<PAGE>
 
                                                                    EXHIBIT 10.7

                     SPLIT-DOLLAR LIFE INSURANCE AGREEMENT



     THIS AGREEMENT, effective as of this _____day of ________________, 1999, is
by and between IMCO RECYCLING INC., a Delaware corporation having its principal
executive offices located in Irving, Texas (the "Company") and [Employee] (the
"Employee").


                                  WITNESSETH:

     WHEREAS, this Agreement is a life insurance employee benefit plan as
described in Revenue Ruling 64-328, in accordance with an award made to the
Employee, who has rendered efforts on behalf of the Company; and

     WHEREAS, the Company highly values the efforts, abilities, and
accomplishments of the Employee and wishes to retain his services, and as an
inducement thereto, the Company is willing to assist the Employee in the payment
of premiums on life insurance; and

     WHEREAS, in exchange for such premium assistance, the Employee is willing
to return to the Company its Premium Advance as provided herein;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, it is
mutually agreed as follows:

     1.   The Insurance. In furtherance of the purposes of this Agreement, the
Company shall transfer to the Employee the policy(ies) described in Exhibit A
(the "Insurance") issued by one or more insurance companies (the "Insurer(s)").
Exhibit A may be amended by the parties to this Agreement, at any time and from
time to time, by a
<PAGE>
 
written instrument complying with Section 14 of this Agreement. Upon the
Employee's death, $XXX,XXX.XX (hereafter referred to as the "Employees Death
Benefit") shall be payable as the Employee shall have designated under the
Insurance, subject to Section 3 of this Agreement.

     2.   Ownership. The Employee shall be the sole owner of the Insurance and
shall hold the Insurance. The Employee shall have all the rights of "owner"
under the terms of the Insurance including, but not limited to, the right to
designate beneficiaries, select settlement and dividend options, borrow on the
security of the Insurance, and to surrender the Insurance. All such rights may
be exercised by the Employee without the Company's consent.

     3.   Repayment of Premium Advance to Company. The Company's "Premium
Advance" is an amount equal to the lesser of (i) the cumulative total of the
Company's share of premiums paid on the Insurance, or (ii) the cash surrender
value of the Insurance as of the applicable date. Subject to Section 6 below, in
the event of the death of the Employee, the "Premium Advance" shall be equal to
the greater of (i) the cumulative total of the Company's share of premiums paid
on the Insurance, or (ii) the total death benefits payable under the Insurance
less the Employee's Death Benefit. Subject to Section 6 below, in exchange for
the Company's payment of its premium contribution under Section 4, the Employee
agrees to pay to the company the amount of its Premium Advance on the earlier
of:

     (1)  Termination of this Agreement as provided in Section 6 or

     (2)  The Employee's death.
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Nothing herein shall give the Company any interest in the Insurance. The Company
will not take any action in dealing with the Insurer(s) that would impair any
right or interest of the Employee in the Insurance.

     4.   Payment of Premiums.

          (a)  Each annual premium on the Insurance shall be paid as follows:

               (1)  At the election of the Company, the Employee shall pay a
               portion of each premium equal to (i) the current term rate for
               the Employee's age, multiplied by the excess of the current death
               benefit over the Company's current Premium Advance. If the
               Company does not require the Employee to pay a portion of the
               premium pursuant to the preceding sentence, the Company shall pay
               such amount on behalf of the Employee and such amount shall be
               treated as compensation to the Employee. Here, the "current term
               rate" shall mean the lesser of the Insurer's annual term
               insurance rate or the rates specified in Revenue Rulings 64-328
               and 66-110.

               (2)  The Company shall pay all premium amounts not paid by the
               Employee.

          (b)  The Employee's premium share (other than that paid with policy
          loans) and the Company's premium share shall be remitted to the
          Insurer before expiration of the grace period for payment of premiums.
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          (c)  Dividends on the Insurance shall be applied as elected by the
          Employee.

