0000912057-95-006516.txt : 19950815 0000912057-95-006516.hdr.sgml : 19950815 ACCESSION NUMBER: 0000912057-95-006516 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07170 FILM NUMBER: 95563395 BUSINESS ADDRESS: STREET 1: 5215 N OCONNOR BLVD STE 940 STREET 2: CENTRAL TOWERS AT WILLIAM SQUARE CITY: IRVING STATE: TX ZIP: 75039 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-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-7170 IMCO RECYCLING INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 75-2008280 (I.R.S. Employer Identification No.) 5215 NORTH O'CONNOR BLVD. SUITE 940 CENTRAL TOWER AT WILLIAMS SQUARE IRVING, TEXAS 75039 (Address of principal executive offices) (214) 869-6575 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the securities exchange act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 31, 1995. COMMON STOCK, $0.10 PAR VALUE, 11,540,936 PART 1 - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS IMCO RECYCLING INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
JUNE DECEMBER 30, 31, 1995 1994 ---- ---- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $ 8,431 $ 2,854 Accounts receivable 17,319 19,239 Inventories 3,818 3,186 Deferred income tax 1,420 1,978 Other current assets 1,205 598 -------- -------- TOTAL CURRENT ASSETS 32,193 27,855 PROPERTY AND EQUIPMENT, NET 62,021 61,046 INTANGIBLE ASSETS Excess acquisition cost over the fair value of net assets acquired, net of amortization of $3,474 and $3,219, respectively. 5,810 6,056 Patents 264 296 -------- -------- TOTAL INTANGIBLE ASSETS 6,074 6,352 OTHER ASSETS, NET 714 1,538 -------- -------- $101,002 $ 96,791 ======== ======== LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,296 $ 4,150 Accrued liabilities 3,758 4,063 Current maturities of long-term debt 1,000 1,094 Dividends payable -- 1,152 Accrued interest 83 93 -------- -------- TOTAL CURRENT LIABILITIES 9,137 10,552 LONG-TERM DEBT 11,250 11,860 OTHER LONG-TERM LIABILITIES 1,514 1,232 DEFERRED INCOME TAX 5,121 4,857 STOCKHOLDERS' EQUITY Preferred Stock; par value $.10;8,000,000 shares authorized; none issued -- -- Common Stock; par value $.10;20,000,000 shares authorized; 11,756,698 issued at June 30,1995; and December 31, 1994 1,176 1,176 Additional paid in capital 23,878 23,511 Retained earnings 50,871 45,421 Treasury stock, at cost; 215,762 shares at June 30, 1995; 244,910 shares at December 31, 1994 (1,945) (1,818) -------- -------- 73,980 68,290 -------- -------- $101,002 $ 96,791 ======== ========
IMCO RECYCLING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (dollars in thousands, except per share)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- ------------------------ 1995 1994 1995 1994 ------- ------- ------- ------- REVENUES $29,725 $23,070 $60,471 $44,752 Cost of sales 22,410 18,385 45,721 35,248 ------- ------- ------- ------- GROSS PROFIT 7,315 4,685 14,750 9,504 Selling, general and administrative expense 2,252 1,407 4,647 2,684 Litigation expense -- 1,494 -- 1,635 Interest expense 233 221 513 461 Interest income (103) (28) (167) (54) ------- ------- ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 4,933 1,591 9,757 4,778 Provision for income taxes 1,974 553 3,904 1,708 ------- ------- ------- ------- NET EARNINGS $ 2,959 $ 1,038 $ 5,853 $ 3,070 ======= ======= ======= ======= Net earnings per common share $ 0.25 $ 0.09 $ 0.49 $ 0.27 ======= ======= ======= ======= Dividends declared per common share $ .035 -- $ .035 -- ======= ======== Weighted average common and common equivalent shares outstanding 12,013,776 11,529,673 11,966,317 11,524,860
IMCO RECYCLING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (dollars in thousands)
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------ 1995 1994 ---------- ---------- OPERATING ACTIVITIES: Net earnings $ 5,853 $ 3,070 Depreciation and amortization 4,484 3,267 Provision for deferred income taxes 821 451 Other noncash charges 471 280 Loss on sale of property and equipment 2 -- Changes in noncash components of working capital (excluding investing and financing transactions) Accounts receivable 1,896 (1,029) Inventories (632) (2,097) Other current assets (606) (405) Accounts payable and accrued liabilities (170) (340) ------- ------- NET CASH FLOWS FROM OPERATING ACTIVITIES 12,119 3,197 INVESTING ACTIVITIES: Purchase of property and equipment (4,373) (3,185) Proceeds from sale of property and equipment 67 10 Other (218) (587) ------- ------- NET CASH USED BY INVESTING ACTIVITIES (4,524) (3,762) FINANCING ACTIVITIES: Net decrease in short-term borrowings -- (1,200) Principal payments of long-term debt (705) -- Dividends paid (1,554) -- Tax benefit from the exercise of stock options 156 155 Treasury stock activity 85 189 ------- ------- NET CASH USED BY FINANCING TRANSACTIONS (2,018) (856) ------- ------- Net increase (decrease) in Cash and Cash Equivalents 5,577 (1,421) Cash and Cash Equivalents at January 1 2,854 1,665 ------- ------- Cash and Cash Equivalents at June 30 $ 8,431 $ 244 ======= ======= SUPPLEMENTARY INFORMATION: Cash payments for interest $ 625 $ 597 Cash payments for income taxes $ 3,610 $ 2,146
IMCO RECYCLING INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1995 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. The accompanying financial statements include the accounts of IMCO Recycling Inc. and all of its subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. Certain reclassifications have been made to prior year statements to conform to the current year presentation. NOTE B - INVENTORIES The components of inventories are: (dollars in thousands)
JUNE 30, DECEMBER 31, 1995 1994 -------- ------------ Finished goods $1,703 $1,391 Raw materials 1,727 1,440 Supplies 388 355 ------ ------ $3,818 $3,186 ====== ======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is in the resource recovery industry and provides recycling services for primary manufacturers of metal. The Company's principal activity involves the recycling of aluminum and aluminum scrap and by- products. The Company also recycles magnesium and zinc. The Company's financial performance is largely determined by the volume of metal it processes. The largest portion of the Company's business is the processing of customer-owned material for a fee (a service called "tolling"). In addition to tolling, the Company to a lesser extent also purchases material for processing and resale ("buy/sell business"). Both the Company's tolling fees per pound recycled and the selling price of metal it owns, recycles and sells for its own account are included in revenues. Variations in the mix between these two types of transactions, which have occurred in the past, can cause revenue amounts to change significantly from period to period while generally not significantly affecting total gross profit, because both types of transactions have approximately the same gross profit value per pound of metal processed. The following table shows the total pounds of metal processed, the percentage of total pounds processed represented by tolled metal, total revenues and total gross profit in the three and six month periods ended June 30:
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------- -------------------- 1995 1994 1995 1994 ------- -------- -------- -------- (In thousands, except percentages) Pounds of Metal Processed 314,998 234,379 619,529 463,748 Percentage of Pounds Tolled 96% 94% 96% 94% Revenues $ 29,725 $ 23,070 $ 60,471 $ 44,752 Gross Profit $ 7,315 $ 4,685 $ 14,750 $ 9,504 ------------------------------------------------------------------------------
