-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EAsxFXBY/xTStonbbfroZLk2zhktipqH3KOfhVWja8BHydbo/UYvnx1SKvUq4Zpg RE9qhvP2k8x5oRbHx/XX8A== 0000912057-96-005735.txt : 19960402 0000912057-96-005735.hdr.sgml : 19960402 ACCESSION NUMBER: 0000912057-96-005735 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMCO RECYCLING INC CENTRAL INDEX KEY: 0000202890 STANDARD INDUSTRIAL CLASSIFICATION: SECONDARY SMELTING & REFINING OF NONFERROUS METALS [3341] IRS NUMBER: 752008280 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07170 FILM NUMBER: 96542587 BUSINESS ADDRESS: STREET 1: 5215 N OCONNOR BLVD STE 940 CITY: IRVING STATE: TX ZIP: 75007 BUSINESS PHONE: 2148696575 MAIL ADDRESS: STREET 1: 5215 N O CONNOR BOULVARD STE 940 CITY: IRVING STATE: TX ZIP: 75030 FORMER COMPANY: FORMER CONFORMED NAME: FRONTIER TEXAS CORP DATE OF NAME CHANGE: 19881012 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER TEXAS CORP DATE OF NAME CHANGE: 19850416 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-7170 IMCO RECYCLING INC. (Exact name of registrant as specified in its charter) Delaware 75-2008280 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification Number) 5215 North O'Connor Blvd., Suite 940, Irving, Texas 75039 (Address of principal executive offices) Registrant's telephone number, including area code: (214) 869-6575 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Each Class Exchange on Which Registered ------------------- ---------------------------- Common Stock, $0.10 Par Value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes__X_ No___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. As of March 15, 1996, the aggregate market value of voting stock held by nonaffiliates of the Registrant was $222,547,762 Shares of Common Stock outstanding at March 15, 1996: 11,786,430 DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement relating to its 1996 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
PART I ITEM PAGE - ---- ---- Item 1. Business (including Executive Officers)...................... 3 Item 2. Properties................................................... 12 Item 3. Legal Proceedings............................................ 13 Item 4. Submission of Matters to a Vote of Security Holders...................................................... 13 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................................... 13 Item 6. Selected Financial Data...................................... 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 15 Item 8. Financial Statements and Supplementary Data.................. 19 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure....................... 34 PART III Item 10. Directors and Executive Officers of the Registrant.................................................. 34 Item 11. Executive Compensation....................................... 34 Item 12. Security Ownership of Certain Beneficial Owners and Management.............................................. 34 Item 13. Certain Relationships and Related Transactions............... 34 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................... 34 Signatures.............................................................. 40
2 PART I ITEM 1. BUSINESS GENERAL The principal business of IMCO Recycling Inc. (the "Company") is owning and operating aluminum recycling plants. The Company believes it is the world's largest recycler of secondary aluminum, which includes used aluminum beverage cans ("UBCs"), scrap and dross (a by-product of aluminum production). The Company converts UBCs, scrap and dross into molten metal in furnaces which it then delivers to customers in molten form or ingots. The Company recovers magnesium via a relatively similar process and also recycles zinc. Except where the context otherwise requires, the term "Company" as used herein refers to IMCO Recycling Inc. and its subsidiaries. The Company's strategy is to participate in sectors of the nonferrous metals recycling industry in which it believes it can provide customers with a technology-based, value-added service and in which it can develop significant market share. A large percentage of the Company's processing capacity is utilized to recycle scrap material and charge a fee for this service (a service called "tolling"). The Company intends to continue to expand its business both in the United States and abroad (i) by establishing additional aluminum recycling facilities which would be dedicated to one or more major customers, (ii) by expanding its existing facilities and (iii) by acquiring or partnering with other similar recycling businesses. There can be no assurance, however, that any such expansions or acquisitions will be accomplished. See "SALES AND MARKETING." The Company's business has benefited from the trend to include recycled materials in finished products, and in particular from the growth in the production and use of aluminum beverage cans and their recycling. The recycling of UBCs in the United States has increased because of economic, legislative and environmental factors. The number of aluminum beverage cans produced has increased from approximately 34.7 billion in 1979 to 101 billion in 1995, and the number of UBCs recycled increased from approximately 8.5 billion to 63 billion during the same period, according to industry estimates. The Company's principal customers include Aluminum Company of America ("Alcoa"), Barmet Aluminum Corporation ("Barmet"), a subsidiary of CasTech Aluminum Group Inc., Alcan Aluminum Corporation, Ravenswood Aluminum Corporation ("Ravenswood"), Commonwealth Aluminum Corporation, ACX Technologies, Inc., Alumax Aluminum Company, Rock Creek Aluminum Inc. and Logan Aluminum Co., all of whom use aluminum recycled by the Company to produce can sheet, building, automotive and other products. For the year ended December 31, 1995, approximately 93.6% of the Company's total pounds of metal processed involved tolling. Tolling operations do not expose the Company to the risk of commodity price fluctuations and impose relatively low working capital demands; consequently, the Company prefers to utilize as much of its capacity as possible for tolling. The balance of the Company's processing is principally derived from dross and scrap purchased, recycled and then sold by the Company ("buy/sell" business). See "OPERATIONS." 3 BACKGROUND The Company was organized in 1985 as Frontier Texas Corporation under the corporate laws of Delaware. In September 1986, the Company acquired its aluminum and magnesium recycling business through its purchase of International Metal Co., an Oklahoma corporation. In September 1988, International Metal Co. merged with and into the Company, and the Company changed its name to IMCO Recycling Inc. In January 1992, the Company purchased Interamerican Zinc, Inc. ("IZI"), a processor and recycler of zinc dross for U.S. steel galvanizers. In March 1992, the Company entered into a long-term supply agreement with Barmet and constructed an aluminum recycling facility adjacent to Barmet's rolling mill in Uhrichsville, Ohio See ITEM 2. "PROPERTIES". In December 1993, the Company purchased substantially all of the assets of a Corona, California aluminum recycling facility, and, in September 1994, the Company purchased Phoenix Smelting Corporation ("Phoenix") and its wholly owned subsidiary, Metal Resources, Inc., which owns and operates an aluminum recycling facility in Loudon, Tennessee ("Loudon"). In September 1995, the Company purchased all of the assets of an aluminum recycling facility in Bedford, Indiana ("Bedford"). In addition, in October 1995, the Company acquired all of the stock of Alumar Associates, Inc. ("Alumar") and its wholly owned subsidiary, Metal Mark, Inc. ("Metal Mark"), which owned and operated three aluminum recycling facilities located in Chicago Heights, Illinois, Sikeston, Missouri, and Pittsburg, Kansas, and also owned 50 percent of another aluminum recycling facility located in East Chicago, Indiana. Subsequent to the purchase the Company decided to close the Pittsburg facility because of economic considerations. See ITEM 2. "PROPERTIES". In December 1995, the Company became a 50% owner in a German company named VAW-IMCO GuB und Recycling GmbH ("VAW-IMCO"). This venture was formed to own and operate two recycling and foundry alloy facilities which were previously owned by VAW aluminium AG, the largest aluminum company in Germany. The plants will principally serve the European automotive markets. This venture represents the Company's first investment in the international aluminum arena. At year-end 1995, the Company owned and operated 10 domestic recycling plants that have an aggregate annual processing capacity of approximately 1.46 billion pounds of aluminum and 50 million pounds of other metals. In addition to the above wholly owned facilities, the Company is a 50% owner of (i) the East Chicago facility mentioned above which has the ability to process 80 million pounds of aluminum, and (ii) VAW-IMCO which will have a processing capacity of 220 million pounds of aluminum. In 1996, the Company plans to construct an aluminum recycling facility in Coldwater, Michigan. The Company will be a 75% owner of the facility, which will have a long-term supply agreement for the delivery of hot metal to the 25% partner, Alchem Aluminum, Inc ("Alchem"). Alchem manufactures specification aluminum alloys that are sold principally to automotive manufacturers. PRODUCTS AND SERVICES The Company recycles aluminum and delivers the recycled metal to customers as ingot or molten aluminum. The Company's customers include most of the major United States aluminum 4 producers, aluminum diecasters, extruders, and other processors of aluminum products. A principal element of the Company's strategic plan calls for entering into new markets, specifically the rapidly expanding aluminum automotive market. In 1995 the Company entered this market with the acquisition of Metal Mark and the announced construction of the Coldwater, Michigan plant. In addition, the Company plans to increase its emphasis on seeking foreign locales for its recycling facilities where market conditions warrant. General political and economic conditions in these countries could affect the overall financial prospects of the Company. Foreign operations are generally subject to several risks, including foreign currency exchange rate fluctuations, strict environmental regulations, changes in the methods and amounts of taxation, foreign exchange controls and government restrictions on the repatriation of hard currency. The Company recycles magnesium dross for primary magnesium producers. It also produces a line of magnesium anodes that are recycled from post-consumer scrap and sold to end users and independent distributors for corrosion protection of steel structures. The Company believes that IZI is the largest recycler of hot-dip zinc dross for continuous galvanizers in the U.S. IZI's principal customers during 1995 consisted of most of the major U.S. steel companies. THE RECYCLING PROCESS The raw material received for aluminum processing is loaded into furnaces where gas heat is applied along with a flux mixture (salt and potash). Some of the Company's aluminum facilities operate proprietary rotary furnaces of a unique design (which are somewhat more flexible than reverberatory furnaces) and can process UBCs, dross and various types of aluminum scrap. The Company believes that its uniquely designed rotary furnaces are more efficient and cleaner than, and provide rates of recovery superior to, conventional rotary furnaces. The Loudon, Bedford and Metal Mark facilities operate conventional rotary furnaces which are somewhat larger than the Company's proprietary rotary furnaces. The Bedford facility's rotary furnace is unique in that it also features automated material charging mechanisms. The Corona plant operates reverberatory type furnaces which are specifically designed for UBCs and can plant scrap. In 1995, the Company installed additional environmental equipment in order to be able to process other types of clean scrap through Corona's reverberatory furnaces. Materials are melted in the furnaces, and the recovered metal is poured directly into an ingot mold or hot metal crucible for delivery to customers. Some of the Company's plants make deliveries of molten aluminum in crucibles transported by trucks to customers' plants. The molten aluminum is poured directly into the customer's furnace, saving the customer the time and expense of remelting aluminum ingot. The Company normally charges an additional fee for transportation and handling of molten aluminum. The Bedford plant has the ability to deliver molten aluminum, but has not yet developed the customer base to take advantage of this capability. The Corona, Sapulpa, and Metal Mark plants are restricted by the geographical location of their customers to delivering the aluminum in ingot form. Magnesium is recycled by the same method in a rotary furnace at the Sapulpa, Oklahoma plant. 5 The Company's principal type of aluminum and magnesium rotary furnace was developed by a former shareholder of International Metal Co. The Company has a nonexclusive right to use this furnace, subject only to the Company's maintaining the confidentiality of the furnace design. The Company requires its key operational employees to enter into agreements to meet this confidentiality requirement. There can be no assurances that others will not purchase or develop similar furnaces, that the process will not be transferred to or obtained by others, or that other metal producers will not develop a similar metal recovery process. The aluminum recycling process from the Company's rotary furnaces produces a by-product called "salt cake," which is formed from the contaminants and coatings on aluminum scrap and dross and the salts added during the aluminum recycling process. (The by-product of the reverberatory furnaces is dross.) Salt cake is composed of salts, metallic aluminum, aluminum oxide and small amounts of other materials. The Company disposes of its salt cake and certain airborne contaminants ("baghouse dust") in landfills with cells dedicated for use exclusively by the Company or that separately encapsulate the Company's material. Salt cake is not currently listed as a "hazardous waste" under the Resource Conservation and Recovery Act of 1976 ("RCRA") or as a "hazardous substance" under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). The Company has built and operates a lined landfill at its Morgantown Plant in 1989 meeting RCRA Subchapter "C" hazardous waste standards. In May 1994 the Company announced that it had developed a patented technology that produces fertilizer as a by-product instead of salt cake. This process, if proven commercially feasible, would allow for "closed loop" recycling of many of the materials used in the aluminum recycling process. In 1995 the Company constructed a facility adjacent to its Morgantown plant to further process the salt cake and extract whatever aluminum is left after the melting process. This salt cake processing facility is the first step needed for closed loop recycling. The process involves crushing of the salt cake and separation of a portion of the aluminum contained in the salt cake. The residual product is then landfilled in the Company's Morgantown landfill. The plant began processing salt cake in January 1996 and is in the initial start-up phase. See "ENVIRONMENTAL MATTERS". The Company has not previously attempted this large scale crushing of its salt cake and the efficiency of this process has not yet been determined. In the zinc recycling process, dross is first melted in an electric induction furnace and then transferred to a reactor which removes the impurities (iron and zinc oxide, which are sold as a by-product). The remaining molten zinc is poured into a reverberatory holding furnace from which it is blended and cast into ingots which are returned to the customer. IZI holds patent rights to its process in the United States and 13 other countries. OPERATIONS In its aluminum tolling operations, the Company accepts UBCs, dross and scrap owned by its customers and processes this material for a tolling charge per pound of incoming weight. In order to retain control of their metal supplies, customers have desired to toll, rather than sell, their scrap materials. Tolling requires no metal inventory to be purchased or held by the Company. In addition, tolling does not expose the Company to the risk of fluctuating metal prices since the Company does not own the material being processed. The Metal Mark acquisition will change somewhat the Company's historical ratio of tolling to buy/sell business because only about 50% of 6 Metal Mark's business has traditionally involved tolling. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS". When purchasing metals in the open market for its buy/sell business, the Company attempts to reduce the risk of fluctuating metal prices by arranging for the sale of the aluminum anticipated to be recovered and by avoiding large inventories of ingot or scrap material except to the extent necessary to allow its plants to operate without interruption. SALES AND MARKETING The Company's principal customers (see "GENERAL" above) all use recycled aluminum to produce can sheet and building, automotive and other products. The Company provides products and services to a number of primary and fabricating facilities of Alcoa. During 1993, 1994 and 1995, Alcoa accounted for approximately 39%, 30% and 23%, respectively, of revenues. Barmet accounted for approximately 14%, 12% and 9% of revenues in 1993, 1994 and 1995, respectively. The loss of either Alcoa or Barmet as customers would have a material adverse effect upon the business of the Company and its future operating results. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS". Agreements with customers in the recycling industry have customarily been short-term agreements. These usually result from a bidding process where aluminum producers and metal traders offer to sell materials or to have materials tolled. Consequently, the Company historically has maintained no significant backlog of orders. However, the Company has secured some longer term commitments for its recycling services with Alcoa, Barmet, Rock Creek and Ravenswood. In 1992 the Company was successful in obtaining a 10 year contract with Barmet to process all of Barmet's scrap aluminum, UBCs and dross at the Company's Uhrichsville plant. See "BACKGROUND" above and ITEM 2. "PROPERTIES - - ALUMINUM RECYCLING" below. In early 1994 the Company entered into a three-year processing agreement with Alcoa whereby the Company's Rockwood plant will provide secondary metal for its Alcoa, Tennessee facility. This agreement was modified in 1995 to reflect greater volumes and to include Loudon as an approved supplier under the terms of the contract. This agreement will extend for additional one year terms at the end of each contract year unless terminated by either party. If terminated by either party, the agreement will continue in effect until the second anniversary date of the last day of the contract year during which the termination notice was given. The agreement obligates the Company to indemnify Alcoa for certain environmental liabilities which Alcoa may incur in connection with the transactions contemplated by the agreement. The Barmet and Alcoa agreements contain escalation provisions which are intended to cover increases in certain of the Company's processing costs. The Company may seek similar dedicated long-term arrangements with customers in the future. See "GENERAL". Increased emphasis on dedicated facilities to customers and dedicated contracts with customers carries the inherent risk of increased dependence on a single or few customers with respect to a particular Company facility. In such cases, the loss of such a customer could have a material adverse affect on the Company's financial condition and results of operation, and any timely replacement of volumes attributable to such a customer could prove difficult. 7 The primary metals industry and the metals recycling industry are subject to cyclical fluctuations, depending upon the availability and price of unprocessed scrap metal and demand in the metal consuming industries. Temporary reductions in can stock production by one of the Company's customers have previously affected the Company's revenues. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS". COMPETITION The aluminum recycling industry is fragmented and highly competitive. The principal factors of competition in the industry are price, recovery rates, environmental and safety regulatory compliance, and services (e.g., the ability to deliver molten aluminum). Freight costs also limit the geographic areas in which the Company can effectively compete. The major aluminum producers, some of which are the Company's largest customers, have generally discontinued processing dross, instead focusing their resources on other aspects of aluminum production. UBCs and other scrap are processed by both the secondary recycling industry and the major producers. The Company competes with both other secondary recyclers and their customers when purchasing and processing scrap for the buy/sell business. The amount of the Company's tolling business can also vary depending upon the extent that the major aluminum producers' used metal materials are internally recycled. The aluminum producers generally vary their rate of internal recycling depending upon furnace availability, inventory levels, the price of aluminum, and their own internal demand for metal. The major aluminum producers are larger and have greater financial resources than the Company. A decision by these producers to expand their recycling operations could reduce demand for certain of the Company's products and services. SOURCE AND AVAILABILITY OF RAW MATERIALS AND ENERGY The Company has historically not had, and does not anticipate having, difficulties in obtaining raw materials for its operations. In the case of buy/sell business, the primary sources of aluminum and magnesium for recycling are dross and scrap, which are purchased from both the major aluminum producers and metal traders. Generally, fluctuations in market prices for both aluminum and magnesium have not affected the availability of these metals to the Company. The availability of zinc dross is dependent upon the demand for galvanized steel, which has historically paralleled fluctuations in customer demand in the automotive, appliance and construction industries. The Company's operations are fueled by natural gas, which represents the second largest component of operating costs. In 1993 the Company experienced increases in its natural gas cost at two of its plants. In response to this increase in natural gas cost, the Company, in 1994, secured 12 month commitments of gas at a fixed rate for the majority of its gas needs at these two plants. Natural gas prices declined in 1995, and the Company decided in most instances to not renew its fixed price natural gas contracts. Due to unseasonably cold weather, natural gas prices increased in early 1996. All of the Company's long term contracts contain natural gas price escalators. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS". The Company understands that most of its competitors' operations also are fueled by natural gas; therefore, it believes that increases in the prices for natural gas do not adversely affect 8 the Company's competitive position. The Company believes it will continue to have access to adequate energy supplies to meet its needs for the foreseeable future. SEASONALITY UBC collections have historically been highest in the summer months and lower in the winter months. Therefore, the Company has at times experienced lower volumes during the winter. In recent years, however, the Company's processing volumes have fluctuated mostly due to its startup of additional capacity rather than the seasonality of UBC collections. TRANSPORTATION The Company receives UBCs, dross and scrap, and ships its recycled aluminum by both rail and truck. Most of the Company's plants own their own rail siding or have access to rail lines nearby. IZI receives zinc dross and ships recycled zinc by truck. The Company owns and leases various trucks and trailers to support its business. Customarily, the transportation costs of scrap materials to be tolled are paid by the customer, while the transportation costs of aluminum and magnesium purchased and sold by the Company may be paid either by the customer or the Company. The Company contracts with third-party transportation firms for the hauling for disposal of some of its solid waste. EMPLOYEES As of December 31, 1995, the Company had 984 employees, consisting of 186 employees engaged in administrative and supervisory activities and 798 employees engaged in production and maintenance. The production and maintenance employees at the Rockwood plant are represented by the United Steelworkers of America under a five-year collective bargaining agreement that expires in August 2000. The production and maintenance workers at the Uhrichsville plant are represented by the United Mine Workers of America. This contract expires on November 30, 1998. The production and maintenance workers at the Corona plant are represented by the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers. This agreement expires on November 30, 1996. The production and maintenance workers at the Bedford plant are represented by the International Brotherhood of Electrical Workers. This agreement expires in April 1997. The production and maintenance workers at the Sikeston plant are also represented by the United Steelworkers of America union under an agreement which expires in March 1997. Labor relations with employees have been satisfactory. ENVIRONMENTAL MATTERS The processing of UBCs, dross and scrap generates solid waste in the form of salt cake and baghouse dust. At the Sapulpa and Morgantown plants, the Company disposes of its solid waste at its own permitted disposal sites. The Rockwood, Loudon, and Bedford plants currently dispose of their solid waste by transporting it to the Morgantown plant where the Company, in 1996, began operating a salt cake processing facility which prepares salt cake for landfilling. See ITEM 2. "PROPERTIES - SOLID WASTE DISPOSAL". Under the supply agreement with Barmet, the disposal of all salt cake generated by the Company as a result of its processing for Barmet is the responsibility of Barmet. Salt cake from all other material processed at the Uhrichsville plant is either shipped to the Morgantown plant for disposal or landfilled with a local solid waste management firm. The by-product generated at the Corona plant is in the form of dross. This dross is processed as an input 9 material at one of the Company's other plants. The Chicago Heights and Sikeston plants currently dispose of most of their salt cake with third party landfills; however, the Company is currently evaluating the disposal of these two plants' salt cake at Morgantown. If salt cake were ever classified as a hazardous waste or substance under RCRA or CERCLA, the Company's handling and disposal of salt cake would be required to be modified. To dispose of its salt cake, the Company may then be required to take other actions including obtaining a RCRA Subchapter "C" permit for its Morgantown landfill, obtaining other permits (including transportation permits), and consider landfilling additional amounts of salt cake with third parties not under the Company's direct control. Based on current annual processing volumes and remaining landfill capacity, the estimated remaining lives of the landfills currently used by the Sapulpa and Morgantown plants are two years and three years, respectively. The Company recently built additional landfill space at its Morgantown plant. Landfill closure costs for the Company-owned landfills are currently estimated to exceed $4,000,000. The Company is currently providing for this expenditure by accruing, on a current basis, these estimated costs as the landfills are used. See ITEM 2. "PROPERTIES". In recent years, the Company's operations, like those of other basic industries, have become subject to stringent legislation and regulations regarding the protection of human health and the environment. It can be anticipated that more rigorous laws and regulations will be enacted that could require the Company to make substantial expenditures in addition to those referred to herein. The Clean Air Act provides for federal, state and local regulation of the emission of air pollutants. As a result of the Clean Air Act amendments in 1990, the Company may have to obtain additional permits, install additional pollution control equipment and otherwise incur additional capital expenditures. The Company does not currently believe that foreseeable costs of compliance will have a material adverse effect on the Company's financial position. The Company believes that it is in material compliance with applicable environmental regulations. Due to relatively high costs and limited coverage, the Company does not carry environmental impairment liability insurance. The Company made capital expenditures for environmental control facilities of approximately $6,344,000 in 1995, most of which was for landfill capacity additions, and it is currently estimated that such expenditures will be approximately $5,250,000 in 1996 and $5,500,000 in 1997. EXECUTIVE OFFICERS The executive officers of the Company are listed below, together with brief accounts of their experience and certain other information. Executive officers are appointed by the Board of Directors. 10
NAME AGE POSITION - ---- --- -------- Frank H. Romanelli 51 President and Chief Executive Officer Richard L. Kerr 53 Executive Vice President and Chief Operating Officer; President of Metals Division Paul V. Dufour 56 Executive Vice President - Finance and Administration, Chief Financial Officer and Secretary Thomas W. Rogers 49 Senior Vice President, Marketing C. Lee Newton 52 Senior Vice President, Operations
Frank H. Romanelli was appointed President and Chief Executive Officer effective January 1, 1995. He was previously Executive Vice President - Commercial at Occidental Chemicals Company in Dallas, Texas, responsible for long-term strategy, acquisitions and divestitures and had served in various other capacities at Occidental over the last 12 years including managing the $1.8 billion petrochemical business. Richard L. Kerr has served as Executive Vice President since July 1988. In 1991, he was promoted to Chief Operating Officer of the Company and in 1994 became President of the Company's Metals Division. Mr. Kerr joined International Metal Co. in April 1984, and became Executive Vice President of International Metal Co. in April 1987. Paul V. Dufour has served as Vice President, Chief Financial Officer and Secretary of the Company since March 1987. He was promoted to Senior Vice President in May 1988 and to Executive Vice President in October 1994. He is principally responsible for the Company's financial and administrative functions. Thomas W. Rogers has served as Senior Vice President of the Company since July 1988. Mr. Rogers was employed as Plant Manager of the Sapulpa, Oklahoma plant in October 1986 and became Senior Vice President of International Metal Co. in April 1987. C. Lee Newton was promoted to Senior Vice President of the Company in 1993. Mr. Newton was named Vice President in 1990 and was the General Manager of the Morgantown, Kentucky plant from 1989 to 1993. He was originally employed by the Company as Plant Manager of its Rockwood, Tennessee plant in 1987. 11 ITEM 2. PROPERTIES ALUMINUM RECYCLING. The Company owns and operates the following processing plants as detailed below:
ESTIMATED NUMBER ANNUAL MOLTEN OWNED OF CAPACITY YEAR YEAR MATERIALS DELIVERY PLANT ACREAGE FURNACES (MILLION LBS) BUILT ACQUIRED PROCESSED CAPABILITY ----- ------- -------- ------------- ----- -------- --------- ---------- Alum, Sapulpa, OK. 64 7 145 1962 -- Mag No Rockwood,TN. 238 6 200 1985 -- Alum Yes Morgantown, KY. 454 6 200 1989 -- Alum Yes Uhrichsville, OH. 42 10 335 1992 -- Alum Yes Corona, CA. 20 3 100 -- 1993 Alum No Loudon, TN. 173 3 180 -- 1994 Alum Yes Bedford, IN. 19 2 150 -- 1995 Alum Yes Chicago Hts., IL. 13 2 100 -- 1995 Alum No Sikeston, MO. 24 3 60 -- 1995 Alum No Adrian, MI. * 2 40 -- 1992 Zinc No
___________________________ * - The 50,000 sq. ft. Adrian facility is leased by IZI. This lease, which includes both the operations and office space, expires in May 1997 and is presently not expected to be renewed. The Company also owns 50% of a recycling facility located in East Chicago, Indiana. This facility has annual capacity to process 80 million pounds of aluminum. Barmet has an option to acquire up to a 49% equity interest in the Uhrichsville plant at a price equal to that equity percentage multiplied by the depreciated book value of the plant or the subsidiary owning the plant, plus a premium to compensate the Company for its recycling technology. The option price may be above or below the fair value of the Uhrichsville plant. Should Barmet exercise its option, there can be no assurance that the production or earnings attributable to the purchased interest could be replaced, and the Company's net earnings and cash flow could be adversely affected. In 1996, the Company plans to construct a new aluminum recycling facility in Coldwater, Michigan. This facility, which will be 75% owned by the Company and 25% owned by the plant's largest customer, Alchem, will have a rated annual capacity of 150 million pounds and will principally serve the automotive market. The Company will be the operator of the facility and will deliver molten aluminum to its customer-partner. Alchem will have certain rights to purchase additional equity interests not to exceed 40% of the total joint venture equity if the facility is expanded or if Alchem increases its supply commitments. In 1996, the Company began its participation in a 50/50 venture in Germany known as VAW-IMCO GuB und Recycling GmbH. The venture will operate two recycling and foundry alloy 12 facilities located at Grevenbroich and Toging, Germany. Annual capacity for these two plants is expected to be 220 million pounds. In 1995, the Sapulpa, Rockwood, Morgantown and Uhrichsville plants all operated at rates in excess of their stated capacities. SOLID WASTE DISPOSAL The Company completed a new landfill cell adjacent to its plant in Morgantown, Kentucky in 1996. This landfill will be used to deposit all of the waste generated from the new salt cake processing facility at the Morgantown site. It is currently anticipated that this new landfill cell, which is designed to be expanded several times throughout its life, will serve the Company's landfilling needs for over 80% of the salt cake generated by facilities currently owned by the Company in the United States for the next several years. The Company also owns a landfill at its Sapulpa plant which is estimated to have two years of limited use remaining. See ITEM 1. "BUSINESS - ENVIRONMENTAL MATTERS". ADMINISTRATIVE In Irving, Texas, the Company leases approximately 17,300 square feet of office space for certain of its executive, financial and management functions. This lease expires in 2000. The Company believes that its plants and equipment are maintained in good operating condition. Substantially all of the properties and equipment at the Sapulpa, Rockwood and Morgantown plants are mortgaged to secure senior indebtedness. See NOTE F--LONG TERM DEBT AND CREDIT LINES OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. ITEM 3. LEGAL PROCEEDINGS The Company is not aware of any material pending legal proceedings against the Company or its operations. The Company is party from time to time to what it believes are routine litigation and proceedings considered as part of the ordinary course of its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Company during the quarter ended December 31, 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock trades on The New York Stock Exchange (trading symbol: IMR). The following table sets forth, for the fiscal quarters indicated, the high and low sales prices for the Company's Common Stock, as reported on The New York Stock Exchange composite tape from January 1, 1994 through December 31, 1995, and the dividends declared per share during the periods indicated. 13
DIVIDENDS HIGH LOW DECLARED ---- --- --------- Calendar Year 1994 First Quarter $15 $12-1/8 $ -- Second Quarter 14-7/8 12-1/2 -- Third Quarter 16-7/8 13-1/2 -- Fourth Quarter 15-3/4 12-1/2 0.10 Calendar Year 1995 First Quarter $16-3/8 $13-3/8 $ -- Second Quarter 19-1/4 15-1/4 0.035 Third Quarter 23-3/4 17-7/8 0.035 Fourth Quarter 24-1/2 20-1/2 0.035
In late 1994 the Board of Directors declared a special year-end $0.10 per share cash dividend, payable on January 26, 1995 to holders of record of Common Stock as of December 29, 1994. This was the first dividend declared by the Company. The Company subsequently commenced paying a quarterly dividend of $.035 per share in the second quarter of 1995 and declared a total of $.105 per share of quarterly dividends in 1995. Dividends as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time out of any funds legally available therefor. The Company's long-term debt instruments limit the amount of cash dividends the Company can pay. This amount is determined by reference to a portion of the Company's "unrestricted net income" accumulated since September 1995 (as defined in its long-term debt instruments). The Company intends to continue the payment of dividends on its Common Stock, although future dividend declarations are discretionary with the Company's Board of Directors and will depend upon the Company's level of earnings, cash flow, financial requirements, economic and business conditions and other relevant factors, including the restrictions contained in the Company's long-term debt instruments. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND NOTE F--LONG TERM DEBT AND CREDIT LINES OF NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. On March 15, 1996, the outstanding shares of Common Stock were held of record by 566 stockholders. ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------- 1991 1992 1993 1994 1995 ------- ------- ------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues $49,177 $60,223 $74,216 $101,116 $141,167 Net Earnings 5,594 7,475 8,022 8,471 12,470 Net earnings per common share 0.52 0.67 0.70 0.73 1.03 Total assets 52,960 68,871 79,427 96,791 139,877 Long-term debt (excluding current maturities) 13,000 10,500 8,000 11,860 29,754 Dividends declared per common share -- -- -- 0.10 0.105
14 See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Most of the Company's processing consists of aluminum, magnesium and zinc tolled for its customers. To a lesser extent, the Company also purchases scrap metal and dross for processing and resale. Both the Company's tolling fees and the selling price of metal it buys, recycles and sells for its own account are included in sales revenue. Accordingly, tolling business produces a lower amount of revenues and cost of sales than does the buy/sell business. Variations in the mix of these two businesses can cause revenues to change significantly from period to period while not significantly affecting gross profit, because both types of transactions generally have the same gross profit per pound of metal processed. As a result, the Company considers processing volume to be a more important determinant of performance than revenues. During the early 1990s there was an excess of primary aluminum produced worldwide, and aluminum inventories on the worldwide commodity exchanges were at record levels, peaking in January 1994. This glut of aluminum was primarily responsible for causing aluminum prices to decline throughout this time period, and prices in January 1994 were at inflation-adjusted historical lows. This situation impacted the profitability of the major aluminum producers who are some of the Company's largest customers. This environment of low profitability for the Company's customers also had a negative impact on the Company's gross margin, as it had been unable to pass cost increases through to its customers. In early 1994, worldwide inventories began falling for a number of reasons, including an increase in demand for aluminum, particularly in the United States, and prices for aluminum began to rise. This increase in pricing for aluminum had a positive effect on the Company in 1994 both in its buy/sell business where the Company received increased prices for the aluminum it owned, and in its tolling business where certain increases in price for tolling services provided by the Company were obtained. During 1995, worldwide aluminum prices declined from their 1994 levels, particularly in the fourth quarter. For the year ended December 31, 1995, this decline was more than offset by increased processing volumes. However, in the first quarter of 1996, the combination of higher energy costs, lower aluminum prices and weather related disruptions which affected volumes processed, negatively impacted the Company's results. It is not possible to predict the future price of aluminum or the level of worldwide inventories of aluminum and whether, or to what extent, such factors will affect the Company's future business. The following table shows the total pounds of material processed (aluminum, magnesium and zinc), the percentage of total pounds processed represented by tolled aluminum, purchased aluminum, magnesium and zinc, total revenues, total gross profits and gross profit percentages: 15
1993 1994 1995 -------- ---------- ---------- (in thousands, except percentages) Pounds processed 787,000 1,012,600 1,323,382 Percent of total pounds processed Tolled Aluminum 92% 93% 92% Purchased Aluminum 4% 3% 5% Magnesium 1% 1% ** Zinc 3% 3% 3% Revenues $ 74,216 $ 101,116 $ 141,167 Gross Profit $ 16,764 $ 22,638 $ 30,939 Gross Profit % 22.6% 22.4% 21.9%
__________________________ ** less than 1 percent RESULTS OF OPERATIONS FISCAL YEAR 1995 VS. FISCAL YEAR 1994 The Company processed 1.3 billion pounds of metal in 1995 which represented an increase of 31% over the 1.0 billion pounds processed in 1994. Increases from the Bedford and Metal Mark plants acquired late in 1995, and the Loudon plant which was acquired in September of 1994 and expanded in 1995, along with increased volume from all plant locations, accounted for the favorable variances. Revenues in 1995 were $141,167,000 which represented an increase of 40% over 1994's revenue of $101,116,000. The percentage increase in revenues was greater than the increase in volumes processed because the amount of buy/sell business was greater in 1995 compared to 1994. Assuming that Metal Mark maintains its approximate one-to-one historical ratio of tolling to buy/sell business, the Company's revenues are projected to continue to outpace the relative gains in processing volumes in 1996 because of the full year's effect of the Metal Mark business. Gross profit of $30,939,000 was 37% above the $22,638,000 reported in 1995. Most of this resulted from the increased pounds processed. Selling, general and administrative costs increased 56% to $10,027,000 compared to the $6,440,000 reported in 1994. This increase occurred because of the addition of key personnel required to manage the Company's rapid growth and because of selling, general and administrative costs associated with acquisitions carried out during the year. Interest expense was about the same in 1995 as it was in 1994, while interest income rose to $424,000 compared to $154,000 in 1994. This increase was due to larger amounts of cash invested. The Company's income before taxes of $20,363,000 rose 49% compared to 1994. In 1994 the Company recorded nonrecurring litigation expense related to a lawsuit which reduced 1994's income before taxes by $1,635,000. Excluding this item, 1995's increase would have been about 33% or very similar to the increases recorded in volume processed and gross profits. 16 The Company's increased income before tax and higher tax rates caused income tax expense to rise to $7,893,000 compared to $5,232,000 in 1994. The effective tax rate was about 39% in 1995 compared to 38% in 1994. FISCAL YEAR 1994 VS. FISCAL YEAR 1993 The Company processed 1.013 billion pounds in 1994, a 29% increase over the 787 million pounds of material it processed in 1993. Most of this increase was due to increased processing at the Uhrichsville plant, which reached full capacity during mid-year 1993 and was expanded by 25% in September 1994. Processing from the Corona plant acquired in December 1993 and Loudon which was acquired in September of 1994 also were significant contributors to the increased volume of metal processed in 1994. In addition, all of the Company's other plants processed more metal in 1994 than they did in 1993. Revenues of $101,116,000 were 36% higher than 1993 revenues of $74,216,000. The percentage increase in revenues was somewhat higher than the percentage increase in processing pounds, mostly because aluminum prices in 1994 were higher than in 1993, which resulted in higher revenues from the Company's buy/sell business. Gross profit of $22,638,000 increased 35% over 1993's amount of $16,764,000. More than 80% of this increase was due to greater volumes of material processed. The remainder of the gross profit increase in 1994 compared to 1993 was a result of increases in revenue exceeding increases in costs. The revenue increase was largely a result of increases in the buy/sell business which, as noted above, benefited from rising aluminum prices in 1994. The increased costs were mostly concentrated in workers compensation, medical, and refuse disposal costs. Selling, general and administrative costs increased 28% above 1993's amount to $6,440,000. Most of the increase is attributed to additional employees required by the Company's growth, and improvements to the operating information system, which improved efficiency, also increased the costs in this category. As reported during 1994, the Company incurred nonrecurring litigation costs of $1,635,000, which represented the cost of settling certain litigation and associated legal costs related to a partnership which owned shares of the Company's stock. The Company agreed to the settlement without admitting liability in order to avoid prolonged and costly litigation. The plaintiffs released all claims against the Company and its subsidiaries, and the Company received the preferred stock of a subsidiary whose ownership had been disputed. Interest expense of $1,014,000 was about 13% higher than 1993's amount. Most of this difference was due to interest on the additional borrowings related to the acquisition of Loudon. Interest income of $154,000 decreased over 50% compared to 1993. Lower levels of cash to invest, principally because of capital spending and acquisitions, are the reasons for this result. Income before taxes of $13,703,000 increased 23% above 1993's level of $11,143,000. The effective tax rate rose to 38% in 1994 compared with 28% in 1993. Increased state income tax amounts in 1994 and an increase in federal tax rates from 34% to 35% (caused by reaching a threshold level of income requiring this increase) were the reasons for the increase in the rate. 17 LIQUIDITY AND CAPITAL RESOURCES Operations provided cash of $26,289,000 in 1995, compared with $13,622,000 of cash provided by operations in 1994. Increased earnings as previously discussed and increases in other noncash charges (such as depreciation and deferred taxes) along with a reduction in working capital (excluding that attributed to acquisitions) in 1995 compared to an increase in 1994 were the factors leading to the increase in cash provided from operations. Working capital (excluding that attributed to acquisitions) decreased $2,411,000 in 1995 which represented a source of cash while it increased $5,302,000 in 1994. The decrease in 1995 was principally the result of reductions in accounts receivable which had increased in 1994. At December 31, 1995, the Company's current ratio of 2.41 was similar to the December 31, 1994 ratio of 2.64. The Company's working capital requirements may increase in 1996 due to an anticipated higher level of processing pounds. Capital spending, excluding acquisitions, amounted to $15,538,000 in 1995 and $6,646,000 in 1994. The new salt cake processing facility and new landfill both at the Morgantown facility accounted for the largest items in 1995. Spending in 1994 was largely related to the expansion of the Uhrichsville plant. The acquisition of Bedford and Metal Mark required $20,137,000 in 1995 while the acquisition of Loudon required approximately $5,300,000 in 1994. In order to take advantage of expansion opportunities and in connection with the acquisition of Bedford and Metal Mark, the Company borrowed $5,000,000 in September 1995 under terms it had previously negotiated with a commercial lending institution. This Variable Rate Converting Revolving Loan has an amortization of five years and bears interest at a fluctuating rate, currently set at 6.8125%. In addition, in November 1995 the Company borrowed $15,000,000 of unsecured debt which represents half of the commitment the Company received from a private placement of notes. The remaining half, or $15,000,000, is anticipated to be issued in the second quarter of 1996 to fund the Company's investment in the VAW-IMCO venture. The notes issued in 1995 have a fixed interest rate set at 7.28% per annum and require mandatory annual prepayments of $3,000,000 beginning in 2003. The notes to be issued in 1996 will have their interest rate set when they are issued. In 1994 the Company also borrowed $5,000,000 under a five year term note (the "Term Note") to fund the repayment of certain debt assumed in connection with the Loudon acquisition. Also in 1995, the Company increased its borrowing limit up to $10,000,000 under a restated revolving credit facility (the "Revolving Facility"). Under the Revolving Facility, the Company has a subfacility for the issuance of standby letters of credit, the amount available for borrowing is based on the Company's working capital as defined. At year end, and at March 25, 1996, the Company had no borrowings outstanding under the Revolving Facility. Capital expenditures for property, plant and equipment in 1996 are currently estimated to total approximately $19,000,000. The Company believes that its cash on hand, the resources available under the terms of its credit facilities and anticipated 1996 cash from operations should provide the financial resources necessary to fund its current needs and to meet its obligations in 1996 and for the foreseeable future. 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX OF FINANCIAL STATEMENTS OF IMCO RECYCLING INC. AND SUBSIDIARIES
PAGE ---- Report of Ernst & Young LLP, Independent Auditors......................... 20 Consolidated Balance Sheets at December 31, 1995 and 1994................. 21 Consolidated Statements of Earnings for the three years ended December 31, 1995....................................................... 22 Consolidated Statements of Cash Flows for the three years ended December 31, 1995....................................................... 23 Consolidated Statements of Changes in Stockholders' Equity for the three years ended December 31, 1995..................................... 24 Notes to Consolidated Financial Statements................................ 25-33