     5.   Supplements and Riders. Should the Employee deem it desirable,
application may be made for a supplemental agreement or rider to be attached to
the Insurance. Ownership of any such agreement or rider shall be in the Employee
and any additional premiums shall be paid by the Employee.

     6.   Release of Company's Right to Payment of Premium. This Agreement shall
terminate if the Employee retires from employment with the Company and all
affiliates after attaining age 62; in that event, the Company shall release, in
its entirety, the Company's right to repayment of its Premium Advance.
Retirement shall mean termination of employment for any reason after attaining
age 62, or voluntary termination of employment by the Employee with the consent
of the Company after attaining at least age 59.

     7.   Termination of Agreement. This Agreement shall terminate on the
earliest to occur of the following events:

          (a)  Surrender of the Insurance by the Employee, who has the sole and
     exclusive right of surrender, subject to Section 3 above;

          (b)  Delivery by the Employee of written notice of termination to the
     Company or delivery of written notice by the Company to the Employee;

          (c)  Failure of the Employee to make a premium contribution required
     in Section 4;

          (d)  Termination of all employment relationships between the Employee
     and the Company, and all affiliated entities (including any corporation,
     partnership, or limited liability company which is controlled by, which
     controls, or which is under common control with, the Company); or
<PAGE>
 
          (e)  Written agreement of the Employee and the Company to terminate
     the Agreement.

     Upon termination of the Agreement, the Employee shall pay to the Company
the Premium Advance. Upon termination of the Agreement, the Employee and the
Company may enter into further agreement to continue the terms of this
Agreement.

     8.   Policy Loans. It is agreed that no policy loans may be taken by the
Employee which would have the effect of reducing the cash surrender value below
the amount of the Premium Advance. Interest on any such policy loans shall be
paid by the Employee, as owner of the policy, as such interest becomes due.

     9.   Payment of Proceeds. At the death of the Employee, the Company and the
Employee shall execute such forms and furnish such other documents or
information as are required to receive payments under the Insurance as
contemplated herein.

     All death benefits under this Agreement shall be paid in accordance with
the terms and conditions for the Insurance and pursuant to the claims and review
procedures of the Insurer. The Company's liability to provide benefits under
this Agreement shall be limited solely to the payment of its share of premiums,
as provided in Section 4. The Company assumes no responsibility for payment of
death benefits under the Insurance.

     10.  Payment Options. In lieu of a lump sum payment, the Employee, as owner
of the Insurance may, in accordance with the procedures of the Insurer(s), elect
any of the optional modes of payment for the death proceeds as enumerate in the
Insurance and known as "settlement options." If no such election is in effect,
the 
<PAGE>
 
beneficiary of any portion of the Insurance shall have the right to elect
such settlement option.

     11.  Named Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974 (P.L. 93-406), as amended, the Company is the "named
fiduciary" of the split-dollar life insurance plan for which this Agreement is
hereby designated the written plan instrument.

     12.  Allocation Of Fiduciary Responsibilities. The Named Fiduciary may
allocate its responsibilities for the operation and administration of this
split-dollar life insurance plan, including the designation of persons to carry
out fiduciary responsibilities under such plan. The Named Fiduciary shall effect
such allocation of its responsibilities by delivering to the Company a written
instrument signed by it that specifies the nature and extent of the
responsibilities allocated, including the persons who are designated to carry
out those fiduciary responsibilities under the plan, together with a signed
acknowledgment of their acceptance.

     13.  Plan Administrator. The Named Fiduciary is hereby designated as the
"Plan Administrator" of this plan.

     14.  Amendment. This Agreement may be altered, amended, or modified,
including the addition of any extra policy provisions, by a written agreement
signed by the Company and the Employee. In addition, either party may assign its
rights, interests and obligations under this Agreement; provided, however, that
any assignment shall be made subject to the terms of this Agreement. The laws of
the State of Texas shall govern the construction and enforceability of this
Agreement.
<PAGE>
 
     15.  Interpretation. Where appropriate in this Agreement, words used in the
singular shall include the plural and words used in the masculine shall include
feminine and vice versa.

