following table sets forth pro forma results of operations of the combined
entities of the Company and Alchem for the year ended December 31, 1997 and the
Company and IMSAMET, Rock Creek and Alchem for the year ended December 31, 1996,
assuming the acquisitions had been consummated on January 1 of the respective
years. 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 acquisitions been consummated on such dates or of future
results of the combined companies under the ownership and management of the
Company:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues $ 461,564 $ 408,936
Gross profit 58,657 45,536
Earnings before extraordinary item 16,402 8,292
Net earnings 15,084 8,292
Earnings per common share before extraordinary item:
Basic $ 1.16 $ 0.61
Diluted $ 1.14 $ 0.59
Net earnings per common share:
Basic $ 1.07 $ 0.61
Diluted $ 1.05 $ 0.59
</TABLE>
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 acquisitions (see NOTE H) and adjustments for related income
taxes and minority interests.
In May 1996, the Company purchased for approximately $14,000,000 a 50% interest
in VAW-IMCO Gu(beta) und Recycling GmbH ("VAW-IMCO"), a joint venture in
Germany. This joint venture was formed to own and operate two aluminum recycling
facilities previously owned by VAW aluminium AG, an aluminum products
manufacturing company in Germany. The plants primarily serve the European
automotive market.
In October 1995, the Company acquired all of the outstanding capital stock of
Alumar Associates, Inc. ("Alumar"), which owned Metal Mark, Inc. Metal Mark,
Inc. owned and operated three aluminum recycling plants located in Chicago
Heights, Illinois; Sikeston, Missouri; and Pittsburg, Kansas and owned 50% of a
fourth facility in East Chicago, Indiana. The value of the transaction, which
was accounted for as a purchase, was approximately $16,745,000, including the
assumption of $8,245,000 of long-term debt of Alumar. The
42
<PAGE> 43
remainder of the purchase price consisted of $4,000,000 in cash and 208,213
shares of the Company's Common Stock. In 1997, the Company sold its investment
in the Indiana facility.
In September 1995, the Company purchased all of the assets of an aluminum
recycling facility located in Bedford, Indiana from a private aluminum company.
The transaction was accounted for as a purchase for approximately $8,500,000 in
cash.
NOTE C--INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
------------- --------------
<S> <C> <C>
Finished goods $ 16,771 $ 8,642
Raw materials 17,313 2,974
Supplies 472 231
------------- --------------
$ 34,556 $ 11,847
============= ==============
</TABLE>
NOTE D--PROPERTY AND EQUIPMENT
The components of property and equipment are:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Land, buildings and improvements $ 100,587 $ 68,890
Production equipment and machinery 89,804 55,102
Office furniture, equipment and other 6,704 4,907
------------- -------------
197,095 128,899
Accumulated depreciation (54,995) (42,591)
------------- -------------
$ 142,100 $ 86,308
============= =============
</TABLE>
Depreciation expense for 1997, 1996 and 1995 was $14,007,000, $10,249,000 and
$8,590,000, respectively.
Estimated useful lives for buildings and improvements range from 15 to 39 years,
machinery and equipment range from 3 to 20 years and office furniture and
equipment range from 3 to 10 years.
In March 1992, the Company entered into an agreement with Commonwealth
Industries, Inc. ("Commonwealth"), formerly Barmet Aluminum Corporation, to
construct, own and operate the Uhrichsville plant adjacent to Commonwealth's
rolling mill in Uhrichsville, Ohio and to supply Commonwealth with all of its
recycled aluminum needs. The Uhrichsville plant, including costs for capitalized
interest and for the 1994 expansion, cost approximately $20,750,000.
Commonwealth has an option to acquire up to a 49% equity interest in the
Company's subsidiary
43
<PAGE> 44
that owns the Uhrichsville plant at a price based on a predetermined formula;
such formula should result in a gain if Commonwealth exercised its option.
NOTE E--LONG-TERM RECEIVABLE
On May 8, 1997, Harvard Industries, Inc. ("Harvard") announced that it and its
wholly-owned subsidiary, Doehler-Jarvis, Inc. ("Doehler-Jarvis"), had filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. At December 31, 1997,
the Company had $3,492,000 of outstanding unsecured receivables from the sale of
aluminum to Doehler-Jarvis, net of related reserves. 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, of
its claims. The Company's revenues from Doehler-Jarvis totaled $12,350,000 and
$17,490,000 for the years ended December 31, 1997 and 1996, respectively. The
Company believes that the loss of this customer will not have a material adverse
effect on the Company's financial position or results of operations.
NOTE F--COMMON STOCK OFFERING
In November 1997, the Company issued and sold 2,645,000 (inclusive of 345,000
shares from the exercise of the underwriters' over-allotment option) shares of
its Common Stock through an underwritten public offering (the "Offering") at a
price to public of $18.00 per share. The Company received net proceeds of
approximately $44,799,000, after deducting underwriting discounts and
commissions and Offering expenses. The Company used the net proceeds to reduce
outstanding indebtedness originally incurred under the Credit Agreement in
January 1997 (see NOTE H).
NOTE G--INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT:
Federal $ 6,035 $ 3,587 $ 5,241
State 1,535 369 1,485
------------ ------------ ------------
7,570 3,956 6,726
DEFERRED:
Federal 2,028 7 1,678
State (512) 169 (511)
------------ ------------ ------------
1,516 176 1,167
------------ ------------ ------------
$ 9,086 $ 4,132 $ 7,893
============ ============ ============
</TABLE>
44
<PAGE> 45
The income tax expense computed by applying the federal statutory tax rate to
earnings before income taxes differed from the provision for income taxes as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income taxes at the federal statutory rate $ 8,227 $ 3,690 $ 7,127
Goodwill amortization, nondeductible 196 168 91
State income taxes, net 651 355 633
Other, net 12 (81) 42
------------ ------------ ------------
Provision for income taxes $ 9,086 $ 4,132 $ 7,893
============ ============ ============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation and amortization $ 13,635 $ 8,139
Federal effect of state income taxes 804 473
Other 171 224
------------ ------------
Total Deferred Tax Liabilities 14,610 8,836
Deferred tax assets:
Net operating loss carryforwards 859 1,130
Tax credit carryforwards 1,900 1,470
Expenses not currently deductible 3,434 1,819
Federal effect of state income taxes 805 488
Other 44 91
------------ ------------
Total deferred tax assets 7,042 4,998
Valuation allowance (928) (556)
------------ ------------
Net deferred tax assets 6,114 4,442
------------ ------------
Net deferred tax liability $ 8,496 $ 4,394
============ ============
</TABLE>
At December 31, 1997, the Company had a $928,000 valuation allowance to reduce
certain deferred tax assets to amounts that are more likely to be realized. The
majority of the valuation allowance relates to the Company's ability to utilize
state investment tax credits generated by the Company's Corona, California
facility, which was closed in 1996, and the state recycling credits available in
Kentucky.
At December 31, 1997, the Company had approximately $322,000 of unused net
operating loss carryforwards for federal purposes, which expire in the year
2008, and had approximately $10,656,000 for state purposes which expire in 2008
to 2012. The majority of the net operating loss carryforwards were generated by
the Loudon and Bedford facilities.
45
<PAGE> 46
At December 31, 1997, the Company had $1,900,000 of unused state investment tax
credit carryforwards, $103,000 of which expire in 2011 and $1,797,000 of which
do not expire.
NOTE H--LONG-TERM DEBT AND EXTRAORDINARY LOSS ON EARLY DEBT RETIREMENT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revolving Credit Loans $ 96,225 $ -
11.18% MONY Senior Notes - 8,000
7.28% MONY Senior Notes - 15,000
7.41% MONY Senior Notes - 15,000
7.65% Morgantown, Kentucky Solid Waste
Disposal Facilities Revenue Bonds-1996 Series 5,688 5,526
7.45% Morgantown, Kentucky Solid Waste
Disposal Facilities Revenue Bonds-1997 Series 4,600 -
Variable Rate Term Loan - 2,750
Variable Rate Converting Revolving Loan - 3,750
Other 3,329 300
------------ ------------
Subtotal 109,842 50,326
Less current maturities 648 2,124
------------ ------------
Total $ 109,194 $ 48,202
============ ============
</TABLE>
In connection with the January 1997 acquisitions (see NOTE B), the Company
entered into a $125,000,000 syndicated credit agreement (the "Credit Agreement")
with certain lenders, including Merrill Lynch & Co. 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
for the IMSAMET acquisition. 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 in
the first quarter of 1997, which consisted of early payment penalties of
$1,953,000, write-off of debt costs of $243,000 and an income tax benefit of
$878,000.
The Credit Agreement provided for $125,000,000 of senior secured credit
facilities consisting of a $105,000,000 term loan, with a final maturity of
seven years, and a $20,000,000 revolving credit facility, with a final maturity
of five years. Of the $20,000,000 revolving credit facility, $4,000,000 was to
be used, as needed, by the Company for standby letters of credit.
On November 5, 1997, the Company amended and restated the terms of the Credit
Agreement with its lenders (the "Amended and Restated Credit Agreement"). The
Amended and Restated
46
<PAGE> 47
Credit Agreement provides for a reducing revolving credit facility of up to
$200,000,000, which allowed the Company to consolidate the unpaid amount of its
then-outstanding indebtedness of $96,755,000 and $15,100,000 under the original
Credit Agreement's term loan and revolving credit facilities, respectively, and
permitted the company to acquire Alchem (see NOTE B). The Company funded the
cash portion of the Alchem acquisition and repaid a portion of Alchem's
outstanding indebtedness from borrowings under the Amended and Restated Credit
Agreement. In addition, up to $12,000,000 available under the Amended and
Restated Credit Agreement may be used, as needed, by the Company for letters of
credit. Indebtedness under the Amended and Restated Credit Agreement will mature
in December 2003. The Amended and Restated Credit Agreement provides that the
maximum amount of commitments under the facility will be reduced on an annual
basis beginning in December 1999, so that by December 31, 2002, the maximum
amount of aggregate commitments may not exceed $100,000,000. Indebtedness under
the Amended and Restated Credit Agreement bears interest, at the Company's
option, at fluctuating interest rates based upon an alternate base rate (which
may be the prime rate), or a rate based upon the applicable LIBOR rate plus a
credit margin which is based upon the Company's ratio of total debt to total
capitalization. In addition, the Company pays a commitment fee for unborrowed
amounts available under the reducing revolving facility at a rate based upon the
Company's ratio of debt to total capitalization.
In order to reduce the fluctuating 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. The cost associated with this Rate Cap
Transaction is being amortized as interest expense over the four-year term of
the agreement. As of December 31, 1997, the floating interest rate was capped at
8% per annum for 41.4% of the total borrowings under the Amended and Restated
Credit Agreement.
The Amended and Restated Credit Agreement imposes certain restrictions,
including: (i) a prohibition of certain additional indebtedness (ii) maintenance
of certain financial ratios, and (iii) limitations on investments, dividends,
capital expenditures, acquisitions of businesses and dispositions of assets. The
annual limitations on cash dividends are as follows: $4,000,000 for 1997,
$5,000,000 for 1998, $6,000,000 per year for 1999 and 2000, and $8,000,000 for
each year after 2000. The indebtedness under the Amended and Restated Credit
Agreement is secured by substantially all of the Company's assets, as well as a
pledge of the capital stock of substantially all of the Company's subsidiaries.
At December 31, 1997, the Company had standby letters of credit outstanding with
TCB and American National Bank and Trust Company in the amounts of $1,752,000
and $1,044,000, respectively.
The 7.45% Morgantown, Kentucky Solid Waste Disposal Facilities Revenue Bonds
(Series 1997) are due on May 1, 2022. The bonds were issued in 1997 in
conjunction with the Company's expansion of its landfill in Morgantown, Kentucky
and additional construction costs of its salt cake processing plant in
Morgantown.
The 7.65% Morgantown, Kentucky Solid Waste Disposal Facilities Revenue Bonds
(Series 1996) are due on May 1, 2016. The bonds were issued in 1996 in
conjunction with the Company's construction of its salt cake processing plant in
Morgantown, Kentucky. The bonds were issued at a 1% discount which is being
amortized over the life of the bonds.
47
<PAGE> 48
The fair value of the Company's debt approximates its carrying value due to its
recent issuance, floating rate and relatively short maturity.
Scheduled maturities of long-term debt subsequent to December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998 $ 648
1999 553
2000 282
2001 257
2002 271
After 2002 107,831
--------------
Total $ 109,842
==============
</TABLE>
NOTE I--NET EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Numerators for basic and diluted earnings per share:
Net earnings before extraordinary item $ 14,127 $ 6,720 $ 12,470
Extraordinary item (1,318) -- --
------------ ------------ ------------
Net earnings $ 12,809 $ 6,720 $ 12,470
============ ============ ============
Denominator:
Denominator for basic earnings per share--
weighted-average shares 13,066,006 11,852,066 11,580,838
Dilutive potential common shares--stock options 226,698 277,773 284,857
------------ ------------ ------------
Denominator for diluted earnings per share 13,292,704 12,129,839 11,865,695
============ ============ ============
Basic net earnings per share:
Net earnings before extraordinary item $ 1.08 $ 0.57 $ 1.08
Extraordinary item (0.10) -- --
------------ ------------ ------------
Net earnings $ 0.98 $ 0.57 $ 1.08
============ ============ ============
Diluted net earnings per share:
Net earnings before extraordinary item $ 1.06 $ 0.55 $ 1.05
Extraordinary item (0.10) -- --
------------ ------------ ------------
Net earnings $ 0.96 $ 0.55 $ 1.05
============ ============ ============
</TABLE>
48
<PAGE> 49
NOTE J--EMPLOYEE BENEFIT PLANS
The Company has a profit-sharing retirement plan covering most of its employees
who meet defined service requirements. Contributions are determined annually by
the Board of Directors and may be as much as 15% of covered salaries.
Contributions for 1997, 1996 and 1995 were $1,524,000, $1,366,000, and
$1,331,000, respectively. The Company paid 1997's contribution in January 1998.
In July 1996, the Company amended and restated the profit-sharing retirement
plan to allow elective contributions as described in Internal Revenue Code
Section 401(k). Subject to certain dollar limits, employees may contribute a
percentage of their salaries to this plan, and the Company will match a portion
of the employees' contributions. The Company's match of employee contributions
totaled $582,000 and $189,000 for 1997 and 1996, respectively.
NOTE K--STOCK OPTION PLANS
In 1990, the Company adopted an amended and restated stock option plan, which
expired in 1997. This plan provided for the granting of nonqualified and
incentive stock options. The number of shares of common stock authorized for
issuance under the plan was 1,200,000 shares. Options granted under the plan had
various vesting periods and are exercisable for a period of 10 years from the
date of grant, although options may expire earlier because of termination of
employment.
In 1992, the Company adopted the 1992 Stock Option Plan, which provides for the
granting of nonqualified and incentive stock options to employees, officers,
consultants and nonemployee members of the Board of Directors. Options granted
to employees under this plan have various vesting periods. Annually, nonemployee
directors will be granted nonqualified stock options exercisable after six
months from the date of grant, equal to the number of shares determined by
dividing the annual director fee amount by the fair market value of a share of
common stock as of the date of grant. All options granted under this plan, once
vested, are exercisable for a period of up to 10 years from the date of grant,
although options may expire earlier because of termination of employment or
service.
In 1996, the Company adopted the Annual Incentive Program, which provides
certain of the Company's key employees with annual incentive compensation tied
to the achievement of pre-established and objective performance goals. This plan
provides for the granting of stock options to key management employees, both on
a discretionary basis and based upon a plan formula, in the event that the
Company's return on total assets (as defined in the plan) for any bonus year
exceeds 15%. Nonqualified and incentive stock options may be granted, and the
terms of the plan concerning the stock options are substantially the same as the
corresponding terms of the 1992 Stock Option Plan.
The 1992 Stock Option Plan and the 1996 Annual Incentive Program allow for the
payment of all or a portion of the exercise price and tax withholding
obligations in shares of the Company's common stock delivered and/or withheld.
Such payment or withholding will be valued at fair market value as of the date
of exercise. Participants making use of this feature will automatically be
granted a reload stock option to purchase a number of shares equal to the number
of shares delivered and/or withheld. When a reload stock option is granted, a
portion of
49
<PAGE> 50
the shares issued to the participant will be designated as restricted stock for
a period of five years, although the restriction may be removed earlier under
certain circumstances. Reload stock options have an exercise price equal to the
fair market value as of the date of exercise of the original options and will
expire on the same date as the original options.
In 1997, 1996, and 1995 the Company acquired from employees and placed in the
treasury, 19,703, 48,806 and 40,652 shares, respectively, pursuant to provisions
of the Company's stock option plan. Such shares were tendered or withheld in
satisfaction of those employees' federal and state withholding taxes on
compensation resulting from the exercise of nonqualified stock options and for
the aggregate exercise cost of certain of the options.
Transactions under the option plans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Options outstanding Jan. 1 1,541,959 $ 13.65 1,291,364 $ 12.05 1,172,402 $ 10.19
Options granted 584,714 $ 15.84 395,422 $ 16.25 200,473 $ 22.55
Options exercised (117,767) $ 10.63 (138,227) $ 6.00 (77,590) $ 11.09
Options forfeited (140,473) $ 17.30 (6,600) $ 17.64 (3,921) $ 13.55
--------- --------- ---------
Options outstanding at Dec. 31 1,868,433 $ 14.25 1,541,959 $ 13.65 1,291,364 $ 12.05
========= ========= =========
Options exercisable at Dec. 31 958,285 $ 12.62 776,732 $ 11.17 714,991 $ 8.19
========= ========= =========
Options available for grant at Dec. 31 80,331 499,821 391,646
========= ========= =========
</TABLE>
Information related to options outstanding at December 31, 1997, is summarized
below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
- -------------------------------------- --------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 4.570 - $7.550 312,000 2.6 Years $ 6.54 312,000 $ 6.54
$12.325 - $13.750 502,011 6.2 Years $ 13.34 409,711 $ 13.32
$15.000 - $19.000 890,498 7.7 Years $ 15.90 125,457 $ 16.47
$22.750 - $23.375 163,924 7.9 Years $ 22.75 111,117 $ 22.75
--------- -----------
1,868,433 958,285
========== ===========
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" requires disclosure of pro forma net earnings and net
earnings per common share information computed as if the Company had accounted
for its employee stock options granted
50
<PAGE> 51
subsequent to December 31, 1995 under the fair value method set forth in SFAS
No. 123. The fair value of the Company's outstanding stock options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Expected option life in years 3.4 3.9 4.0
Risk-free interest rate 6.13% 6.11% 5.59%
Volatility factor 0.293 0.305 0.242
Dividend yield 1.28% 1.22% 0.89%
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the option's vesting period. In addition, because SFAS No. 123 is
applicable only to options granted subsequent to December 31, 1994, the pro
forma information does not reflect the pro forma effect of all previous stock
option grants of the Company. Therefore, the pro forma information is not
necessarily indicative of future amounts until SFAS No. 123 is applied to all
outstanding stock options.
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ---------- ------------
<S> <C> <C> <C>
Earnings before extraordinary item:
As reported $ 14,127 $ 6,720 $ 12,470
Pro forma $ 13,446 $ 6,406 $ 12,455
Earnings per common share before extraordinary item:
As reported--basic $ 1.08 $ 0.57 $ 1.08
As reported--diluted $ 1.06 $ 0.55 $ 1.05
Pro forma--basic $ 1.03 $ 0.54 $ 1.08
Pro forma--diluted $ 1.01 $ 0.53 $ 1.05
Weighted-average fair value of options granted during the year $ 4.15 $ 4.83 $ 5.88
</TABLE>
51
<PAGE> 52
NOTE L--OPERATIONS
During 1997, 1996 and 1995, sales to Aluminum Company of America ("Alcoa")
totaled 9%, 13% and 23%, respectively, of revenues. No other customer accounted
for more than 10% of revenues in 1997, 1996 and 1995. The loss of Alcoa would
have a material adverse effect upon the business of the Company and its future
operating results. However, a significant portion of the processing for this
customer is performed pursuant to long-term supply agreements.
During the third quarter of 1996, the Company recorded a charge to cost of sales
of $3,577,000 resulting from management's decision to close the Company's
Corona, California aluminum recycling plant.
The Company's operations, like those of other basic industries, are subject to
federal, state, local and foreign laws, regulations and ordinances that (1)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (2) impose liability for costs of cleaning
up, and certain damages resulting from, past spills, disposals, or other
releases of hazardous substances (together, "Environmental Laws"). It is
possible that more rigorous Environmental Laws will be enacted that could
require the Company to make substantial expenditures in addition to those
referred to herein.
From time to time, operations of the Company have resulted or may result in
certain noncompliance with applicable requirements under Environmental Laws.
However, the Company believes that any such noncompliance under current
Environmental Laws would not have a material adverse effect on the Company's
financial position or results of operations.
The Illinois Environmental Protection Agency ("IEPA") recently notified the
Company that its zinc subsidiary ("IZI") is a potentially responsible party
("PRP") pursuant to the Illinois Environmental Protection Act for the cleanup of
contamination at a site in Marion County, Illinois to which IZI, among others,
in the past sent zinc oxide for processing and resale. IZI has joined a group of
PRPs that is planning to negotiate with the IEPA regarding the cleanup of the
site. Although the site has not been fully investigated and final cleanup costs
not yet determined, based on current cost estimates and information regarding
the amount and type of materials sent to the site by IZI, the Company does not
believe, although there can be no assurance, that its liability at this site
will have a material adverse effect on its financial position or results of
operations.
52
<PAGE> 53
NOTE M--QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
1997: QUARTER QUARTER QUARTER QUARTER YEAR
- ----- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 82,528 $ 76,600 $ 77,461 $ 102,792 $ 339,381
Gross profit 10,152 12,140 12,843 12,719 47,854
Earnings before extraordinary item 2,280 3,567 4,131 4,149 14,127
Extraordinary item (1,318) - - - (1,318)
Net earnings 962 3,567 4,131 4,149 12,809
Basic net earnings per common share (a):
Earnings before extraordinary item 0.18 0.28 0.33 0.28 1.08
Extraordinary item (0.10) - - - (0.10)
----------- ---------- ---------- --------- ----------
Net earnings 0.08 0.28 0.33 0.28 0.98
=========== ========== ========== ========= ==========
Diluted net earnings per common share (a):
Earnings before extraordinary item 0.18 0.28 0.32 0.28 1.06
Extraordinary item (0.10) - - - (0.10)
----------- ---------- ---------- --------- ----------
Net earnings $ 0.08 $ 0.28 $ 0.32 $ 0.28 $ 0.96
=========== ========== ========== ========= ==========
1996 (b):
- ---------
Revenues $ 50,718 $ 50,465 $ 53,689 $ 55,999 $ 210,871
Gross profit 7,890 7,807 2,625 7,215 25,538
Net earnings (loss) 2,963 2,598 (798) 1,958 6,720
Net earnings (loss) per common share(a):
Basic 0.25 0.22 (0.07) 0.16 0.57
Diluted $ 0.24 $ 0.21 $ (0.07) $ 0.16 $ 0.55
</TABLE>
NOTES:
(a) The earnings per share amounts have been restated, as required, to comply
with the Statement of Financial Accounting Standards No. 128, Earnings per
Share (see NOTE A).