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 19 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Stockholders and Board of Directors IMCO Recycling Inc. We have audited the accompanying consolidated balance sheets of IMCO Recycling Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of IMCO Recycling Inc. and subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Dallas, Texas February 5, 1996 20 CONSOLIDATED BALANCE SHEETS - --------------------------- IMCO RECYCLING INC. AND SUBSIDIARIES (DOLLARS IN THOUSANDS)
DECEMBER 31, 1995 1994 -------- ------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 8,678 $ 2,854 Accounts receivable 27,442 19,239 Inventories 9,146 3,186 Deferred income taxes 1,298 1,978 Other current assets 1,353 598 -------- ------- TOTAL CURRENT ASSETS 47,917 27,855 PROPERTY AND EQUIPMENT, net 78,769 61,046 INTANGIBLE ASSETS Excess of acquisition cost over the fair value of net assets acquired, net of accumulated amortization of $3,866 and $3,219 at December 31, 1995 and 1994, respectively 10,968 6,056 Patents, net 233 296 -------- ------- TOTAL INTANGIBLE ASSETS 11,201 6,352 OTHER ASSETS, net 1,990 1,538 -------- ------- $139,877 $96,791 -------- ------- LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 10,691 $ 4,150 Accrued liabilities 7,059 4,156 Dividends payable -- 1,152 Current maturities of long-term debt 2,169 1,094 -------- ------- TOTAL CURRENT LIABILITIES 19,919 10,552 LONG-TERM DEBT 29,754 11,860 DEFERRED INCOME TAXES 5,516 4,857 OTHER LONG-TERM LIABILITIES 1,412 1,232 STOCKHOLDERS' EQUITY Preferred Stock; par value $.10; 8,000,000 shares authorized; none issued -- -- Common Stock; par value $.10; 20,000,000 shares authorized, 11,964,911 issued at December 31, 1995; 11,756,698 issued at December 31, 1994 1,196 1,176 Additional paid in capital 27,282 23,511 Retained earnings 56,672 45,421 Treasury stock, at cost; 207,972 shares at December 31, 1995; 244,910 shares at December 31, 1994 (1,874) (1,818) -------- ------- 83,276 68,290 -------- ------- $139,877 $96,791 -------- ------- -------- -------
See notes to consolidated financial statements 21 CONSOLIDATED STATEMENTS OF EARNINGS - ----------------------------------- IMCO RECYCLING INC. AND SUBSIDIARIES (DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------ 1995 1994 1993 ---------- ---------- ---------- REVENUES $ 141,167 $ 101,116 $ $74,216 Cost of sales 110,228 78,478 57,452 ---------- ---------- ---------- GROSS PROFIT 30,939 22,638 16,764 Selling, general and administrative expense 10,027 6,440 5,023 Nonrecurring litigation expense -- 1,635 -- Interest expense 1,073 1,014 897 Interest and other (income) (524) (154) (299) ---------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 20,363 13,703 11,143 Provision for income taxes 7,893 5,232 3,121 ---------- ---------- ---------- NET EARNINGS $ 12,470 $ 8,471 $ 8,022 ---------- ---------- ---------- NET EARNINGS PER COMMON SHARE $ 1.03 $ .73 $ .70 ---------- ---------- ---------- Weighted average common and common equivalent shares outstanding 12,108,216 11,643,846 11,524,223
See notes to consolidated financial statements 22 CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------- IMCO RECYCLING INC. AND SUBSIDIARIES (DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1995 1994 1993 -------- -------- -------- OPERATING ACTIVITIES: Net earnings $ 12,470 $ 8,471 $ 8,022 Depreciation and amortization 9,353 7,367 6,201 Other noncash items 888 1,227 586 Provision for deferred taxes 1,167 1,859 654 Changes in noncash components of working capital (excluding investing and financing transactions): Accounts receivable 3,330 (5,829) (7,369) Inventories (1,756) 95 (874) Other current assets (546) (121) (31) Accounts payable and accrued liabilities 1,383 553 (140) -------- -------- -------- NET CASH FROM OPERATING ACTIVITIES 26,289 13,622 7,049 INVESTING ACTIVITIES: Purchase of property and equipment (15,538) (6,646) (11,939) Purchase of other businesses (20,137) (5,325) (5,103) Other (1,304) (1,005) 58 -------- -------- -------- NET CASH USED BY INVESTING ACTIVITIES (36,979) (12,976) (16,984) FINANCING ACTIVITIES: Net (decrease) increase in short-term borrowings -- (1,800) 1,800 Proceeds from issuance of long-term debt 20,000 5,000 -- Principal payments of long-term debt (1,477) (2,751) (2,500) Proceeds from issuance of common stock -- -- 332 Dividends paid (2,371) -- -- Other 362 94 (239) -------- -------- -------- NET CASH FROM (USED BY) FINANCING ACTIVITIES 16,514 543 (607) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,824 1,189 (10,542) BEGINNING CASH AND CASH EQUIVALENTS 2,854 1,665 12,207 -------- -------- -------- ENDING CASH AND CASH EQUIVALENTS $ 8,678 $ 2,854 $ 1,665 -------- -------- -------- SUPPLEMENTARY INFORMATION: Cash payments for interest $ 1,357 $ 1,271 $ 1,440 Cash payments for taxes $ 6,440 $ 3,411 $ 2,535
See notes to consolidated financial statements 23 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - ---------------------------------------------------------- IMCO RECYCLING INC. AND SUBSIDIARIES (DOLLARS IN THOUSANDS)
COMMON STOCK TREASURY STOCK -------------------- --------------------- PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT ---------- ------ ------- -------- -------- -------- BALANCE AT DECEMBER 31, 1992 11,458,708 $1,146 $19,617 $30,080 (315,367) $(1,933) Net earnings 8,022 Exercise of stock options 43,000 4 328 -- 5,000 31 Net treasury stock activity -- -- -- -- (24,170) (353) Tax benefit from the exercise of nonqualified stock options -- -- 114 -- -- -- BALANCE AT DECEMBER 31, 1993 11,501,708 1,150 20,059 38,102 (334,537) (2,255) Net earnings -- -- -- 8,471 -- -- Cash dividend ($.10 per share) -- -- -- (1,152) -- -- Litigation agreement -- -- 67 -- 25,000 185 Exercise of stock options -- -- 20 -- 19,735 (81) Purchase of Phoenix Smelting 254,990 26 3,207 -- 44,892 333 Tax benefit from the exercise of nonqualified stock options -- -- 158 -- -- -- BALANCE AT DECEMBER 31, 1994 11,756,698 1,176 23,511 45,421 (244,910) (1,818) Net earnings -- -- -- 12,470 -- -- Cash dividend ($.105 per share) -- -- -- (1,219) -- -- Exercise of stock options -- -- 234 -- 36,938 (56) Purchase of Alumar Associates, Inc. 208,213 20 3,354 -- -- -- Tax benefit from the exercise of nonqualified stock options -- -- 183 -- -- -- BALANCE AT DECEMBER 31, 1995 11,964,911 $1,196 $27,282 $56,672 (207,972) $(1,874)
See notes to consolidated financial statements 24 IMCO RECYCLING INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 (dollars in tables are in thousands, except per share) NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of IMCO Recycling Inc. and all of its subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated upon consolidation. Investments in affiliated companies, owned 50% or less, are recorded by the Company on the equity method. The Company's principal business involves the owning and operating of aluminum recycling facilities. The Company recycles scrap material for a fee and returns the material to its customers, some of whom are the world's largest aluminum companies. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount approximates fair value because of the short maturity of those instruments. INVENTORIES: Inventories are stated at the lower of average cost or market. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Major renewals and improvements are capitalized, while maintenance and repairs are expensed when incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Landfill closure costs are currently estimated to be in excess of $4,000,000 and are being accrued over the estimated useful lives of the landfills. Landfill costs are depreciated as space in the landfill is used. Interest is capitalized in connection with the construction of major facilities. In 1995, 1994 and 1993, $438,000, $309,000, and $525,000 of interest costs were capitalized, respectively. 25 NET EARNINGS PER SHARE: Earnings per common share are based upon the weighted average number of common and common equivalent shares outstanding in each period. Common equivalent shares relate solely to outstanding warrants and stock options. Warrants to purchase 50,000 shares of stock were outstanding at December 31, 1995. The warrants were issued in 1986 at an exercise price of $.10 per share and have a 10-year life. Shares have been reserved relating to these warrants. AMORTIZATION OF INTANGIBLES: The excess of original acquisition cost over the fair value of net assets acquired is amortized on a straight-line basis over their expected life, currently from 7-40 years. Management regularly reviews the remaining goodwill with consideration toward recovery through future operating results. Goodwill is evaluated by the Company on an undiscounted basis. Deferred debt issuance costs, included in other assets, are being amortized over the term of the long-term debt based upon the average amount of debt outstanding. Patents are amortized over their remaining legal lives. CREDIT RISK: A majority of the Company's accounts receivable are due from companies in the aluminum industry. Credit is extended based on evaluation of the customers' financial condition and, generally, collateral is not required. Credit losses are within management's expectations and historically have been very low. NOTE B -- ACQUISITIONS In September 1995, the Company purchased all of the assets of an aluminum recycling facility located in Bedford, Indiana from a private aluminum company. The value of the transaction, which was accounted for as a purchase, was approximately $8,500,000. Goodwill of about $2,000,000 related to this acquisition is being amortized over 15 years. Had the acquisition occurred on January 1, 1995, it would not have had a material impact on either the revenues or net earnings of the Company. In October 1995, the Company acquired all of the outstanding stock of Alumar Associates, Inc. which owned Metal Mark, Inc. Metal Mark owned and operated three aluminum recycling plants located in Chicago Heights, Illinois, Sikeston, Missouri, and Pittsburg, Kansas and owned 50% of a fourth facility in East Chicago, Indiana. The value of the transaction, which was accounted for as a purchase, was about $8,500,000, with $4,000,000 paid in cash and the balance consisting of 208,213 shares of the Company's common stock. In addition, the Company repaid long-term debt of Alumar of about $8,245,000. Goodwill related to the acquisition of about $2,000,000 is being amortized over 15 years. The following unaudited, summarized pro forma results of operations of the combined entities of IMCO and Metal Mark, for the years ended December 31, 1994 and 1995, assuming the acquisition occurred as of the beginning of the respective periods is as presented below: 26
1995 1994 -------- -------- Revenues $204,734 $168,288 Net Earnings $ 13,917 $ 9,637 Earnings per share $ 1.14 $ .81
This pro forma information does not purport to be indicative of what would have occurred had the acquisition been made as of those dates or of results which may occur in the future. In September 1994, the Company purchased the stock of Phoenix Smelting Corporation which operated an aluminum recycling facility in Loudon, Tennessee through its wholly owned subsidiary, Metal Resources, Inc. ("Loudon"). The value of the transaction was approximately $10,000,000 including the Company's repayment of about $5,100,000 of Loudon debt and the issuance of approximately 300,000 shares of common stock. Loudon had, and the Company thereby acquired, a net operating loss carryforward ("NOL") of about $1,100,000. The use of this NOL is subject to certain limitations and will expire in the year 2009. The Company recorded a valuation allowance of approximately $600,000 reducing the value of this NOL at the acquisition date. Goodwill related to this purchase was about $250,000, which is being amortized over 15 years. Had the acquisition occurred on January 1, 1994, it would not have had a material impact on either revenues or net earnings of the company. In December 1993, a subsidiary of the Company acquired all of the assets of an aluminum recycling plant in Corona, California from a private aluminum company. The purchase cost was about $5,000,000. The Company recorded goodwill of approximately $1,000,000 related to the purchase, which is being amortized over 15 years. NOTE C -- INVENTORIES The components of inventories are:
DECEMBER 31, 1995 1994 ------ ------ Finished Goods $6,839 $1,391 Raw Materials 1,986 1,440 Supplies 321 355 ------ ------ $9,146 $3,186 ------ ------
NOTE D -- PROPERTY AND EQUIPMENT The components of property and equipment are:
DECEMBER 31, 1995 1994 -------- -------- Land, Buildings and Improvements $ 58,280 $ 45,329 Production Equipment and Machinery 49,236 37,278 Office Furniture, Equipment and Other 4,242 3,363 -------- -------- 111,758 85,970 Accumulated Depreciation (32,989) (24,924) -------- -------- $ 78,769 $ 61,046 -------- --------
27 In March 1992, the Company entered into an agreement with Barmet Aluminum Corporation ("Barmet"), a subsidiary of CasTech Aluminum Group Inc., to construct, own and operate the Uhrichsville plant adjacent to Barmet's rolling mill in Uhrichsville, Ohio and to supply Barmet with all of its secondary aluminum needs. The Uhrichsville plant, including costs for capitalized interest and for the 1994 expansion, cost approximately $20,750,000. Barmet has an option to acquire up to a 49% equity interest in the Uhrichsville plant at a price equal to such equity percentage multiplied by depreciated book value of the plant plus a premium to compensate the Company for its recycling technology. In 1996 the Company is planning to invest about $12,000,000 for a 50% interest in a German joint venture to be called VAW-IMCO. This venture was formed to own and operate two recycling facilities previously owned by VAW, the largest aluminum company in Germany. The plants will serve the European automotive market. In addition, the Company is planning to construct and operate a new aluminum recycling facility in Coldwater, Michigan during 1996. The total cost is currently projected at approximately $12,000,000. The Company will own 75% of this facility and it is intended to serve the U.S. automotive market. NOTE E -- INCOME TAXES The provision for income taxes was as follows:
FOR THE YEAR ENDED DECEMBER 31, 1995 1994 1993 ------ ------ ------ CURRENT: Federal $5,241 $2,690 $2,017 State 1,485 683 450 ------ ------ ------ 6,726 3,373 2,467 DEFERRED: Federal $1,678 $1,955 $ 649 State (511) (96) 5 ------ ------ ------ 1,167 1,859 654 ------ ------ ------ $7,893 $5,232 $3,121 ------ ------ ------ ------ ------ ------
The tax expense computed by applying the statutory federal income tax rate to earnings before taxes differed from the provision for taxes as follows: 28
FOR THE YEAR ENDED DECEMBER 31, 1995 1994 1993 ------ ------ ------ Tax at statutory rates $7,127 $4,659 $3,789 Goodwill amortization, nondeductible 91 59 61 State income taxes, net 633 387 292 Recognition of credit carryforwards -- -- (699) Other, net 42 127 (322) ------ ------ ------ Provision $7,893 $5,232 $3,121 ------ ------ ------ ------ ------ ------
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
DECEMBER 31, 1995 1994 ------ ------ DEFERRED TAX LIABILITIES: Accelerated depreciation $7,902 $6,534 Federal effect of state income taxes 516 169 Other 199 167 ------ ------ Total Deferred Tax Liabilities 8,617 6,870 DEFERRED TAX ASSETS: Net operating loss carryforwards 919 2,159 Tax credit carryforwards 1,709 1,334 Accruals 1,758 1,066 Federal effect of state income taxes 473 290 Other 230 105 ------ ------ Gross Deferred Tax Assets 5,089 4,954 Valuation Allowance (690) (963) ------ ------ Net Deferred Tax Assets 4,399 3,991 ------ ------ Net Deferred Tax Liability $4,218 $2,879 ------ ------
At December 31, 1995, the Company had a $690,000 valuation allowance to reduce certain deferred tax assets to amounts that are more likely to be realized. The allowance includes $473,000 in related net operating loss assets generated by Loudon, prior to its acquisition by the Company. The remaining $217,000 relates to the Company's ability to utilize certain state tax credits. At December 31, 1995, the Company had $1,709,000 of unused tax credit carryforwards, $168,000 of which expire in 1998, $69,000 of which expire in 2010, and $1,472,000 of which do 29 not expire. State investment tax credits total $1,077,000. However, due to annual limitations on credit utilization, the Company has included $217,000 of this amount in the valuation allowance. At December 31, 1995, the Company had approximately $1,511,000 of unused net operating loss carryforwards for federal purposes which expire in the years 2001 and 2009, and had approximately $5,574,000 for state purposes which expire in 2008 and 2009. The issuance of Common Stock in a public offering on May 19, 1989 produced an "ownership change" under Section 382 of the Internal Revenue Code of 1986, as amended, and subjects the Company's use of the historic net operating loss carryforwards to certain limitations. Under Section 382, the total amount of the Company's net operating loss carryforwards remain unchanged. However, the net operating loss carryforwards utilized to offset income earned in tax years subsequent to 1989 is limited to $3,877,000 per year. The 1994 acquisition of Loudon resulted in an "ownership change" for Loudon. As a result of the change, Loudon's net operating loss carryfowards will be subject to an annual limitation of approximately $300,000 per year. NOTE F -- LONG-TERM DEBT AND CREDIT LINE Long-term debt is summarized as follows:
DECEMBER 31, 1995 1994 ------- ------- 11.18% MONY Senior Notes $ 8,000 $ 8,000 Variable Rate Term Loan 3,750 4,750 Variable Rate Converting Revolving Loan 4,750 -- 7.28% MONY Senior Notes 15,000 -- Other 423 204 ------- ------- Subtotal 31,923 12,954 Less current maturities 2,169 1,094 ------- ------- Total $29,754 $11,860 ------- -------
The 11.18% MONY Senior Notes are collateralized by the Company's Sapulpa, Rockwood, and Morgantown property and equipment carried at a net amount of approximately $27,600,000. The notes mature December 1, 1998. The 7.28% MONY Senior Notes are unsecured. The Company can prepay the notes at any time subject to a make-whole provision. The notes mature October 31, 2007 with mandatory annual prepayments of $3,000,000 scheduled for each October 31 beginning in 2003. The Senior Notes Agreements contain restrictive covenants concerning plant maintenance, disposition and replacement of assets, insurance coverage, financial reporting, and internal and external financing, investing, and operating activities. There are also provisions limiting the payment of cash dividends on and purchases of the Company's Common Stock; however, at December 31, 1995, retained earnings of $6,234,000 were not restricted under these provisions. The Variable Rate Term Loan has an amortization schedule of five years and bears interest at a fluctuating rate based on the Company's ratio of total debt to earnings before interest, tax, depreciation and amortization. The Company has the option to choose either the bank's prime rate, 30 the bank's cost of funds plus 1%, or the appropriate Eurodollar rate plus 1%. At December 31, 1995, the rate was 6.8125% The Variable Rate Converting Revolving Loan has an amortization schedule of four years and bears interest at a fluctuating rate based on the Company's ratio of total debt to earnings before interest, tax, depreciation and amortization. The Company has the option to choose either the bank's prime rate, the bank's cost of funds plus 1%, or the appropriate Eurodollar rate plus 1%. At December 31, 1995, the rate was 6.875%. The fair value of the Company's debt approximates its carrying value due to its recent issuance, floating rate or relatively short maturity. NOTE G -- RETIREMENT PLANS The Company has a profit-sharing retirement plan covering most of its employees who meet defined service requirements. Contributions are determined annually by the Board of Directors and may be as much as 15% of covered salaries. Contributions for 1995, 1994 and 1993 were $1,331,000, $1,039,000, and $738,000, respectively. Pursuant to the terms of the asset purchase agreement for the Bedford, Indiana facility, the Company assumed the obligation to continue to provide a pension plan for eligible hourly employees at this location. Pension payments are determined by a premium factor times the number of years of service for each employee. Pension payments for 1995 were $ 24,000. NOTE H -- STOCK OPTION PLANS In 1992 the Company adopted the 1992 Stock Option Plan, which provides for the granting of nonqualified and incentive stock options to employees, officers, consultants and nonemployee members of the Board of Directors. Options granted to employees under this plan have various vesting periods. Annually, nonemployee directors will be granted nonqualified stock options exercisable after six months from the date of grant, equal to that number of shares determined by dividing the annual director fee amount by the fair market value of a share of common stock as of the date of grant. All options granted under this plan, once vested, are exercisable for a period of up to 10 years from the date of grant, although options may expire earlier because of termination of employment or service. The 1992 Stock Option Plan allows for the payment of all or a portion of the exercise price and tax withholding obligations in shares of the Company's common stock delivered and/or withheld. Such payment or withholding will be valued at fair market value as of the date of exercise. Participants making use of this feature will automatically be granted a reload stock option to purchase a number of shares equal to the number of shares delivered and/or withheld. When a reload stock option is granted, a portion of the shares issued to the participant will be designated as restricted stock for a period of five years, although the restriction may be removed earlier under certain circumstances. Reload stock options have an exercise price equal to the fair market value as of the date of exercise of the original options and will expire on the same date as the original options. In 1995, 1994, and 1993 the Company acquired from employees and placed in the treasury, 40,652, 27,665 and 24,170 shares, respectively, pursuant to provisions of the Company's stock option plan. Such shares were tendered or withheld in satisfaction of those employees' federal and 31 state withholding taxes on compensation resulting from the exercise of nonqualified stock options and for the aggregate exercise cost of certain of the options. In 1990 the Company adopted an amended and restated stock option plan. This plan provides for the granting of nonqualified and incentive stock options. The number of shares of common stock authorized for issuance under the plan is 1,200,000 shares. Options granted under the plan have various vesting periods and are exercisable for a period of 10 years from the date of grant, although options may expire earlier because of termination of employment. Transactions under the option plans are as follows:
1995 1994 1993 ------------ ------------ ----------- Options outstanding January 1, 1,172,402 833,555 725,425 Options granted 200,473 389,847 157,130 Options exercised (77,590) (47,400) (48,000) Options canceled (3,921) (3,600) (1,000) Options outstanding at December 31, 1,291,364 1,172,402 833,555 Option price range at December 31, $.10-$22.75 $.10-$13.75 $.10-$13.75 Option price exercise range $4.89-$13.75 $4.57-$13.63 $4.89-$7.55 Options exercisable at December 31, 714,991 580,355 383,525 Options available for grant at December 31, 391,646 38,198 424,445
NOTE I -- RELATED PARTY TRANSACTIONS An agreement exists with one of the members of the Board of Directors for consulting on Company operations on a month-to-month basis. This agreement, which may be terminated on thirty days' notice, was previously paid at a rate of $10,000 per month and for 1996 will be paid at the rate of $15,000 per month. Payment of $120,000 was made under this consulting agreement during each of the three years ended December 31, 1995. NOTE J -- SIGNIFICANT CUSTOMERS During 1995, sales to Aluminum Company of America ("Alcoa") totaled $32,400,000 or 23% of revenues. No other customer accounted for more than 10% of revenues in 1995. During 1994, sales to Alcoa totaled $30,382,000 or 30% of revenues. Sales to Barmet Aluminum totaled $12,476,000 or 12% of revenues. No other customer accounted for more than 10% of revenues in 1994. During 1993, sales to Alcoa totaled $28,585,000 or 39% of revenues. Sales to Barmet Aluminum totaled $10,569,000 or 14% of revenues. No other customer accounted for more than 10% of revenues in 1993. 32 NOTE K -- QUARTERLY FINANCIAL DATA (Unaudited) Quarterly financial results for 1995 and 1994 were as follows:
1ST 2ND 3RD 4TH TOTAL 1995 QUARTER QUARTER QUARTER QUARTER YEAR - -------------------------------------------------------------------------- Revenues $30,746 $29,725 $32,105 $48,591 $141,167 Gross Profit $ 7,435 $ 7,315 $ 7,783 $ 8,406 $ 30,939 Income before tax $ 4,824 $ 4,933 $ 5,543 $ 5,063 $ 20,363 Net earnings $ 2,894 $ 2,959 $ 3,327 $ 3,290 $ 12,470 Earnings per share $ .24 $ .25 $ .27 $ .27 $ 1.03 1ST 2ND 3RD 4TH TOTAL 1994 QUARTER QUARTER QUARTER QUARTER YEAR - -------------------------------------------------------------------------- Revenues $21,682 $23,070 $26,206 $30,158 $101,116 Gross Profit $ 4,819 $ 4,685 $ 6,065 $ 7,069 $ 22,638 Income before tax $ 3,187 $ 1,591 $ 4,070 $ 4,855 $ 13,703 Net earnings $ 2,032 $ 1,038 $ 2,589 $ 2,812 $ 8,471 Earnings per share $ .18 $ .09 $ .22 $ .24 $ .73
33 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item with respect to directors of the Company appears under the caption "Election of Directors" in the definitive Proxy Statement (herein so called) of the Company relating to the Company's 1996 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A of the Securities Exchange Act of 1934, which information is incorporated herein by reference. It is currently anticipated that the Proxy Statement will be publicly available and mailed to stockholders in April 1996. Certain information as to executive officers is included herein under Part I, ITEM 1. "BUSINESS - EXECUTIVE OFFICERS." ITEM 11. EXECUTIVE COMPENSATION The information required by this item appears under the caption "Remuneration of Directors and Officers" in the Proxy Statement, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item appears under the caption "Voting and Principal Stockholders" in the Proxy Statement, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item appears under the captions "Compensation Committee Report to Stockholders - Compensation Committee Interlocks and Insider Participation" and "Remuneration of Directors and Officers -- Directors Compensation" in the Proxy Statement, which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Annual Report on Form 10-K: 1. Consolidated Financial Statements: See index to Consolidated Financial Statements and Financial Statement Schedules on Page 19 hereof. 2. Consolidated Financial Statement Schedules: See index to Consolidated Financial Statements and Financial Statement Schedules on Page 19 hereof. 3. EXHIBITS: 34 3.1 Certificate of Incorporation of IMCO Recycling Inc., as amended, filed as Exhibit 4.6 to the Company's Registration Statement on Form S-2 (No. 33-48571) and incorporated herein by reference. 3.2 By-laws of IMCO Recycling Inc., as amended, filed as Exhibit 4.7 to the Company's Registration Statement on Form S-2 (No. 33-48571) and incorporated herein by reference. 4.1 Specimen Stock Certificate of the Common Stock, $0.10 par value, of IMCO Recycling Inc., filed as Exhibit 4.1 to the Company's Registration Statement on Form S-2 (No. 33-48571) and incorporated herein by reference. 10.1 Note Purchase Agreement, dated as of December 15, 1988, by and among IMCO Recycling Inc., The Mutual Life Insurance Company of New York, and MONY Life Insurance Company of America, filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "1993 Form 10-K"), and incorporated herein by reference. 10.2 Amendment, dated as of May 3, 1990, to Note Purchase Agreements by and among IMCO Recycling Inc., The Mutual Life Insurance Company of New York, MONY Life Insurance Company of America, and MONY Legacy Life Insurance Company, filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "1994 Form 10-K"), and incorporated herein by reference. 10.3 Second Amendment, dated as of October 1, 1990, to Note Purchase Agreements by and among IMCO Recycling Inc., The Mutual Life Insurance Company of New York, MONY Life Insurance Company of America, and MONY Legacy Life Insurance Company, filed as Exhibit 10.3 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.4 Third Amendment, dated as of May 10, 1991, to Note Purchase Agreements, by and among IMCO Recycling Inc., The Mutual Life Insurance Company of New York, and MONY Life Insurance Company of America, filed as Exhibit 10.4 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.5 Fourth Amendment, dated as of November 27, 1991, to Note Purchase Agreements by and among IMCO Recycling Inc., The Mutual Life Insurance Company of New York, and MONY Life Insurance Company of America, filed as Exhibit 10.5 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.6 Amended and Restated Registration Agreement, dated September 30, 1988, among IMCO Recycling Inc., Merrill Lynch Interfunding Inc., Don V. Ingram, Larry Thrasher, and PTX Partners, filed as Exhibit 10.6 to the Company's 1993 Form 10-K and incorporated herein by reference. 35 10.7 Amendment No. 1 to Amended and Restated Registration Agreement, dated as of December 30, 1988, filed as Exhibit 10.7 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.8 Amendment, dated as of September 5, 1990, to Registration Agreement between Merrill Lynch Interfunding Inc. and Don V. Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.9 IMCO Recycling Inc. Amended and Restated Stock Option Plan, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (the "1992 Form 10-K") and incorporated herein by reference. 10.10 Employment Agreement, effective as of April 1, 1991, by and between IMCO Recycling Inc. and Richard L. Kerr, filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (the "1991 Form 10-K") and incorporated herein by reference. 10.11 Addendum to Employment Agreement-Stock Option, dated as of April 1, 1987, by and among International Metal Co., Frontier Texas Corporation, and Richard L. Kerr, filed as Exhibit 10.11 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.12 Employment Agreement, effective as of April 1, 1991, by and between IMCO Recycling Inc. and Thomas W. Rogers, filed as Exhibit 10.17 to the Company's 1991 Form 10-K and incorporated herein by reference. 10.13 Employment Agreement, effective as of March 1, 1990 by and between IMCO Recycling Inc. and Paul V. Dufour, filed as Exhibit 10.15 to the Company's 1993 Form 10-K and incorporated herein by reference. 10.13A Amendment to Employment Agreement, dated February 19, 1993, by and between IMCO Recycling Inc. and Paul V. Dufour, filed as Exhibit 10.18 to the Company's 1992 Form 10-K and incorporated herein by reference. 10.14 Employment Agreement, effective as of April 1, 1991, by and between IMCO Recycling Inc., and C. Lee Newton, filed as Exhibit 10.17 to the Company,s 1993 Form 10-K and incorporated herein by reference. 10.15 Employment Agreement, effective as of January 13, 1995, by and between IMCO Recycling Inc. and Frank H. Romanelli, filed as Exhibit 10.15 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.16 Assignment, dated September 16, 1986, from Clarence W. Haack and Genevieve Haack to International Metal Co., filed as Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated herein by reference. *10.17 Agreement, dated as of August 26, 1995, between IMCO Recycling Inc., Rockwood, Tennessee Facility, and International Union, United Steelworkers of America. 36 10.18 Form of Stock Purchase Warrant between IMCO Recycling Inc. and Don V. Ingram for the purchase of 50,000 shares of Common Stock, filed as Exhibit 10.18 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.19 Split-Dollar Life Insurance Agreement, dated as of November 5, 1990, between Thomas W. Rogers and IMCO Recycling Inc., filed as Exhibit 10.19 to the Company's 1994 Form 10-K and incorporated herein by reference (The Company is a party to two virtually identical Split-Dollar Life Insurance Agreements with Paul V. Dufour, C. Lee Newton, Richard L. Kerr and Frank Romanelli. These agreements have been omitted since they are substantially identical to Mr. Rogers' in all material respects). 10.20 Stock Purchase Agreement among the former shareholders of Interamerica Zinc, Inc. and IZI Acquisition Co., effective as of January 1, 1992, filed as Exhibit (1) to the Company's Current Report on Form 8-K, dated January 13, 1992, and incorporated herein by reference. 10.21 Escrow Agreement, dated January 13, 1992, among IZI Acquisition Company, Society Bank Michigan, and the former shareholders of Interamerica Zinc, Inc., filed as Exhibit (2) to the Company's Current Report on Form 8-K dated January 13, 1992, and incorporated herein by reference. 10.22 Supply Agreement between Barmet Aluminum Corporation and the Company, dated March 2, 1992, filed as Exhibit 10.25 to the Company's 1991 Form 10-K and incorporated herein by reference. 10.23 Right of First Refusal Agreement between Barmet Aluminum Corporation and the Company, dated March 2, 1992, relating to Barmet's Indiana recycling plant, filed as Exhibit 10.23 to the Company's 1994 Form 10-K and incorporated by reference. *10.24 Agreement, effective as of December 1, 1995, between IMCO Recycling of Ohio Inc. and the United Mine Workers of America. 10.25 Consulting Agreement, dated as of May 31, 1985, between Don V. Ingram and Frontier Texas Corporation, filed as Exhibit 10.25 to the Company's 1994 Form 10-K and incorporated herein by reference. 10.26 IMCO Recycling Inc. 1992 Stock Option Plan, as amended December 15, 1994, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995, and incorporated herein by reference. 10.27 IMCO Recycling Inc. 1992 Bonus Participation Plan filed as Exhibit 10.32 to the 1992 Form 10-K and incorporated herein by reference. 10.28 Agreement, dated as of March 29, 1994, between IMCO Recycling of California, Inc. and the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers, filed as Exhibit 10.33 to the Company's 1993 37 Form 10-K and incorporated herein by reference. 10.29 Agreement, effective as of January 1, 1994, between IMCO Recycling Inc. and Aluminum Company of America, filed as Exhibit 10.34 to the Company's 1993 Form 10-K and incorporated herein by reference. 10.30 Agreement and Plan of Merger, dated September 20, 1994, among IMCO Recycling Inc., IMCO Recycling of Tennessee, Inc., Phoenix Smelting Corporation, and the shareholders of Phoenix Smelting Corporation, filed as Exhibit 1 to the Company's Current Report on Form 8-K, dated September 20, 1994, and incorporated herein by reference. 10.31 Registration Rights Agreement, dated September 20, 1994, among IMCO Recycling Inc. and the shareholders of Phoenix Smelting Corporation, filed as Exhibit 2 to the Company's Current Report on Form 8-K dated September 20, 1994, and incorporated herein by reference. 10.32 Loan Agreement, dated September 20, 1994, between IMCO Recycling Inc. and Texas Commerce Bank, National Association, filed as Exhibit 3 to the Company's Current Report on Form 8-K, dated September 20, 1994, and incorporated herein by reference. 10.33 Negative Pledge Agreement, dated September 20, 1994, between IMCO Recycling Inc. and Texas Commerce Bank, National Association, filed as Exhibit 4 to the Company's Current Report on Form 8-K, dated September 20, 1994, and incorporated herein by reference. *10.34 First Amendment to Loan Documents, dated as of May 31, 1995, by and between IMCO Recycling Inc. and Texas Commerce Bank National Association. 10.35 First Amendment to processing agreement by and among the Rigid Packaging division of Aluminum Company of America, the Company and Metal Resources Inc., filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995, and incorporated herein by reference. 10.36 Agreement and Plan of Merger, dated as of October 1, 1995, among IMCO Recycling Inc., IMCO Recycling of Illinois Inc., Alumar Associates, Inc. and the Shareholders, filed as Exhibit 1 to the Company's Current Report on Form 8-K, dated October 3, and incorporated herein by reference. 10.37 Registration Rights Agreement, dated as of October 1, 1995, among IMCO Recycling Inc. and the Shareholders, filed as Exhibit 2 to the Company's Current Report on Form 8-K, dated October 3, 1995, and incorporated herein by reference. *10.38 Second Amendment to Loan Documents, dated as of November 3, 1995, by and between IMCO Recycling Inc. and Texas Commerce National Association. *10.39 Note Purchase Agreement, dated as of November 29, 1995, by and between IMCO Recycling Inc. and The Mutual Life Insurance Company of New York. 38 *10.40 Fifth Amendment, dated as of November 29, 1995, to Note Purchase Agreements by and among IMCO Recycling Inc., The Mutual Life Insurance Company of New York, and MONY Life Insurance Company of America. *21 Subsidiaries of IMCO Recycling Inc., as of March 15, 1996. *23 Consent of Ernst & Young LLP. *27 Financial Data Schedule. *Filed herewith (b) Reports on Form 8-K filed in fourth quarter 1995: 1. The Company filed a current report on Form 8-K dated October 3, 1995, under "Item 2 - Acquisition or Disposition of Assets," reporting the Company's acquisition of Alumar Associates, Inc. and under "Item 5 - Other Events," reporting the acquisition of the Bedford, Indiana assets. (c) See sub-item (a) above. (d) See sub-item (a) above. 39 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 25, 1996 IMCO Recycling Inc. By: /s/ Robert R. Holian --------------------------- Robert R. Holian Vice President and Controller, Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, This report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: SIGNATURE TITLE DATE --------- ----- ---- /s/ Don V. Ingram Director, Chairman of the Board March 25, 1996 - ----------------------- Don V. Ingram /s/ Jack M. Brundrett Director March 25, 1996 - ----------------------- Jack M. Brundrett /s/ Ralph L. Cheek Director March 25, 1996 - ----------------------- Ralph L. Cheek /s/ John J. Fleming Director March 25, 1996 - ----------------------- John J. Fleming /s/ Richard Hanselman Director March 25, 1996 - ----------------------- Richard Hanselman /s/ Thomas James Director March 25, 1996 - ----------------------- Thomas James /s/ Don Navarro Director March 25, 1996 - ----------------------- Don Navarro /s/ Jack C. Page Director March 25, 1996 - ----------------------- Jack C. Page /s/ Frank H. Romanelli Director, President & Chief March 25, 1996 - ----------------------- Executive Officer Frank H. Romanelli /s/ Paul V. Dufour Executive Vice President March 25, 1996 - ----------------------- Finance and Administration Paul V. Dufour (Principal Financial Officer) 40 /s/ Robert R. Holian Vice President and Controller March 25, 1996 - ----------------------- (Principal Accounting Officer) Robert R. Holian 41 EX-10.17 2 EXHIBIT 10.17 AGREEMENT BY AND BETWEEN IMCO RECYCLING INC. ROCKWOOD, TENNESSEE AND INTERNATIONAL UNION UNITED STEELWORKERS OF AMERICA LOCAL NO. 9147 AUGUST 26, 1995 Table of Contents Page Purpose and Intent . . . . . . . . . . . . . . . . . 1 Article I - Recognition. . . . . . . . . . . . 1 Article II - Management Rights. . . . . . . . . 1 Article III - Check-Off Authorization. . . . . . 2 Article IV - Creation of New Jobs . . . . . . . 2 Article V - Overtime . . . . . . . . . . . . . 2 Article VI - Holiday Pay. . . . . . . . . . . . 3 Article VII - Seniority. . . . . . . . . . . . . 4 Article VIII - Temporary Transfers and Job Assignments. . . . . . . . . . 5 Article IX - Permanent Vacancies. . . . . . . . 6 Article X - Temporary Reduction in Force . . . 7 Article XI - Reduction in Force . . . . . . . . 7 Article XII - Restoration of Forces. . . . . . . 7 Article XIII - Production Work by Non-Bargaining Unit Personnel. . . 8 Article XIV - Leave of Absence . . . . . . . . . 8 Article XV - Plant Closing or Relocations . . . 8 Article XVI - Grievance Procedure. . . . . . . . 9 Article XVII - No Strike/No Lockout . . . . . . .10 Article XVIII - Discharge and Discipline . . . . .11 Article XIX - Safety . . . . . . . . . . . . . .11 Article XX - Contractual Benefits . . . . . . .11 Article XXI - Credit Union . . . . . . . . . . .11 Article XXII - Duration . . . . . . . . . . . . .11 Schedule A . . . . . . . . . . . . . . . . . . . . .14 Schedule B . . . . . . . . . . . . . . . . . . . . .15 This Agreement by and between IMCO Recycling, Inc., Rockwood, Tennessee, facility, (hereinafter called "Company") and International Union, United Steelworkers of America (hereinafter called "Union") is entered into this 25th day of August, 1995. PURPOSE AND INTENT It is the purpose and intent of the parties to set forth certain Agreements pertaining to wages, hours, and working conditions to be observed by the parties during the life of this Agreement and to provide procedures for the prompt and equitable adjustment of grievances. The Union, Company, and employees agree they will work together in harmony toward turning out a quality product and will abide by the terms and conditions set forth in this Agreement. ARTICLE I RECOGNITION The Company recognizes the Union as the exclusive bargaining agent for employees of the Company at its Rockwood, Tennessee, facility in the below-described unit certified by the National Labor Relations Board on January 16, 1986: INCLUDED: All production and maintenance employees employed by the Employer at its Rockwood, Tennessee, facility, including lead persons. EXCLUDED: Laboratory technicians, all office clerical employees, professional employees, guards and supervisors as defined by the Act. All other employees not specifically listed above as included or excluded shall be excluded. ARTICLE II MANAGEMENT RIGHTS The Company has, retains, and shall continue to possess and exercise each and every management right, right to function, privilege, authority; only except, as specifically limited, relinquished, modified, or restricted by this Agreement. Illustrative, but not all inclusive of the rights of management retained, are the right to manage the Company; to direct the work force; to make and enforce rules of conduct; to subcontract; to change hours and days of work; to assign work to other of the Company's employees and facilities; to make and change work duties and assignments; to determine the quality and quantity of productivity required; to change or adjust the hours and numbers of shifts and assignments thereto; to hire employees; to classify, promote, discipline, demote, and discharge employees for just cause; to lay off and recall employees; to select and make technological state of the art changes in processes, tools, equipment, and facilities; to determine the number of employees to be employed; to determine the number of employees to be employed in each department, shift, classification; to determine the number of employees to be employed in any particular work function or assignment; to decide the methods, equipment, processes, and means of production; to determine the utilization of labor-saving devices which may result in a reduction of the work force; to establish new departments, job classifications, and initial rates of pay; to transfer and assign employees to duties without regard to titles, job classifications, departments, etc.; (subject to the terms of this contract) and to exercise the right not specifically set forth in this Agreement upon which the parties negotiated or had the opportunity to negotiate whether or not such rights have been exercised by the Company in the past. ARTICLE III CHECK-OFF AUTHORIZATION The Company will check-off monthly dues, assessments and initiation fees each as designated by the Union, as membership dues in the Union, on the basis of individually signed voluntary checkoff authorization cards. The cards and forms will be mutually agreed upon by the Company and the Union. ARTICLE IV CREATION OF NEW JOBS At such time as the Company establishes a new classification, it will notify the Union of the duties and the proposed wage for that classification and will be subject to the grievance procedure only to the extent the duties are unreasonable. ARTICLE V OVERTIME SECTION 1. The Company will make a good faith effort to fairly and equitably distribute overtime in a consistent manner as practical among qualified employees. The Company will make every effort to minimize the amount of overtime worked, but when the need arises, those employees who are designated by the Company for overtime must perform the work. The least senior employees must perform the work. 2 SECTION 2. Overtime will be paid at time and one-half the regular rate and will apply only after forty (40) hours have been worked during the workweek. Hours not actually worked will not count toward overtime (e.g., holiday, vacation, sick leave, etc.). SECTION 3. The Company will pay, on a trial basis, overtime pay to those individuals who work on major equipment outages (i.e. , rebricking a rotary furnace) for all hours over eight (8) hours worked (twelve (12) hours for those on a twelve (12) hour schedule) when they work more than sixteen (16) hours. This type of special overtime pay will be scheduled and not be the normal type incidental-scheduled overtime which occurs during the normal workweek. SECTION 4. At the option of the supervisor and the employee, the employee who has been called in to work may leave and receive a minimum of two (2) hours pay. However, if the employee chooses to accept the four (4) hour pay provision (at the employee's option), he will perform any and all work available for the remaining portion of the four (4) hour call-in period. SECTION 5. The practice of distributing overtime will be done in a consistent manner on a plantwide basis. The Union will review the overtime records at least on a weekly basis. ARTICLE VI HOLIDAY PAY Holidays recognized in the Agreement are: New Year's Day Labor Day Easter Thanksgiving Day Memorial Day Day after Thanksgiving Flag Day Christmas Eve Fourth of July Christmas Day Employees shall receive Holiday Pay for these holidays, provided they work their scheduled workdays immediately prior and immediately after the Holiday, unless absent for a good cause as determined by the Company. 