<PAGE> 1
Filed Pursuant to Rule 424(B)(1)
Registration Statement No. 333-00831
ICO, INC.
AND
WEDCO TECHNOLOGY, INC.
JOINT PROXY STATEMENT
---------------------
ICO, INC.
PROSPECTUS RELATING TO
UP TO 10,132,609 SHARES OF COMMON STOCK
---------------------
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Common Stock, no par value (the "ICO Common Stock"), of ICO, Inc., a Texas
corporation ("ICO"), in connection with the solicitation of proxies by the ICO
Board of Directors for use at a Special Meeting of Shareholders of ICO to be
held at the Wyndham Greenspoint Hotel, 1240 Greenspoint Drive, Houston, Texas,
on April 29, 1996 at 10:00 a.m., Central Standard Time, and at any and all
postponements or adjournments thereof (the "ICO Special Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to the holders
of Common Stock, $0.10 par value (the "Wedco Common Stock"), of Wedco
Technology, Inc., a New Jersey corporation ("Wedco"), in connection with the
solicitation of proxies by the Wedco Board of Directors for use at a Special
Meeting of Shareholders of Wedco to be held at Wedco's corporate headquarters on
Route 173, West Portal, New Jersey, on April 29, 1996 at 10:00 a.m., Eastern
Standard Time, and at any and all postponements or adjournments thereof (the
"Wedco Special Meeting").
This Joint Proxy Statement/Prospectus relates to the Merger Agreement dated
as of December 8, 1995, as amended (the "Merger Agreement") among ICO, W
Acquisition Corp., a New Jersey corporation and wholly-owned subsidiary of ICO
("W Acquisition"), and Wedco, which provides for the merger (the "Merger") of
Wedco with and into W Acquisition with W Acquisition surviving the Merger as a
wholly-owned subsidiary of ICO. Each share of Wedco Common Stock outstanding
immediately prior to the Effective Time (as defined in the Merger Agreement) of
the Merger would be converted into the right to receive, at the option of the
holder, either (i) 2.20 shares of ICO Common Stock and $3.50 in cash or (ii)
2.84 shares of ICO Common Stock.
The consummation of the Merger is subject, among other things, to: (i) the
approval of the issuance of ICO Common Stock pursuant to the Merger in
accordance with the terms of the Merger Agreement (the "Share Issuance") by the
affirmative vote of a majority of the votes cast by the shareholders of ICO
entitled to vote on the Share Issuance at the ICO Special Meeting; and (ii) the
approval and adoption of the Merger Agreement by at least 66 2/3% of the votes
cast by the shareholders of Wedco entitled to vote thereon at the Wedco Special
Meeting. SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY SHAREHOLDERS BEFORE VOTING. A conformed
copy of the Merger Agreement is attached hereto as Annex A.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of ICO
filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission under the Securities Act
of 1933, relating to the shares of ICO Common Stock constituting the Share
Issuance.
In addition, this Joint Proxy Statement/Prospectus relates to the proposal,
if the Merger is consummated, to approve an amendment to the Articles of
Incorporation of ICO to change its corporate name to Willoughby International,
Inc. (the "Charter Amendment"). Approval of the Charter Amendment will require
the affirmative vote of at least 66 2/3% of the outstanding shares of ICO Common
Stock entitled to vote thereon. APPROVAL OF THE CHARTER AMENDMENT IS NOT A
CONDITION TO THE CONSUMMATION OF THE MERGER.
ICO Common Stock and Wedco Common Stock are traded on the Nasdaq Stock
Market under the symbols "ICOC" and "WEDC", respectively. On December 8, 1995,
the last trading day prior to the public announcement of the signing of the
Merger Agreement, the closing bid prices of the ICO Common Stock and Wedco
Common Stock were $5.375 and $10.875, respectively. ICO intends to file an
application to list the ICO Common Stock on the New York Stock Exchange ("NYSE")
pending consummation of the Merger. LISTING OF THE ICO COMMON STOCK ON THE NYSE
IS NOT A CONDITION TO THE CONSUMMATION OF THE MERGER.