(b) During the third quarter of 1996, the Company recorded a charge of
$4,177,000 resulting from management decisions to close the Company's
Corona, California aluminum recycling plant and to accelerate the closure
of the first cell of the Company's landfill in Morgantown, Kentucky.
53
<PAGE> 54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors and nominees for
director of the Company appears under the captions "Election of Directors" and
"Remuneration of Directors and Officers - Compliance with Section 16(a)" in the
definitive Proxy Statement (herein so called) of the Company relating to the
Company's 1998 Annual Meeting of Stockholders, to be filed with the Securities
and Exchange Commission (the "Commission") pursuant to Regulation 14A of the
Securities Exchange Act of 1934, which information is incorporated herein by
reference. It is currently anticipated that the Proxy Statement will be publicly
available and mailed to stockholders in April 1998. Certain information as to
executive officers is included herein under PART I, ITEM 4A. "EXECUTIVE OFFICERS
OF THE REGISTRANT."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears under the caption "Remuneration of
Directors and Officers" in the definitive Proxy Statement, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the caption "Voting and
Principal Stockholders" in the definitive Proxy Statement, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the captions "Remuneration
of Directors and Officer--Directors Compensation" and "Compensation Committee
Report to Stockholders - Compensation Committee Interlocks and Insider
Participation" in the definitive Proxy Statement, which information is
incorporated herein by reference.
54
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
1. Consolidated Financial Statements: See index to Consolidated
Financial Statements and Financial Statement Schedules on Page 32
hereof.
2. Consolidated Financial Statement Schedules: See index to
Consolidated Financial Statements and Financial Statement Schedules
on Page 32 hereof.
3. Exhibits:
3.1 Certificate of Incorporation of IMCO Recycling Inc., as
amended, filed as Exhibit 4.6 to the Company's Registration
Statement on Form S-2 (No. 33-48571) and incorporated herein
by reference.
*3.2 By-laws of IMCO Recycling Inc., as amended, effective as of
February 25, 1997.
4.1 Specimen Stock Certificate of the Common Stock, $0.10 par
value, of IMCO Recycling Inc., filed as Exhibit 4.1 to
the Company's Registration Statement on Form S-2 (No.
33-48571) and incorporated herein by reference.
10.1 Amended and Restated Registration Agreement, dated September
30, 1988, among IMCO Recycling Inc., Merrill Lynch
Interfunding Inc., Don V. Ingram, Larry Thrasher, and PTX
Partners, filed as Exhibit 10.6 to the Company's 1993 Form
10-K and incorporated herein by reference.
10.2 Amendment No. 1 to Amended and Restated Registration
Agreement, dated as of December 30, 1988, filed as
Exhibit 10.7 to the Company's 1994 Form 10-K and incorporated
herein by reference.
10.3 Amendment, dated as of September 5, 1990, to Registration
Agreement between Merrill Lynch Interfunding Inc. and Don V.
Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K
and incorporated herein by reference.
*10.4 IMCO Recycling Inc. Amended and Restated Stock Option Plan.
10.5 Assignment, dated September 16, 1986, from Clarence W. Haack
and Genevieve Haack to International Metal Co., filed as
Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated
herein by reference.
10.6 Agreement, dated as of August 26, 1995, between IMCO Recycling
Inc., Rockwood, Tennessee Facility, and International Union,
United Steelworkers of America, and filed as Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 Form 10-K"), and
incorporated herein by reference.
55
<PAGE> 56
10.7 Split-Dollar Life Insurance Agreement, dated as of November 5,
1990, between Thomas W. Rogers and IMCO Recycling Inc., filed
as Exhibit 10.19 to the Company's 1994 Form 10-K and
incorporated herein by reference (The Company is a party to
virtually identical Split-Dollar Life Insurance Agreements
with Paul V. Dufour, C. Lee Newton and Richard L. Kerr. These
agreements have been omitted since they are substantially
identical to Mr. Rogers' in all material respects).
*10.8 Supply Agreement between Barmet Aluminum Corporation (now
Commonwealth Aluminum Corporation) and the Company, dated
March 2, 1992.
10.9 Right of First Refusal Agreement between Barmet Aluminum
Corporation (now Commonwealth Aluminum Corporation) and the
Company, dated March 2, 1992, relating to Commonwealth's
Indiana recycling plant, filed as Exhibit 10.23 to the
Company's 1994 Form 10-K and incorporated herein by reference.
10.10 Agreement, effective as of December 1, 1995, between IMCO
Recycling of Ohio Inc. and the United Mine Workers of America,
and filed as Exhibit 10.24 to the Company's 1995 Form 10-K and
incorporated herein by reference.
10.11 Agreement, effective as of January 1, 1994, between IMCO
Recycling Inc. and Aluminum Company of America, filed as
Exhibit 10.34 to the Company's 1993 Form 10-K and incorporated
herein by reference.
10.12 First Amendment to processing agreement by and among the Rigid
Packaging division of Aluminum Company of America, the Company
and Metal Resources Inc., filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995, and incorporated herein by
reference.
10.13 Agreement and Plan of Merger, dated as of October 1, 1995,
among IMCO Recycling Inc., IMCO Recycling of Illinois Inc.,
Alumar Associates, Inc., and the Shareholders, filed as
Exhibit 1 to the Company's Current Report on Form 8-K, dated
October 3, 1995, and incorporated herein by reference.
10.14 Registration Rights Agreement, dated as of October 1, 1995,
among IMCO Recycling Inc. and the former Alumar Shareholders,
filed as Exhibit 2 to the Company's Current Report on Form
8-K, dated October 3, 1995, and incorporated herein by
reference.
10.15 Stock Purchase Agreement by and among IMCO Recycling Inc.,
EnviroSource, Inc. and IMSAMET, Inc. dated November 26, 1996.
(In accordance with Item 601 of Regulation S-K, the copy of
the IMSAMET Agreement filed with the Securities and Exchange
Commission (the "Commission") does not include the Schedules
or exhibits thereto. The Company agrees to furnish such
information supplementally to the Commission upon request).
This agreement was filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated January 21, 1997, and is
incorporated herein by reference.
56
<PAGE> 57
10.16 Amendment No. 1 to Stock Purchase Agreement by and among IMCO
Recycling Inc., EnviroSource, Inc. and IMSAMET, Inc. dated
January 21, 1997. Filed as Exhibit 2.2 to the Company's
Current Report on Form 8-K, dated January 21, 1997, and
incorporated herein by reference.
10.17 Registration Rights Agreement dated as of January 21, 1997
among IMCO Recycling Inc. and the former shareholders of Rock
Creek Aluminum, Inc., filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1997, and incorporated herein by reference.
10.18 IMCO Recycling Inc. 1992 Stock Option Plan, as amended
December 15, 1994, February 28, 1996, February 25, 1997 and
May 13, 1997, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1997, and incorporated herein by reference.
10.19 IMCO Recycling Inc. Annual Incentive Program, as amended
February 25, 1997, April 1, 1997 and May 13, 1997, filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1997, and incorporated
herein by reference.
10.20 Agreement and Plan of Merger by and among IMCO Recycling Inc.,
IMCO Recycling of Coldwater Inc., Alchem Aluminum, Inc. and
the Shareholders of Alchem Aluminum, Inc. dated November 14,
1997, filed as Exhibit 10.3 to the Company's Current Report on
Form 8-K/A-2 dated September 18, 1997, and incorporated herein
by reference.
10.21 Registration Rights Agreement dated as of November 14, 1997
among IMCO Recycling Inc. and the former shareholders of
Alchem Aluminum, Inc., filed as Exhibit 10.4 to the Company's
Current Report on Form 8-K/A-2 dated September 18, 1997, and
incorporated herein by reference.
10.22 Amended and Restated Credit Agreement by and among the
Company, the Subsidiary Guarantors named therein, the Lenders
thereunder, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Texas Commerce Bank National
Association dated November 5, 1997, filed as Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997, and incorporated herein by
reference.
*21 Subsidiaries of IMCO Recycling Inc. as of March 2, 1998.
*23 Consent of Ernst & Young LLP.
*27 Financial Data Schedule.
- ------------------
* Filed herewith.
57
<PAGE> 58
(b) Reports on Form 8-K filed in fourth quarter 1997:
(1) The Company filed a Current Report on Form 8-K dated October 1,
1997 under "Item 5--Other Events" reporting the Company's pending
acquisition of Alchem Aluminum, Inc. Such Current Report on Form
8-K was amended (1) by Form 8-K/A-1 dated October 9, 1997 to
include certain financial statements of Alchem Aluminum, Inc., (2)
by Form 8-K/A-2 dated November 19, 1997 to file certain exhibits
and other information regarding the transaction (under "Item
2--Acquisition or Disposition of Assets"), including the Agreement
and Plan of Merger and the Registration Rights Agreement and (3)
by Form 8-K/A-3 dated January 9, 1998 to include the audited
financial statements of Alchem Aluminum, Inc. and other financial
information.
(2) The Company filed a Current Report on Form 8-K dated October 20,
1997 under "Item 5--Other Events" reporting the Company's press
announcement containing its earnings report for its fiscal quarter
ended September 30, 1997.
(3) The Company filed a Current Report on Form 8-K dated November 6,
1997 under "Item 5--Other Events" reporting the Company's press
release concerning the Amended and Restated Credit Agreement.
(c) See sub-item (a) above.
(d) See sub-item (a) above.
58
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: March 6, 1998 IMCO Recycling Inc.
By: /s/ Robert R. Holian .
-------------------------
Robert R. Holian, Vice President and
Controller, Principal Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------- ------------------------------------------------ ---------------
<S> <C> <C>
Director, Chairman of the Board, Chief
/s/ Don V. Ingram Executive Officer March 6, 1998
- -----------------------------
Don V. Ingram
/s/ Jack M. Brundrett Director March 6, 1998
- -----------------------------
Jack M. Brundrett
/s/ Ralph L. Cheek Director March 6, 1998
- -----------------------------
Ralph L. Cheek
/s/ John J. Fleming Director March 6, 1998
- -----------------------------
John J. Fleming
/s/ Thomas A. James Director March 6, 1998
- -----------------------------
Thomas A. James
/s/ Don Navarro Director March 6, 1998
- -----------------------------
Don Navarro
/s/ Jack C. Page Director March 6, 1998
- -----------------------------
Jack C. Page
Executive Vice President Finance and
/s/ Paul V. Dufour Administration (Principal Financial Officer) March 6, 1998
- -----------------------------
Paul V. Dufour
Vice President and Controller (Principal
/s/ Robert R. Holian Accounting Officer) March 6, 1998
- -----------------------------
Robert R. Holian
</TABLE>
59
<PAGE> 60
EXHIBIT INDEX
3.1 Certificate of Incorporation of IMCO Recycling Inc., as
amended, filed as Exhibit 4.6 to the Company's Registration
Statement on Form S-2 (No. 33-48571) and incorporated herein
by reference.
*3.2 By-laws of IMCO Recycling Inc., as amended, effective as of
February 25, 1997.
4.1 Specimen Stock Certificate of the Common Stock, $0.10 par
value, of IMCO Recycling Inc., filed as Exhibit 4.1 to
the Company's Registration Statement on Form S-2 (No.
33-48571) and incorporated herein by reference.
10.1 Amended and Restated Registration Agreement, dated September
30, 1988, among IMCO Recycling Inc., Merrill Lynch
Interfunding Inc., Don V. Ingram, Larry Thrasher, and PTX
Partners, filed as Exhibit 10.6 to the Company's 1993 Form
10-K and incorporated herein by reference.
10.2 Amendment No. 1 to Amended and Restated Registration
Agreement, dated as of December 30, 1988, filed as
Exhibit 10.7 to the Company's 1994 Form 10-K and incorporated
herein by reference.
10.3 Amendment, dated as of September 5, 1990, to Registration
Agreement between Merrill Lynch Interfunding Inc. and Don V.
Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K
and incorporated herein by reference.
*10.4 IMCO Recycling Inc. Amended and Restated Stock Option Plan.
10.5 Assignment, dated September 16, 1986, from Clarence W. Haack
and Genevieve Haack to International Metal Co., filed as
Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated
herein by reference.
10.6 Agreement, dated as of August 26, 1995, between IMCO Recycling
Inc., Rockwood, Tennessee Facility, and International Union,
United Steelworkers of America, and filed as Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 Form 10-K"), and
incorporated herein by reference.
<PAGE> 61
10.7 Split-Dollar Life Insurance Agreement, dated as of November 5,
1990, between Thomas W. Rogers and IMCO Recycling Inc., filed
as Exhibit 10.19 to the Company's 1994 Form 10-K and
incorporated herein by reference (The Company is a party to
virtually identical Split-Dollar Life Insurance Agreements
with Paul V. Dufour, C. Lee Newton and Richard L. Kerr. These
agreements have been omitted since they are substantially
identical to Mr. Rogers' in all material respects).
*10.8 Supply Agreement between Barmet Aluminum Corporation (now
Commonwealth Aluminum Corporation) and the Company, dated
March 2, 1992.
10.9 Right of First Refusal Agreement between Barmet Aluminum
Corporation (now Commonwealth Aluminum Corporation) and the
Company, dated March 2, 1992, relating to Commonwealth's
Indiana recycling plant, filed as Exhibit 10.23 to the
Company's 1994 Form 10-K and incorporated herein by reference.
10.10 Agreement, effective as of December 1, 1995, between IMCO
Recycling of Ohio Inc. and the United Mine Workers of America,
and filed as Exhibit 10.24 to the Company's 1995 Form 10-K and
incorporated herein by reference.
10.11 Agreement, effective as of January 1, 1994, between IMCO
Recycling Inc. and Aluminum Company of America, filed as
Exhibit 10.34 to the Company's 1993 Form 10-K and incorporated
herein by reference.
10.12 First Amendment to processing agreement by and among the Rigid
Packaging division of Aluminum Company of America, the Company
and Metal Resources Inc., filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995, and incorporated herein by
reference.
10.13 Agreement and Plan of Merger, dated as of October 1, 1995,
among IMCO Recycling Inc., IMCO Recycling of Illinois Inc.,
Alumar Associates, Inc., and the Shareholders, filed as
Exhibit 1 to the Company's Current Report on Form 8-K, dated
October 3, 1995, and incorporated herein by reference.
10.14 Registration Rights Agreement, dated as of October 1, 1995,
among IMCO Recycling Inc. and the former Alumar Shareholders,
filed as Exhibit 2 to the Company's Current Report on Form
8-K, dated October 3, 1995, and incorporated herein by
reference.
10.15 Stock Purchase Agreement by and among IMCO Recycling Inc.,
EnviroSource, Inc. and IMSAMET, Inc. dated November 26, 1996.
(In accordance with Item 601 of Regulation S-K, the copy of
the IMSAMET Agreement filed with the Securities and Exchange
Commission (the "Commission") does not include the Schedules
or exhibits thereto. The Company agrees to furnish such
information supplementally to the Commission upon request).
This agreement was filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated January 21, 1997, and is
incorporated herein by reference.
<PAGE> 62
10.16 Amendment No. 1 to Stock Purchase Agreement by and among IMCO
Recycling Inc., EnviroSource, Inc. and IMSAMET, Inc. dated
January 21, 1997. Filed as Exhibit 2.2 to the Company's
Current Report on Form 8-K, dated January 21, 1997, and
incorporated herein by reference.
10.17 Registration Rights Agreement dated as of January 21, 1997
among IMCO Recycling Inc. and the former shareholders of Rock
Creek Aluminum, Inc., filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1997, and incorporated herein by reference.
10.18 IMCO Recycling Inc. 1992 Stock Option Plan, as amended
December 15, 1994, February 28, 1996, February 25, 1997 and
May 13, 1997, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1997, and incorporated herein by reference.
10.19 IMCO Recycling Inc. Annual Incentive Program, as amended
February 25, 1997, April 1, 1997 and May 13, 1997, filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1997, and incorporated
herein by reference.
10.20 Agreement and Plan of Merger by and among IMCO Recycling Inc.,
IMCO Recycling of Coldwater Inc., Alchem Aluminum, Inc. and
the Shareholders of Alchem Aluminum, Inc. dated November 14,
1997, filed as Exhibit 10.3 to the Company's Current Report on
Form 8-K/A-2 dated September 18, 1997, and incorporated herein
by reference.
10.21 Registration Rights Agreement dated as of November 14, 1997
among IMCO Recycling Inc. and the former shareholders of
Alchem Aluminum, Inc., filed as Exhibit 10.4 to the Company's
Current Report on Form 8-K/A-2 dated September 18, 1997, and
incorporated herein by reference.
10.22 Amended and Restated Credit Agreement by and among the
Company, the Subsidiary Guarantors named therein, the Lenders
thereunder, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Texas Commerce Bank National
Association dated November 5, 1997, filed as Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997, and incorporated herein by
reference.
*21 Subsidiaries of IMCO Recycling Inc. as of March 2, 1998.
*23 Consent of Ernst & Young LLP.
*27 Financial Data Schedule.
- ------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
IMCO RECYCLING INC.
(a Delaware Corporation)
As Amended February 25, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C> <C>
OFFICES
Section 1. Registered Office.................................................... 1
Section 2. Other Offices........................................................ 1
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Place of Meetings.................................................... 1
Section 2. Annual Meetings...................................................... 1
Section 3. Notice of Annual Meetings............................................ 1
Section 4. Special Meetings..................................................... 1
Section 5. Notice of Special Meetings........................................... 2
Section 6. Quorum............................................................... 2
Section 7. Organization......................................................... 2
Section 8. Order of Business.................................................... 2
Section 9. Voting............................................................... 3
Section 10. List of Stockholders................................................. 4
Section 11. Inspectors of Votes.................................................. 4
Section 12. Actions Without a Meeting............................................ 4
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers............................................................... 5
Section 2. Number, Qualification and Term of Office............................. 5
Section 3. Resignations......................................................... 5
Section 4. Removal of Directors................................................. 6
Section 5. Vacancies............................................................ 6
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings.................................................... 7
Section 7. Annual Meetings...................................................... 7
Section 8. Regular Meetings..................................................... 7
Section 9. Special Meetings; Notice............................................. 7
Section 10. Quorum and Manner of Acting.......................................... 7
Section 11. Remuneration......................................................... 7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
COMMITTEES OF DIRECTORS
Section 12. Executive Committee: How Constituted and Powers..................... 8
Section 13. Organization......................................................... 8
Section 14. Meetings............................................................. 8
Section 15. Quorum and Manner of Acting.......................................... 9
Section 16. Other Committees..................................................... 9
Section 17. Alternate Members of Committees...................................... 9
Section 18. Minutes of Committees................................................ 10
GENERAL
Section 19. Actions Without a Meeting............................................ 10
Section 20. Presence at Meeting by Means of Communication Equipment.............. 10
NOTICES
Section 1. Type of Notice ..................................................... 10
Section 2. Waiver of Notice..................................................... 10
OFFICERS
Section 1. Elected and Appointed Officers....................................... 11
Section 2. Time of Election or Appointment...................................... 11
Section 3. Salaries of Elected Officers......................................... 11
Section 4. Term................................................................. 11
Section 5. Duties of the Chairman of the Board.................................. 11
Section 6. Duties of the President.............................................. 11
Section 7. Duties of Vice President............................................. 12
Section 8. Duties of Assistant Vice Presidents.................................. 12
Section 9. Duties of the Secretary.............................................. 12
Section 10. Duties of Assistant Secretaries...................................... 13
Section 11. Duties of the Controller............................................. 13
Section 12. Duties of Assistant Controllers...................................... 13
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation............. 14
Section 2. Actions by or in the Right of the Corporation ...................... 14
Section 3. Determination of Right to Indemnification............................ 14
Section 4. Right to Indemnification............................................. 15
Section 5. Prepaid Expenses..................................................... 15
Section 6. Other Rights and Remedies............................................ 15
Section 7. Insurance............................................................ 15
Section 8. Mergers.............................................................. 15
CERTIFICATES OF STOCK
Section 1. Right to Certificate................................................. 16
Section 2. Facsimile Signatures................................................. 16
Section 3. New Certificates..................................................... 16
Section 4. Transfers............................................................ 17
Section 5. Record Date.......................................................... 17
Section 6. Registered Stockholders.............................................. 17
GENERAL PROVISIONS
Section 1. Dividends............................................................ 17
Section 2. Reserves............................................................. 17
Section 3. Annual Statement..................................................... 18
Section 4. Checks ............................................................. 18
Section 5. Fiscal Year.......................................................... 18
Section 6. Corporate Seal....................................................... 18
AMENDMENTS......................................................................... 18
</TABLE>
iii
<PAGE> 5
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other place or places, both within and without the State of Delaware, as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders for
the election of directors shall be held in the City of Dallas, State of Texas,
at such place within such city as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver or notice
thereof.
Section 2. Annual Meetings. Annual meetings of stockholders,
commencing with the year 1986, shall be held on such date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting, at which the stockholders shall elect by a plurality vote by
written ballot a Board of Directors and transact such other business as may
properly be brought before the meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual
meeting, stating the place, date and hour of the meeting, shall be given to each
stockholder of record entitled to vote at such meeting not less than ten or more
than 60 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by order of the Board of
Directors and shall be called by the Chairman of the Board, the President or the
Secretary at the request in writing of a majority of the Board of Directors.
Such request shall state the purpose or purposes of the proposed special
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
1
<PAGE> 6
Section 5. Notice of Special Meetings. Written notice of a special
meeting, stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote at such meeting not less than ten nor more than 60 days
before the date of the meeting.
Section 6. Quorum. Except as otherwise provided by statute or the
Certificate of Incorporation, the holders of stock having a majority of the
voting power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the stockholders. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy shall have
power to adjourn the meeting from time to time without notice (other than
announcement at the meeting at which the adjournment is taken of the time and
place of the adjourned meeting) until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 7. Organization. At each meeting of the stockholders the
Chairman of the Board or the President, determined as provided in Article V of
these By-Laws, or if those officers shall be absent therefrom, another officer
of the Corporation chosen as chairman present in person or by proxy and entitled
to vote thereat, or if all the officers of the Corporation shall be absent
therefrom, a stockholder holding of record shares of stock of the Corporation so
chosen, shall act as chairman of the meeting and preside thereat. The Secretary,
or if he shall be absent from such meeting or shall be required pursuant to the
provisions of this Section 7 to act as chairman of such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present
thereat) whom the chairman of such meeting shall appoint, shall act as secretary
of such meeting and keep the minutes thereof.
