<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
IMCO Recycling Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
IMCO RECYCLING INC.
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of IMCO
Recycling Inc. scheduled to be held at the Central Tower at Williams Square,
Twenty-Sixth Floor, LaCima Club, Lakeside Room, 5215 North O'Connor Blvd.,
Irving, Texas, on Wednesday, May 13, 1998, commencing at 9:00 A.M., Central
Daylight Savings Time. Your Board of Directors and management look forward
to greeting those stockholders able to attend in person.
At the meeting, you will be asked to consider and elect two directors to
serve until the 2001 Annual Meeting of Stockholders. Your Board of Directors
has unanimously nominated these persons for election as directors. You are
also being asked to consider and approve an amendment to increase the number
of the Corporation's authorized shares of Common Stock, to consider and
approve amendments to the Corporation's Annual Incentive Program and the
Corporation's 1992 Stock Option Plan, and to consider and ratify the
appointment of Ernst & Young LLP as the Corporation's independent accountants
for 1998. Information concerning the Board nominees, the proposal regarding
the authorized share increase, the proposals regarding the amendments to the
Annual Incentive Program and the 1992 Stock Option Plan, and the proposal
regarding the Corporation's independent accountants, as well as other
important information, is contained in the accompanying proxy statement which
you are urged to read carefully.
Whether or not you plan to attend in person and regardless of the number
of shares you own, it is important that your shares be represented and voted
at the meeting. Accordingly, you are requested to sign, date and mail the
enclosed proxy at your earliest convenience. Your shares will then be
represented at the meeting, and the Corporation will be able to avoid the
expense of further solicitation.
On behalf of IMCO's Board of Directors and employees, thank you for your
cooperation and continued support.
Sincerely,
DON V. INGRAM
CHAIRMAN OF THE BOARD
April 9, 1998
<PAGE>
IMCO RECYCLING INC.
5215 North O'Connor Blvd., Suite 940
Central Tower at Williams Square
Irving, Texas 75039
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1998
To the Stockholders of
IMCO Recycling Inc.
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
IMCO Recycling Inc. (the "Corporation") will be held at the Central Tower at
Williams Square, Twenty-Sixth Floor, LaCima Club, Lakeside Room, 5215 North
O'Connor Blvd., Irving, Texas, on Wednesday, May 13, 1998, at 9:00 A.M.,
Central Daylight Savings Time, for the following purposes:
1. To elect two Class I directors to hold office until the 2001 Annual
Meeting of Stockholders or until their respective successors shall
have been elected and qualified.
2. To consider and vote upon the approval of an amendment to the
Corporation's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 to 40,000,000
shares.
3. To consider and vote on the approval of an amendment to the
Corporation's Annual Incentive Program.
4. To consider and vote on the approval of an amendment to the
Corporation's 1992 Stock Option Plan.
5. To consider and ratify the appointment of Ernst & Young LLP as the
Corporation's independent accountants for 1998.
6. To transact any other business which properly may be brought before
the meeting and any adjournment thereof.
Only holders of record of the Corporation's Common Stock at the close of
business on March 20, 1998 are entitled to notice of and to vote at the
Annual Meeting. A complete list of such stockholders will be open to the
examination of any stockholder at the Corporation's principal executive
offices at 5215 North O'Connor Blvd., Suite 940, Central Tower at Williams
Square, Irving, Texas for a period of ten days prior to the meeting. The
meeting may be adjourned from time to time without notice other than by
announcement at the meeting.
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN
DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE
PROXY CARD SHOULD BE SIGNED BY ALL REGISTERED HOLDERS EXACTLY AS THE STOCK IS
REGISTERED. ANY PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME
PRIOR TO ITS EXERCISE AND, IF PRESENT AT THE MEETING, MAY WITHDRAW IT AND
VOTE IN PERSON. ATTENDANCE AT THE ANNUAL MEETING IS LIMITED TO STOCKHOLDERS,
THEIR PROXIES AND INVITED GUESTS OF THE CORPORATION.
This Notice, the accompanying Proxy Statement, and the Proxy enclosed
herewith are sent to you by order of the Board of Directors of the
Corporation.
PAUL V. DUFOUR
Secretary
Irving, Texas
April 9, 1998
<PAGE>
IMCO RECYCLING INC.
5215 North O'Connor Blvd., Suite 940
Central Tower at Williams Square
Irving, Texas 75039
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1998
SOLICITATION AND REVOCABILITY OF PROXIES
The Board of Directors of the Corporation is soliciting proxies to be
voted at the Annual Meeting of Stockholders to be held in Irving, Texas on
May 13, 1998 and at any adjournment thereof. The Proxy Statement and the
enclosed proxy are first being mailed to stockholders on or about April 9,
1998 in connection with this solicitation.
This proxy solicitation is intended to afford stockholders the
opportunity to vote on the matters set forth in the accompanying Notice of
Annual Meeting dated April 9, 1998. The proxy permits stockholders to
withhold voting for any or all nominees for election to the Corporation's
Board of Directors (the "Board") and to abstain from voting on any other
specified proposal if the stockholder so chooses.
All holders of record of shares of the Corporation's Common Stock at the
close of business on March 20, 1998 (the "Record Date") are entitled to notice
of and to vote at the meeting. On the Record Date, the Corporation had
outstanding 16,502,111 shares of Common Stock, par value $.10 per share (the
"Common Stock"). Each share of Common Stock is entitled to one vote on each
matter to come before the meeting. The presence, in person or by proxy, of
holders of a majority of the outstanding shares of Common Stock entitled to
vote as of the Record Date is necessary to constitute a quorum at the meeting.
A plurality of the votes of the shares present in person or represented by
proxy at the Annual Meeting, provided a quorum is constituted, is required for
the election of directors. The proposal to amend the Corporation's
Certificate of Incorporation requires for its approval the affirmative vote of
a majority of the shares of Common Stock issued, outstanding and entitled to
vote at the Annual Meeting. The two proposals to amend the Annual Incentive
Program and the 1992 Stock Option Plan each require for their approval the
affirmative vote of a majority of the votes cast by the stockholders
represented at the Annual Meeting, provided that the total vote cast on a
proposal represents over 50% in interest of all shares entitled to vote on
that proposal. All other action proposed herein may be taken upon the
affirmative vote of a majority of the votes cast by the stockholders
represented at the Annual Meeting, provided a quorum is constituted.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all other proposals and
will be counted as present for purposes of the item on which the abstention
is noted. Since the amendment to the Corporation's Certificate of
Incorporation will require the approval of holders of a majority of the
outstanding shares of Common Stock, abstentions will have the effect of a
negative vote. In addition, abstentions on the proposal to amend the Annual
Incentive Program or the proposal to amend the 1992 Stock Option Plan will
<PAGE>
have the effect of a negative vote because approval of those proposals
requires the affirmative vote of holders of a majority of the shares present
in person or by proxy and entitled to vote. Under the rules of the New York
Stock Exchange ("NYSE"), brokers who hold shares in street names for
customers have the authority to vote on certain items when they have not
received instructions from beneficial owners. Brokers who do not receive
instructions are entitled to vote on the election of directors, the proposal
to amend the Corporation's Certificate of Incorporation, the proposal to
amend the Annual Incentive Program, the proposal to amend the 1992 Stock
Option Plan and the proposal to ratify the appointment of the auditors.
Under applicable Delaware law, a broker non-vote will have no effect on the
outcome of the election of directors or the proposal to ratify the
appointment of the auditors, nor will it count as a vote cast in determining
the total votes cast on the proposal to amend the Annual Incentive Program or
the proposal to amend the 1992 Stock Option Plan. However, a broker non-vote
will have the same effect as a vote against the proposed amendment to the
Corporation's Certificate of Incorporation.
Any stockholder has the unconditional right to revoke his proxy at any
time before it is voted. Any proxy given may be revoked either by a written
notice duly signed and delivered to the Secretary of the Corporation prior to
the exercise of the proxy, by execution of a subsequent proxy or by voting in
person at the meeting (although attending the Annual Meeting without
executing a ballot or executing a subsequent proxy will not constitute
revocation of a proxy). Where a stockholder's duly executed proxy specifies a
choice with respect to a voting matter, the shares will be voted accordingly.
If no such specification is made, the shares will be voted (i) FOR the
nominees for director identified below; (ii) FOR the approval of the proposed
amendment to the Corporation's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 20,000,000 to 40,000,000
shares; (iii) FOR the approval of the amendment to the Corporation's
Annual Incentive Program; (iv) FOR the approval of the amendment to the
Corporation's 1992 Stock Option Plan; and (v) FOR the ratification of the
appointment of Ernst & Young LLP as the Corporation's independent accountants
for 1998.
1999 ANNUAL MEETING
The Board presently intends to hold the Corporation's next Annual
Meeting of Stockholders on or about May 12, 1999. A Proxy Statement and
Notice of such meeting will be mailed to all stockholders approximately one
month prior to that date. In order to be eligible for inclusion in the
Corporation's proxy statement for the 1999 Annual Meeting of Stockholders,
any proposal of a stockholder must be received by the Corporation at its
principal executive offices in Irving, Texas, by December 1, 1998. All
stockholder proposals must comply with Rule 14a-8 promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
VOTING AND PRINCIPAL STOCKHOLDERS
At the Record Date, there were outstanding 16,502,111 shares of Common
Stock which were held of record by 487 stockholders. The holders of the
Common Stock have no appraisal or similar rights with respect to any of the
matters being voted on at the Annual Meeting.
2
<PAGE>
The following table sets forth as of March 20, 1998, certain information
with regard to the beneficial ownership of Common Stock by (i) all persons
known by the Corporation to be the beneficial owner of more than 5% of the
outstanding Common Stock of the Corporation; (ii) each director and nominee
for director of the Corporation (see "Election of Directors"); (iii) each
named executive officer of the Corporation; and (iv) all executive officers
and directors as a group.
3
<PAGE>
<TABLE>
<CAPTION>
Number Shares Underlying Total Percent
Name of of Options Exercisable Beneficial of
Beneficial Owner Shares(1) within 60 Days Ownership Class
- ---------------------------- ---------- ------------------- ----------- ---------
<S> <C> <C> <C> <C>
Don V. Ingram 1,235,310 (2) 87,916 1,383,077 7.8%
2200 Ross Ave., Suite 4500-E
L.B. 170
Dallas, Texas 75201
William Warshauer 1,102,660 (3) -0- 1,102,660 6.7%
430 W. Garfield Ave.
Coldwater, Michigan 49036
Mellon Bank Corporation 1,880,577 (4) -0- 1,880,577 11.4%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Eagle Asset Management, Inc. 1,198,940 (5) -0- 1,198,940 7.3%
880 Carillion Parkway
St. Petersburg, Florida 33716
Steve Bartlett (6) -0- -0- -0- *
J.M. Brundrett 16,678 5,581 24,204 *
Ralph L. Cheek 69,519 2,670 74,134 *
John J. Fleming 20,646 5,981 28,572 *
Thomas A. James (7) 7,128 2,505 11,578 *
Don Navarro 2,678 5,981 10,604 *
Jack C. Page 1,778 5,981 9,704 *
Paul V. Dufour 80,410 189,233 269,643 1.6%
Richard L. Kerr 36,980 117,000 153,980 *
C. Lee Newton 36,173 112,234 148,407 *
Thomas W. Rogers 23,200 106,667 129,867 *
Frank H. Romanelli (8) -- -- -- *
All Executive Officers 1,537,575 690,074 (9) 2,227,649
and Directors as a group
(14 persons, including those
individuals named above)
</TABLE>
- --------------------------------
*Less than 1%
(1) Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Includes shares of Common Stock held
by wives and minor children of such persons and corporations in which such
persons hold a controlling interest.