1. Employees not working the Holiday shall receive eight (8) hours straight-time pay. 2. If the Plant is scheduled closed for a Holiday, those employees scheduled to work the Holiday will receive Holiday pay equal to their scheduled hours. 3 3. Employees scheduled to work shall receive double their straight-time hourly rate for each hour actually worked. 4. Employees scheduled to work less than a regular eight (8) hour shift shall be paid for time worked in addition to eight (8) hours Holiday pay. 5. Employees scheduled to work the Holiday who are absent without good cause will not be entitled to Holiday pay. 6. Probationary employees are not eligible for Holiday pay. ARTICLE VII SENIORITY SECTION 1. The seniority as recognized in this Agreement shall run from an employee's date of last hire. It is understood that the term "seniority" as used in this Agreement only refers to such length of service. SECTION 2. A probationary employee is any employee whose continuous length of service is less than sixty (60) calendar days. When a probationary employee has accumulated sixty (60) calendar days of continuous service, he(1) will become a regular employee and have his seniority established as set forth in the paragraph above. During an employee's probationary period, the Company shall not be restricted in its right to discharge or discipline such employee for any cause, except as limited by state and federal law. The discipline or discharge of a probationary employee shall not be subject to the grievance procedure of this Agreement. Further, no contractual terms or entitlements of this Agreement shall be available to any probationary employee. The probationary period of any employee may be extended an additional thirty (30) calendar days at the discretion of the Company. When an employee's probationary period is to be extended, the Local Union President will be notified at the time of the extension. SECTION 3. An employee who is transferred outside the bargaining unit into a permanent supervisory position shall have the right to return to the bargaining unit within sixty (60) _________________________ (1) The masculine pronouns refer to both genders and are simply used for ease of reading. 4 calendar days of such transfer. There shall be no break in seniority. SECTION 4. An employee shall lose seniority rights when any of the following occur: a. The employee quits; b. The employee is properly or justly discharged and not reinstated; c. The employee is absent from work for three (3) consecutive workdays without notifying the Company of a legitimate reason for such absence on a daily basis, unless such notification is not possible; d. The employee has not been recalled from layoff for a period of two (2) years; e. The employee fails to return from a leave of absence within three (3) workdays following the expiration thereof; f. The employee fails to respond to a notice of recall to work on the day set forth in the notice. (The Company shall send a written notice of recall to the employees' last known address. It shall be the employees' responsibility to keep the Company advised of its current address and telephone number.); g. The employee retires. SECTION 5. The Company will furnish the senior Union Officer/employee a list of bargaining unit employees ranked in seniority order. Such list shall be furnished every six (6) months. SECTION 6. The Company and Union shall discuss modifications of this collective bargaining agreement to permit the Company to comply with the Americans with Disabilities Act. ARTICLE VIII TEMPORARY TRANSFERS AND JOB ASSIGNMENTS The Company reserves the right to transfer an employee to a temporary job and/or classification for a period of ninety (90) days. The Union recognizes the Company's need to have employees work at any job for the successful operation of the Company so long as the employee maintains his rate of pay. When the Company 5 temporarily transfers an employee, consideration will be given to seniority, qualifications and the operating requirements of the plant. When the temporary transfer is over, an employee shall be returned to the job and shift from which he was transferred. In the event of a Leadman Operator temporary vacancy that is filled by an Equipment Operator from that crew, the senior qualified employee will be temporarily upgraded to the position and pay rate. Similarly, the senior qualified Maintenance employee will be upgraded to the Maintenance Leadman, if a temporary vacancy occurs and (at the discretion of the Company) the position is filled. Employees who are transferred to another job classification will be paid fifty percent (50%) of the difference between the higher job classification rate of pay and their present rate of pay. ARTICLE IX PERMANENT VACANCIES Permanent Vacancies are those which have been created by an employee leaving the Company or by the creation of a new job or increased workload. SECTION 1. When it becomes necessary to fill a permanent vacancy as defined above, notification shall be placed on the bulletin board for a period of five (5) calendar days. Employees who seek to bid on the job shall sign the posting. If a posting goes up during an employee's vacation, the local Union President may bid for that person if so requested. The posting shall include the job classification, shift and, if a new job, the rate and a brief description of the duties. The Company shall advise the Union President of the successful bidders as soon as the posting comes down. Employees shall be permitted to select shift preference to an open job if the employee has a shift preference form on file. Such forms must be renewed on January lst on an annual basis. After two (2) shift preference moves have occurred or made available, the open position shall be bid. During the term of this Agreement, employees will be permitted one (1) lateral bid per year and one (1) downward bid per contract. SECTION 2. Promotions and filling of permanent vacancies shall be made on the basis of an employee's overall qualifications. If overall qualifications are relatively equal, then seniority will prevail. SECTION 3. If an employee fails to demonstrate within thirty (30) working days that he can perform the job, then he shall 6 be returned to his former job. An employee who wishes to disqualify himself from the position during the first sixty (60) workdays may, with the agreement of the Company, do so at which time he may go to an open position or return to his former position at the option of the Company. SECTION 4. If there are no qualified or successful bidders, the Company reserves the right to hire from a list of job applicants. ARTICLE X TEMPORARY REDUCTION IN FORCE The Company may select persons for temporary reductions in force without regard to job classification, seniority, or any other contractual provisions for periods of up to ten (10) calendar days. ARTICLE XI REDUCTION IN FORCE SECTION 1. When a reduction in force is necessary, the Company will notify the employees and the Union at least five (5) calendar days in advance, unless an unforeseen circumstance arises, in which case Article X will be applied. Selection for reduction in force shall be made on the basis of seniority, with one exception, that being when the skills and/or qualifications of the junior employees are necessary for the efficient and productive operation of the plant. ARTICLE XII RESTORATION OF FORCES SECTION 1. Recall to employment from layoff shall be according to the jobs needed to be performed and seniority. Employees will be returned to their former positions (or other positions for which they are qualified) and pay rates on the basis of seniority. Employees whose skills and/or qualifications are necessary for the efficient and productive operation of the plant may be recalled without consideration of their seniority. 7 ARTICLE XIII PRODUCTION WORK BY NON-BARGAINING UNIT PERSONNEL Non-bargaining unit personnel have the right to perform bargaining unit work, at the discretion of the Company, which does not result in the layoff of an employee (as distinguished from a continued layoff). It is the intent of the Company that supervisors will not routinely perform work that is normally performed by bargaining unit employees. However, there are situations whereby supervisors are required to and/or do accomplish bargaining unit work. Such situations are for work that is of short duration, work required by emergency conditions, work that requires special skills, work that is related to special projects, demonstration work, development work, and work that is applicable to both the supervisory duties and bargaining unit. ARTICLE XIV LEAVE OF ABSENCE An employee may be granted a Leave of Absence for up to three (3) months. Extensions of the leave may be granted for good cause. Leaves will be granted for employees to perform work for the union in an official capacity. Leaves of absence greater than five (5) days (and extensions of the leave) must be in writing. At the discretion of the Company all leaves of absence will be granted depending upon the operating requirements of the plant. The Company will comply with the terms of the Tennessee statute covering maternity leave. The company will comply with the Family and Medical Leave Act to the extent it exceeds the provisions of this contract. ARTICLE XV PLANT CLOSING OR RELOCATIONS If the Company decides to sell, close, or relocate its Rockwood, Tennessee, facility, it shall comply with its statutory obligations. 8 ARTICLE XVI GRIEVANCE PROCEDURE A grievance is defined as any charge or claim by the Union or an employee(s) that the Company has breached the precise and specific terms of this Agreement. Such grievance signed by the employee and a committeeman shall clearly state the particular article and language claimed to have been violated. Any grievance not filed within three (3) days of the occurrence of the alleged violation shall be deemed null and void. Failure of the employee or union to timely process the grievance shall result in the grievance being deemed null and void. Failure of the Company to timely respond to the grievance at any step shall result in the grievance being moved to the next step. However, the Company and the Union may mutually agree to extend the response periods for steps two through five of this procedure. The procedure shall be as follows: STEP ONE. The employee shall present the grievance orally to, and discuss the grievance with, his immediate supervisor with or without a Union committeeman present. The first level supervisor shall orally advise the employee of his decision on the grievance within five (5) days thereafter. STEP TWO. The employee and the committeeman may appeal the Step One decision within seventy-two (72) hours after receiving the answer. Such appeal shall be in writing identifying the precise Agreement article and language claimed to have been violated, signed by the employee and the committeeman. It shall be presented to the Superintendent, who shall discuss the grievance with the employee, with a Union committeeman present. Such discussion will take place within three (3) days of the filing of the written grievance. The Superintendent will give this decision within five (5) days thereafter. NOTE: IN THOSE CASES WHERE THERE IS NOT A SECOND LEVEL OF MANAGEMENT (I.E., MAINTENANCE DEPT.) THE STEP TWO PROCEDURE WILL BE BYPASSED AND MOVED TO STEP THREE IN THE PROCEDURE. STEP THREE. The Union may appeal the decision of the Superintendent within five (5) days of the date of the answer. A meeting shall take place with the Superintendent and the Plant Manager within five (5) days thereafter. The Company will answer the grievance within five (5) days after such meeting. STEP FOUR. The Union may appeal the decision of the Plant Manager within five (5) days of the date of the answer. A meeting shall take place with the Plant Managers from two (2) of the Company facilities within seven (7) days thereafter. The Company will answer the grievance within seven (7) days after such meeting. 9 STEP FIVE. The Union may appeal the Company's decision to the Executive Vice President of the Company within ten (10) days after the date of the Company's final answer. The response of Step Five will be rendered in writing within ten (10) days after the receipt of the appeal. In the event the grievance concerns a discipline case whereby more than five (5) days off have been administered to an employee, then the Company and the Union will agree to settlement by arbitration. The parties shall request FMCS to provide a panel of seven (7) arbitrators. The parties will strike alternately until one (1) arbitrator is left, with the Union striking first. In the event the issue is other than one involving more than a five (5) day disciplinary case and the Company denies the grievance at the last step, the parties may contact the Federal Mediation and Conciliation Service, Knoxville, Tennessee office and request a Federal Mediator who will meet with the parties to make one final effort to resolve the grievance. The request for federal mediation involvement must be made within ten (10) calendar days of the Step 5 written answer. Such request must be in writing. The meeting between the parties and the Federal Mediator must occur within ten (10) calendar days after the date of the requesting letter. No later than the conclusion of the meeting with the Federal Mediator, the grievance will be resolved or the Union has the right to strike the Rockwood, Tennessee facility only after written notification of five (5) days of an intent to engage in such a work stoppage. Such strike shall be commenced within sixty (60) calendar days following the five (5) days referenced hereinbefore or such right shall be lost. The sixty (60) days may be extended by mutual agreement. Any such strike shall be deemed an economic strike, and the Company shall have all rights reserved by law in an economic strike. Work stoppages or strikes shall be limited to the Rockwood, Tennessee, facility. Any work stoppage or strike actually engaged in by the Union or employees away from the Rockwood, Tennessee, facility shall result in immediate discharge of such employees. The written notification of work stoppage shall be sent by registered mail to Rockwood, Tennessee. Failure of the Union to send such notification within ten (10) days after the receipt of the Fifth Step response shall void any right to strike pursuant to Article XVI of the Agreement. ARTICLE XVII NO STRIKE/NO LOCKOUT During the term of this Agreement, subject to Article XVI, the Union agrees it will not engage in any strike, work stoppage, slow down, or other interference with work. Failure of an employee to comply with this provision shall result in his 10 immediate termination. Proof of an employee(s) engaging in conduct violative of this Article shall be just cause for permanent discharge and not subject to Article XVI. The Company agrees it will not lock out its employees. ARTICLE XVIII DISCHARGE AND DISCIPLINE No employee will be discharged or disciplined without proper or just cause. When an employee is to be discharged or disciplined, he may ask for a committeeman to be present. ARTICLE XIX SAFETY The Company and the Union will jointly work on the objective of eliminating accidents and health hazards in the work place. This joint effort may take the form of joint safety committees, special groups working on safety projects, safety training, and/or other activities which will improve the overall safety effort of the Plant. It is the intent of the Company that all safety problems will be dealt with immediately by an employee's supervisor. ARTICLE XX CONTRACTUAL BENEFITS Any and all contractual benefits, rights, or entitlements under this Agreement are predicated on actual hours worked. ARTICLE XXI CREDIT UNION There will be a payroll deduction credit union option for all bargaining unit employees with a local credit union. ARTICLE XXII DURATION 1. This Agreement constitutes the complete contractual relationship between the parties hereto. 2. This Agreement shall become effective as of 12: 01 AM August 26, 1995, and shall continue in full force and effect until 11 midnight August 25, 2000. It shall automatically be renewed for successive periods of one (1) year thereafter unless either party notifies the other in writing at least sixty (60) days prior to August 25, 2000, or sixty (60) days prior to any succeeding August 25th, that the Agreement will terminate on such specified date. 3 . Written notices required under Section 2 above shall be made by Certified Mail. Such notice shall be addressed to: IMCO Recycling Inc., P.O. Box 268, Rockwood, Tennessee 37854, if to the Company and to United Steelworkers of America, AFL-CIO-CLC, 269 Cusick Road, Suite D, Alcoa, Tennessee 37701, if to the Union. Either party may, by written notice to the other, effect a change of the addresses given above. IN WITNESS WHEREOF, this Agreement has been signed on behalf of both parties on the day of September, 1995. UNITED STEELWORKERS OF AMERICA IMCO INC. By: By: - ---------------------------------- ---------------------------------- George Becker Richard L. Kerr International President Executive Vice President - ---------------------------------- ---------------------------------- Leo Gerard F. Robert Hubbard International Sec./Treasurer General Manager, Rockwood Plant - ---------------------------------- ---------------------------------- Richard Davis J. B. Walburg International V.P. (Admin.) Treasurer - ---------------------------------- Leon Lynch International V.P. (Human Affairs) - ---------------------------------- Joe Kiker Director, District 9 - ---------------------------------- Staff Representative USWA LOCAL UNION 9147 COMMITTEE - ---------------------------------- Virgil McNelly, President - ---------------------------------- Terry Hall, Vice President 12 - ---------------------------------- George Kirkland - ---------------------------------- Archie Cook - ---------------------------------- Doug Young 13 SCHEDULE A
8/26/95 8/26/96 8/26/97 8/26/98 8/26/99 ------- ------- ------- ------- ------- Maintenance Leadman 12.00 12.30 12.60 13.00 13.50 Maintenance Mechanic 11.40 11.70 12.00 12.40 12.90 Furnace Operator 10.90 11.20 11.50 11.90 12.40 Equipment Operator 10.15 10.45 10.75 11.15 11.65 Janitor 8.45 8.75 9.05 9.45 9.95 Truck Driver 10.90 11.20 11.50 11.90 12.40 Electrician 11.55 11.85 12.15 12.55 13.05 Leadman Operator 10.90 11.20 11.50 11.90 12.40 Leadman Furnace Operator 11.50 11.80 12.10 12.50 13.00 Mobile Vehicle Maintenance Mechanic 11.40 11.70 12.00 12.40 12.90 Scheduled premium of $.15/hr. for those employees working on eight (8) or twelve (12) hour rotating shift schedule.
Commencing on August 26, 1994 through August 26, 1999, the following annual increases will be given: $.35 (8/26/95); $.30 (8/26/96); $.30 (8/26/97); $.40 (8/26/98); and $.50 (8/26/99). 14 SCHEDULE B I. JURY DUTY - Employees who are selected for jury duty will be made "whole" for their normal scheduled hours missed. The appropriate documentation will be required for reimbursement. II. BEREAVEMENT PAY - Employees will be given time off with their normal scheduled pay up to three (3) days for the following relatives: spouse, son, daughter, mother, father, sister, brother, mother-in-law, father-in-law, grandmother, grandfather. One (1) day will be allowed for current brother or sister-in-law funerals. In the case of brother and sister-in-law funerals, the employee may ask for and shall be granted two (2) additional days off without pay or attendance points. The employee must attend the funeral. III. VACATION ACCRUAL: After 1 year . . . . . . . . . . 1 week After 2 years. . . . . . . . . . 2 weeks After 10 years . . . . . . . . . 3 weeks After 20 years . . . . . . . . . 4 weeks IV. Employees and dependents shall be covered under health, life and dental insurance after the employee ends his or her probationary period. V. The Company will buy each bargaining unit employee a pair of safety shoes upon ratification of the contract. Thereafter, the Company will repair the shoes of bargaining unit employees but if in its opinion the shoe is not repairable, it will purchase a new pair for the employee. The cost thereof will be split 50/50 with the employee. In no event will the Company purchase more than one (1) pair per year. VI. The Company shall pay up to One Hundred Fifty Dollars ($150.00) for the cost of a welder receiving his welding certification (AWS). VII. Employees shall be furnished term life insurance in the amount of Twenty-Five Thousand Dollars ($25,000.00). Spouses and dependent children of employees shall be furnished term life insurance in the amount of Ten Thousand Dollars ($10,000.00) and Five Thousand Dollars ($5,000.00) respectively. 15 EX-10.24 3 EXHIBIT 10.24 CONTRACT BETWEEN IMCO RECYCLING OF OHIO INC. UNITED MINE WORKERS, AFL-CIO Effective 12/1/95 Through Midnight 11/30/98 TABLE OF CONTENTS Purpose and Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Article I - Recognition . . . . . . . . . . . . . . . . . . . . . . 1 Article II - Management Rights . . . . . . . . . . . . . . . . . . . 1 Article III - Probationary Employees. . . . . . . . . . . . . . . . . 2 Article IV - Union Security. . . . . . . . . . . . . . . . . . . . . 2 Article V - Seniority . . . . . . . . . . . . . . . . . . . . . . . 3 Article VI - Permanent Vacancies . . . . . . . . . . . . . . . . . . 4 Article VII - Temporary Vacancy . . . . . . . . . . . . . . . . . . . 5 Article VIII - Temporary Reduction In Force . . . . . . . . . . . . . 7 Article IX - Reduction in Force . . . . . . . . . . . . . . . . . . 7 Article X - Grievance Committee . . . . . . . . . . . . . . . . . . 8 Article XI - Permanent Job Classification Elimination . . . . . . . 8 Article XII - Working Hours and Overtime Pay and Payday . . . . . . . 8 Article XIII - Call Back Pay . . . . . . . . . . . . . . . . . . . . . 9 Article XIV - Grievance Procedure . . . . . . . . . . . . . . . . . . 9 Article XV - Leaves of Absence . . . . . . . . . . . . . . . . . . . 11 Article XVI - Suspension and Discharge. . . . . . . . . . . . . . . . 11 Article XVII - No Strike/No Lockout. . . . . . . . . . . . . . . . . . 12 Article XVIII - Health and Safety . . . . . . . . . . . . . . . . . . . 12 Article XIX - Supervisory Employees . . . . . . . . . . . . . . . . . 14 Article XX - Contracting Out . . . . . . . . . . . . . . . . . . . . 14 Article XXI - Bulletin Boards . . . . . . . . . . . . . . . . . . . . 14 Article XXII - Voting Place. . . . . . . . . . . . . . . . . . . . . . 15 Article XXIII - Jury Duty . . . . . . . . . . . . . . . . . . . . . . . 15 i Article XXIV - Bereavement Pay . . . . . . . . . . . . . . . . . . . . 15 Article XXV - Holiday Pay . . . . . . . . . . . . . . . . . . . . . . 15 Article XXVI - Profit Sharing. . . . . . . . . . . . . . . . . . . . . 16 Article XXVII - Accident and Sickness Benefits. . . . . . . . . . . . . 16 Article XXVIII - Insurance . . . . . . . . . . . . . . . . . . . . . . . 17 Article XXIX - Basic Workday . . . . . . . . . . . . . . . . . . . . . 17 Article XXX - Plant Closing or Relocation . . . . . . . . . . . . . . 17 Article XXXI - Duration of Agreement and Responsibilities of the Parties. . . . . . . . . . . . . . . . . . . . . . 17 MEMORANDUM OF UNDERSTANDING - CHECKOFF. . . . . . . . . . . . . . . . . . 19 SCHEDULE A - . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SCHEDULE B - . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ii This Agreement by and between IMCO Recycling of Ohio Inc. (hereinafter called "Company") and United Mine Workers Union (hereinafter "Union") is entered into this 1st day of December, 1995. PURPOSE AND INTENT It is the purpose and intent of the parties to set forth certain agreements pertaining to wages, hours, and working conditions to be observed by the parties during the life of this Agreement and provide the procedures for the prompt and equitable adjustment of grievances. The Union, Company and employees agree they will work together in harmony toward turning out a quality product and will abide by the terms and conditions set forth in this Agreement. ARTICLE I RECOGNITION The Company recognizes the Union as the exclusive bargaining agent for its employees at its Uhrichsville, Ohio facility in the below-described unit: INCLUDED: All production and maintenance employees employed by the Employer at its Uhrichsville, Ohio facility, including leadpersons. EXCLUDED: Laboratory and plant technicians, all office clerical employees, professional employees, janitorial employees, guards, and supervisors as defined in the Act. All other employees not specifically listed above as included or excluded shall be excluded. ARTICLE II MANAGEMENT RIGHTS The Company retains and shall possess every management right, right to function, privilege, authority; except as specifically limited or restricted by this Agreement. Illustrative, but not all-inclusive of the rights of management retained, are the right to manage the Company; to direct the work force; to make and enforce rules of conduct; to subcontract; to change hours and days of work; to assign work to other of the Company's employees and facilities; to make and change work duties and assignments; to determine the quality and quantity of productivity required; to change or adjust the hours and numbers of shifts and assignments thereto; to hire employees; to classify, promote, discipline, demote, and discharge employees for just cause; to lay off and recall employees; to select and make technological state of the art changes in processes, tools, equipment, and facilities; to determine the number of employees to be employed; to determine the number of employees to be employed in each department, shift, classification; to determine the number of employees to be employed in any particular work function or assignment; to decide the methods, equipment, processes, and means of production; to determine the utilization of labor-saving devices which may result in a reduction of the work force; to establish new departments, job classifications, and initial rates of pay; to transfer and assign employees to duties without regard to titles, job classifications, departments, etc.; (subject to the terms of this contract) and to exercise the right not specifically set forth in this Agreement upon which the parties negotiated or had the opportunity to negotiate whether or not such rights have been exercised by the Company in the past. ARTICLE III PROBATIONARY EMPLOYEES A newly hired or rehired employee of the Company will be considered a new employee on a probationary basis for the first sixty (60) calendar days of his employment. Thereafter, if kept on the Company payroll, his name will be placed on the Company's seniority list and his seniority shall date back to his most recent date of hire. Employees terminated and rehired within a one (1) year period will maintain credit for any days previously worked. ARTICLE IV UNION SECURITY All present employees who have concluded their probationary period of at least sixty (60) calendar days, must become and remain members of the Union in good standing as a continuing condition of employment on and after the sixtieth (60th) calendar day following their beginning of such employment or sixty (60) calendar days after the effective date of their contract, whichever is the later. 2 ARTICLE V SENIORITY SECTION 1. In all cases of increase or decrease of the work force, length of plant wide continuous service in years, months and days shall govern. Seniority shall be counted from the employee's date of last hire. Seniority shall govern in all circumstances unless set forth to the contrary herein. SECTION 2. A probationary employee is any employee whose continuous length of service is less than sixty (60) calendar days. When a probationary employee has accumulated sixty (60) calendar days of continuous service, he (1) will become a regular employee and have his seniority established as set forth in the paragraph above. During the probationary period the employee shall be paid thirty cents ($.30) less per hour than the entry level rate. During an employee's probationary period, the Company shall not be restricted in its right to discharge or discipline such employee for any cause, except as limited by state and federal law. The discipline or discharge of a probationary employee shall not be subject to the grievance procedure of this Agreement. Further, no contractual terms or entitlements of this Agreement shall be available to any probationary employee. The probationary period of any employee may be extended an additional thirty (30) calendar days at the discretion of the Company. However, when the probationary period of an employee is to be extended, Management shall notify the Local Union President, in writing, of the reason for the extension. SECTION 3. An employee shall lose seniority rights when any of the following occurs: a) The employee quits; b) The employee is properly or justly discharged and not reinstated; c) The employee is absent from work for three (3) consecutive workdays without notifying the Company of a legitimate reason for such absence on a daily basis unless such notification is not possible; d) The employee has not been recalled from layoff for a period of two (2) years; _______________ (1) The masculine pronouns refer to both genders and are simply used for ease of reading. 3 e) The employee fails to return from a leave of absence within three (3) workdays following the expiration thereof; f) The employee fails to respond within five (5) postal service days after receiving a notice of recall to work on the day set forth in the notice. (The Company shall send a written notice of recall, via Certified Mail, to the employees' last known address. It shall be the employees' responsibility to keep the Company advised of his current address and telephone number); g) The employee retires; h) When an employee accepts a position outside of the bargaining unit. (2) The Company will furnish the Local Union's Recording Secretary an up-to-date seniority list of employees stating the name, social security number, address, telephone number, and date of hire thereof every three (3) months, or whenever additions, deletions, or corrections are made to said roster. ARTICLE VI PERMANENT VACANCIES Permanent vacancies are created by a union member's termination of employment or by the creation of a new job or increased work load. SECTION 1. ROTATING CREW MOVES. Prior to any vacancy being posted for bid, the Company will determine if any employee currently in that job classification has elected to change rotating crews. If an employee desires another crew, he may sign a form indicating the crew to which he desires to move. The resulting vacancy after such rotating crew move will be the job posted for bid. SECTION 2. A permanent vacancy notification shall be posted on the bulletin board for a period of six (6) calendar days. Employees seeking to bid on the job shall sign the posting on the list provided at the Security Guard/Scale House. If a posting goes up during an employee's absence from work, the employee may show his desire to be considered for the job by signing the appropriate vacation bid posting sheet provided at the Security Guard/Scale _______________ (2) Subject to sixty (60) calendar day return to the bargaining unit for persons promoted to supervisory positions. An employee shall have one (1) such right during the term of this contract. 4 House. Postings shall include the job classification, shift, and if a new classification, the rate and a brief description of the duties. The Company shall advise the Union President, in writing, of the successful bidder as soon as practical but no later than seven (7) calendar days after the posting goes down. The successful employee shall be awarded the bid position on or before fourteen (14) calendar days from the advisement of the Union President. Employees may bid laterally or downward four (4) times during the life of the contract. They may bid upward without limitation; however, if such bid is to a job previously held, one of the four (4) bids will be used. Bids on new classifications (not included in the Wage Schedule) and bids to the day shift shall not be subject to the limitations set forth hereinbefore. SECTION 3. All permanent job vacancies shall be awarded to the senior most employee bidding for such job. Maintenance Employees, including lubricators and electricians, must pass a maintenance test before being considered for such jobs. SECTION 4. If an employee fails to demonstrate within thirty (30) calendar days that he can perform the job or if the employee desires to decline the job within the same period of time, then he shall be returned to his former job. An employee who desires to decline the job during the period from the thirty-first (31st) to the sixtieth (60th) calendar day may, with the agreement of the Company, do so at which time he will be assigned to an open position unless his previous position has not been awarded to another employee in which case the employee may be returned to his former position. If an employee declines the job within thirty (30) calendar days, the job will be awarded to the next employee entitled to the job from the list of bidders. Employees whose names appear on the list of bidders who subsequently successfully bid on other jobs will be deemed to have their names removed from such list. If an employee declines the job or leaves the position after thirty (30) calendar days, said position shall be posted as a permanent vacancy. SECTION 5. If there are no successful bidders or employees on layoff status, the Company reserves the right to hire from the street. ARTICLE VII TEMPORARY VACANCY SECTION 1. Every reasonable effort shall be made to keep an employee at work on the job duties normally and customarily a part of his regular job and to minimize to the extent practicable the amount of temporary assignments to other jobs. 5 SECTION 2. This section shall apply to temporary vacancies in excess of eight (8) or ten (10) working days (rotating and day shift respectively) where management determines a need to fill a job on a temporary basis. The following procedures will apply: 1) Between January 1st and January 15th of each year employees will elect job classifications they desire to be considered for on temporary transfers in excess of ten (10) and eight (8) working days. Any employee not listing his name and selections during such period will not be considered for temporary transfers under this provision until he so indicates in the succeeding January 1st through 15th. Employees hired during the calendar year in question shall have eight (8) or ten (10) working days (rotating and day shifts respectively) following their exhaustion of the probationary period in which to elect job classifications. Such transfers will be only to another classification or department. The senior employee on the list will be called for a temporary transfer which he may accept or reject. Until the contacted employee has accepted or rejected the offer, the Company reserves the right to select as though the assignment were ten (10) or eight (8) days or less. Employees who may not be selected on the basis of their seniority may not grieve the failure to be selected if a bargaining unit employee is awarded the temporary transfer. (3) 2) In the event no employee is listed for the job, the junior employee on the shift and department will be required to fill the vacancy. 3) If the Company is unable to fill the vacancy by the above means, the classified employee with the lowest overtime hours may be called out. SECTION 3. Employees who are awarded a temporary vacancy shall be required to fill that job until such time as the Employee completes that assignment in accordance with the above procedures. _______________ (3) The Company reserves the right under this provision to not transfer employees from critical positions. If the transferee's vacated position must be staffed, the Company reserves the right to do so through overtime or utilize the procedure hereinbefore or a second temporary transfer. Any position filled after the second temporary transfer shall be filled as though they are transfers of less than ten (10) or eight (8) working days. 6 SECTION 4. When an employee is assigned to a job other than his own on a temporary daily basis, he shall be compensated for the entire shift at the higher rate of pay for either his job or the job to which he is temporarily assigned. ARTICLE VIII TEMPORARY REDUCTION IN FORCE When it is determined by the Company that there will be a temporary reduction in force in the work force for extraordinary reasons, employees may be sent home for four (4) days without regard to other provisions of this collective bargaining agreement. ARTICLE IX REDUCTION IN FORCE SECTION 1. When it is determined by the Company that a reduction in force is necessary, the Company will notify the Union as soon as practicable but no less than five (5) working days in advance of the layoff. As soon as practicable, the Company will meet with the officers and one (1) member of the Grievance Committee of the Local Union to discuss how many employees are to be reduced, what jobs must be filled, and which employees must be realigned. In the event of a layoff or reduction in force, employees with the greatest seniority at the plant shall be retained if qualified (Maintenance Department). The senior employees in each job shall be retained in their job classification. Those employees who are displaced from their job classification shall be offered open jobs based on their seniority. If within twenty-four (24) hours of the meeting required by this Section an employee advises the Company that he wishes to waive the opportunity for an open job in favor of an open day shift job, such employee will be granted such request, seniority permitting. An employee who is not retained in his job classification and who is not successfully assigned to an open job shall, seniority permitting, displace the last person hired. No bumps shall be permitted under this Section with the exception of the one referenced immediately hereinbefore. SECTION 2. Employees who are laid off will be recalled in order of seniority and assigned to jobs by the Company. At the point in time when all employees have been recalled or when the Company determines further recalls are not likely, all jobs from which employees have been laid off, or jobs they occupied during such layoff period, shall be posted for bid according to the procedures set forth in Article VII. During the recall process, laid off employees who earlier had been recalled or who during the layoff occupied a position resulting from the layoff, and resultant 7 moves, may be assigned or reassigned to their pre-layoff position prior to the job posting referenced immediately hereinbefore. ARTICLE X GRIEVANCE COMMITTEE There shall be a Grievance Committee consisting of at least three (3) employees employed at the plant and selected by the Local Union. The Grievance Committee shall assist members in the processing of grievances and shall participate at Step 1, if requested, by the Grievant. They shall refer and process Grievances at Step 2 and may participate in Steps 3 and 4 of the Grievance Procedure. ARTICLE XI PERMANENT JOB CLASSIFICATION ELIMINATION If the Company determines that jobs at the plant are to be eliminated, the following procedures will be followed: 1) Five (5) days prior to any action being taken, the Company shall meet with the local union president and the grievance committee to discuss: A. the reasoning for elimination of said jobs; B. the number of employees affected by said elimination; and C. the job classifications affected by said elimination. 2) The employees who are to be displaced from such jobs shall, to the extent their seniority (and qualifications in regard to maintenance jobs) permits, be entitled to displace the junior employee in a job of their choosing. 3) Any employee displaced under No. 2 above shall also be entitled to exercise their seniority in the same manner. ARTICLE XII WORKING HOURS AND OVERTIME PAY AND PAYDAY SECTION 1. The Company will make a good faith effort to fairly and equitably distribute overtime among qualified employees. The Company will make every effort to minimize the amount of overtime worked, but when the need arises, those employees who are 8 designated by the Company for overtime must perform the work. The least senior employee must perform the work. SECTION 2. Overtime will be paid at time and one-half the regular rate and will apply only after forty (40) hours have been worked during the workweek. Hours not actually worked will not count toward overtime (e.g., holiday, vacation, sick leave, etc.). SECTION 3. The Company will pay overtime pay to all those employees who work on major equipment outages (i.e., worked on five (5) eights (8) and all hours worked over twelve (12) on four (4) twelves (12). This type of special overtime pay will be scheduled and not be the normal type incidentally-scheduled overtime which occurs during the normal workweek. SECTION 4. The payday for all employees shall be on a weekly basis. SECTION 5. As soon as practicable the Company will implement a wage equalization pay system as proposed in a letter dated January 3, 1996. ARTICLE XIII CALL BACK PAY In the event an employee is called back to work and no work is available, the employee leaves and receives a minimum of two (2) hours of pay at the applicable rate. If the employee performed the work he/she was called back to do, the employee leaves and receives a minimum of four (4) hours of pay at the applicable rate. If the work performed by the employee called back exceeds four (4) hours, the employee will leave and be paid for the actual hours worked. ARTICLE XIV GRIEVANCE PROCEDURE SECTION 1. Should any difference arise between the Company and its employees as to the meaning or application of the provision of this Agreement, an earnest effort shall be made to settle such grievance immediately in accordance with the following procedure. STEP 1. Any employee with the belief that there is a complaint shall discuss the issue with his immediate supervisor within three (3) working days of the incident prompting the complaint. If the employee desires that a representative of the Union be present during the discussion with his immediate supervisor, he shall notify the supervisor of his desire and the 9 immediate supervisor shall arrange to have the requested representative of the Union present while the employee is discussing the grievance with his supervisor. The supervisor shall have the authority to settle the matter. The supervisor will answer the aggrieved employee within two (2) working days of the original discussion. STEP 2. If the supervisor's answer is not acceptable, or if the answer is not given within two (2) working days of the original discussion, the aggrieved employee may submit a written grievance, within five (5) working days to the Plant Superintendent. A meeting with the Grievant, Plant Superintendent, supervisor, and two (2) members of the Grievance Committee shall be held within ten (10) working days of receipt of the written grievance to review the facts and contract provisions in an effort to resolve the grievance. (4) If the complaint is not settled, the grievance will be referred to a representative of the UMWA District and the General Manager or his designee. STEP 3. Within ten (10) working days of the time the grievance is referred to them, the District Representative and General Manager or his designee shall meet in an effort to reach an agreement. No more than two (2) members of the Grievance Committee shall have the right to be present. STEP 4. In cases where the UMWA District Representative and the General Manager or his designee fail to reach an agreement, the matter shall, within ten (10) calendar days after referral to them, be referred to an arbitrator. Such arbitrator may be selected by mutual consent between the parties, or failing to reach consent, by applying for a panel of arbitrators from the American Arbitration Association or the Federal Mediation and Conciliation Service; the parties shall alternately strike names from the panel until one (1) arbitrator is named. The salary and expenses of the arbitrator shall be borne equally by the Company and the Union. SECTION 2. The time limits contained in this Grievance Procedure must be strictly adhered to. The time limits may be waived by mutual consent of the parties in writing. Should the grievance not be timely responded to by the Company, it shall be automatically moved to the next stage. The Company will make every good faith effort to timely process grievances. SECTION 3. Settlements reached at Steps 1, 2 or 3 of the Grievance Procedure shall be without precedent and not referred to nor used by either party in the processing of any other grievance, unless agreed to in a signed writing by both parties. _______________ (4) In Step 2 and Step 3 two (2) committee persons shall remain on the clock. 10 SECTION 4. The grievant shall have the right to be present at each step of the grievance procedure until such time as all evidence is taken. ARTICLE XV LEAVES OF ABSENCE Leaves of absence will be granted to local union officers and committee members to perform duties for the local union without any loss of contractual benefits not to include wages. Forty-eight (48) hours notice shall be given to the Company prior to the commencement of such leave, absent extraordinary circumstances. Employees who request a leave of absence to serve as District or International union officers or representatives shall be granted such leave and shall retain their seniority and continue to accrue seniority while on such leave. While on such leave, employees shall be entitled to no benefits under the contract. Employees who are appointed or elected to District or International union positions shall, upon expiration of their term(s), be entitled to return to the job held immediately prior to such leave. Written notice of such leaves shall be presented to the Company as soon as practicable but no less than forty-eight (48) hours before the commencement of such leave. Employees who are eligible shall be granted military leave, and family and medical leave. The Company and Union will discuss contractual adjustments in the case of persons covered under the Americans with Disabilities Act. ARTICLE XVI SUSPENSION AND DISCHARGE SECTION 1. No employee covered by this Agreement may be disciplined or discharged, except for just cause. The burden shall be on the employer to establish grounds for discipline or discharge in all proceedings under this Agreement. SECTION 2. Where management concludes that the conduct of an employee justifies suspension or discharge, the employee shall first be suspended without pay and shall be given written notice stating the reason(s), with a copy to be furnished to the Grievance Committee. Within seventy-two (72) hours the employee may be afforded the right to meet with the General Manager or his designee. 