Section 8. Order of Business. The order of business at annual
meetings of stockholders and, so far as practicable, at other meetings of
stockholders shall be as follows unless changed by the vote of a majority in
voting interest of those present in person or by proxy at such meeting and
entitled to vote thereat:
(a) Call to order.
(b) Proof of due notice of meeting.
(c) Determination of quorum and examination of proxies.
(d) Announcement of availability of list of stockholders.
2
<PAGE> 7
(e) Reading and disposing of minutes of last meeting of
stockholders.
(f) Announcement of purposes for which the meeting was called.
(g) Nomination of directors.
(h) Entertainment of motions with respect to other business.
(i) Opening of polls or voting and collection of ballots.
(j) Reports of officers and committees.
(k) Report of voting judges.
(l) Other business.
(m) Adjournment.
Section 9. Voting. Except as otherwise provided in the Certificate
of Incorporation, each stockholder shall, at each meeting of the stockholders,
be entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of Article
VII of these By-Laws as the record date for the determination of stockholders
who shall be entitled to notice of and to vote at such meeting. Shares of its
own stock belonging to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held directly or indirectly by the Corporation, shall not be
entitled to vote. Any vote by stock of the Corporation, shall not be entitled to
vote. Any vote by stock of the Corporation may be given at any meeting of the
stockholders by the stockholder entitled thereto, in person or by his proxy
appointed by an instrument in writing subscribed by such stockholder or by his
attorney thereunto duly authorized and delivered to the Secretary of the
Corporation or to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date, unless said proxy
shall provide for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law. At all meetings of the stockholders all matters, except
where other provision is made by law, the Certificate of Incorporation or these
By-Laws, shall be decided by the vote of a majority of the votes cast by the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by a stockholder of the Corporation
present in person or by proxy at any meeting of the stockholders and entitled of
vote thereat, or so directed by the chairman of the meeting, the vote thereat on
any question other than the election or removal of directors need not be by
written ballot. Upon a demand of any such stockholder for a vote by written
ballot on any question or at the direction of such chairman that a vote by
written ballot be taken on any question, such vote shall be taken by written
ballot. On a vote by written ballot, each ballot shall be
3
<PAGE> 8
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 10. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have share of its stock
ledger, either directly or through another officer of the Corporation designated
by him or through a transfer agent appointed by the Board of Directors, to
prepare and make, at least ten days before every meeting of the stockholders, a
complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to said
meeting, either at a place within the city where said meeting is to be held,
which place shall be specified in the notice of said meeting, of, if not so
specified, at the place where said meeting is to be held. The list shall also be
produced and kept at the time and place of said meeting during the whole time
thereof, and may be inspected by any stockholder of record who shall be present
thereat. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, such list or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 11. Inspectors of Votes. At each meeting of the
stockholders, the chairman of such meeting may appoint two Inspectors of Votes
to act thereat, unless the Board of Directors shall have theretofore made such
appointments. Each Inspector of Votes so appointed shall first subscribe an oath
or affirmation faithful to execute the duties of an Inspector of Votes at such
meeting with strict impartiality and according to the best of his ability. Such
Inspectors of Votes, if any, shall take charge of the ballots, if any, at such
meeting and after the balloting thereat on any question shall count the ballots
cast thereon and shall make a report in writing to the secretary of such meeting
of the results thereof. An Inspector of Votes need not be a stockholder of the
Corporation, and any officer of the Corporation may be an Inspector of Votes on
any question other than a vote for or against his election to any position with
the Corporation or on any other question in which he may be directly interested.
Section 12. Actions Without a Meeting. Any action required to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
4
<PAGE> 9
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which shall have and may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute, the Certificate of Incorporation or these By-Laws directed or
required to be exercised or done by the stockholders.
Section 2. Number, Qualification and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall not be less
than three and shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in the previously
authorized directorships at the time any such resolution is presented to the
Board of Directors of adoption). The directors shall be divided into three
classes as nearly equal in number as possible as set forth in the Corporation's
Certificate of Incorporation, as amended. Directors need not be stockholders. At
each annual meeting of stockholders following the initial classification and
election of directors as set forth in the Corporation's Certificate of
Incorporation, as amended, each director elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after his election and until his
successor is elected and qualified or until his death or retirement or until he
shall resign or shall be removed in the manner hereinafter provided. Such
election shall be by written ballot.
Notwithstanding any other provisions of the By-Laws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of capital
stock of the Corporation entitled to vote generally in the election of directors
(hereinafter referred to as the "Voting Stock") required by law or the
Corporation's Certificate of Incorporation or the resolution or resolutions of
the Board of Directors relating to the issuance thereof, the affirmative vote of
the holders of at least 60% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend, repeal, or adopt any provision inconsistent with this Section 2
of Article III.
Section 3. Resignations. Any director may resign at any time by
giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein, or, if the time
when it shall become effective shall not be specified therein, then it shall
take effect immediately upon its receipt by the Secretary. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
5
<PAGE> 10
Section 4. Removal of Directors. Subject to the right of the
holders of any particular class or series of Voting Stock then outstanding, any
director, or the entire Board of Directors, may be removed from office at any
time, with or without cause, but only by the affirmative vote by written ballot
of the holders of at least a majority of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class.
The vacancy in the Board of Directors caused by any such removal shall be filled
by the Board of Directors as provided in Section 5 of this Article III.
Notwithstanding any other provisions of the By-Laws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of Voting
Stock required by law or the Corporation's Certificate of Incorporation or the
resolution or resolutions of the Board of Directors relating to the issuance
thereof, the affirmative vote of the holders of at least 60% of the voting power
of all of the then-outstanding shares of the Voting Stock, voting together as a
single class, shall be required to alter, amend, repeal, or adopt any provision
inconsistent with this Section 4 of Article III.
Section 5. Vacancies. Subject to the rights of the holders of any
class or series of the Voting Stock then outstanding, newly created directorship
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
by a majority vote of the directors then in office, though less than a quorum,
and directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the class to which they
have been elected expires. No decrease in the number of authorized directors
constituting the entire Board of Directors shall shorten the term of any
incumbent director. If there are no directors in office, then an election of
directors may be held in the manner provided by statute.
Notwithstanding the foregoing, whenever the holders, if any of any
series of preferred stock of the Corporation shall have the right to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies, and other features of such directorships shall be
governed by the terms of the Corporation's Certificate of Incorporation
applicable thereto, or the resolution or resolutions of the Board of Directors
relating to the issuance of such series of preferred stock, and such directors
so elected shall not be divided into classes pursuant to Section 2 of Article
III unless expressly provided by such terms or such resolution or resolutions.
Notwithstanding any other provisions of the By-Laws or any provision of
laws which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of Voting
Stock required by law or the Corporation's Certificate of Incorporation or the
resolution or resolutions of the Board of Directors relating to the issuance
thereof, the affirmative vote of the holders of at least 60% of the voting power
of all of the then-outstanding shares of the Voting Stock, voting
6
<PAGE> 11
together as a single class, shall be required to alter, amend, repeal, or adopt
any provision inconsistent with this Section 5 of Article III.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 7. Annual Meetings. The first meeting of each newly
elected Board of Directors shall be held immediately following the annual
meeting of stockholders and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event such meeting is not held immediately
following the annual meeting of stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the Board
of Directors may be called by the Chairman of the Board, President or Secretary
on 24 hours notice to each director, either personally or by telephone or by
mail, telegraph, telex, cable, wireless or other form of recorded communication;
special meetings shall be called by the Chairman of the Board, President, or
Secretary in like manner and on like notice on the written request of two
directors. Notice of any such meeting need not be given to any director,
however, if waived by him in writing or by telegraph, telex, cable, wireless or
other form of recorded communication, or if he shall be present at such meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the
Board of Directors, a majority of the directors at the time in office (but not
less than one-third of the whole Board of Directors) shall constitute a quorum
for, the transaction of business, and the act of a majority of the directors
present all any meeting at which a quorum is present shall be the act of the
Board of Directors, except as may be otherwise specifically provided by statute
or by the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting form time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Remuneration. Unless otherwise expressly provided by
resolution adopted by the Board of Directors, none of the directors shall, as
such, receive any stated remuneration for his services, but the Board of
Directors may at any time and
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from time to time by resolution provide that a specified sum shall be paid to
any director of the Corporation, either as his annual remuneration as such
director or member of any committee of the Board of Directors or as remuneration
for his attendance at each meeting of the Board of Directors or any such
committee. The Board of Directors may also likewise provide that the Corporation
shall reimburse each director for any expenses paid by him on account of his
attendance at any meeting. Nothing in this Section 11 shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving remuneration thereof.
COMMITTEES OF DIRECTORS
Section 12. Executive Committee: How Constituted and Powers. The
Board of Directors may in its discretion, by resolution passed by a majority of
the whole Board of Directors, designate an Executive Committee consisting of one
or more of the directors of the Corporation. Subject to the provisions of
Section 141 of The General Corporation Law of the State of Delaware, the
Certificate of Incorporation and these By-Laws, the Executive Committee shall
have and may exercise, when the Board is not in session, all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have the power to authorize the seal of
the Corporation to be affixed to all paper which may require it; but the
Executive Committee shall not have the power to fill vacancies in the Board of
Directors, the Executive Committee or any other committee of directors, or to
elect or approve officers of the Corporation. The Executive Committee shall have
the power and authority to authorize the issuance of common stock and grant and
authorize options and other rights with respect to such issuance. The Board of
Directors shall have the power at any time, by resolution passed by a majority
of the whole Board of Directors, to change the membership of the Executive
Committee, to fill all vacancies in it, or to dissolve it, either with or
without cause.
Section 13. Organization. The Chairman of the Executive Committee,
to be selected by the Board of Directors, shall act as chairman at all meetings
of the Executive Committee and the Secretary shall act as secretary thereof. In
case of the absence from any meeting of the Executive Committee of the Chairman
of the Executive Committee or the Secretary, the Executive Committee may appoint
a chairman or secretary, as the case may be, of the meeting.
Section 14. Meetings. Regular meetings of the Executive Committee,
of which no notice shall be necessary, may be held on such days and at such
places, within or without the State of Delaware as shall be fixed by resolution
adopted by a majority of the Executive Committee and communicated in writing to
all its members. Special meetings of the Executive Committee shall be held
whenever called by the Chairman of the Executive Committee or a majority of the
members of the Executive Committee then in office. Notice of each special
meeting of the Executive Committee shall be given by mail, telegraph, telex,
cable, wireless or other form of recorded communication or be delivered
personally or by telephone to each member of the Executive Committee not
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later than the day before the day on which such meeting is to be held. Notice of
any such meeting need not be given to any member of the Executive Committee,
however if waived by him in writing or by telegraph, telex, cable, wireless or
other form of recorded communication, or if he shall be present at such meeting;
and any meeting of the Executive Committee shall be a legal meeting without any
notice thereof having been given, if all the members of the Executive Committee
shall be present thereat. Subject to the provisions of this Article III, the
Executive Committee, by resolution adopted by a majority of the whole Committee
shall fix its own rules of procedure.
Section 15. Quorum and Manner of Acting. A majority of the
Executive Committee shall constitute a quorum for the transaction of business,
and the act of a majority of those present at a meeting thereof at which a
quorum is present shall be the act of the Committee.
Section 16. Other Committees. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one or more other committees consisting of one or more directors of
the Corporation, which, to the extent provided in said resolution or
resolutions, shall have and may exercise, subject to the provisions of Section
141 of The General Corporation Law of the State of Delaware, the Certificate of
Incorporation and these By-Laws, the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
shall have the power to authorize the seal of the Corporation to be affixed to
all papers which may require it; but no such committee shall have the power to
fill vacancies in the Board of Directors, the Executive Committee or any other
committee or in their respective membership, appoint or remove officers of the
Corporation, or authorize the issuance of shares of the capital stock of the
Corporation, except that such a committee may, to the extent provided in said
resolutions, grant and authorize options and other rights to the common stock of
the Corporation pursuant to and in accordance with any plan approved by the
Board of Directors. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors. A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings and specify what notice
thereof, if any, shall be given, unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power, to change the members of any
such committee at any time to fill vacancies, and to discharge any such
committee, either with or without cause, at any time.
Section 17. Alternate Members of Committees. The Board of Directors
may designate one or more directors as alternate members of the Executive
Committee or any other committee, who may replace any absent or disqualified
member at any meeting of the committee, or if none be so appointed, the member
of members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of any such
absent or disqualified member.
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Section 18. Minutes of Committees. Each committee shall keep
regular minutes of its meetings and proceedings and report the same to the Board
of Directors at the next meeting thereof.
GENERAL
Section 19. Actions Without a Meeting. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or the committee.
Section 20. Presence at Meeting by Means of Communications
Equipment. Members of the Board of Directors, or of any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 20 shall
constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of the
statutes, the Certificate of Incorporation or these By-Laws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, in person or by mail,
addressed to such director or stockholder, at his address as it appears on the
record of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given in any manner permitted by
Article III hereof and shall be deemed to be given at the time when first
transmitted by the method of communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provision of the statutes, the Certificate of Incorporation or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether, before or after the time stated therein, shall
be deemed equivalent thereto, and transmission of a waiver of notice by a
director of stockholder by mail, telegraph, telex, cable, wireless or other form
of recorded communication may constitute such a waiver.
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ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers. The elected officers of
the Corporation shall be a President, one or more Vice Presidents, with or
without such descriptive titles as the Board of Directors shall deem
appropriate, a Secretary and a Controller, and, if the Board of Directors so
elects, a Chairman of the Board (who shall be a director). The Board of
Directors or the Executive Committee of the Board of Directors by resolution
also may appoint one or more Assistant Vice Presidents, Assistant Secretaries,
Assistant Controllers, and such other officers and agents as from time to time
may appear to be necessary or advisable in the conduct of the affairs of the
Corporation.
Section 2. Time of Election or Appointment. The Board of Directors
at its annual meeting shall elect and appoint, as the case may be, officers to
fill the positions designated in or pursuant to Section 1 of this Article V.
Officers of the Corporation may also be elected or appointed, as the case may
be, at any other time.
Section 3. Salaries of Elected Officers. The salaries of all
elected officers of the Corporation shall be fixed by the Board of Directors.
Section 4. Term. Each officer of the Corporation shall hold his
office until his successor is elected or appointed and qualified or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Any officer elected or appointed by the Board of
Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 5. Duties of the Chairman of the Board. The Chairman of
the Board, if one be elected, shall preside when present at all meetings of the
Board of Directors and may preside at meetings of the stockholders. He shall
advise and counsel the President and other officers of the Corporation, and
shall exercise such powers and perform such duties as shall be assigned to or
required of him from time to time by the Board of Directors.
Section 6. Duties of the President. The President, subject to the
provisions of these By-laws, shall have general supervision of the affairs of
the Corporation and shall have general and active control of all its business.
He shall preside, in the absence of the Chairman of the Board or any other
person designated to do so by these By-Laws, at all meetings of the Board of
Directors and at meetings of the stockholders. He shall see that all orders and
resolutions of the Board of Directors and the stockholders are carried into
effect. He shall have general authority to execute bonds, deeds and contracts in
the name of the Corporation and affix the corporate seal thereto; to
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sign stock certificates; to cause the employment or appointment of such
employees and agents of the Corporation as the proper conduct of operations may
require, and to fix their compensation, subject to the provisions of these
By-Laws; to remove or suspend any employee or agent who shall have been employed
or appointed under his authority or under authority of an officer subordinate to
him; to suspend for cause, pending final action by the authority which shall
have elected or appointed him, any officer subordinate to the President, and, in
general, to exercise all the powers and authority usually appertaining to the
president of a corporation, except as otherwise provided in these By-Laws.
Section 7. Duties of Vice Presidents. In the absence of the
President or in the event of his inability or refusal to act, the Vice President
(or in the event there be more than one Vice President, the Vice Presidents in
the order designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors or the President may from time to time
prescribe.
Section 8. Duties of Assistant Vice Presidents. In the absence of
a Vice President or in the event of his inability or refusal to act, the
Assistant Vice President (or in the event there shall be more than one, the
Assistant Vice Presidents in the order designated by the Board of Directors, or
in the absence of any designation, then in the order of their appointment) shall
perform the duties and exercise the powers of that Vice President, and shall
perform such other duties and have such other powers as the Board of Directors,
the President or the Vice President under whose supervision he is appointed may
from time to time prescribe.
Section 9. Duties of the Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the Executive Committee or other standing committees when required. He shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the President, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or an Assistant Secretary, shall have authority to affix the
same to any instrument requiring it, and when so affixed, it may be attested by
his signature or, by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature. The Secretary shall
keep and account for all books, documents, papers and records of the Corporation
except those for which some other officer or agent is properly accountable. He
shall have authority to sign stock certificates and shall generally perform all
the duties usually appertaining to the office of the secretary of a corporation.
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Section 10. Duties of Assistant Secretaries. In the absence of the
Secretary or in the event of his inability or refusal to act, the Assistant
Secretary (or, if there shall be more than one, the Assistant Secretaries in the
order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors, the President or the Secretary
may from time to time prescribe.
Section 11. Duties of the Controller. The Controller shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Controller and of the financial condition of the Corporation. If
required by the Board of Directors, he shall give the Corporation a bond (which
shall be renewed every six years) in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation. The Controller shall also have
supervision of the accounting practices of the Corporation and of each
subsidiary and division of the Corporation, and shall prescribe the duties and
powers of the chief accounting personnel of the subsidiaries and divisions. He
shall cause to be maintained an adequate system of financial control through a
program of budget an interpretive reports. He shall initiate and enforce
measures and procedures whereby the business of the Corporation and its
subsidiaries and divisions shall be conducted with the maximum safety,
efficiency and economy. He shall prepare a monthly report covering the operating
results of the Corporation, its subsidiaries and divisions. The Controller shall
be under the supervision of the Vice President, in charge of finance, if one is
so designated, and he shall perform such other duties as may be prescribed by
the Board of Directors, the President or any such Vice President in charge of
finance.
Section 12. Duties of Assistant Controllers. The Assistant
Controller or Assistant Controllers shall assist the Controller, and in the
absence of the Controller or in the event of his inability or refusal to act,
the Assistant Controller (or, if there shall be more than one, the Assistant
Controllers in the order designed by the Board of Directors, or in the absence
of any designation, then in the order of their appointment), shall perform the
duties and exercise the powers of the Controller and perform such other duties
and have such other powers as the Board of Directors, the President or the
Controller may from time to time prescribe.
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ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or contemplated action or suit by or
I the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Determination of Right to Indemnification. Any
indemnification under Sections 1 or 2 of this Article VI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 1 or 2 of this Article VI. Such determination
shall be made (i) by the Board of Directors by a majority
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vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders.
Section 4. Right to Indemnification. Notwithstanding the other
provisions of this Article VI, to the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 or 2 of this
Article VI, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 5. Prepaid Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not entitled
to indemnified by the Corporation as authorized in this Article VI.
Section 6. Other Rights and Remedies. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article VI
shall not be deemed exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 7. Insurance. Upon resolution passed by the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
Section 8. Mergers. For purposes of this Article VI, references to
"the Corporation" shall include, in addition to the resulting or surviving
corporation, constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee, or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
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trust or other enterprise shall stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Right to Certificate. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a Vice
President, and the Secretary or an Assistant Secretary of the Corporation
certifying the number of shares owned by him in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of the State of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. New Certificates. The Board of Directors may direct a
new certificate or certificates theretofore issued by the Corporation and
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new certificate.
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Section 4. Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation, subject to any proper
restrictions on transfer, to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be less than ten nor more than 60 days
before the date of such meeting, nor more than 60 days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any person, whether or not
provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors (but not any committee thereof)
at any regular meeting, pursuant to law. Dividends may be paid in cash, in
property or in shares of the capital stock, subject to the provision of the
Certificate of Incorporation.
Section 2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, thinks proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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Section 3. Annual Statement. The Board of Directors shall present
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the Corporation.
Section 4. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time prescribe.
Section 5. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the word
"Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed, affixed, reproduced or otherwise.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted by the stockholders or by the Board of Director at any regular meeting
of the stockholders or the Board of Director or at any special meeting of the
stockholders or the Board of Directors if notice of such alteration, amendment,
repeal or adoption of new By-Laws be contained in the notice of such special
meeting.
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EXHIBIT 10.4
IMCO RECYCLING INC.
AMENDED AND RESTATED STOCK OPTION PLAN
(as amended May 7, 1991, November 5, 1992 and May 13, 1997)
PURPOSE
The purpose of the Plan is to attract and retain key employees 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 the employees in the Company's welfare;
(b) furnish an incentive to the employees to continue their services
for the Company; and
(c) provide a means through which the Company may attract able persons
to enter its employ.
ARTICLE I
DEFINITIONS
For the purpose of this Plan, unless the context requires otherwise,
the following terms shall have the meanings indicated:
1.1 "Board" means the board of directors of the Company.
1.2 "Change in Control" means the occurrence of any of the following
events: (i) there shall be consummated (x) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of the Company's Common Stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of the Company's Common Stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other transfer
(excluding transfer by way of pledge or hypothecation), in one transaction or a
series of related transactions, of all, or substantially all, of the assets of
the Company, (ii) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company, (iii) any "person" (as such
term is defined in Section 3(a)(9) or Section 13(d)(3) under the 1934 Act) or
any "group" (as such term is used in Rule 13d-5 promulgated under the 1934 Act),
other than the Company or any successor of the Company or any Subsidiary of the
Company or any employee benefit plan of the Company or any Subsidiary (including
such plan's trustee), becomes a beneficial owner for purposes of Rule 13d-3
promulgated under the 1934 Act, directly or indirectly, of securities of the
Company representing 50.1% or more of the Company's then outstanding securities
having the right to vote in the election of directors, or (iv) during any
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<PAGE> 2
period of two consecutive years, individuals who, at the beginning of such
period constituted the entire Board, cease for any reason (other than death) to
constitute a majority of the directors, unless the election, or the nomination
for election, by the Company's stockholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Common Stock" means the common stock which the Company is
currently authorized to issue or may in the future be authorized to issue.
1.5 "Company" means IMCO Recycling Inc., a Delaware corporation.
1.6 "Date of Grant" means the effective date on which an option is
awarded to an employee as set forth in the stock option agreement.
1.7 "Incentive Stock Option" means an option to purchase shares of
Common Stock granted to a Participant pursuant to Article V and which is
intended to qualify as an incentive stock option under Section 422 of the Code.
1.8 "1934 Act" means the Securities Exchange Act of 1934, as amended.
1.9 "Nonqualifying Stock Option" means an option to purchase shares of
Common Stock granted to a Participant pursuant to Article V and which is not
intended to qualify as an incentive stock option under Section 422 of the Code.