This Joint Proxy Statement/Prospectus and the accompanying proxy are first
being mailed to shareholders of ICO and Wedco on or about March 21, 1996.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. NEITHER THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Joint Proxy Statement/Prospectus is March 15, 1996.
<PAGE> 2
[PICTURE OF PLASTIC PELLETS]
The Merger of ICO, Inc. and Wedco Technologies, Inc. creates a
financially strong company poised for growth in the upstream and downstream
energy markets.
<PAGE> 3
[PICTURES OF VARIOUS ICO, INC.
PRODUCTS AND SERVICE FACILITIES,
AND PLASTIC PELLETS AND GRINDING MACHINERY]
ICO services the upstream energy exploration and production markets.
Wedco services the downstream energy petrochemical plastic processing
industry.
Combining ICO's presence in the upstream energy exploration and
production markets with Wedco's technological leadership in the downstream
petrochemical plastic processing industry provides: Shared expertise in
manufacturing high technology equipment for their respective markets; A
balance to the cyclical nature of energy's upstream and downstream
fluctuations; An opportunity to expand into strategic international markets;
Expanded support for a customer base of major integrated oil companies allowing
us to more fully serve both their upstream and downstream operations.
<PAGE> 4
AVAILABLE INFORMATION
ICO has filed a Registration Statement on Form S-4, No. 333-00831 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 (the "Securities Act") with
respect to the ICO Common Stock offered hereby. This Joint Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the ICO Common Stock offered hereby, the Merger, ICO and Wedco,
reference is made to the Registration Statement, annexes thereto and exhibits
filed as a part thereof. Statements contained herein concerning the provisions
of any documents or agreements are not necessarily complete, and in each such
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement or incorporated therein by reference. Each such
statement is qualified in its entirety by such reference.
Both ICO and Wedco are subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, file reports, proxy statements and other information with the
Commission. Such reports and other information filed with the Commission, as
well as the Registration Statement, can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C., and at the Commission's regional offices located at Suite 1400, 500 West
Madison Avenue, Chicago, Illinois, and at 7 World Trade Center, 13th Floor, New
York, New York. Copies of such material can also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, ICO Common Stock and
Wedco Common Stock are listed on the Nasdaq Stock Market, and such reports can
be inspected at the offices of the Nasdaq Stock Market at 1735 K Street, N.W.,
Washington, D.C.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by ICO (File No. 0-10068)
and Wedco (File No. 1-5528) are incorporated herein by reference:
1(a) Annual Report of ICO on Form 10-K for the fiscal year ended
September 30, 1995;
(b) Quarterly Report of ICO on Form 10-Q for the quarter ended
December 31, 1995; and
(c) Current Report of ICO on Form 8-K dated December 12, 1995.
2(a) Annual Report of Wedco on Form 10-K for the fiscal year ended
March 31, 1995;
(b) Quarterly Reports of Wedco on Form 10-Q for the quarters ended
June 30, 1995, September 30, 1995, and December 31, 1995; and
(c) Current Reports of Wedco on Form 8-K dated August 14, 1995 and
February 16, 1996.
ICO's Annual Report on Form 10-K for the fiscal year ended September 30,
1995 and Quarterly Report on Form 10-Q for the quarter ended December 31, 1995
are attached as Annexes B and C, respectively.
Wedco's Annual Report on Form 10-K for the fiscal year ended March 31, 1995
and Wedco's Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 are attached as Annexes D and E, respectively.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM ICO AND WEDCO AT THE ADDRESSES AND PHONE NUMBERS SET
FORTH BELOW.
ICO and Wedco will provide without charge to each person to whom a copy of
this Joint Proxy Statement/Prospectus is delivered, upon the written or verbal
request of any such person, a copy of any or all of the documents which have
been incorporated herein by reference, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests for such documents should be directed to ICO, Inc., 100
Glenborough Drive, Suite 250, Houston, Texas 77067,
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telephone (713) 872-4994, Attention: Dr. Asher O. Pacholder or Wedco Technology,
Inc., P.O. Box 397, Bloomsbury, New Jersey 08804, telephone (908) 479-4181,
Attention: Mark L. Kuna.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES AND THE OFFERING MADE HEREBY AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ICO OR WEDCO.