(2) Represents 995,169 shares owned by Mr. Ingram directly, 78,141 shares owned
by Mr. Ingram's wife and 162,000 shares held by trusts and custodial
accounts created for the benefit of Mr. Ingram's children and relatives (of
which Mr. Ingram is trustee). Substantially all of these shares have been
pledged or are held in margin maintenance accounts.
4
<PAGE>
(3) Represents 551,330 shares owned by Mr. Warshauer directly and 551,330 owned
by Mr. Warshauer's wife. Includes 225,000 shares owned by Mr. Warshauer
and his wife held in an escrow fund and subject to return to the
Corporation under certain conditions pursuant to an Escrow Agreement by and
among Mr. Warshauer, his wife and the Corporation, entered into in
connection with the Corporation's acquisition of Alchem Aluminum, Inc. in
1997.
(4) Information with respect to beneficial ownership of shares of Common Stock
by Mellon Bank Corporation is based solely upon the latest report of Mellon
Bank Corporation on Schedule 13G dated January 20, 1998 as filed with the
Securities and Exchange Commission. Mellon Bank Corporation or certain of
its direct or indirect subsidiaries has sole and shared power to vote or to
direct the vote for 1,569,024 shares and 157,680 shares, respectively, and
sole and shared power to dispose or to direct the disposition of 1,723,952
shares and 156,625 shares, respectively.
(5) Information with respect to beneficial ownership of shares of Common Stock
by Eagle Asset Management, Inc. is based solely upon the latest report
of Eagle Asset Management, Inc. on Schedule 13G dated January 31, 1998
as filed with the Securities and Exchange Commission.
(6) Mr. Bartlett is a nominee for Class I Director of the Corporation.
(7) Does not include shares owned by Raymond James Financial, Inc. or its
subsidiaries of which Mr. James is Chairman of the Board and Chief
Executive Officer.
(8) Mr. Romanelli resigned as President, Chief Executive Officer and director
of the Corporation effective February 7, 1997.
(9) Represents outstanding options under the Corporation's stock option plans
granted to officers and directors of the Corporation which are exercisable
within 60 days of March 20, 1998.
ELECTION OF DIRECTORS
GENERAL
The Certificate of Incorporation of the Corporation provides that the
number of directors which shall constitute the whole Board of Directors shall
be fixed from time to time exclusively by the Board of Directors (but not to
a number less than three) and that the directors shall be divided into three
classes as nearly equal in number as possible. The term of office of the
Class I directors expires at the Annual Meeting of Stockholders to be held on
May 13, 1998, the term of office of the Class III directors expires at the
1999 Annual Meeting of Stockholders and the term of office of the Class II
directors expires at the 2000 Annual Meeting of Stockholders.
5
<PAGE>
The persons named in the proxy will vote for Don V. Ingram and Steve
Bartlett as nominees for election as Class I Directors except where authority
has been withheld as to a particular nominee or as to all nominees. Mr.
Ingram is currently a member of the Board of Directors. Each nominee has
consented to being named in this Proxy Statement and to serve if elected. If
any nominee should for any reason become unavailable for election, proxies
may be voted with discretionary authority by the persons named therein for
any substitute designated by the Board.
DIRECTORS AND NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
NOMINEES
CLASS I DIRECTORS; PRESENT TERM EXPIRES 1998.
<TABLE>
<CAPTION>
NAME AGE
----- -----
<S> <C>
Don V. Ingram ............... 62
Steve Bartlett .............. 50
</TABLE>
Don V. Ingram has served as a director since 1988. He was elected chief
executive officer of the Corporation on February 7, 1997 and has served as
Chairman of the Board of the Corporation since 1994. Mr. Ingram played the
major role in the Corporation's formation in 1986. Mr. Ingram has been owner
and President since 1984 of Summit Partners Management Co., a private
investment management company in Dallas. Mr. Ingram is also a director of
Profco Resources Ltd.
Steve Bartlett founded Meridian Products Corporation, located in Dallas,
Texas, in 1976 and serves as its Chairman. He is also Chairman of Saranda
Corporation, located in Phoenix, Arizona, which he acquired with other
shareholders in 1996. Meridian Products Corporation and Saranda Corporation
are manufacturers of injection-molded plastics. Mr. Bartlett served as Mayor
of Dallas, Texas from 1991 until 1995, and he served as a Member of the U.S.
House of Representatives from 1983 until 1991, representing the Third
Congressional District of Texas. Mr. Bartlett is a also a director of Sun
Coast Industries, Inc., Kaufman and Broad Home Corporation and Oasis Car
Wash, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS; PRESENT TERM EXPIRES 1999.
<TABLE>
<CAPTION>
NAME AGE
----- ----
<S> <C>
J.M. Brundrett ......................... 73
Ralph L. Cheek ......................... 67
Jack C. Page............................ 72
</TABLE>
J. M. Brundrett, a retired Doctor of Veterinary Medicine, has served as
a director since March 1985. Dr. Brundrett is a private investor in real
estate and securities.
6
<PAGE>
Ralph L. Cheek has served as a director since May 1987. Mr. Cheek
served as Chairman, President and Chief Executive Officer of the Corporation
and its predecessors from 1987 to August 1994. Previously, Mr. Cheek held
various positions with Kaiser Aluminum and Chemical Corporation, most
recently as Vice President--Europe and Vice President--Pacific Northwest.
Jack C. Page has served as a director since November 1991. Mr. Page is
an independent management consultant with experience in conducting
organizational, marketing, management and computer studies in both the
private and public sectors. Before founding his own consulting business in
1972, Mr. Page headed the Dallas and Mexico City offices of Booz, Allen &
Hamilton, Inc., an international consulting firm.
CLASS II DIRECTORS; PRESENT TERM EXPIRES 2000.
<TABLE>
<CAPTION>
NAME AGE
----- ----
<S> <C>
John J. Fleming......................... 58
Don Navarro............................. 53
</TABLE>
John J. Fleming has served as a director since May 1989. Mr. Fleming is
Chairman and Chief Executive Officer of Profco Resources Ltd., a Canadian oil
and gas exploration and production company. Mr. Fleming served as Chairman
and Chief Executive Officer from 1980 until March 1991 of CanCapital
Corporation, a Canadian merchant banking, securities investment, and oil and
gas exploration and production company headquartered in Calgary, Alberta,
Canada. Mr. Fleming also serves as a director of Gothic Energy Corporation.
Don Navarro has served as a director since June 1986. Mr. Navarro is
president of The Navarro Group, a company which provides business and
management services to public and private companies, specializing in
assisting organizations to develop, refine and implement strategic plans.
Mr. Navarro also serves as a director of Pizza Inn, Inc.
Thomas A. James is currently a Class I Director but is not standing for
reelection at the Annual Meeting.
The Board recommends that stockholders vote FOR Don V. Ingram and Steve
Bartlett as nominees for election as Class I Directors at the Annual Meeting
of Stockholders.
MEETINGS OF DIRECTORS AND COMMITTEES
The Board held a total of six Board meetings in 1997. Each director
attended at least 75% of the meetings of the full Board and the committees of
which he was a member held during 1997. The Board has established four
standing committees to assist it in the discharge of its responsibilities.
In addition, the Board has created an Executive Compensation Subcommittee
within the Compensation Committee.
The Audit Committee reviews the professional services provided by the
Corporation's independent accountants and the independence of such firm from
management
7
<PAGE>
of the Corporation. This Committee also reviews the scope of the audit
coverage, the annual financial statements of the Corporation, the adequacy of
the Corporation's internal accounting controls and such other matters with
respect to the accounting, auditing and financial reporting practices and
procedures of the Corporation as it may find appropriate or as have been
brought to its attention. This Committee held seven meetings in 1997. The
members of the Audit Committee are Mr. Page, Chairman, and Mr. Fleming and
Mr. James.
The Compensation Committee reviews and recommends the amount and form of
compensation and benefits payable to all officers, advises and consults with
management regarding the benefit plans and compensation policies and
practices of the Corporation, and administers the Corporation's stock option,
incentive and bonus plans (except with respect to matters entrusted to the
Executive Compensation Subcommittee, as described below). This Committee
held eight meetings in 1997. The members of the Compensation Committee are
Mr. Navarro, Chairman, Mr. Fleming and Mr. Page.
The Executive Compensation Subcommittee was formed during 1997 to
succeed to certain principal functions previously reserved to the
Compensation Committee. The Executive Compensation Subcommittee's principal
responsibility is to review and advise the board with respect to
performance-based compensation of corporate officers who are, or who are
likely to become, subject to Section 162(m) of the Internal Revenue Code
(which limits the deductibility of compensation in excess of $1 million paid
to a corporation's chief executive and four other highest compensated
executive officers, unless certain conditions are met), and equity awards to
corporate officers and directors who are subject to Section 16 of the
Securities Exchange Act of 1934. The Subcommittee met one time during 1997.
Messrs. Fleming (Chairman) and Page comprise the members of this subcommittee.
The Environmental Committee was established for the purposes of
providing oversight and reviewing, reporting on and making recommendations to
the Board regarding the Corporation's policies concerning environmental,
health and safety matters affecting the Corporation. This Committee held
three meetings in 1997. The members of the Environmental Committee are Dr.
Brundrett, Chairman, and Mr. Cheek.
The Committee on Directors was established for the purpose of
recommending to the Board nominees for election or reelection as director and
to recommend policies regarding certain board governance issues. While the
Committee on Directors normally is able to identify from its own resources an
ample number of qualified candidates, it will consider stockholder
suggestions of persons to be considered as nominees to fill future vacancies
on the Board. Such suggestions must be sent in writing to the Secretary at
the address of the Corporation's principal executive offices, and must be
accompanied by detailed biographical and occupational data on the prospective
nominee, along with a written consent of the prospective nominee to the
consideration of his or her name by the Committee on Directors.
Additionally, there must be no legal impediments to the nominee serving as a
director. However, the selection of nominees is solely within the discretion
of the Board of Directors. The Committee on Directors held two meetings in
1997. The members of the Committee on Directors are Mr. Navarro, Chairman,
Dr. Brundrett and Mr. Ingram.
8
<PAGE>
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The Compensation Committee of the Board of Directors (the "Committee")
has furnished the following report on executive compensation for 1997. During
1997 the Committee was comprised of Don Navarro, Chairman, John J. Fleming
and Jack C. Page. Because certain of the functions of the Committee have
been transferred to the Executive Compensation Subcommittee (the
"Subcommittee"), the Subcommittee joins in this report.