11 At such meeting, no more than two (2) members of the Grievance Committee shall be present and, if requested by the employee or the Grievance Committee, a representative of the District UMWA shall also be present. SECTION 3. If the General Manager or his designee informs the employee at the meeting between the Employer and the employee, that discharge or suspension is still intended (or if no meeting is requested), the employee may within five (5) calendar days file a grievance directly to Step 4 of the Grievance Procedure. SECTION 4. In all cases where it is determined that just cause did not exist for discharge or suspension, the arbitrator has full authority to fashion an appropriate remedy. ARTICLE XVII NO STRIKE/NO LOCKOUT During the term of this Agreement, subject to Article XII, the Union agrees it will not engage in any strike, work stoppage, slow down, or other interference with work. Failure of an employee to comply with this provision shall result in his immediate termination. Proof of an employee(s) engaging in conduct violative of this Article shall be just cause for permanent discharge and not subject to Articles XII or XIII. The Company agrees it will not lock out its employees. ARTICLE XVIII HEALTH AND SAFETY SECTION 1. The Company and the Union shall cooperate in the objective of eliminating accidents and health hazards. The Company will make reasonable provisions for the safety and health of its employees at the plant during the hours of their employment. SECTION 2. There will be a Joint Health and Safety Committee consisting of at least three (3) bargaining unit employees employed at the facility and selected by the Local Union and an equal number of management/supervisory employees, at the Company's option. The Joint Health and Safety Committee shall at all times be deemed to be acting within the scope of their employment in the plant within the meaning of the applicable worker's compensation law. SECTION 3. The Joint Health and Safety Committee, or in the absence of the entire Joint Health and Safety Committee, a member or members may inspect any portion of the plant and related 12 facilities. If the Committee finds conditions which need correcting, they shall report their findings to the Company for APPROPRIATE attention. In those special instances where the Joint Health and Safety Committee believes a situation endangers the lives and bodies of employees and poses an imminent danger, they may remove employees from that area or job until the situation is corrected. SECTION 4. No Joint Health and Safety Committee member may be disciplined or discharged for his actions as a member of the Joint Health and Safety Committee as long as his activities are in good faith and in compliance with applicable OSHA (state and federal) rules and guidelines and Company safety policies and standards. SECTION 5. A representative of the Company and a Joint Health and Safety Committee member may accompany the federal and/or state Safety and Health Inspectors when they make their examinations of the plant. The employee of the Joint Health and Safety Committee shall suffer no loss of pay while on such inspection. SECTION 6. In the event of an injury or illness on the job, where appropriate, the Company will transport the employee to a place where medical services can be obtained (hospital, doctor's office, etc.). (If applicable, the Company will also provide the employee transportation for a return ride.) The employee, if able, may request the facility to which he wishes to be transported. Each month the Company will furnish the Joint Health and Safety Committee a list of all accidents which occurred during the previous month. SECTION 7. The Joint Health and Safety Committee and management shall investigate all serious or potentially serious accidents with the sole purpose to find ways to eliminate or reduce such accidents. SECTION 8. Hard hats, gloves, safety glasses or one (1) pair prescription safety glasses per year, hearing protection, long-sleeve cotton jackets (molten metal area) and metatarsal shoes shall be furnished by the Company and worn at all times. Items referenced above will be replaced upon presentation of the item sought to be replaced. SECTION 9. At the request of the Joint Health and Safety Committee, Union officials, District and International officers and representatives of the UMWA Department of Occupational Safety and Health shall be granted access to the plant to inspect the facility or to investigate serious accidents. Such request shall be made in writing, copy to the Company, after a verbal advisement of such action. The letter shall state the reason for the visit which 13 should not take place before five (5) days from receipt, absent unusual circumstances. SECTION 10. An employee injured during his shift shall be paid for the entire shift, if he cannot reasonably be expected to complete his shift. SECTION 11. Union members of the Joint Health and Safety Committee shall be compensated by management for all time spent on official Joint Health and Safety Committee business and meetings, as requested by the Company. ARTICLE XIX SUPERVISORY EMPLOYEES Any supervisor may, as a part of that person's regular duties, perform work in emergencies, in training of other employees, in improving or checking the quality of production, in experimental or research and development assignments, to assist a regular worker or in order to prevent harm to employees or equipment. Such supervisor shall not regularly perform bargaining unit work so as to cause a layoff or displacement or loss of a full day's work opportunity for an employee who is in the bargaining unit. It is understood that the Company will make every reasonable effort to secure a replacement, if needed, for those employees who fail to report to work. ARTICLE XX CONTRACTING OUT Contracting out of repair and maintenance work or work which can be performed by classified employees shall not be permitted when classified employees are on a layoff status or when such contracting out knowingly will result in the layoff of classified employees. ARTICLE XXI BULLETIN BOARDS The Company will furnish and maintain one (1) bulletin board locked and under glass in a conspicuous place in the shop which shall be for the sole use of the Union. A key to the board shall be furnished to the General Manager. 14 ARTICLE XXII VOTING PLACE The Company shall make available space within the shop for the purpose of holding Union elections and contract ratification votes for oncoming and off going crews only. ARTICLE XXIII JURY DUTY Employees who are summoned for jury duty and serve in such capacity shall receive for each day of service, the difference between the amount received for such service and, in the case of hourly workers, eight (8) times his regular rate or in the case of incentive or piece workers, eight (8) times his average hourly earnings, for a period not to exceed thirty (30) working days. Such payments are to be made for only the days upon which the employee would have worked because of being scheduled to work. ARTICLE XXIV BEREAVEMENT PAY In the event of the death of an employee's spouse, children, stepchildren, father, mother, current mother-in-law, current father-in-law, brother or sister, and the employee has been in the employ of the Company for sixty (60) calendar days or more, he shall receive up to but not in excess of three (3) days' pay while off prior to and while attending funeral services. Payment of bereavement pay will only be made after the employee furnishes his employer with acceptable proof of death by copy of the death certificate or newspaper clipping of the funeral notice or other proof acceptable to the Employer. The pay for time off shall be the amount of eight (8) times the employee's hourly rate. In addition to the above, two (2) days without pay or attendance points shall be granted as leave for the day of the funeral for any other family member. ARTICLE XXV HOLIDAY PAY Holidays recognized in the Agreement are: 15 New Year's Day Thanksgiving Day Easter Day after Thanksgiving Memorial Day Christmas Eve Fourth of July Christmas Day Labor Day Floating Holiday Employees shall receive holiday pay for holidays on the following basis: A) Employees scheduled to work the Holiday shall be paid at double time rates for all hours worked, which includes the holiday pay. B) Employees scheduled to work who do not complete the full shift shall be paid double time rates for all hours worked. C) Employees who do not accrue any attendance policy discipline and have no OSHA recordable injuries during a given calendar year will be entitled to one (1) personal day to be taken in the following year. ARTICLE XXVI PROFIT SHARING If the Company maintains its profit sharing plan, employees will participate if and when the profit sharing to employees occurs. Employees shall be eligible for profit sharing after one (1) year of continuous employment. ARTICLE XXVII ACCIDENT AND SICKNESS BENEFITS Accident and sickness benefits will be provided under the terms as set forth under the corporate policy. (5) However, the benefits will be modified to reflect thirty (30) weeks and Two Hundred Eighty Dollars ($280.00) per week. In all other respects the corporate policy will be followed. ARTICLE XXVIII INSURANCE Employees will be covered under the corporate insurance plans for medical and life insurance and such documents are incorporated herein by reference. _______________ (5) Group Health Benefits for Employees of IMCO Recycling Inc. 16 ARTICLE XXIX BASIC WORKDAY The Company shall fairly distribute overtime. Overtime scheduling system shall be determined by the parties and communicated to employees. ARTICLE XXX PLANT CLOSING OR RELOCATION If the Company decides to sell, close, or relocate its Uhrichsville, Ohio facility, it shall comply with its statutory obligations. ARTICLE XXXI DURATION OF AGREEMENT AND RESPONSIBILITIES OF THE PARTIES This Agreement shall become effective as of December 1, 1995, and shall continue in full force and effect until November 30, 1998. It shall automatically be renewed for successive periods of one (1) year thereafter, unless either party notifies the other, in writing, at least sixty (60) days prior to December 1, 1995 that the Agreement will terminate on such specified date. The written notice required under the immediately preceding paragraph shall be made by certified mail. Such notice shall be addressed to: United Mine Workers of America (UMWA), District Six, 56000 Dilles Bottom, Shadyside, Ohio 43947 if to the Union; and to IMCO Recycling of Ohio Inc., P.O. Box 151, Uhrichsville, OH 44683 if to the Company. Either party may, by written notice to the other, effect a change of the addresses given above. The Company and its managers and supervisors at all levels shall be bound to observe the provisions of this Agreement. The Union and its officers and representatives at all levels and all employees shall be bound to observe the provisions of this Agreement. It is the continuing policy of the Company and the Union that the provisions of this Agreement shall be applied equally to all employees without regard to race, color, religious creed, national origin, veteran status, sex, age or union activity in accordance with state and/or federal laws. Should any provision of 17 this Agreement be found to be in violation of any state or federal law, the parties will attempt to renegotiate that provision. The remainder of the contract shall remain in effect whether the renegotiation is successful or not. IN WITNESS WHEREOF, this Agreement has been signed on behalf of the parties only upon the condition that it has been ratified and approved by the members covered hereby to become effective this lst day of December, 1995. 18 MEMORANDUM OF UNDERSTANDING Checkoff The membership dues, including initiation fees, and assessments of the United Mine Workers of America and its various subdivisions, credit union, voluntary COMPAC contributions, and Union-sponsored group auto insurance, as authorized and approved by the International Union, United Mine Workers of America, shall be checked off the wages of the employees by the Employer covered by this contract and shall be remitted by the Employer to the properly designated officers of the Union for distribution to its various branches. Such remittance shall be made within 30 days of the date such amount has been checked off. The Employer shall also submit an itemized statement showing the name of each employee, his social security number, hours worked, and the amount checked off for dues, initiation fees, and assessments. Such itemized statement shall be made within 60 days of the date the checkoff has been made, and shall include a list of employees from whom dues, initiation fees and assessments have not been collected. In order that this section may become effective and operate within the limitations of the Labor-Management Relations Act of 1947, the Union hereby agrees to furnish, with all reasonable dispatch to the respective Employer, and the Employer agrees to aid, assist and cooperate in obtaining, written authorizations from each employee so employed. Upon the presentation to the Employer of such authorizations in such reasonable form as time and circumstances, looking to continuous and uninterrupted production, may allow, said Employer shall make deductions so authorized and deliver the same to the designated District Officer of the Union or to such authorized representative as may be designated by the Union. 19 /s/ LARRY WARD 2-14-96 - ------------------------------------ Larry Ward, President U.M.W.A. District Six /s/ VINCE LUCIDO 2-14-96 ** - ------------------------------------ Vince Lucido I.E B. United Mine Workers of America /s/ GERALD K. REICHELT 3-2-96 * - ------------------------------------ Gerald K. Reichelt, General Manager, IMCO Recycling /s/ JAMES B. WALBURG 3-5-96 - ------------------------------------ James B. Walburg Vice President and Treasurer /s/ JAMES A. MADDEN - ------------------------------------ James A. Madden Manager Human Resources /s/ DEBORAH J. VANDALL - ------------------------------------ Deborah J. Vandall Production Superintendent _______________ * Subject to the issue of whether employees are required to work the scheduled workday before and after a holiday to qualify, i.e., whether the first full paragraph in the 1992-95 contract, Article XXIII, p. 12, was omitted due to inadvertence or clerical error. ** BY SIGNING THIS AGREEMENT, THE PARTIES AGREE THAT: 1) The Company will immediately make provisions to pay the retroactive pay increases for classified employees for all hours worked since December 1, 1995. 2) That Management and the Local Union will immediately draft and post the overtime procedure required in Article XXIX. 3) That the Company and Local Union shall equally share the costs of printing the new contract. 4) The Company will immediately post for bid, according to Article VI, __, a shipping/ receiving (Dock) job whose primary duties are to operate the John Deere Loader. 5) That the Union maintains its position regarding the John Deere loader in any subsequent job bid. The Company disagrees and the issue may be referred to a third party for resolution.
- ----------------------------------------------------------------------------- SCHEDULE A - ----------------------------------------------------------------------------- CURRENT CLASSIFICATION RATE 12/01/95 12/01/96 12/01/97 - ----------------------------------------------------------------------------- PAY GRADE ONE Electrician $10.80 $11.30 $11.70 $12.10 - ----------------------------------------------------------------------------- PAY GRADE TWO Maintenance Mechanic $10.50 $11.00 $11.40 $11.80 Maintenance Mechanic, Rotating Shift 10.50 11.00 11.40 11.80 Maintenance Mechanic, Truck Shop 10.50 11.00 11.40 11.80 Baghouse Mechanic 10.50 11.00 11.40 11.80 - ----------------------------------------------------------------------------- PAY GRADE THREE Furnace Operator $ 9.85 $10.35 $10.75 $11.15 Shredder Operator 9.85 10.35 10.75 11.15 De-Ox Operator 9.85 10.35 10.75 11.15 Cruc. Truck Driver 9.20 10.35 10.75 11.15 Dayshift CDL Truck Driver 9.20 10.35 10.75 11.15 Lubricator 9.80 10.35 10.75 11.15 - ----------------------------------------------------------------------------- PAY GRADE FOUR Furnace Equipment Operator $ 9.20 $ 9.70 $10.10 $10.50 Shredder Equipment Operator 9.20 9.70 10.10 10.50 De-Ox Equipment Operator 9.20 9.70 10.10 10.50 Cruc. Cleaner 9.20 9.70 10.10 10.50 Ship & Receiving Equipment Operator (Dock & Bar Handlers) 9.20 9.70 10.10 10.50 Parts Runner 9.20 9.70 10.10 10.50 Mud Room 9.20 9.70 10.10 10.50 - ----------------------------------------------------------------------------- Scheduled premium of $.15 per hour shall be paid for those employees working on rotating shifts. Production lead persons will get $.60 per hour in addition to their regular hourly rate. - -----------------------------------------------------------------------------
21 SCHEDULE B 1. Vacation Accrual: After 1 year . . . . . . . . . . . . 1 week After 2 years . . . . . . . . . . . 2 weeks After 10 years . . . . . . . . . . . 3 weeks After 20 years . . . . . . . . . . . 4 weeks 22 EX-10.34 4 EXHIBIT 10.34 FIRST AMENDMENT TO LOAN DOCUMENTS This First Amendment to Loan Documents (this "AGREEMENT") is made and entered into as of May 31, 1995, by and between TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, with an office located at 2200 Ross Avenue, Dallas, Texas 75201 ("LENDER") and IMCO RECYCLING INC., a Delaware corporation, with its principal business address located at 5215 North O'Connor Blvd., Suite 940, Irving, Texas 75039 ("BORROWER"). R E C I T A L S: A. On September 20, 1994, Lender and Borrower entered into that certain Loan Agreement (the "LOAN AGREEMENT") pursuant to which Lender agreed to make loans and advances (collectively the "LOANS") to Borrower in accordance with the terms thereof. The Loans are evidenced by (i) a Revolving Promissory Note of even date with the Loan Agreement, in the stated principal amount of $5,000,000.00, bearing interest and being payable to the order of Lender as therein provided (as amended, the "REVOLVING NOTE"), (ii) a Term Promissory Note of even date with the Loan Agreement, in the stated principal amount of $5,000,000.00, bearing interest and being payable to Lender as therein provided (as amended, the "TERM NOTE") and (iii) a Converting Promissory Note of even date with the Loan Agreement, in the stated principal amount of $5,000,000 bearing interest and being payable to Lender as therein provided (as amended, the "CONVERTING NOTE") (the Revolving Note, the Term Note and the Converting Note are collectively, the "NOTES"). The Loan Agreement, the Notes and the documents, instruments and agreements executed in connection therewith are collectively referred to herein as the "Loan DOCUMENTS". B. The total outstanding indebtedness of Borrower to Lender under each of the Revolving Note, the Term Note and the Converting Note as of May 24, 1995 was $0, $4,500,000 and $0, respectively; and C. Borrower has requested Lender to extend the term of certain of the Loan Documents, and Lender, as the legal and equitable owner and holder of the Loan Documents, at the request of Borrower, for good and valuable consideration, is willing to enter into this Agreement upon the terms and conditions set forth below: A G R E E M E N T: NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby covenant and agree as follows: 1 1. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Loan Agreement. 2. SECTION 1 of the Loan Agreement is hereby amended by deleting the term "REVOLVING COMMITMENT TERMINATION DATE" in its entirety and inserting the following in lieu thereof. "'REVOLVING COMMITMENT TERMINATION DATE' means the earlier of (i) May 31, 1996, or (ii) any date on which the Revolving Commitment terminates pursuant to the terms hereof." 3. Each of PARAGRAPH 2 and PARAGRAPH 8 of the Revolving Note are hereby amended by deleting each reference therein to "May 31, 1995" and inserting "May 31, 1996" in lieu thereof. 4. Borrower hereby expressly promises to pay to the order of Lender, the principal sum of the Notes, as modified by this Agreement, and all accrued and unpaid interest now due and payable or hereafter to become due and payable under the Notes, and Borrower expressly promises to perform all of its obligations under the Loan Agreement and other Loan Documents, as modified by this Agreement. 5. Lender may elect, in its sole discretion, on behalf of and without notice to Borrower, to make and use Revolving Loans and/or Converting Revolving Loans to pay Lender for any amounts due to Lender pursuant to the Loan Documents, including without limitation any and all costs and expenses incurred by Lender pursuant to the Loan Documents and/or to cure any Default or Event of Default. 6. Borrower hereby agrees to reimburse Lender for Lender's costs and expenses, including, but not limited to, attorney's fees and legal expenses, incurred by Lender in connection with (a) the preparation of this Agreement and the Loan Documents executed in connection herewith and in connection with the negotiation and consummation of the transaction contemplated hereby; and (b) the enforcement of the Loan Documents (including reasonable, actual attorneys fees if collected by or through an attorney) and all such expense incurred in the defense of legal proceedings involving any claim made against Lender arising out of the Loan Documents. The obligations of Borrower hereunder shall survive the final payment of all Obligations of Borrower and the resulting termination of this Agreement. 7. All Loan Documents are hereby amended and modified in a manner consistent with the modifications contained herein. All references to the Notes in the Loan Agreement and any other Loan Documents shall be deemed to be the Notes as modified hereby and all references to the Loan Agreement or any other Loan Documents in the Loan Documents shall be deemed to be the Loan Agreement and the other Loan Documents, as modified hereby. 8. Borrower hereby renews the Notes and the indebtedness evidenced thereby and promises to pay to the order of Lender the unpaid principal balance of the Notes and interest thereon as specified in the Loan Agreement and the Notes, as amended hereby. 2 9. Borrower hereby acknowledges and agrees that (a) Lender is not in default in the performance of its obligations under the Loan Documents; (b) Borrower has no claims, counterclaims, offsets, credits or defenses to the Loan Documents and the performance of its obligations thereunder, or if Borrower has any such claims, counterclaims, offsets, credits or defenses to the Loan Documents or any transaction related to the Loans and/or the Loan Documents, same are hereby waived, relinquished and released in consideration of Lender's execution and delivery of this Agreement; (c) all of the provisions of the Loan Documents, except as amended hereby, are in full force and effect; (d) upon the execution hereof, the Loan Agreement, the Notes, and the other Loan Documents are not in default; and (e) no granting of a lien or security interest or assignment has been or will be executed affecting the assets of Borrower without Lender's prior written consent. 10. Except as expressly modified and amended in this Agreement, all of the terms, provisions and conditions of the Loan Agreement, the Notes, and all other Loan Documents are and shall remain in full force and effect and are incorporated herein by reference. 11. Borrower agrees and acknowledges that upon the maturity of the Loans as amended hereby, Lender shall have no obligation to renew, extend, modify or rearrange the Loans and shall have the right to require all amounts due and owing under the Loans to be paid in full upon the maturity thereof. 12. Borrower acknowledges that the execution of this Agreement by Lender is not intended nor shall it be construed as (a) an actual or implied waiver of any default under the Loan Agreement, the Notes or any other Loan Documents or (b) an actual or implied waiver of any condition or obligation imposed upon Borrower pursuant to the Loan Agreement, the Notes or any other Loan Documents, except to the extent expressly set forth herein. 13. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. 14. The parties intend that Chapter 15 of Texas Consumer Credit Code (Tex. Civ. Stat. Ann. art. 5069-15.01, ET SEQ.) not apply to the transactions covered by the Loan Documents. 15. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. 3 IN WITNESS WHEREOF, the parties have executed this First Amendment to Loan Documents as of the day and year first above written. LENDER: TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association By: /s/ Joe Watford ----------------------------- Name: Joe Watford Title: Vice President BORROWER: IMCO RECYCLING INC., a Delaware corporation By: /s/ Paul V. Dufour ----------------------------- Name: Paul V. Dufour Title: Executive Vice President 4 EX-10.38 5 EXHIBIT 10.38 SECOND AMENDMENT TO LOAN DOCUMENTS This SECOND AMENDMENT TO LOAN DOCUMENTS (this "AMENDMENT"), dated AS OF NOVEMBER 3, 1995, is entered into by and between IMCO RECYCLING INC., a Delaware CORPORATION (the "BORROWER"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "LENDER"). WHEREAS, the Borrower and the Lender entered into a loan agreement, dated as of September 20, 1994, as amended by the First Amendment to Loan Documents, dated as of May 31, 1995 (the "FIRST AMENDMENT") (said agreement, as amended by the First Amendment and by this Amendment, being the "LOAN AGREEMENT"; the terms defined in the Loan Agreement are used herein as therein defined), pursuant to which the Lender agreed to make loans and advances (collectively, the "LOAN") to the Borrower in accordance with the terms thereof, WHEREAS, the Loan is evidenced by that certain (i) Revolving Promissory Note, (ii) Term Promissory Note and (iii) Converting Promissory Note (collectively, the "ORIGINAL NOTES"), each dated as of September 20, 1994, each in the stated principal amount of $5,000,000, bearing interest and being payable to the order of the Lender as therein provided; WHEREAS, in connection with the execution of the Loan Agreement, the Borrower and the Lender entered into a Negative Pledge Agreement, dated as of September 20, 1994 (herein called the same); WHEREAS, the Borrower and the Lender wish to amend certain provisions of the Loan Agreement, the Original Notes and the Negative Pledge Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO LOAN AGREEMENT. (a) AMENDMENT TO THE DEFINITIONS OF "EBITDA", "MONY DOCUMENTS", "REVOLVING COMMITMENT", "REVOLVING COMMITMENT TERMINATION DATE" AND "TERM COMMITMENT" IN SECTION 1 OF THE LOAN AGREEMENT. (1) Effective as of the date hereof, the definition of "EBITDA" contained in SECTION I of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "EBITDA means, for any period without duplication, the total of the following for Borrower and its Subsidiaries on a consolidated basis, calculated quarterly for the most recently completed four (4) quarters: (i) net income determined in accordance with GAAP; PLUS, to the extent included in the calculation of net income, (ii) the sum of (a) taxes paid or accrued; (b) interest expenses, net of interest income, paid or accrued; (c) amortization and depreciation; and (d) other 1 non-cash charges (excluding accruals for cash expenses made in the ordinary course of business); LESS, to the extent included in the calculation of net income, (iii) the sum of (a) the earnings of any Person that Borrower (or a Subsidiary of Borrower) has a minority ownership interest in unless such earnings are irrevocably received by Borrower (or such Subsidiary) in the form of a cash dividend or cash distribution, (b) extraordinary or non-recurring items other than extraordinary or non-recurring "cash" losses, in each case for the four fiscal quarters immediately preceding the date of calculation and (c) the earnings derived, directly or indirectly, from joint ventures between Borrower and any Person whose income and/or losses are not consolidated with those of Borrower for tax or other reporting purposes." (2) Effective as of the date hereof, the definition of "MONY Documents" contained in SECTION 1 of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "MONY Documents" means those certain Note Purchase Agreements dated as of December 15, 1988 and on or about November 15, 1995, respectively (as ended from time to time) and any and all notes, instruments, contracts and agreements executed in connection therewith, pursuant to which Borrower (or a Subsidiary of Borrower) is indebted to MONY in the aggregate principal amount of $38,000,000." (3) Effective as of the date hereof, the definition of "Revolving Commitment" contained in SECTION 1 of the Loan Agreement is hereby amended by deleting therefrom the figure of $5,000,000 and substituting therefor the figure of "$10,000,000." "(4) Effective as of the date hereof, the definition of "Term Commitment" contained in SECTION 1 of the Loan Agreement is hereby amended by deleting therefrom the figure of $5,000,000 and substituting therefor the figure of "$4,000,000." (b) ADDITION OF THE DEFINITION OF "CURRENT MATURITIES" TO SECTION 1 OF THE LOAN AGREEMENT. Effective as of the date hereof, a new definition "Current Maturities" is hereby added to SECTION 1 of the Loan Agreement as follows: "CURRENT MATURITIES means, at any date of determination, the sum of (i) current maturities of long term indebtedness of Borrower as at such date, in accordance with GAAP; (ii) accrued and unpaid taxes; and (iii) accrued and unpaid interest expense." (c) DELETION OF THE DEFINITION OF "ACCELERATION DATE" TO SECTION 1 OF THE LOAN AGREEMENT. Effective as of the date hereof, the definition of "Acceleration Date" contained in SECTION 1 of the Loan Agreement is hereby deleted in its entirety. 2 (d) DELETION OF SECTION 2.9(b) TO THE LOAN AGREEMENT. Effective as of the date hereof, SECTION 2.9(b) of the Loan Agreement is hereby deleted in its entirety. (e) DELETION OF SECTION 2.9(c) TO THE LOAN AGREEMENT. Effective as of the date hereof, SECTION 2.9(c) of the Loan Agreement is hereby deleted in its entirety. (f) AMENDMENT TO SECTION 2.13 TO THE LOAN AGREEMENT. Effective as of the date hereof, SECTION 2.13 of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "2.13 USE OF PROCEEDS. Borrower shall use the proceeds of the Loan to fund capital projects, acquisitions and investments and to finance the working capital needs of Borrower. All loan proceeds shall be used by Borrower only for legal and proper corporate purposes which are consistent with all applicable laws and statutes." (g) ADDITION OF SECTION 2.16 TO THE LOAN AGREEMENT. Effective as of the date hereof, a new SECTION 2.16 is hereby added to the Loan Agreement as follows: "2.16. COMMITMENT FEE. In consideration for Lender's commitment to make the Revolving Loans available to Borrower, Borrower agrees to pay to Lender a quarterly loan commitment fee in an amount equal to three-sixteenths of one percent (.1875%) per annum (calculated on the basis of a year of 360 days) of the average daily amount of the unused portion of the Revolving Commitment in excess of the first $5,000,000 available to be advanced thereunder by Lender to Borrower for such quarter. Borrower and Lender agree that (i) Borrower shall have no obligation to pay to Lender a commitment fee on any unused portion of the first $5,000,000 available to be advanced by Lender to Borrower under the Revolving Commitment during any fiscal quarter, and (ii) any advance under the Revolving Commitment will first be applied to the first $5,000,000 available to be advanced that is not subject to the commitment fee. Such loan commitment fee is due and payable in arrears on the last Business Day of each quarter, commencing on December 31, 1995, during the term of this Agreement, and upon the termination hereof." (h) DELETION OF SECTION 5.1(l) TO THE LOAN AGREEMENT. Effective as of the date hereof, SECTION 5.1(l) of the Loan Agreement is hereby deleted in its entirety. (i) AMENDMENT TO SECTION 5.2(a) TO THE LOAN AGREEMENT. Effective as of the date hereof, SECTION 5.2(a) of the Loan Agreement is hereby amended and restated to read in its entirety as follows: "(a) DEBT. Create, incur or suffer to exist any direct, indirect, fixed or contingent liability for any Debt, other than, without duplication, and solely with respect to Borrower (i) the Obligations, (ii) the obligations of Borrower to MONY under the MONY Documents, (iii) additional secured Debt for borrowed money in an amount not to exceed $250,000 in the aggregate at any time to be used solely for purchases by 3 Borrower made in the ordinary course of business, (iv) unsecured Debt, (v) Debt secured by Permitted Liens, (vi) secured indebtedness to the Commonwealth of Kentucky, any municipality, political subdivision, department, agency or instrumentality thereof in a principal amount not to exceed $10,000,000 in the aggregate, and (vii) Debt incurred by VAW-IMCO Guss and Recycling GmbH, a German limited liability company ("GMBH"); PROVIDED, HOWEVER, that the lender of any such Debt shall not have any contractual recourse against the Borrower or its Subsidiaries (other than GmbH) if GmbH defaults in the payment of such Debt. Notwithstanding the foregoing, Borrower shall not permit any of its Subsidiaries (other than GmbH) to create, incur or suffer to exist any direct, indirect, fixed or contingent liability for any debt for borrowed money. Nothing contained in this SECTION 5.2(a) shall in any way affect Borrower's obligations under SECTION 5.2(g) or (m) to maintain the financial covenants set forth therein. (j) AMENDMENT TO SECTION 5.2(k) TO THE LOAN AGREEMENT. Effective as of the date hereof, SECTION 5.2(k) to the Loan Agreement is hereby amended and restated in its entirety as follows: "(k) NEW BUSINESSES. Engage in any business other than business related to nonferrous metal recovery." (k) ADDITION OF SECTION 5.2(m) TO THE LOAN AGREEMENT. Effective as of the date hereof, a new SECTION 5.2(m) to the Loan Agreement is hereby added to the Loan Agreement as follows: "(m) RATIO OF EBITDA TO CURRENT MATURITIES. Permit the ratio of (i) EBITDA to (ii) Current Maturities to be or become less than 1.2 to 1.0 at any time during the term hereof." (l) RESTATEMENT OF CERTAIN SCHEDULES. Effective as of the date hereof, Schedules 4.6, 4.9, 4.11, 4.13, 4.14 and 4.15 to the Loan Agreement are amended and restated in their entirety in the form attached hereto. (m) AMENDMENT TO SECTION 5.2(c) OF LOAN AGREEMENT. Effective as of the date hereof, Section 5.2(c) is hereby amended and restated in its entirety as follows: "Sponsor or contribute to, or create or suffer to exist any contractual or other obligation to contribute to, any Plan or Multiemployer Plan except such Plans or Multiemployer Plans as described on Schedule 4.9. (n) AMENDMENT TO FIRST AMENDMENT. Effective as of the date hereof, Section 5 of the First Amendment is hereby amended and restated in its entirety as follows: "Upon the occurrence of any Default or Event of Default, Lender may elect, in its sole discretion, on behalf of and without notice to Borrower, to make and use Revolving Loans and/or Converting Revolving Loans to pay Lender for any amounts due to Lender pursuant to the Loan Documents, including without limitation any and all costs and 4 expenses incurred by Lender pursuant to the Loan Documents and/or to cure any Default or Event of Default." SECTION 2. AMENDMENTS TO NEGATIVE PLEDGE AGREEMENT. (a) AMENDMENT TO THE PREAMBLE OF THE NEGATIVE PLEDGE AGREEMENT. Effective as of the date hereof, the preamble of the Negative Pledge Agreement is hereby amended by deleting therefrom the figure of "$15,000,000" and substituting therefor the figure of "$19,000,000." (b) AMENDMENTS TO SECTION 4(iii) OF THE NEGATIVE PLEDGE AGREEMENT. Effective as of the date hereof, the first sentence of SECTION 4(iii) is hereby amended and restated in its entirety as follows: "The execution and delivery by the Company of this Agreement, the Loan Agreement, and the Amended and Restated Revolving Promissory Note in the stated principal amount of $10,000,000, the Amended and Restated Term Promissory Note in the stated principal amount of $4,000,000, and the Amended and Restated Converting Promissory Note in the stated principal amount of $5,000,000 (individually and collectively, the "NOTE"), each Note executed as of November 3, 1995 and payable to the order of Lender evidencing the Loan and the performance of the obligations hereunder and thereunder have been duly authorized." SECTION 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived in writing by the Lender: (a) The Lender shall have received this Amendment, duly executed by Borrower, and such additional documents, instruments and information as the Lender or its legal counsel may request; (b) The Lender shall have received the Amended and Restated Revolving Promissory Note (the "AMENDED REVOLVING NOTE"), duly executed by Borrower, and payable to the order of Lender in the original principal amount of $10,000,000; (c) The Lender shall have received the Amended and Restated Term Promissory Note (the "AMENDED TENDER NOTE"), duly executed by Borrower, and payable to the order of Lender in the original principal amount of $4,000,000; (d) The Lender shall have received the Amended and Restated Converting Promissory Note (the "AMENDED CONVERTING NOTE"), duly executed by Borrower, and payable to the order of Lender in the original principal amount of $5,000,000; 5 (e) The Lender shall have received a true, correct and complete copy of presently effective resolutions of the Borrower's board of directors, authorizing the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith, certified by the Secretary or an Assistant Secretary of the Borrower; and (f) Each of the representations and warranties contained herein shall be true and correct on the date hereof. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. (b) The execution, delivery and performance by the Borrower of this Amendment, the Loan Agreement, as amended hereby, the Notes, as amended and restated in connection herewith, and the Loan Documents are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not contravene the Borrower's charter or bylaws, or any law or contractual restriction binding on or affecting the Borrower, or result in, or require, the creation of any lien, security interest or other charge or encumbrance (other than in favor of the Lender) on or upon or with respect to any of its properties. (c) No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Amendment or the Loan Agreement, as amended hereby, the Notes, as amended and restated in connection herewith, or any of the Loan Documents. (d) This Amendment and the Loan Agreement, as amended hereby, the Notes, as amended and restated in connection herewith, and the Loan Documents to which Borrower is a party, constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms (except as enforcement thereof may be limited by bankruptcy reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors' rights generally). (e) There is no pending or threatened action or proceeding affecting the Borrower or any of its affiliates before any court, governmental agency or arbitrator, which may result in a Material Adverse Effect. (f) The representations and warranties contained in SECTION 4 of the Loan Agreement are true and correct on and as of the date of this Amendment. 6 (g) No event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. (h) There has been no material adverse change in the condition, financial or otherwise, or operations of the Borrower since June 30, 1995, nor has there otherwise occurred a Material Adverse Effect. (i) There has been no material adverse change with respect to any document, instrument or other information supplied by the Borrower to the Lender prior to the date hereof. (j) Borrower hereby acknowledges and agrees that Borrower has no claims, counterclaims, offsets, credits or defenses to the Loan Documents and the performance of its obligations thereunder, or if Borrower has any such claims, counterclaims, offsets, credits or defenses to the Loan Documents or any transaction related to the Loans and/or the Loan Documents, same are hereby waived, relinquished and released in consideration of Lender's execution and delivery of this Agreement. SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT. (a) Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof', "herein" or words of like import shall mean and be a reference to the Loan Agreement as amended hereby, and each reference in the other Loan Documents to the Loan Agreement shall mean and be a reference to the Loan Agreement, as amended hereby. (b) Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Loan Documents to (i) "Revolving Note" shall mean and be a reference to Amended Revolving Note, (ii) "Term Note" shall mean and be a reference to Amended Term Note, (iii) "Converting Revolving Note" shall mean and be a reference to Amended Converting Note, and (iv) "Notes" shall collectively mean and be a reference to the Amended Revolving Note, the Amended Term Note and the Amended Converting Note. (c) Except as specifically amended above, the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (d) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under the Loan Agreement or the other Loan Documents nor constitute a waiver of any provision of any thereof. 7 SECTION 6. COSTS, FEES AND EXPENSES. The Borrower agrees to pay on demand all costs and expenses of the Lender in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder including, without limitation, the reasonable fees and out-of-pocket expenses of counsel (who may be in-house counsel) for the Lender with respect thereto and with respect to advising the Lender as to its rights and responsibilities hereunder and thereunder. SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. SECTION 8. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Texas. SECTION 9. FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND LENDER. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ Bill Stroope ----------------------------------- Bill Stroope, Senior Vice President IMCO RECYCLING INC. By: /s/ James B. Walburg ----------------------------------- James B. Walburg Vice President and Treasurer 8 EX-10.39 6 EXHIBIT 10.39 ============================================================================ IMCO RECYCLING INC. ---------- NOTE PURCHASE AGREEMENT Dated As of November 29, 1995 ---------- Unsecured Promissory Notes Due October 31, 2007 ============================================================================ TABLE OF CONTENTS* SECTION PAGE ------- ---- 1. ISSUE OF NOTES............................ 1 1.1 Authorization............................. 1 1.2 Purchase and Sale of Notes; Closings...... 2 1.3 Use of Proceeds........................... 3 1.4 Notes Not Secured......................... 3 2. PREPAYMENTS............................... 4 2.1 Optional Prepayments...................... 4 2.2 Mandatory Prepayments..................... 5 2.3 Other Prepayments Prohibited.............. 5 2.4 Allocation of Prepayments................. 5 2.5 Surrender of Notes on Prepayment.......... 5 2.6 Interest After Date Fixed for Prepayment.............................. 6 3. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.................... 6 3.1 Registration of Registered Notes; Ownership of Notes...................... 6 3.2 Replacement............................... 7 3.3 Delivery Expenses......................... 7 3.4 Method and Place of Payment of Principal, Premium and Interest.................... 7 4. GENERAL REPRESENTATIONS AND WARRANTIES.... 8 4.1 Condition - Financial and otherwise....... 8 (a) Business; Financial Statements.... 8 (b) NO Material Change................ 9 4.2 Capital Stock............................. 9 4.3 Due Corporate Organization and Authority.. 9 4.4 Title to Properties....................... 10 4.5 Patents, Trademarks, Licenses and Permits................................. 11 * This Table of Contents is not part of the Note Purchase Agreement. i SECTION PAGE ------- ---- 4.6 Taxes .................................... 11 4.7 Pending Litigation ....................... 11 4.8 Compliance with Contractual Obligations and Requirements of Law ................ 12 4.9 Environmental Matters .................... 12 4.10 Insurance ................................ 13 4.11 Full Disclosure .......................... 14 4.12 Status under Federal Laws and Regulations ........................ 14 4.13 Compliance with ERISA..................... 15 4.14 Descriptive Materials..................... 17 4.15 Investment Company Act.................... 17 4.16 Subsidiaries.............................. 17 4.17 Insolvency................................ 18 5. REPRESENTATIONS AND WARRANTIES RELATING TO SECURITIES ACT AND SOURCES OF FUNDS18 5.1 By the Purchaser.......................... 18 5.2 By the Company............................ 18 5.3 Source of Funds........................... 18 6. CLOSING CONDITIONS OF THE PURCHASER....... 19 6.1 Opinion of Company Counsel................ 19 6.2 Opinion of Special Counsel................ 21 6.3 Representations True...................... 22 6.4 No Event of Default....................... 23 6.5 Officers' Certificate..................... 23 6.6 Legality of Investment.................... 23 6.7 Proceedings, Instruments, etc. ........... 23 6.8 Private Placement Number.................. 24 7. BUSINESS COVENANTS........................ 24 7.1 Payment of Notes and Maintenance of Offices................................. 24 7.2 Payment of Taxes, Claims and Indebtedness............................ 24 7.3 Maintenance of Properties and Corporate Existence............................... 25 7.4 Limitation on Indebtedness................ 27 7.5 Limitation on Liabilities for Obligations of Others............................... 30 7.6 Limitation on Liens....................... 30 7.7 Limitation on Restricted Payments and Restricted Investments.............. 33 ii SECTION PAGE ------- ---- 7.8 Maintenance of Current Assets, Consolidated Working Capital, Net Worth and Fixed Charge Coverage.................... 34 7.9 Limitation on Leases....................... 34 7.10 Merger or Consolidation or Transfer of Assets................................ 35 7.11 Issue or Disposition of Securities......... 36 7.12 Limitation on Transactions with Affiliates. 38 7.13 Limitation on Investments.................. 38 7.14 Tax Consolidation.......................... 40 7.15 Auditors................................... 40 7.16 Acquisition of Notes....................... 41 7.17 Limitation on Prior Claims................. 41 7.18 Sale or Discount of Receivables............ 41 7.19 ERISA...................................... 41 7.20 Foreign Pension Liability.................. 43 7.21 Speculation in Commodities and Inventory Levels......................... 43 7.22 Environmental Covenants.................... 43 7.23 Pari Passu................................. 44 8. REPORTS, ETC. ............................. 44 8.1 Financial Statements and Other Reports..... 44 8.2 Officers' Certificates..................... 48 8.3 Accountants' Certificate................... 48 8.4 Inspection................................. 48 9. EVENTS OF DEFAULT.......................... 49 9.1 Nature of Events........................... 49 9.2 Default Remedies........................... 53 9.3 Notice of Default.......................... 54 10. INTERPRETATION OF AGREEMENT AND NOTES...... 55 10.1 Definitions................................ 55 10.2 Accounting Terms........................... 75 10.3 New York Law............................... 75 10.4 Headings................................... 75 11. MISCELLANEOUS.............................. 75 11.1 Communications............................. 75 11.2 Amendment and Waiver....................... 76 iii SECTION PAGE ------- ---- 11.3 Expenses................................... 77 11.4 Counterparts............................... 78 11.5 Survival of Warranties and Representations.......................... 78 11.6 Successors and Assigns..................... 78 11.7 Severability............................... 78 Signatures................................. 