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION
OF A PROXY OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY
SECURITIES IN ANY JURISDICTION IN WHICH SUCH SOLICITATION OR OFFER MAY NOT
LAWFULLY BE MADE.
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT COVER ANY RESALES OF THE ICO
COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY SHAREHOLDERS OF WEDCO DEEMED TO BE
AFFILIATES OF ICO OR WEDCO UPON THE CONSUMMATION OF THE MERGER.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF ICO OR WEDCO
SINCE THE DATE HEREOF.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY............................................................................... 6
The Companies....................................................................... 6
The Merger Agreement................................................................ 6
ICO Common Stock Outstanding........................................................ 8
ICO Special Meeting................................................................. 8
Wedco Special Meeting............................................................... 8
No Appraisal Rights................................................................. 9
Recommendations of the Boards of Directors of ICO and Wedco......................... 9
Election of Merger Consideration by Shareholders of Wedco........................... 9
ICO, Inc. Selected Unaudited Pro Forma Condensed Combined Financial Data Fiscal Year
Ended September 30, 1995......................................................... 10
Capitalization...................................................................... 11
ICO, Inc. Selected Consolidated Financial Data...................................... 12
Wedco Technology, Inc. Selected Consolidated Financial Data......................... 13
Comparative Per Share Data.......................................................... 14
Comparative Market Price Data....................................................... 15
Dividend Policy..................................................................... 15
INTRODUCTION.......................................................................... 16
RISK FACTORS.......................................................................... 17
Risk Factors Relating to ICO........................................................ 17
Risk Factors Relating to Wedco...................................................... 18
Risk Factors Relating to the Merger................................................. 20
THE COMPANIES......................................................................... 23
ICO................................................................................. 23
Wedco............................................................................... 23
W Acquisition....................................................................... 24
ICO SPECIAL MEETING................................................................... 25
General............................................................................. 25
Purpose of Meeting.................................................................. 25
Date, Place and Time; Record Date................................................... 25
Voting Rights....................................................................... 25
Voting Agreement.................................................................... 26
Proxies............................................................................. 26
Solicitation of Proxies............................................................. 26
Adjournment of ICO Special Meeting.................................................. 26
WEDCO SPECIAL MEETING................................................................. 27
General............................................................................. 27
Purpose of Meeting.................................................................. 27
Date, Place and Time; Record Date................................................... 27
Voting Rights....................................................................... 27
Voting Agreement.................................................................... 27
Proxies............................................................................. 27
Solicitation of Proxies............................................................. 28
Adjournment of Wedco Special Meeting................................................ 28
Election of Merger Consideration by Shareholders of Wedco........................... 28
MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER............................... 29
THE MERGER............................................................................ 32
Background of the Merger............................................................ 32
ICO's Reasons for the Merger........................................................ 34
Wedco's Reasons for the Merger...................................................... 35
Opinion of Wedco's Financial Adviser................................................ 36
Merger Consideration................................................................ 40
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
</TABLE>
<TABLE>
<S> <C>
Interests of Certain Persons in the Merger.......................................... 40
Certain Federal Income Tax Consequences............................................. 41
Accounting Treatment................................................................ 43
Listing on Stock Exchange........................................................... 43
THE MERGER AGREEMENT.................................................................. 43
General............................................................................. 43
Effective Time of the Merger........................................................ 43
Effect on ICO Common Stock.......................................................... 44
Conditions.......................................................................... 44
Indemnification and Insurance....................................................... 45
Amendment and Termination........................................................... 45
Ancillary Agreements................................................................ 46
Cash Redemption of Wedco Stock Options.............................................. 48
Transferability of Common Stock to be Received in the Merger........................ 48
No Appraisal Rights................................................................. 48
Regulatory Matters.................................................................. 48
Expenses............................................................................ 48
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................................. 49
DESCRIPTION OF ICO CAPITAL STOCK...................................................... 55
General............................................................................. 55
ICO Common Stock.................................................................... 55
ICO Preferred Stock................................................................. 55
ICO Depositary Shares............................................................... 57
ICO Options and Warrants............................................................ 57
Registration Rights................................................................. 57
COMPARISON OF SHAREHOLDER RIGHTS...................................................... 58
Voting of Shares of Common Stock.................................................... 58
Dividend Rights..................................................................... 58
Shareholder Approval................................................................ 58
Appraisal Rights.................................................................... 59
Action by Shareholders Without a Meeting............................................ 59
Shareholder Proposals............................................................... 59
Call of Special Meetings............................................................ 59
Anti-Takeover Provisions............................................................ 59
Classification of Board of Directors................................................ 60
Removal of Directors................................................................ 60
Indemnification of Directors; Director's Liability.................................. 60
LEGAL MATTERS......................................................................... 61
EXPERTS............................................................................... 61
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING......................................... 61
Annex A -- Merger Agreement dated as of December 8, 1995, as amended on March 13, 1996 by
and among Wedco Technology, Inc., W Acquisition Corp. and ICO, Inc.