COMPENSATION POLICY
The principal goal of the Corporation's executive compensation policy is
to support the overall objective of enhancing stockholder value, while at the
same time attracting, motivating and retaining qualified and productive
employees. It is the policy of the Corporation that a significant portion of
the compensation paid to the executive officers should be based on the
Corporation's results of operations and the growth in value of its equity.
This policy aligns the interests of the Corporation's management and
stockholders by placing increased emphasis on performance-based pay and
reduced emphasis on fixed pay in total compensation. To achieve its goals,
the Corporation's executive compensation policies have been designed to
provide competitive levels of compensation that integrate annual base
compensation with bonuses based upon corporate performance and individual
initiatives and performance. Since 1990, the Corporation has also adopted
and implemented stock option plans under which the benefits realized by
executives are directly related to stock price performance. To further this
objective of linking compensation to Corporation performance, the Board
adopted bonus participation plans in 1992 and 1996. The 1996 plan established
bonuses tied to formulas based on return on total assets and earnings per
share.
During 1997, the Board of Directors created the Executive Compensation
Subcommittee, consisting of Messrs. Fleming and Page, to address all issues
before the Committee that require decisions by directors who qualify as
outside directors under Section 162(m) of the Internal Revenue Code of 1986,
and as non-employee directors under Section 16(b) of the Securities Exchange
Act of 1934.
As a result of the Committee's continuing review of the competitiveness
of the Corporation's total compensation program for officers, employees,
directors and consultants, the Committee has recommended to the Board of
Directors that the Corporation adopt an amendment to the IMCO Recycling Inc.
Annual Incentive Program (the "Incentive Plan"), to increase the number of
shares of Common Stock reserved for issuance under the Incentive Plan from
500,000 to 900,000 shares. See "Proposal to Approve Amendment to the IMCO
Recycling Inc. Annual Incentive Program." The Committee has also recommended
to the Board of Directors that the Corporation adopt a similar amendment to
the IMCO Recycling Inc. 1992 Stock Option Plan (the "1992 Plan"), increasing
the number of shares of Common Stock reserved for issuance under the 1992 Plan
from 1,150,000 to 1,550,000 shares. See "Proposal to Approve Amendment to the
IMCO Recycling Inc. 1992 Stock Option Plan."
9
<PAGE>
In its assessment of compensation levels, the Committee takes into
consideration performance relative to the individual responsibilities of the
executive officers as well as the financial performance of the Corporation
relative to its goals and the financial performance of other companies. To
assist it in its consideration, the Committee periodically engages the
services of outside compensation consultants to evaluate the Corporation's
executive compensation structure from time to time. In this regard, the
Corporation has recently retained an outside consulting firm to advise the
Committee regarding the compensation paid to the Corporation's employees,
including its executive officers.
For 1997, the principal elements of the Corporation's executive
compensation program consisted of base salary, cash bonuses and stock
options. Following is a description of the elements of the Corporation's
current executive compensation program and how each relates to the objectives
and policies outlined above.
BASE SALARY
The Committee reviews each executive officer's salary annually. In
determining appropriate salary levels, the Committee considers compensation
levels for executive positions in the external market with similar duties and
responsibilities, corporate and individual performance, and internal equity.
Mr. Ingram's annual base salary was fixed at $350,000 in February 1997,
when he assumed the duties of chief executive officer of the Corporation
pursuant to negotiations with members of the Committee. In connection with
Mr. Ingram's employment, a consulting agreement between the Corporation and
Mr. Ingram was terminated. In determining Mr. Ingram's base salary amount,
the Committee considered relevant factors, including compensation levels for
comparable CEO positions. As a result of improved financial results of the
Corporation in 1997, Mr. Ingram's annual base salary was increased to
$361,200 effective January 1, 1998. See also "Remuneration of Directors and
Officers."
ANNUAL BONUSES
Under the Corporation's Incentive Plan, in the event that the
Corporation's return on total assets is greater than ten percent (10%) with
respect to a fiscal year, executive participants are eligible for a bonus to
be determined pursuant to a formula tied to each participant's salary.
Participants are also eligible for a bonus based upon the growth in average
annual earnings per share of the Corporation. After calculating the maximum
bonuses payable under the Annual Incentive Program, such amounts may be
reduced by the Committee (or Subcommittee, in the case of the Named Executive
Officers). Bonuses under the Incentive Plan are payable in cash and/or in
shares of Common Stock.
During 1997, the Subcommittee awarded cash bonuses in accordance with the
terms of the Incentive Plan to Mr. Ingram and the other Named Executive
Officers totalling $457,300 in the aggregate. In addition, the Committee
awarded discretionary cash bonuses to Mr. Ingram and the other Named Executive
Officers totalling $266,500 in the aggregate. See "Remuneration of Directors
and Officers" and "Proposal to Approve Amendment to the IMCO Recycling Inc.
Annual Incentive Program."
10
<PAGE>
LONG-TERM INCENTIVES
Through grants of stock options to the Named Executive Officers and
others, the Corporation's philosophy for long-term incentives is to retain
and motivate executives to improve corporate performance and stock value.
The Incentive Plan provides for the granting of stock options to
participants in the event that the return on total assets for any fiscal year
exceeds 15%. In that event, the Committee (or Subcommittee, as the case may
be) may grant options covering a number of shares of Common Stock to be
determined pursuant to a formula based upon the total bonus awarded to each
participant. In addition, the Incentive Plan was amended in 1997 to permit
discretionary grants of options to employees, officers, directors and
consultants by the Committee (or the Subcommittee) in recognition of a
participant's contributions or potential contributions to the Corporation.
The Corporation's 1992 Plan permits options to be granted at the
discretion of the Committee (or the Subcomittee) for shares of Common Stock
having an exercise price of not less than the market value on the date of
grant. To encourage early exercise and stock retention, both the 1992 Plan
and the Incentive Plan provide for a replacement option feature which
results in automatic additional stock option grants if a participant delivers
Common Stock in payment of the exercise price or if shares are delivered to,
or withheld by, the Corporation in payment of the Corporation's tax
withholding obligations. Additionally, both plans contain provisions which
restrict the disposition of a portion of the Common Stock received by a
participant upon any exercise of this nature for a specified period of time
while he or she remains employed by the Corporation.
To encourage stock ownership, the Committee has established stock
ownership guidelines for all officers of the Corporation. These guidelines
set forth specified levels, as established from time to time by the
Committee, of stock ownership that officers are encouraged to achieve in
order to determine the portions of each participant's Incentive Plan bonus to
be payable in stock and the portion payable in cash. In addition, the
guidelines prohibit the granting of additional stock options under the
formula-option-grant provisions of the Incentive Plan to officers who have
outstanding vested stock options covering shares in excess of specified
amounts established by the Committee from time to time (these provisions
would not, however, prohibit grants of discretionary options to these officers
under the Incentive Plan.)
To further encourage option exercises and stock ownership, the Board has
also recently approved the Amended and Restated Option Plan Executive Option
Exercise Loan Program (the "Option Loan Program"). The Option Loan Program
only applies to certain options which have remained outstanding under the
Corporation's Amended and Restated Option Plan; the term of this plan has
expired, and no additional options may be granted under its terms. The
Option Loan Program provides designated executive employees with the
opportunity to borrow, on a full recourse basis, funds from the Corporation
in order to permit the executives to exercise their stock options under
the Amended and Restated Option Plan and to pay federal and state taxes
realized upon such exercises. Loans are secured by the shares purchased upon
exercise.
11
<PAGE>
During 1997, Mr. Ingram and the other Named Executive Officers received
discretionary stock option grants under the 1992 Plan and the Incentive Plan
covering an aggregate of 365,000 shares of Common Stock at exercise prices
ranging from $15.00 per share to $15.625 per share. At December 31, 1997,
Mr. Ingram and the other Named Executive Officers held options covering an
aggregate of 1,220,442 shares of Common Stock, of which 623,050 shares were
then vested and exercisable. See "Summary Compensation Table," "Option Grants
in Last Fiscal Year" and "Proposal to Approve Amendment to the IMCO Recycling
Inc. Annual Incentive Program" below.
CHIEF EXECUTIVE OFFICER COMPENSATION
In February 1997, Mr. Frank H. Romanelli resigned as the Corporation's
President and Chief Executive Officer, and as director. Following Mr.
Romanelli's resignation, Don V. Ingram assumed the duties of Chief Executive
Officer in addition to his duties as Chairman of the Board of Directors of
the Corporation. Mr. Ingram's annual base salary was fixed at $350,000. As
stated above, Mr. Ingram's annual base salary was increased to $361,200
effective January 1, 1998. See "Election of Directors."
Mr. Ingram received an aggregate of $243,000 in cash bonus with respect
to the year ended December 31, 1997. Of this amount, $153,000 was determined
in accordance with the terms of the Incentive Plan, and $90,000 was awarded by
the Committee as a discretionary cash bonus.
Mr. Ingram's aggregate cash bonuses and his participation in total option
grants made by the Corporation during 1997 under the 1992 Plan and the
Incentive Plan were based upon overall compensation packages and option plans
provided to senior executives in similar companies as well as Mr. Ingram's
level and scope of responsibilities and contributions to the Corporation
during 1997. Based on these criteria, in 1997 the Committee awarded Mr.
Ingram options to purchase 55,000 shares of Common Stock under the 1992 Plan
and options to purchase 100,000 shares of Common Stock under the Incentive
Plan.
INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for
any fiscal year to the corporation's chief executive officer and four other
most highly compensated executive officers as of the end of any fiscal year.
However, the statute exempts qualifying performance-based compensation from
the deduction limit if certain requirements are met. The Subcommittee
generally intends to structure performance-based compensation, including
stock option grants and annual bonuses to executive officers who may be
subject to Section 162(m) requirements, in a manner that satisfies those
requirements.
The Board, the Committee and the Subcommittee reserve the authority to
award non-deductible compensation in other circumstances as they deem
appropriate. Further, because of ambiguities and uncertainities as to the
application and interpretation of Section 162(m) and the regulations issued
thereunder, no assurance can be given, notwithstanding the Corporation's
efforts, that compensation intended by the Corporation to satisfy the
requirements for deductibility under Section 162(m) does in fact do so.
12
<PAGE>
SUMMARY
The Committee believes that the Corporation's executive compensation
policies and programs serve the interests of the stockholders and the
Corporation effectively, provide motivation for executives to contribute to
the Corporation's overall success and enhance the value of the Corporation
for the stockholders' benefit. As in past years, when performance goals are
met or exceeded, resulting in increased value to stockholders, executives
will be rewarded commensurately. In the aggregate, 39% of the Named
Executive Officers' cash compensation for 1997 was derived from incentives
directly linked to corporate performance. Mr. Ingram received 43% of his
cash compensation from these incentives. The Committee will continue to
monitor the effectiveness of the Corporation's total compensation program and
continue to make proposals where applicable to meet the current and future
needs of the Corporation.
COMPENSATION COMMITTEE
Compensation Committee Members:
Don Navarro, Chairman John J. Fleming Jack C. Page
Executive Compensation Subcommittee Members:
John J. Fleming, Chairman Jack C. Page
The Compensation Committee Report on executive compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Corporation specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the Corporation paid Mr. Navarro $185,000 for Mr. Navarro's
special services as a consultant in advising the Corporation in connection
with its representation on the Creditors' Committee of a bankrupt major
customer of the Corporation. In addition, Mr. Ingram, Chief Executive
Officer and Chairman of the Board of the Corporation, is a director of Profco
Resources Ltd., a Canadian oil and gas exploration and production company.