79 Schedule I -- Purchaser's Addresses for Payment and Other Communications Exhibit A -- Form of Note Exhibit B -- Description of the Company Exhibit C -- Form of Report to Management iv IMCO RECYCLING INC. NOTE PURCHASE AGREEMENT $30,000,000 Unsecured Promissory Notes Due October 31, 2007 As of November 29, 1995 To the Purchaser Listed on Schedule I Ladies and Gentlemen: IMCO RECYCLING INC., a Delaware corporation (herein called the "Company"), hereby agrees with you (herein referred to as the 'Purchaser') as follows: SECTION 1. ISSUE OF NOTES. Section 1.1. AUTHORIZATION. (a) The Company has duly authorized the issuance and sale, on the terms hereinafter provided and on the date hereof, of $15,000,000 aggregate principal amount of its Unsecured Promissory Notes due October 31, 2007 (herein collectively called the "Twelve Year Notes' and individually called a "Twelve Year Note"). Each Twelve Year Note will be in registered form and in a denomination of $50,000 or any larger integral multiple of $1,000, will mature on October 31, 2007, will be substantially in the form set forth in Exhibit A to this Agreement, appropriately completed, and will bear interest on the unpaid portion of the principal amount thereof, payable in semiannual installments on April 30 and October 31 in each year beginning with the April 30 next following the date thereof, at the rate of 7.28% per annum, from the date of the Note until such unpaid portion of such principal amount shall have become due and payable (whether at maturity, by acceleration or otherwise). (b) The Company has duly authorized'-the issuance and sale, on the terms hereinafter provided, of $15,000,000 aggregate principal amount of its Unsecured Promissory Notes due October 31, 2007 (herein collectively called the "Eleven and One-Half Year Notes" and individually called an 'Eleven and One-Half Year Note"). Each Eleven and One-Half Year Note will be in registered form and in a denomination of $50,000 or any larger integral multiple of $1,000, will mature on October 31, 2007, will be substantially in the form set forth in Exhibit A to this Agreement, appropriately completed, and will bear interest on the unpaid portion of the principal amount thereof, payable in semiannual installments on April 30 and October 31 in each year beginning with the first such date next following the date thereof, at the rate per annum equal to the sum of (i) 1.15% per annum plus (ii) the yield at 10:00 a.m., New York City time, on actively traded U.S. Treasury securities having a constant 10-year maturity determined by reference to the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on the Telerate Access Service) determined on a date which is no more than five Business Days prior to the Second Closing Date, from the date of the Note until such unpaid portion of such principal amount shall have become due and payable (whether at maturity, by acceleration or otherwise). (c) The Twelve Year Notes and Eleven and One-Half Year Notes are sometimes herein collectively called the "Notes" and individually called a "Note". (d) Each Note will bear interest on any overdue portion of the principal amount thereof and premium, if any, thereon at a rate equal to 2% per annum above the then prevailing interest rate per annum thereon until paid, and will bear interest, to the extent permitted by applicable law, on any overdue installment of interest thereon at a rate equal to 2% per annum above the then-prevailing interest rate per annum thereon. Section 1.2. PURCHASE AND SALE OF NOTES; CLOSINGS. Subject to the terms and conditions herein set forth, the Company hereby agrees to sell to you, and, in reliance on representations, warranties and agreements of the Company herein contained, you agree to purchase from the Company, Notes in the aggregate principal amount set forth opposite your name in Schedule I hereto at the purchase price of 100% of each such principal amount. The aggregate loan made under this Agreement will be advanced by you as set forth in Schedule I on a date not later than November 30, 1995 (the "First Closing Date") and a date, to be mutually agreed between you and the Company, on or before April 30, 1996 (the "Second Closing Date") (each such date a "Closing Date"). Execution and delivery of the Notes shall take place at the offices of Seward & Kissel, New York, New York, 2 at 10:00 A.M. New York City time on each Closing Date, by the delivery by the Company to you (x) on the First Closing Date, of a single Twelve Year Note and (y) on the Second Closing Date, of a single Eleven and One-Half Year Note (or, if you shall have so requested in writing prior to such Closing Date, multiple Notes in denominations authorized by Section 1.1), in each case dated such Closing Date, and in an aggregate principal amount equal to the principal amount of the relevant Notes to be purchased by you on such Closing Date as set forth in Schedule I. Each Note shall be registered in the name of the Purchaser or in such other name or names as the Purchaser may have designated in writing to the Company prior to such Closing Date. The purchase price of Notes to be purchased by you on each Closing Date shall be paid by you by wire transferring funds to IMCO Recycling Inc., c/o Texas Commerce Bank National Association, Dallas, Texas, ABA 113000609, Account No. 08500216028. Section 1.3. USE OF PROCEEDS. (a) The Company shall use the proceeds of the sale of the Notes to fund capital projects, acquisitions and investments in 1995 and 1996. Section 1.4. NOTES NOT SECURED. Any provision herein, or in any other document executed or delivered in connection herewith, or in any other agreement or commitment, whether written or oral, expressed or implied, to the contrary notwithstanding, the Notes shall be unsecured and are specifically not secured by the Mortgages or the Mortgaged Properties, including, but not limited to the following: (i) Mortgage, Security Agreement, Assignment of Rents and Financing Statement dated October 31, 1986, from International Metal Co. to MONY Pension Insurance Corporation, MONY Life Insurance Company of America and MONY Legacy Life Insurance Company, filed October 31, 1986 at 2:20 P.M. and recorded in Book 212, Pages 926 through 950 of the Real Property Records of Creek County, Oklahoma; (ii) Deed of Trust executed by International Metal Co. to Robert L. Badger, Trustee, dated October 31, 1986, recorded October 31, 1986 at 3:00 P.M. and recorded in Trust Book 413, page 334, Register's Office for Roane County, Tennessee, in favor of MONY Pension Insurance Corporation; MONY Life Insurance Company of America; and MONY Legacy Life Insurance Company, as their interests may appear; (iii) Deed of Trust, Assignment of Rents and Security Agreement executed by IMCO Recycling Inc., a Delaware corporation, to Joseph B. Pitt, Jr., Trustee, dated December 15, 1988 and 3 recorded December 28, 1988 at 4:15 P.M. in Trust Book 441, Page 237 Register's Office for Roane County, Tennessee, in favor of The Mutual Life Insurance Company of New York and MONY Life Insurance Company of America; (iv) Mortgage, Security Agreement, Assignment of Rents and Financing Statement dated December 15, 1988 from IMCO Recycling Inc. to The Mutual Life Insurance Company of New York and MONY Life Insurance Company of America, as co-mortgagees, filed for record in the office of the County Clerk of Creek County, Oklahoma, December 28, 1988 at 3:45 P.M. and recorded in Book 243, Pages 1016 thru 1048 inclusive; or (v) Mortgage, Security Agreement, Assignment of Rents and Financing Statement from IMCO Recycling Inc. to The Mutual Life Insurance Company of New York and MONY Life Insurance Company of America, and MONY Legacy Life Insurance Company, dated December 15, 1988 and recorded December 24, 1988 at 3:25 P.M. of record in Book 65, Page 540 of the Office of the Clerk of the County Court of Butler County, Kentucky. SECTION 2. PREPAYMENTS. Section 2.1. OPTIONAL PREPAYMENTS. (a) Upon notice given as provided in Section 2.1(b) and otherwise as provided in Section 2.4 the Company shall have the right to prepay the Notes in whole at any time, or in part in multiples of $100,000 from time to time. Each prepayment pursuant to this 52.1(a) shall be at 100% of the principal amount of the Notes so to be prepaid, plus accrued interest thereon to the date fixed for such prepayment, plus a premium equal to the applicable Make-Whole Amount on the date of such prepayment. (b) NOTICE OF PREPAYMENT AND OTHER NOTICES. The Company shall give written notice of prepayment of any Note or any portion thereof pursuant to Section 2.1(a), not less than 30 nor more than 60 days prior to the date fixed for such prepayment in such notice, which notice shall specify the amount so to be prepaid and the date fixed for such prepayment. Such notice of prepayment and all other notices to be given to any holder of any Note shall be given by registered or certified mail to the registered holder thereof at its address designated on the register maintained by the Company on the date fixed for such notice of prepayment or other notice. Upon notice of any prepayment pursuant to Section 2.1(a) being given as provided in this Section 2.1(b), the Company covenants and agrees that it will prepay on the date therein fixed for prepayment the principal amount of Notes so to be prepaid as specified in such notice at the principal amount thereof, together with interest accrued 4 thereon to such date fixed for prepayment, plus the applicable premium. The principal amount of all Notes so to be prepaid as specified in such notice at the principal amount thereof, together with accrued interest thereon to such date plus the applicable premium shall be due and payable on the date specified in such notice. The applicable premium shall be computed on the second Business Day Prior to the applicable prepayment date, and notice of such amount together with the calculation thereof shall be promptly given to the Company. Any such computation of premium shall be conclusive and binding on the Company absent manifest error. Section 2.2 MANDATORY PREPAYMENTS. The Company covenants and agrees that on October 31, 2003 and on each October 31 thereafter, to and including October 31, 2006, it will prepay $6,000,000 aggregate principal amount of the Notes. Each such prepayment shall be made at 100% of the principal amount so to be prepaid together with accrued interest thereon to the date fixed for such prepayment, without premium, and otherwise as provided in Section 2.4. Section 2.3. Other PREPAYMENTS PROHIBITED. Except as provided in Section 2.1 and Section 2.2, the principal of the Notes shall not be subject to prepayment in whole or in part at any time. Section 2.4. ALLOCATION OF PREPAYMENTS. In the event of any prepayment of less than all of the outstanding Notes, the Company will allocate the principal amount so to be prepaid (but only in units of $1,000) among the holders of Notes in proportion, as nearly as may be, to the respective principal amounts of such Notes, not theretofore called for prepayment, of which they shall be holders. Section 2.5. SURRENDER OF NOTES ON PREPAYMENT. Subject to Section 3.4, upon any partial prepayment of a Note, such Note shall, at the option of the holder thereof, be either (a) surrendered to the Company pursuant to Section 3.1(b) in exchange for a new Note in a principal amount equal to the principal amount remaining unpaid on the surrendered Note, or (b) made available to the Company for notation thereon of the portion of the principal so prepaid. In case the entire principal amount of any Note is prepaid, such Note shall be surrendered to the Company for cancellation and shall not be reissued, and no Note shall be issued in lieu of the prepaid principal amount of any Note. 5 Section 2.6. INTEREST AFTER DATE FIXED FOR PREPAYMENT. Each Note, or the portion hereof called for prepayment as herein provided, shall cease to bear interest on and after the date fixed for such prepayment, unless, upon presentation for such purpose, the Company shall fail to pay each such Note or such portion, as the case may be, in which event each such Note or such portion, as the case may be, shall bear interest thereafter and until paid at a rate equal to 2% per annum above the then-prevailing interest rate per annum thereon until paid and, so far as may be lawful, any overdue installment of interest shall bear interest at a rate equal to 2% per annum above the then prevailing interest rate per annum thereon until paid. SECTION 3. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES. Section 3.1. REGISTRATION OF REGISTERED NOTES; OWNERSHIP OF NOTES. (a) The Company will keep at its office maintained pursuant to Section 7.1 a register for the registration of registered Notes and transfers thereof. The names and addresses of the holders of Notes in registered form, the transfer thereof and the names and addresses of the transferees of such Notes shall be registered in the register. No transfer of any such Note shall be registered unless such Note is duly endorsed or accompanied by a written instrument of transfer, in form reasonably satisfactory to the Company, duly executed by the registered holder or by his duly authorized attorney, and unless such transfer is made on the aforesaid register. Subject to 53.4, the Company may treat the Person in whose name any registered Note is registered as the holder of such Note for the purpose of receiving payment of principal of (and premium, if any) and interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue. (b) Upon surrender of any Note or Notes at its office maintained pursuant to Section 7.1, the Company shall execute and, in exchange therefor and upon cancellation thereof, shall deliver, at the Company's expense (except as provided below), a new Note or Notes in such denominations of $50,000 or any larger integral multiple of $1,000 as may be requested and in the same aggregate principal amount as, and dated as of the interest payment date to which interest has been paid on, or, if no interest has yet been so paid, then dated the date of, the Note or Notes so surrendered. Such new Note shall, as a registered Note, be made payable 6 to such Person as such holder or transferee may request. The Company may require payment of a sum sufficient to cover any stamp tax or Governmental charge imposed in respect of any transfer. Section 3.2. REPLACEMENT. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Note and (a) in the case of loss, theft or destruction, upon receipt by the Company of indemnity or security reasonably satisfactory to it (except that if the holder of such Note is an insurance company or other financial institution of recognized financial responsibility, the holder's own agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender to the Company of such mutilated Note and cancellation thereof, the Company at its expense will execute and deliver in lieu thereof a new Note of like tenor, executed by the Company and in the same unpaid principal amount as the Note being replaced and dated as of the date to which interest has been paid on such Note, or, if no interest has yet been so paid, then dated the date of such Note. Section 3.3. DELIVERY EXPENSES. If any Note shall be presented to the Company pursuant to this Agreement, the Company will pay the cost of delivering to or from the holder's home office from or to the Company, insured to the holder's satisfaction, the Note so presented and any Note issued in substitution or replacement for the Note so presented. Section 3.4. METHOD AND PLACE OF PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any provision to the contrary in this Agreement or the Notes, the Company will punctually pay all amounts payable with respect to any Notes held by you, your nominee or any other holder or its nominee (without any presentment thereof and without any notation of such payment being made thereon) (a) to the address and in the manner specified in Schedule I or in such other manner as may be agreed to in writing by you or such holder and the Company or (b) if no other manner of payment has been agreed to pursuant to clause (a), by check drawn upon New York Clearing House or other funds of comparable availability duly mailed and addressed to the address specified with respect to you or such holder pursuant to Section 11.1. If you or any other holder sells or transfers any Note, you or such holder, as the case may be, will notify the Company of the name and address of the transferee, on which the Company may 7 rely, and will, prior to the delivery of such Note, make a notation on such Note of the date to which interest has been paid thereon and of the amount of any prepayments made on account of the principal thereof. SECTION 4. GENERAL REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants as follows: Section 4.1. CONDITION -- FINANCIAL AND OTHERWISE. (a) BUSINESS; FINANCIAL STATEMENTS. Exhibit B to this Agreement correctly describes in all material respects the business operations and principal properties of the Company and each Subsidiary. (ii) The Company has heretofore delivered to you (A) the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1990, December 31, 1991, December 31, 1992, December 31, 1993 and December 31, 1994, and the related statements of earnings, changes in stockholders' equity and cash flows for the fiscal years ended on those dates, together with reports thereon by Ernst & Young LLP, certified public accountants, and (B) the unaudited consolidated balance sheets of the Company and its Subsidiaries as of March 31, 1995 and June 30, 1995, and the related statements of earnings and cash flows for the fiscal period ended on March 31, 1995 and June 30, 1995, respectively, together with reports thereon by Ernst & Young LLP, certified public accountants. All of said financial statements, including in each case the related schedules and notes, are true, complete (in the case of year-end financial statements) and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position of the Company and its Subsidiaries as of the respective dates of said balance sheets and the results of their operations for the respective periods covered thereby, subject (in the case of interim statements) to period-end audit adjustments. (iii) The Company does not know of any fact relating to its business and the business of each Subsidiary (other than matters of a general economic nature) which the Company has not disclosed in Exhibit B to this Agreement, or in the financial statements referred to in this Section 4.1(a) which individually or in the aggregate materially and adversely 8 affects or is reasonably likely to materially and adversely affect the business, operations, properties or prospects, or the condition, financial or otherwise, of the Company and its Restricted Subsidiaries taken as a whole or the ability of the Company to perform this Agreement or of the Company to pay when due, in accordance with the terms of the Notes and this Agreement, the principal of, and premium, if any, .and interest on the Notes. (b) NO MATERIAL CHANGE. Except as disclosed in the financial statements and reports referred to in Section 4.1(a), in Exhibit B, or in documents delivered pursuant hereto, since December 31, 1994 there have been no changes in the condition, financial or otherwise, of the Company and its Restricted Subsidiaries taken as a whole which, individually or in the aggregate, have been materially adverse, nor any changes in such condition occurring otherwise than in the ordinary course of business. Section 4.2. CAPITAL STOCK. At the close of business on the Business Day immediately preceding the First Closing Date and after giving effect to the transactions contemplated by this Agreement, the authorized stock of the Company consists of: 20,000,000 shares of Common Stock, $.10 par value, of which 11,964,911 shares are issued and outstanding; and 8,000,000 shares of Preferred Stock, $.10 par value, of which no shares are issued and outstanding. Section 4.3. DUE CORPORATE ORGANIZATION AND AUTHORITY. The Company and each Restricted Subsidiary (a) is a corporation or other business entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, (b) has all requisite power and authority (corporate or otherwise) to own, or hold under lease, its properties and assets, to operate its properties and assets and to conduct its business as now conducted and as currently proposed to be conducted, and has in full force and effect all necessary franchises, licenses, permits, consents or approvals from or by, and has made all necessary filings with, every Government having jurisdiction and required for such ownership, operation and conduct of its business, except for those approvals set forth in Exhibit B or except where the failure to have in effect such items or the failure to make such filings would not have a Material Adverse Effect, (c) in the case of the Company only, has all requisite corporate power and authority to execute, deliver and perform this Agreement and to issue, sell and deliver the 9 Notes to the Purchaser and (d) has duly qualified and is authorized to transact business and is in good standing as a foreign corporation or other entity in each jurisdiction wherein the character of the properties or assets owned or held under lease by it or the nature of the business transacted by it makes such qualification necessary, except where such failure to qualify would not have a Material Adverse Effect. Section 4.4. TITLE TO PROPERTIES. The Company and each Restricted Subsidiary has good and indefeasible title to all of its properties purported to be owned by it, including all property reflected in the most recent audited balance sheet of the Company and its Restricted Subsidiaries referred to in Section 4.1(a) (except property sold or otherwise disposed of in the ordinary course of business since the date thereof), free from any Liens other than those permitted by Section 7.6. None of the assets or property the value of which is reflected in said most recent balance sheet of the Company and its Restricted Subsidiaries is held by the Company or any Restricted Subsidiary as lessee, conditional vendee or under any other title retention agreement, except as set forth in said balance sheet or the notes relating thereto or as otherwise disclosed pursuant hereto. Other than Uniform Commercial Code financing statements disclosed to you on Exhibit B, no financing or continuation statement which names the Company or any Restricted Subsidiary as debtor has been filed with respect to property of the Company or any Restricted Subsidiary under the Uniform Commercial Code in any United States jurisdiction and neither the Company nor any Restricted Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien, except in each case as permitted by Section 7.6. Each real estate lease to which the Company or any Restricted Subsidiary is a party as lessee is not in default unless such default would not have a Material Adverse Effect, and is valid, binding and enforceable by the lessee in all material respects in accordance with its terms and entitles the lessee to undisturbed possession of the real estate covered thereby during the full term thereof, except as such enforceability and undisturbed possession may be affected by condemnation or other acts of Governmental bodies or by bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally. 10 Section 4.5. PATENTS, TRADEMARKS, LICENSES AND PERMITS. The Company and each Restricted Subsidiary owns or possesses all patents, trademarks, service marks, trade names, copyrights, licenses, permits, franchises and other Governmental and private authorizations, or rights with respect to the foregoing, necessary or advisable for the present and currently proposed future conduct of its business (except for the permits set forth on Exhibit B), without any known conflict with the rights of others, except where the failure to so own or possess any of the above would not have a Material Adverse Effect. Section 4.6. TAXES. (a) All tax returns required to be filed by the Company and each Subsidiary in any jurisdiction have been filed, and all taxes, assessments, fees and other Governmental charges or levies imposed upon the Company or any Subsidiary or upon any of their properties, assets, income, profits or franchises, which are due and payable, have been paid, except those which are due and payable but not yet delinquent. Except as disclosed in Exhibit B, the Company does not know of any proposed additional tax assessment against it or any Subsidiary or any basis for one. The federal income tax liability of the Company and its Subsidiaries has been finally determined by the Internal Revenue Service for all fiscal years up to and including the year ended December 31, 1989, and there are no waivers or agreements by the Company or its Subsidiaries for the extension of time for the assessment of any tax. (b) The provisions for taxes on the books of the Company and its Subsidiaries are adequate in all material respects for all open years and for its current fiscal period. The amount of the reserves for income taxes reflected in the most recent audited consolidated balance sheet of the Company and its Subsidiaries referred to in Section 4.1(a) is an adequate provision for such income taxes as may be payable by the Company and its Subsidiaries. Section 4.7. PENDING LITIGATION. Except as set forth on Exhibit B, there are no actions, suits, proceedings, inquiries or investigations pending, or, to the knowledge of the Company, threatened against or directly affecting the Company or its Restricted Subsidiaries, or, to the knowledge of the Company, any basis therefor, in any court or before any arbitrator or Government which, if adversely determined against the Company or any Restricted Subsidiary, would have a Material Adverse Effect. 11 Section 4.8. COMPLIANCE WITH CONTRACTUAL OBLIGATIONS AND REQUIREMENTS OF Law. (a) Except where such breach, default or violation would not have a Material Adverse Effect, the Company and each Restricted Subsidiary: (i) is not in default in the performance, observance or fulfillment of any Contractual Obligation, and no event has occurred which constitutes, or but for any requirement of notice or lapse of time, or both, would constitute, an event of default by the Company or such Subsidiary under any Contractual Obligation; or (ii) is not in breach or violation of, or in default under, any Requirement of Law. (b) Neither the execution and delivery of this Agreement or the Notes, nor the consummation of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof, by the Company: (i) will conflict with, or result in a breach or violation of, or constitute a default under, any Requirement of Law on the part of the Company or any Restricted Subsidiary or will conflict with, or result in a breach or violation of, or constitute a default in the performance, observance or fulfillment of any obligation, covenant or condition contained in, or constitute, or but for any requirement of notice or lapse of time, or both, would constitute an event of default by the Company or any Restricted Subsidiary under, any Contractual Obligation; (ii) will result in the creation or imposition of any Lien upon any of the properties or assets of the Company or any Restricted Subsidiary; or (iii) will require any filing with or approval by any Government other than informational filings which may be made, subsequent to each Closing Date, with respect to this Agreement. 12 (c) Neither the Company nor any Restricted Subsidiary is a party to any Contractual Obligation or subject to any Requirement of Law which has a Material Adverse Effect. Neither the Company nor any Restricted Subsidiary is a party to any Contractual Obligation which restricts its right or ability to incur Current Liabilities or Funded Indebtedness other than: (i) this Agreement; (ii) the 1988 Note Purchase Agreement; and (iii) the Bank Loan Agreement. Section 4.9. ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as set forth in Exhibit B, (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them, except in compliance in all material.-respects with applicable laws, regulations and permits, and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its 13 Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. Section 4.10. INSURANCE. All of the properties, assets and operations of the Company and each Restricted Subsidiary of a character usually insured by Persons of established reputation engaged in the same or a similar business similarly situated are adequately insured, by financially sound and reputable insurers, against loss or damage of the kinds and in amounts customarily insured against by such Persons, and the Company and each Restricted Subsidiary carries, with such insurers in customary amounts, such other insurance, including without limitation public and product liability insurance and workers compensation insurance (except that the Company and each Restricted Subsidiary may self-insure workers compensation liability to the extent permitted by applicable state law), as is usually carried by Persons of established reputation engaged in the same or a similar business similarly situated. Section 4.11. FULL DISCLOSURE. Neither the financial statements referred to in Section 4.1(a), any report referred to in Section 4.1(a), this Agreement, or any certificate or written statement furnished by or on behalf of the Company to you in connection with the negotiation of this Agreement and the sale to you of the Notes contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or herein not misleading. There is no fact which the Company has not disclosed to you in writing prior to the date of this Agreement which would have a Material Adverse Effect. Section 4.12. STATUS UNDER FEDERAL LAWS AND REGULATIONS. (a) Neither the execution, delivery and performance of this Agreement, nor any transactions contemplated by this Agreement, nor the Company nor any Restricted Subsidiary is in violation of, or is, controls or is acting on behalf of, for the benefit of, or pursuant to the direction of, any person with whom any transaction is prohibited by the Trading with the Enemy Act of 1917, as amended, or any order, regulation or other Governmental action issued or taken pursuant thereto, including Executive Order 9193, as amended, of the President of the United States issued pursuant to such Act and the following regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended): the Transaction Control Regulations, the Foreign Assets Control Regulations, the 14 Cuban Assets Control Regulations, the Iranian Assets Control Regulations, the Libyan Sanctions Regulations, the Iraqi Sanctions Regulations, the Federal Republic of Yugoslavia Sanctions Regulations and the Angola Sanctions Regulations; and (b) neither the Company nor any Restricted Subsidiary will, directly or indirectly, use or apply any portion of the proceeds of the sale of the Notes so as to violate or otherwise take or permit any action which would subject the acquisition of the Notes to any penalty or tax provided for in or by such Trading with the Enemy Act, any of such Regulations or any of such orders, regulations, or other Governmental actions issued or taken pursuant thereto by an authorized Governmental authority; and none of the transactions contemplated in this Agreement (including without limitation thereof, the use of the proceeds of the sale of the Notes) will violate or result in a violation on the part of the Company or any Restricted Subsidiary or you of Section 7 of the 1934 Act, or any regulations issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. Neither Company nor any Restricted Subsidiary owns or intends to carry or purchase any 'margin stock' within the meaning of said Regulation G. None of the proceeds from the sale of Notes will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any "margin stock" within the meaning of said Regulation G. Section 4.13. COMPLIANCE WITH ERISA. (a) The Company, each Related Person and each Plan (other than a multiemployer Plan), including any trust created under or forming a part thereof, is in compliance in all material respects with the applicable provisions of ERISA and the regulations and published official interpretations thereunder. Neither the Company nor any Related Person has engaged in any transaction or failed to take any action in connection with which the Company or any Related Person could be subjected to either a material civil penalty assessed pursuant to section 502 of ERISA or a tax in a material amount imposed by section 4975 of the Code. No Plan, or trust created under or forming a part of any Plan, has been terminated since September 2, 1974. No liability in a material amount to the Pension Benefit Guaranty Corporation has been or, based on existing or anticipated circumstances, is expected by the Company or any Related Person to be incurred by the Company or any Related Person in connection, with any Plan, and the Pension Benefit Guaranty Corporation has not instituted any proceeding to terminate any Plan or to 15 appoint a trustee to administer any Plan. No Reportable Event has occurred or is currently under consideration by the Pension Benefit Guaranty Corporation in connection with any Plan, and no event has occurred nor does any condition exist, which presents a substantial risk of termination of any Plan by the Pension Benefit Guaranty Corporation. There has been no "complete withdrawal" or "partial withdrawal" by the Company or any Related Person from any Multiemployer Plan within the meaning of Subtitle E of Title IV of ERISA with respect to which the Company or any Related Person has incurred or will incur any liability. There do not exist any conditions, nor are any circumstances anticipated, which could result in any such withdrawal; and neither the Company nor any Related Person has incurred, or based on existing or anticipated circumstances may incur, any liability in a material amount with respect to any Multiemployer Plan under that Title IV. (b) The Company and each Related Person have paid all contributions or other amounts required of them under the provisions of each Plan or pursuant to any applicable collective bargaining agreement, and no "accumulated funding deficiency" (as defined in Section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan (other than a Multiemployer Plan). There is no proceeding by a fiduciary of any Multiemployer Plan against the Company or any Related Person to enforce Section 515 of ERISA. (c) The actuarial present value of all benefit liabilities under all Plans (other than Multiemployer Plans) did not, as of the end of the most recently ended fiscal year of the Company, exceed the fair market value of the assets of such Plans by more than $250,000, with such benefit liabilities determined based on the actuarial assumptions which would be used by the Pension Benefit Guaranty Corporation with respect to plans terminating that year. (d) Neither the execution and delivery of this Agreement, the issue and sale of the Notes under this Agreement, nor the purchase by you of the Notes, will involve any Prohibited Transaction that could have a Material Adverse Effect or that could have a material adverse effect on the financial condition or operation of any Plan, it being understood that, in order for the Company to make such representation and warranty, the Company is 16 relying on your representation and warranty set forth in Section 5.3. Section 4.14. DESCRIPTIVE MATERIALS. Exhibit B hereto correctly sets forth in all material respects, or incorporates by reference documents setting forth, (1) a brief description of the business (as conducted and presently proposed to be conducted) and the approximate physical dimensions of the operating facilities (including leaseholds under real property leases and the location, the annual rentals payable and the term of such leaseholds) of the Company and its Restricted Subsidiaries, (2) the jurisdiction or jurisdictions in which each of the Company and its Restricted Subsidiaries is organized and in which the Company and each Restricted Subsidiary is qualified to conduct its business, (3) a statement of the Indebtedness for Money Borrowed of the Company and its Restricted Subsidiaries outstanding as of the First Closing Date, setting forth, in each case, the amount and the obligee of such Indebtedness and whether or not such Indebtedness is secured, and (4) Investments of the Company and its Restricted Subsidiaries existing on the First Closing Date. Section 4.15. INVESTMENT COMPANY Act. The Company is not, nor is it directly or indirectly controlled by, affiliated with, or acting on behalf of any Person which is, an investment company within the meaning of the Investment Company Act of 1940, as amended. Section 4.16. SUBSIDIARIES. Exhibit B hereto sets forth a list of all of the Company's Subsidiaries. Each Restricted Subsidiary is designated as such on said Exhibit B. Each of the Company's Restricted Subsidiaries is duly organized and validly existing and is in good standing under the laws of the jurisdiction in which it is organized and which is specified in Exhibit B, with powers (corporate or otherwise) adequate for the carrying on of the business now conducted by it. All outstanding capital stock of each Restricted Subsidiary listed in Exhibit B which is a corporation is validly issued, fully paid and nonassessable, and all partnership and other interests in each Restricted Subsidiary which is not a corporation are fully paid for and validly created. Except as set forth in Exhibit B, the Company owns, directly or indirectly, all of the outstanding capital stock or equity interest of each Restricted Subsidiary. Except as set forth in Exhibit B to this Agreement, the Company does not own, directly or indirectly, any capital stock of or equity interest in any Person. 17 Section 4.17. INSOLVENCY. The Company is not insolvent (as such term is defined in Section 101(29) of the Bankruptcy Code of 1978, as amended) and will not be rendered insolvent (as such term is defined in Section 101(29) of the Bankruptcy Code of 1978, as amended) by execution of this Agreement or any other loan document in connection therewith to which it is a party or by the consummation of the transaction contemplated hereby or thereby. SECTION 5. REPRESENTATIONS AND WARRANTIES RELATING TO SECURITIES ACT AND SOURCES OF FUNDS. Section 5.1. BY THE PURCHASER. You hereby represent: that you are purchasing the Notes for your own account or a separate account maintained by you for investment and not with a view to or in connection with any distribution thereof, subject, nevertheless, to any requirements of law that the disposition thereof by you shall at all times be within your control; and you further represent that each acquisition of Notes by you shall be deemed to be a reaffirmation as of the time of purchase of the representations made by you under this Section 5.1. Section 5.2. BY THE COMPANY. The Company hereby represents that (a) it has not, either directly or through any agent, sold or disposed of, or attempted or offered to sell or dispose of, any of the Notes or any similar securties of the Company to, or solicited offers to buy any such Notes or similar securities from, or otherwise approached or negotiated with respect to such Notes or similar securities with, any Person or Persons other than you; and (b) neither the Company nor any Person acting on its behalf will hereafter take any action with respect to the Notes or any similar securities of the Company which would adversely affect the exemption of the Notes from the registration provisions of the Securities Act. Section 5.3. SOURCE OF FUNDS. You hereby represent: either (i) none of the funds to be used by you to acquire the Notes are assets of an employee benefit plan (or, if such funds would be deemed assets of an employee benefit plan as a consequence of the United States Supreme Court's holding in JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY V. HARRIS TRUST & SAVINGS BANK, then you represent that all of the transactions contemplated herein are fully exempted under Department of Labor Prohibited Transaction Class Exemption 95-60), or (ii) you have previously disclosed in 18 writing to the Company the names of all employee benefit plans the assets of which exceed 5% of the total assets in any separate account providing funds for the purchase of the Notes. As used in this Section 5.3, the term "employee benefit plan" shall have the meaning assigned to such term in Section 3(3) of ERISA. SECTION 6. CLOSING CONDITIONS OF THE PURCHASER. Your obligation to purchase and pay for the Notes to be delivered on each Closing Date shall be subject to the satisfaction on such Closing Date of the following conditions precedent: Section 6.1. OPINION OF COMPANY COUNSEL. You shall have received on each Closing Date from the Company's counsel, Haynes and Boone, L.L.P., a favorable opinion dated such Closing Date addressed to, and in form, scope and substance satisfactory to, you, to the effect that: (a) the Company and each Restricted Subsidiary is a duly incorporated (or organized in the case of partnerships) and validly existing entity in good standing under the laws of the state of its incorporation or organization and has all requisite corporate or partnership power and authority to own, or hold under lease, its properties and assets, to operate its properties and assets, to conduct its business, and (in the case of the Company) to execute, deliver and perform this Agreement and to issue, sell and deliver the Notes to you; (b) the Company and each Restricted Subsidiary is duly qualified and is authorized to transact business and is in good standing as a foreign corporation or entity in each jurisdiction wherein the character of the properties or assets owned or held under lease by the Company or such Restricted Subsidiary or the nature of the business transacted by the Company or such Restricted Subsidiary as described in Exhibit B to this Agreement makes such qualification necessary; (c) to the knowledge of such counsel, there are no actions, suits, proceedings, inquiries or investigations pending or threatened against or affecting the Company or any of its Restricted Subsidiaries of a character referred to in Section 4.7; 19 (d) this Agreement and the Notes being purchased by you on such Closing Date have been duly authorized by all necessary corporate action on the part of the Company (no action by the stockholders of the Company having been required by law, by the certificate of incorporation or bylaws of the Company or otherwise), each have been duly executed and delivered, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except insofar as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws or equitable principles affecting the enforcement of creditors' rights generally; (e) neither the execution and delivery of this Agreement or the Notes being purchased by you on such Closing Date, nor the consummation of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof by the Company will conflict with, or result in a breach or violation of, or constitute a default under, any Requirement of Law on the part of the Company, or, to the knowledge of such counsel after due inquiry, will conflict with, or result in a breach or violation of, or constitute a default in the performance, observance or fulfillment of any obligation, covenant or condition contained in, or constitute, or but for any requirement of notice or lapse of time, or both, would constitute, an event of default by the Company under any Contractual Obligation or, to the knowledge of such counsel after due inquiry, will result in the creation or imposition of any Lien upon any of the properties or assets of the Company; (f) no filing with, or other action involving, any Government is required on the part of the Company in connection with the execution or delivery of this Agreement or the offer, issuance, sale or delivery of the Notes being purchased by you other than informational filings which may be required to be made, subsequent to the Closing Date, with respect to this Agreement; (g) it is not necessary, in connection with the offer, issuance, sale and delivery of the Notes being purchased by you, to register the Notes under the Securities Act or to qualify an indenture under the Trust Indenture Act of 1939, as amended (it being understood that the opinion called for by this paragraph (g) shall assume the existence of the facts and circumstances contemplated by this 20 Agreement, including the accuracy of the representations set forth in Section 5); and (h) none of the transactions contemplated in this Agreement (including without limitation thereof, the use of the proceeds of the sale of the Notes) will violate or result in a violation of Section 7 of the 1934 Act, or any regulations issued pursuant thereto, including without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 CFR, Chapter II and, to the knowledge of such counsel after due inquiry, none of the proceeds of the sale of the Notes will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any 'margin stock' within the meaning of such Regulation G. Such opinion shall also cover such other legal matters incident to the transactions contemplated by this Agreement as you or your special counsel may reasonably request. In giving the foregoing opinion counsel may rely, as to questions of fact material thereto, upon certificates of public officials and specified certificates of appropriate officers of the Company and its Restricted Subsidiaries, copies of which shall have been received by you. Section 6.2. OPINION OF SPECIAL COUNSEL. You shall have received on each Closing Date from Messrs. Seward & Kissel of New York, New York, your special counsel in connection with the transactions contemplated by this Agreement, a favorable opinion dated such Closing Date, addressed to, and in form, scope and substance satisfactory to, you to the effect that: (a) the Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, or hold under lease, its properties and assets and to conduct business of the type described in Exhibit B and to execute, deliver and perform.-this Agreement, and to issue, sell and deliver the Notes to you; (b) neither the execution and delivery of this Agreement or the Notes being purchased by you on such Closing Date, nor the consummation of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof by the Company will conflict with, or result in a breach or 21 violation of the provisions of the certificate of incorporation or bylaws of the Company; (c) it is not necessary, in connection with the offer, issuance, sale and delivery of the Notes being purchased by you, to register the Notes under the Securities Act or to qualify an indenture under the Trust Indenture Act of 1939, as amended (it being understood that the opinion called for by this paragraph (c) shall assume the existence of the facts and circumstances contemplated by this Agreement, including the accuracy of the representations set forth in Section 5); (d) this Agreement and the Notes being purchased by you on such Closing Date have been duly authorized by all necessary corporate action on the part of the Company (no action by the stockholders of the Company being required by law or by the certificate of incorporation or bylaws of the Company), have been duly executed and delivered, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except insofar as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws or equitable principles affecting the enforcement of creditors' rights generally; and (e) while said special counsel have not independently considered the additional matters covered by the legal opinion referred to in Section 6.1, such legal opinion is satisfactory in form and scope to said special counsel and nothing has come to the attention of said special counsel that leads them to believe that you or they are not justified in relying thereon. The opinion of such special counsel shall also cover such other legal matters incident to the transactions contemplated by this Agreement as you may reasonably request. in giving the foregoing opinion said special counsel may rely, as to questions of fact material thereto, upon certificates of public officials and of appropriate officers of the Company and its Restricted Subsidiaries, copies of which shall have been received by you. Section 6.3. REPRESENTATIONS TRUE. All representations, warranties and statements by or on behalf of the Company contained in this Agreement or in any certificate, statement or document furnished by or on behalf of the Company to you in connection with the negotiation of this Agreement, the 22 sale of the Notes or the Company's performance of its obligations hereunder or thereunder or otherwise furnished to you in compliance with this Agreement, shall be true as and to the extent set forth therein in all material respects on and as of each Closing Date with the same effect as though such representations, warranties and statements had been made on and as of each Closing Date (or, to the extent that any such representations and warranties expressly relate solely to a specific date, as of that date). Section 6.4. NO EVENT OF DEFAULT. (a) Neither the Company nor any Restricted Subsidiary shall have taken any action which it would have been prohibited from taking, or omitted or permitted the omission of any action which it would have been required to take, if the Notes had been outstanding at all times since the date of this Agreement, and the Company will not upon the execution of the Notes to be delivered on each Closing Date be in default in the performance of any of the covenants and agreements hereunder and no Event of Default, or event which after notice or lapse of time or both would constitute an Event of Default, shall have occurred. (b) No "Event of Default" under the 1988 Note Purchase Agreement shall have occurred or be continuing. Section 6.5. OFFICERS' CERTIFICATE. The Company shall have delivered to you on each Closing Date a certificate or certificates, signed by the President or an Executive Vice President and the Vice President Finance of the Company, to the effect that the conditions specified in Section 6.3 and Section 6.4 required to be fulfilled on such Closing Date have been fulfilled. Section 6.6. LEGALITY OF INVESTMENT. The acquisition of the Notes shall qualify as of each Closing Date as a legal investment for you under all laws applicable to investments by you (exclusive, in any case, of section 1405(a)(8) of the New York Insurance Law). Section 6.7. PROCEEDINGS, INSTRUMENTS, ETC. All proceedings to be taken in connection with the transactions contemplated by this Agreement, and all documents incidental thereto, shall be satisfactory in form, scope and substance to you and your special counsel, and you shall have received copies of all documents which you may reasonably request in connection with said transactions and copies of the records of all corporate proceedings in connection therewith in 23 form, scope and substance satisfactory to you and your special counsel. Section 6.8. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. SECTION 7. BUSINESS COVENANTS. The Company covenants and agrees that so long as any Note shall be outstanding: Section 7.1. PAYMENT OF NOTES AND MAINTENANCE OF OFFICES. The Company will punctually pay or cause to be paid the principal and interest (and premium, if any) to become due in respect of the Notes according to the terms thereof and will maintain an office at 5215 North O'Connor Boulevard, Suite 940, Central Tower at Williams Square, Irving, Texas 75039, or such other place as it may from time to time specify by written notice to all holders of the Notes, where notices, presentations and demands in respect of this Agreement or the Notes may be made upon it and will notify each holder of a Note of any change of location of such office. Section 7.2. PAYMENT OF TAXES, CLAIMS AND INDEBTEDNESS. The Company and its Restricted Subsidiaries will each pay and discharge promptly: (a) all taxes, assessments, fees and other Governmental charges or levies imposed upon it or upon any of its properties, assets, income, profits or franchises before the same shall become delinquent; (b) all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar persons for labor,.materials, supplies and rentals which, if unpaid, might by law become a Lien or charge upon its properties or assets; and (c) any liability imposed upon it pursuant to Section 4062, 4063 or 4064 of ERISA; 24 PROVIDED, HOWEVER, that neither the Company nor any Restricted Subsidiary, shall be required to pay any of the foregoing if (w) the aggregate of such items referred to above does not exceed $500,000 at any one time outstanding, (x) in the case of items referred to above aggregating in excess of $500,000, the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings, (y) the Company or such Restricted Subsidiary, as the case may-be, shall have set aside on its books reserves which in the opinion of the Firm of Certified Public Accountants employed by the Company in accordance with Section 7.15 are adequate with respect thereto (as evidenced in the auditor's reports referred to in Section 8.1(b)) and (z) the title of the Company or such Restricted Subsidiary, as the case may be, to, and its right to use, a material portion of its property shall not be materially and adversely affected thereby. Section 7.3. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The Company and its Restricted Subsidiaries will each: (a) do or cause to be done all things necessary to maintain its properties and assets (including properties and assets leased by it) in good condition, and make all renewals, replacements, additions, betterments and improvements to its properties and assets (including properties and assets leased by it and the leases relating thereto); (b) keep adequately insured, by financially sound and reputable insurers, all of its properties,.assets and operations of a character usually insured by Persons of established reputation engaged in the same or a similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons and carry, with such insurers in customary amounts, such other insurance, including without limitation public and product liability insurance, business interruption insurance (if available at commercially reasonable rates) and workers compensation insurance (except that the Company or any Restricted Subsidiary may self-insure workers compensation liability to the extent permitted 25 by applicable state law), as is usually carried by Persons of established reputation engaged in the same or a similar business similarly situated; (c) keep proper books of record and account in which full, true and correct entries will be made of all its business transactions in accordance with generally accepted accounting principles; (d) set aside on its books from its earnings for each fiscal year in amounts deemed adequate in the opinion of the Company or such Restricted Subsidiary, as the case may be, all proper accruals and reserves which, in accordance with generally accepted accounting principles, should be set aside from such earnings in connection with its business, including, without limitation, provisions for depreciation, depletion, obsolescence and/or amortization and accruals for taxes for such period, including all taxes based on or measured by income or profits; (e) except as otherwise permitted by Sections 7.10 and 7.11, do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, and all rights, licenses, permits, franchises and other authorizations; (f) not enter into, or allow any Restricted Subsidiary to enter into, the ownership, active management or operation of any business which is not a business related to the recovery of non-ferrous metals; and (g) not be in default, in any respect, in the performance, observance or fulfillment of any obligation, covenant or condition contained in any Contractual Obligation or be in breach or violation of, or in default under, any Requirement of Law to which it is subject, which breach, violation or default would have a Material Adverse Effect; 26 PROVIDED, HOWEVER, that nothing in subsections (a), (e) or (f) above shall prevent the Company or any of its Restricted Subsidiaries from (i) abandoning any of its properties or assets, or abandoning or terminating any right, license, permit, franchise or other authorization (including its qualification to transact business in any jurisdiction wherein neither the character of the properties or assets owned or held under lease by it nor the nature of the business transacted by it makes such qualification or licensing necessary), or (ii) liquidating or dissolving any Restricted Subsidiary of the Company, if in any case such abandonment, termination, liquidation or dissolution is in the best interest of the Company, is not detrimental in any material respect to the ability of the Company to pay when due, in accordance with the terms of the Notes and this Agreement, the principal of, and premium, if any, and interest on, the Notes and is not prohibited by Section 7.10 or Section 7.11 or any other provisions of, and would not result in the occurrence of any Event of Default (or an event which with notice or lapse of time or both would constitute an Event of Default) under, this Agreement. Section 7.4. LIMITATION ON INDEBTEDNESS. Neither the Company nor any Restricted Subsidiary shall create, incur, assume, or in any manner become or be liable, contingently or otherwise, in respect of any Indebtedness, except: (a) Indebtedness represented by the Notes and the 1988 Notes; (b) Current Liabilities of the Company constituting Indebtedness for Money Borrowed not overdue and not at the time of incurrence thereof in the aggregate principal amount outstanding in excess of $10,000,000, PROVIDED that during the 14-month period ending on October 31, 1995, and each consecutive 14month period ending on the last day of each month thereafter, the Company will eliminate and be free of all such Current Liabilities for a period of at least 60 consecutive days; (c) Funded Indebtedness of the Company outstanding on the First Closing Date and listed on Exhibit B, provided that such Funded Indebtedness shall be paid in accordance with the terms thereof in effect on the First Closing Date; 27 (d) Current Liabilities of the Company or any Restricted Subsidiary (other than Current Liabilities constituting Indebtedness for Money Borrowed and Current Liabilities in respect of taxes, assessments, fees or other Governmental charges or levies or the claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar persons) incurred in the ordinary course of business and not more than 45 days overdue unless the amount, applicability or validity thereof shall then currently be contested in good faith; (e) Current Liabilities of the Company or any Restricted Subsidiary in respect of taxes, assessments, fees or other Governmental charges or levies or the claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar persons to the extent the payment thereof is not, at the time, required by Section 7.2; (f) Indebtedness of any Restricted Subsidiary owing to the Company or to any other Wholly-Owned Restricted Subsidiary and Indebtedness of the Company owing to its Restricted Subsidiary, IMCO Management Partnership L.P., a Texas limited partnership; (g) Indebtedness of the Company or any Restricted Subsidiary not otherwise permitted by the provisions of this Section 7.4 secured by Liens as and to the extent permitted by Section 7.6; (h) Indebtedness in respect of Guaranties of the Company and any Restricted Subsidiary as and to the extent permitted by Section 7.5; (i) Indebtedness represented by amounts declared, payable as, or set apart for, dividends as and to the extent permitted by Section 7.7; (j) additional Funded Indebtedness of the Company or any Restricted Subsidiary, 28 PROVIDED, HOWEVER, that immediately after giving effect to the creation, incurrence or assumption of such additional Funded Indebtedness and to the application of any proceeds thereof: (i) Consolidated Funded Indebtedness shall not exceed 45% of Consolidated Net Tangible Assets at any time prior to December 1, 1998; and from and after December 1, 1998, Consolidated Funded Indebtedness shall not exceed 40% of Consolidated Net Tangible Assets; (ii) the ratio of the aggregate Consolidated Cash Make for the immediately preceding four fiscal quarters of the Company to Pro Forma Consolidated Debt Service shall not be less than 1.2 to 1; and (iii) in the case of Funded Indebtedness of Restricted Subsidiaries, the sum of (A) such Funded Indebtedness, together with all other Funded Indebtedness of Restricted Subsidiaries then outstanding, plus, without duplication, (B) the outstanding principal amount of all Indebtedness permitted by Section 7.4(k), shall not exceed 10% of Consolidated Net Tangible Assets at such time of determination; and (k) Indebtedness of the Company or any Restricted Subsidiary to the seller of property in respect of the purchase by the Company or such Restricted Subsidiary of such property to be used in the ordinary course of the Company's or such Restricted Subsidiary's business, provided that the sum of (i) such Indebtedness, together with all other Indebtedness permitted by this Section 7.4(k) then outstanding, plus, without duplication, (ii) the outstanding principal amount of Funded Indebtedness of Restricted Subsidiaries, shall not exceed 10% of Consolidated Net Tangible Assets at such time of determination and provided, further, that 29 in the event such Indebtedness shall by its terms mature more than one year from the incurrence thereof, immediately after giving effect to the incurrence thereof, the Company can incur an additional $1.00 of Funded Indebtedness pursuant to Section 7.4(j). Notwithstanding any provisions of this Section 7.4 to the contrary, neither IMCO Investment Company nor IMCO Management Partnership, L.P. will create, incur, assume, or in any manner become liable, contingently or otherwise, in respect of any Indebtedness for Money Borrowed other than Indebtedness for Money Borrowed owing to the Company or another Restricted Subsidiary. Section 7.5. LIMITATION ON LIABILITIES FOR OBLIGATIONS OF OTHERS. Neither the Company nor any Restricted Subsidiary will become or be liable in respect of any Guaranty other than (i) endorsements in the ordinary course of business of negotiable instruments for deposit or collection, (ii) Guaranties by the Company and Restricted Subsidiaries pertaining to obligations not exceeding in the aggregate the greater of (x) $5,000,000 and (y) 5% of Consolidated Tangible Net Worth as of such date, and (iii) Guaranties by the Company or by any Wholly-Owned Restricted Subsidiary of Indebtedness of any Wholly-owned Restricted Subsidiary or of the Company, as the case may be; provided that all such Indebtedness described in clauses (ii) and (iii) above is permitted to be incurred under this Agreement at the date of the making of such Guaranty and provided, further, that in the event that any Restricted Subsidiary shall guarantee any Indebtedness of the Company, such Restricted Subsidiary shall also deliver a Guaranty, in form and substance reasonably satisfactory to each holder of the Notes, to each such holder of the obligations of the Company under the Notes, but any such Guaranty to such holder(s) shall not be included in any computation of outstanding Guaranties for purposes of this Section 7.5. Section 7.6. LIMITATION ON LIENS. Neither.-the Company nor any Restricted Subsidiary shall create, assume, incur or suffer to exist, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise) to be created, assumed, incurred or to exist, any mortgage, lien, charge, security interest or encumbrance of any kind upon, or pledge of, any of its properties or assets (including, without limitation, accounts receivable, inventory and cash and deposits), whether now owned or 30 hereafter acquired, or acquire or agree to acquire any property or assets subject to any conditional sale agreement or other title retention agreement, or as lessee under a Capitalized Lease (the foregoing mortgages, liens, charges, security interests, encumbrances, pledges and the rights of others under conditional sale agreements and other title retention agreements and Capitalized Leases being herein collectively called "Liens"); PROVIDED, however, that the foregoing restriction shall-not apply to the following Liens so long as (in the case of Liens other than those Liens set forth in clauses (e), (g) and (h) below) such Liens do not in the aggregate materially and adversely affect the conduct of the business of the Company and its Restricted Subsidiaries: (a) Liens securing taxes, assessments, fees or other Governmental charges or levies or the claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar persons, the payment of which is not overdue under the provisions of Section 7.2; (b) Liens incurred or deposits made in the ordinary course of business not involving Indebtedness for Money Borrowed, including Liens (i) in connection with workers compensation, unemployment insurance, social security and other similar laws, or (ii) to secure the performance of letters of credit, bids, tenders, sales, contracts, leases, public or statutory obligations, surety, customs, appeal and performance bonds and other similar obligations not incurred in connection with the. borrowing of money, the obtaining of advances or the payment of the deferred purchase price of property; (c) attachment, judgment and other similar Liens arising in connection with court proceedings, PROVIDED that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are currently being contested in good faith by appropriate proceedings; (d) easements, rights of way, restrictions, leases and other similar encumbrances affecting real or tangible 31 personal property, which do not in the aggregate materially detract from the value of such property or materially impair its use in the operation of the business of the Company or any Restricted Subsidiary; (e) Liens created in connection with Indebtedness permitted under Section 7.4(k), provided that such Liens are taken or retained by the seller of the property being acquired to secure all or part of its price and such Liens do not cover any property of the Company or any Restricted Subsidiary other than the property being so acquired; (f) the Liens on the Mortgaged Property created by the Mortgages and all Uniform Commercial Code financing statements, Liens and other matters affecting the Mortgaged Property that are described in Exhibit B of the 1988 Note Purchase Agreement; (g) Liens on the real and personal property subject (as of the First Closing Date) to the Kentucky Mortgage and Security Agreement (as defined in the 1988 Note Purchase Agreement) which may be created to secure certain revenue bonds issued or to be issued in an aggregate principal amount not exceeding $10,000,000 in connection with a salt cake processing facility and landfill expansion constructed or to be constructed on such property; (h) Liens outstanding on the First Closing Date and listed on Exhibit B with respect to property then owned by the Company securing Indebtedness permitted by Section 7.4(c), PROVIDED that such Liens are not renewed or extended and do not at any time extend to property other than property that was subject to such Liens on the First Closing Date; and (i) (i) Liens on any shares of the capital stock of an Unrestricted Subsidiary and (ii) the Barmet Option. 32 In case any Lien arises in violation of this Section 7.6, the Company shall make or cause to be made provisions whereby the Notes will be secured equally and ratably with all other obligations secured thereby, and in any case, the Notes shall have the benefit to the full extent that the holders may be entitled thereto under applicable law of an equitable Lien so equally and ratably securing the Notes. Any violation of this Section 7.6 shall constitute an Event of Default pursuant to Section 9.1(c) whether or not any such provision is made pursuant to the preceding sentence. Section 7.7. LIMITATION ON RESTRICTED PAVMENTS AND RESTRICTED INVESTMENTS. The Company will not directly or indirectly, through any of its Subsidiaries or otherwise, declare or make, or incur any liability to make, any of the following (such actions as are hereinafter described in subsections (a) and (b) being called 'Restricted Payments"): (a) any payment in cash, property or other assets (other than shares of any class of capital stock of the Company or any rights, warrants or options to purchase such shares) as dividends or other distributions upon, for the purpose of purchasing, retiring, redeeming or otherwise acquiring for value, directly or indirectly, or otherwise in respect of, any shares of any class of capital stock (or any warrants or options evidencing a right to purchase any such shares of stock) of the Company, except to the extent permitted below; or (b) any Restricted Investment; PROVIDED, HOWEVER, that the provisions of this Section 7.7 shall not prohibit the making of any Restricted Payment if, immediately after, and after giving effect to, the making of such Restricted Payment (i) no Event of Default (or event which with notice or lapse of time or both would constitute an Event of Default) would exist and (ii) the Net Amount of Restricted Payments made after September 30, 1995 would not exceed the sum of (x) $5,000,000 plus (y) 50% of Consolidated Net Income (minus 100% of any consolidated net loss) for the period commencing October 1, 1995 and ending on the last day of the fiscal quarter of the Company most recently ended at the time such Restricted Payment is made plus (z) the sum of the aggregate net cash proceeds, determined by reference to the net cash received by the 33 Company (after deducting all underwriting discounts and commissions and all other expenses of such issuance), from the sale of Company capital stock made after September 30, 1995. For purposes of this Section 7.7, "Net Amount of Restricted Payments" means for any period (i) the aggregate amount of cash, property and other assets (at the greater of net book value or fair market value) distributed during, and liabilities outstanding at the end of, such period in respect of Restricted Payments of the type described in subsection (a) above, and (ii) in respect of Restricted Investments, the cost thereof less any actual return of capital in respect thereof (it being understood that any dividends and interest payments received in respect of Restricted Investments shall not reduce the cost thereof). Section 7.8. MAINTENANCE OF CURRENT ASSETS, CONSOLIDATED WORKING CAPITAL, NET WORTH AND FIXED CHARGE COVERAGE. (a) The Company and its Restricted Subsidiaries shall at all times maintain Consolidated Working Capital equal to or greater than $5,000,000 and shall not permit Consolidated Current Assets to be less than 125% of Consolidated Current Liabilities. (b) The Company shall not at any time permit its Consolidated Net Worth to be less than the sum of $60,000,000 plus the greater of (i) zero and (ii) 50% of cumulative Consolidated Net Income from and after October 1, 1995. (c) The Company shall not at any time permit the sum of (i) Consolidated Cash Make plus (ii) the aggregate Rentals attributable to the Company and its Restricted Subsidiaries to be less than 250% of the sum of Consolidated Interest Expense plus Rentals attributable to the Company and its Restricted Subsidiaries for the four immediately preceding consecutive fiscal quarters. Section 7.9. LIMITATION ON LEASES. Neither the Company nor any Restricted Subsidiary shall, directly or indirectly, become or be liable for any payment of Rentals with respect to any lease of real or personal property having a remaining 34 term in excess of five years, including extensions and renewals at the option of the lessor, if the aggregate Rentals payable by the Company and its Restricted Subsidiaries under all such leases for all future periods shall exceed $2,000,000, unless the amount in excess of $2,000,000 is included, when capitalized, as Consolidated Funded Indebtedness; PROVIDED, HOWEVER, that this limitation shall not apply to (i) any lease of data processing, office, communication, mobile or transportation equipment having aggregate annual Rentals not to exceed $150,000, (ii) that certain Lease dated as of June 1, 1981, between Valjo Corporation and Interamerican Zinc, Inc., as amended by that certain Amendment to Lease dated November 4, 1988, between Anderson Development Company and Interamerican Zinc, Inc., providing for aggregate annual Rentals not to exceed $100,000, as it may be extended from time to time, and (iii) that certain Rental Agreement dated December 1, 1983, between Anderson Development Company and Interamerican Zinc, Inc., as amended by that certain Amendment to Rental Agreement dated as of November 4, 1988, between Anderson Development Company and Interamerican Zinc, Inc., providing for aggregate annual Rentals not to exceed $7,000, as it may be extended from time to time. Section 7.10. MERGER OR CONSOLIDATION OR TRANSFER OF ASSETS. Neither the Company nor any Restricted Subsidiary will merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or directly or indirectly convey, sell, lease, transfer, abandon or otherwise dispose of or suffer to be conveyed, sold, leased, transferred, abandoned or otherwise to be disposed of (whether voluntarily or involuntarily) all or any part of its properties or assets; PROVIDED, HOWEVER that so long as no Event-of Default (or event which with notice or lapse of time or both would become an Event of Default) exists immediately before, or would exist immediately after and after giving effect to, such transaction: (a) any Wholly-Owned Restricted Subsidiary may be consolidated with or merged into the Company or another Wholly-O@ed Restricted Subsidiary; (b) any Wholly-Owned Restricted Subsidiary may make dispositions of any of its property or assets to the Company or another Wholly-Owned Restricted Subsidiary, whether by dissolution, liquidation or otherwise; 35 (c) the Company may be consolidated with or merged into any other Person, and the Company may convey, sell, lease, transfer or otherwise dispose of all or substantially all of its properties and assets to any Person, and any Person may consolidate with or merge into the Company or convey or transfer its properties or assets substantially as an entirety to the Company, if the resulting Person or the transferee of such assets, as the case may be, is a corporation organized and existing under the laws of a State in the United States which (i) will assume the obligations of the Company under this Agreement and the Notes and (ii) can incur an additional $1.00 of Funded Indebtedness pursuant to Section 7.4(j); and (d) the Company and any Restricted Subsidiary may convey, sell, lease, transfer, abandon or otherwise dispose of or suffer to be conveyed, sold, leased, transferred, abandoned or otherwise to be disposed of (whether voluntarily or involuntarily) any of its assets constituting not more than 10% of Consolidated Total Assets in any transaction or series of related transactions during any consecutive twelve-month period, PROVIDED that not more than 15% of Consolidated Total Assets are disposed of on a cumulative basis from the date hereof. The sale or other disposition of assets in the ordinary and usual conduct of business and the disposition of worn-out or obsolete equipment shall not be deemed to be dispositions of assets for the purposes of this Section 7.10. Section 7.11. ISSUE OR DISPOSITION OF SECURITIES. No Restricted Subsidiary shall issue, sell, assign, transfer or otherwise dispose of any shares (or other ownership interests) of any class of its capital stock or equity ownership interests or of any options or warrants to purchase its capital stock or equity ownership interests or of other securities exchangeable for or convertible into its capital stock or equity ownership interests except (a) to the Company or a Wholly-Owned Restricted Subsidiary or (b) directors' qualifying shares as required by law. 36 Neither the Company nor any Restricted Subsidiary shall sell, assign, transfer or otherwise dispose of (except to the Company or a Wholly-Owned Restricted Subsidiary) any shares of capital stock (or other ownership interests) of any class of any Restricted Subsidiary, or any other security of, or any Indebtedness owing to it by, any Restricted Subsidiary, unless: (i) the greater of the consideration received therefor and the value thereof as stated on the books of the Company or such Restricted Subsidiary of (A) the stock (or other ownership interests) and other securities of such Restricted Subsidiary and of each other Restricted Subsidiary disposed of pursuant to this Section 7.11 in the fiscal year of the Company in which such sale shall occur and (B) the other properties and assets of the Company and its Restricted Subsidiaries disposed of pursuant to Section 7.10(d) does not exceed 10% of Consolidated Total Assets during any consecutive twelve-month period, PROVIDED that not more than 15% of Consolidated Total Assets are disposed of on a cumulative basis from the date hereof; (ii) ll of the capital stock (or other ownership interests) and other securities and the entire Indebtedness of such Restricted Subsidiary owned by the Company and each other Restricted Subsidiary shall be sold, assigned, transferred or otherwise disposed of (other than to the Company or a Wholly-Owned Restricted Subsidiary) at the same time; (iii) such Restricted Subsidiary shall not, at the time of such sale, assignment, transfer or other disposition, own either (A) any shares of capital stock (or other ownership interests) of any class or any other security or any Indebtedness of any other Restricted Subsidiary which is not being simultaneously disposed of as permitted by this Section 7.11 or (B) any Indebtedness of the Company; (iv) immediately before and after giving effect to such sale, assignment, transfer or 37 other disposition, no Event of Default (or event which with notice or lapse of time or both would constitute an Event of Default) will have occurred and be continuing; and (v) the consideration received for such shares of capital stock (or other ownership interests), other security or Indebtedness is not less than the fair market value thereof as determined by the Board of Directors of the Company. For purposes of clause (i) of this Section 7.11, the value of capital stock of any Restricted Subsidiary issued or sold in connection with the Barmet Option shall be included as capital stock of a Restricted Subsidiary that was sold for a consideration of $8,417,000 and shall be included in the computation of Consolidated Total Assets for purposes of such clause (i) as though such sale took place on the date immediately following the date hereof. Section 7.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor any Restricted Subsidiary shall enter into any transaction, including, without limitation, the purchase, sale or exchange of property or assets or the rendering of any service, with any Affiliate unless in the ordinary and usual conduct of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. Section 7.13. LIMITATION ON INVESTMENTS. Neither the Company nor any Restricted Subsidiary will acquire or hold any stock, bond, note, or other evidence of Indebtedness or any other security of, or make any loan, advance, capital contribution or extension of credit (except for current trade and customer accounts receivable for merchandise, products, materials and supplies sold) to, any Person (herein called "Investments") except: (a) obligations of the United States of America or the Dominion of Canada or any agency or instrumentality thereof, unconditionally guaranteed by the United States of America or the Dominion of Canada, as the case may be, PROVIDED that such securities have a final maturity not in excess 38 of one year from the date of acquisition thereof; (b) time deposits or certificates of deposit maturing within one year from the date of acquisition thereof issued by any bank or trust company which (i) is a member of the Federal Reserve System or has been organized under the laws of the Dominion of Canada, (ii) has capital stock, surplus and undivided profits of not less than $100,000,000, and (iii) has been assigned an investment rating of "A-2' or higher by Moody's Investors Service, Inc. or "A" or higher by Standard & Poor's Corporation (or the successors thereof); (c) commercial paper which has a final maturity not in excess of 270 days from the date of issuance thereof and which is rated "Prime 1" (or such other equivalent rating as signifies the highest investment quality) by Moody's Investors Service, Inc. or 'A-I+' (or such other equivalent rating as signifies the highest investment quality) by Standard & Poor's Corporation (or the successors thereof); (d) Investments in a corporation, limited liability company, partnership, trust or other similar entity which is, or immediately after the making of such Investment will be, a Restricted Subsidiary; (e) Investments in a corporation, limited liability company, partnership, trust or other similar entity which is, or immediately after the making of such Investment will be, an Unrestricted Subsidiary, PROVIDED that Investments in respect of such Unrestricted Subsidiary, together with Investments in respect of all other Unrestricted Subsidiaries (the amount of each such Investment being the cost thereof determined as of the time such Investment is actually made), do not exceed either $1,000,000 during any one fiscal year of the 39 Company or $5,000,000 in the aggregate at any time; (f) only in respect of Investments made by the Company, Investments as permitted under the PROVISO to Section 7.7; (g) an Investment constituting the initial investment in a joint venture solely to conduct activities as permitted by Section 7.3(f), to be entered into between the Company or a Restricted Subsidiary and VAW aluminum AG, a German corporation, or an affiliate thereof, such initial Investment not to exceed $16,000,000 (U.S.); (h) Investments in a foreign subsidiary in which all of the capital stock and voting power will be 100% owned, directly or indirectly, by the Company, to be organized solely to conduct activities as permitted by Section 7.3(f) at a plant to be located in Swansea, Wales, United Kingdom, with such Investments not to exceed, in the aggregate, $9,000,000 (U.S.); and (i) Investments by the Company or a Restricted Subsidiary in Marport Smelting, L.L.C., an Indiana limited liability company, to conduct business solely as permitted by Section 7.3(f), with such Investments not to exceed $1,000,000. Section 7.14. TAX CONSOLIDATION. Neither the Company nor any Restricted Subsidiary will file or consent to the filing of any consolidated income tax return with any Person other than the Company and/or one or more Subsidiaries. Section 7.15. AUDITORS. The Company will employ, or cause to be employed, a Firm of Certified Public Accountants. Such Firm of Certified Public Accountants will examine the consolidated financial statements of the Company and its Restricted Subsidiaries referred to in Section 8.1(b) in accordance with generally accepted auditing standards and accordingly will include in such examination such tests of the accounting records and such other procedures as they consider necessary in the circumstances. Such Firm of Certified Public Accountants will express an opinion on such 40 consolidated financial statements without reliance upon the opinion of any other accountants. Such consolidated financial statements will present fairly, in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding fiscal year, the consolidated financial position of the Company and its Restricted Subsidiaries at the end of, and their consolidated results of operations, changes in stockholders' equity and cash flows for, the periods specified in Section 8.1(b). The opinion to be expressed by such Firm of Certified Public Accountants shall be without qualification. Section 7.16. ACQUISITION OF Notes. Neither the Company nor any of its Restricted Subsidiaries or Affiliates will, directly or indirectly, purchase or otherwise acquire any outstanding unpaid Notes except pursuant to an offer made PRO rata and on the same terms to the holders of all of the Notes at the time outstanding; and any Notes so acquired pursuant to such offer shall forthwith be canceled and no Notes shall be issued in substitution therefor. Section 7.17. LIMITATION ON PRIOR CLAIMS. Except as permitted hereunder and except as otherwise provided by statute, neither the Company nor any Restricted Subsidiary will in any manner become or remain liable, contingently or otherwise, in respect of any Indebtedness to any Person (including any Person who guarantees or otherwise becomes surety for the whole or any part of such Indebtedness or acquires any right or incurs any obligation to become, either immediately or upon the occurrence of some future contingency, the owner of all or any part thereof) who shall either immediately or upon the occurrence of insolvency or some other contingency, have any right by reason of any statute or otherwise to have any claim in respect of such Indebtedness first satisfied out of the general assets of the Company or such Restricted Subsidiary in priority to claims of its general creditors. Section 7.18. SALE OR DISCOUNT OF RECEIVABLES. Neither the Company nor any Restricted Subsidiary will discount or sell with recourse, or sell for less than the-greater of the face value or market value thereof, any of its notes, trade acceptances, accounts or bills receivable. Section 7.19. ERISA. (a) The Company will maintain, and cause each Related Person to maintain, each Plan (other than a Multiemployer Plan) in compliance with the applicable provisions of ERISA and the regulations and published 41 official interpretations thereunder, the failure to comply with which could subject the Company or any Related Person to tax in a material amount or to a material penalty. (b) The Company will not, and will not permit any Related Person to, (i) engage in any transaction or fail to take any action in connection with which the Company or any Related Person could be subject to either a material civil penalty assessed pursuant to Section 502 of ERISA or a tax in a material amount imposed by section 4975 of the Code; (ii) terminate any Plan in a manner, or permit to be taken or take any other action, which could result in any liability of the Company or any Related Person in a material amount to the Pension Benefit Guaranty Corporation or with respect to any Multiemployer Plan under Title IV of ERISA; (iii) fail to make full payment when due of all contributions and other amounts which the Company or any Related Person is required to pay under the provisions of any Plan or pursuant to any applicable collective bargaining agreement, or, with respect to any Plan (other than a Multiemployer Plan), permit to exist any "accumulated funding deficiency", whether or not waived, with respect to such Plan; (iv) permit the actuarial present value of all benefit liabilities under all Plans (other than Multiemployer Plans) to exceed the fair market value of the assets of such Plans by more than $250,000, with such benefit liabilities determined based on the actuarial assumptions which would be used by the Pension Benefit Guaranty Corporation with respect to Plans terminating at the time of determination; or (v) adopt any amendment to a Plan to which Section 307 of ERISA applies. 42 As used in this Section 7.19, the term 'accumulated funding deficiency' has the meaning indicated for such term in Section 4.13. Section 7.20. FOREIGN PENSION LIABILITY. The Company will not, and will not permit any Related Person to, incur any liability under the laws of any applicable jurisdiction outside of the United States to or in respect of any employee benefit plan or other plan mandated by law or established or maintained for the benefit of employees of the Company or of any Related Person which could have a Material Adverse Effect. Section 7.21. SPECULATION IN COMMODITIES AND INVENTORY LEVELS. Neither the Company nor any Restricted Subsidiary will buy or sell aluminum or futures contracts or options for futures contracts with respect thereto for speculation (i.e., buying or selling in expectation of profiting from market fluctuation), nor will it sell forward recycled aluminum unless it owns or has under firm contract the raw materials (e.g., dross, used aluminum beverage cans, or aluminum scrap) sufficient to produce such recycled aluminum. At any one time, the Company and its Restricted Subsidiaries will not exceed 5% of their consolidated yearly capacity in inventory owned by the Company and its Restricted Subsidiaries that is not presold to an established customer or the sale of which is not supported by a letter of credit. Section 7.22. ENVIRONMENTAL COVENANTS. Neither the Company nor any of its Subsidiaries shall use any of their respective properties to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process or in any manner deal with, Hazardous Materials except as may be necessary to conduct the Company's or its Subsidiaries' business and in accordance in all material respects with all Requirements of Law, and neither the Company nor any Subsidiary shall cause or permit, as a result of any intentional or unintentional act or omission on the part of the Company or any Occupant, the installation or placement of Hazardous Materials in or on any of its properties or a release of Hazardous Materials onto any of its properties or suffer the presence of Hazardous Materials on any of its properties except as aforesaid. The Company and each Subsidiary shall not fail to comply with, and shall ensure that all Occupants not fail to comply with, all applicable Requirements of Law with respect@to Hazardous 43 Materials, to the extent such failure would result in a Material Adverse Effect, and shall keep all of their respective properties free and clear of any Liens imposed pursuant to such Requirements of Law. In the event that the Company or any Subsidiary receives any notice or advice from any governmental agency, or any Occupant with regard to Hazardous Materials on, from or affecting any of its properties, which notice relates to a violation by the Company, any Subsidiary or any Occupant of any Environmental Law, the Company shall immediately notify the Noteholders. The Company and each Subsidiary shall, and shall cause all Occupants to, maintain their properties and business in a manner and condition in accordance with all Requirements of Law in all material respects. Section 7.23. PARI PASSU. The Company shall ensure that its obligations under the Notes shall at all times rank at least PARI PASSU in priority of payment with all unsecured and unsubordinated Indebtedness of the Company. SECTION 8. REPORTS, ETC. Section 8.1. FINANCIAL STATEMENTS AND OTHER REPORTS. The Company will deliver to the Purchaser from the date of this Agreement and so long as it holds any Note, and to each holder of Notes: (a) as soon as practicable after the end of each of the first, second and third fiscal quarters of each fiscal year, and in any event within 45 days thereafter, duplicate copies of the consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries, as at the end of such fiscal quarter, and consolidated and consolidating statements of earnings and consolidated statements of cash flows of the Company and its Restricted Subsidiaries for such fiscal quarter and (in the case of the second and third fiscal quarters) for the portion of the fiscal year ending with such fiscal 'quarters setting forth in each case in comparative form the figures for the corresponding periods one year earlier, all in reasonable detail and certified as having been prepared in accordance with generally accepted accounting principles, consistently applied (except for inconsistencies specifically disclosed in such 44 certificate), and fairly presenting the financial position of the Company and its Restricted Subsidiaries and the results of its and their operations, subject to changes resulting from year-end audit adjustments, by the principal financial officer of the Company, PROVIDED, that so long as any of the Company's Restricted Subsidiaries as of the date of this Agreement shall not be engaged in any active operations, the Company shall not be required to deliver consolidating balance sheets and statements of income and such other statements for such Restricted Subsidiary; (b) as soon as practicable after the end of their respective fiscal years, and in any event within 90 days thereafter, duplicate copies of: (i) consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries as at the end of such year, and (ii) consolidated and consolidating statements of earnings and consolidated statements of changes in stockholders' equity and cash flows of the Company and its Restricted Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and, in the case of the consolidated statements of the Company, certified and accompanied by the report of the Firm of Certified Public Accountants, and, in the case of the consolidating statements and the separate statements of the Company, certified by the principal financial officer of the Company, such certifications and reports to state that such financial statements fairly present the matters covered-thereby in accordance with generally accepted accounting principles consistently applied (except for inconsistencies, if any, which are specifically disclosed and with which such Firm of Certified Public Accountants concurs), PROVIDED, that so long as any of the Company's Restricted Subsidiaries as of the date of this Agreement shall not be engaged in any active 45 operations, the Company shall not be required to deliver consolidating balance sheets and statements of income and such other statements for such Restricted Subsidiary; (c) together with the delivery of the financial statements referred to in Section 8.1(a) and (b) (or, in the case of clause (i) below, if quarterly or annual reporting requirements for such entities differ from those set forth in Section 8.1(a) or (b), as soon as the same are available), (i) separate financial statements of substantially the same type referred to in Section 8.1(a) and (b) for each of the entities described in Section 7.13(g), (h) and (i), together with, to the extent any such fiscal year-end financial statements are audited, a copy of the auditor's report with respect to such financial statements, and (ii) a copy of a report to management of the Company on a plant-by-plant, year-to-date, basis, substantially in the form attached hereto as Exhibit C; (d) promptly upon receipt thereof, one copy of each other report submitted to the Company or any Restricted Subsidiary by any certified public accountants in connection with any annual, interim or special audit made by them of the books of the Company or any Restricted Subsidiary; (e) promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company or any Restricted Subsidiary to stockholders generally, and of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by the Company or any Restricted Subsidiary with, or received by such Person in connection therewith from, any securities exchange or the Securities and Exchange Commission or any successor agency; (f) as soon as possible (but in any event within ten days) after the Company or 46 any Related Person knows or has reason to know with respect to any Plan (or any trust created under or forming a part of any Plan) of any Reportable Event, Prohibited Transaction, Termination or Withdrawal Event or other occurrence which could result in liability in a material amount to the Pension Benefit Guaranty Corporation or with respect to any Multiemployer Plan under Title IV of ERISA, a statement of the chief financial officer of the Company describing the details of such Reportable Event, Prohibited Transaction, Termination or Withdrawal Event or other occurrence and the action which the Company or any Related Person proposes to take with respect thereto, together with a copy of any notice, report, return or other papers filed or received by the Company or any Related Person with respect to, or otherwise pertaining to, the Reportable Event, Prohibited Transaction, Termination or Withdrawal Event or other occurrence; and (g) with reasonable promptness, such other data and information as to the business, operations, properties, assets or prospects, or the condition, financial or otherwise, of the Company or any Restricted Subsidiary or the ability of the Company to perform this Agreement or to pay when due in accordance with the terms of the Notes and this Agreement, the principal of, premium, if any, and interest on, the Notes, as from time to time may be reasonably requested by the Purchaser or any holder of the Notes. Recipients of any financial statements or other reports or documents delivered by the Company pursuant to this Section 8.1 may furnish such statements and reports to any regulatory authority having jurisdiction over them and the National Association of Insurance Commissions and to such other Persons as they in their discretion may deem appropriate; provided, however, that neither you nor any subsequent holder of Notes shall be permitted to, and the Company shall not be required to, furnish any financial statements or other reports or documents delivered or to be delivered by the Company pursuant to this Section 8.1, or disclose any information obtained pursuant to Section 8.4, unless (i) such 47 information is publicly available or (ii) otherwise required under applicable law, to any Person who at the time is known to you, such holder or the Company, as the case may be, to be in direct competition with the Company. The Company agrees to furnish to the Purchaser and each other holder of the Notes (except as provided in the preceding sentence) additional copies of the materials referred to in this Section 8.1 upon its request. Section 8.2. OFFICERS' CERTIFICATES. Each set of financial statements relating to the Company delivered to the Purchaser or any other holder of the Notes pursuant to Section 8.1(a) or (b) will be accompanied by a certificate of the President or an Executive Vice President and of the chief financial officer of the Company setting forth (i) the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of SS 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.13, 7.14 and 7.21 during the period covered by the income statements then being furnished and a certification as to insurance in force at the close of the fiscal year covered by such, financial statements meeting the requirements of 57.3(b); and (ii) whether there exists on the date of the certificate any condition or event which then constitutes, or which after lapse of time would constitute an Event of Default, and, if any such condition or event then exists, specifying the nature and period of existence thereof and the action being taken and proposed to be taken with respect thereto. Section 8.3. ACCOUNTANTS' CERTIFICATE. Each set of annual financial statements relating to the Company delivered to the Purchaser or any other holder of the Notes pursuant to Section 8.1(b) will be accompanied by a report of the Firm of Certified Public Accountants who examined such financial statements, which report shall state that, in making their examination necessary to express an opinion on such financial statements, such accountants have obtained no knowledge of any condition or event which then constitutes, or which after notice or lapse of time or both would constitute, an Event of Default or, if any such condition or event then exists, specifying the nature and period of existence thereof. Section 8.4. INSPECTION. The Company will permit the representatives of the Purchaser, so long as the Purchaser holds any Note, or the representatives of any other holder of the Notes (other than a holder which at the time is in 48 direct competition with the Company), at the Purchaser's or such holder's expense (unless an Event of Default shall have occurred and is continuing, in which event at the Company's expense), to visit and inspect any of the properties of the Company or any of its Restricted Subsidiaries, to examine all their books of account and other financial records and reports related thereto, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective employees, officers and certified public accountants, all at such reasonable times and as often as may reasonably be requested, PROVIDED, that any information concerning the Company's internal operations or financial condition which is not public knowledge and which is so designated by the Company in writing and disclosed hereafter by the Company pursuant to this Section 8.4 shall be kept confidential