(excluding the Schedules and Annexes thereto).
Annex B -- Annual Report on Form 10-K for the fiscal year ended September 30, 1995 of ICO,
Inc.
Annex C -- Quarterly Report on Form 10-Q for the quarter ended December 31, 1995 of ICO,
Inc.
Annex D -- Annual Report on Form 10-K for the fiscal year ended March 31, 1995 of Wedco
Technology, Inc.
Annex E -- Quarterly Report on Form 10-Q for the quarter ended December 31, 1995 of Wedco
Technology, Inc.
</TABLE>
5
<PAGE> 8
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Joint Proxy Statement/Prospectus. Reference is
made to, and this summary is qualified in its entirety by, the more detailed
information and financial statements, including the notes thereto, contained in
or incorporated by reference in this Joint Proxy Statement/Prospectus and the
Annexes hereto.
ICO's fiscal year ends on September 30 of each year and Wedco's fiscal year
ends on March 31 of each year. References to fiscal years for ICO refer to the
fiscal year ending on September 30 of such year (for example, fiscal 1995 refers
to the fiscal year ended September 30, 1995). References to fiscal years for
Wedco refer to the fiscal year ending on March 31 of such year (for example,
fiscal 1995 refers to the fiscal year ended March 31, 1995).
SHAREHOLDERS OF ICO AND WEDCO ARE URGED TO READ THIS JOINT PROXY
STATEMENT/PROSPECTUS, INCLUDING THE ANNEXES HERETO, IN THEIR ENTIRETY AND SHOULD
CONSIDER CAREFULLY THE INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK
FACTORS" COMMENCING ON PAGE 17."
THE COMPANIES
ICO. ICO is engaged principally in providing inspection, reconditioning
and coating services for new and used tubular goods and sucker rods utilized in
the exploration of oil and gas. ICO is the leading provider of sucker rod
services and one of the two largest providers of inspection, reconditioning and
coating services for tubular goods in the United States. ICO's inspection,
reconditioning and coating services for new and used tubular goods and sucker
rods involve a variety of processes, many of which are patented, designed to
reduce customers' operating costs by extending the useful lives and reducing the
downhole failure of sucker rods and tubular goods. ICO also sells equipment and
supplies used in the inspection, reconditioning and coating of tubular goods and
sucker rods.
ICO's principal executive offices are located at 100 Glenborough Drive,
Suite 250, Houston, Texas 77067, telephone (713) 872-4994.
Wedco. Wedco's principal business is providing size-reduction services,
such as the grinding of plastic pellets to plastic powder, and related
processing services primarily to the petrochemical industry and also to other
industries that require powder in their operations. Wedco is the largest
provider of size-reduction services for new petrochemicals in the United States
and one of the largest providers of such services in Western Europe. Wedco also
manufactures equipment designed to provide grinding and other ancillary
services.
Wedco's principal executive offices are located at Route 173, West Portal,
New Jersey 08802, telephone (908) 479-4181.