Mr. Fleming is the President, Chairman and Chief Executive Officer of Profco
Resources Ltd. Other than the foregoing, the Corporation has no interlocking
relationships or other transactions involving any of its Compensation
Committee members that are required to be reported by Securities and Exchange
Commission rules, and no current or former officer of the Corporation serves
on its Compensation Committee.
13
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the cumulative total stockholder return on the Corporation's Common Stock (as
measured by dividing: (i) the difference between the Common Stock share price
at the end and the beginning of the measurement period by (ii) the Common
Stock share price at the beginning of the measurement period) with the
cumulative total return assuming reinvestment of dividends of (1) The
Standard and Poor's 500 Index, (2) The Standard and Poor's Small Cap 600
Index and (3) an index of peer companies selected by the Corporation
consisting of: Wellman Inc., Safety-Kleen Corp., and EnviroSource Inc.
Allwaste, Inc., a former member of the Corporation's index of peer companies,
was acquired on July 31, 1997 by Philip Services Corp. As a result of this
transaction, the securities of Allwaste, Inc. are no longer publicly traded,
and the company is therefore not included in the Corporation's index of peer
companies for 1997. The Corporation considers itself a part of the resource
recovery industry, along with the other companies in the peer index.
[Stock Performance Graph]
Research Data Group Peer Group Total Return Worksheet
Imco Recycling Inc (IMR)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Imco Recycling Inc IMR 100.00 80.17 100.73 164.02 98.97 109.94
PEER GROUP 100.00 75.63 87.14 81.30 75.83 112.48
S & P 500 110.00 110.08 111.53 153.45 188.68 251.64
S & P SMALLCAP 600 100.00 118.79 113.12 147.01 178.35 223.98
</TABLE>
The foregoing graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Corporation specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
14
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Corporation to or on behalf of the
Corporation's chief executive officers and each of the other four most highly
compensated executive officers of the Corporation determined as of the end of
the last fiscal year (herein referred to collectively as the "Named Executive
Officers") for the fiscal years ended December 31, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
--------------------------------------- -----------------------
Other annual Securities underlying All other
Name and Principal Position Year Salary Bonus(2) compensation options (#)compensation(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 $320,833 $243,000 -- 155,000 --
D.V. Ingram 1996 -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $ 29,087 -- -- -- $ 1,031
F.H. Romanelli (1) 1996 $275,000 -- -- 56,000 $12,375
President and Chief Executive Officer 1995 $275,000 $202,000 -- 18,050 $ 730
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $247,058 $183,000 -- 95,000 $13,770
R.L. Kerr 1996 $214,700 -- -- 33,000 $12,307
President and Chief Operating Officer 1995 $214,700 $151,000 $18,144(4) 13,800 $11,286
- -----------------------------------------------------------------------------------------------------------------------------------
P.V. Dufour 1997 $232,000 $175,400 -- 95,000 $13,935
Executive Vice President, Chief 1996 $199,000 -- -- 33,000 $11,985
Financial Officer and Secretary 1995 $199,000 $138,000 -- 12,800 $11,589
- -----------------------------------------------------------------------------------------------------------------------------------
T.W. Rogers 1997 $172,000 $72,000 -- 10,000 $13,478
Senior Vice President, Marketing 1996 $161,500 -- -- 12,500 $11,423
and Sales 1995 $161,500 $112,000 -- 9,000 $11,139
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $161,000 $45,700 -- 10,000 $13,408
C.L. Newton 1996 $150,500 -- -- 12,500 $11,257
Senior Vice President, Operations 1995 $150,500 $ 96,000 -- 8,500 $11,050
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Romanelli resigned as the Corporation's President and Chief Executive
Officer on February 7, 1997.
(2) Amounts represent cash bonus payments made to Named Executive Officers (a)
in 1998 and 1997 with respect to fiscal year 1997; (b) in 1997 and 1996
with respect to fiscal year 1996; and (c) in 1996 and 1995 with respect to
fiscal year 1995.
(3) Represents compensation paid or accrued pursuant to the Corporation's
Retirement Savings Plan and Executive Life and Health Insurance Programs
described below.
Retirement Savings Plan. Executive officers who have served for at least
one year are eligible to participate in the Corporation's Retirement
Savings Plan, which includes both a profit sharing plan feature and a
401(k) feature.
15
<PAGE>
The Corporation contributed the following amounts to the Retirement Savings
Plan for the accounts of the Named Executive Officers during 1997, 1996 and
1995:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Don V. Ingram -- -- --
Frank H. Romanelli $ 1,031 $12,375 --
Richard L. Kerr $12,750 $12,307 $10,500
Paul V. Dufour $12,750 $11,985 $10,500
Thomas W. Rogers $12,750 $11,423 $10,500
C. Lee Newton $12,750 $11,257 $10,500
</TABLE>
EXECUTIVE LIFE INSURANCE PROGRAMS. The Corporation has entered into
split-dollar life insurance agreements with certain of the Named Executive
Officers to provide each of them with death benefits of $500,000 ($350,000
in the case of Mr. Newton) under life insurance policies. Under the split-
dollar life insurance agreements, the Corporation paid the following
premiums on behalf of the following officers with respect to term life
insurance portions of these policies during 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Don V. Ingram -- -- --
Frank H. Romanelli -- $ 785 $ 730
Richard L. Kerr $1,020 $ 861 $ 786
Paul V. Dufour $1,185 $1,171 $1,089
Thomas W. Rogers $ 728 $ 686 $ 639
C. Lee Newton $ 658 $ 601 $ 550
</TABLE>
(4) Represents reimbursements of moving expense to Mr. Kerr under the
Corporation's relocation policy.
16
<PAGE>
STOCK OPTIONS
The options shown below were awarded during 1997 pursuant to the 1992 Stock
Option Plan and the Annual Incentive Program:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of total
Number of securities options granted to
underlying options employees in fiscal Exercise or Hypothetical Grant
Name granted year base price Expiration date Date Value (1)
- -----------------------------------------------------------------------------------------------------------------------------------
(#) (%) ($/Sh)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
D.V. Ingram 40,000 (2) 7.3% $15.000 3/20/2002 $150,800
100,000 (2) 18.3% $15.625 5/13/2002 $398,000
15,000 (3) 2.7% $15.500 12/19/2007 $66,300
- -----------------------------------------------------------------------------------------------------------------------------------
F. H. Romanelli -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
R.L. Kerr 20,000 (2) 3.7% $15.000 3/20/2002 $75,400
55,000 (2) 10.1% $15.625 5/13/2002 $218,900
20,000 (3) 3.7% $15.500 12/19/2007 $88,400
- -----------------------------------------------------------------------------------------------------------------------------------
P.V. Dufour 20,000 (2) 3.7% $15.000 3/20/2002 $75,400
55,000 (2) 10.1% $15.625 5/13/2002 $218,900
20,000 (3) 3.7% $15.500 12/19/2007 $88,400
- -----------------------------------------------------------------------------------------------------------------------------------
T.W. Rogers 10,000 (3) 1.8% $15.500 12/19/2007 $44,200
- -----------------------------------------------------------------------------------------------------------------------------------
C.L. Newton 10,000 (3) 1.8% $15.500 12/19/2007 $44,200
- -----------------------------------------------------------------------------------------------------------------------------------
Executive Group 80,000 14.6% $15.000 3/20/2005 $301,600
210,000 38.4% $15.625 5/13/2005 $835,800
91,000 16.6% $15.500 12/19/2007 $402,220
- -----------------------------------------------------------------------------------------------------------------------------------
Non-Employee Director Group 11,670 2.1% $17.125 12/15/2007 $39,561
- -----------------------------------------------------------------------------------------------------------------------------------
Non-Executive Officer, Employee
and Consultant Group 25,000 4.6% $16.625 5/27/2007 $124,250
129,400 23.7% $15.500 12/19/2007 $571,948
</TABLE>
(1) The options are valued pursuant to the Black-Scholes valuation model, based
upon the following assumptions: (a) expected stock price volatility
calculated using monthly changes in stock price since January 1994,
resulting in a stock price volatility of 0.293; (b) a risk-free rate of
return calculated using the interest rates of five-year U.S. Treasury notes
as of the date of the grant, resulting in a risk-free rate of return
assumption of 6.38%, 6.42%, 6.50%, 5.72% and 5.76% for options granted on
March 20, 1997, May 13, 1997, May 27, 1997, December 15, 1997 and December
19, 1997, respectively; (c) a weighted dividend yield assumption of 1.23%,
determined by dividing the current $0.20 per share annualized dividends by
the fair market value of the common stock on the date of the grant; and (d)
a time of exercise assumption of four years (although the actual option
term is ten years, that period was reduced for valuation purposes to
reflect the non-transferability, vesting schedule and risk of forfeiture of
the options).
17
<PAGE>
(2) These options will vest in three equal annual increments beginning on the
first anniversary date of the grant. The options provide for an
accelerated vesting schedule based upon the attainment of certain market
prices per share of the Corporation's Common Stock. The 1992 Stock Option
Plan and the Annual Incentive Program provide that in the event of a
"change in control" of the Corporation (as defined in the plans), all stock
options will become fully vested.
(3) These options will vest in three equal annual increments beginning on the
first anniversary date of the grant.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Executive Officers concerning the exercise of options granted under the
Corporation's Amended and Restated Stock Option Plan and 1992 Stock Option
Plan during the last fiscal year and unexercised options under the Amended
and Restated Stock Option Plan, the 1992 Stock Option Plan and the Annual
Incentive Program held as of the end of the fiscal year:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
Number of Number of
shares Value of shares Value of
underlying unexercised underlying unexercised
unexercised in-the-money unexercised in-the-money
Shares acquired Value options at options at options at options at
Name on exercise (#) realized (1) 12/31/97(#) 12/31/97 (2) 12/31/97 (#) 12/31/97 (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D.V. Ingram 16,667 $93,752 87,916 $ 44,793 243,536 $94,688
- -------------------------------------------------------------------------------------------------------------------
F.H. Romanelli 50,667 $143,704 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
R.L.Kerr -- -- 117,000 $ 466,560 135,600 $93,688
- -------------------------------------------------------------------------------------------------------------------
P.V. Dufour -- -- 189,233 $1,025,444 133,657 $88,744
- -------------------------------------------------------------------------------------------------------------------
T.W. Rogers -- -- 106,667 $ 580,994 32,833 $35,656
- -------------------------------------------------------------------------------------------------------------------
C.L. Newton 10,000 $141,100 122,234 $ 856,470 31,766 $33,463
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Common Stock on the date
of exercise multiplied by the number of shares to which the exercise
relates.
(2) The last reported sale price of the Common Stock on the ("NYSE") composite
tape on December 31, 1997 was $16.0625 per share.