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THREE MONTHS ENDED JUNE 30, 1994 AND SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1994 The Company processed 34% more metal in both the three month and six month periods ending June 30, 1995 than it did in the same periods of 1994. Aluminum processing at the Company's newest facility in Loudon, Tennessee, which was purchased in September, 1994 along with large increases in processing at both the Corona, California plant and the Uhrichsville, Ohio plant were the major factors contributing to these increases. The Corona plant processing reflected favorable market conditions for recycling used beverage containers. The Uhrichsville plant increases are the result of a capacity addition put in place in the third quarter of 1994 which is being fully utilized. In addition to these factors, all of the Company's other aluminum plants processed more material in both the three and six month periods ending June 30, 1995 than they did in the same periods of 1994. Revenues increased 29% in 1995's second quarter ending June 30, 1995 compared to 1994 and increased 35% for the six month period ending the same date. These increases in revenues are substantially the same as the increases in processing volume as discussed above. Tolling activity represented 96% of the Company's processing for both the three month and six month periods ending June 30, 1995. Magnesium revenues and volumes processed were about equal in both the second quarter and for the first half of 1995 compared to 1994. Zinc revenues on the other hand increased 157% on a volume increase of 50% for the three months ending June 30, 1995, while year-to-date June 1995 increases were 115% for revenues and 28% for processing volume, both periods compared to like periods in 1994. The increases in processing volumes reflected record levels of dross receipts during the first half of 1995. The increases in zinc revenues for both of the periods in 1995 compared to 1994 were due to the increased processing volumes as well as increases in buy/sell business. Some customers which were previously tolling their material opted to change to a buy/sell basis. This has the effect of increasing revenues as discussed above. Gross profit increased to $7,315,000 for the three months and $14,750,000 for the six months, both ending June 30, 1995. Compared to $4,685,000 and $9,504,000, these represented 56% and 55% increases, respectively, versus the same periods of 1994. These increases were mostly due to the increased volume as previously discussed. In addition, gross profit was negatively impacted in 1994 by the California plant, which operated at a loss due to both low volume and an equipment failure in the second quarter. As noted above, the California plant's processing rates increased in 1995, and the plant was profitable. Selling, general and administrative expenses were $2,252,000 for the three month period and $4,647,000 for the six month period ending June 30, 1995. These compared to $1,407,000 and $2,684,000 for similar periods of 1994. Increased employee costs due to additional staff hired at the Company's headquarters location necessitated by the Company's recent rapid growth, and travel costs were the principal contributors to this increase. In the second quarter of 1994 the Company incurred $1,494,000 ($1,635,000 year-to-date) of litigation expense related to a lawsuit it settled. Interest expense of $233,000 for the second quarter and $513,000 year- to-date 1995 was very similar to 1994 amounts of $221,000 and $461,000 respectively. Interest income of $103,000 for the three months and $167,000 for the six months both ending June 30, 1995 were higher than comparable periods of 1994 because of higher levels of cash to invest in 1995 compared to 1994. Income before the provision for tax of $4,933,000 in 1995's second quarter was $3,342,000 above 1994's second quarter, while year-to-date income before tax of $9,757,000 was $4,979,000 above 1994's amounts. The Company's effective income tax rate was 40% for both the three and six month periods of 1995 which was about 4-5% higher than for similar periods in 1994, due mostly to higher effective state income tax rates. As a result of all of the above, the Company reported net earnings of $2,959,000 for the second quarter of 1995, and $5,853,000 year-to-date 1995, or 185% and 91%, respectively, more than the comparable 1994 periods. LIQUIDITY AND CAPITAL RESOURCES Operations provided cash of $12,119,000 during the first half of 1995, compared to $3,197,000 in the same period of 1994. Increases in earnings as discussed above, and non-cash charges such as depreciation and deferred income taxes along with a positive contribution to cash provided by working capital items accounted for the variance between the two periods. Working capital other than cash decreased $488,000 in the first half of 1995 and increased $3,871,000 during 1994's first half. A decrease in working capital is a source of cash. The main reason for the working capital decline (other than cash) was a reduction in accounts receivable. The Company's total capital spending in the first half of 1995 was $4,373,000, compared to $3,185,000 spent in the first half of 1994. Capital expenditures for 1995 are expected to be approximately $14,000,000. A capacity expansion and facility improvements at Loudon and the construction of a new cell at the Morgantown landfill have been the largest uses of capital so far in 1995. An aluminum recovery facility at Morgantown is expected to be the largest single expenditure in 1995. This facility, which is expected to cost $6,300,000, received its construction permit in July 1995. Construction is expected to be completed in early 1996. Financing activities in the first half of 1995 included the repayment of $705,000 in long-term debt and the payment of $1,554,000 in dividends. The Company announced in June 1995 that it had signed a letter of intent to acquire all outstanding shares of Alumar Associates, Inc., a privately owned firm headquartered in Chicago Heights, Illinois. Alumar owns Metal Mark which operates three aluminum recycling facilities located in Chicago Heights, Pittsburg, Kansas, and Sikeston, Missouri. It also owns a 50% interest in an aluminum recycling plant in East Chicago, Indiana. These four facilities have an annual capacity net to Metal Mark of 240 million pounds. The purchase price is $10,000,000, with $4,000,000 in cash and $6,000,000 in new IMCO stock. IMCO will also to assume debt outstanding under a working capital line of credit at the time of closing the transaction. In July 1995 the Company announced that it had signed a letter of intent to purchase a Bedford, Indiana aluminum recycling facility from Ravenswood Aluminum, a privately owned firm. The Bedford facility is designed to process used beverage cans and has a rated annual capacity of 150 million pounds. The Company feels that its cash on hand, the availability of funds under its lines of credit and its anticipated internally generated funds will be sufficient to fund its current needs and meet its obligations. At June 30, 1995, the relationship of current assets to current liabilities, or current ratio, was 3.52 to 1, compared to 2.64 to 1 at December 31, 1994. Working capital will fluctuate as the mix of buy/sell business and tolling business changes relative to the total business, for the reasons discussed above. REVIEW BY INDEPENDENT ACCOUNTANTS The Company's independent accountants, Ernst & Young LLP, have reviewed the Company's consolidated financial statements at June 30, 1995, and for the six months then ended prior to filing and their report is included herein. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In April 1995, the Company reached a settlement in a lawsuit it had filed in 1991 against Garney Scott and Scepter Industries Inc. ("Scepter") regarding the Company's recycling process. The settlement agreement dismisses all claims in the litigation each party had against the other parties, and contains mutual releases. The order of dismissal was entered by the Court on May 2, 1995. ITEM 4 . SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of the Stockholders of the Company was held on May 12, 1995, at which the election of three Class I directors, the appointment of Ernst & Young LLP as the Company's independent accountants for 1995 and amendments to the Company's 1992 Stock Option Plan. Don V. Ingram was re-elected as a director, and received 8,501,500 votes for his election with 467,641 votes withheld. Thomas A. James was elected as a director, and received 8,500,825 votes for his election with 468,316 votes withheld. Frank H. Romanelli was re-elected as a director, and received 8,501,300 votes for his election with 467,841 votes withheld. Ernst & Young was ratified as independent accountants for 1995 with 8,676,255 votes for their ratification, 258,198 votes against and 34,688 votes abstaining. The amendments to the Company's 1992 Stock Option Plan were approved with 7,254,562 votes approving, 913,488 against, and 801,091 votes abstaining. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits are included herein: 10.1 Amendment to the Company's 1992 Stock Option Plan as amended December 15, 1994 10.2 First amendment to processing agreement by and among the Rigid packaging division of Aluminum Company of America, The Company and Metal Resources Inc. 15.1 Acknowledgment letter regarding unaudited financial information from Ernst & Young LLP. 27 Financial Data Schedule (b) Reports on Form 8-K - None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IMCO Recycling Inc. Date: August 11, 1995 By: /s/ Robert R. Holian ____________________________ Robert R. Holian Vice President and Controller (Principal Accounting Officer) [Letterhead] Independent Accountant's Review Report Stockholders and Board of Directors IMCO Recycling Inc. We have reviewed the accompanying consolidated balance sheet of IMCO Recycling Inc. as of June 30, 1995, and the related consolidated statements of earnings for three-month and six-month periods ended June 30, 1995, and 1994, and the consolidated statements of cash flows for the six-month periods ended June 30, 1995, and 1994. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of IMCO Recycling Inc. as of December 31, 1994, and the related consolidated statements of earnings, stockholders' equity, and cash flows, [not presented herein], and in our report dated February 9, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP July 28, 1995 EX-10.1 2 EXHIBIT 10.1 EXHIBIT 10.1 IMCO RECYCLING INC. 1992 STOCK OPTION PLAN (As amended December 15, 1994) PURPOSE The purpose of the Plan is to attract and retain key employees, consultants, officers and directors of the Company and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options and Nonqualified Stock Options which will: (a) increase the interest of such employees, consultants, officers and directors in the Company's welfare; (b) furnish an incentive to such employees, consultants, officers and directors to continue their services for the Company; and (c) provide a means through which the Company may attract able persons to enter its employ or to serve as consultants, officers and directors. ARTICLE I DEFINITIONS For the purpose of this Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: 1.1 "Board" means the board of directors of the Company. 1.2 "Change in Control" means the occurrence of any of the following events: (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (excluding transfer by way of pledge or hypothecation), in one transaction or a series of related transactions, of all, or substantially all, of the assets of the Company, (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, (iii) any "person" (as such term is defined in Section 3(a)(9) or Section 13(d)(3) under the 1934 Act) or any "group" (as such term is used in Rule 13d-5 promulgated under the 1934 Act), other than the Company or any successor of the Company or any Subsidiary of the Company or any employee benefit plan of the Company or any Subsidiary (including such plan's trustee), becomes a beneficial owner for purposes of Rule 13d-3 promulgated under the 1934 Act, directly or indirectly, of securities of the Company representing 50.1% or more of the Company's then outstanding securities having the right to vote in the election of directors, or (iv) during any period of two consecutive years, individuals who, at the beginning of such period constituted the entire Board, cease for any reason (other than death) to constitute a majority of the directors, unless the election, or the nomination for election, by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 1.3 "Code" means the Internal Revenue Code of 1986, as amended. 1.4 "Common Stock" means the common stock which the Company is currently authorized to issue or may in the future be authorized to issue. 1.5 "Company" means IMCO Recycling Inc., a Delaware corporation. 1.6 "Date of Grant" means the effective date on which an option is awarded to a Participant as set forth in the stock option agreement. 1.7 "Eligible Participant" shall have the meaning set forth in Section 6.1 hereof. 1.8 "Fair Market Value" of the Company's shares of Common Stock means (i) the closing price per share on any stock exchange on which the Common Stock is traded, or (ii) the mean between the closing or average (as the case may be) bid and asked prices per share of Common Stock on the over-the-counter market, whichever is applicable. 1.9 "Incentive Stock Option" means an option to purchase shares of Common Stock granted to an eligible Participant pursuant to Article V and which is intended to qualify as an incentive stock option under Section 422 of the Code. 1.10 "1934 Act" means the Securities Exchange Act of 1934, as amended. 1.11 "Nonqualified Stock Option" means an option to purchase shares of Common Stock granted to a Participant pursuant to Article IV or Article V and which is not intended to qualify as an incentive stock option under Section 422 of the Code. 1.12 "Participant" means any employee of the Company or any Subsidiary of the Company or any non-employee director, officer or consultant of the Company who is, or who is proposed to be, a recipient of a Stock Option. 1.13 "Plan" means the IMCO Recycling Inc. 1992 Stock Option Plan, as it may be amended from time to time. 1.14 "Reload Stock Option" means a Nonqualified Stock Option or an Incentive Stock Option granted pursuant to Section 7.2 hereof. 1.15 "Restricted Stock" shall have the meaning set forth in Section 7.3 hereof. 1.16 "Restriction Period" shall have the meaning set forth in Section 7.3 hereof. 1.17 "Spread" shall have the meaning set forth in Article XIII hereof. 1.18 "Stock Dividend" means a dividend or other distribution declared on the shares of Common Stock payable in (i) capital stock of the Company or any Subsidiary of the Company, or (ii) rights, options or warrants to receive or purchase capital stock of the Company or any Subsidiary of the Company, or (iii) securities convertible into or exchangeable for capital stock of the Company or any Subsidiary of the Company, or (iv) any capital stock received upon the exercise, or with respect to, the foregoing. 1.19 "Stock Options" shall mean any and all Incentive Stock Options, Nonqualified Stock Options and Reload Stock Options granted pursuant to the Plan. 1.20 "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of granting of the Stock Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, and "Subsidiaries" means more than one of any such corporations. 2 ARTICLE II ADMINISTRATION Subject to the terms of this Article II, the Plan shall be administered by the Compensation Committee (the "Committee") of the Board, which shall consist of at least two members. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. Each member of the Committee, at the time of his appointment to the Committee and while he is a member thereof, must be a "disinterested person", as that term is defined in Rule 16b-3 promulgated under the 1934 Act. The Board shall select one of its members to act as the Chairman of the Committee, and the Committee shall make such rules and regulations for its operation as it deems appropriate. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee. Subject to the terms hereof, the Committee shall designate from time to time the key employees, consultants, or officers of the Company to whom Stock Options will be granted, interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and make such other determinations and take such other action as it deems necessary or advisable. In this regard, the Committee shall consider and give appropriate weight to input from representatives of management of the Company regarding the contributions or potential contributions to the Company or a Subsidiary of certain of the employees, officers or consultants, or potential employees, officers or consultants, of the Company or any Subsidiary. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and the terms of any Stock Options issued under it and to adopt such rules and regulations for administering the Plan as it may deem necessary. The Committee may, in its absolute discretion (except with respect to Stock Options granted to the Company's non-employee directors pursuant to Article IV hereof) accelerate the date on which any Stock Option granted under the Plan becomes exercisable. Except as provided below, any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties, including the Company and all Participants. ARTICLE III SHARES SUBJECT TO PLAN The Committee may not grant Stock Options under the Plan for more than 1,150,000 shares of Common Stock of the Company (as may be adjusted in accordance with Article XII or XIII hereof). Shares to be distributed and sold may be made available from either authorized but unissued Common Stock or Common Stock held by the Company in its treasury. Shares that by reason of the expiration or unexercised termination of a Stock Option are no longer subject to purchase may be reoffered under the Plan. ARTICLE IV NON-EMPLOYEE DIRECTORS' STOCK OPTIONS The provisions of this Article IV shall apply only to Nonqualified Stock Options granted under the Plan to non-employee directors of the Company. 