THE MERGER AGREEMENT
General. ICO, W Acquisition and Wedco have entered into the Merger
Agreement pursuant to which (i) Wedco would merge with and into W Acquisition
with W Acquisition surviving the Merger as a wholly-owned subsidiary of ICO and
(ii) each share of Wedco Common Stock would be converted into the Merger
Consideration (as defined hereinafter). The Merger Agreement also provides that
upon consummation of the Merger, ICO shall take all actions necessary to amend
its Articles of Incorporation in order to change ICO's name to "Willoughby
International, Inc."
The Merger Consideration. Each share of Wedco Common Stock will, by virtue
of the Merger and without the need for any further action on the part of the
holder thereof, be converted into the right to receive, at the option of the
holder thereof, either (i) 2.20 shares of ICO Common Stock and $3.50 in cash
(the "Cash/Stock Consideration") or (ii) 2.84 shares of ICO Common Stock (the
"Stock Consideration" and together with the Cash/Stock Consideration, the
"Merger Consideration"). Promptly following the consummation of the Merger, each
holder of Wedco Common Stock will be furnished with a Letter of Transmittal upon
which to make its election of the Merger Consideration to be received and submit
its Wedco
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<PAGE> 9
stock certificates. If a holder of Wedco Common Stock fails to make an election
regarding the Merger Consideration to be received within 30 days after the date
the Letter of Transmittal is mailed, the holder will be deemed to have elected
to receive the Stock Consideration.
Additional Merger Consideration. If the weighted average of the closing
prices for ICO Common Stock on the Nasdaq Stock Market for the last five trading
days immediately preceding the effective date of the Merger is less than $4.00
per share, Wedco may elect either to consummate the Merger or to notify ICO that
Wedco will require additional merger consideration in order to consummate the
Merger. If Wedco notifies ICO of such an election to require additional merger
consideration, ICO may elect either to terminate the Merger Agreement or
consummate the Merger. If ICO elects to consummate the Merger, ICO will provide
additional consideration of cash and/or ICO Common Stock as determined by ICO
("Additional Merger Consideration") in order to increase the aggregate value of
the Merger Consideration to $12.30 for each share of Wedco Common Stock. All ICO
Common Stock issued as Additional Merger Consideration shall be valued at the
weighted average price determined pursuant to the formula set forth above. If
these conditions arise, ICO and Wedco will each resolicit proxies and a new vote
will be taken unless, in the opinion of the Boards of Directors of each of the
companies, the amount by which the average weighted price of ICO Common Stock is
less than $4.00 per share is immaterial.
Certain Federal Income Tax Consequences. Based on certain assumptions,
including the accuracy of certain certificates and representations to be
provided by ICO, W Acquisition, Wedco and certain Wedco shareholders regarding
the satisfaction of certain requirements to a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986 (the "Code") (including
the absence of any plan or intention by certain holders of Wedco Common Stock to
sell, exchange or otherwise dispose of shares of ICO Common Stock to be received
by them in the Merger), Dilworth, Paxson, Kalish & Kauffman and Keating,
Muething & Klekamp intend to deliver their respective opinions as of the
Effective Time to the effect that the Merger will qualify as a reorganization
described in Section 368(a) of the Code. Keating, Muething & Klekamp (as counsel
to ICO) has not been retained to provide any opinion to Wedco or the Wedco
shareholders. Dilworth, Paxson, Kalish & Kauffman LLP (as counsel to Wedco) has
not been retained to provide any opinion to ICO or the ICO shareholders.
For the principal federal income tax consequences of the Merger to holders
of Wedco Common Stock see "THE MERGER -- Certain Federal Income Tax
Consequences." Each Wedco shareholder is advised to consult with its own tax
advisor concerning the federal income tax consequences of the Merger, as well as
any applicable state, local, foreign or other tax consequences, based upon such
shareholder's own particular facts and circumstances.