1.10 "Participant" means any employee of the Company who is, or who is
proposed to be, a recipient of a Stock Option.
1.11 "Plan" means IMCO Recycling Inc. Amended and Restated Stock Option
Plan, as it may be amended from time to time.
1.12 "Stock Options" shall mean any and all Incentive Stock Options and
Nonqualified Stock Options granted pursuant to the Plan.
1.13 "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.
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<PAGE> 3
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 "disinterested." For the
purposes of the Plan, a member of the Committee shall be deemed to be
"disinterested" at any time only if the Company has not, within one (1) year
prior to the time such person became a member of the Committee, granted or
awarded any shares of Common Stock, any options to acquire Common Stock, or any
other "equity security" (as defined in Rule 16b-3 promulgated under the 1934
Act) of the Company, to such person pursuant to the Plan or any other benefits
plan of the Company or any of its affiliates.
The Committee shall select one of its members to act as its Chairman,
and 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 to
whom Stock Options will be granted, interpret the Plan, prescribe, amend, and
rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and make such other determinations and take such
other action as it deems necessary or advisable. In this regard, the Committee
shall consider and give appropriate weight to input from representatives of
management of the Company regarding the contributions or potential contributions
to the Company of certain of the employees or potential employees of the
Company. 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
ELIGIBILITY
The Committee shall, from time to time, select the particular key
employees of the Company and its Subsidiaries to whom the Stock Options provided
under the Plan are to be granted and/or distributed in recognition of each such
employee's contribution to the Company's success.
ARTICLE IV
SHARES SUBJECT TO PLAN
The Committee may not grant Stock Options under the Plan for more than
1,200,000 shares of Common Stock of the Company (as may be adjusted in
accordance with Article IX or X hereof). As set forth in Section 12.7 hereof,
this Plan amends and restates the Company's
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<PAGE> 4
Nonqualified Stock Option Plan, which authorized the Committee to grant
Nonqualified Stock Options to acquire up to an aggregate of 850,000 shares of
Common Stock. As of the date of adoption of the Plan (i.e., March 6, 1990) by
the Board, options covering 776,000 shares have been granted under the
Nonqualified Stock Option Plan, of which options to purchase 100,000 of such
shares have been exercised (resulting in options outstanding to purchase 676,000
shares under the Plan as of such date of adoption). It is intended that the Plan
incorporated under its terms all outstanding stock options which have been
granted pursuant to the Nonqualified Stock Option Plan. Shares to be distributed
and sold may be made available from either authorized but unissued Common Stock
or Common Stock held by the Company in its treasury. Shares that by reason of
the expiration or unexercised termination of a Stock Option are no longer
subject to purchase may be reoffered under the Plan.
ARTICLE V
STOCK OPTIONS
5.1 GRANT OF STOCK OPTIONS. All grants of Stock Options under the Plan
shall be awarded by the Committee. The grant of Stock Options shall be evidenced
by stock option agreements setting forth the total number of shares subject to
the Stock Option, the option 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.
5.2 OPTION PRICE. The option price for a Nonqualified Stock Option
shall be determined by the Committee and shall be an amount not less than 85% of
the fair market value per share of the Common Stock on the Date of Grant. The
option price for an Incentive Stock Option shall be determined by the Committee
and shall be an amount not less than 100% of 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, using any reasonable valuation method.
Notwithstanding anything to the contrary in this Section 5.2, 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.
5.3 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. However, if a 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
employee, 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. 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.
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<PAGE> 5
5.4 STOCK OWNERSHIP LIMITATION. No Incentive Stock Option may be
granted to an employee who owns more than 10% of the total combined voting power
of all classes of stock of the Company or its Subsidiaries. This limitation
will not apply if the option price is at least 110% of the fair market value of
the Common Stock on the Date of Grant and the option is not exercisable more
than five years from the Date of Grant.
5.5 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.
5.6 TERMINATION OF EMPLOYMENT. In the event a Participant shall cease
to be employed by the Company, such Participant's Stock Options may be exercised
by the Participant for a period of ninety (90) days after the Participant's
termination of employment or until expiration of the Stock 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:
(a) Death. In the event of death while employed, the Stock Option may
be exercised, for a period of ninety (90) 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. In the event of termination of employment as the
result of a total and permanent disability (as defined in Section 22(e)
of the Code), the Stock Option may be exercised by the Participant or
his guardian for a period of ninety (90) 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.
Notwithstanding the foregoing, individual grants of Stock Options 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 by the
Participant.
5.7 PAYMENT. Full payment for shares purchased upon exercise of a Stock
Option shall be made in cash, or, provided that the particular stock option
agreement so provides, by the Participant's delivery to the Company of shares of
Common Stock which have a fair market value equal to the option price (or in any
combination of cash and shares of Common Stock having an aggregate fair market
value equal to the option price). No shares may be issued until full payment of
the purchase price therefor has been made, and a Participant will have none of
the rights of a stockholder until shares are issued to him.
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<PAGE> 6
5.8 EXERCISE OF STOCK OPTION. 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; provided,
however, that Stock Options shall not be exercisable at any time during the six
month period which begins on the Date of Grant. Except as otherwise contained
herein (see Section 12.7 hereof), Stock Options may not be exercised, nor may
shares be issued pursuant to a Stock Option (i) until the Plan has been approved
by the stockholders of the Company, if necessary to comply with Rule 16b-3
promulgated under the 1934 Act or with the applicable rules or regulations of
any stock exchange or inter-dealer quotation system on which the Common Stock is
listed or quoted or (ii) 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.
5.9 NON-ASSIGNABILITY. A Stock Option granted to a Participant may not
be transferred or assigned, other than (i) by will or the laws of descent and
distribution or (ii) pursuant to the terms of a qualified domestic relations
order (as defined in Section 401(a)(13) of the Code or Section 206(d)(3) of the
Employee Retirement Income Security Act of 1974, as amended), provided, that in
the case of an Incentive Stock Option, such transfer or assignment may occur
only to the extent it will not result in disqualifying such option as an
incentive stock option under Section 422 of the Code, or any successor
provision. Subject to the foregoing, during a Participant's lifetime, Stock
Options granted to a Participant may be exercised only by the Participant or,
provided the particular stock option agreement so provides, by the Participant's
guardian or legal representative.
5.10 DISQUALIFYING DISPOSITION. If stock acquired upon exercise of an
Incentive Stock Option is disposed of by a 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 the Participant pursuant to the exercise of such option,
or in any other disqualifying disposition within the meaning of Section 422 of
the Code, such Participant shall notify the Company in writing of the date and
terms of such disposition. A disqualifying disposition by a 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.
ARTICLE VI
AMENDMENT OR DISCONTINUANCE
The Board may at any time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan, provided that such
action shall not, without obtaining the approval of the stockholders of the
Company, (i) materially increase the benefits accruing to Participants under the
Plan, (ii) materially increase the number of securities which may be issued
under the Plan, or (iii) materially modify the requirements as to eligibility
for participation in the Plan. Subject to the foregoing limitations, the Board
may amend the Plan or modify the agreements evidencing same in order to comply
with any exemption from the operation of Section 16(b) of the 1934 Act. The
Committee may also substitute new Stock Options for
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<PAGE> 7
previously granted Stock Options, including previously granted Stock Options
having higher exercise prices.
ARTICLE VII
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 officer 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 the Committee and executed on behalf of
the Company and then only to the extent and upon the terms and conditions
expressly set forth therein.
ARTICLE VIII
TERM
Unless sooner terminated by action of the Board, the Plan will
terminate on the 3rd day of March, 1997. 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 IX
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect or unexercised Stock Options
are outstanding there shall be any increase or decrease in the number of issued
and outstanding shares of Common Stock through the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, then and in such event:
(i) An appropriate adjustment shall be made in the
maximum number of shares of Common Stock then subject to being awarded
under grants pursuant to the Plan, to the end that the same proportion
of the Company's issued and outstanding shares of Common Stock shall
continue to be subject to being so awarded; and
(ii) Appropriate adjustments shall be made in the number
of shares of Common Stock and the exercise price per share thereof then
subject to purchase pursuant to each such Stock Option previously
granted and unexercised, to the end that the same proportion of the
Company's issued and outstanding shares of Common Stock in each
instance shall remain subject to purchase at the same aggregate
exercise price.
Any fractional shares resulting from any adjustment made pursuant to
this Article IX 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
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<PAGE> 8
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 X
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 merger or consolidation pursuant to
which the Company is not the surviving or resulting corporation, there
shall 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, all such Stock Options may be cancelled by the
Board as of the effective date of any such reorganization, merger or
consolidation, or of any proposed sale of substantially all of the
assets of the Company, or of any dissolution or liquidation of the
Company, by giving notice to each holder thereof or his personal
representative of its intention to do so and by permitting 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 Option would not otherwise be
exercisable.
(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.
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<PAGE> 9
(e) 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 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 than in effect with respect to
each option shall be reduced, as of the payment date of such
distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in
accordance with generally accepted accounting principles) resulting by
reason of such distribution; provided, that in no event shall any
adjustment of exercise prices in accordance with the terms of the Plan
result in any exercise prices being reduced below the par value per
share of the Common Stock.
(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 XI
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 XII
MISCELLANEOUS PROVISIONS
12.1 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
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<PAGE> 10
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.
12.2 ALLOTMENT OF SHARES. 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 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.
12.3 NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in
any Stock Option confers upon any employee the right to continue in the employ
of the Company or interferes with or restricts in any way the right of the
Company to discharge any employee at any time (subject to any contract rights
of such employee).
12.4 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.
12.5 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 issued 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.
12.6 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board
or the Committee, nor any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
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12.7 AMENDMENT AND RESTATEMENT OF PRIOR PLAN. This Plan is intended
to amend and restate the Company's Nonqualified Stock Option Plan approved and
adopted by the Board on December 14, 1988, which, in turn, memorialized the
Company's informal plan or program in effect since March 3, 1987 to provide
employees with an opportunity to obtain an equity interest in the Company in
order to motivate employment performance, encourage retention of qualified
employees and attract highly qualified personnel, by the grant of nonqualified
stock options to purchase shares of Common Stock of the Company. The Plan was
further amended on May 7, 1991 by action of the Board in order to conform the
plan's provisions to the amended rules promulgated by the Securities and
Exchange Commission under Section 16(b) of the 1934 Act. The Plan was amended on
November 5, 1992 by action of the Board to, among other things, amend Section
12.5. The Plan was amended on May 13, 1997 by action of the Board to further
amend Section 12.5.
ARTICLE XIII
EFFECTIVE DATE
The effective date of the Plan shall be March 6, 1990, that is, the
date on which it was approved and adopted by the Board (although it amends and
restates the Company's Nonqualified Stock Option Plan as set forth in Section
12.7 hereof).
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed effective 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:
---------------------------------
Don V. Ingram
Chief Executive Officer
Attest:
- -----------------------------------
Paul V. Dufour
Secretary
11
<PAGE> 1
EXHIBIT 10.8
SUPPLY AGREEMENT
BETWEEN
BARMET ALUMINUM CORPORATION
AND
IMCO RECYCLING INC.
Prepared by:
Roetzel & Andress
George A. Dietrich
Joseph F. Timmons
75 East Market Street
Akron, OH 44308
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. Construction of Facility ................................................ 2
II. Agreement to Sell and to Purchase ....................................... 3
III. Term .................................................................... 5
IV. Tolling Operation ....................................................... 5
V. Price, Packaging and Terms and Conditions of Sale ....................... 8
VI. Warranty and Related Rights ............................................. 9
VII. Force Majeure ........................................................... 11
VIII. Proprietary and Confidential Information ................................ 11
IX. Patent Infringement ..................................................... 15
X. Employment Matters ...................................................... 16
XI. Notices and Communication ............................................... 16
XII. Independent Status of Parties and Limitation of Authority ............... 18
XIII. Arbitration ............................................................ 18
XIV. Indemnity ............................................................... 19
XV. Buyer's Option to Participate ........................................... 20
XVI. Rights of First Refusal ................................................. 21
XVII. Purchase of Personal Property ........................................... 22
XVIII. Closing Procedure ....................................................... 23
XIX. Termination ............................................................. 24
XX. Representations ......................................................... 25
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
XXI. Miscellaneous ........................................................... 28
Exhibit "A" (Quantity and Quality of Product Delivered) ..................... 33
Exhibit "B" (Scrap Receiving Procedures) .................................... 36
Schedule 5.01 (Price) ....................................................... 41
Exhibit "C" (Contract Recoveries) ........................................... 45
Exhibit "D" (Base Price Adjustment) ......................................... 50
Exhibit "E" (Waste Minimization) ............................................ 52
Exhibit "F" (Supplier's Records) ............................................ 54
Exhibit "G" (Sample Calculation of Recoverable Costs) ....................... 64
Schedule 15.01 (Exercise and Terms of Option) ............................... 65
Exhibit "H" (Memorandum of Facility Rights of First Refusal) ................ 71
Schedule 16.01 (Participation Formula) ...................................... 78
Exhibit "I" (Memorandum of Rockport Rights of First Refusal) ................ 79
Exhibit "J" (List of and Purchase Price for Personal Property) .............. 87
Exhibit "K" (Bill of Sale) .................................................. 88
</TABLE>
<PAGE> 4
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is made and entered into as of this
2nd day of March, 1992, by and between Barmet Aluminum Corporation, an Ohio
corporation with its principal place of business at 753 W. Waterloo Road, Akron,
Ohio 44314 (referred to in this Agreement and Schedules as "Buyer" and in
Exhibits as "Barmet") and IMCO Recycling Inc., a Delaware corporation with its
principal executive offices at 5215 North O'Connor Blvd., Suite 940, Central
Tower at Williams Square, Irving, Texas 75039 (referred to in this Agreement and
Schedules as "Supplier" and in Exhibits as "IMCO").
WITNESSETH
WHEREAS, Buyer is engaged in the business of producing aluminum rolled
products at its rolling mill facility in Uhrichsville, Ohio (the "Mill"); and
WHEREAS, Buyer currently operates a Salt Plant (the "Salt Plant"), Crushing
Plant (the "Crushing Plant") and Furnace Operations (the "Furnace Operations")
in Uhrichsville, Ohio as support operations for the Mill;
WHEREAS, Supplier has agreed, subject to the terms hereof, to construct a
recycling and processing facility in Uhrichsville, Ohio for the purpose of
recycling dross, aluminum scrap and concentrates into ingot or molten metal (the
"Facility");
WHEREAS, once the First Phase of the Facility as described below is
completed, its recycling capacity will be sufficient to fulfill Buyer's
requirements for secondary metal as described in Exhibit "A" and enable Buyer to
discontinue its Furnace Operations; and
WHEREAS, the parties desire to enter into a Supply Agreement whereby
Supplier will provide tolling/converting services to Buyer so as to satisfy
Buyer's requirements of secondary metal in the form of ingot and molten metal
and Buyer will purchase said services from Supplier.
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NOW, THEREFORE, and in consideration of the mutual covenants and
conditions set forth herein the adequacy and sufficiency of which is hereby
acknowledged and intending to be legally bound, the parties agree as follows:
ARTICLE 1. CONSTRUCTION OF FACILITY
SECTION 1.01 CONSTRUCTION OF FACILITY BY SUPPLIER. Subject to the terms of
this Agreement, Supplier agrees to proceed with the construction of the Facility
and to complete the installation of five (5) furnaces in the Facility within ten
(10) months after all environmental and construction permits required for the
construction of the Facility have been duly procured by Supplier. The period
beginning on the date hereof and ending upon the first date that all five (5)
furnaces in the Facility become operational is referred to herein as the "First
Phase". Supplier agrees to construct additional furnaces as may be necessary to
satisfy its supply obligations stated in this Agreement and in Exhibit "A".
Supplier shall complete the installation of said additional furnaces in the
Facility by April 1, 1993 or within ten (10) months after all environmental and
construction permits required for the construction of said additional furnaces
have been duly procured by Supplier, whichever is later. Supplier hereby agrees
to use its best efforts to obtain all permits required to construct the initial
five (5) furnaces, as well as the additional furnaces necessary to satisfy its
supply obligations stated in this Agreement and in Exhibit "A". Supplier agrees
to cause the Facility to be constructed so that, in Supplier's reasonable
judgment, it will contain adequate parking, storage and loading space to
facilitate incoming and outgoing truck deliveries.
SECTION 1.02 CLOSURE OF FURNACE OPERATIONS. Buyer shall completely cease
its Furnace
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Operations for production purposes upon the completion of the First Phase
provided Supplier then has sufficient furnace capacity to satisfy Buyer's
requirements of the Product as defined in Section 2.01 below.
ARTICLE II. AGREEMENT TO SELL AND TO PURCHASE
SECTION 2.01 PURCHASE OF REQUIREMENTS. After the completion of the First
Phase Supplier shall be Buyer's exclusive source of secondary ingot and molten
metal with respect to the Scrap Based Alloys used by the Mill in conformance
with the specifications detailed in Exhibit "A" hereto (the "Product"). For
purposes of this Agreement, the term Scrap Based Alloys shall refer to all
alloys except alloys 1100, 1350, 8111 and 5052 and any additional high purity
alloys which may be excluded by agreement as listed in the Registration Record
of Aluminum Association Designation and Chemical Composition Limits for Wrought
Aluminum and Wrought Aluminum Alloys ("Green Sheet"). Buyer shall, however, be
permitted to purchase nominal quantities of primary alloys and other
"sweeteners" from vendors other than Supplier to achieve the standards set forth
for Scrap Based Alloys in said Green Sheet. In determining the source of raw
materials to be used in the production of Buyer's alloys, it is the intent of
Buyer to maximize the use of Scrap in the composition of Scrap Based Alloys.
Exceptions to this Section 2.01 for ingot tolling arrangements which Buyer has
with certain of its sheet customers shall be communicated to Supplier in
advance, provided, however, total annual volume for such ingot tolling of Scrap
Based Alloys shall not exceed ten (10%) percent of the installed capacity per
Exhibit "A" hereto. Except as otherwise provided herein, Buyer shall be
prohibited from purchasing any of the Product from any other source, whether on
a
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tolling/conversion or a purchase basis.
SECTION 2.02 SUPPLY OBLIGATIONS. After the completion of the First Phase
and subject to the terms of this Agreement, Supplier shall toll/convert
sufficient quantities of Buyer's Scrap (as described in Section 4.01 below) as
ordered by Buyer from time to time so as to satisfy Buyer's quantity
requirements. Supplier shall not be prohibited from selling any ingot or molten
metal it produces at the Facility to purchasers other than Buyer assuming
Supplier at all times meets its supply obligations to Buyer hereunder.
Notwithstanding the foregoing, it is intended that Buyer shall be the principal
customer of the Facility and shall be accorded priority treatment meaning that
Buyer's orders shall receive priority scheduling over Supplier's other
customers.
In the event Supplier agrees to sell or toll any ingot, molten metal or any
other product or accepts any Scrap at the Facility for any purchaser other than
Buyer, Supplier shall not comingle the Scrap, waste, dunnage, or finished
products relating to any other purchasers with those of Buyer. Supplier shall
maintain and make available to Buyer accurate and complete records of the Scrap,
waste, dunnage, and finished products relating to services performed for Buyer
under this Agreement and separate records for services provided or products
produced for other purchasers. The exact content of said records shall include
such detail as may reasonably be requested by Buyer from time to time but shall
include, but not be limited to, the data described in Exhibit "F". The parties
may, but shall not be obligated to, enter into a separate agreement with regard
to Buyer recycling any saltcake generated as a result of Supplier providing
services or products to any other purchasers. If such a separate agreement is
entered into, the parties will allocate and define obligations with respect to
disposal of waste generated as a result
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of Buyer providing said services to Supplier.
ARTICLE III. TERM
SECTION 3.01 TERM. This Agreement shall be effective as of the date first
written above. Subject to the provisions of Section 19.01 below, the obligations
of the parties with respect to the delivery and processing of Scrap (as defined
in Section 4.01) shall commence at the beginning of the First Contract Year, as
defined in this Section 3.01 and shall be in effect for a ten (10) year term
thereafter (the "Initial Term"). Buyer shall have the option to extend the term
of this Agreement for an additional ten (10) year period at the expiration of
the Initial Term based upon the price and terms contained herein (the "Extended
Term"). For purposes of this Agreement the term "Contract Year" shall refer to
consecutive twelve (12) month periods commencing on the earlier of the first day
of the first month in which Supplier processes a minimum of ten million (10MM
lbs.) pounds of Buyer's Scrap or notifies Buyer that sufficient capacity has
been installed at the Facility to enable it to process said ten million (10MM
lbs) pounds per month. Similarly "Contract Quarter" shall refer to each
consecutive three (3) month period beginning on the first day of the First
Contract Year.
ARTICLE IV. TOLLING OPERATION
SECTION 4.01 TOLLING OPERATION.
(a) Buyer will order and request Scrap, as described herein, to be
delivered to Supplier in accordance with Exhibit "B" hereto. Upon request by
Buyer, Supplier will, at its expense, receive and accept said Scrap. For
purposes of this Agreement, Scrap shall be classified into the categories listed
in Exhibit "C" and shall be defined therein (the "Scrap").
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Buyer shall make available for the use of Supplier and Supplier shall at its
expense pick up or cause to be picked up concentrates from the Buyer's Crushing
Plant, flux from the Buyer's Salt Plant, and dross from Buyer's Mill for its use
in the processing of Scrap for Buyer hereunder. To the extent Supplier utilizes
any flux, concentrates, and/or dross provided by Buyer in providing services or
products to other purchasers as permitted pursuant to Section 2.02 hereof,
Supplier shall pay to Buyer the then prevailing market price of said flux,
concentrates, and dross. The quantities of Scrap, flux, concentrates, and dross
supplied by Buyer shall be sufficient so that, assuming the Supplier obtains
recovery rates set forth in Exhibit "C", it will be able to fill Buyer's total
requirements of the Product. All Scrap, flux, concentrate and dross supplied by
Buyer to Supplier hereunder, as well as the resulting ingot and/or molten metal,
shall remain the sole property of and be at all times titled in the name of
Buyer, and Supplier shall execute and deliver to Buyer upon reasonable request
by and at the expense of Buyer, documentation to evidence and/or perfect such
retention of title. The flux provided to Supplier described herein shall be
comprised of a minimum of forty percent (40%) potassium chloride with the
remainder of said flux consisting of sodium chloride. In the event, but only to
the extent, the flux supplied hereunder consists of less than forty (40%)
percent potassium chloride, the Supplier may add potash to the flux in amounts
necessary to raise the potash content of the flux to the level which would have
been accomplished had the flux originally consisted of forty (40%) percent
potassium chloride. Subject to the inspection and verification requirements set
forth in Section 5.04 hereof with respect to the potassium chloride
concentration in the flux, Buyer shall promptly reimburse Supplier for its cost
of the potash added to the flux hereunder.