4.1 ELIGIBILITY. Only non-employee directors of the Company shall be eligible to receive grants of Nonqualified Stock Options under this Article IV. 4.2 GRANT OF STOCK OPTIONS. On December 15 of each year during the term of this Plan (or if such date is not a business day, then on the next succeeding business day thereafter), the Company shall grant to each non-employee director of the Company a Nonqualified Stock Option to purchase that number of shares of Common Stock determined by dividing the annual director's fee paid or accrued to be paid to that director with respect to the 12-month period immediately preceding such Date of Grant, by the Fair Market Value per share of the Common Stock on the Date of Grant. Each grant of Nonqualified Stock Options under this Article IV shall be evidenced by a stock option agreement setting forth the 3 total number of shares subject to the Nonqualified Stock Option, the option exercise price, the term of the Nonqualified Stock Option and such other terms and provisions as are consistent with the Plan. 4.3 OPTION PRICE. The option exercise price for a Nonqualified Stock Option granted under this Article IV shall be equal to the Fair Market Value per share of Common Stock on the Date of Grant. Notwithstanding anything to the contrary contained in this Section 4.3, the option exercise price of each Nonqualified Stock Option granted pursuant to this Article IV shall not be less than the par value per share of the Common Stock. 4.4 OPTION PERIOD. All Nonqualified Stock Options granted under this Article IV shall automatically vest and be exercisable in full after the expiration of six months from the Date of Grant. The period during which a Nonqualified Stock Option granted under this Article IV may be exercised shall expire ten years from the Date of Grant, unless sooner terminated pursuant to Article VIII. No Nonqualified Stock Option granted under this Article IV may be exercised at any time after its term. ARTICLE V STOCK OPTIONS FOR EMPLOYEES, CONSULTANTS AND OFFICERS The provisions of this Article V shall apply only to Stock Options granted under the Plan to key employees, consultants and officers of the Company or any of its Subsidiaries, including directors who are employees of the Company and/or any of its Subsidiaries and non-employee officers of the Company and/or any of its Subsidiaries: 5.1 ELIGIBILITY. The Committee shall, from time to time, select the particular key employees, consultants and officers of the Company and its Subsidiaries to whom the Stock Options provided under this Article V are to be granted and/or distributed in recognition of each such Participant's contribution to the Company's or the Subsidiary's success. In this regard, the Committee shall consider and give appropriate weight to input from representatives of management of the Company regarding the contributions or potential contributions to the Company or a Subsidiary of certain of the employees, officers or consultants or potential employees, officers or consultants of the Company or a Subsidiary. 5.2 GRANT OF STOCK OPTIONS. All grants of Stock Options under this Article V shall be awarded by the Committee. Each grant of Stock Options shall be evidenced by a stock option agreement setting forth the total number of shares subject to the Stock Option, the option exercise price, the term of the Stock Option, and such other terms and provisions as are approved by the Committee, but, except to the extent permitted herein, are not inconsistent with the Plan. In the case of an Incentive Stock Option, the stock option agreement shall also include provisions that may be necessary to assure that the option is an incentive stock option under the Code. The Company shall execute stock option agreements upon instructions from the Committee. 5.3 OPTION PRICE. The option price for a Nonqualified Stock Option shall be equal to the Fair Market Value per share of the Common Stock on the Date of Grant. The option price for an Incentive Stock Option shall be determined by the Committee and shall be an amount not less than the Fair Market Value per share of the Common Stock on the Date of Grant; the Committee shall determine the Fair Market Value of the Common Stock on the Date of Grant, and shall set forth the determination in its minutes. Notwithstanding anything to the contrary contained in this Section 5.3, the exercise price of each Stock Option granted pursuant to the Plan shall not be less than the par value per share of the Common Stock. 5.4 OPTION PERIOD. The option period will begin and terminate on the respective dates specified by the Committee, but may not terminate later than ten years from the Date of Grant. No Stock Option granted under the Plan may be exercised at any time after its term. The Committee may provide for the exercise of Stock Options in installments and upon such terms, conditions and restrictions as it may determine. The Committee shall have the right to accelerate the time at which any Stock Option granted to an employee, consultant or officer (including an employee director) shall become exercisable. In the event of the retirement of an employee of the Company or a Subsidiary in accordance with the standard 4 retirement policies of the Company or the Subsidiary, as the case may be, all unmatured installments of Stock Options outstanding shall automatically be accelerated and exercisable in full in accordance with the provisions of Article VIII. ARTICLE VI LIMITS ON INCENTIVE STOCK OPTIONS 6.1 OPTION PERIOD. Notwithstanding the provisions of Sections 5.4 and 7.2 hereof, if a Participant eligible to receive a grant of an Incentive Stock Option under Section 422 of the Code (an "Eligible Participant") owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any Subsidiary of the Company) and an Incentive Stock Option is granted to such Eligible Participant, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five years from the Date of Grant. In addition, the option price of any such Incentive Stock Option granted to any such Eligible Participant owning more than 10% of the combined voting power of all classes of stock of the Company (or any Subsidiary of the Company) shall be at least 110% of the Fair Market Value of the Common Stock on the Date of Grant. 6.2 LIMITATION ON EXERCISES OF SHARES SUBJECT TO INCENTIVE STOCK OPTIONS. To the extent required by the Code for incentive stock options, the exercise of Incentive Stock Options granted under the Plan shall be subject to the $100,000 calendar year limit as set forth in Section 422(d) of the Code. 6.3 DISQUALIFYING DISPOSITION. If stock acquired upon exercise of an Incentive Stock Option is disposed of by an Eligible Participant prior to the expiration of either two years from the Date of Grant of such option or one year from the transfer of shares to such Eligible Participant pursuant to the exercise of such option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Eligible Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by an Eligible Participant shall not affect the status of any other option granted under the Plan as an incentive stock option within the meaning of Section 422 of the Code. 6.4 TERMINATION. Notwithstanding the provisions of Article VIII, an Eligible Participant's Incentive Stock Options shall terminate no later than ninety (90) days after termination of such Participant's employment with the Company and its Subsidiaries; PROVIDED that if such employment terminates by reason of the death or total and permanent disability (as defined in Section 22(e) of the Code) of the Participant, then such Participant's Incentive Stock Options shall terminate no later than one hundred eighty (180) days after such termination by reason of death or disability. ARTICLE VII EXERCISE OF STOCK OPTIONS; RELOAD STOCK OPTIONS; RESTRICTED STOCK 7.1 PAYMENT. Full payment for shares purchased upon exercise of a Stock Option shall be made in cash or by the Participant's delivery to the Company of shares of Common Stock which have a Fair Market Value equal to the option price (or in any combination of cash and shares of Common Stock having an aggregate