SEVERANCE ARRANGEMENTS
In February 1997, Mr. Romanelli resigned as the Corporation's President and
Chief Executive Officer. The Corporation entered into a Consulting Agreement
with Mr. Romanelli pursuant to which the Corporation agreed to pay Mr. Romanelli
a monthly retainer of $20,000
18
<PAGE>
for a period not to exceed 18 months. The Consulting Agreement will expire
on August 1, 1998 unless earlier terminated upon the occurrence of certain
conditions.
DIRECTORS' COMPENSATION
The Annual Incentive Program provides that each non-employee director
shall be granted as a retainer on a quarterly basis (i) a number of shares of
Common Stock to be determined from time to time by the Board (the "retainer
shares") plus (ii) a cash payment equal to the fair market value of the
retainer shares, determined over the five successive trading days prior to
the quarterly retainer award date. If a director so elects prior to the
beginning of the fiscal quarter, the director may take a total retainer for
that quarter equal to twice the number of the retainer shares, in lieu of the
cash portion of the quarterly retainer for such quarter. During 1997, the
number of shares determined by the Board to constitute the number of retainer
shares to be granted each quarter to each non-employee director was 250
shares; the aggregate number of shares issued by the Corporation as retainer
shares during 1997 was 7,778 and the aggregate cash payments made were
$78,734. In addition, any director serving as a member of a committee of the
Board is entitled to receive $750 per committee meeting attended and $250 for
telephonic meetings. The Chairman of the Compensation Committee is to
receive an annual cash retainer of $4,000; the Chairmen of the other standing
committees are each to receive annual retainers of $2,000.
The 1992 Stock Option Plan provides that each non-employee director will
automatically be granted on December 15th of each year a nonqualified stock
option to purchase that number of shares of Common Stock determined by
dividing the aggregate fair market value (determined over the previous four
fiscal quarters when calculating the fair market value of the Common Stock
retainer component) of the retainer granted to each director by the fair
market value per share of Common Stock on December 15th. On December 15,
1997, pursuant to the 1992 Stock Option Plan, each such non-employee director
was granted an option to purchase 1,945 shares of Common Stock. The exercise
price per share with respect to these options granted is $17.125. See
"Proposal to Approve Amendment to the IMCO Recycling Inc. 1992 Stock Option
Plan."
The Corporation previously had in effect a Consulting Agreement with Mr.
Ingram on a month-to-month basis with respect to operations of the
Corporation. The Consulting Agreement was terminated effective February 1,
1997. A total of $15,000 was paid to Mr. Ingram under the Consulting
Agreement during 1997 prior to its termination.
COMPLIANCE WITH SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers, directors and persons who own more than 10% of the
Corporation's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms filed by such person.
Based solely on the Corporation's review of such forms furnished to the
Corporation and written representations from certain reporting persons, the
Corporation believes that all filing
19
<PAGE>
requirements applicable to the Corporation's executive officers, directors
and 10% stockholders were complied with, except that Richard L. Kerr,
President of the Corporation, had inadvertently incorrectly reported on Form
4 one transaction during 1995, which resulted in overstating his Common Stock
beneficial ownership by 59 shares. This mistake was corrected by amendment to
Form 4 filed in August 1997.
PROPOSAL TO INCREASE AUTHORIZED SHARES
THE PROPOSAL
The Board seeks stockholder approval to amend Article Fourth of the
Corporation's Certificate of Incorporation to increase the number of
authorized shares of Common Stock of the Corporation from 20,000,000 to
40,000,000 shares. This proposal has been adopted by the Board subject to
approval by the stockholders of the Corporation, and is attached hereto as
Appendix A and made a part hereof.
Of the 20,000,000 shares of Common Stock authorized for issuance under
the Certificate of Incorporation, there are only approximately 1,575,125
shares unissued and unreserved. As of the Record Date, 16,502,111 shares of
Common Stock were outstanding and 1,922,764 shares of Common Stock were
reserved for issuance under the Corporation's existing stock option and
equity incentive plans. Approval of the amendments to the Annual Incentive
Program and the 1992 Stock Option Plan without an increase in the
Corporation's outstanding Common Stock would result in the Corporation having
only approximately 775,125 authorized and unreserved shares to issue under
its Certificate of Incorporation.
The proposed amendment increases the number of authorized shares of
Common Stock by 20,000,000 shares. This proposed increase has been
recommended by the Board to assure that an adequate supply of authorized and
unissued shares is available for general corporate needs, such as employee
benefit plans, any future stock dividends and other distributions to
stockholders, raising additional capital and other financing arrangements, the
conversion of any other securities (such as warrants and preferred stock) that
may be issued by the Corporation, and acquisitions by the Corporation of other
businesses if favorable opportunities become available. It is important for
the Corporation's Board of Directors to have the flexibility to act promptly
to address future business needs as they arise. Except for issuances of
shares of Common Stock pursuant to the Corporation's stock option and equity
incentive plans, the Corporation has no present plans, arrangements or
understandings to issue any additional shares of Common Stock. In addition,
from time to time, the Corporation considers opportunities to acquire other
businesses in which it may use shares of Common Stock as consideration. If
the Corporation were to pursue any such opportunity prior to the approval of
the proposed amendment to the Corporation's Certificate of Incorporation, it
is contemplated that the aggregate number of shares to be issued in such
acquisitions would not exceed the number of currently unreserved and
otherwise uncommitted shares of Common Stock.
If approved by the stockholders, the additional authorized shares of
Common Stock would be available for issuance at the discretion of the Board
of Directors without further stockholder approval (subject to applicable
Delaware law and NYSE rules), and without the delay and expense incident to
the holding of a special meeting of stockholders to consider any specific
issuance. The rules of the NYSE require stockholder approval (i) in
connection with the acquisition of certain stock or assets, including another
business, from a director, officer or substantial stockholder, or from an
entity in which one of such persons has a substantial direct
20
<PAGE>
or indirect interest, (ii) in a transaction or a series of transactions
(except for a public offering of Common Stock for cash) that would result in
an increase in the number of shares or voting power of the outstanding shares
by 20% or more, (iii) where the issuance of Common Stock would result in a
change of control of the Corporation or (iv) in connection with a stock
option or stock purchase plan under which stock may be acquired by officers
or directors.
While the Board of Directors is of the opinion that the proposed
amendment is in the best interests of the Corporation and its stockholders,
the Board recognizes that there may be some disadvantages to the
stockholders. The authorized but unissued shares of Common Stock could be
used by incumbent management to make more difficult a change in control of
the Corporation. Under certain circumstances, such shares could be used to
frustrate persons seeking to effect a takeover or otherwise gain control of
the Corporation. The increase in authorized shares of Common Stock might
have the effect of discouraging an attempt by another person, through the
acquisition of a substantial number of shares of Common Stock, to acquire
control of the Corporation with a view to imposing a merger, a sale of all or
any part of the Corporation's assets or a similar transaction, since the
issuance of any shares could be used to dilute the stock ownership of shares
of the Corporation's voting stock held by that person. Any transaction which
may be so discouraged could be a transaction that the Corporation's
stockholders might consider to be in their best interests. The Board of
Directors does have a fiduciary duty to act in the best interests of the
Corporation's stockholders at all times. See also "--Potential Anti-Takeover
Effects of Proposal."
The Corporation's Board of Directors has not proposed the amendments to
the Certificate of Incorporation as an anti-takeover measure. Any actions
taken by the Corporation to discourage an attempt to acquire control of the
Corporation may result in stockholders not being able to participate in any
possible premiums which may arise in the absence of anti-takeover provisions,
as well as may be used to entrench management's position even if such change
in control may be beneficial to stockholders.
The approval of the amendment to Article Fourth of the Certificate of
Incorporation will not of itself cause any change in the capital stock or
surplus of the Corporation. However, any future issuance of shares of Common
Stock could have a dilutive effect on the Corporation's per share earnings
and the stockholders' voting power in the Corporation.
DESCRIPTION OF CAPITAL STOCK
The Common Stock for which authorization is sought would become part of
the existing class of Common Stock. The new shares, when issued, would have
the same rights and privileges as the shares of Common Stock now outstanding.
Holders of Common Stock are entitled to such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. The Corporation has paid a regular quarterly cash
dividend on its shares of Common Stock since 1996. During 1997, the
Corporation declared and paid quarterly cash dividends of $0.05 per share.
Dividends in such amounts as may be determined by the Board of Directors may
be declared and paid on the
21
<PAGE>
Common Stock from time to time out of any funds legally available for the
payment of dividends. The Corporation's long-term debt instruments limit the
amount of cash dividends the Corporation can pay. Annual limitations are as
follows: $5.0 million for 1998, $6.0 million for each year in 1999 and 2000,
and $8.0 million for each year after the year 2000. The Corporation intends
to continue paying cash dividends on its Common Stock, although future
dividend declarations are at the discretion of the Corporation's Board of
Directors and will depend on the Corporation's level of earnings, cash flow,
financial requirements, economic and business conditions and other relevant
factors, including the restrictions contained in the Corporation's long-term
debt instruments.
No stockholder of the Corporation has any preemptive right to subscribe
for or purchase any of the shares of Common Stock. Holders of the Common
Stock have no redemption, conversion or sinking fund rights. Holders of
Common Stock are entitled to one vote per share on all matters submitted to a
vote of holders of Common Stock and do not have any cumulative voting rights.
In the event of a liquidation, dissolution or winding-up of the Corporation,
the holders of Common Stock are entitled to share equally and ratably in the
assets of the Corporation, if any, remaining after the payment of all debts
and liabilities of the Corporation and the liquidation preference of any
outstanding Preferred Stock.
The Board of Directors is authorized to provide for the issuance of
Preferred Stock in one or more series and to fix the designations,
preferences, powers and relative, participating, optional or other rights and
restrictions thereof, including without limitation, the dividend rate,
conversion rights, voting rights, redemption price and liquidation
preference, to fix the number of shares constituting any such series and to
increase and decrease the number of shares of such series. The Board of
Directors of the Corporation, without obtaining stockholder approval, may
issue shares of Preferred Stock with voting rights or conversion rights which
could adversely affect the voting power of the holders of the Common Stock.
The Corporation's Certificate of Incorporation currently authorizes the
Corporation to issue up to 8,000,000 shares of Preferred Stock. The proposed
amendment would effect no change in the Corporation's Preferred Stock
authorized for issuance.
POTENTIAL ANTI-TAKEOVER EFFECTS
The additional shares of Common Stock proposed to be authorized would be
available for issuance by the board in opposing an attempt by another
corporation or individual to acquire or to take control of the Corporation
which management may consider to not be in the best interests of the
Corporation. For example, the Corporation might seek to frustrate a takeover
attempt by making a private sale of a large block of shares to a third party
who was opposed to such an attempt or by issuing shares of Preferred Stock or
stock rights to stockholders, which shares or rights would acquire certain
characteristics (such as conversion or redemption rights) upon an unfriendly
takeover.
The provisions of the Corporation's Certificate of Incorporation and Bylaws
summarized below may be considered to have an anti-takeover effect and may
delay, defer or prevent a tender
22
<PAGE>
offer or takeover attempt that a stockholder might consider to be in his or
her best interests, including those that might result in a premium over the
market price for the shares.