     16.  Miscellaneous. The waiver by either party of a breac4i of any
provision hereof will not be deemed a waiver of any succeeding breach of such
provision, or a waiver of the provision itself. The parties will not enter into
any agreement or contract with others that would tend to vary, rescind or
abrogate the provisions hereof, nor shall they hinder or interfere with, or
cause to be interfered with in any manner whatsoever, the operation of the terms
of this Agreement. Each party hereto acknowledges that any breach or attempted
breach of any provision of this Agreement will cause irreparable harm for which
there is no adequate remedy at law, and each party agrees that each of the other
parties hereto shall be entitled to specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach. This
Agreement is severable and if, for any reason, any provision or provisions
hereof are determined to be invalid, inoperative, or contrary to any existing or
future law, the remainder of this Agreement shall continue to be valid after
giving effect to the intent manifested by the portion held invalid or
inoperative. This Agreement shall be binding upon and inure to the benefit of
the parties, their heirs, legal representatives, successors and assigns.

     17.  Notices. All notices, requests, demands or other communications
provided for herein shall be in writing and shall be deemed to have been given
when sent by registered or certified mail, return receipt requested, addressed
to the parties at their addresses set forth below or to such other person or
address as a party shall designate to the other parties from time to time in
writing forwarded in like manner:
<PAGE>
 
     Company:                              Employee: 
                                                     
     IMCO RECYCLING INC.                   Name                
     5215 North O'Connor Blvd.             Address              
     Suite 940                             
     Irving, Texas 75039                   

Any party may change such party's address by written notice to all other parties
to this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first hereinabove written.

                                       Employee:


                                       ------------------------------
                                       Name

                                       IMCO Recycling Inc.


                                       ------------------------------
                                       By:
                                          ---------------------------
                                       Title:
                                             ------------------------
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                                   EXHIBIT A

                                                     
INSURANCE COMPANY                      FACE AMOUNT
-----------------                      -----------
 
Pacific Life                           $ XXX,XXX
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                                   EXHIBIT B

                         ASSIGNMENT OF LIFE INSURANCE
                             POLICY AS COLLATERAL
                             --------------------
                                        
A.   For Value Received, the undersigned hereby assigns, transfers and sets over
     to IMCO - RECYCLING INC., a Delaware corporation (herein called the
     "Assignee"), a certain interest hereinafter specified in Policy No. XXXXXXX
     (herein called the "Policy") issued by Pacific Life (herein called the
     "Insurer"), upon the life of [Employee] subject to all the terms and
     conditions of the Policy and to all superior liens, if any, which the
     Insurer may have against the Policy. The undersigned by this instrument
     agrees, and the Assignee by the acceptance of this assignment agrees, to
     the conditions and provisions herein set forth. This Assignment is entered
     into in accordance with a Transfer of Ownership Agreement by and between
     the Assignee and [Employee] dated the same date as this Assignment (the
     "Agreement").

B.   It is expressly agreed that the following specific interest in the Policy
     (including any divided accumulations or additions standing to the credit of
     the Policy) passes by virtue hereof:

          The Assignee shall have an interest in the Policy and any proceeds
          becoming payable under the Policy due to death, maturity, policy loan
          or surrender of the policy to the extent of any liability arising
          under the Agreement.