Fair Market Value equal to the option price). No shares may be issued until full payment of the purchase price therefor has been made, and a Participant will have none of the rights of a stockholder until shares are issued to him. 7.2 RELOAD STOCK OPTIONS. Subject to the terms of this Section 7.2, in the event that shares are delivered by a Participant in payment of all or a portion of the exercise price of a Stock Option as set forth in Section 7.1 and/or shares are delivered to or withheld by the Company in satisfaction of the Company's tax withholding obligations upon exercise in accordance with Section 15.7, then a Participant so exercising a Nonqualified Stock Option shall automatically be granted a Nonqualified Stock Option and a Participant so exercising an Incentive Stock Option shall automatically be granted an Incentive Stock Option (in either case, a "Reload Stock Option"), to purchase that number of shares so delivered to or withheld by the Company, as the case may be, at an option exercise price equal to the Fair Market Value per share of the Common Stock on 5 the date of exercise (subject to the provisions of Article VI regarding Incentive Stock Options and, in any event not less than the par value per share of the Common Stock). The option period for a Reload Stock Option will expire on the expiration date of the Stock Option it replaces (subject to the provisions in Article VI regarding Incentive Stock Options and the provisions of Article VIII), after which the Reload Stock Option cannot be exercised. The Date of Grant of a Reload Stock Option shall be the date that the Stock Option it replaces is exercised. A Reload Stock Option shall automatically vest and be exercisable in full after the expiration of six months from its Date of Grant. It shall be a condition to the grant of a Reload Stock Option that promptly after its Date of Grant, a stock option agreement shall be delivered to, and executed and delivered by the Participant and the Company which sets forth the total number of shares subject to the Reload Stock Option, the option price, the term of the Reload Stock Option and such other terms and provisions as are consistent with the Plan. 7.3 RESTRICTED STOCK. In the event that a Participant exercises a stock option and receives a Reload Stock Option under Section 7.2, the following restrictions and conditions will apply to that number of the shares of Common Stock (the "Restricted Stock") issued to the Participant upon such exercise, which is equal to one-half of the sum of (i) the number of shares of Common Stock delivered by the Participant to the Company in payment of the exercise price, if any, plus (ii) the number of shares of Common Stock delivered to, or withheld by, the Company in satisfaction of the Company's tax withholding obligations under Section 15.7, if any: (a) RESTRICTION PERIOD. Subject to the other provisions of this Plan, each Participant shall not be permitted to sell, assign, transfer, pledge, exercise or place any encumbrance on shares of Restricted Stock and any Stock Dividends paid on or with respect to such Restricted Stock until the earliest to occur of any of the following events (such period of restriction being referred to herein as the "Restriction Period"): (i) the expiration of five years from the date of issuance of the Restricted Stock in the name of the Participant; (ii) in the case of an employee of the Company or a Subsidiary, the retirement of such Participant from the Company or the Subsidiary in accordance with the standard retirement policies of the Company or the Subsidiary, as the case may be; (iii) in the case of a non-employee director, officer or consultant of the Company, the cessation of service to the Company of such Participant in such capacity; (iv) the death of such Participant; (v) the total and permanent disability of such Participant (as defined in Article VIII hereof); or (vi) a Change in Control of the Company. (b) RIGHTS WITH RESPECT TO RESTRICTED STOCK. Except as otherwise provided in the Plan, the Participant shall have, with respect to his or her Restricted Stock (and any Stock Dividends paid on such Restricted Stock), all of the rights of a stockholder of the Company, including the right to vote the shares and the right to receive any dividends thereon. Each Participant who is to receive Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, registered in the name of the Participant, which shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock, to read substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions of the IMCO Recycling Inc. 1992 Stock Option Plan. A copy of such Plan is on file in the offices of IMCO Recycling Inc., 5215 North O'Connor Blvd., Suite 940, Irving, Texas 75039." 6 ARTICLE VIII TERMINATION OF EMPLOYMENT OR SERVICE In the event a Participant who is an employee of the Company (including any employee who is an officer or a director) or any Subsidiary shall cease to be employed by the Company or a Subsidiary, or a Participant who is a non-employee director or a non-employee officer or consultant of the Company or any Subsidiary shall cease to serve in his capacity as a director, officer or consultant, as the case may be, of the Company or any Subsidiary, for any reason other than death, disability or retirement, such Participant's Stock Options may be exercised by the Participant for a period of one hundred eighty (180) days after the Participant's termination of employment or service, as the case may be, or until expiration of the applicable Option Period (if sooner) to the extent of the shares with respect to which such Stock Options could have been exercised by the Participant on the date of termination, and thereafter to the extent not so exercised, such Stock Options shall terminate. In addition, except as provided in Section 6.4 with respect to Incentive Stock Options, a Participant's Stock Options may be exercised as follows in the event of such Participant's death, disability or retirement: (a) DEATH. In the event of death while employed or while serving as a (i) non-employee director, (ii) non-employee officer or (iii) consultant, as the case may be, the Stock Option may be exercised, for a period of one hundred eighty (180) days after the Participant's death or until expiration of the Stock Option period (if sooner), to the extent of the shares with respect to which the Stock Option could have been exercised by the Participant on the date of the Participant's death, by the Participant's estate or personal representative, or by the person who acquired the right to exercise the Stock Option by bequest or inheritance or by reason of the Participant's death; and (b) DISABILITY OR RETIREMENT. In the event of termination of employment of an employee (or termination of service in the case of a (i) non-employee director, (ii) non-employee officer or (iii) consultant) as the result of a total and permanent disability (as defined in Section 22(e) of the Code) or as the result of retirement in accordance with the standard retirement policies of the Company or the Subsidiary, as the case may be, the Stock Option may be exercised by the Participant or his guardian for a period of one hundred eighty (180) days after such termination or until expiration of the Stock Option period (if sooner), to the extent of the shares with respect to which the Stock Option could have been exercised by the Participant on the date of such termination, after taking into account any acceleration of unmatured installments of Stock Options pursuant to Section 5.4. Notwithstanding the foregoing, individual grants of Stock Options to Participants under the Plan may provide, pursuant to the terms of the particular stock option agreement, more restrictive terms than those contained in this Plan concerning any exercise of such Stock Options with respect to any termination of employment or service by such Participants. ARTICLE IX AMENDMENT OR DISCONTINUANCE Subject to the limitations set forth in this Article IX, the Board may at any time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan, provided that such action shall not, without obtaining the approval of the stockholders of the Company, (i) materially increase the benefits accruing to Participants under the Plan, (ii) materially increase the number of securities which may be issued under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the Plan. Subject to the foregoing limitations, the Board may amend the Plan or modify the agreements evidencing same in order to comply with Section 16(b) of the 1934 Act and the rules and regulations promulgated thereunder, as amended from time to time. The Board may not amend the provisions of Article IV more than once during any six-month period unless such amendment is deemed necessary in order to comply with the provisions of the Code or the treasury regulations promulgated thereunder. The Committee may also substitute new Stock Options for Stock Options previously granted to employees of the Company or any of its Subsidiaries, including previously granted Stock Options having higher exercise prices. 