The Board of Directors of the Corporation is divided into three classes
that are elected for staggered three-year terms. Stockholders may remove a
director, or the entire Board of Directors with or without cause, by a
majority of the voting power of the then-outstanding shares of voting stock.
A vacancy may be filled by a majority vote of the directors remaining in
office. The number of directors to constitute the entire Board of Directors
may be determined only by the Board of Directors.
Pursuant to the Certificate of Incorporation, the Corporation's Board of
Directors by resolution may establish one or more series of Preferred Stock
having such number of shares, designations, relative voting rights, dividend
rates, liquidation and other rights, preferences and limitations as may be
fixed by the Board of Directors without any further stockholder approval.
These include, among other things, each share having more than one vote,
voting as a class on certain matters, and special conversion rights or
redemption features. Such rights, preferences, powers and limitations as may
be established could have the effect of impeding or discouraging the
acquisition of control of the Corporation.
The Corporation is subject to Section 203 of the Delaware General
Corporation Law ("Section 203") which contains certain restrictions on the
ability of an "interested stockholder" (defined as a stockholder owning 15%
or more of a corporation's voting stock) to engage in a "business
combination" with such corporation. For purposes of Section 203, "business
combination" is defined broadly to include mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
The Corporation's Bylaws provide generally that they may be amended by
the Board of Directors or by the affirmative vote of holders of a majority of
shares of Common Stock outstanding and entitled to vote. However, the
Certificate of Incorporation states that certain sections of the Bylaws
regarding the election, qualification and removal of directors may only be
amended with the affirmative vote of at least 60% of the outstanding shares
of the Corporation entitled to vote.
The Board recommends that the stockholders vote FOR the approval of the
proposed amendment to the Corporation's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 20,000,000 to
40,000,000 shares.
23
<PAGE>
PROPOSAL TO APPROVE AMENDMENT TO THE IMCO RECYCLING INC.
ANNUAL INCENTIVE PROGRAM
GENERAL
The Corporation's Annual Incentive Program (the "Incentive Plan") was
originally adopted by the Board in February 1996 and approved by the
stockholders at the Corporation's 1996 Annual Meeting. On February 25, 1998,
the Board approved, subject to approval by the Corporation's stockholders, an
amendment to the Incentive Plan, which increases the number of shares of
Common Stock reserved for issuance under the Incentive Plan from 500,000 to
900,000 shares, subject to adjustments to reflect possible future stock
splits, stock dividends, recapitalizations, reorganizations, mergers,
combinations or exchanges of shares, or similar transactions.
The provisions of the Incentive Plan are summarized below. The
statements herein concerning the terms and provisions of the amendment to the
Incentive Plan are summaries only and are qualified in their entirety by
reference to the full text of the amendment, a copy of which is attached
hereto as Appendix B.
The Board of Directors believes that maintaining a source of shares for
grants of bonuses, directors retainers and stock options is in the best
interests of the Corporation in order for the Corporation to attract and
retain talented individuals. The ability of the Corporation to make stock
option grants to a broad class of Incentive Plan stock option participants
preserves the Corporation's flexibility to attract new employees as well as
reward existing employees for their contributions. The Incentive Plan
increases the Corporation's ability, at any time and from time to time, to
reward and retain those individuals who have been identified as important to
the success of the Corporation or its subsidiaries.
Eligible participants under the discretionary stock option provisions of
the Incentive Plan include key employees, consultants, officers
and directors of the Corporation and its subsidiaries selected by the
Committee (or the Subcommittee) from time to time. At December 31, 1997, the
Corporation estimates that approximately 90 individuals were eligible to
participate in the Incentive Plan, 82 of whom were participants. As of March
20, 1998 options to purchase 477,400 shares of Common Stock had been granted
under the Incentive Plan. See "Compensation Committee Report to
Stockholders." As of March 20, 1998, only 10,104 shares of Common Stock were
available for future grants of options under, and for other purposes of, the
Incentive Plan.
For information concerning stock options granted during 1997 under the
Incentive Plan to the Named Executive Officers, the Corporation's executive
officers as a group, all non-employee directors as a group, and all
non-executive officers, employees and consultants as a group, see
"Remuneration of Directors and Officers -- Stock Options."
24
<PAGE>
TERMS OF THE INCENTIVE PLAN
Unless sooner terminated by action of the Board, the Incentive Plan will
terminate on February 28, 2006, and thereafter no awards may be granted
thereunder.
BONUSES. The Subcommittee has the authority to grant bonuses to
officers of the Corporation or any majority-owned subsidiary at such time,
and in such amounts and under such terms as the Subcommittee determines in
accordance with the Incentive Plan. The Incentive Plan authorizes the
Subcommittee to award two types of bonuses: (i) a ROTA bonus, and (ii) an EPS
bonus. The Subcommittee is authorized to grant ROTA bonuses to officers if
the Corporation's return on total assets ("ROTA") is greater than ten percent
(10%) with respect to a fiscal year. The Incentive Plan also provides that
participants selected by the Subcommittee may be eligible for a bonus based
on the Corporation's earnings per share ("EPS") for the current fiscal year
as compared with the average of the Corporation's EPS for the prior three
years. The maximum bonus amounts for any participant as calculated above may
be reduced by an amount of up to 50% by the Subcommittee in its sole
discretion; however, the total maximum bonus amounts to any participant may
not be increased. In addition, the maximum total bonus payable to any
participant with respect to any bonus year shall not exceed $750,000. On
June 1 of each year, each participant shall irrevocably elect, in writing,
the percentages of such participant's bonus to be paid in cash and in shares
of Common Stock (the "Annual Election"). On the preliminary payment date,
which shall be in the last month of the fiscal year in question, the
Subcommittee shall calculate the bonuses and distribute 80% of the aggregate
of the actual ROTA bonus and EPS bonus, if any, awarded to a participant. On
the final payment date, which shall occur after the Corporation's independent
auditors render their final audit opinion with respect to the fiscal year in
question, the Subcommittee shall calculate the bonus, and distribute the
portions of the bonus which had not been previously distributed to
participants on the preliminary payment date.
The Incentive Plan does not prohibit the Corporation from granting
discretionary bonuses to employees, officers, non-employee directors or
consultants from time to time.
OPTIONS. The terms of the Incentive Plan permit the Committee (or the
Subcommittee, in the case of officers and non-employee directors) from time
to time, but not less often than annually, to grant options to selected key
members of management of the Corporation or any majority-owned subsidiary
eligible to receive grants of options under the Incentive Plan, if ROTA for
that particular fiscal year exceeds 15%. In addition, the Incentive Plan
permits the Committee at any time and from time to time to grant options on a
discretionary basis to a broad base of potential participants (i.e., key
employees, officers, non-employee directors and consultants of the
Corporation or any majority-owned subsidiary), without regard to whether the
15% ROTA amount has been attained with respect to that fiscal year.
The aggregate number of shares of Common Stock that may be represented
by grants of stock options made to any individual participant under the
Incentive Plan in any fiscal year may not exceed 100,000 shares.
The exercise price for nonqualified stock options granted pursuant to the
Incentive Plan cannot be less than the fair market value of Common Stock on the
date of grant, and the
25
<PAGE>
Committee or Subcommittee shall provide for the exercise of such options in
installments and on such terms, conditions and restrictions as it may
determine. The exercise price for an incentive stock option cannot be less
than 100% (110% in the case of certain employees owning more than 10% of the
outstanding shares of Common Stock) of the fair market value of Common Stock
on the date of grant, and the Committee shall provide for the exercise of
such options in installments and on such terms, conditions and restrictions
as it may determine. The option period may not extend longer than ten years
from the date the option is granted and, in the case of incentive stock
options, is limited to five years from the date of grant for certain eligible
participants owning more than 10% of the outstanding shares of Common Stock,
subject to earlier expiration upon death, disability, retirement or
termination of service.
The options granted under the Incentive Plan are not transferable other
than by will or by the laws of descent and distribution or pursuant to the
terms of a qualified domestic relations order. The exercise of incentive
stock options shall be subject to a $100,000 calendar year limit based on the
fair market value of the Common Stock at the time the option was granted.
During the lifetime of the optionee, his stock options may be exercised only
by him unless the particular stock option agreement provides that his
guardian or legal representative may do so.
EXERCISE OF OPTIONS; RELOAD OPTIONS. The exercise price of options
granted under the Incentive Plan may be paid in cash or in shares of Common
Stock valued at their fair market value on the date of exercise (or in any
combination of cash and shares of Common Stock having an aggregate fair
market value equal to the exercise price). In the event that shares are
delivered by a participant in payment of all of a portion of the exercise
price and/or shares to be delivered to, or withheld by, the Corporation in
payment of the Corporation's tax withholding obligations upon exercise, the
participant so exercising a nonqualified stock option shall automatically be
granted a replacement nonqualified stock option (or a participant exercising
an incentive stock option shall automatically be granted a replacement
incentive stock option) (in either case, a "Reload Stock Option") to purchase
that number of shares so delivered to, or withheld by, the Corporation at an
exercise price equal to the fair market value per share of Common Stock on
such date of exercise. The option period for a Reload Stock Option will
commence on the date of grant and expire on the expiration date of the
original stock option it replaces.
In the event that a participant exercises a stock option and receives a
Reload Stock Option as described above, the participant is restricted from
transferring or pledging that number of shares received by the participant
upon exercise of the original stock option, which is equal to one-half of the
total number of shares delivered to and/or withheld by the Corporation upon
the participants exercise of the stock option (the "Restricted Stock").
These restrictions will continue in effect until the earliest to occur of the
following: (i) the expiration of five years from the date of issuance of the
Restricted Stock, (ii) in the case of an employee, the retirement of such
participant from the Corporation or the subsidiary in accordance with
standard retirement policies, (iii) in the case of a non-employee director,
officer or consultant of the Corporation, the cessation of service to the
Corporation of such participant in such capacity, (iv) the death of such
participant, (v) the total and permanent disability of such participant, or
(vi) a Change in Control of the Corporation (as defined in the Incentive
Plan). However, shares of Restricted Stock may be used in payment of the
exercise price of a stock option or in satisfaction of the Corporation's tax
withholding obligations upon any such exercise. Except for those
restrictions on transfer,
26
<PAGE>
participants receiving shares of Restricted Stock shall have all of the
rights of a stockholder of the Corporation, including the right to vote the
shares and the right to receive any dividends or distributions thereon. In
addition, the Committee is empowered, in its discretion, to waive the
restrictions on transfer imposed on shares of Restricted Stock.
TERMINATION OF EMPLOYMENT OR SERVICE. The Incentive Plan states that
upon termination of an optionee's employment or service with the Corporation
for any reason other than death, total and permanent disability, or
retirement, his nonqualified stock option will be exercisable for a period of
180 days after such termination to the extent the option was exercisable on
the date of such termination (so long as the option is exercised prior to the
date of its stated expiration). In the event of an optionee's death, total
and permanent disability or retirement, his nonqualified stock option will be
exercisable for a period of one year after such termination to the extent the
option was exercisable on the date of such termination (so long as the option
is exercised prior to the date of its stated expiration). With respect to
incentive stock options, the options will terminate 90 days after termination
of employment, except that if the optionee's employment with the Corporation
terminates by reason of death or total and permanent disability, the options
will terminate 180 days after the termination of the optionee's employment
with the Corporation. The Incentive Plan provides that more restrictive
terms than the foregoing concerning exercises following termination of
service may be provided for in the particular stock option agreement.