C.   Except as expressly provided in paragraph D below, it is expressly agreed
     that the following specific rights are reserved and excluded from this
     assignment and do not pass by virtue hereof:

     1.   The right to collect from the Insurer any disability benefit payable
          in cash that does not reduce the amount of insurance;

     2.   The right to designate and change the beneficiary;

     3.   The right to elect any optional mode of settlement permitted by the
          Policy or allowed by the Insurer; but any designation or change of
          beneficiary or election of a mode of settlement shall be made subject
          to this assignment and to the rights of the Assignee hereunder;

     4.   The right to surrender the Policy or to obtain policy loans from the
          Insurer;

     5.   The right to elect a nonforfeiture provision, to change the
          application of dividends or to exercise any other rights, privileges
          and options available 
<PAGE>
 
          under the terms of the policy to the undersigned as owner of the
          Policy; and

     6.   The right to select investment options with respect to the policy.

D.   This assignment is made and the Policy is to be held as collateral security
     under the Agreement for any and all liabilities of the undersigned to the
     Assignee, either now existing or that may hereafter arise between the
     undersigned and the Assignee (all of which liabilities secured or to become
     secured are herein called "Liabilities"). It is expressly agreed that all
     sums received by the Assignee hereunder, either in the event of death of
     the Insured, the maturity or surrender of the Policy, the obtaining of a
     loan or advance on the Policy, or otherwise, shall first be applied to the
     payment of one or more of the following in such order of preference as the
     Assignee shall determine: (a) principal of and/or interest on Liabilities;
     or (b) premiums paid by the Assignee on the Policy. In the event that the
     undersigned is obligated to pay any amount to the Assignee under the
     Agreement, the Assignee shall be entitled to direct payment from the
     Insurer, and the right to direct the surrender of the Policy or to obtain
     policy loans from the Insurer in order to enforce its rights under the
     Agreement, upon written notice to the Insurer.

E.   The Assignee covenants and agrees with the undersigned as follows:

     1.   That any balance of the sums received hereunder from the Insurer
          remaining after payment of the then existing Liabilities, matured or
          unmatured, shall be paid by the Assignee to the persons entitled
          thereto under the terms of the Policy had this assignment not been
          executed;

     2.   That the Assignee will forward to the Insurer, upon request and
          without unreasonable delay, the Policy for endorsement of any
          designation or change of beneficiary or any election of an optional
          mode of settlement.

F.   The Insurer is hereby authorized to recognize the Assignee's claims to
     rights hereunder without investigating the reason for any action taken by
     the Assignee, or the validity or the amount of the Liabilities or the
     existence of any default herein, or the giving of any notice, or the
     application to be made by the Assignee of any amounts to be paid to the
     Assignee. The sole receipt of the Assignee for any sums received shall be a
     full discharge and release therefore to the Insurer. Checks for the sums
     payable under the Policy and assigned herein shall be drawn to the
     exclusive order of the Assignee if, when, and in such amounts, as may be
     requested by the Assignee. The Insurer shall not take any notice of the
     terms of any outside agreement or of any restrictions that may be imposed
     on the Assignee thereby.

G.   The Assignee shall be under no obligation to pay any premium, or the
     principal of or interest on any loans or advances on the Policy, or any
     other charges on the
<PAGE>
 
     Policy, but any such amounts so paid by the Assignee from its own funds
     shall become a part of the Liabilities hereby secured except as may be
     provided by the Agreement.

H.   The Assignee may take or release other security, may release any party
     primarily or secondarily liable for any of the Liabilities, may grant
     extensions, renewals or indulgences with respect to the Liabilities, or may
     apply to the Liabilities proceeds of the Policy hereby assigned or any
     amount received on account of the Policy by the exercise of any right
     permitted under this assignment, without resorting or regard to other
     security.

I.   The undersigned declares that no proceedings in bankruptcy are pending
     against him and that his property is not subject to any assignment for the
     benefit of creditors.

J.   It is the intent of the undersigned to assign an interest in proceeds
     becoming payable under the Policy as security for certain advances from the
     Assignee, without giving the Assignee any incidents of ownership in the
     Policy as defined under Section 2042 of the Internal Revenue Code (and
     Regulations thereunder) presently in effect, or any successor thereto.

     Signed this _______ day of ________________________ , 1999.



                                       ------------------------------
                                       Name