7 ARTICLE X EFFECT OF THE PLAN Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any director, officer, consultant or employee any right to be granted a Stock Option to purchase or receive Common Stock of the Company or any other rights except as may be evidenced by a stock option agreement, or any amendment thereto, duly authorized by and executed on behalf of the Company and then only to the extent of and upon the terms and conditions expressly set forth therein. ARTICLE XI TERM The Plan shall be submitted to the Company's stockholders for their approval; PROVIDED, HOWEVER, that Stock Options may be granted under the Plan prior to the time of stockholder approval. Unless sooner terminated by action of the Board, the Plan will terminate on the 15th day of December, 2002. Stock Options under the Plan may not be granted after that date, but Stock Options granted before that date will continue to be effective in accordance with their terms and conditions. ARTICLE XII CAPITAL ADJUSTMENTS If at any time while the Plan is in effect or unexercised Stock Options are outstanding there shall be any increase or decrease in the number of issued and outstanding shares of Common Stock through the declaration of a Stock Dividend or through any recapitalization resulting in a stock split-up, combination, or exchange of shares of Common Stock, then and in such event: (i) An appropriate adjustment shall be made in the maximum number of shares of Common Stock then subject to being awarded under grants pursuant to the Plan, to the end that the same proportion of the Company's issued and outstanding shares of Common Stock shall continue to be subject to being so awarded; and (ii) Appropriate adjustments shall be made in the number of shares of Common Stock and the exercise price per share thereof then subject to purchase pursuant to each such Stock Option previously granted and unexercised, to the end that the same proportion of the Company's issued and outstanding shares of Common Stock in each instance shall remain subject to purchase at the same aggregate exercise price. Any fractional shares resulting from any adjustment made pursuant to this Article XII shall be eliminated for the purposes of such adjustment. Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or exercise price of shares of Common Stock then subject to outstanding Stock Options granted under the Plan. ARTICLE XIII RECAPITALIZATION, MERGER AND CONSOLIDATION (a) The existence of this Plan and Stock Options granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options or warrants to purchase same), or 8 the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (b) Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger or consolidation, any outstanding Stock Option granted hereunder shall pertain to and apply to the securities or rights (including cash, property or assets) to which a holder of the number of shares of Common Stock subject to the Stock Option would have been entitled. (c) In the event of any reorganization, merger or consolidation pursuant to which the Company is not the surviving or resulting corporation, or of any proposed sale of substantially all of the assets of the Company, there may be substituted for each share of Common Stock subject to the unexercised portions of such outstanding Stock Option that number of shares of each class of stock or other securities or that amount of cash, property or assets of the surviving or consolidated company which were distributed or distributable to the stockholders of the Company in respect of each share of Common Stock held by them, such outstanding Stock Options to be thereafter exercisable for such stock, securities, cash or property in accordance with their terms. Notwithstanding the foregoing, however, the Board, in its sole discretion, may cancel all such Stock Options as of the effective date of any such reorganization, merger or consolidation, or of any such proposed sale of substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, and either: (i) give notice to each holder thereof or his personal representative of its intention to cancel such Stock Options and permit the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares subject to such outstanding Stock Options, including shares as to which such Stock Options would not otherwise be exercisable; or (ii) pay the holder thereof an amount equal to a reasonable estimate of an amount (hereinafter the "Spread") equal to the difference between the net amount per share payable in such transaction or as a result of such transaction, less the exercise price of such Stock Options. In estimating the Spread, appropriate adjustments to give effect to the existence of the Stock Options shall be made, such as deeming the Stock Options to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Options as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed. (d) In the event of a Change in Control of the Company, then, notwithstanding any other provision in the Plan to the contrary, all unmatured installments of Stock Options outstanding shall thereupon automatically be accelerated and exercisable in full. (e) Notwithstanding sub-Section (c) above of this Article XIII, in case the Company shall, at any time while any Stock Option under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property or (ii) dissolve, liquidate, or wind up its affairs, then, provided that the Board so determines in its sole discretion, each Participant may thereafter receive upon exercise hereof (in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive) the same kind and amount of any securities or assets as may be issuable, distributable or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. In the event that the Company shall, at any time prior to the expiration of any Stock Option, make any partial distribution of its assets in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of retained earnings or earned surplus and designated as such), then in such event the exercise prices then in effect with respect to each option shall be reduced, as of the payment date of such distribution, in proportion to the percentage reduction in the tangible book value of the shares of the Company's Common Stock (determined in accordance with generally accepted accounting principles) resulting by reason of such distribution; provided, that in no event shall any adjustment of exercise prices in accordance with the terms of the Plan result in any exercise prices being reduced below the par value per share of the Common Stock. 9 (f) Upon the occurrence of each event requiring an adjustment of the exercise price and/or the number of shares purchasable pursuant to Stock Options granted pursuant to the terms of this Plan, the Company shall mail forthwith to each Participant a copy of its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant, except as to any Participant who contests such computation by written notice to the Company within thirty (30) days after receipt thereof by such Participant. ARTICLE XIV OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER CORPORATIONS Stock Options may be granted under the Plan from time to time in substitution for such stock options held by employees of a corporation who become or are about to become employees of the Company or a Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by either of the foregoing of stock of the employing corporation as the result of which it becomes a Subsidiary. The terms and conditions of the substitute options so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the options in substitution for which they are granted. ARTICLE XV MISCELLANEOUS PROVISIONS 15.1 EXERCISE OF STOCK OPTIONS. Stock Options granted under the Plan may be exercised during the option period, at such times and in such amounts, in accordance with the terms and conditions and subject to such restrictions as are set forth herein and in the applicable stock option agreements. Notwithstanding anything to the contrary contained herein, Stock Options may not be exercised, nor may shares be issued pursuant to a Stock Option if any necessary listing of the shares on a stock exchange or any registration under state or federal securities laws required under the circumstances has not been accomplished. 