However, the Committee (or Subcommittee, in the case of officers) is also
authorized, in its discretion, to extend the date upon which any option
granted under the Incentive Plan ceases to be exercisable.
The Incentive Plan provides that if an optionee who is an employee
(including any employee-director) retires in accordance with standard
policies of the Corporation, all stock options held by the optionee will
become fully exercisable and vested. If an option granted under the
Incentive Plan terminates or expires without having been exercised in full,
the unexercised shares subject to that option will be available for further
grants of options under the Incentive Plan.
The Incentive Plan provides that in the event of a Change in Control (as
defined therein) of the Corporation, all stock options will become fully
exercisable and vested, regardless of provisions under option agreements
requiring shares to be exercised in installments.
DIRECTORS' ANNUAL RETAINER
The Corporation may pay an annual retainer, in amounts as may be
established and modified from time to time at the discretion of the Board, to
non-employee directors with respect to their service as members of the Board
and committees thereof. The Incentive Plan provides that each non-employee
director shall be granted as a retainer on a quarterly basis (i) a number of
shares of Common Stock to be determined from time to time by the Board (the
"retainer shares") plus (ii) a cash payment equal to the fair market value of
the retainer shares, determined over the five successive trading days prior
to the quarterly retainer award date. If a director so elects prior to the
beginning of the fiscal quarter, the director may take a total retainer for
that quarter equal to twice the number of the retainer shares in lieu of the
cash portion of the quarterly retainer for such quarter. During 1997, the
number of shares determined by the Board to constitute the
27
<PAGE>
number of retainer shares to be granted each quarter to each non-employee
director was 250 shares. See "Remuneration of Directors and Officers."
ADMINISTRATION OF THE INCENTIVE PLAN
The Incentive Plan is administered by the Compensation Committee of the
Board and the Executive Compensation Subcommittee. The Committee (or
Subcommittee) may grant options and bonuses subject to the terms of the
Incentive Plan and determine the terms of options granted to participants.
See "Compensation Committee Report to Stockholders".
AMENDMENT OF THE INCENTIVE PLAN
The Incentive Plan provides that the Board may from time to time
discontinue or amend the Incentive Plan without the consent of the
participants, provided that no such amendment or termination will adversely
affect any rights of participants with respect to options or bonuses
previously granted or awarded without that participant's consent.
ADJUSTMENTS
The Incentive Plan provides that the number of shares issuable in
payment of bonuses and upon exercises of stock options and the exercise price
of such options are subject to such adjustments as the Corporation may deem
appropriate to reflect any stock dividend, stock split, share combination,
exchange of shares, recapitalization, merger, consolidation, reorganization,
sale of substantially all of the Corporation's assets, liquidation or such
similar events or occurrences, of or by the Corporation.
CERTAIN FEDERAL INCOME TAX ASPECTS
The following is a summary of the principal federal income tax
consequences associated with the Incentive Plan. It does not describe all
federal income tax consequences under the Incentive Plan, nor does it
describe foreign, state or local tax consequences. Each participant is urged
to consult his or her personal tax advisor to determine the specific tax
consequences to him or her with respect to the Incentive Plan.
BONUSES. Under current law, bonuses paid in cash will be included for
federal income tax purposes in the recipient's income as taxable compensation
in the year paid, and the Corporation will generally receive an income tax
deduction at the same time and for the same amount. Similarly, the fair
market value of shares of Common Stock issued in payment of a portion of a
recipient's bonus shall be recognized as taxable income to the recipient in
the year issued, and the Corporation will generally receive an income tax
deduction at the same time and for the same amount.
NONQUALIFIED STOCK OPTIONS. The Incentive Plan is not a qualified plan
within the meaning of Section 401 of the Code. The granting of a
nonqualified stock option will not result in federal income tax consequences
to either the Corporation or the optionee. Upon exercise of a nonqualified
stock option, the optionee will recognize ordinary income in an amount equal
to
28
<PAGE>
the difference between the fair market value of the shares on the date of
exercise and the exercise price, and the Corporation will be entitled to a
corresponding deduction.
For purposes of determining gain or loss realized upon a subsequent sale
or exchange of such shares, the optionee's tax basis will be the sum of the
exercise price paid and the amount of ordinary income, if any, recognized by
the optionee. Any gain or loss realized by an optionee on disposition of
such shares generally will be a long-term capital gain or loss (if the shares
are held as a capital asset for at least one year) and will not result in any
tax deduction to the Corporation.
INCENTIVE STOCK OPTIONS. In general, no income will be recognized by an
optionee and no deduction will be allowed to the Corporation at the time of
the grant or exercise of an incentive stock option granted under the
Incentive Plan. When the stock received on exercise of the option is sold,
provided that the stock is held for more than two years from the date of
grant of the option and more than one year from the date of exercise, the
optionee will recognize long-term capital gain or loss equal to the
difference between the amount realized and the exercise price of the option
related to such stock. If these holding period requirements under the Code
are not satisfied, the subsequent sale of stock received upon exercise of an
incentive stock option is treated as a disqualifying disposition. In
general, the optionee will recognize taxable income at the time of a
disqualifying disposition as follows: (i) ordinary income in an amount equal
to the excess of the lesser of the fair market value of the Common Stock on
the date the incentive stock option is exercised or the amount realized on
such disqualifying disposition over the exercise price and (ii) capital gain
to the extent of any excess of the amount realized on such disqualifying
disposition over the fair market value of the Common Stock on the date the
incentive stock option is exercised (or capital loss to the extent of any
excess of the exercise price over the amount realized on disposition). Any
capital gain or loss recognized by the optionee will be long-term or
short-term depending upon the holding period for the stock sold. The
Corporation may claim a deduction at the time of the disqualifying
disposition equal to the amount of the ordinary income the optionee
recognizes.
Although an optionee will not realize ordinary income upon the exercise
of an incentive stock option, the excess of the fair market value of the
shares acquired at the time of exercise over the exercise price is included
in alternative minimum taxable income for purposes of calculating the
optionee's alternative minimum tax, if any, pursuant to Section 55 of the
Code.
WITHHOLDING. Withholding of federal income taxes at applicable rates
will be required in connection with any ordinary income realized by a
participant by reason of the payment of a bonus in cash or in shares of
Common Stock and by reason of the exercise of stock options granted pursuant
to the Incentive Plan. Such taxes may be deducted, withheld or remitted to
the Corporation prior to the receipt of any Common Stock certificates.
The Board recommends that stockholders vote FOR the proposal to approve
amendment to the IMCO Recycling Inc. Annual Incentive Program.
29
<PAGE>
PROPOSAL TO APPROVE AMENDMENT TO THE IMCO RECYCLING INC.
1992 STOCK OPTION PLAN
GENERAL
The Corporation's 1992 Stock Option Plan (the "1992 Plan") was adopted
in 1992 and has since been amended a number of times. In February 1998, the
Board approved, subject to approval by the Corporation's stockholders, an
additional amendment to the 1992 Plan to increase the number of shares of
Common Stock authorized to be issued under the 1992 Plan from 1,150,000
shares to 1,550,000 shares, subject to adjustments to reflect possible future
stock splits, stock dividends, recapitalizations, reorganizations, mergers,
combinations or exchanges of shares, or similar transactions.
The provisions of the 1992 Plan, as proposed to be amended, are
summarized below. The statements herein concerning the terms and provisions
of this amendment are summaries only and are qualified in their entirety by
reference to the full text of this amendment, a copy of which is attached
hereto as Appendix C.
Eligible participants under the 1992 Plan include employees,
non-employee directors, officers and consultants selected by the Compensation
Committee from time to time. At December 31, 1997, the Corporation estimates
that approximately 90 employees, non-employee directors, officers and
consultants were eligible to participate in the 1992 Plan, 70 of whom were
participants. As of March 20, 1998 options to purchase 1,119,773 shares of
Common Stock had been granted to 75 persons under the 1992 Plan at exercise
prices ranging from $13.375 to $23.75 per share, leaving only 30,227 shares of
Common Stock available for future option grants thereunder. As of March 20,
1998, the aggregate market value of the shares of Common Stock underlying
outstanding options under the 1992 Plan was $17,651,000 (based on the closing
sales price per share of $18.00 on the New York Stock Exchange Composite Tape
on such date).
For information concerning stock options granted during 1997 under the
1992 Plan to the Named Executive Officers, the Corporation's executive
officers as a group, all non-employee directors as a group, and all
non-executive officers, employees and consultants as a group, see
"Remuneration of Directors and Officers -- Stock Options."
TERMS OF THE 1992 PLAN
Unless sooner terminated by action of the Board, the 1992 Plan will
terminate on December 15, 2002, and thereafter no options may be granted
thereunder.
NON-EMPLOYEE DIRECTORS. On December 15th of each year, all directors of
the Corporation who are not employees will receive a nonqualified stock
option to purchase that number of shares of Common Stock determined by
dividing the aggregate fair market value (determined over the previous four
fiscal quarters when calculating the fair market value of the Common Stock
retainer component) of the retainer granted to each director by the fair
market value per share of Common Stock on December 15th. The exercise price
for non-employee
30
<PAGE>
director options will be equal to the fair market value per share of Common
Stock on the date of grant, and all such options shall vest and become fully
exercisable after the expiration of six months after the date of grant. The
term of each non-employee director option will expire ten years from the date
of grant, subject to earlier expiration upon death, disability, retirement or
termination of service. All grants of options to non-employee directors under
the 1992 Plan are automatic without any discretion on the part of the
Compensation Committee (or Subcommittee) with respect to the grantee, the
number of shares of Common Stock subject to options to be granted, the term of
the options and the exercise price of the options.
EMPLOYEES, CONSULTANTS AND OFFICERS. The Compensation Committee (or the
Subcommittee, as the case may be) has the authority to grant stock options to
key employees, consultants and officers of the Corporation (including
non-employee officers) or any majority-owned subsidiary at such time, in such
amounts and under such terms as the Compensation Committee or the
Subcommittee determines in accordance with the 1992 Plan.
Terms of the 1992 Plan concerning exercises of stock options, Reload
Stock Options, Restricted Stock, and termination of employment or service are
substantially the same as the corresponding terms of the Incentive Plan. See
"Proposal to Approve Amendment to the IMCO Recycling Inc. Annual Incentive
Program," "--Terms of the Incentive Plan -- Exercise of Options; Reload
Options," and "--Termination of Employment or Service."
ADMINISTRATION OF THE 1992 PLAN
The 1992 Plan is administered by the Compensation Committee of the Board
and the Executive Compensation Subcommittee thereof. The Committee (or
Subcommittee) may grant options subject to the 1992 Plan and determine the
terms of options granted to participants. See "Compensation Committee Report
to Stockholders."
AMENDMENT OF THE 1992 PLAN
The 1992 Plan provides that the Board may from time to time discontinue
or amend the 1992 Plan without the consent of the participants, provided that
no such amendment or termination will adversely affect any rights of
participants with respect to options or bonuses previously granted or awarded
without that participant's consent.