by the Purchasers, the other holders of the Notes and their respective representatives in accordance with such Purchaser's or holder's usual internal procedures and shall not be used otherwise than in connection with the administration of the loans contemplated hereby, except to the extent (a) it was known to the Purchaser or such holder when received or (b) it is or hereafter becomes public knowledge or becomes lawfully obtainable from other sources, or (c) the Purchaser or such holder is compelled to disclose such information by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, or (d) such information is required by attorneys or accountants of such Purchaser or holder or is to be disclosed to the National Association of Insurance Commissioners, or (e) such duty as to confidentiality and non-use is waived by the Company. SECTION 9. EVENTS OF DEFAULT. Section 9.1. NATURE OF EVENTS. An "Event of Default" shall exist if any of the following occurs and is continuing: (a) any payment or prepayment of principal or premium, if any, or interest on any Note is not made on or before the date such payment or prepayment is due, provided that if a payment or prepayment made by the Company pursuant to wire transfer or similar means is not received by virtue of a breakdown in such wire transfer or other system beyond the control of the Company, the failure of any Noteholder to receive such payment or prepay- 49 ment when due shall not constitute an Event of Default if and so long as the Company uses its best efforts to correct such nonpayment; (b) the Company or any Restricted Subsidiary fails to perform or observe any covenant applicable to it contained in Sections 7.4 through 7.18 and Section 7.21, and (if capable of cure) such failure shall continue unremedied for a period of 15 days after the Company knew or reasonably should have known about such failure; (c) the Company or any Restricted Subsidiary fails to comply with any other provision of this Agreement and such failure shall continue 30 days after the earlier of (i) the date the Company has knowledge of such failure, and (ii) the date you give written notice to the Company of such failure; (d) any representation, warranty or statement by or on behalf of the Company or any Restricted Subsidiary contained in this Agreement or in any certificate, written statement or document, furnished by or on behalf of the Company or any Restricted Subsidiary in connection with the negotiation of this Agreement, the sale of the Notes or the Company's performance of its obligations hereunder or thereunder is, when taken together with all such representations, warranties and statements, false or misleading in any material respect; (e) (1) the Company or any Restricted Subsidiary fails to make any payment due in respect of any Indebtedness for Money Borrowed (including any of the 1988 Notes) or any other security, which failure shall continue beyond any applicable period of grace with respect thereto, or (2) any event shall occur or any condition shall exist in respect of any such Indebtedness or other security of the Company or any Restricted Subsidiary, or under any agreement securing or relating to such Indebtedness or other security, the effect of which is (i) to cause (or permit any holder of 50 such indebtedness or other security, or a trustee for any such holder, to cause) such Indebtedness or other security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or (ii) to permit a trustee or the holder of any security of the Company or any Restricted Subsidiary (other than the Voting Securities of the Company or such Restricted Subsidiary) to elect a majority of the directors on the Board of Directors or other governing body of the Company or such Restricted Subsidiary; (f) any default or other event shall occur or any condition shall exist under any lease entered into by the Company or any Restricted Subsidiary having aggregate Rentals in excess of $1,000,000, which default, event or condition continues beyond any applicable period of grace with respect thereto, and the effect of such default, event or condition is to cause or permit the lessor under any such lease to terminate such lease or the rights of possession thereunder of the Company or a Restricted Subsidiary or to accelerate the maturity of unaccrued Rentals thereunder; (g) a receiver, custodian, liquidator, or trustee of the Company or any Restricted Subsidiary or of any of the property of any of them, shall be appointed by court order and such order shall remain unstayed and in effect for more than 60 days; or the Company or any Restricted Subsidiary shall be adjudicated bankrupt or insolvent, or any substantial part of the property of any of them shall be sequestered by court order and such order shall remain unstayed and in effect for more than 60 days; or a petition shall be filed against the Company or any Restricted Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and is not dismissed within 60 days after such filing; 51 (h) the Company or any Restricted Subsidiary shall commence a voluntary case under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law; (i) the Company or any Restricted Subsidiary shall make an assignment for the benefit of its creditors, or shall be generally unable to pay its debts as they become due, or shall petition for or consent to the appointment of a receiver, custodian, trustee or liquidator of the Company or a Restricted Subsidiary or of all or any substantial part of the property of any of them; (j) provided that any of the following actions could result in a Material Adverse Effect (with respect to the Company or any Related Person), either (i) the plan administrator of any Plan shall file notice, required under Section 4041 of ERISA, with the Pension Benefit Guaranty Corporation of intent to terminate such Plan, (ii) the Pension Benefit Guaranty Corporation shall institute proceedings under Section 4042 of ERISA to terminate any Plan, (iii) the plan administrator of any Plan shall notify the Pension Benefit Guaranty Corporation that the withdrawal of the Company or any Related Person is, or is treated as, the withdrawal of a substantial employer within the meaning of Section 4063 of ERISA, or (iv) the Company or any Related Person shall withdraw or partially withdraw from any Multiemployer Plan; (k) any order, judgment or decree shall be entered in any proceeding against the Company decreeing the dissolution of the Company and such order, judgment or decree remains unstayed and in effect for more than 60 days; 52 (l) any order, judgment or decree shall be entered in any proceedings against the Company or any Restricted Subsidiary decreeing a split-up of the Company or such Restricted Subsidiary which requires the divestiture of a substantial part, or the divestiture of the stock of a Restricted Subsidiary whose assets constitute a substantial part, of the consolidated assets of the Company and its Restricted Subsidiaries, and such order, judgment or decree remains unstayed and in effect for more than 60 days; and/or (m) a final judgment or judgments for the payment of money aggregating in excess of $500,000 is or are outstanding against one or more of the Company and its Restricted Subsidiaries and any one of such judgments has been outstanding for more than 60 days from the date of its entry and has not been discharged in full or stayed by writ of SUPERSEDEAS or otherwise. Section 9.2. DEFAULT REMEDIES. If an Event of Default referred to in paragraph (g), (h), (i) or (k) of Section 9.1 exists, automatically, or, in the case of an Event of Default referred to in paragraph (a), at the option of any holder of any Note then outstanding exercised by written notice to the Company, or, in the case of any other Event of Default, at the option of the Directing Noteholders exercised by written notice to the Company, the entire principal of and all interest accrued on the Notes shall forthwith be due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived and, in addition to any other right, power or remedy permitted to it by law, each such holder shall have the right to proceed to enforce all other remedies available to it under this Agreement. The Company will forthwith pay to the holder of each such Note the entire principal of and interest accrued on such Note, and, to the extent permitted by law, a premium equal to the Make-Whole Amount at the time of such payment. No course of dealing on the part of any Noteholder nor any delay or failure on the part of any Noteholder to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. If the Company fails to pay when due the principal of, premium, if any, or interest on any Note, or fails to comply with any other 53 provisions of this Agreement, the Company will pay to the holder of such Note, to the extent permitted by law, such further amount as shall be sufficient to cover the costs and expenses, including but not limited to reasonable attorneys' fees, incurred by such holder in collecting any sums due on such Note or in otherwise enforcing any of the holder's rights. At any time after the principal of, and interest accrued on, any Note is declared due and payable (except pursuant to an automatic acceleration due to the occurrence of an Event of Default referred to in paragraph (g), (h), (i) or (k) of Section 9.1 or an acceleration due to the occurrence of an Event of Default referred to in Section 9.1(a)), and before a judgment or decree for payment of the money due has been obtained, the Majority Holders, by written notice to the Company, may rescind and annul such declaration and its consequences if (a) the Company has paid (i) all overdue installments of interest on all the Notes, (ii) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration, (iii) interest on such overdue principal and premium and (to the extent permitted by applicable law) on any overdue installments of interest in respect of the Notes at the rate per annum applicable to overdue payments on such Notes set forth in Section 1.1, and (b) all Events of Default, other than nonpayment of amounts which have become due solely by such declaration, and all conditions and events which after notice or lapse of time or both would constitute Events of Default have been cured or waived as provided in Section 11.2. No such rescission and annulment shall affect any subsequent declaration or impair any right consequent thereon. Section 9.3. NOTICE OF DEFAULT. If any one or more of the Events of Default specified in Section 9.1 shall occur, or if any one or more events which with notice or lapse of time or both would become one or more Events of Default shall occur, or if the holder of any Note or of any other evidence of Indebtedness or other security of the Company or any of its Restricted Subsidiaries or the lessor under any lease referred to in Section 9.1(f) gives any notice or takes any other action in respect to a claimed default, the Company will forthwith, upon becoming aware of same, GIVE written notice thereof to all holders of Notes then outstanding describing such Event of Default, event, notice or action, the nature of the Event of Default, event or claimed default and specifying what action the Company is taking or proposes to take with respect thereto. 54 SECTION 10. INTERPRETATION OF AGREEMENT AND NOTES. Section 10.1. DEFINITIONS. For all purposes of this Agreement and the Notes, the following definitions shall have the meanings herein specified and shall include in the singular number the plural and in the plural number the singular: "AFFILIATE" means a Person which, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company; PROVIDED, that the term Affiliate shall not be deemed to include a Restricted Subsidiary. The term "control" (including the terms "controlled by' and 'under common control with') means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Securities, by contract or otherwise. "AGREEMENT" means this Agreement, as the same may at any time be amended or modified and in effect. "APPLICABLE TREASURY YIELD" shall be determined by reference to (i) the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on the Telerate Access Service) as of 10:00 a.m. (New York City time) on the second Business Day preceding the date fixed for the payment of Notes in question, or (ii) if not reported as of such time or otherwise unascertainable, the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the date fixed for the payment of Notes in question (or, if such Statistical Release is no longer published, any publicly available source of similar market data), and shall mean the yield reported on such Telerate Access Service, or most recent weekly average yield, as the case may be, on actively traded U.S. Treasury securities adjusted to a constant maturity 55 equal to the then remaining Weighted Average Life to Maturity of such Notes (the "REMAINING LIFE"); provided that if the Remaining Life of such Notes is not equal to the contract maturity of a U.S. Treasury security for which a yield or weekly average yield is given, the Applicable Treasury Yield shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the yield or weekly average yield of U.S. Treasury securities for which such yields are given. "BANK LOAN AGREEMENT" means that certain Loan Agreement dated September 20, 1994, as amended, between the Company and Texas Commerce Bank National Association. "BARMET OPTION" means that certain right of Barmet Aluminum Corporation ("Barmet") to purchase up to a 49% interest in IMCO Recycling of Ohio Inc., a Restricted Subsidiary, pursuant to the terms and conditions of that certain Supply Agreement dated March 2, 1992, as amended, by and between the Company and Barmet. "BUSINESS DAY" means a day on which banks located in New York City are not required or authorized by law or executive order to remain closed. "CAPITALIZED LEASE" means a lease under which the obligation of the lessee would, in accordance with generally accepted accounting principles consistently applied, be included in determining total liabilities as shown on the liability side of a balance sheet of the lessee. "CLOSING DATE" has the meaning set forth in Section 1.2. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMON STOCK" of the Company means the Company's common stock, $.10 par value. 56 "COMPANY" means IMCO Recycling Inc., a Delaware corporation. "CONSOLIDATED CASH MAKE" for any period means the sum of: (a) Consolidated Net Income for such period (minus, in the event of any sale or other disposition of the type referred to in S7.10 or Section 7.11, other than to the Company or a Restricted Subsidiary, Net Income attributable to any Restricted Subsidiary (or reasonably attributable to any assets) so sold or otherwise disposed of for such period) plus expenses of the Company and its Restricted Subsidiaries in respect of interest on Indebtedness and expenses of the type set forth in (b)(v) of the definition of Net Income for such period (except for such expenses which were deducted in calculating Net Income for such period and were attributable to assets sold or otherwise disposed of in a transaction of the type referred to in Section 7.10 or Section 7.11, other than to the Company or a Restricted Subsidiary, attributable to the assets or securities so sold); and (b) (without duplication of any amounts included for such period pursuant to (a) above) as to any corporation or other entity which became a Restricted Subsidiary after the beginning of such period, or part or all of the assets of which were acquired by the Company or a Restricted Subsidiary after the beginning of such period, its Net Income during such period prior to the date on which it became a Restricted Subsidiary or the Net Income reasonably attributable to such assets during the period prior to the acquisition thereof without, in either case, any deduction for interest charges on Indebtedness of such corporation or other entity or for depreciation and amortization of such acquired assets, provided that if during such period the 57 proceeds from any sale or other disposition of the type referred to in Section 7.10 or Section 7.11 (other than to the Company or a Restricted Subsidiary) have been utilized to acquire such corporation or such assets, the Net Income of such corporation or the Net Income reasonably attributable to such assets included in Consolidated Cash Make pursuant to this clause (b) shall be reduced by the amount of the contribution, if any, to Consolidated Net Income made during such period by such proceeds. "CONSOLIDATED CURRENT ASSETS" and "CONSOLIDATED CURRENT LIABILITIES" mean, at any date, the aggregate of the Current Assets and Current Liabilities, respectively, of the Company and its Restricted Subsidiaries after eliminating all intercompany items in accordance with generally accepted accounting principles. "CONSOLIDATED FUNDED INDEBTEDNESS" means the aggregate of the Funded Indebtedness of the Company and its Restricted Subsidiaries after eliminating all inter-company items, and otherwise computed, in accordance with generally accepted accounting principles; PROVIDED, that for purposes of computing Consolidated Funded Indebtedness prior to the Second Closing Date, such term shall be deemed to include $15,000,000 aggregate principal amount of the Eleven and One-Half Year Notes as though the same had been issued in full on the First Closing Date. "CONSOLIDATED INTEREST EXPENSE" means the aggregate of all interest charges on Indebtedness of the Company and its Restricted Subsidiaries after eliminating all intercompany items, and otherwise computed, in accordance with generally accepted accounting principles. "CONSOLIDATED NET INCOME" means, for any period, the aggregate of the Net Income of the Company and its Restricted Subsidiaries after 58 eliminating all minority interests and intercompany items and otherwise computed in accordance with generally accepted accounting principles, but excluding in any event (i) Net Income of any Restricted Subsidiary prior to the date it became a Restricted Subsidiary, (ii) Net Income of any Restricted Subsidiary which by reason of legal or contractual restrictions is unavailable for payment of dividends to the Company or any other Restricted Subsidiary, (iii) Net Income of any Person, other than a Restricted Subsidiary, in which the Company or one or more Restricted Subsidiaries has an ownership interest unless such Net Income shall have actually been received by the Company or such Restricted Subsidiary in the form of cash dividends or similar cash distributions or shall represent declared cash dividends receivable, and (iv) Net Income of any Person, substantially all the properties and assets of which have been acquired, directly or indirectly, in any manner by the Company or any Restricted Subsidiary, realized by such Person prior to such acquisition. "CONSOLIDATED NET TANGIBLE ASSETS" means, at any date, the aggregate amount of all assets of the Company and its Restricted Subsidiaries after deducting therefrom (i) depreciation, depletion, obsolescence, amortization, valuation, contingency and other proper reserves in accordance with generally accepted accounting principles, (ii) Consolidated Current Liabilities, (iii) Restricted Investments and Investments referred to in Section 7.13(e) and (i), (iv) that portion of the book amount of all such assets which would be treated as intangible assets under generally accepted accounting principles, including without limitation, all such items as goodwill, trade marks, trade names, brand names, copyrights, patents, licenses and rights with respect to the foregoing, write-up of assets subsequent to June 30, 1995 and unamortized debt discount and expenses, and (v) all long term liabilities other than Funded Indebtedness; PROVIDED that, solely for 59 purposes of Section 7.4(j)(i), for purposes of computing Consolidated Net Tangible Assets prior to the Second Closing Date, such term shall be deemed to include $15,000,000 aggregate principal amount of the Eleven and One-Half Year Notes as though the same had been issued in full on the First Closing Date and that the Company had received $15,000,000 cash in proceeds from such issuance. "CONSOLIDATED NET WORTH" shall mean the amount of the Company's stockholder's equity (including all preferred stock) determined on a consolidated basis (excluding Unrestricted Subsidiaries) in accordance with generally accepted accounting principles consistently applied. "CONSOLIDATED TANGIBLE NET WORTH" means, at any date, (a) the aggregate of all assets (less reserves for depreciation, depletion, obsolescence, amortization, valuation and any other reserves which are properly deductible therefrom under generally accepted accounting principles) which, in accordance with generally accepted accounting principles, would be included on the asset side of a balance sheet of the Company and its Restricted Subsidiaries, but in any event excluding all assets constituting (i) franchises, licenses, permits, patents, patent applications, copyrights, trademarks, trade names, goodwill, research development, experimental and organizational expense and all other assets which would be classified as intangible assets under generally accepted accounting principles, (ii) unamortized debt discount and expenses of issuance of Indebtedness, (iii) write-ups of assets subsequent to June 30, 1995, (iv) deferred assets, other than prepaid insurance and prepaid taxes classified as current assets in accordance with generally accepted accounting principles, (v) treasury shares, if any, and (vi) Restricted Investments and Investments referred to in Section 7.13(e) and (i), less (b) the aggregate of all Indebtedness, liabilities, deferred taxes and other items which, in 60 accordance with generally accepted accounting principles, would be included on the liability side of such balance sheet (except capital stock (including all Preferred Stock), capital surplus and retained earnings). "CONSOLIDATED TOTAL ASSETS" means, at any date and determined in accordance with generally accepted-accounting principles, the aggregate of all assets of the Company and its Restricted Subsidiaries. "CONSOLIDATED WORKING CAPITAL" means, at any date, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "CONTRACTUAL OBLIGATION" means any obligation, covenant or condition contained in any evidence of Indebtedness or any agreement or instrument under or pursuant to which such evidence of Indebtedness has been issued, or any other agreement or instrument to which the Company or any Restricted Subsidiary is a party or by which they or any of their properties or assets are bound. "CURRENT ASSETS" means, at any date, for any Person (i) cash and cash items in any bank or trust company, on hand or in transit, (ii) good and collectible notes, trade acceptances, accounts and bills receivable not more than 59 days overdue taken at their face value, (iii) inventories, stated at the lower of cost and fair market value, (iv) prepaid costs and expenses, (v) advances and prepayments to suppliers and (vi) Investments described in clauses (a) through (c) of Section 7.13, stated at the lower of cost and current market value or, if there is no ascertainable current market value for any such Investment, at the lower of cost and fair value, but in each case only to the extent that such items would be classified as current assets in accordance with generally accepted accounting principles and all after deduction of appropriate depreciation, depletion, obsolescence, amortization, valuation, contingency and other proper reserves in accordance with generally 61 accepted accounting principles and after deduction of all assets located outside the United States of America. "CURRENT LIABILITIES" means, at any date, for any Person (i) all Indebtedness payable on demand or maturing within one year from the date as of which Current Liabilities are to be determined, and (ii) all other items (including taxes accrued as estimated) which in accordance with generally accepted accounting principles would be included as current liabilities on the liability side of a balance sheet of such Person as of the date of such determination, except all repayments, including final maturities, sinking fund payments, installment maturities, serial maturities and prepayments required to be made within one year from such date of determination in respect of any Funded Indebtedness (including the Notes and the 1988 Notes). "DIRECTING NOTEHOLDERS" means the holders of not less than 33-1/3% in aggregate principal amount of the Notes at the time outstanding. "DISCOUNT RATE" shall mean an interest rate computed in accordance with generally accepted financial practice equal to the sum of (i) the Applicable Treasury Yield and (ii) 0.50% per annum. "ELEVEN AND ONE-HALF YEAR NOTES" has the meaning set forth in Section 1.1(b). "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous 62 substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EVENT OF DEFAULT" means one of the Events of Default enumerated in Section 9.1. "FIRM OF CERTIFIED PUBLIC ACCOUNTANTS" means Ernst and Young LLP, Arthur Andersen & Co., Coopers & Lybrand, Deloitte & Touche LLP, KPMG Peat Marwick LLP, Price Waterhouse & Co., or any other nationally recognized firm of certified public accountants satisfactory to the Majority Noteholders, PROVIDED that such firm is independent with respect to the Person or Persons whose financial statements it examines in accordance with this Agreement. "FIRST CLOSING DATE" has the meaning set forth in Section 1.2. "FUNDED INDEBTEDNESS" means, at any date, for any Person (i) all Indebtedness of such Person which by its terms matures one year or more from the date of creation thereof, including all repayments (including final maturities, sinking fund payments, installment maturities and serial maturities) and prepayments required to be made within one year after such date of determination in respect of such Indebtedness (including the Notes and the 1988 Notes), and (ii) any Indebtedness maturing within one year from the date of determination which may be renewed or extended at the option of the obligor, whether or not theretofore renewed or extended. "GOVERNMENT" means the government of the United States of America, the government of any other nation, any political subdivision of the United States of America or any such other nation (including, without limitation, any state, province, territory, federal district, municipality or possession) and any department, agency or instrumentality thereof; 63 and "GOVERNMENTAL" means of, by, or pertaining to, any Government. "GUARANTY" means, at any date, for any Person all obligations of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without in any respect limiting the generality of the foregoing, obligations incurred through an agreement, contingent or otherwise, by such particular Person (a) to purchase such Indebtedness or other obligation or any properties or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or other obligation or (ii) to maintain working capital or equity capital or any other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or other obligation, (c) to lease property or to purchase property, securities or services primarily for the purpose of assuring the owner of such Indebtedness or other obligation of the ability of the primary obligor to make payment of the Indebtedness or other obligation or (d) otherwise to assure the owner of the Indebtedness or obligation against loss in respect thereof. "HAZARDOUS MATERIALS" means, collectively, all gasoline, petroleum products, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls or related or similar materials, asbestos or any materials containing asbestos, or any other substance or materials as may be defined or listed as a hazardous or toxic substance by any Federal, state or local environmental law, ordinance, rule or regulation including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous 64 Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.) and the Clean Air Act (42 U.S.C. Section 7401 et seq.) or in the regulations promulgated pursuant thereto. "INDEBTEDNESS" means, at any date, for any Person all items (other than capital stock, capital surplus, retained earnings, deferred taxes and deferred credits) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date on which Indebtedness is to be determined, but in any event including, without in any respect limiting the generality of the foregoing, (a) indebtedness, obligations and liabilities secured by any Lien existing on property owned by such Person and subject to such Lien whether or not the indebtedness, obligation or liability secured thereby shall have been assumed, (b) Capitalized Leases, (c) all Swaps and (d) all Guaranties in the amounts of the Indebtedness of primary obligors to which they relate (and such Indebtedness shall determine for all purposes the classification of the Guaranties thereof as Funded Indebtedness or Current Liabilities); PROVIDED, HOWEVER, that in any computation of Indebtedness where Indebtedness of a primary obligor is included, there shall not be included in such computation any Guaranty of such Indebtedness. "INDEBTEDNESS FOR MONEY BORROWED" means, at any date, for any Person any obligation (a) for borrowed money or (b) evidenced by a promissory note, debenture or other like written obligation to pay money or Guaranties of such Person of any such obligations of other Persons. "INVESTMENTS" has the meaning set forth in Section 7.13. 65 "LIENS" has the meaning set forth in Section 7.6. "MAJORITY NOTEHOLDERS" has the meaning set forth in Section 11.2. "MAKE-WHOLE AMOUNT" means with respect to any prepayment or payment of the Notes as to which a Make-Whole Amount is payable, the excess, if any, and in any case not less than zero, of (i) the present value, discounted semi-annually at the Discount Rate, of the required principal payments of such Notes thereafter required to be made and the remaining scheduled interest payments on and in respect of such Notes from the respective dates on which such principal payments and interest payments are payable, with all such discounts to be computed on the basis of a 360-day year of twelve 30-day months, over (ii) the principal amount of such Notes being prepaid. The calculations upon which any such Make-Whole Amount shall be based shall be set forth in a written document submitted to the Company and shall, absent manifest error, be conclusive and binding on the Company. "MATERIAL ADVERSE EFFECT" means any circumstance or event which individually or in the aggregate (i) has or is reasonably likely to have an adverse effect upon the validity, performance or enforceability of this Agreement, (ii) is or is reasonably likely to be material and adverse to the condition, financial or otherwise, properties or prospects or business operations of the Company and its Restricted Subsidiaries, on a consolidated basis, or (iii) impairs or is reasonably likely to impair the ability of the Company to fulfill its obligations under this Agreement. "MORTGAGED PROPERTY" has the meaning set forth in each Mortgage. "MORTGAGES" means the "Mortgages" as defined in the 1988 Note Purchase Agreement. 66 "MULTIEMPLOYER PLAN" means an employee benefit plan (as defined in Section 3(37) of ERISA) to which contributions are or have been required to be made by the Company or any Related Person. "NET INCOME" of any Person means, for any period, the net income (or the net deficit) of such Person for such period, determined in the following manner: (a) The gross revenues and other proper income credits of such Person shall be computed for such period in accordance with generally accepted accounting principles, PROVIDED, HOWEVER, that in any event there shall not be included in such gross revenues and income credits any of the following items: (i) any proceeds of any life insurance policy; (ii) any restoration to income of any contingency or other reserve, except to the extent that provision for such contingency or other reserve shall have been made from earnings accrued subsequent to September 30, 1995 (or, in the case of any corporation which becomes a Restricted Subsidiary after such date, accrued subsequent to the date it became a Restricted Subsidiary); (iii) any gain arising from any sale of capital assets or the write-up of any assets or any gain from the acquisition or retirement or sale of securities of such Person or any of its Restricted Subsidiaries or any other gain arising from or represented by items which would be accounted for as extraordinary items in accordance with generally accepted accounting principles; and (iv) any deferred credit, or amortization thereof, arising from the acquisition of any other Person or arising from the acquisition, directly or indirectly in any manner, of substantially all of the properties and assets of any other Person; and 67 (b) From the amount of such gross revenues and other proper income credits for such period determined as provided in the preceding clause (a), there shall be deducted an amount equal to the aggregate of all expenses and other proper income charges (exclusive of any losses arising from any write-down or abandonment of any assets and of any losses arising from the sale of any capital assets) for such period, determined in accordance with generally accepted accounting principles, but in any event including (without in any respect limiting the generality of the foregoing) the following items: (i) all interest on Indebtedness and all rental charges; (ii) amortization of debt discount and expenses of issuance and amortization of all other deferred charges properly subject to amortization; (iii) provision for all taxes, whether in respect of property, income, excess profits or otherwise, accrued in respect of any period subsequent to September 30, 1995 and payments in excess of prior periods' provisions for taxes applicable to prior periods; (iv) provisions for all contingency, valuation and other proper reserves; (v) provision for depreciation, depletion, obsolescence and amortization of the properties of such Person (including depreciation and amortization of leasehold improvements and amortization of purchased technology, patents and the excess of cost over net assets of businesses purchased) in amounts in the aggregate not less than the greater of (y) those actually deducted on its books and (z) the amounts which would be deducted in accordance with generally accepted accounting principles; and (vi) the excess, if any, of the aggregate amount of all reductions or savings in income taxes resulting from the Person having claimed depreciation, depletion, obsolescence and/or amortization for income tax purposes in 68 excess of the amounts actually deducted on its books over the aggregate amount of all increases in income taxes resulting from the amounts charged by such Person for income tax purposes on account of depreciation, depletion, obsolescence and/or amortization being less than the amounts actually deducted on its books (due to such Person having elected to deduct for income tax purposes accelerated depreciation, depletion obsolescence and/or amortization in prior years and having so exhausted or diminished the amounts otherwise permitted to be deducted on such account); PROVIDED, HOWEVER, that, except as provided in clause (b)(iii) above, in determining the amounts to be included in clauses (a) and (b) above no federal tax adjustments for any period prior to October 1, 1995 shall be a proper charge or credit to income for any period subsequent to September 30, 1995, and any federal tax adjustments for any period subsequent to September 30, 1995 shall be included as a proper charge or credit to income for the year in which actually finally determined, except to the extent, if any, to which the amount of such adjustment is charged to a proper reserve for federal taxes set up out of income for any period subsequent to September 30, 1995. "1934 ACT" means the Securities and Exchange Act of 1934, as amended. "1988 NOTE PURCHASE AGREEMENT" means each of the Note Purchase Agreements, dated as of December 15, 1988, as amended, between the Company and each of The Mutual Life insurance Company of New York and MONY Life Insurance Company of America. "1988 NOTES" means the 11.58% secured promissory notes due December 1, 1998 of the Company issued pursuant to the 1988 Note Purchase Agreement. 69 "NOTE" and "NOTES" have the respective meanings set forth in Section 1.1. "NOTEHOLDER" means the person in whose name a Note has been registered by the Company pursuant to Section 3.1, except that until such Note has been so registered, the term Noteholder shall mean the person in whose name any such Note was,issued. "OCCUPANT" means any tenant, subtenant, occupant, prior tenant, prior subtenant, prior occupant or other person in possession of or occupying property owned, leased or otherwise occupied by the Company or any Subsidiary. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, trust, estate, unincorporated organization, Government or Governmental body. "PLAN" means any employee benefit plan or other plan (i) established or maintained for the benefit of employees of the Company or any Related Person or to which the Company or any Related Person makes any contribution and (ii) to which Title IV of ERISA applies. "PREFERRED STOCK" means capital stock of any class or classes (however designated) of a corporation which is preferred as to the payment of dividends, or as to the distribution of assets on any voluntary or involuntary liquidation or dissolution of such corporation over shares of stock of any other class of such corporation or which is subject to any requirement of mandatory redemption by such corporation (whether through the operation of any sinking fund or otherwise). "PREPAYMENTS" has the meaning set forth in Section 2.1. "PRO FORMA CONSOLIDATED DEBT SERVICE" means the aggregate amount payable during the period of the next four consecutive fiscal 70 quarters of the Company and its Restricted Subsidiaries, beginning subsequent to the date on which such determination is made, in respect of interest on Indebtedness and in respect of required payments and prepayments of the principal of, and premium, if any, on, Indebtedness, PROVIDED that, in the case of any Indebtedness which provides for the payment of interest thereon at a rate which fluctuates, the interest in respect thereof which shall be included in Pro Forma Consolidated Debt Service shall be computed on the basis of the higher of (x) the interest rate in effect at the time of any such determination of Pro Forma Consolidated Debt Service and (y) the maximum interest rate which may be borne by such Indebtedness, if by its terms such maximum interest rate is established, except for any maximum interest rate established solely in order to ensure compliance with applicable usury laws. "PROHIBITED TRANSACTION" has the meaning assigned to that term in Title I of ERISA or in Section 4975 of the Code. "PURCHASER" has the meaning set forth in the introduction to this Agreement. "RELATED PERSON" means any corporation or unincorporated trade or business which is controlled by, or under common control with, the Company within the meaning of sections 414(b) and (c) of the Code. "RENTALS" means, for any period, for any Person the aggregate fixed amounts (other than amounts required to be capitalized and included in Indebtedness in accordance with generally accepted accounting principles) payable by such Person as lessee under any lease having a remaining term in excess of one year from the date of determination, including extensions and renewals at the option of the lessor but shall not include any amounts required to be paid by such lessee (whether or not designated in such lease as rentals or additional rentals) in respect of maintenance, 71 repairs, income taxes, property taxes, insurance, assessments, amortization or other similar charges. "REPORTABLE EVENT" has the meaning assigned to that term in Title IV of the Employee Retirement Income Security Act of 1974. "REQUIREMENT OF LAW" means any applicable term, condition or provision of any law (including, without limitation, any Environmental Law), or of any rule, regulation, order, writ, injunction or decree of any court or Government, domestic or foreign, or of any decision or ruling of any arbitrator, or of the certificate of incorporation or by-laws of the Company or any Restricted Subsidiary. "RESTRICTED INVESTMENT" means any Investment not permitted pursuant to Section 7.13(a) through (e) and (g) through (i), inclusive. "RESTRICTED PAYMENT" has the meaning set forth in Section 7.7. "RESTRICTED SUBSIDIARY" means any Subsidiary which is not an Unrestricted Subsidiary. A Subsidiary which becomes a Restricted Subsidiary shall remain so for all purposes of this Agreement, and may not be designated an Unrestricted Subsidiary. "SECOND CLOSING DATE" has the meaning set forth in Section 1.2. "SECURITIES ACT" means the Securities Act of 1933, as amended. "STOCK OPTION PLAN" means the stock option plans of the Company under which shares of Common Stock of the Company shall be reserved for purchase options of officers, directors, employees and agents of the Company, as the same may be modified and in effect from time to time. 72 "SUBSIDIARY" means, at any date, any corporation, partnership, trust, limited liability company, limited partnership or similar entity (a) at least a majority of the outstanding capital stock or equity interests having ordinary voting power of which, except directors' qualifying shares (as required by law), is directly or indirectly owned by the Company or one or more Subsidiaries, (b) which is incorporated or organized, as the case may be, under the laws of any State of the United States or the District of Columbia or under the laws of the Dominion of Canada or any province thereof, and (c) which maintains all or substantially all of its properties and .assets within the United States or any territory thereof or the Dominion of Canada. "SWAPS" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "TERMINATION OR WITHDRAWAL EVENT" means (a) the filing of a notice of intent to terminate any Plan under Section 4041 of ERISA, (b) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer any Plan, (c) the institution by the Pension 73 Benefit Guaranty Corporation of proceedings to terminate any Plan or to have a trustee appointed to administer any Plan, (d) the filing of a notice by the plan administrator that the withdrawal of the Company or any Related Person is, or is treated as, the withdrawal of a substantial employer within the meaning of Section 4063 of ERISA, (e) the withdrawal of the Company or a Related Person from any Multiemployer Plan or a "complete withdrawal" or a "partial withdrawal" within the meaning of Subtitle E of Title IV of ERISA, or (f) the involvement of the Company or a Related Person in a situation referred to in Section 4204 of ERISA. "TWELVE YEAR NOTES" has the meaning set forth in Section 1.1(a). "UNRESTRICTED SUBSIDIARY" means any Subsidiary designated as such by the Company to the Noteholders. A Subsidiary designated as an Unrestricted Subsidiary shall remain so for all purposes of this Agreement, and may not be designated or become a Restricted Subsidiary. "VOTING SECURITIES" means capital stock of any class or classes of a corporation, or other equity interests in any other Person, having general voting power under ordinary circumstances to elect a majority of the board of directors of such corporation, or persons performing similar functions in such corporation or other Person (irrespective of whether or not at the time stock or other securities of any other class or classes shall have or might have special voting power or rights by reason of the happening of any contingency). "WEIGHTED AVERAGE LIFE TO MATURITY" of any obligation means as of the date of the determination thereof the number of years obtained by dividing the then Remaining Dollar Years of such obligation by the then outstanding principal amount of such obligation. The term "Remaining Dollar Years" 74 of any obligation means as of the date of determination thereof the amount obtained by (a) multiplying the principal amount of each then remaining sinking fund, serial maturity, installment maturity or other required repayment or redemption, including repayment at final maturity, by the number of years (calculated to the nearest one- twelfth) which will elapse between such date of determination and the date of that repayment or redemption and (b) totaling all of the products obtained in (a). "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-owned Restricted Subsidiaries at such time. Section 10.2. ACCOUNTING TERMS. All accounting terms used herein which are not otherwise expressly defined shall have the meanings respectively given to them in accordance with generally accepted accounting principles. If because of a change in generally accepted accounting principles an Event of Default would exist under this Agreement, the Company and the Purchaser will, in good faith, mutually discuss the effects of such changes on the covenants contained in this Agreement and the possibility of amending or modifying such covenants to eliminate such Event of Default. Section 10.3. NEW YORK LAW. THIS AGREEMENT AND THE NOTES ISSUED HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. Section 10.4. HEADINGS. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part hereof. SECTION 11. MISCELLANEOUS. Section 11.1. COMMUNICATIONS. Subject to Section 3.4, all communications provided for under this Agreement or under the Notes shall be in writing and shall be deemed to have been given or made when delivered or mailed by registered 75 or certified mail postage prepaid or, to the extent receipt is confirmed, by telecopy, telefax or other electronic transmission service: (a) if to the Purchaser, at the Purchaser's address or telecopy number set forth in Schedule I to this Agreement, as such address or telecopy number may be changed from time to time by written notice to the Company; or (b) if to the Company at its office at 5215 North O'Connor Boulevard, Suite 940, Central Tower at Williams Square, Irving, Texas 75039, marked for attention to Mr. Paul V. Dufour, Telecopy Number: (214) 869-6556, as such address or telecopy number may be changed from time to;time in accordance with Section 7.1 by written notice to the Purchasers and the holders of the Notes; or (c) if to any holder of a Note, at the address or telecopy number of such holder as it appears on the register maintained as provided in Section 3.1 (which address or telecopy number, in the case of a Purchaser, initially shall be the address or telecopy number of such Purchaser specified in clause (a) of this Section 11.1) as such address or telecopy number may be changed by such holder from time to time by written notice to the Company. Section 11.2. AMENDMENT AND WAIVER. (a) Any term, covenant, agreement or condition of this Agreement may, with the consent of the Company, be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by and only by one or more substantially concurrent written instruments signed by the holders of not less than 66-2/3% in aggregate principal amount of the Notes at the time outstanding (the "Majority Noteholders"); PROVIDED, HOWEVER, that no such amendment or waiver shall, without the consent in writing of the holders of all of the Notes at the time outstanding, subordinate or change the amount of, or the date of final maturity of, the principal of any of the Notes, or change the amount of, or the time of payment of, any installment of principal of any of the Notes, or change the rate of, or the time of payment of, interest on any of 76 the Notes, or change the amount of any premium payable upon any prepayment of the Notes, or amend any provision of 59, or change the percentage of holders of Notes required to approve any such amendment or effectuate any such waiver. Any amendment or waiver pursuant to this Section 11.2 shall apply equally to all holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company. (b) The Company will give prompt notice to all holders of the Notes of the effectiveness of any amendment or waiver entered into in accordance with the provisions of this Section 11.2. Such notice shall state the terms of any such amendment or waiver and shall be accompanied by at least two conformed copies (which may be composite conformed copies) of each written instrument which embodies such amendment or waiver. Section 11.3. EXPENSES. Whether or not the transactions contemplated by this Agreement shall be consummated, the Company will (a) pay all your reasonable expenses incident thereto and all reasonable expenses of all holders of Notes incident to any modification, amendment, waiver or alteration of the terms or provisions of this Agreement or of the Notes, and to any such modification, amendment, waiver or alteration proposed or initiated by the Company, whether or not effected, including in each case, but not limited to, your or such holders' out-of-pocket expenses, the costs of delivery of your or such holders' Notes (and insurance with respect to such delivery to your or such holders' home office or offices or the office or offices of your or such holders' nominee or nominees, and the fees and disbursements of your or such holders' special counsel; (b) pay all printing and/or word processing costs in connection therewith or in connection with any such modification, amendment, waiver or alteration or any such proposed modification, amendment, waiver or alteration; and (c) pay any and all taxes in connection with the issuance, sale, and delivery of the Notes and in connection with any modification, amendment, waiver or alteration of this Agreement or the Notes and save the Purchaser and any subsequent holders of the Notes harmless without limitation as to time against any and all liabilities (including any interest or penalty for non- payment or delay in payment) with respect to all such taxes (other than transfer taxes on a transfer thereof). The obligations of the Company under this Section 11.3 shall survive the payment or prepayment of the Notes and the termination of this Agreement. 