15.2 NON-ASSIGNABILITY. A Stock Option granted to a Participant may not be transferred or assigned, other than (i) by will or the laws of descent and distribution or (ii) pursuant to the terms of a qualified domestic relations order (as defined in Section 401(a)(13) of the Code or Section 206(d)(3) of the Employee Retirement Income Security Act of 1974, as amended), provided, that in the case of an Incentive Stock Option, such transfer or assignment may occur only to the extent it will not result in disqualifying such option as an incentive stock option under Section 422 of the Code, or any successor provision. Subject to the foregoing, during a Participant's lifetime, Stock Options granted to a Participant may be exercised only by the Participant or, provided the particular stock option agreement so provides, by the Participant's guardian or legal representative. 15.3 INVESTMENT INTENT. The Company may require that there be presented to and filed with it by any Participant(s) under the Plan, such evidence as it may deem necessary to establish that the Stock Options granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution. 15.4 ALLOTMENT OF SHARES. Except as otherwise set forth in Article IV, the Committee shall determine the number of shares of Common Stock to be offered from time to time by grant of Stock Options to Participants under the Plan. The grant of a Stock Option to a Participant shall not, by itself, be deemed either to entitle the Participant to, or to disqualify the Participant from, participation in any other grant of Stock Options under the Plan. 15.5 NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any Stock Option confers upon any employee the right to continue in the employ of the Company or interferes with or restricts in any way the right of the Company to discharge any employee at any time (subject to any contract rights of such employee). 10 15.6 STOCKHOLDERS' RIGHTS. The holder of a Stock Option shall have none of the rights or privileges of a stockholder except with respect to shares which have been actually issued. 15.7 TAX REQUIREMENTS. Any employee who exercises any Stock Option shall be required to pay the Company the amount of all taxes which the Company is required to withhold as a result of the exercise of the Stock Option. With respect to an Incentive Stock Option, in the event of a subsequent disqualifying disposition of Common Stock within the meaning of Section 422 of the Code, such payment of taxes may be made in cash, by check or through the delivery of shares of Common Stock which the employee then owns, which shares have an aggregate Fair Market Value equal to the required withholding payment, or any combination thereof. With respect to the exercise of a Nonqualified Stock Option by a Participant who is an officer, director or 10% stockholder of the Company (as determined by reference to Section 16(b) of the 1934 Act and the rules promulgated thereunder), any obligation of such Participant to pay such taxes shall only be satisfied by the Company's withholding of that number of whole shares of Common Stock otherwise issuable upon such exercise which have an aggregate Fair Market Value which equals or exceeds (if necessary to avoid the issuance of fractional shares) the required tax withholding payment. With respect to the exercise of a Nonqualified Stock Option by any Participant who is not such an officer, director or 10% stockholder of the Company, such Participant's obligation to pay such taxes may be satisfied by the following, or any combination thereof: (i) the delivery of cash to the Company in an amount necessary to satisfy the required tax withholding obligation of the Company and/or (ii) the actual delivery by the exercising Participant to the Company of shares of Common Stock which the Participant owns and/or the Company's withholding of a number of shares to be delivered upon the exercise of the Stock Option), which shares so delivered or withheld have an aggregate Fair Market Value which equals or exceeds (if necessary to avoid the issuance of fractional shares) the required tax withholding payment. Any such withholding payments with respect to the exercise of a Nonqualified Stock Option made by a Participant in cash or by actual delivery of shares of Common Stock shall be required to be made within thirty (30) days after the delivery to the Participant of any certificate representing the shares of Common Stock acquired upon exercise of the Stock Option. 15.8 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the Committee, nor any officer or employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. ARTICLE XVI EFFECTIVE DATE The effective date of the Plan shall be December 15, 1992, that is, the date on which it was first approved and adopted by the Board. Notwithstanding the amendment of this Plan effective as of December 15, 1994, neither the terms of the Stock Options outstanding as of such date nor the Agreements entered into by and between the Company and such relevant Participant in respect of such Stock Options, shall be deemed to be amended in any way. * * * * * * * * * 11 IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of the 15th day of December, 1994 by its Chief Executive Officer pursuant to prior action taken by the Board. IMCO RECYCLING INC. By:____________________________________ Chief Executive Officer Attest: ___________________________________ Secretary 12 EX-10.2 3 EXHIBIT 10.2 EXHIBIT 10.2 FIRST AMENDMENT TO PROCESSING AGREEMENT This First Amendment to Processing Agreement (this "Amendment") is executed and delivered this ___ day of ____________, 1995, but effective as of the 1st day of March, 1995, by and among the Rigid Packaging Division of Aluminum Company of America, a Pennsylvania corporation ("Alcoa"), IMCO Recycling Inc., a Delaware corporation ("IMCO") and Metal Resources, Inc., a Tennessee corporation ("MRI"). All references herein to "IMCO" shall be references to both IMCO and MRI, collectively, unless the context otherwise requires. WITNESSETH: WHEREAS, Alcoa and IMCO entered into a Processing Agreement (herein so called) dated effective as of January 1, 1994 pursuant to which IMCO provides tolling/converting services at its recycling and processing facility in Rockwood, Tennessee ("Rockwood Facility") to Alcoa to satisfy Alcoa's requirements of secondary metal in the form of RSI and Molten Metal, and Alcoa purchases such services from IMCO; and WHEREAS, MRI is an indirect wholly owned subsidiary of IMCO which owns and operates a recycling and processing facility in Loudon, Tennessee, and is in the process of expanding its facilities with the addition of a new furnace at its plant ("MRI Facility"); and WHEREAS, IMCO, MRI and Alcoa desire to expand the scope of the Processing Agreement to include additional tolling/converting services for Alcoa by MRI at the MRI Facility; and WHEREAS, IMCO and Alcoa desire to amend the Processing Agreement to include the terms and conditions of such additional tolling/converting services at the MRI Facility, as well as certain other amendments to the terms and conditions of IMCO's tolling/converting services at the Rockwood Facility. NOW, THEREFORE, for Ten and No/100 Dollars ($10.00) and in consideration of and in reliance upon the mutual covenants and conditions set forth herein, the sufficiency of which are hereby acknowledged, Alcoa, IMCO and MRI agree as follows: 1. PROCESSING AGREEMENT. Except to the extent specifically amended by the terms of this Agreement, all terms, conditions, covenants and agreements set forth in the Processing Agreement are hereby ratified and confirmed and shall remain in full force and effect. 2. DEFINED TERMS. All capitalized terms used herein and not expressly defined herein shall have the same meanings as the identical terms contained in the Processing Agreement. 