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(b) Supplier shall at its expense deliver or cause to be delivered all
saltcake and rotary furnace baghouse dust generated as a result of Supplier's
tolling operations for Buyer at the Facility to the Buyer's Crushing Plant.
Supplier shall be solely responsible for disposing of all waste, impurities,
refuse or other substance or material produced as a result of the Facility
operations not otherwise required to be delivered to Buyer hereunder.
Buyer shall indemnify and hold Supplier, its officers, directors and
shareholders harmless from any and all damages, losses, liabilities, suits,
actions, demands, proceedings (whether legal or administrative), and expenses
(including but not limited to attorneys' fees) suffered by Supplier which arise
directly or indirectly out of Buyer's treatment, storage, recycling or disposal
of saltcake and rotary furnace baghouse dust. Buyer shall from time to time
provide to Supplier the information and documentation reasonably requested by
Supplier regarding the disposal or recycling of saltcake and rotary furnace
baghouse dust by Buyer.
(c) Supplier shall, as part of its tolling operations, supply and at all
times maintain at its expense a sufficient number of crucibles and sow molds
necessary to comply with its supply obligations under this Agreement.
(d) Except as otherwise provided in Section 7.01, Supplier shall at all
times during the period of performance of this Agreement, provide and augment as
necessary a work force and Plant Capacity fully adequate to perform and comply
with this Agreement. The term "Plant Capacity" as used herein shall include but
shall not be limited to, engineers, skilled and unskilled workmen, supervision,
materials, supplies, tools, equipment and facilities.
(e) In the event that Buyer offers to sell any excess flux generated at its
Salt Plant,
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Supplier shall purchase at the then prevailing delivered price so much of said
flux as is then needed to satisfy Supplier's requirement of flux at all of its
other recycling locations other than the Facility, as well as the Facility's
requirements for service or product provided to other purchasers.
ARTICLE V. PRICE, PACKAGING AND TERMS AND CONDITIONS OF SALE
SECTION 5.01 PRICE. The compensation and remuneration which Buyer shall be
required to pay Supplier in consideration of Supplier's performance of its
obligations hereunder is set forth in Schedule 5.01 hereto.
SECTION 5.02 PACKAGING AND DELIVERY PROCEDURE. Packaging, preparation for
transport, delivery, and identification of Product items shall be in accordance
with Exhibit "A" hereto. Subject to Section 7.01 hereof, time shall be of the
essence with respect to Supplier's delivery deadlines as set forth in said
Exhibit "A", but Supplier shall have the right to toll the Buyer's Scrap at any
of Supplier's other plants if the Facility is not able to produce the quantities
of Scrap, dross and concentrates set forth on Exhibit "A" by the dates indicated
thereon. Supplier shall at its expense, deliver or cause to be delivered to the
Mill all ingot or molten metal processed pursuant to this Agreement.
SECTION 5.03 TERMS AND CONDITIONS OF SALE. All orders placed and services
performed pursuant to this Agreement shall be subject only to the terms of this
Agreement. Notwithstanding the fact that either party may submit purchase
orders, acknowledgments, invoices, or similar documentation, any terms or
conditions contained in said documents shall be superseded by the terms hereof.
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SECTION 5.04 INSPECTION OF SUPPLIER'S FACILITY. Supplier shall grant to
Buyer access to the Facility during normal business hours upon prior written
notice for the purpose of verifying Supplier's compliance with the terms of
this Agreement, including but not limited to inspecting Buyer's Scrap,
verifying the accuracy of Supplier's testing of the potassium chloride
concentration in the flux, and verifying that Supplier is maintaining accurate
and complete records as described in Section 2.02 of this Agreement.
ARTICLE VI. WARRANTY AND RELATED RIGHTS
SECTION 6.01 WARRANTY. Supplier warrants that the Product will meet the
specifications set forth in Exhibit "A" in all material respects. In the event
Supplier fails to achieve the recovery rates set forth in Exhibit "C", Supplier
shall be obligated to pay the penalty set forth therein either in cash or such
other method acceptable to Buyer.
SECTION 6.02 QUALITY. The Product shall meet the manufacturing, design,
performance, and appearance specifications as described in Exhibit "A". Should
any of the Product fail to meet said specifications, Supplier shall immediately
initiate procedural changes required to correct the deficient condition at its
expense. In no event shall Buyer be entitled to consequential damages but this
exclusion shall in no event limit or restrict Buyer's right to recover direct
and incidental damage for Supplier's breach.
SECTION 6.03 QUANTITY. Buyer shall furnish Supplier with a written
ninety (90) day month by month rolling forecast on or before the first day of
each month which shall estimate Buyer's requirements of the Product during the
next three months. The parties hereby acknowledge that said forecast for the
third (3rd) month in each ninety (90) day period shall be
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utilized for planning purposes only and Buyer shall incur no obligation to
purchase the volume of Product listed on said forecast for the third (3rd)
month in each ninety (90) day period nor shall the Supplier be relieved of any
of its obligations to satisfy Buyer's requirements hereunder in the event that
the Buyer's forecast proves to be substantially lower than the volume of
Product eventually purchased. Subject to Section 7.01, Buyer agrees that it
will purchase a minimum of ninety (90%) percent of the volume of Product listed
in said forecast for the second month, and Supplier agrees that it will accept
orders from Buyer for a maximum of one hundred ten (110%) percent of the volume
of Product listed in said forecast for the second month, or Supplier's full
capacity, whichever is less. Supplier agrees to use its reasonable best efforts
to fully satisfy Buyer's requirements hereunder. Upon a minimum of sixteen (16)
hours notice from Buyer, Supplier agrees to make changes in its production
schedule with respect to the types of alloys requested by Buyer. Notwithstanding
Section 2.02 hereof, Supplier shall not be required to accept orders during the
year totalling in excess of the volume set forth in Exhibit "A".
Notwithstanding Section 2.01, Buyer has made no representations or warranties
with regard to the level of ingot or molten metal it will require during the
term of this Agreement or any extension thereof and shall have no obligation to
purchase any minimum level of tolling/conversion services from Supplier except
as provided in this Section 6.03.
SECTION 6.04 DISCLAIMER OF OTHER WARRANTIES. EXCEPT FOR THE WARRANTIES
CONTAINED IN THIS ARTICLE VI, SUPPLIER MAKES NO WARRANTY THAT THE PRODUCT
COVERED BY THIS AGREEMENT IS MERCHANTABLE OR FIT FOR ANY PARTICULAR PURPOSE AND
THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THIS ARTICLE
VI.
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ARTICLE VII. FORCE MAJEURE
SECTION 7.01 FORCE MAJEURE. In any event, and in addition to all other
limitations stated herein, the parties hereto shall not be liable for any act,
omission, result, or consequence, including but not limited to any delay in
delivery or performance, which is due to any act of God, the prior performance
of any government order, local labor shortage, fire, flood, or casualty,
government regulation or requirement, shortage or failure of raw material,
supplies, fuel, power or transportation, breakdown of equipment, or any other
cause beyond said party's reasonable control whether of a similar or dissimilar
nature to those above enumerated, or due to any strike, labor dispute or
difference with workers, regardless of whether or not said party is capable of
settling such labor problem.
Upon the happening of any of the events described in this Section 7.01,
Supplier shall have the duty to use its reasonable best efforts to supply the
Product to the Buyer from its other plants if the Facility is not able, as a
result of one of the events described herein, to process the quantities of
Scrap, dross and concentrates set forth on Exhibit "A" at any time during the
term of this Agreement.
ARTICLE VIII. PROPRIETARY AND CONFIDENTIAL INFORMATION
SECTION 8.01 PROPRIETARY INFORMATION. Buyer and Supplier acknowledge that,
in the course of performing their duties under this Agreement, they will
necessarily be supplied with confidential and/or proprietary information of the
other party concerning business affairs, methods of operation, processes and
other information.
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(a) For purposes of this Article VIII, the term "Confidential Information"
shall mean any and all proprietary, trade secret, technical and other
confidential information concerning the business or affairs of the provider,
including but not limited to:
(i) information concerning the design or method of production of any
of the provider's products or services, including but not limited to all
records, files, memorandum, reports, price lists, customer lists, drawings,
plans, sketches, documents, equipment, production specifications,
manufacturing processes and methods, production machinery, quality
assurance methods, accounting systems, and the like;
(ii) discoveries, inventions, copyrights, whether patentable or not,
and including, without limitation, the nature and result of research,
development, manufacturing, marketing, planning and other business
activities and all designs, concepts, processes and operational techniques
in connection with Supplier's rotary furnaces;
(iii) ideas, concepts and mathematical formulas which comprise all of
said confidential information.
(b) It is agreed that the Confidential Information shall include all
information described in Section 8.01(a) except for any information:
(i) which is already in recipient's possession, by recipient's
development;
(ii) which is generally available to the public or which becomes
generally available to the public through no act or failure to act on the
part of recipient or recipient's agents or employees;
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(iii) which is disclosed to recipient on a non-confidential basis by a
third party having no obligation to provide it on a confidential basis or
to refrain from so doing; or
(iv) which the recipient can demonstrate by written record was
independently developed by persons who did not have access to provider's
information.
Specific information disclosed shall not be deemed to be in recipient's
possession, or part of public knowledge or literature, or available to recipient
merely because it can be assembled by selection of information previously in
recipient's possession or part of the public knowledge or literature or
available to recipient from a source other than the provider. Buyer hereby
acknowledges that Supplier's rotary furnace design, construction and process is
not generally available to the public.
SECTION 8.02 NON-DISCLOSURE. The parties hereby acknowledge that all
Confidential Information has been developed or acquired at considerable expense,
and has independent economic value from not being known or readily ascertainable
by others, and hereby covenant and agree that each will not communicate or
divulge to, or use for the benefit of itself or any other person, firm,
association, or corporation, without the prior written consent of the other
party, any Confidential Information or Know how (as defined in Section 8.03
below) that may be communicated to, acquired by, or learned by the other party
in the course of or as a result of this Agreement.
SECTION 8.03 KNOW HOW. The parties hereby recognize that the other party
has a property interest not only in the actual Confidential Information but also
in the ideas, concepts, and mathematical formulas ("Know how") which comprises
said information. In addition to each
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party's duty not to disclose said Know how as provided in Section 8.02, each
further agrees that it will not integrate any of the Know how into any of its
products which it develops.
SECTION 8.04 LABELING CONFIDENTIAL INFORMATION. The failure of either party
to designate or label any property or information as confidential, proprietary
or trade secret shall in no way affect the property's classification as such. In
no instance shall any information disclosed to the other party, regardless of
whether said information would constitute Confidential Information, be
reproduced by the other party in any form whatsoever.
SECTION 8.05 RETURN OF INFORMATION. Each party agrees, upon request of the
other party, to promptly deliver to the other party all drawings, blueprints,
manuals, letters, notes, notebooks, reports, computer software, compilations of
information and all other material or copies thereof, in whatever form,
including without limitation, electronic media or other tangible forms of any
information, obtained from the other party, regardless of whether said
information would constitute Confidential Information, which is in said party's
possession or under said party's control.
SECTION 8.06 USE BY PARTY'S EMPLOYEES AND AGENTS. The parties hereby agree
to limit the number of employees and agents that have access to the Confidential
Information to those whose knowledge of such information is essential for said
party to satisfy its obligations under this Agreement. Each party shall use its
reasonable best efforts to ensure that its employees and agents do not utilize
the Confidential Information except in the performance of their duties to said
party.
SECTION 8.07 PUBLICITY. Neither party shall use the name of the other in
publicity
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releases or advertising or for other promotional purposes, without securing the
prior written approval of the other party hereto, unless in the opinion of
counsel to such disclosing party, such disclosure is required by law in which
event a copy will be provided to the non-disclosing party.
SECTION 8.08 EQUITABLE RELIEF. The parties hereby acknowledge and agree
that a breach by it of the provisions of this Article VIII would cause the other
party irreparable injury and damage which could not be reasonably or adequately
compensated by damages at law. Therefore, each party expressly agrees that in
addition to any other remedies provided for by law, in equity or pursuant to
this Agreement, either party shall be entitled to injunctive or other equitable
relief to prevent a breach of this Article VIII by the other party.
ARTICLE IX. PATENT INFRINGEMENT
SECTION 9.01 PATENT INFRINGEMENT. Supplier shall, at its own expense,
defend any suit or proceeding brought against Buyer to the extent the same is
based upon a claim that any Product furnished by Supplier hereunder constitutes
an infringement of any patent of the United States, and Supplier shall pay all
damages and costs awarded in such action against Buyer. In case any Product
furnished hereunder is in such suit held to constitute infringement and their
use or sales enjoined, Supplier shall, at its expense, either:
(a) procure for Buyer the rights to continue using said Product;
(b) replace them with non-infringing Products;
(c) modify them so they become non-infringing, provided that the Products
are so modified to Buyer's satisfaction; or
(d) remove them and refund the purchase price and the transportation costs
thereof.
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ARTICLE X. EMPLOYMENT MATTERS
SECTION 10.01 PREFERENTIAL HIRING STATUS. Supplier agrees that it will give
preferential hiring consideration to Buyer's employees who shall lose their
employment as a result of Buyer ceasing its Furnace Operation. Said displaced
employees shall be hired by Supplier to staff its operations as needed, so long
as they are able to meet the employment standards established for all new hires
at the Facility. Supplier is not obligated to assume Buyer's obligations or
liabilities under any collective bargaining agreement covering any employees of
Buyer.
Supplier agrees that it shall not hire away employees from Buyer, except
those displaced employees described above. Except for those employees who lose
their employment as a result of Buyer ceasing its Furnace Operations, under no
circumstance shall Supplier employ any individual who was employed by Buyer
within a two (2) year period prior to the proposed date of hire unless prior
written permission is obtained from the President of Buyer.
ARTICLE XI. NOTICES AND COMMUNICATION
SECTION 11.01 NOTICES AND COMMUNICATION. Any notice or other communication
required or permitted hereunder shall be sufficiently given if delivered in
person, sent registered mail, postage prepaid, or by electronic transmission
confirmed by the recipient addressed as follows:
As to buyer:
(when personally delivered)
Barmet Aluminum Corporation
Attention:
Uhrichsville, Ohio
or
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(IF TRANSMITTED BY MAIL)
Barmet Aluminum Corporation
Attention: Terry D. Smith
753 W. Waterloo Road
Akron, Ohio 44314
WITH A COPY TO:
George A. Dietrich
Roetzel & Andress
75 East Market Street
Akron, Ohio 44308
AS TO SUPPLIER:
(WHEN PERSONALLY DELIVERED)
IMCO Recycling Inc.
Attention: President
Irving, Texas
or
(IF TRANSMITTED BY MAIL)
IMCO Recycling Inc.
Attention: Paul V. Dufour
5215 North O'Connor Blvd.
Suite 940
Central Tower at Williams Square
Irving, Texas 75039
WITH A COPY TO:
Haynes and Boone, L.L.P.
Attention: Marc H. Folladori, Esq.
1600 Smith Street
Suite 3700
Houston, Texas 77002
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The date upon which any such communication is personally delivered or, if
such communication is transmitted by mail or electronic transmission, the date
upon which it is received by the addressee, shall be deemed the effective date
of such communication. Each party shall promptly advise the other in writing in
the event of any change in their respective addresses.
ARTICLE XII.
INDEPENDENT STATUS OF PARTIES AND LIMITATION OF AUTHORITY
SECTION 12.01 INDEPENDENT STATUS OF PARTIES. This Agreement does not
appoint either party the other's agent, or partner for any purpose whatsoever,
nor does it grant to either party any right or authority to create any
obligation or responsibility, expressed or implied, on behalf of or in the name
of the other party, nor to bind the other party in any manner whatsoever. Except
in the circumstances described in Article XV, no partnership or joint venture is
intended nor is created as a result of this Agreement but rather the parties
relationship shall be that of a Supplier/Customer and except as otherwise
provided herein, each shall be solely answerable for the cost and expenses,
consequences and damages arising out of their own acts and from the operation
and maintenance of their respective businesses.
ARTICLE XIII. ARBITRATION
SECTION 13.01 ARBITRATION OF CERTAIN DISPUTES. In the event that the
parties are unable to agree as to the allocation of certain increases in
operating costs and capital expenditures as described in Schedule 5.01(e), or in
the event of a dispute regarding either party's rights or obligations under
Sections 16.01 or 16.02 said allocation and/or any said disputes shall be
finally
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settled by arbitration as provided herein. In the event of any such dispute, the
parties shall for a period of not less than one (1) month discuss in good faith,
and attempt to agree upon a resolution of such dispute. In the event that the
parties are unable to agree, the issue may be submitted to arbitration of a
three (3) member panel as provided for herein. Either party may invoke the
arbitration procedure by serving on the other party written notice requesting
arbitration. The three (3) member arbitration panel shall be selected pursuant
to and the arbitration should be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (AAA). The arbitration
shall be conducted before the selected panel according to the then current
Commercial Arbitration Rules established by the AAA. All costs for the
arbitration shall be shared equally between the parties. The decision of the
arbitrators will be final and binding on both parties. Venue of the arbitration
shall be in Akron, Ohio. Notwithstanding anything herein, all other disputes,
controversies or claims arising out of or in connection with this Agreement
shall be instituted and resolved in the federal or state court and pursuant to
the law described in Section 21.06 hereof.
ARTICLE XIV. INDEMNITY
SECTION 14.01 BUYER'S INDEMNITY. Buyer hereby agrees to indemnify and hold
Supplier, its officers, directors and shareholders harmless from and against any
and all damages, losses, liabilities, suits, actions, demands, proceedings
(whether legal or administrative), and expenses (including but not limited to
attorneys fees) arising, directly or indirectly, out of any action or failure to
act by Buyer, its employees or agents or any negligence, breach of this
Agreement, or misrepresentation, on the part of Buyer, its employees or agents.
Notwithstanding anything
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contained in this Agreement to the contrary, Supplier shalI only be entitled to
recover direct and incidental damages and not consequential damages.
SECTION 14.02 SUPPLIER'S INDEMNITY. Supplier hereby agrees to indemnify and
hold Buyer, its officers, directors and shareholders harmless from and against
any and all damages, losses, liabilities, suits, actions, demands, proceedings
(whether legal or administrative), and expenses (including but not limited to
attorneys fees) arising, directly or indirectly, out of any action or failure to
act by Supplier, its employees or agents or any negligence, breach of this
Agreement, or misrepresentation, on the part of Supplier, its employees or
agents. Notwithstanding anything contained this Agreement to the contrary, Buyer
shall only be entitled to recover direct and incidental damages and not
consequential damages.
ARTICLE XV.BUYER'S OPTION TO PARTICIPATE
SECTION 15.01 EXERCISE AND TERMS OF OPTION. Commencing after the completion
of the Second Contract Year and continuing during the Initial Term of this
Agreement and any extensions thereof, Buyer shall have the option to purchase an
interest in the Facility in accordance with Schedule 15.01 hereto. The parties
hereby agree to negotiate in good faith and use their best efforts to agree upon
the most advantageous form of legal entity to own and operate the Facility. Both
Buyer and Supplier hereby acknowledge their intent to be bound by the provisions
of this Section 15.01 and that Schedule 15.01 contains the essential terms upon
which the Entity (as defined in Schedule 15.01) will be formed, and that the
failure of the parties to agree as to any other aspect with respect to the
formation and/or operation of the Entity contemplated herein shall not relieve
the parties from their obligation to form and operate said
20
<PAGE> 24
Entity in the event that Buyer exercises its option as provided herein.
ARTICLE XVI. RIGHTS OF FIRST REFUSAL
SECTION 16.01 RIGHT OF FIRST REFUSAL RELATING TO FACILITY. Within ninety
(90) days of the execution of this Agreement, Buyer and Supplier shall execute
and deliver the Right of First Refusal (Facility) in the form attached hereto as
Exhibit "H" (the "Facility Right of First Refusal"), wherein Supplier shall
grant to Buyer a Right of First Refusal to purchase the Facility in the event a
third party makes an offer to purchase the Facility on terms that Supplier is
willing to accept (the "Facility Offer"), all as in accordance with the terms of
the Facility Right of First Refusal. Notwithstanding the Facility Right of First
Refusal, the Supplier shall be prohibited from selling, transferring or
otherwise disposing of the Facility prior to the completion of the Second
Contract Year except as permitted by Section 21.01. The Buyer's option to
purchase an interest in the Facility pursuant to Section 15.01 will not be
exercisable from the date notice of the Facility Offer has been made by Supplier
until the Facility is sold pursuant to the Facility Offer or while any purchase
agreement executed pursuant to the Facility Offer is pending, subject, however,
to Buyer's right to share in any Profit as defined herein which may result from
said sale. In the event of any sale of the Facility which occurs prior to Buyer
exercising its right to acquire an interest in the Facility as described in
Section 15.01, Supplier shall pay to Buyer a portion of any Profits resulting
from said sale based upon the formula set forth in Schedule 16.01 hereto.
SECTION 16.02 RIGHT OF FIRST REFUSAL RELATING TO ROCKPORT FACILITY. Upon
execution of this Agreement, Buyer and Supplier shall execute and deliver the
Right of First Refusal
21
<PAGE> 25
(Rockport) in the form attached hereto as Exhibit "I" (the "Rockport Right of
First Refusal"), wherein Buyer shall grant to Supplier Right of First Refusal
to purchase the Buyer's Facility and Rockport, Indiana (the "Rockport
Facility") in the event a third party makes an offer to purchase the Rockport
Facility on terms that Buyer is willing to accept (the "Rockport Offer"), all
as in accordance with the terms of the Rockport Right of First Refusal.
ARTICLE XVII. PURCHASE OF PERSONAL PROPERTY
SECTION 17.01 PURCHASE AND SALE. At the Closing, the Buyer agrees to sell
to the Supplier and the Supplier agrees to purchase from the Buyer the Personal
Property (as defined in Section 17.02(a) below) for the purchase price and upon
the terms and conditions set forth in this Article XVII.
SECTION 17.02 PERSONAL PROPERTY.
(a) The Supplier shall purchase from the Buyer such machinery,
equipment and other personal property scheduled on Exhibit "J" hereto (the
"Personal Property").
(b) At the Closing the Buyer shall furnish the Supplier with a limited
warranty bill of sale (the "Bill of Sale") to the Personal Property in the
form as Exhibit "K" hereto. At Supplier's discretion for a period of up to
one-hundred twenty (120) days following the transfer of title to said
Personal Property to the Supplier as provided for herein, the Supplier
shall grant to the Buyer a license to retain possession of and use the
Personal Property in Buyer's processing operations. During such possession
Buyer shall at its own cost and expense keep the Personal Property in good
repair, condition and working order, ordinary wear and tear excepted. Until
Supplier takes possession of the Personal Property, Buyer shall assume the
entire risk of loss and
22
<PAGE> 26
damage to the Personal Property and shall carry property damage insurance
covering the full replacement value thereof. Supplier shall be entitled to no
compensation from Buyer as a result of or related to Buyer's use of the
Personal Property as described herein. All costs relating to moving the
Personal Property to and/or installing it at the Supplier's Facility shall be
borne by the Supplier.