77 Section 11.4. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing one or more counterparts. Section 11.5. SURVIVAL OF WARRANTIES AND REPRESENTATIONS. All covenants, agreements, representations, warranties and statements by or on behalf of the Company or any Restricted Subsidiary made herein or in any certificate, written statement, document or other instrument furnished by or on behalf of the Company or any Restricted Subsidiary to you in connection with the negotiation of this Agreement, the sale of the Notes or the Company's performance of its obligations hereunder or thereunder or otherwise furnished to you in compliance with this Agreement, subject to the following, shall be considered to have been relied upon by you and shall survive the issuance and delivery of the Notes to you and the payment therefor regardless of any investigation made by you or on your behalf. All statements in such certificates, statements, documents or other instruments shall constitute warranties and representations of the Company hereunder to the extent set forth therein. Section 11.6. SUCCESSORS AND ASSIGNS. All covenants, agreements, representations and warranties made herein shall bind, and inure to the benefit of, the successors and assigns of the Company, whether so expressed or not, and all such covenants, agreements, representations and warranties shall bind, and inure to the benefit of, your successors and assigns. All provisions of this Agreement are intended to be for the benefit of all holders, from time to time, of the Notes issued pursuant hereto and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights under this Agreement has been made by you, or any of your successors or assigns. Section 11.7. SEVERABILITY. Any provision of this Agreement or the Notes which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 78 If the foregoing is satisfactory to you, will you please sign the form of acceptance on the enclosed counterparts of this Agreement and forward the same to the undersigned, whereupon this Agreement will become a binding agreement between us. Very truly yours, IMCO RECYCLING INC. By: /s/ JAMES B. WALBURG ---------------------- Title The foregoing Agreement is hereby accepted, as of the date first above written. THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By: /s/ PETER W. OLIVER -------------------------- Peter W. Oliver Managing Director EX-10.40 7 EXHIBIT 10.40 FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT THIS AMENDMENT TO NOTE PURCHASE AGREEMENT is made and entered into effective as of the 29th day of November, 1995, by and among IMCO Recycling Inc., a Delaware corporation (the "Company"), The Mutual Life Insurance Company of New York ("MONY") and MONY Life Insurance Company of America ("MLICA"). W I T N E S S E T H WHEREAS, the Company, MONY and MLICA are parties to that certain Note Purchase Agreement, dated as of December 15, 1988, as heretofore amended (the "1988 Agreement"), pursuant to which the Company sold and MONY and MLICA collectively purchased $2,500,000 aggregate principal amount of the Company's 10.29% Secured Promissory Notes due December 1, 1993, $2,500,000 aggregate principal amount of its 10.37% Secured Promissory Notes due December 1, 1994, and $8,000,000 aggregate principal amount of its 11.58% Secured Promissory Notes due December 1, 1998 (collectively, the "1988 Notes"); and WHEREAS, the parties desire to further amend the Agreement in accordance with Section 11.2 thereof as set forth herein; NOW THEREFORE, FOR AND IN CONSIDERATION of the mutual promises and covenants set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS. The following Sections of the Agreement are each amended as follows: (A) Section 7.1 is amended by deleting the language "4300-E Texas Commerce Bank Tower, 2200 Ross Avenue, LB 169, Dallas, Texas 75201," in the fifth line thereof and substituting in its place the following language: "5215 North O'Connor Boulevard, Suite 940, Central Tower at Williams Square, Irving, Texas 75039,". (B) Section 7.2 is amended by deleting the two references to "$100,000" in the proviso thereto with the term "$500,000". (C) Section 7.3 is amended as follows: (i) subparagraph (b) is amended in its entirety to read as follows: "(b) keep adequately insured, by financially sound and reputable insurers, all of its properties, assets and operations of a character usually insured by Persons of established reputation engaged in the same or a similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons and carry, with such insurers in customary amounts, such other insurance, including without limitation public and product liability insurance, business interruption insurance (if available at commercially reasonable rates) and workers compensation insurance (except that the Company or any Restricted Subsidiary may self-insure workers compensation liability to the extent permitted by applicable state law), as is usually carried by Persons of established reputation engaged in the same or a similar business similarly situated"; and (ii) subparagraph (f) is amended in its entirety to read as follows: "(f) not enter into, or allow any Restricted Subsidiary to enter into, the ownership, active management or operation of any business which is not a business related to the recovery of nonferrous metals;". (D) Section 7.4 is amended as follows: (i) subparagraph (a) is amended by replacing the term "1986" in the second line thereof with the term "1995"; (ii) subparagraph (b) is deleted in its entirety and replaced with the language "[intentionally omitted]"; (iii) subparagraph (c) is amended in its entirety to read as follows: 2 "Current Liabilities of the Company constituting Indebtedness for Money Borrowed not overdue and not at the time of incurrence thereof in the aggregate principal amount outstanding in excess of $10,000,000, PROVIDED that during the 14-month period commencing on October 31, 1995, and each consecutive 14-month period commencing on the first day of each month thereafter, the Company will eliminate and be free of all such Current Liabilities for a period of at least 60 consecutive days"; (iv) subparagraph (d) is amended by replacing all references to "September 30, 1988" with November 29, 1995, and by inserting the phrase "to the 1995 Agreement" after the phrase "Exhibit B" in the third line thereof; (v) subparagraph (g) is amended in its entirety to read as follows: "(g) Indebtedness of any Restricted Subsidiary owing to the Company or to any other Wholly-Owned Restricted Subsidiary and Indebtedness of the Company owing to its Restricted Subsidiary, IMCO Management Partnership L.P., a Texas limited partnership;" (vi) subparagraph (k) is amended in its entirety to read as follows: "additional Funded Indebtedness of the Company or any Restricted Subsidiary, PROVIDED HOWEVER, that immediately after giving effect to the creation, incurrence or assumption of such additional Funded Indebtedness and to the application of any proceeds thereof: (i) Consolidated Funded Indebtedness shall not exceed 45% of Consolidated Net Tangible Assets at any time prior to December 1, 1998; and from and after December 1, 1998, Consolidated Funded Indebtedness shall not exceed 40% of Consolidated Net Tangible Assets; (ii) the ratio of the aggregate Consolidated Cash Make for the 3 immediately preceding four fiscal quarters of the Company to PRO Forma Consolidated Debt Service shall not be less than 1.2 to 1; and (iii) in the case of Funded Indebtedness of Restricted Subsidiaries, the sum of (A) such Funded Indebtedness, together with all other Funded Indebtedness of Restricted Subsidiaries then outstanding, plus, without duplication, (B) the outstanding principal amount of all Indebtedness permitted by Section 7.4(l), shall not exceed 10% of Consolidated Net Tangible Assets at such time of determination; and" (vii) subparagraph (l) is amended in its entirety to read as follows: "(l) Indebtedness of the Company or any Restricted Subsidiary to the seller of property in respect of the purchase by the Company or such Restricted Subsidiary of such property to be used in the ordinary course of the Company's or such Restricted Subsidiary's business, provided that the sum of (i) such Indebtedness, together with all other Indebtedness permitted by this Section 7.4(l) then outstanding, plus, without duplication, (ii) the outstanding principal amount of Funded Indebtedness of Restricted Subsidiaries, shall not exceed 10% of Consolidated Net Tangible Assets at such time of determination and provided, further, that in the event such Indebtedness shall by its terms mature more than one year from the incurrence thereof, immediately after giving effect to the incurrence thereof, the Company can incur an additional $1.00 of Funded Indebtedness pursuant to Section 7.4(k)." Section 7.4 is further amended by adding the 4 following language at the end thereof: "Notwithstanding any provisions of this Section 7.4 to the contrary, neither IMCO Investment Company nor IMCO Management Partnership, L.P. will create, incur, assume or in any manner become liable, contingently or otherwise, in respect of any Indebtedness for Money Borrowed other than Indebtedness for Money Borrowed owing to the Company or another Restricted Subsidiary." (E) Section 7.5 is amended by inserting the term "(i)" after the word "than" in the fourth line thereof and by adding the following language to the end thereof: ", (ii) Guaranties by the Company and Restricted Subsidiaries pertaining to obligations not exceeding in the aggregate the greater of (x) $5,000,000 and (y) 5% of Consolidated Tangible Net Worth as of such date, and (iii) Guaranties by the Company or by any Wholly-Owned Restricted Subsidiary of Indebtedness of any Wholly-Owned Restricted Subsidiary or of the Company, as the case may be; provided that all such Indebtedness described in clauses (ii) and (iii) above is permitted to be incurred under this Agreement at the date of the making of such Guaranty and provided, further, that in the event that any Restricted Subsidiary shall guarantee any Indebtedness of the Company, such Restricted Subsidiary shall also deliver a Guaranty, in form and substance reasonably satisfactory to each holder of the Notes, to each such holder of the obligations of the Company under the Notes, but any such Guaranty to such holder(s) shall not be included in any computation of outstanding Guaranties for the purposes of this Section 7.5. (F) Section 7.6 is amended by inserting the language "(including, without limitation, accounts receivable, inventory and cash and deposits)" after the language "properties or assets" in the eighth line thereof and by replacing the phrase "(h), (i) and (j)" after the phrase "clauses (e)," in the nineteenth line thereof with the phrase "(g) and (h)". Section 7.6 is further amended by the following changes: 5 (i) subparagraph (b) is amended to insert the language "not involving Indebtedness for Money Borrowed, including Liens" after the language "ordinary course of business" in the second line thereof; (ii) subparagraph (f) is amended by adding the following language at the end thereof: "and all Uniform Commercial Code financing statements, Liens and other matters affecting the Mortgaged Property that are described in Exhibit B;" (iii) subparagraph (g) is amended in its entirety to read as follows: "(g) Liens on the real and personal property subject (as of November 29, 1995) to the Kentucky Mortgage and Security Agreement which may be created to secure certain revenue bonds issued or to be issued in an aggregate principal amount not exceeding $10,000,000 in connection with a salt cake processing facility and landfill expansion constructed or to be constructed on such property;"; (iv) subparagraph (h) is amended by deleting all references to the phrase "September 30, 1988" and replacing them with the phrase "November 29, 1995" and by inserting the phrase "to the 1995 Agreement" after the phrase "Exhibit B" in the second line thereof; (v) subparagraph (i) is deleted in its entirety and the language "[intentionally omitted]" is inserted in its place; and (vi) subparagraph (j) is amended in its entirety to read as follows: "(j) (i) Liens on any shares of the capital stock of an Unrestricted Subsidiary and (ii) the Barmet Option." 6 (G) Section 7.7 is amended in its entirety to read as follows: Section 7.7. LIMITATION ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The Company will not directly or indirectly, through any of its Subsidiaries or otherwise, declare or make, or incur any liability to make, any of the following (such actions as are hereinafter described in subsections (a) and (b) being called "Restricted Payments"): (a) any payment in cash, property or other assets (other than shares of any class of capital stock of the Company or any rights, warrants or options to purchase such shares) as dividends or other distributions upon, for the purpose of purchasing, retiring, redeeming or otherwise acquiring for value, directly or indirectly, or otherwise in respect of, any shares of any class of capital stock (or any warrants or options evidencing a right to purchase any such shares of stock) of the Company, except to the extent permitted below; or (b) any Restricted Investment; PROVIDED, HOWEVER, that the provisions of this Section 7.7 shall not prohibit the making of any Restricted Payment if, immediately after, and after giving effect to, the making of such Restricted Payment (i) no Event of Default (or event which with notice or lapse of time or both would constitute an Event of Default) would exist and (ii) the Net Amount of Restricted Payments made after September 30, 1995 would not exceed the sum of (x) $5,000,000 plus (y) 50% of Consolidated Net Income (minus 100% of any consolidated net loss) for the period commencing October 1, 1995 and ending on the last day of the fiscal quarter of the Company most recently ended at the time such Restricted Payment is made plus (z) the sum of the aggregate net cash proceeds, determined by reference to the net cash received by the Company (after deducting all underwriting discounts and commissions and all other expenses of such 7 issuance), from the sale of Company capital stock made after September 30, 1995. For purposes of this Section 7.7, "Net Amount of Restricted Payments" means for any period (i) the aggregate amount of cash, property and other assets (at the greater of net book value or fair market value) distributed during, and liabilities outstanding at the end of, such period in respect of Restricted Payments of the type described in subsection (a) above, and (ii) in respect of Restricted Investments, the cost thereof less any actual return of capital in respect thereof (it being understood that any dividend and interest payments received in respect of Restricted Investments shall not reduce the cost thereof." (H) Section 7.8 is amended in its entirety to read as follows: "Section 7.8. MAINTENANCE OF CURRENT ASSETS, CONSOLIDATED WORKING CAPITAL NET WORTH AND FIXED CHARGE COVERAGE. (a) The Company and its Restricted Subsidiaries shall at all times maintain Consolidated Working Capital equal to or greater than $5,000,000 and shall not permit Consolidated Current Assets to be less than 125% of Consolidated Current Liabilities. (b) The Company shall not at any time permit its Consolidated Net Worth to be less than the sum of $60,000,000 plus the greater of (i) zero and (ii) 50% of cumulative Consolidated Net Income from and after October 1, 1995. (c) The Company shall not at any time permit the sum of (i) Consolidated Cash Make plus (ii) the aggregate Rentals attributable to the Company and its Restricted Subsidiaries to be less than 250% of the sum of Consolidated Interest Expense plus Rentals attributable to the Company and its Restricted Subsidiaries for the four immediately preceding consecutive fiscal quarters." (I) Section 7.9 is amended by (i) deleting the word "three" in the fifth line thereof and replacing it with the word "five", (ii) deleting all references therein to the 8 term "$500,000" and replacing each of them with the term "2,000,000", (iii) deleting the word "Senior" in the eleventh line thereof and (iv) deleting clause (i) of the proviso thereto in its entirety and replacing it with the language "(i) any lease of data processing, office, communication, mobile or transportation equipment having aggregate Rentals not to exceed $150,000." (J) Section 7.10 is amended by inserting the word "convey" following the language "directly or indirectly" in the fifth line thereof and by inserting the word "conveyed" following the language "suffer to be" in the sixth line thereof. Section 7.10 is further amended by the following changes: (i) subparagraphs (a) and (b) are amended by adding the words "Wholly-Owned" immediately prior to all references to the language "Restricted Subsidiary" therein; and (ii) subparagraphs (c) and (d) and the last paragraph of Section 7.10 are amended in their entirety to read as follows: "(c) the Company may be consolidated with or merged into any other Person, and the Company may convey, sell, lease, transfer or otherwise dispose of all or substantially all of its properties and assets to any Person, and any Person may consolidate with or merge into the Company or convey or transfer its properties or assets substantially as an entirety to the Company, if the resulting Person or the transferee of such assets, as the case may be, is a corporation organized and existing under the laws of a State in the United States which (i) will assume the obligations of the Company under this Agreement and the Notes and (ii) can incur an additional $1.00 of Funded Indebtedness pursuant to Section 7.4(k); and (d) the Company and any Restricted Subsidiary may convey, sell, lease, transfer, abandon or otherwise dispose of or suffer to be conveyed, sold, leased, transferred, abandoned or otherwise to be disposed of (whether voluntarily or involuntarily) any of its assets constituting not 9 more than 10% of Consolidated Total Assets in any transaction or series of related transactions during any consecutive twelve-month period, provided that not more than 15% of Consolidated Total Assets are disposed of on a cumulative basis from the date hereof. The sale or other disposition of assets in the ordinary and usual conduct of business and the disposition of worn-out or obsolete equipment shall not be deemed to be dispositions of assets for the purposes of this Section 7.10." (K) Section 7.11 is amended in its entirety to read as follows: "Section 7.11. ISSUE OR DISPOSITION OF SECURITIES. No Restricted Subsidiary shall issue, sell, assign, transfer or otherwise dispose of any shares (or other ownership interests) of any class of its capital stock or equity ownership interests or of any options or warrants to purchase its capital stock or equity ownership interests or of other securities exchangeable for or convertible into its capital stock or equity ownership interests except (a) to the Company or a Wholly-Owned Restricted Subsidiary or (b) directors' qualifying shares as required by law. Neither the Company nor any Restricted Subsidiary shall sell, assign, transfer or otherwise dispose of (except to the Company or a Wholly-Owned Restricted Subsidiary) any shares of capital stock (or other ownership interests) of any class of any Restricted Subsidiary, or any other security of, or any Indebtedness owing to it by, any Restricted Subsidiary, unless: (i) the greater of the consideration received therefor and the value thereof as stated on the books of the Company or such Restricted Subsidiary of (A) the stock (or other ownership interests) and other securities of such Restricted Subsidiary and of each other Restricted Subsidiary disposed of pursuant to this Section 7.11 in the fiscal year of the Company in which such sale shall occur and (B) the other properties and assets of the Company and its Restricted Subsidiaries disposed of pursuant to Section 7.10(d) does not exceed 10% of Consolidated Total Assets during any consecutive twelve-month period, 10 PROVIDED that not more than 15% of Consolidated Total Assets are disposed of on a cumulative basis from November 29, 1995; (ii) all of the capital stock (or other ownership interests) and other securities and the entire Indebtedness of such Restricted Subsidiary owned by the Company and each other Restricted Subsidiary shall be sold, assigned, transferred or otherwise disposed of (other than to the Company or a Wholly-Owned Restricted Subsidiary) at the same time; (iii) such Restricted Subsidiary shall not, at the time of such sale, assignment, transfer or other disposition, own either (A) any shares of capital stock (or other ownership interests) of any class or any other security or any Indebtedness of any other Restricted Subsidiary which is not being simultaneously disposed of as permitted by this Section 7.11 or (B) any Indebtedness of the Company; (iv) immediately before and after giving effect to such sale, assignment, transfer or other disposition, no Event of Default (or event which with notice or lapse of time or both would constitute an Event of Default) will have occurred and be continuing; and (v) the consideration received for such shares of capital stock (or other ownership interests), other security or Indebtedness is not less than the fair market value thereof as determined by the Board of Directors of the Company. For purposes of clause (i) of this Section 7.11, the value of capital stock of any Restricted Subsidiary issued or sold in connection with the Barmet Option shall be included as capital stock of a Restricted Subsidiary that was sold for a consideration of $8,417,000 and shall be included in the computation of Consolidated Total Assets for purposes of such clause (i) as though such sale took place on November 30, 1995." (L) Section 7.13 is amended as follows: (i) subparagraphs (d) and (e) are amended by inserting the language", limited liability 11 company, partnership, trust or other similar entity" after the word "corporation" in the first line thereof; (ii) subparagraph (e) is further amended by (x) deleting the term "$250,000" and replacing it with the term "$1,000,000", (y) deleting the term "$500,000" and replacing it with the term "$5,000,000" and (z) deleting the phrase "the Company's" preceding "Investments" in each of the fifth and seventh lines thereof; and (iii) subparagraph (f) is amended in its entirety to read as follows: "(f) only in respect of Investments made by the Company, Investments as permitted under the PROVISO to Section 7.7;" Section 7.13 is further AMENDED BY adding the following language at the END thereof: "(g) an Investment constituting the initial investment in a joint venture solely to conduct activities as permitted by Section 7.3(f), to be entered into between the Company or a Restricted Subsidiary and VAW aluminium AG, a German corporation, or an affiliate thereof, such initial Investment not to exceed $16,000,000 (U.S.); (h) Investments in a foreign subsidiary in which all of the capital stock and voting power will be 100% owned, directly or indirectly, by the Company, to be organized solely to conduct activities as permitted by Section 7.3(f) at a plant to be located in Swansea, Wales, United Kingdom, with such Investments not to exceed, in the aggregate, $9,000,000 (U.S.); and (i) Investments by the Company or a Restricted Subsidiary in Marport Smelting, L.L.C., an Indiana limited liability company, to conduct business solely as permitted by Section 7.3(f), with such Investments not to exceed $1,000,000." (M) Section 7.15 is amended by replacing the phrase "and change in financial position" with the language 12 ", changes in stockholders' equity and cash flows" in the eighteenth and nineteenth lines thereof. (N) Section 7.19 is amended as follows: (i) subparagraph (b), subsection (iv) is amended in its entirety to read as follows: "(iv) permit the actuarial present value of all benefit liabilities under all Plans (other than Multiemployer Plans) to exceed the fair market value of the assets of such Plans by more than $250,000, with such benefit liabilities determined based on the actuarial assumptions which would be used by the Pension Benefit Guaranty Corporation with respect to Plans terminating at the time of determination; or"; and (ii) the last sentence at the end thereof is amended in its entirety to read as follows: "As used in this Section 7.19, the term "accumulated funding deficiency" has the meaning indicated for such term in Section 4.13." (0) Section 7.20 is amended in its entirety to read as follows: "Section 7.20. FOREIGN PENSION LIABILITY. The Company will not, and will not permit any Related Person to, incur any liability under the laws of any applicable jurisdiction outside of the United States to or in respect of any employee benefit plan or other plan mandated by law or established or maintained for the benefit of employees of the Company or of any Related Person which could have a Material Adverse Effect." (P) Section 8.1 is amended as follows: (i) subparagraph (a) is amended (w) by replacing the word "income" with the word "earnings" in the ninth line thereof, (x) by replacing the phrase "stockholders' equity and changes in financial position" with the phrase "cash flows" in the tenth line thereof, (y) by replacing the word "either" 13 with the word "any" in the twenty-ninth line thereof, and (z) by inserting the language "and such other statements" after the word "income" in the thirty-fourth line thereof; (ii) subparagraph (b) is amended (v) by replacing the word "income" with the word "earnings" in the tenth line thereof, (w) by inserting the phrase "changes in" after the word "of" in the eleventh line thereof, (x) by replacing the phrase "changes in financial position" with the phrase "cash flows" in the twelfth line thereof, (y) by replacing the word "either" with the word "any" in the thirty-second line thereof, and (z) by inserting the language "and such other statements" after the word "income" in the thirty-seventh line thereof; (iii) subparagraph (c) is amended in its entirety to read as follows: "(c) together with the delivery of the financial statements referred to in Section 8.1(a) and (b) (or, in the case of clause (i) below, if quarterly or annual reporting requirements for such entities differ from those set forth in Section 8.1(a) or (b), as soon as the same are available), (i) separate financial statements of substantially the same type referred to in Section 8.1(a) and (b) for each of the entities described in Section 7.13(g), (h) and (i), together with, to the extent any such fiscal year-end financial statements are audited, a copy of the auditor's report with respect to such financial statements, and (ii) a copy of a report to management of the Company on a plant-by-plant, year-to-date, basis, substantially in the form attached to the 1995 Note Agreement as Exhibit C;" (iv) subparagraphs (g) and (h) are deleted in their entirety and the language "[intentionally omitted]" is inserted in each of their places; and (v) the last paragraph is amended by inserting the language "(i) such information is publicly available or (ii)" after the word "unless" in the thirteenth line thereof. 14 (Q) Section 8.2 is amended by deleting the phrase "the Chairman of the Board of Directors or" after the word "of" in the fourth line thereof. (R) Section 8.4 is amended by inserting the phrase "(unless an Event of Default shall have occurred and is continuing, in which event at the Company's expense)" after the word "expense" in the sixth line thereof. (S) Section 9.1 is amended as follows: (i) subparagraph (e) is amended (x) by deleting the parenthesized phrase in the fourth and fifth lines thereof and replacing it with the language "(including any of the 1995 Notes)", (y) by deleting the phrase ", except in the case of immaterial defaults relating to the Bond Documents," in the fourteenth, fifteenth, and sixteenth lines thereof and (z) by inserting the language "or other governing body" following the language "Board of Directors" in the twenty-seventh line thereof; (ii) subparagraph (f) is amended by replacing the term "$500,000" in the fifth line thereof with the term "$1,000,000"; (iii) subparagraph (j) is amended (x) by (i) inserting the language "provided that any of the following actions could result in a Material Adverse Effect (with respect to the Company or any Related Person)," at the beginning thereof, (y) by deleting the word "or" in the eighth line thereof, and by (z) inserting the phrase ", or (iv) the Company or any Related Person shall withdraw or partially withdraw from any Multiemployer Plan" at the end thereof; (iv) subparagraph (m) is amended by replacing the phrase "$200,000" in the third line thereof with the phrase "$500,000"; and (v) subparagraph (p) is amended by deleting the phrase ", or the Company or any party thereto shall default in the performance of its material obligations under the Bond Documents at the end thereof". 15 (T) Section 10.1 is amended as follows: (i) the following definitions are deleted in their entirety: "Accounts Receivable", "Consolidated Cash Flow Available for Debt Service", "Excess Cash Flow", and "Pro Forma Consolidated Debt Service Requirements". (ii) the following definitions are hereby added to Section 10.1: "'BARMET OPTION' means that certain right of Barmet Aluminum Corporation ("Barmet") to purchase up to a 49% interest in IMCO Recycling of Ohio Inc., a Restricted Subsidiary, pursuant to the terms and conditions of that certain Supply Agreement dated March 2, 1992, as amended, by and between the Company and Barmet." "'CONSOLIDATED CASH MAKE' for any period means the sum of: (a) Consolidated Net Income for such period (minus, in the event of any sale or other disposition of the type referred to in Section 7.10 or Section 7.11, other than to the Company or a Restricted Subsidiary, Net Income attributable to any Restricted Subsidiary (or reasonably attributable to any assets) so sold or otherwise disposed of for such period) plus expenses of the Company and its Restricted Subsidiaries in respect of interest on Indebtedness and expenses of the type set forth in (b)(v) of the definition of Net Income for such period (except for such expenses which were deducted in calculating Net Income for such period and were attributable to assets sold or otherwise disposed of in a transaction of the type referred to in Section 7.10 or Section 7.11, other than to the Company or a Restricted Subsidiary, attributable to the assets or securities so sold); and (b) (without duplication of any amounts included for such period pursuant to (a) above) as to any corporation or other entity which became a Restricted Subsidiary after the beginning of such period, or part or all of the assets of which were 16 acquired by the Company or a Restricted Subsidiary after the beginning of such period, its Net Income during such period prior to the date on which it became a Restricted Subsidiary or the Net Income reasonably attributable to such assets during the period prior to the acquisition hereof without, in either case, any deduction for interest charges on Indebtedness of such corporation or other entity or for depreciation and amortization of such acquired assets, provided that if during such period the proceeds from any sale or other disposition of the type referred to in Section 7.10 or Section 7.11 (other than to the Company or a Restricted Subsidiary) have been utilized to acquire such corporation or such assets, the Net Income of such corporation or the Net Income reasonably attributable to such assets included in Consolidated Cash Make pursuant to this clause (b) shall be reduced by the amount of the contribution, if any, to Consolidated Net Income made during such period by such proceeds." "'CONSOLIDATED INTEREST EXPENSE' means the aggregate of all interest charges on Indebtedness of the Company and its Restricted Subsidiaries after eliminating all inter-company items, and otherwise computed, in accordance with generally accepted accounting principles." "'ELEVEN AND ONE-HALF YEAR NOTES' has the meaning set forth in the 1995 Note Agreement. "'ENVIRONMENTAL LAWS' means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems." "'1995 NOTE AGREEMENT' means the Note Purchase Agreement dated as of November 29, 1995 between the Company and The Mutual Life Insurance Company of New York." 17 "'1995 NOTES' means the unsecured promissory notes due October 31, 2007 of the Company issued pursuant to the 1995 Note Agreement." "'PRO FORMA CONSOLIDATED DEBT SERVICE' means the aggregate amount payable during the period of the next four consecutive fiscal quarters of the Company and its Restricted Subsidiaries, beginning subsequent to the date on which such determination is made, in respect of interest on Indebtedness and in respect of required payments and prepayments of the principal of, and premium, if any, on, Indebtedness, PROVIDED that, in the case of any Indebtedness which provides for the payment of interest thereon at a rate which fluctuates, the interest in respect thereof which shall be included in Pro Forma Consolidated Debt Service shall be computed on the basis of the higher of (x) the interest rate in effect at the time of any such determination of Pro Forma Consolidated Debt Service and (y) the maximum interest rate which may be borne by such Indebtedness, if by its terms such maximum interest rate is established, except for any maximum interest rate established solely in order to ensure compliance with applicable usury laws." "'SWAPS' means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined." "'WHOLLY-OWNED RESTRICTED SUBSIDIARY' means, at any time, any Restricted Subsidiary one hundred percent 18 (100%) of all of the equity interest (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Restricted Subsidiaries at such time." (iii) The following definitions are amended as follows: "APPLICABLE TREASURY YIELD" is amended in its entirety to read as follows: "'APPLICABLE TREASURY YIELD' shall be determined by reference to (i) the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on the Telerate Access Service) as of 10:00 a.m. (New York City time) on the second Business Day preceding the date fixed for the payment of the Notes in question, or (ii) if not reported as of such time or otherwise unascertainable, the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the date fixed for the payment of Notes in question (or, if such Statistical Release is no longer published, any publicly available source of similar market data), and shall mean the yield reported on such Telerate Access Service, or most recent weekly average yield, as the case may be, on actively traded U.S. Treasury securities adjusted to a constant maturity equal to the then remaining Weighted Average Life to Maturity of such Notes (the "REMAINING LIFE"); provided that if the Remaining Life of such Notes is not equal to the contract maturity of a U.S. Treasury security for which a yield or weekly average yield is given, the Applicable Treasury Yield shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the yield or weekly average yield of U.S. Treasury securities for which such yields are given." "CONSOLIDATED FUNDED INDEBTEDNESS" is amended by adding the following language to the end thereof: "PROVIDED, that for purposes of computing Consolidated Funded Indebtedness prior to the 19 Second Closing Date (as defined in the 1995 Note Agreement), such term shall be deemed to include $15,000,000 aggregate principal amount of the Eleven and One-Half Year Notes as though the same had been issued in full on November 29, 1995". "CONSOLIDATED NET TANGIBLE ASSETS" is amended in its entirety to read as follows: "'CONSOLIDATED NET TANGIBLE ASSETS' means, at any date, the aggregate amount of all assets of the Company and its Restricted Subsidiaries after deducting therefrom (i) depreciation, depletion, obsolescence, amortization, valuation, contingency and other proper reserves in accordance with generally accepted accounting principles, (ii) Consolidated Current Liabilities, (iii) Restricted Investments and Investments referred to in Section 7.13(e) and (i), (iv) that portion of the book amount of all such assets which would be treated as intangible assets under generally accepted accounting principles, including without limitation, all such items as goodwill, trade marks, trade names, brand names, copyrights, patents, licenses and rights with respect to the foregoing, write-up of assets subsequent to June 30, 1995 and unamortized debt discount and expenses, and (v) all long term liabilities other than Funded Indebtedness; PROVIDED that, solely for purposes of Section 7.4(k)(i), for purposes of computing Consolidated Net Tangible Assets prior to the Second Closing Date (as defined in the 1995 Note Agreement), such term shall be deemed to include $15,000,000 aggregate principal amount of the Eleven and One-Half Year Notes as though the same had been issued in full on November 29, 1995 and that the Company had received $15,000,000 cash in proceeds from such issuance." "CONSOLIDATED TANGIBLE NET WORTH" is amended by deleting the phrase "October 31, 1986" in clause (iii) thereof and inserting the language "June 30, 1995" in its place and by adding the language "and Investments referred to in Section 7.13(e) and (i)" after "Restricted Investments" in clause (vi) thereof. "CURRENT LIABILITIES" is amended by replacing the language "and the 1986 Notes and the Subordinated 20 Notes" with the phrase "and the 1995 Notes" in the penultimate and last lines thereof. "FIRM OF CERTIFIED PUBLIC ACCOUNTANTS" is amended in its entirety to read as follows: "'FIRM OF CERTIFIED PUBLIC ACCOUNTANTS' means Ernst and Young LLP, Arthur Andersen & Co., Coopers & Lybrand, Deloitte & Touche LLP, KPMG Peat Marwick LLP, Price Waterhouse & Co., or any other nationally recognized firm of certified public accountants satisfactory to the Majority Noteholders, PROVIDED that such firm is independent with respect to the Person or Persons whose financial statements it examines in accordance with this Agreement." "FUNDED INDEBTEDNESS" is amended by deleting "the 1986 Notes and the Subordinated Notes" in the eleventh and twelfth lines thereof and replacing such language with "the 1995 Notes." "INDEBTEDNESS" is amended by deleting the phase "and (c)" in the eighteenth line thereof and replacing such language with ", (c) all Swaps and (d)," "NET INCOME" is amended by (i) deleting all references to the phrase "October 31, 1985" and replacing them with the phrase "September 30, 1995" and (ii) replacing the reference to "November 1, 1985" therein with "October 1, 1995." "PERSON" is amended by inserting the language ", limited liability company" after the word "Partnership" in the second line thereof. "REQUIREMENT OF LAW" is amended by inserting the phrase "(including without limitation, any Environmental Law)" after the word "law" in the second line thereof. "RESTRICTED INVESTMENT" is amended in its entirety to read as follows: "'RESTRICTED INVESTMENT' means any Investment not permitted pursuant to Section 7.13(a) through (e) and (g) through (i), inclusive." 21 "RESTRICTED SUBSIDIARY" is amended in its entirety to read as follows: "'RESTRICTED SUBSIDIARY' means any Subsidiary which is not an Unrestricted Subsidiary. A Subsidiary which becomes a Restricted Subsidiary shall remain so for all purposes of this Agreement, and may not be designated an Unrestricted Subsidiary." "STOCK OPTION PLAN" is amended (w) by deleting the word "non-qualified" in the first line thereof, (x) by replacing the word "plan" with the word "plans" in the second line thereof, (y) by inserting the phrase ", directors" after the word "officers" in the fifth line thereof, and (z) by inserting the phrase "and agents" after the word "employees" in the fifth line thereof. "'SUBSIDIARY" is amended in its entirety to read as follows: "'SUBSIDIARY' means, at any date, any corporation, partnership, trust, limited liability company, limited partnership or similar entity (a) at least a majority of the outstanding capital stock or equity interest having ordinary voting power of which, except directors' qualifying shares (as required by law), is directly or indirectly owned by the Company or one or more Subsidiaries, (b) which is incorporated or organized, as the case may be, under the laws of any State of the United States or the District of Columbia or under the laws of the Dominion of Canada or any province thereof, and (c) which maintains all or substantially all of its properties and assets within the United States or any territory thereof or the Dominion of Canada." "UNRESTRICTED SUBSIDIARY" is amended in its entirety to read as follows: "'UNRESTRICTED SUBSIDIARY' means any Subsidiary designated as such by the Company to the Noteholders. A Subsidiary designated as an Unrestricted Subsidiary shall remain so for all purposes of this Agreement, and may not be designated or become a Restricted Subsidiary." 22 "VOTING SECURITIES" is amended by inserting the language ", or other equity interests in any other Person," following the word "corporation" in the second line thereof and by inserting the language "in such corporation or other Person" following the phrase "similar functions" in the sixth line thereof. (U) Section 11.1 is amended in its entirety to read as follows: "Section 11.1 COMMUNICATIONS. Subject to Section 3.4, all communications provided for under this Agreement or under the Notes shall be in writing and shall be deemed to have been given or made when delivered or mailed by registered or certified mail postage prepaid or, to the extent receipt is confirmed, by telecopy, telefax or other electronic transmission service: (a) if to the Purchaser, at the Purchaser's address or telecopy number set forth in Schedule I to this Agreement, as such address or telecopy number may be changed from time to time by written notice to the Company; or (b) if to the Company at its office at 5215 North O'Connor Boulevard, Suite 940, Central Tower at Williams Square, Irving, Texas 75039, marked for attention to Mr. Paul V. Dufour, Telecopy Number: (214) 869-6556, as such address or telecopy number may be changed from time to time in accordance with Section 7.1 by written notice to the Purchasers and the holders of the Notes; or (c) if to any holder of a Note, at the address or telecopy number of such holder as it appears on the register maintained as provided in Section 3.1 (which address or telecopy number, in the case of a Purchaser, initially shall be the address or telecopy number of such Purchaser specified in clause (a) of this Section 11.1) as such address or telecopy number may 23 be changed by such holder from time to time by written notice to the Company." 2. RELEASE OF KENTUCKY PROPERTY. The Company has advised MONY and MLICA that a municipality or subdivision of the Commonwealth of Kentucky has proposed to the Company that it provide industrial revenue bond or similar financing (the "New Kentucky Financing") for the construction of certain saltcake processing, landfill and related facilities on the property which is currently subject to the Kentucky Mortgage and Security Agreement (as defined the 1988 Agreement) (the "Kentucky Property") and that, in connection therewith, the entity providing the New Kentucky Financing will require a first mortgage lien on such property and the new plant and landfill to be constructed thereon. In order to facilitate such financing, when a final commitment is received to effect the New Kentucky Financing, the Company desires to take such action as is necessary to subdivide the Kentucky Property so that the current plant and facilities located thereon shall remain subject to the Kentucky Mortgage and Security Agreement but that a portion of the Kentucky Property on which the new facilities are to be constructed shall be released from the Lien of the Kentucky Mortgage and Security Agreement. In connection therewith, MONY and MLICA agree that, subject to the delivery to each of them of (i) a release of lien instrument, in form and substance satisfactory to each of them and their counsel, and (ii) lien searches of the Mortgaged Property (as defined in the 1988 Agreement) showing no liens having priority over the lien of the Mortgages (as defined in the 1988 Agreement) other than those previously permitted in connection with the closing of the transactions contemplated by the 1988 Agreement, each of them will execute such documents in order to release the Lien of the Kentucky Mortgage and Security Agreement from that portion of the Kentucky Property as is necessary in order to enable the New Kentucky Financing to be effectuated. 3. MISCELLANEOUS. MONY hereby represents that it is the holder of the entire outstanding principal amount of the Notes. Except to the extent amended or modified by this Amendment, or except as may have been previously waived in writing pursuant to Section 11.2 of the Agreement, the remaining terms and provisions of the Agreement shall remain in full force and effect for all purposes. This Amendment is limited precisely as written and shall not be deemed to (a) be a waiver of or consent to the modification or deviation from any other term or condition of the Agreement 24 or any of the other instruments, agreements or documents referred to therein or (b) prejudice any right or rights which the holders of the Notes may have now or may have in the future under or in connection with the Agreement or any of the other instruments, agreements or documents referred to therein. EXECUTED effective as of the day and year first above written. IMCO RECYCLING INC. By: /s/ James B. Walburg ------------------------ James B. Walburg Vice President THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By: /s/ Diane Hom ------------------------ Name: Diane Hom Title: Managing Director MONY LIFE INSURANCE COMPANY OF AMERICA By: /s/ Diane Hom ------------------------ Name: Diane Hom Title: Authorized Agent 25 EX-21 8 EXHIBIT 21 LIST OF SUBSIDIARIES OF IMCO RECYCLING INC. 1. IMCO Investment Company, a Delaware Corporation 2. Interamerican Zinc, Inc., a Delaware Corporation 3. IMCO Recycling of Ohio Inc., a Delaware Corporation 4. IMCO Management Partnership L.P., a Texas limited partnership 5. IMCO Recycling of California, Inc., a Delaware Corporation 6. IMCO Energy Corp., a Delaware Corporation 7. Phoenix Smelting Corporation, a Georgia Corporation 8. IMCO Recycling of Loudon Inc., a Tennessee Corporation 9. IMCO International, Inc., a Delaware Corporation 10. IMCO Recycling of Indiana Inc., a Delaware Corporation 11. IMCO Recycling of Illinois Inc., a Delaware Corporation 12. Metal Mark, Inc., an Illinois Corporation 13. Columbia Aluminum Processing, Ltd. an Illinois Corporation 14. Marnor Aluminum Processing, Inc., a Missouri Corporation 15. Tropram, Inc., an Indiana Corporation 16. Pittsburg Aluminum, Inc., a Kansas Corporation 17. IMCO Recycling of Michigan L.L.C. a Delaware Limited Liability Company EX-23 9 EXHIBIT 23 EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-26641) pertaining to the Nonqualified Stock Option Plan of IMCO Recycling Inc. and the related Prospectus, in the Registration Statement (Form S-8 No. 33-34745) pertaining to the IMCO Recycling Inc. Amended and Restated Stock Option Plan, in the Registration Statement (Form S-8 No. 33-76780) pertaining to the IMCO Recycling Inc. 1992 Stock Option Plan, and in the Registration Statement (Form S-8 No. 333-00075) pertaining to the IMCO Recycling Inc. Amended and Restated 1992 Stock Option Plan of our report dated February 5, 1996, with respect to the consolidated financial statements of IMCO Recycling Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1995. /s/ Ernst & Young LLP Dallas, Texas March 27, 1996 EX-27 10 EXHIBIT 27
5 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 8,678 0 27,442 0 9,146 47,917 111,758 (32,989) 139,877 19,919 29,754 0 0 1,196 82,080 139,877 141,167 141,167 110,228 110,228 0 0 1,073 20,363 7,893 12,470 0 0 0 12,470 1.03 1.03
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