CERTAIN FEDERAL INCOME TAX ASPECTS
The following is a summary of the principal federal income tax
consequences associated with grants of options under the 1992 Plan. It does
not describe all federal income tax consequences under the 1992 Plan, nor
does it describe foreign, state or local tax consequences. Each participant
is urged to consult his or her personal tax advisor to determine the specific
tax consequences to him or her of the 1992 Plan.
NONQUALIFIED AND INCENTIVE STOCK OPTIONS. For a description of certain
federal income tax consequences associated with nonqualified and incentive stock
options granted under the 1992 Plan, see "Proposal to Approve Amendment to the
IMCO Recycling Inc. Annual Incentive
31
<PAGE>
Program -- Certain Federal Income Tax Aspects -- Nonqualified Stock Options,"
and "--Incentive Stock Options."
WITHHOLDING. Withholding of federal income taxes at applicable rates
will be required in connection with any ordinary income realized by a
participant by reason of the exercise of stock options granted pursuant to
the 1992 Plan. A participant must pay such taxes to the Corporation in cash
or Common Stock prior to the receipt of any Common Stock certificates.
The Board recommends that stockholders vote FOR the proposal to approve
the amendment to the IMCO Recycling Inc. 1992 Stock Option Plan.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board, upon the recommendation of its Audit Committee, has selected
Ernst & Young LLP as its independent auditors to examine the consolidated
financial statements of the Corporation for 1998. Stockholders are being
asked to ratify this appointment. The Corporation has been informed that
neither Ernst & Young LLP nor any of its partners have any direct financial
interest or any material indirect financial interest in the Corporation nor
have had any connection during the past three years with the Corporation in
the capacity of promoter, underwriter, voting trustee, director, officer or
employee.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they so desire and
to be available to respond to appropriate questions.
The Board recommends that stockholders vote FOR the ratification of the
appointment of Ernst & Young LLP as the Corporation's independent auditors
for 1998.
OTHER MATTERS
The Corporation will bear all costs of this proxy solicitation. In
addition to soliciting proxies by mail, directors, executive officers and
employees of the Corporation, without receiving additional compensation, may
solicit proxies by telephone, by telegram or in person. Arrangements will
also be made with brokerage firms and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of
shares of the Common Stock, and the Corporation will reimburse such brokerage
firms and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with forwarding such
materials. In addition, the Corporation has retained the services of Kissel-
Blake Inc., a proxy solicitation firm, for assistance in connection with the
Annual Meeting at a cost of approximately $7,000 plus reimbursement of their
reasonable out-of-pocket expenses.
The Board does not know of any business to be presented for
consideration at the Annual Meeting other than that stated in the
accompanying Notice. It is intended, however, that the persons authorized
under the Board's proxies may, in the absence of instructions to the
contrary, vote or act in accordance with their judgment with respect to any
other proposal properly presented for action at such meeting.
32
<PAGE>
The Annual Report to Stockholders for the fiscal year ended December 31,
1997, which includes financial statements, is enclosed herewith. The Annual
Report does not form a part of this Proxy Statement or the materials for the
solicitation of proxies to be voted at the annual meeting.
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES BUT NOT INCLUDING EXHIBITS, WILL BE
FURNISHED AT NO CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS DELIVERED
UPON RECEIPT OF A WRITTEN REQUEST OF SUCH PERSON ADDRESSED TO IMCO RECYCLING
INC., ATTN: PAUL V. DUFOUR, 5215 NORTH O'CONNOR BLVD., SUITE 940, CENTRAL
TOWER AT WILLIAMS SQUARE, IRVING, TEXAS 75039, TELEPHONE (972) 869-6575. THE
CORPORATION WILL ALSO FURNISH SUCH ANNUAL REPORT ON FORM 10-K TO ANY
"BENEFICIAL OWNER" OF SUCH SECURITIES AT NO CHARGE UPON RECEIPT OF A WRITTEN
REQUEST, ADDRESSED TO MR. DUFOUR CONTAINING A GOOD FAITH REPRESENTATION THAT,
AT THE RECORD DATE, SUCH PERSON WAS A BENEFICIAL OWNER OF SECURITIES OF THE
CORPORATION ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 13, 1998. COPIES OF ANY EXHIBIT TO THE FORM 10-K WILL BE FURNISHED UPON
THE PAYMENT OF A REASONABLE FEE.
Information contained in the Proxy Statement relating to the occupations
and security holdings of directors and officers of the Corporation is based
upon information received from the individual directors and officers.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
Paul V. Dufour
Secretary
Irving, Texas
April 9, 1998
33
<PAGE>
APPENDIX A
AMENDMENT
TO
INCREASE AUTHORIZED SHARES
Following is the text of the proposed amendment to Article FOURTH of the
Certificate of Incorporation of the Corporation:
The first paragraph of Article FOURTH of the Corporation's Certificate of
Incorporation is amended so that, as amended, the first paragraph of Article
FOURTH shall be and read as follows:
"FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 48,000,000, 8,000,000 of such shares to be
classified as preferred stock (the "Preferred Stock"), par value $0.10 per
share, and 40,000,000 of such shares to be classified as common stock (the
"Common Stock"), par value $0.10 per share."
A-1
<PAGE>
APPENDIX B
AMENDMENT TO THE
IMCO RECYCLING INC.
ANNUAL INCENTIVE PROGRAM
I. Article III of the IMCO Recycling Inc. Annual Incentive Program is
hereby deleted in its entirety and replaced with the following:
"ARTICLE III
SHARES SUBJECT TO PLAN
Subject to the provisions of Articles XVI and XVII of the Plan,
the aggregate number of shares which may be issued to Participants
under grants of Stock Options and in payment of Bonuses made by the
Committee under the Plan shall be:
(a) 900,000 shares of Common Stock; plus
(b) the number of shares that are delivered or tendered,
or withheld from any exercise, by a Participant as full or partial
payment made to the Company in connection with the exercise price of
any Stock Option or in connection with satisfying the Participant's
tax withholding obligations pursuant to Section 19.6 of the Plan, to
the extent that a Reload Stock Option is granted to purchase such
number of shares so delivered to or withheld by the Company.
The aggregate number of shares of Common Stock that may be represented
by grants of Stock Options made to any Participant under the Plan in
any Bonus Year may not exceed 100,000 shares. Shares to be distributed
and sold under the Plan may be made available from either authorized
but unissued Common Stock or Common Stock held by the Company in its
treasury. Shares that by reason of the expiration or unexercised
termination of a Stock Option are no longer subject to purchase may be
reoffered under the Plan. Shares of Common Stock that are forfeited
pursuant to the terms of the Plan shall be returned to the Plan and
made available for future grant."
B-1
<PAGE>
APPENDIX C
AMENDMENT TO THE
IMCO RECYCLING INC.
1992 STOCK OPTION PLAN
I. Article III of the IMCO Recycling Inc. 1992 Stock Option Plan is hereby
deleted in its entirety and replaced with the following:
"ARTICLE III
SHARES SUBJECT TO PLAN
Subject to the provisions of Articles XII and XIII of the Plan,
the aggregate number of shares which may be issued to Participants
under grants of Stock Options made by the Committee under the Plan
shall be:
a. 1,550,000 shares of Common Stock; plus
b. The number of shares that are delivered or tendered, or withheld
from any exercise, by a Participant as full or partial payment made to
the Company in connection with the exercise price of any Stock Option
or in connection with satisfying the Participant's tax withholding
obligations pursuant to Section 15.7 of the Plan, to the extent that a
Reload Stock Option is granted to purchase such number of shares so
delivered to or withheld by the Company.
The aggregate number of shares of Common Stock that may be
represented by grants of Stock Options made to any Participant under
the Plan during any fiscal year during which the Plan is in effect,
may not exceed 100,000 shares. Shares to be distributed and sold may
be made available from either authorized but unissued Common Stock or
Common Stock held by the Company in its treasury. Shares that by
reason of the expiration or unexercised termination of a Stock Option
are no longer subject to purchase may be reoffered under the Plan."
C-1
<PAGE>
Dear Stockholder:
Enclosed you will find material relating to the Corporation's 1998 Annual
Meeting of Stockholders. The Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the meeting, as summarized
on the attached proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a stockholder, please
remember that your vote is important to us. We look forward to hearing from
you.
IMCO Recycling Inc.
<PAGE>
REVOCABLE PROXY
IMCO RECYCLING INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Don V. Ingram and Paul V. Dufour, or
either of them, each with full power of substitution, as proxies of the
undersigned, with all the powers that the undersigned would possess if
personally present to cast all votes that the undersigned would be entitled
to vote at the Annual Meeting of Stockholders of IMCO Recycling Inc. (the
"Corporation") to be held on Wednesday, May 13, 1998 at the Central Tower at
Williams Square, Twenty-Sixth Floor, La Cima Club, Lakeside Room, 5215 North
O'Connor Blvd., Irving, Texas, at 9:00 a.m., Central Daylight Savings Time,
and at any and all adjournments and postponements thereof (the "Annual
Meeting"), including (without limiting the generality of the foregoing) to
vote and act as follows on the reverse side.
This Proxy will be voted at the Annual Meeting and any adjournments or
postponements thereof as specified. IF NO SPECIFICATIONS ARE MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED ON
THE REVERSE SIDE AND FOR PROPOSALS 2, 3, 4 AND 5. This Proxy hereby
revokes all prior proxies given with respect to the shares of the undersigned.
(Continued on Reverse Side)
<PAGE>
1. * For * Against Election of Directors: The election of the following
nominees to the Board of Directors as Class I Directors unless otherwise
indicated below:
Nominees: Don V. Ingram Steve Bartlett
IN THE EVENT THE UNDERSIGNED WISHES TO WITHHOLD AUTHORITY TO VOTE FOR ANY
PARTICULAR NOMINEE OR NOMINEES LISTED ABOVE, PLEASE SO INDICATE BY CLEARLY
AND NEATLY LINING THROUGH OR STRIKING OUT THE NAME OF ANY SUCH NOMINEES OR
NOMINEES.
2. * For * Against * Abstain The proposal to amend the Corporation's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 20,000,000 to 40,000,000 shares.
3. * For * Against * Abstain The Proposal to amend the Corporation's Annual
Incentive Program.
4. * For * Against * Abstain The Proposal to amend the Corporation's 1992
Stock Option Plan.
5. * For * Against * Abstain The Proposal to ratify the appointment of Ernst
& Young LLP as the independent certified public accountants of the
Corporation for 1998.
6. In their discretion, upon such other matters as may properly come
before the meeting or any adjournment thereof.
Please complete, date, sign and mail this Proxy promptly in the enclosed
envelope. No postage is required for mailing in the United States.
Dated..................................................., 1998
.........................................................
Stockholder's Signature
.........................................................
Stockholder's Signature
IMPORTANT: Please date the Proxy and sign exactly as your name appears in
the Proxy. If shares are held by joint tenants, EACH joint owner should
sign. Executors, administrators, trustees, guardians, and attorneys should
indicate the capacity in which they sign. Attorneys should submit powers of
attorney. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership
name by authorized person.