SECTION 17.03 PURCHASE PRICE. The purchase price of the Personal Property
shall be as set forth on Exhibit "J" hereto ("Purchase Price").
SECTION 17.04 CLOSING. The Closing (the "Closing") of the purchase and sale
of the Personal Property contemplated hereby shall occur within thirty (30) days
of the completion of the First Phase (the "Closing Date"), unless otherwise
mutually agreed in writing by the parties hereto or as otherwise extended under
the terms of this Agreement. Time is of the essence in this transaction.
SECTION 17.05 CONDITION OF THE PERSONAL PROPERTY. The Supplier agrees and
understands that the purchase of the Personal Property is "AS IS, WHERE IS,"
without any representation or warranty of any nature whatsoever, except (a) for
warranties of title, and (b) that the Personal Property has been kept and will,
until delivered to Supplier, be kept in good repair, condition and working
order, ordinary wear and tear excepted.
ARTICLE XVIII. CLOSING PROCEDURE
SECTION 18.01 CLOSING PROCEDURES. On the Closing Date Buyer shall deliver
to Supplier the Bill of Sale. Supplier shall deliver to Buyer a certified check
for the full amount of the purchase price of the Personal Property at Closing.
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<PAGE> 27
ARTICLE XIX. TERMINATION
SECTION 19.01 TERMINATION,
(a) Either of the parties hereto may terminate this Agreement by notice
in writing to the other party in any of the following events:
(i) Any attempted assignment of this Agreement by the other
party except as provided in Article XXI of this Agreement;
(ii) Dissolution or liquidation of the other party;
(iii) Application for or appointment of a receiver by the
non-terminating party;
(iv) Assignment for the benefit of creditors by the
non-terminating party;
(v) Appointment of a committee of creditors or a liquidating
agent by the non-terminating party;
(vi) An offer of composition or extension to creditors
generally by the non-terminating party;
(vii) The adjudication of the non-terminating party as bankrupt
or insolvent;
(viii) The non-terminating party files a voluntary petition for
bankruptcy or admits in writing that it is unable to pay its debts as
they become due;
(ix) Either party fails to cure a default hereunder, other than
as a result of Buyer's failure to make payments when due hereunder or
Supplier's failure to deliver the Product when said delivery is required
hereunder, within sixty (60) days after receipt of written notice
thereof; or
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<PAGE> 28
(x) Subject to Section 7.01, delivery or payments not made
when due after the expiration of a sixty (60) day grace period.
The grace periods provided for in Subparts (ix) and (x) shall be extended
during such period as the Parties are negotiating in good faith with regard to
a legitimate dispute with respect to the Parties' obligations hereunder.
(b) In the event that Supplier is unable, despite its reasonable best
efforts, to procure the air quality and construction permits required for the
construction of the Facility referred to Section 1.01 of this Agreement on or
before April 30, 1992, this Agreement shall automatically terminate and the
obligation of Buyer to make the scheduled payments set forth in Schedule
5.01(b) and 5.01(c) shall automatically be extinguished.
(c) In the event of a termination of this Agreement pursuant to the
provisions of this Article XIX, except under Section 19.01(a)(x), any orders
outstanding as of the effective date of termination shall be filled in
accordance with the terms of this Agreement.
(d) No termination of this Agreement shall in any way affect the
obligation of the other party with regard to the provisions of this Agreement
previously matured and/or in effect, including, but not limited to, the
obligations relating to confidentiality under Article VIII hereof, the right to
enforce any remedy for the breach of any terms of this Agreement or the
indemnity obligations under Article IX, and Section 4.01(b).
ARTICLE XX. REPRESENTATIONS
SECTION 20.01 REPRESENTATIONS OF BUYER.
(a) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution, delivery and
25
<PAGE> 29
performance by Buyer of this Agreement have been duly authorized by its Board
of Directors. No other corporate action on the part of Buyer is necessary for
the execution, delivery and performance by Buyer of this Agreement. This
Agreement has been duly executed and delivered by Buyer and is a legal, valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceedings therefor may be brought.
(b) NO CONFLICT. Neither the execution and delivery of this Agreement,
nor any other agreement or instrument executed and delivered by Buyer under
this Agreement does (i) conflict with, violate or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or
accelerate or permit the acceleration of the performance under, the Certificate
or Articles of Incorporation or Bylaws, as amended, of Buyer, or any contract,
judgment, order, award or decree to which Buyer is a party or is subject to by
which it is bound or to which any of its assets is subject; (ii) require the
approval, consent, authorization or other order or action of any court,
governmental authority or regulatory body or filing or registration therewith
or notice thereto; (iii) result in the violation by Buyer of any law, rule,
regulation or order of any jurisdiction; or (iv) require the consent, approval
or authorization of any other person.
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<PAGE> 30
SECTION 20.02 REPRESENTATIONS OF SUPPLIER.
(a) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution, delivery and
performance by Supplier of this Agreement have been duly authorized by its
Board of Directors. No other corporate action on the part of Supplier is
necessary for the execution, delivery and performance by Supplier of this
Agreement. This Agreement has been duly executed and delivered by Supplier and
is a legal, valid and binding obligation of Supplier, enforceable against
Supplier in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which
any proceedings therefor may be brought.
(b) NO CONFLICT. Neither the execution and delivery of this Agreement,
nor any other agreement or instrument executed and delivered by Supplier under
this Agreement does (i) conflict with, violate or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or
accelerate or permit the acceleration of the performance under, the Certificate
of Incorporation or Bylaws, as amended, of Supplier, or any contract, judgment,
order, award or decree to which Supplier is a party or is subject or by which
it is bound or to which any of its assets is subject; (ii) require the
approval, consent, authorization or other order or action of any court,
governmental authority or regulatory body or filing or registration therewith
or notice thereto; (iii) result in the violation by Supplier of any law, rule,
regulation or order of any jurisdiction; or (iv) require the consent, approval
or authorization of any other person.
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<PAGE> 31
ARTICLE XXI. MISCELLANEOUS
SECTION 21.01 BENEFIT. Subject to the restrictions contained in this
Agreement prohibiting the assignment of this Agreement, this Agreement shall
inure to the benefit of, and be binding upon, the respective successors and
assigns of the parties hereto. Except as set forth in Section 16.01 and
Schedule 15.01, this Agreement shall not be assigned by either party without
the express written consent of the other which consent shall not be
unreasonably withheld or delayed. If Buyer or Supplier proposes to assign this
Agreement in accordance with terms of this Section 21.01 then Buyer or
Supplier, as the case may be, agrees to cause the person or entity to whom this
Agreement will be assigned or transferred to assume in writing Buyer's or
Supplier's, as the case may be, obligations under this Agreement.
Notwithstanding anything contained herein to the contrary, either party shall
have the right to assign this Agreement to its direct or indirect wholly owned
subsidiary. In addition, notwithstanding any provision herein to the contrary,
no provision in this Agreement shall affect in any way the right or power of
either Buyer or Supplier, or their respective shareholders, to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in their respective capital structure or business, or any merger or
consolidation of either of them, or any other corporate act or proceeding
respecting them, whether of a similar character or otherwise. Notwithstanding
anything in this Agreement to the contrary, the assignment of this Agreement by
either party to a direct or indirect wholly owned subsidiary or any adjustment,
recapitalization, reorganization, or other change or merger or consolidation
described above shall in no way release said assignor of its obligations and
duties under this Agreement.
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<PAGE> 32
SECTION 21.02 NON-WAIVER. The failure of either party at any time to
enforce any provision of this Agreement shall not be construed to be a waiver
of such provision of the right of the respective party hereunder to enforce any
such provision.
SECTION 21.03 SEVERABILITY. If any provision of this Agreement or the
application thereof to any party or circumstance shall for any reason and to
any extent be deemed invalid or unenforceable, the remainder of this Agreement
and application of such provision to the other parties and other circumstances
shall not be affected thereby, but rather the invalid or unenforceable
provisions as applied to the particular party or circumstance shall be modified
to the extent necessary so as to render said provision valid and enforceable
while to the greatest extent possible accomplishing the intended purpose of
said provision.
SECTION 21.04 ENTIRE AGREEMENT. This writing constitutes the entire
Agreement between the parties relating to the sale of the Products described
herein during the specific term, and any extensions thereof, and supersedes all
previous contracts, including but not limited to, the Confidentiality Agreement
entered into between the parties hereto on October 17, 1991. Neither party to
this Agreement makes any representation to the other party except as expressly
set forth in this Agreement. No modification or waiver of any of the terms of
this Agreement shall bind either party unless in writing signed by duly
authorized representatives of both Buyer and Supplier.
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<PAGE> 33
SECTION 21.05 CAPTIONS. Captions of the sections of this Agreement are
for convenience and reference only and the words contained therein shall in no
way be held to explain, modify, amplify, or aid in the interpretation,
construction, or meaning of the provisions of this Agreement.
SECTION 21.06 GOVERNING LAW. This Agreement shall be construed under and
enforced according to the laws of the State of Ohio, including without
limitation the Ohio Sales Act contained in Ohio Revised Code Section 1302, and
any action arising out of or related to this Agreement shall be venued in a
federal or state court of appropriate jurisdiction in the State of Ohio. The
parties hereby consent to the jurisdiction of the said courts.
SECTION 21.07 FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, Buyer and Supplier shall use their reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things reasonably necessary, proper or advisable to make effective as promptly
and practicable the transactions contemplated by this Agreement and to
cooperate with each other in connection with the foregoing.
SECTION 21.08 FINDER'S AND BROKER'S FEES. Buyer and Supplier each
represent and warrant to the other that there are no claims (or any basis for
any claims) for brokerage commissions, finder's fees or like payments in
connection with this Agreement or the transactions contemplated hereby
resulting from any action taken by either of them or on either of their behalf.
SECTION 21.09 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the
30
<PAGE> 34
same instrument.
SECTION 21.10 SUBSTANTIATION. For purposes of substantiating Supplier's
operating costs and capital expenditures, as well as any other financial
information or data of Supplier which relates to this Agreement and exhibits,
including but not limited to the calculation of sustaining capital expenditures
under Schedule 5.01(b), increases in certain operating costs and capital
expenditures described in Schedule 5.01(d) and certain costs and expenditures
described in Exhibit "D", the Supplier shall record and account for such items
in a manner which is consistent with its historical practice applied in a
consistent manner or if it is determined by Supplier's independent Certified
Public Accountants that it is appropriate to change said historical practice,
then in a manner in conformity with generally accepted accounting principles
with all said changes being fully disclosed to Buyer.
SECTION 21.11 REFERENCES. When references appear in this Agreement to a
Section, such reference where applicable, should be deemed to refer to the
appropriate Schedule to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the date first written above by their duly authorized representatives.
BARMET ALUMINUM CORPORATION
By /s/ TERRY D. SMITH By /s/ NORMAN E. WELLS, JR.
------------------------------ ------------------------------
Title Vice-Pres. & C.F.O. Title C.E.O
--------------------------- ---------------------------
Date 3-2-92 Date March 2, 1992
---------------------------- ----------------------------
31
<PAGE> 35
IMCO RECYCLING INC.
By /s/ PAUL V. DUFOUR By /s/ RALPH L. CHEEK
------------------------------ ------------------------------
Title Sr. Vice Pres. Title President
--------------------------- ---------------------------
Date March 2, 1992 Date March 2, 1992
---------------------------- ----------------------------
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<PAGE> 36
EXHIBIT "A"
QUANTITY AND QUALITY OF PRODUCT DELIVERED
I. Quantity of Product Delivered
A. Provided that the necessary construction permits have been received
by March 1, 1992, IMCO will have installed capability to process the
following annual volumes by April 1, 1993:
Scrap 210MM lbs.
Dross 12MM lbs.
Concentrates 30MM lbs.
-----------
252MM lbs.
If the construction permits have not been obtained by March 1, 1992,
the processing capabilities described above will be made available
within 10 months of the receipt of permits to install or April 1,
1993, whichever is later.
B. Due to seasonal fluctuations, Barmet may request up to 10% of this
volume to be processed in any one month except February, and may
request up to 8% of this volume during any February.
C. IMCO will be responsible for supplying and maintaining all crucible
and sow molds.
D. IMCO will be responsible for delivering hot metal or sows to the
rolling mill.
II. Quality of Product Delivered
A. IMCO will cooperate with Barmet to establish metal cleanliness
practices in the total combined IMCO/Barmet cycle. Any holding
furnace, filtration unit or other new requirement not practiced by
IMCO at present will be jointly considered by both parties to find
the lowest cost answer. Any additional operating and/or capital
costs incurred by IMCO will be reflected in the price charged to
Barmet as mutually agreed.
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<PAGE> 37
B. Contaminants listed below will not exceed the levels specified:
Sodium - .0075%
Potassium - .0025%
Calcium - .0075%
Lithium - .0010%
C. Chemistry of Metal Supplied:
1. The average monthly level of magnesium in UBC's will be
greater than 0.70% unless otherwise agreed by Barmet.
2. If scrap materials are available, IMCO will blend where
required to meet alloy chemistries required by Barmet.
D. Quality Requirements of Molten Metal
1. Crucibles must be kept clean and free of contaminants.
2. The metal must not have excessive skim or salts floating
on the top.
3. Each crucible must be accompanied by weight and
composition information.
4. Crucibles must be at a suitable temperature for pouring
when delivered to the rolling mill's molten metal handling
system.
E. Quality Requirements of Sows
1. The ingot should be skimmed and poured so that the surface
is free of surface and/or entrained salts, excessive skim,
surface contamination, corrosion, or seams and folds
caused by multiple pours.
2. Ingots shall have minimum shrinkage cavities and/or
internal voids.
3. Each ingot must clearly display the heat number and alloy
on the side of the ingot. Ingots which are out of
specification with respect to the stated alloy will be so
marked with respect to such elements.
4. Every shipment is to be accompanied by chemical analysis
for each heat. Every shipment is to be accompanied with a
sample button for each heat.
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<PAGE> 38
5. Each ingot must be poured level so they can be stacked
properly.
6. There will be no excessive splashing on sides of ingots.
35
<PAGE> 39
EXHIBIT "B"
SCRAP RECEIVING PROCEDURES
I. Scope:
Scrap Receiving Procedures are to be implemented and maintained as agreed
to by IMCO and Barmet. Proposed changes will be submitted by IMCO to the Barmet
Corporate Materials Management Group for review prior to enactment.
H. Purpose:
The receipt, acceptance, and data entry of aluminum scrap must be
consistent with Barmet's system to assure:
- Timely delivery, scrap mix and control of raw material inventory
through delivery appointment scheduling.
- Quality of scrap conforms to published specifications and yields
expected recoveries and chemistries.
- Open purchase order balances are managed at current status.
- Suppliers are promptly advised of weight differences, rejections
and/or proposed downgrades.
- Detailed record of delivery performance, quality, and traceability
by supplier is readily accessible.
- Timely and accurate issuance of scrap payments.
- Assessment of current raw material inventories by type and
forecasting of future requirements.
III. Delivery Appointment Scheduling
A. All deliveries of raw materials must be assigned an appointment
number for a specific date and time. Appointment numbers should be
sequential (nonrepeating) and indicate the calendar month.
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<PAGE> 40
1. A designated employee from IMCO should issue delivery
appointments to vendors.
2. All appointments must be entered into the Barmet mainframe
computer at the time of issuance.
a. Vendor requesting an appointment must indicate
Barmet's P.O. number and applicable scrap type. No
appointment will be given without this information.
B. The delivery appointment schedule is to be printed daily.
Appointments may be made as far in advance as practical according to
scrap mix requirements, inventory control, and toll customer
priority. Delivery appointment schedule will include the following:
- Vendor (P.O. issued to)
- P.O. Number
- Appointment (Release) No.
- Type of Material
- Delivery Date and Time
IV. Delivery Documentation
A. A complete manifest or packing list indicating the applicable Barmet
purchase order and a bill of lading must accompany each load.
B. If load documents presented are incomplete or do not correspond to
delivery appointment information, the load is to be held. IMCO is to
notify Raw Material Buyers in Akron of any discrepancies. The Buyer
will contact the vendor for resolution.
C. Once all delivery documentation is in order, the IMCO operator gross
weighs the vehicle and initiates internal receiving documents (scrap
report sheet and/or weight certificate).
V. Unloading
A. IMCO's receiving inspector should compare the physical seal numbers
to those indicated on delivery documents for agreement and that the
seal is intact. If the numbers do not agree or the seal is broken or
missing, proper notation must be made on the Bill of Lading and the
internal receiving report.
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<PAGE> 41
B. IMCO's receiving inspector should compare actual package type and
item count to the supplier's packing list. If a packing list is
missing or a discrepancy exists in material type and/or count,
notations are to be made on the Bill of Lading and the internal
receiving report.
C. Each delivery lot must be identified by a tag or paint with the
corresponding scrap receiving report or weight ticket number. The
method of marking must be sufficient to identify the load at a
future date.
D. Separate scale weights must be obtained for each scrap type unloaded
from mixed loads. Care should be taken to record the correct
purchase order for each scrap type. No more than two (2) scrap types
will be allowed per load.
VI. Inspection
A. IMCO's receiving inspector must ensure that the physical scrap (type
and package) agrees with the purchase order description.
B. Loose material packed in boxes should be dumped into storage bins or
bunkers for thorough inspection, whenever possible.
C. A hand-held magnet should be passed over as much material as
possible to detect the presence of iron or steel.
D. Each package must be manually inspected for contamination, (i.e.,
chrome, plastic, dirt, rubber, radiators, wire, etc.). Maximum
allowable grease and/or oil is 1% by weight. If present, a sample
should be taken and measured by the Supplier.
If sufficient contamination is evident to cause the entire lot or load to
be rejected, unloading should cease and Barmet's Raw Material Buyer notified
immediately. The Scrap Rejection form should be completed and faxed to Barmet's
Raw Material Buyer. All packages should be put back on the delivery vehicle.
If contamination is present, but in the opinion of IMCO's inspector, it
is not sufficient to warrant outright rejection, the Request for Downgrade form
should be prepared and faxed to the Buyer. An estimate of the expected actual
recovery, compared to the standard recovery, must be included. The Buyer will
discuss with the vendor and notify IMCO of the determination. The load is to be
held until final resolution.
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<PAGE> 42
All scrap loads that are downgraded will be identified for separate
processing to the extent that downgrading resulted from excessive dirt, oil or
other unmeasurable contaminants. Such scrap will be processed on a "best
efforts" basis. Where excessive contaminants are measurable, such excessive
contamination amounts will be credited to IMCO for recovery calculation
purposes.
VII. Moisture Testing (UBC's)
A. Moisture testing procedures must be approved by Barmet in
advance. Our procedure is based upon the test developed by
Alcoa and used in the industry.
B. Visually inspect and verify the scrap as specified in
Section VI (Inspection).
C. All lots or loads of UBC, tagged or marked with ID number
(see V C), must be held, intact, until the moisture test
results are known.
D. Moisture tests must be completed within twenty-four (24)
hours of load delivery.
E. Moisture test results and overall average are to be
recorded on the Moisture Test form.
1. In the event the average moisture content exceeds
the allowable limit (4%), Barmet's Raw Material
Buyer is to be notified. The Buyer win advise IMCO
of the vendor's decision.
2. Accepted moisture deductions are to be clearly
noted on the test result form and attached to all
other internal receiving documents.
(Note: Excessive moisture, in the opinion of the
receiving inspector, that may cause a safety
hazard, is cause for rejection without testing).
VIII. Received Weights and Data Entry
A. Information on received material will be supplied by IMCO
to Barmet within 24 hours of delivery.
B. Barmet's net received weight will be the governing payable
weight.
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<PAGE> 43
1. If the net received weight is less than the shipping claimed weight,
for any item or lot, by one-half of one (0.5) percent or more, the
load and delivery vehicle are to be held and Barmet's Raw Material
Buyer notified immediately.
Barmet's Buyer will notify the vendor of the weight discrepancy. The
Buyer will advise the IMCO plant of disposition.
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<PAGE> 44
EXHIBIT "F"
DATE: 02/27/92 TIME: 11:23 MORGANTOWN, KENTUCKY PAGE 1
IMCO RECYCLING INC.
********** MONTH END INVENTORY ACTIVITY REPORT **********
AS OF 11/30/91
CONVERSION COST/LB:
COMPANY BARMET RPT
<TABLE>
<CAPTION>
------------------------- RAW MATERIALS ----------------------------
11/01/91 11/30/91
MATERIAL ON NON EOL ON RAW MATERIAL
DESIG HAND RECEIVED PROCESSED SHIPPED HAND COST
- -------- -------- -------- --------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BAS 160,660 160,660
***** COMPANY 160,660 160,660
<CAPTION>
------------------------ FINISHED GOODS -------------------------
11/01/91 11/30/91
MATERIAL ON ON COST FIN GOODS
DESIG HAND PRODUCED SHIPPED HAND / LB COST
- -------- -------- -------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BAS 148,780 148,780
***** COMPANY 148,780 148,780
</TABLE>
54
<PAGE> 45
DATE: 02/27/92 TIME: 11:29 MORGANTOWN, KENTUCKY PAGE 1
IMCO RECYCLING INC.
********** MONTH END RECEIVING STATUS REPORT **********
FROM 11/01/91 TO 11/30/91
FOR BARMET RPT
<TABLE>
<CAPTION>
DATE LOAD CUSTOMER MATERIAL IMCO BILLING CONTRACT FREIGHT MATERIAL FREIGHT TOTAL
CUSTOMER ON SPOT NUMBER REF. # DESIG WEIGHT WEIGHT RATE RATE COST COST COST
- -------- ------- ------ -------- -------- ------ ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BARMET RPT 11/19/91 BAS-1 0001 BAS 26,280 26,280 .0700 1,839.60 .00 1,839.60
11/19/91 BAS-2 0002 BAS 46,460 46,460 .0700 3,252.20 .00 3,252.20
11/20/91 BAS-3 0003 BAS 44,960 44,960 .0700 3,147.20 .00 3,147.20
11/20/91 BAS-4 0004 BAS 42,960 42,960 .0700 3,007.20 .00 3,007.20
<CAPTION>
*---- REF ----* RAW FINISHED
CUSTOMER INV. # DATE MATERIAL GOODS SHIPPED
- -------- ------ ----- -------- -------- -------
<S> <C> <C> <C> <C> <C>
BARMET RPT 25,312
42,454
40,274
40,740
</TABLE>
55
<PAGE> 46
DATE: 02/27/92 TIME: 11:19 MORGANTOWN, KENTUCKY PAGE 1
IMCO RECYCLING INC.