3. EXHIBITS "B" AND "C". (a) Exhibit "B" of the Processing Agreement is hereby deleted and substituted in lieu of thereof is Exhibit "B" which is attached hereto and made a part hereof. (b) Exhibit "C" is hereby amended by adding a new paragraph (f) to read as follows: "(f) Notwithstanding any provision to the contrary herein, effective January 1, 1995, any fee adjustment required to be made on a quarterly basis hereunder shall be made in the second Contract Quarter immediately following the particular Contract Quarter in which the cost changes took place; for example, cost increases or decreases in the first Contract Quarter of 1995 will be calculated and resolved during the second Contract Quarter of 1995, but will not be implemented until the third Contract Quarter of 1995. This provision is implemented in order to eliminate the need for retroactive price changes." 4. MRI AS A PARTY. Effective as of March 1, 1995, MRI shall be a party to the Processing Agreement. All references to "IMCO" in the Processing Agreement shall be references to both IMCO and MRI, collectively, unless the context otherwise requires. References to "Facility" in the Processing Agreement shall mean either the Rockwood Facility or the MRI Facility, as the context requires; provided, however, all references to "Facility" in Exhibit "C" of the Processing Agreement shall mean only the Rockwood Facility. 5. APPROVALS. Unless otherwise provided in the Processing Agreement, whenever approval or consent is required of IMCO or MRI, the approval or consent by IMCO shall be deemed to be the approval and/or consent by both IMCO and MRI. 6. ASSIGNMENT. Notwithstanding the provisions contained in SECTION 23.01 of the Processing Agreement, IMCO and MRI shall have the right to assign the Processing Agreement to any of their parents or direct or indirect wholly owned subsidiaries. 7. WORK COVERED BY PROCESSING AGREEMENT. The Processing Agreement shall govern the terms and conditions of performance by IMCO of its tolling/converting services at the Rockwood Facility and the MRI Facility and the rights and obligations of Alcoa in connection with the payment therefor and the deliveries of product thereto from the Alcoa Plant and from Alcoa's Warrick, Indiana facility. Effective as of March 1, 1995 (except as otherwise expressly set forth therein), the amounts to be paid by Alcoa for such services are set forth in Exhibit "B" hereto, subject to adjustment pursuant to SECTION 5.02 of the Processing Agreement. The parties acknowledge that Exhibit "B" contains base charges for such services and that some of these charges have previously been adjusted pursuant to SECTION 5.02 of the Processing Agreement. 8. TARGET MONTHLY VOLUME. All references in the Processing Agreement (including but not limited to those contained in SECTIONS 2.01 and 2.02 thereof) to a target monthly volume of 15 million pounds of Product are hereby revised to mean a target monthly volume of 20 million pounds. Such monthly volume shall be allocated between the Rockwood Facility and the MRI Facility at the sole discretion of IMCO. All references contained in SECTION 2.06 of the Processing Agreement to the 15 million pounds of Product to be delivered monthly by Alcoa in order to avoid a Deficiency is hereby revised to mean 20 million pounds. All references to a monthly volume of 9 million pounds of Product during the final Contract Year, such as those contained in SECTIONS 2.02, 2.06(c) and 3.03 of the Processing Agreement, are hereby revised to refer to a monthly volume of 12 million pounds. 9. DEFAULT VOLUMES. The reference to 12 million pounds of Product per month contained in the first sentence of SECTION 2.04 of the Processing Agreement is hereby revised to mean 16 million pounds of Product per month. The reference to Exhibit "C" in the seventh line of SECTION 2.04 is hereby revised to mean Exhibit "B." The reference to 12 million pounds of Product per month contained in the first sentence of SECTION 2.05 of the Processing Agreement is hereby revised to mean 16 million pounds of Product per month. 10. EXPANSION. The second, third and fourth sentences of SECTION 3.02 are hereby deleted in their entirety. -2- 11. TERMINATION. Section 3.01 is hereby amended by adding a new paragraph to follow the existing paragraph in such section, to read as follows: "Notwithstanding any provision contained herein to the contrary, after January 1, 1996, Alcoa shall have a one-time right and option to reduce the target monthly volume referred to in Sections 2.01 and 2.02 to an amount to be specified by Alcoa of less than 20 million pounds, but in no event less than 15 million pounds. This one-time right and option shall be exercisable by Alcoa at any time during the remaining term of the Agreement by Alcoa's giving written notice of such exercise to IMCO, specifying the reduced target monthly volume so chosen by Alcoa. In such event,the target monthly volume shall nonetheless remain in effect at 20 million pounds, and the provisions of the Agreement concerning such reduced target monthly volume chosen by Alcoa will not become effective, until the first anniversary date of the last day of the particular Contract Year in which such Alcoa notice of exercise is given. In such event, the provisions of this Agreement concerning volumes required to avoid a Deficiency, final Contract Year monthly volumes, default volumes, and any and all provisions regarding similar amounts which have been modified by the terms of this Amendment, shall be appropriately reduced on a pro rata basis by the relative amount of such reduction in target monthly volume. In addition, commencing on the first of January following Alcoa's notice of exercise, the Fixed Charge Payment attributable to the Expanded Commitment shall be reduced on a pro rata basis by the relative amount of such reduction in target monthly volume; provided, however, during the first Contract Year commencing on such January 1st (the "Intervening Year"), the Fixed Charge Payment attributable to the Expanded Commitment shall not be reduced to less than $120,000. Additionally, if requested by Alcoa in the notice of exercise, during the Intervening Year the Fixed Charge Payment attributable to the Expanded Commitment shall be reduced to less than $120,000 to the extent that IMCO is able to recover the remaining volume attributable to the Expanded Commitment with third-party business. Within 30 days after the exercise of such option by Alcoa, the parties will enter into a further amendment to the Agreement reflecting the reduced target monthly volume and the other reductions necessitated thereby." 12. SECTION 1.02. The first sentence of Section 1.02 is hereby deleted in its entirety, and substituted in lieu thereof is the following: "It is intended that Alcoa shall be the principal customer of the Facility and shall always receive priority scheduling and toll conversion pricing over IMCO's other customers of the Facility, up to an aggregate maximum of 24 million pounds per month." 13. CAPTIONS. Captions of the sections of this Amendment are for convenience and reference only and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Amendment. 14. MULTIPLE COUNTERPARTS. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed effective as of the date first written above. -3- ALUMINUM COMPANY OF AMERICA By:____________________________________ Name:______________________________ Title:_____________________________ IMCO RECYCLING INC. By:____________________________________ Name:______________________________ Title:_____________________________ METAL RESOURCES, INC. By:____________________________________ Name:______________________________ Title:_____________________________ -4- EX-15.1 4 EXHIBIT 15.1 Exhibit 15.1 We are aware of the incorporation by reference in the Registration Statement (Form S-8 No. 33-26641) pertaining to the Nonqualified Stock Option Plan of IMCO Recycling Inc. and the related Prospectus, in the Registration Statement (Form S-8 No. 33-34745) pertaining to the IMCO Recycling Inc. Amended and Restated Stock Option Plan, and in the Registration Statement (Form S-8 No. 33-76780) pertaining to the IMCO Recycling Inc. 1992 Stock Option Plan of our report dated July 28, 1995 relating to the unaudited condensed consolidated interim financial statements of IMCO Recycling Inc. which are included in its Form 10-Q for the quarter ended June 30, 1995. Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part of the registration statements prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. Ernst & Young LLP August 10, 1995 Dallas, Texas EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 8,431 0 17,319 0 3,818 32,193 90,982 28,961 101,002 9,137 11,250 1,176 0 0 72,804 101,002 60,471 60,471 45,721 45,721 46,472 0 513 9,757 3,904 5,853 0 0 0 5,853 .49 .49