********** CONTRACT PERFORMANCE REPORT **********
FROM 11/01/91 THRU 11/30/91
<TABLE>
<CAPTION>
CONTRACT CONTRACT CONTRACT CONTRACT MATERIAL MATERIAL CONT CONTRACT CONTRACT CONTRACT
CUSTOMER NUMBER BEG DATE END DATE CLASS DESIG TYPE WEIGHT RECEIVED EOL IN
- -------- -------- -------- -------- -------- -------- ---- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BARMET RPT PO#105990 11/01/91 11/30/91 OTHSCRAP BAS T 180,000 160,660 160,660
<CAPTION>
CONTRACT CONTRACT CONTRACT CONTRACT CONTRACT CONTRACT
CUSTOMER EOL OUT RECOVERY PRICE FREIGHT COMMENTS
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BARMET RPT 148,780 92.60 .0700 PTD SIDING & MLC
</TABLE>
<TABLE>
<CAPTION>
CUSTOMER LOAD DATE NON EOL EOL IN EOL OUT LOAD EOL
REF NUMBER NUMBER RECEIVED WEIGHT WEIGHT WEIGHT RECOV DATE
- ---------- ------ -------- ------- ------- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
0001 BAS-1 11/19/91 26,280 25,312 96.31 11/19/91
0002 BAS-2 11/19/91 46,460 42,454 91.37 11/19/91
0003 BAS-3 11/20/91 44,960 40,274 89.57 11/21/91
0004 BAS-4 11/20/91 42,960 40,740 94.83 11/22/91
160,660 148,780 92.60
</TABLE>
56
<PAGE> 47
DATE: 02/27/92 TIME: 11:33 MORGANTOWN, KENTUCKY PAGE 1
IMCO RECYCLING INC.
********** MTD/YTD FINISHED GOODS ANALYSIS REPORT **********
FOR BARMET RPT
FROM 11/01/91 THRU 11/30/91
<TABLE>
<CAPTION>
LOAD HEAT UNITS/ WEIGHT ALLOY PROD PROD PROD
NUMBER NUMBER CRUCE OUT CODE FURN SHFT DATE
--------- -------- ------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
* BAS-1 BAS 813 4 5,558 AL 6 4 11/19/91
* BAS-2 BAS 816 5 6,450 AL 6 5 11/19/91
* BAS-2 BAS 817 4 5,148 AL 6 5 11/19/91
* BAS-2 BAS 818 5 6,320 AL 6 5 11/19/91
* BAS-2 BAS 820 6 8,308 AL 6 5 11/19/91
* BAS-3 BAS 836 4 5,546 AL 6 4 11/21/91
* BAS-4 BAS 842 5 5,990 AL 6 5 11/21/91
* BAS-4 BAS 844 4 5,342 AL 6 5 11/21/91
* BAS-2 BAS 815 4 5,474 CF W/FE 6 5 11/19/91
* BAS-3 BAS 839 8 10,230 CF W/FE 6 5 11/21/91
* BAS-2 BAS 814 4 5,478 CF 111 6 5 11/19/91
* BAS-2 BAS 819 4 5,276 CF 111 6 5 11/19/91
* BAS-3 BAS 838 5 6,834 CF 111 6 4 11/21/91
* BAS-3 BAS 837 4 5,706 0000000 6 4 11/21/91
* BAS-1 BAS 811 5 7,154 3004 6 4 11/19/91
* BAS-3 BAS 834 5 6,550 3004 6 4 11/21/91
* BAS-3 BAS 835 4 5,408 3004 6 4 11/21/91
* BAS-4 BAS 841 5 6,428 3004 6 5 11/21/91
* BAS-4 BAS 845 5 6,200 3004 6 5 11/21/91
* BAS-4 BAS 846 4 4,972 3004 6 4 11/22/91
* BAS-1 BAS 810 5 6,686 3105 6 4 11/19/91
* BAS-1 BAS 812 4 5,914 3105 6 4 11/19/91
* BAS-4 BAS 840 5 6,586 3105 6 5 11/21/91
* BAS-4 BAS 843 4 5,222 3105 6 5 11/21/91
---- --------
112 148,780
***** BAS AL 37 48,662 32.71%
CF W/FE 12 15,704 10.56%
CF 111 13 17,588 11.82%
0000000 4 5,706 3.84%
3004 28 36,712 24.68%
3105 18 24,408 16.41%
------- --------
112 148,780
</TABLE>
<TABLE>
<CAPTION>
LOAD
NUMBER -SI- -FE- -CU- -MN- -MG- -CR- -NI- -ZN- -TI- -PB- -BI- -BE- -AL-
--------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* BAS-1 .312 .559 .310 .366 .323 .117 .008 .140 .015 .048 .000 .000 97.802
* BAS-2 .270 .766 .140 .676 .028 .032 .009 .106 .019 .010 .000 .000 97.944
* BAS-2 .264 .786 .134 .620 .018 .031 .008 .099 .022 .008 .000 .000 98.010
* BAS-2 .267 .756 .136 .656 .028 .027 .008 .102 .017 .011 .000 .000 97.992
* BAS-2 .253 .809 .130 .583 .048 .027 .008 .103 .018 .009 .000 .000 98.012
* BAS-3 .245 .778 .142 .643 .020 .020 .006 .149 .019 .128 .000 .000 97.850
* BAS-4 .284 .715 .216 .803 .106 .048 .010 .175 .012 .008 .000 .000 97.623
* BAS-4 .309 .545 .202 .849 .028 .023 .006 .197 .010 .019 .000 .000 97.812
* BAS-2 .252 1.030 .144 .639 .020 .042 .010 .104 .019 .008 .000 .000 97.732
* BAS-3 .263 1.237 .135 .620 .008 .021 .006 .190 .015 .022 .000 .000 97.483
* BAS-2 .248 .877 .174 .620 .023 .041 .009 .103 .019 .010 .000 .000 97.876
* BAS-2 .271 .947 .128 .611 .035 .023 .008 .095 .015 .009 .000 .000 97.858
* BAS-3 .287 .896 .168 .723 .062 .021 .008 .156 .010 .035 .000 .000 97.634
* BAS-3 .239 4.071 .130 .658 .021 .030 .007 1.510 .023 .016 .000 .000 93.295
* BAS-1 .259 .584 .212 .635 .031 .024 .006 .109 .009 .006 .000 .000 98.125
* BAS-3 .300 .656 .199 .642 .016 .029 .009 .126 .017 .014 .000 .000 97.992
* BAS-3 .261 .700 .150 .632 .009 .024 .006 .146 .016 .010 .000 .000 98.046
* BAS-4 .282 .585 .207 .709 .010 .035 .007 .155 .012 .008 .000 .000 97.990
* BAS-4 .250 .544 .208 .785 .018 .033 .006 .149 .013 .009 .000 .000 97.985
* BAS-4 .248 .649 .221 .575 .026 .037 .008 .121 .012 .007 .000 .000 98.096
* BAS-1 .252 .505 .166 .527 .066 .064 .005 .083 .010 .005 .000 .000 98.317
* BAS-1 .259 .549 .208 .695 .257 .072 .007 .153 .013 .006 .000 .000 97.781
* BAS-4 .341 .548 .251 .668 .023 .044 .010 .186 .008 .014 .000 .000 97.907
* BAS-4 .323 .682 .229 .740 .023 .036 .010 .203 .010 .013 .000 .000 97.731
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
AVE .272 .866 .179 .651 .050 .036 .007 .190 .014 .017 .000 .000 97.718
HIGH .341 4.071 .310 .849 .323 .117 .010 1.510 .023 .128 .000 .000 98.317
LOW .239 .505 .128 .366 .008 .020 .005 .083 .008 .005 .000 .000 93.295
ALLOY CODE
AL .274 .721 .172 .647 .072 .039 .007 .131 .016 .028 .000 .000 97.893
CF W/FE .259 1.164 .138 .626 .012 .028 .007 .160 .016 .017 .000 .000 97.573
CF 111 .270 .905 .157 .657 .041 .027 .008 .121 .014 .019 .000 .000 97.781
0000000 .239 4.071 .130 .658 .021 .030 .007 1.510 .023 .016 .000 .000 93.295
3004 .267 .616 .200 .665 .018 .030 .006 .133 .013 .009 .000 .000 98.043
3105 .292 .565 .212 .651 .091 .054 .007 .153 .010 .009 .000 .000 97.956
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
.272 .866 .179 .651 .050 .036 .007 .190 .014 .017 .000 .000 97.718
</TABLE>
<PAGE> 48
DATE: 02/27/92 TIME: 11:42 MORGANTOWN, KENTUCKY PAGE 1
IMCO RECYCLING INC.
********** MATERIAL SHIPMENTS REPORT BY BILL OF LADING **********
FOR 12/01/91 THRU 12/31/91
SHIPPED BY BARMET RPT
<TABLE>
<CAPTION>
BILL BILL SHIPPING PRODUCTION MATERIAL MATERIAL SHIPPED LOAD HEAT SHIPPED SHIPPED IMCO
NUMBER DATE CONTRACT CONTRACT CLASS DESIG TO NUMBER NUMBER INGOTS WEIGHT SALE
- ------ -------- -------- ---------- -------- -------- ------- ------ --------- -------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3679 12/17/91 PO#106065 PO#105990 OTHSCRAP BAS BARMET BAS-1 BAS 810 5 6,686 N
BAS 811 5 7,154
BAS 812 4 5,914
BAS 813 4 5,558
BAS-2 BAS 814 4 5,478
BAS 815 4 5,474
*****TOTAL 3679 TOLL 36,264 26 36,264
3680 12/17/91 PO#106065 PO#105990 OTHSCRAP BAS BARMET BAS-2 BAS 816 5 6,450 N
BAS 817 4 5,148
BAS 818 5 6,320
BAS 819 4 5,276
BAS 820 6 8,308
BAS-3 BAS 834 5 6,550
*****TOTAL 3680 TOLL 38,052 29 38,052
3681 12/18/91 PO#106065 PO#105990 OTHSCRAP BAS BARMET BAS-3 BAS 835 4 5,408 N
BAS 836 4 5,546
BAS 837 4 5,706
BAS 838 5 6,834
BAS-4 BAS 840 5 6,586
BAS 841 5 6,428
*****TOTAL 3681 TOLL 36,508 27 36,508
3682 12/18/91 PO#106065 PO#105990 OTHSCRAP BAS BARMET BAS-3 BAS 839 8 10,230 N
BAS-4 BAS 842 5 5,590
BAS 843 4 5,222
BAS 844 4 5,342
BAS 845 5 6,200
BAS 846 4 4,972
*****TOTAL 3682 TOLL 37,956 30 37,956
</TABLE>
<PAGE> 49
DATE: 02/27/92 TIME: 11:42 MORGANTOWN, KENTUCKY PAGE 2
IMCO RECYCLING INC.
********** MATERIAL SHIPMENTS REPORT BY BILL OF LADING **********
FOR 12/01/91 THRU 12/31/91
SHIPPED BY BARMET RPT
<TABLE>
<CAPTION>
BILL BILL SHIPPED SHIPPED SHIPPING TOLL SALES SHIPPED SHIPPED
NUMBER DATE BY TO CONTRACT IGNOTS WEIGHT
- --------- ------ --------- ---------- -------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
3679 12/17/91 BARMET RPT BARMET PO#106065 36,264 26 36,264
3680 12/17/91 BARMET RPT BARMET PO#106065 38,052 29 38,052
3681 12/18/91 BARMET RPT BARMET PO#106065 36,508 27 36,508
3682 12/18/91 BARMET RPT BARMET PO#106065 37,956 30 37,956
------- -------- --------- ---------
148,780 112 148,780
</TABLE>
*****MONTH TOTALS
<PAGE> 50
DATE: 02/27/92 TIME: 11:34 PAGE 1
IMCO RECYCLING INC.
MORGANTOWN, KENTUCKY
********** END-OF-LOAD REPORT **********
EOL DATE: 11/19/91
<TABLE>
<CAPTION>
LOAD CUST REF SOURCE CONTRACT TYPE MATERIAL DATE CAR/TRUCK
NUMBER NUMBER CUSTOMER CUSTOMER NUMBER P/T CLASS RECEIVED CARRIER NUMBER
- ------ -------- -------- -------- -------- ---- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BAS-1 0001 BARMET RPT BARMET RPT P0#105990 T OTHSCRAP 11/19/91 PTS 678
</TABLE>
<TABLE>
<CAPTION>
WEIGHT WEIGHT RECOV
IN OUT PCT
------ ------ -----
<S> <C> <C>
26,280 25,312 96.31
</TABLE>
<TABLE>
<CAPTION>
HEAT UNITS/
NUMBER CRUCE WEIGHT -SI- -FE- -CU- -MN- -MG- -CR-
- -------- ----- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*BAS 810 5 6,686 .252 .505 .166 .527 .066 .064
*BAS 811 5 7,154 .259 .584 .212 .635 .031 .024
*BAS 812 4 5,914 .259 .549 .208 .695 .257 .072
*BAS 813 4 5,558 .312 .559 .310 .366 .323 .117
----- -------
18 25,312
AVERAGE ANALYSIS - .269 .549 .220 .561 .157 .066
<CAPTION>
-NI- -ZN- -TI- -PB- -BI- -BE- -AL-
---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
*BAS 810 .005 .083 .010 .005 .000 .000 98.31
*BAS 811 .006 .109 .009 .006 .000 .000 98.12
*BAS 812 .007 .153 .013 .006 .000 .000 97.78
*BAS 813 .008 .140 .015 .048 .000 .000 97.80
AVERAGE ANALYSIS - .006 .119 .012 .015 .000 .000 98.0
</TABLE>
* - THIS HEAT HAS BEEN SHIPPED.
60
<PAGE> 51
DATE: 02/27/92 TIME: 11:34 PAGE 1
IMCO RECYCLING INC.
MORGANTOWN, KENTUCKY
********** END-OF-LOAD REPORT **********
EOL DATE: 11/19/91
<TABLE>
<CAPTION>
LOAD CUST REF SOURCE CONTRACT TYPE MATERIAL DATE CAR/TRUCK
NUMBER NUMBER CUSTOMER CUSTOMER NUMBER P/T CLASS RECEIVED CARRIER NUMBER
- ------ -------- -------- -------- -------- ---- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BAS-2 0002 BARMET RPT BARMET RPT P0#105990 T OTHSCRAP 11/19/91 AMERISTAR 025021
</TABLE>
<TABLE>
<CAPTION>
WEIGHT WEIGHT RECOV
IN OUT PCT
------ ------ -----
<S> <C> <C>
46,460 42,454 91.37
</TABLE>
<TABLE>
<CAPTION>
HEAT UNITS/
NUMBER CRUCE WEIGHT -SI- -FE- -CU- -MN- -MG- -CR-
- -------- ----- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*BAS 814 4 5,478 .248 .877 .174 .620 .023 .041
*BAS 815 4 5,474 .252 1.030 .144 .639 .020 .042
*BAS 816 5 6,450 .270 .766 .140 .676 .028 .032
*BAS 817 4 5,148 .264 .786 .134 .620 .018 .031
*BAS 818 5 6,320 .267 .756 .136 .656 .028 .027
*BAS 819 4 5,276 .271 .947 .128 .611 .035 .023
*BAS 820 6 8,308 .253 .809 .130 .583 .048 .027
----- -------
32 42,454
AVERAGE ANALYSIS - .260 .846 .140 .628 .030 .031
<CAPTION>
-NI- -ZN- -TI- -PB- -BI- -BE- -AL-
---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
*BAS 814 .009 .103 .019 .010 .000 .000 97.8
*BAS 815 .010 .104 .019 .008 .000 .000 97.7
*BAS 816 .009 .106 .019 .010 .000 .000 97.9
*BAS 817 .008 .099 .022 .008 .000 .000 98.0
*BAS 818 .008 .102 .017 .011 .000 .000 97.9
*BAS 819 .008 .095 .015 .009 .000 .000 97.8
*BAS 820 .008 .103 .018 .009 .000 .000 98.0
AVERAGE ANALYSIS - .009 .102 .018 .009 .000 .000 97.9
</TABLE>
* - THIS HEAT HAS BEEN SHIPPED.
61
<PAGE> 52
DATE: 02/27/92 TIME: 11:34 PAGE
IMCO RECYCLING INC.
MORGANTOWN, KENTUCKY
********** END-OF-LOAD REPORT **********
EOL DATE: 11/21/91
<TABLE>
<CAPTION>
LOAD CUST REF SOURCE CONTRACT TYPE MATERIAL DATE CAR/TRUCK
NUMBER NUMBER CUSTOMER CUSTOMER NUMBER P/T CLASS RECEIVED CARRIER NUMBER
- ------ -------- -------- -------- -------- ---- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BAS-3 0003 BARMET RPT BARMET RPT P0#105990 T OTHSCRAP 11/20/91 AMERISTAR 025021
</TABLE>
<TABLE>
<CAPTION>
WEIGHT WEIGHT RECOV
IN OUT PCT
------ ------ -----
<S> <C> <C>
44,960 40,274 89.57
</TABLE>
<TABLE>
<CAPTION>
HEAT UNITS/
NUMBER CRUCE WEIGHT -SI- -FE- -CU- -MN- -MG- -CR-
- -------- ----- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*BAS 834 5 6,550 .300 .656 .199 .642 .016 .029
*BAS 835 4 5,408 .261 .700 .150 .632 .009 .024
*BAS 836 4 5,546 .245 .778 .142 .643 .020 .020
*BAS 837 4 5,706 .239 4.071 .130 .658 .021 .030
*BAS 838 5 6,834 .287 .896 .168 .723 .062 .021
*BAS 839 8 10,230 .263 1.237 .135 .620 .008 .021
----- -------
30 40,274
AVERAGE ANALYSIS - .267 1.351 .153 .651 .022 .024
<CAPTION>
-NI- -ZN- -TI- -PB- -BI- -BE- -AL-
---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
*BAS 834 .009 .126 .017 .014 .000 .000 97.
*BAS 835 .006 .146 .016 .010 .000 .000 98.
*BAS 836 .006 .149 .019 .128 .000 .000 97.
*BAS 837 .007 1.510 .023 .016 .000 .000 93.
*BAS 838 .008 .156 .010 .035 .000 .000 97.
*BAS 839 .006 .190 .015 .022 .000 .000 97.
AVERAGE ANALYSIS - .007 .349 .016 .035 .000 .000 97.
</TABLE>
* - THIS HEAT HAS BEEN SHIPPED.
62
<PAGE> 53
DATE: 02/27/92 TIME: 11:34 PAGE 1
IMCO RECYCLING INC.
MORGANTOWN, KENTUCKY
********** END-OF-LOAD REPORT **********
EOL DATE: 11/22/91
<TABLE>
<CAPTION>
LOAD CUST REF SOURCE CONTRACT TYPE MATERIAL DATE CAR/TRUCK
NUMBER NUMBER CUSTOMER CUSTOMER NUMBER P/T CLASS RECEIVED CARRIER NUMBER
- ------ -------- -------- -------- -------- ---- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BAS-4 0004 BARMET RPT BARMET RPT P0#105990 T OTHSCRAP 11/20/91 AMERISTAR 025021
</TABLE>
<TABLE>
<CAPTION>
WEIGHT WEIGHT RECOV
IN OUT PCT
------ ------ -----
<S> <C> <C>
42,960 40,740 94.83
</TABLE>
<TABLE>
<CAPTION>
HEAT UNITS/
NUMBER CRUCE WEIGHT -SI- -FE- -CU- -MN- -MG- -CR-
- -------- ----- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*BAS 840 5 6,586 .341 .548 .251 .668 .023 .044
*BAS 841 5 6,428 .282 .585 .207 .709 .010 .035
*BAS 842 5 5,990 .284 .715 .216 .803 .106 .048
*BAS 843 4 5,222 .323 .682 .229 .740 .023 .036
*BAS 844 4 5,342 .309 .545 .202 .849 .028 .023
*BAS 845 5 6,200 .250 .544 .208 .785 .018 .033
*BAS 846 4 4,972 .249 .650 .222 .576 .026 .037
----- -------
32 40,740
AVERAGE ANALYSIS - .292 .607 .220 .734 .033 .037
<CAPTION>
-NI- -ZN- -TI- -PB- -BI- -BE- -AL-
---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
*BAS 840 .010 .186 .008 .014 .000 .000 97.9
*BAS 841 .007 .155 .012 .008 .000 .000 97.9
*BAS 842 .010 .175 .012 .008 .000 .000 97.6
*BAS 843 .010 .203 .010 .013 .000 .000 97.7
*BAS 844 .006 .197 .010 .019 .000 .000 97.8
*BAS 845 .006 .149 .013 .009 .000 .000 97.9
*BAS 846 .009 .122 .012 .008 .000 .000 98.0
AVERAGE ANALYSIS - .008 .170 .011 .011 .000 .000 97.8
</TABLE>
* - THIS HEAT HAS BEEN SHIPPED.
63
<PAGE> 54
EXHIBIT "H"
RIGHT OF FIRST REFUSAL
(Facility)
THIS RIGHT OF FIRST REFUSAL (the "Agreement"), is made and entered into as
of this 2nd day of March 1992, by and between IMCO RECYCLING INC., a Delaware
corporation (the "Grantor") and BARMET ALUMINUM CORPORATION, an Ohio corporation
(the "Grantee").
RECITALS:
A. Grantor is the owner of a parcel of real estate located near
Uhrichsville, Ohio described in Exhibit "A" attached hereto (the "Property") on
which Grantor intends to construct and operate an aluminum recycling and
processing facility (the "Facility");
B. Grantee owns and operates a rolling mill facility in Uhrichsville, Ohio
(the "Mill") located near the Property; and
C. Grantor and Grantee have entered into that certain Supply Agreement (the
"Supply Agreement") dated as of March 2, 1992, wherein Grantor has agreed, among
other agreements, to provide tolling/converting services to Grantee to satisfy
Grantee's requirements for certain raw materials at the Mill.
D. Pursuant to and as part of the considerations for the Agreement, Grantor
has agreed to grant to Grantee a right of first refusal to purchase the Property
and the Facility on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, representations and undertakings of the parties set forth herein, the
adequacy and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Right of First Refusal. Grantor hereby grants to Grantee the right of first
refusal (the "Right of First Refusal") to purchase the Property and the
Facility, together with all equipment, fixtures, licenses, permits and other
tangible and intangible personal property and contract rights owned by Grantor
and used in connection with the Facility (collectively, the "Plant"). The Right
of First Refusal shall apply to any offer to purchase the Plant received by
Grantor from a third party (other than a direct or indirect wholly-owned
subsidiary of Grantor) and that Grantor is willing to accept, subject to
approval of Grantor's acceptance thereof by Grantor's lenders (the "Offer").
Upon receipt of an Offer, Grantor shall promptly give written notice of the
Offer to Grantee, together with a copy of the written Offer and any other terms
or materials delivered in connection therewith (the "Notice").
71
<PAGE> 55
Grantee shall have ten (10) days after its receipt of the Notice (the
"Acceptance Period") to exercise the Right of First Refusal by delivering to
Grantor written notice of Grantee's exercise of the Right of First Refusal and
its agreement to purchase the Plant on the same terms as set forth in the Offer
(the "Acceptance"). If Grantor does not receive the Acceptance on or before 5:00
p.m. (Dallas, Texas time) on the last day of the Acceptance Period, Grantee
shall be conclusively deemed to have waived its Right of First Refusal and
Grantor shall be free to sell the Plant on the terms set forth in the Offer. if
Grantee delivers the Acceptance to Grantor prior to the expiration of the
Acceptance Period, Grantor and Grantee shall execute a written contract
substantially identical to the agreement constituting the Offer and Grantor
shall sell the Plant to Grantee on the terms and conditions set forth in the
Offer. Notwithstanding the above, Grantee shall not have any right to exercise
the Right of First Refusal during any time when Grantee is in material default
of its obligations under the Supply Agreement.
2. Transfer of Supply Agreement Rights. Notwithstanding any provision herein
to the contrary, Grantor agrees that it will not sell the Plant to a third party
unless Grantor also transfers to the Transferee, and the Transferee assumes in
writing, all of Grantor's rights, liabilities and obligations under and pursuant
to the Supply Agreement and this Right of First Refusal. If Grantee fails or
refuses to exercise the Right of First Refusal, Grantor shall provide to Grantee
such reasonable assurances as Buyer may reasonable require that the Transferee
has the ability to perform the obligations of the Grantor under the Supply
Agreement in a manner reasonably satisfactory to Buyer.
3. Term. This Agreement shall terminate and be of no further force and effect
upon the earlier to occur of the following events:
(a) The termination of the Supply Agreement or the Supply Agreement is no
longer in force and effect; or
(b) Grantee exercises the Right of First Refusal but fails or refuses to
consummate the purchase of the Plant in accordance with the terms of
the Offer.
4. Notices. Any notices or other communication required hereunder shall be in
writing and deemed effective upon the earlier to occur of (a) actual receipt or
(b) two (2) days after being deposited in the United States mail, certified or
registered, postage prepaid, addressed to the Grantee and the Grantor at the
following addresses, or to such other address as either party hereto may
designate to the other upon ten (10 days written notice:
72
<PAGE> 56
to the Grantee: Barmet Aluminum Corporation
753 West Waterloo Road
Akron, Ohio 44314
Attention: Terry D. Smith
with copies to: Roetzel & Andress
75 E. Market Street
Akron, Ohio 44308
Attention: George A. Dietrich, Esq.
to the Grantor: IMCO Recycling Inc.
5215 North O'Connor Road
Suite 940
Central Tower at Williams Square
Irving, Texas 75039
Attention: Ralph Cheek, President
with copies to: Haynes and Boone, L.L.P.
1600 Smith Street, Suite 3700
Houston, Texas 77002
Attention: Marc H. Folladori, Esq.
5. Assignment. This Agreement may be assigned by the Grantor to a wholly-owned
subsidiary of the Grantor without the consent of the Grantee. This Agreement may
not otherwise be assigned by any party hereto without the prior written consent
of the other party.
6. Waiver. No waiver of any provision of this Agreement shall be valid unless
the same is in writing and signed by the party against whom it is sought to be
enforced. No waiver of any provision of this Agreement at any time will be
deemed a waiver of any other provision of this Agreement at such time or will be
deemed a waiver of such provision at any other time. No modification of this
Agreement shall be binding unless in writing and signed by the party against
whom sought to be enforced.
7. Binding Effect. This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns.
8. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED UNDER AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF OHIO.
73
<PAGE> 57
9. Attorney's Fees. If either party is required to employ an attorney to
enforce or defend the rights of such party hereunder, the prevailing party shall
be entitled to recover its costs from the other party, including, but not
limited to, its reasonable attorney's fees.
10. Time of the Essence. Time is of the essence with respect to this Agreement.
******
74
<PAGE> 58
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by those duly authorized on the day and year first above written.
GRANTEE:
BARMET ALUMINUM CORPORATION, an Ohio
corporation
ATTEST: /s/ TERRY D. SMITH By: /s/ NORMAN E. WELLS, JR.
------------------------ ---------------------------------
Vice-President & C.F.O. Its: Chief Executive Officer
------------------------ --------------------------------
GRANTOR:
IMCO RECYCLING INC., a Delaware corporation
By: /s/ RALPH L. CHEEK
-------------------------------
Its: President
-------------------------------
75
<PAGE> 59
STATE OF OHIO )
)
COUNTY OF SUMMIT )
This instrument was acknowledged on this 2nd day of March, 1992, by Terry
D. Smith, Norman E. Wells, Jr. of Barmet Aluminum Corporation, an Ohio
corporation, on behalf of said corporation.
/s/ [ILLEGIBLE]
---------------------------
Notary Public
March 2, 1992
No Expiration
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged on this ____ day of ______, 1992, by
____________, __________ of IMCO Recycling Inc., a Delaware corporation, on
behalf of said corporation.
---------------------------
Notary Public
76
<PAGE> 60
IMCO RECYCLING INC.
PROPERTY DESCRIPTION
TUSCARAWAS COUNTY, OHIO
MILL TOWNSHIP
Situated in the Township of Mill, County of Tuscarawas and State of Ohio:
Lot 8 to the Rathbone tract in 4th Qr. Twp. 7 Range 1 U.S.M.D. as follows:
beginning at a post on the east boundary of the right of way of B & 0 R. R. and
at the north line of lands of Stella Morrison about 500 feet northwardly along
said right of way line from the south line of lot 8 thence south 88 deg. 38 min.
E 1536.6 feet to a stone; thence north 8 deg. 25 min. west 715 1/2 feet to a
stone; thence north 88 deg. 33 min. west 1577 feet to a stone; thence south 11
deg. 33 min. east 720 1/2 feet to place of beginning, containing 25 acres.
77
<PAGE> 61
EXHIBIT "I"
RIGHT OF FIRST REFUSAL
----------------------
(Rockport]
THIS RIGHT OF FIRST REFUSAL (the "Agreement"), is made and entered into as
of this 2nd day of March, 1992, by and between BARMET ALUMINUM CORPORATION, an
Ohio corporation (the "Grantor") and IMCO RECYCLING INC., a Delaware corporation
(the "Grantee").
R E C I T A L S:
A. Grantor is the owner of a parcel of real estate located near Rockport,
Indiana, described in Exhibit "A" attached hereto (the "Property") on which
Grantor operates an aluminum recycling and processing facility (the "Facility");
B. Grantor and Grantee have entered into that certain Supply Agreement (the
"Supply Agreement") dated as of March 2, 1992, wherein Grantee has agreed, among
other agreements, to provide tolling/converting services to Grantor to satisfy
Grantor's requirements for certain raw materials at its facility in
Uhrichsville, Ohio.
C. Pursuant to and as part of the considerations for the Supply Agreement,
Grantor has agreed to grant to Grantee a right of first refusal to purchase the
Property and the Facility on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, representations and undertakings of the parties set forth herein, the
adequacy and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Right of First Refusal. Grantor hereby grants to Grantee the right of first
refusal (the "Right of First Refusal") to purchase the Property and the
Facility, together with all equipment, fixtures, licenses, permits and other
tangible and intangible personal property and contract rights owned by Grantor
and used in connection with the Facility (collectively, the "Plant"). The Right
of First Refusal shall apply to any offer to purchase the Plant received by
Grantor from a third party (other than a direct or indirect wholly-owned
subsidiary of Grantor) and that Grantor is willing to accept (the "Offer"). Upon
receipt of an Offer, Grantor shall promptly give written notice of the Offer to
Grantee, together with a copy of the written Offer and any other terms or
materials delivered in connection therewith (the "Notice"). Grantee shall have
ten (10) days after its receipt of the Notice (the "Acceptance Period") to
exercise the Right of First Refusal by delivering to Grantor written notice of
Grantee's exercise of the Right of First Refusal and its agreement to purchase
the
79
<PAGE> 62
Plant on the same terms as set forth in the Offer (the "Acceptance"). If Grantor
does not receive the Acceptance on or before 5:00 p.m. (Dallas, Texas time) on
the last day of the Acceptance Period, Grantee shall be conclusively deemed to
have waived its Right of First Refusal and Grantor shall be free to sell the
Plant on the terms set forth in the Offer. If Grantee delivers the Acceptance to
Grantor prior to the expiration of the Acceptance Period, Grantor and Grantee
shall execute a written contract substantially identical to the agreement
constituting the Offer and Grantor shall sell the Plant to Grantee on the terms
and conditions set forth in the Offer. Notwithstanding the above, Grantee shall
not have any right to exercise the Right of First Refusal during any time when
Grantee is in material default of its obligations under the Supply Agreement.
2. Term. This Agreement shall terminate and be of no further force and effect
upon the earlier to occur of the following events:
(a) The termination of the Supply Agreement or the Supply Agreement is no
longer in force and effect;
(b) The sale of the Plant to a third party following Grantee's failure or
refusal to exercise the Right of First Refusal in accordance with the
terms hereof; or
(c) Grantee exercises the Right of First Refusal but fails or refuses to
consummate the purchase of the Plant in accordance with the terms of
the Offer.
3. Notices. Any notices or other communication required hereunder shall be in
writing and deemed effective upon the earlier to occur of (a) actual receipt or
(b) two (2) days after being deposited in the United States mail, certified or
registered, postage prepaid, addressed to the Grantee and the Grantor at the
following addresses, or to such other address as either party hereto may
designate to the other upon ten (10) days written notice:
to the Grantor: Barmet Aluminum Corporation
753 West Waterloo Road
Akron, Ohio 44314
Attention: Terry D. Smith
with copies to: Roetzel & Andress
75 E. Market Street
Akron, Ohio 44308
Attention: George A. Dietrich, Esq.
80
<PAGE> 63
to the Grantee: IMCO Recycling Inc.
5215 North O'Connor Road
Suite 940
Central Tower at Williams Square
Irving, Texas 75039
Attention: Ralph Cheek, President
with copies to: Haynes and Boone, L.L.P.
1600 Smith Street, Suite 3700
Houston, Texas 77002
Attention: Marc H. Folladori, Esq.
4. Waiver. No waiver of any provision of this Agreement shall be valid unless
the same is in writing and signed by the party against whom it is sought to be
enforced. No waiver of any provision of this Agreement at any time will be
deemed a waiver of any other provision of this Agreement at such time or will be
deemed a waiver of such provision at any other time. No modification of this
Agreement shall be binding unless in writing and signed by the party against
whom sought to be enforced.
5. Binding Effect. This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns.
6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED UNDER AND ENFORCED
ACCORDING TO THE LAWS OF THE STATE OF INDIANA.
7. Attorney's Fees. If either party is required to employ an attorney to
enforce or defend the rights of such party hereunder, the prevailing party shall
be entitled to recover its costs from the other party, including, but not
limited to, its reasonable attorney's fees.
8. Time of the Essence. Time is of the essence with respect to this Agreement.
* * * * * *
81
<PAGE> 64
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by those duly authorized on the day and year first above written.
GRANTOR:
BARMET ALUMINUM CORPORATION, an Ohio
corporation
ATTEST: /s/ TERRY D. SMITH By: /s/ NORMAN E. WELLS, JR.
----------------------- ---------------------------------
Vice-Pres. & C.F.O. Its: Chief Executive Officer
----------------------- --------------------------------
GRANTEE:
IMCO RECYCLING INC.,
a Delaware corporation
By: /s/ RALPH L. CHEEK
-------------------------------
Its: President
------------------------------
82
<PAGE> 65
STATE OF OHIO )
)
COUNTY OF SUMMIT )
This instrument was acknowledged on this 2nd day of March, 1992, by Terry
D. Smith, Norman E. Wells, Jr. of Barmet Aluminum Corporation, an Ohio
corporation, on behalf of said corporation.
/s/ [ILLEGIBLE]
---------------------------
Notary Public
March 2, 1992
No Expiration
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged on this 2nd day of March, 1992, by Ralph
L. Cheek, President of IMCO Recycling Inc., a Delaware corporation, on behalf of
said corporation.
LAINE LYKES
---------------------------
Notary Public
=====================
LAINE LYKES
MY COMMISSION EXPIRES
January 5, 1994
=====================
83
<PAGE> 66
BARMET ALUMINUM CORPORATION
REAL PROPERTY DESCRIPTION
SPENCER COUNTY, INDIANA
84
<PAGE> 67
Schedule A1 -(Continued)
COMMITMENT NO. 87-126A
Beginning at an iron pin, being the northeast corner of the northwest quarter of
the northeast quarter of Section (15), Township (7) South, Range (6) West;
thence with the east line of said quarter quarter section, S 0 degrees 11'20" E,
1316.66 feet to an iron pin, being the southwest corner of the northeast quarter
of the northeast quarter of said section; thence with the south line of quarter
quarter section, N 88 degrees 27'18" E, 1327.71 feet to an iron pin, being the
northwest corner of the southwest quarter of the northwest quarter of Section
(14), Township (7) South, Range (6) West; thence with the west line of said
quarter quarter section, S 0 degrees 20'20" E, 1314.96 feet to a railroad spike,
being the northwest corner of the northwest quarter of the southwest quarter of
Section (14); thence with the West line of said quarter quarter section, S 0
degrees 36'32" W, 330.10 feet to an iron pin, being in the east line of the
northeast quarter of the southeast quarter of said section (15); thence severing
said quarter quarter section, S 88 degrees 24'00" W, 1322.42 feet to an iron
pin, being in the west line of said quarter quarter section; thence with the
west line of said quarter quarter section S 0 degrees 05'52" W, 1006.35 feet to
an iron pin, being the northeast corner of the southwest quarter of the
southeast quarter of said Section (15); thence with the north line of said
quarter quarter section, S 89 degrees l3'25" W, 1312.84 feet to an iron pin,
being the southeast corner of the northeast quarter of the southwest quarter of
said Section (15); thence with the east line of said quarter quarter section, N
0 degrees 25'44" W, 1317.17 feet to a point, being the southeast corner of the
southeast quarter of the northwest quarter of said section (15); thence with the
east line of said quarter quarter section, N 0 degrees 32'43" W, 1317.52 feet to
an iron pin, being the southeast corner of the northeast quarter of the
northwest quarter of said Section (15); thence with the east line of said
quarter quarter section, N 0 15'19" W, 1317.52 feet to a concrete nail, being
the northwest corner of the northwest quarter of the northeast quarter of said
Section (15); thence with the north line of said quarter quarter Section N 88
degrees 29'55" E, 1329.22 feet to the point of beginning. EXCEPT 0.50 acres,
more particularly described as follows: Beginning at an iron pin, being the
northwest corner of the southwest quarter of the northwest quarter of said
Section (14); thence with the west line of said quarter quarter section, S 0
degrees 20'20" E, 66.00 feet to an iron pin, being in the east line of the
southeast quarter of the northeast quarter of said Section (15); thence severing
said quarter quarter section, S 88 degrees 27'18" W, 330.00 feet to an iron
pin and, N 0 degrees 20'20" W, 66.00 feet to an iron pin, being in the South
line of the northeast quarter of the northeast quarter of said Section (15);
thence with the south line of said quarter quarter section, N 88 degrees 27'18"
E, 330.00 feet to the point of beginning. ALSO EXCEPT 0.309 acres, more
particularly described as follows: Beginning at an iron pin, being in the west
line of the northwest quarter of the northeast quarter of said section (15) and
being, S 0 degrees 15'19" E, 873.90 feet from the northwest corner of said
quarter quarter section; thence severing said quarter section, the following
seven (7) calls:
85
<PAGE> 68
Schedule A2 -(Continued)
COMMITMENT NO.
87-126A
(1) N 88 degrees 29'55" E, 75.00 feet to an iron pin;
(2) N 0 degrees 15'19" W, 27.00 feet to an iron pin;
(3) N 88 degrees 29'55" E, 100.00 feet to an iron pin;
(4) S0 degrees 15'19" E, 100.00 feet to an iron pin;
(5) S88 degrees 29'55" W, 100.00 feet to an iron pin;
(6) N 0 degrees 15'19" W, 27.00 feet to an iron pin;
(7) S88 degrees 29'55" W, 75.00 feet to an iron pin, being in the West
line of said quarter quarter section; thence with the west line of
said quarter quarter section, N 0 degrees 15'19" W, 46.00 feet to the
point of beginning.
86
<PAGE> 69
EXHIBIT "J"
LIST OF AND PURCHASE PRICE FOR PERSONAL PROPERTY
DESCRIPTION
Tilting Rotary Furnace with 20 ton Crane
and Charging System
Scrap Crusher and Conveyor
Eight (8) lined Crucibles with lids;
Two (2) pre-heat Burner Stations
One 40-ton low-bed Truck
The aggregate purchase price for the Personal Property shall be One Million
Dollars ($1,000,000.00).
87
<PAGE> 70
EXHIBIT "K"
BILL OF SALE
Know all men by these presents that Barmet Aluminum Corporation, an Ohio
corporation, the Grantor, for consideration of One Million Dollars
($1,000,000.00) paid by IMCO Recycling Inc., the Grantee, the receipt of which
is hereby acknowledged, does hereby grant, bargain, sell, transfer and deliver
onto said Grantee the goods and chattels listed in the Schedule attached hereto
(the "Personal Property") marked Exhibit "A" and made a part hereof, and all
insurance proceeds and insurance claims of Grantor relating to all or any part
of the Personal Property and, to the extent transferable, the benefit of and the
right to enforce the covenants and warranties, if any, that Grantor is entitled
to enforce with respect to the Personal Property against Grantor's predecessors
in title to the Personal Property and against the manufacturers or producers of
the Personal Property.
And the said Grantor hereby covenants to and with the said Grantee that
said Grantor is the lawful owner of the above-described goods and chattels; that
the same are free from all encumbrances whatsoever, and that said Grantor has
good right to sell the same as aforesaid, and that said Grantor will warrant and
defend the same against all lawful claims and demands whatsoever.
Grantee agrees and understands that the purchase of the Personal Property
is "AS IS, WHERE IS," without any representation or warranty of any nature
whatsoever, except (a) for the warranties of title contained herein, and (b)
that the Personal Property has been kept and will, until delivered to Grantee,
be kept in good repair, condition and working order, ordinary wear
88
<PAGE> 71
and tear excepted.
From time to time, as and when requested by Grantee, Grantor shall execute
and deliver, or cause to be executed and delivered, such documents and
instruments and shall take, or cause to be taken, such further or other actions
as may be reasonably necessary to carry out the purposes of this Bill of Sale.
This Bill of Sale shall bind Grantor and its successors and assigns and
inure to the benefit of Grantee and its successors and assigns.
The covenants and warranties of Grantor contained herein shall survive the
closing of the transfer of the Personal Property evidenced hereby.
This Bill of Sale shall be governed by and construed in accordance with the
laws of the State of Ohio, excluding any conflicts-of-law rule or principle
which might refer same to another jurisdiction.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this __ day of
__________, ____.
SIGNED AND DELIVERED IN THE PRESENCE OF: BARMET ALUMINUM CORPORATION
By
- ---------------------------------------- ------------------------------
Its
- ---------------------------------------- -----------------------------
89
<PAGE> 1
Exhibit 21
LIST OF IMCO RECYCLING INC. SUBSIDIARIES
Wholly owned unless otherwise indicated as of March 2, 1998.
1. IMCO Investment Company, a Delaware Corporation
2. Interamerican Zinc, Inc., a Delaware Corporation
3. IMCO Recycling of Ohio Inc., a Delaware Corporation
4. IMCO Management Partnership L.P., a Texas Limited Partnership
5. IMCO Recycling of California, Inc., a Delaware Corporation
6. IMCO Energy Corp., a Delaware Corporation
7. IMCO International, Inc., a Delaware Corporation
8. IMCO Recycling of Indiana Inc., a Delaware Corporation
9. IMCO Recycling of Illinois Inc., a Delaware Corporation
10. IMCO Indiana Partnership L.P., an Indiana Limited Partnership
11. Metal Mark, Inc., an Illinois Corporation
12. Pittsburg Aluminum, Inc., a Kansas Corporation
13. VAW-IMCO Gu(beta) und Recycling GmbH, a private company with limited
liability organized under the laws of Germany (50% owned)
14. IMCO Recycling of Michigan L.L.C., a Delaware Limited Liability Company
15. IMCO Recycling (UK) Ltd., a private company limited by shares and
organized under the laws of England and Wales
16. IMSAMET, Inc., a Delaware Corporation
17. IMCO Recycling of Idaho Inc., a Delaware Corporation
18. IMCO Recycling of Utah Inc., a Delaware Corporation
<PAGE> 2
LIST OF IMCO RECYCLING INC. SUBSIDIARIES
19. Imsamet of Arizona, an Arizona General Partnership (70% owned)
20. Solar Aluminum Technology Services, a Utah General Partnership
(50% owned)
21. Rock Creek Aluminum, Inc., an Ohio Corporation
22. Alchem Aluminum, Inc., a Delaware Corporation
23. IMCO Recycling Holding B.V., a Dutch BV
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-26641, Form S-8 No. 33-34745, Form S-8 No. 33-76780,
Form S-8 No. 333-00075, and Form S-8 No. 333-07091) pertaining to the
Nonqualified Stock Option Plan of IMCO Recycling, Inc., the IMCO Recycling
Inc. Amended and Restated Stock Option Plan, the IMCO Recycling Inc. 1992
Stock Option Plan, and the IMCO Recycling Inc. Annual Incentive Program,
respectively, of our report dated February 2, 1998, with respect to the
consolidated financial statements of IMCO Recycling, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1997.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 4, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 405
<SECURITIES> 74
<RECEIVABLES> 53,508
<ALLOWANCES> 1,345
<INVENTORY> 34,556
<CURRENT-ASSETS> 91,652
<PP&E> 197,095
<DEPRECIATION> 54,995
<TOTAL-ASSETS> 332,536
<CURRENT-LIABILITIES> 33,804
<BONDS> 109,194
0
0
<COMMON> 1,652
<OTHER-SE> 167,272
<TOTAL-LIABILITY-AND-EQUITY> 332,536
<SALES> 339,381
<TOTAL-REVENUES> 339,381
<CGS> 291,527
<TOTAL-COSTS> 291,527
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 668
<INTEREST-EXPENSE> 7,331
<INCOME-PRETAX> 23,506
<INCOME-TAX> 9,086
<INCOME-CONTINUING> 14,127
<DISCONTINUED> 0
<EXTRAORDINARY> (1,318)
<CHANGES> 0
<NET-INCOME> 12,809
<EPS-PRIMARY> .98
<EPS-DILUTED> .96
</TABLE>