Conditions. The Merger is subject to the absence of any statute, rule,
regulation, judgment, injunction, decree or order issued by any federal, state
or local legislative, administrative or regulatory body or court that prohibits,
makes illegal or restricts consummation of the Merger; approval of the Merger
Agreement by the shareholders of Wedco; approval of the Share Issuance by the
shareholders of ICO; the cash redemption by Wedco of all outstanding options to
purchase Wedco Common Stock; the weighted average of the closing prices for ICO
Common Stock on the Nasdaq Stock Market for the last five (5) trading days
immediately preceding the effective time of the Merger being at least $4.00; the
execution and delivery of certain ancillary agreements; the receipt by Wedco of
a favorable fairness opinion from an investment banking firm; and other
customary conditions. See "THE MERGER AGREEMENT -- Conditions."
Ancillary Agreements. Among the conditions to the Merger are the execution
and delivery of certain ancillary agreements pursuant to which certain directors
and officers of Wedco, including William E. Willoughby, Fred R. Feder and Robert
F. Bush, will receive payments under non-competition covenants and consulting,
Employment and Legal services retainer agreements. In addition, ICO has agreed
to provide certain indemnification to all of Wedco's "corporate agents," as
defined in Article VII of Wedco's By-laws, which include its directors and
officers, and maintain directors' and officers' liability insurance for their
benefit. See "THE MERGER -- Interests of Certain Persons in the Merger" and "THE
MERGER AGREEMENT -- Indemnification and Insurance and -- Ancillary Agreements."
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Cash Redemption of Wedco Stock Options. The Merger Agreement provides that
Wedco shall redeem for cash all outstanding options to purchase Wedco Common
Stock as a condition to the consummation of the Merger. Holders of Wedco stock
options, including Wedco's directors and executive officers, will be paid a
total of approximately $2,167,000 in connection with such redemptions. See "THE
MERGER -- Interests of Certain Persons in the Merger" and "THE MERGER
AGREEMENT -- Cash Redemption of Wedco Stock Options."
ICO COMMON STOCK OUTSTANDING
8,927,361 shares at March 15, 1996.
16,776,488 shares following consummation of the Merger, assuming all Wedco
shareholders elect to receive the Cash/Stock Consideration and further assuming
no Additional Merger Consideration is issued.
19,059,870 shares following consummation of the Merger, assuming all Wedco
shareholders elect to receive the Stock Consideration and further assuming no
Additional Merger Consideration is issued.
ICO SPECIAL MEETING
Purpose. To consider and vote on proposals to (i) approve the Share
Issuance and (ii) approve the Charter Amendment. Approval of the Charter
Amendment is not a condition to the consummation of the Merger.
Time, Date and Place. 10:00 a.m., Central Standard Time on Monday, April
29, 1996, at the Wyndham Greenspoint Hotel, 1240 Greenspoint Drive, Houston,
Texas.
Record Date; Shares Entitled to Vote. March 15, 1996, on which date there
were 8,927,361 shares of ICO Common Stock outstanding.
Affirmative Vote Required. The favorable vote of a majority of the votes
cast at the ICO Special Meeting is required to approve the Share Issuance. The
favorable vote of two-thirds of the outstanding shares is required to approve
the Charter Amendment.
Voting Agreement. Certain shareholders of ICO, including Dr. Asher O.
Pacholder and Sylvia A. Pacholder, who beneficially own in the aggregate
1,075,213 shares, or approximately 12%, of the ICO Common Stock, entered into an
agreement (the "ICO Voting Agreement") with Wedco to vote all of such shares in
favor of the Share Issuance and Charter Amendment and have granted to Wedco,
Walter L. Leib and Edward N. Barol irrevocable proxies to vote all of such
shares in favor of the Share Issuance and Charter Amendment. The authorizations
by the ICO shareholders set forth in the ICO Voting Agreement are subject to the
registration by ICO under the Securities Act of the ICO Common Stock included in
the Merger Consideration.
WEDCO SPECIAL MEETING
Purpose. To consider and vote on a proposal to approve the Merger
Agreement.
Time, Date and Place. 10:00 a.m., Eastern Standard Time on Monday, April
29, 1996 at Wedco's corporate headquarters on Route 173, West Portal, New
Jersey.
Record Date; Shares Entitled to Vote. March 15, 1996, on which date there
were 3,567,785 shares of Wedco Common Stock outstanding.
Affirmative Vote Required. The favorable vote of two-thirds of the votes
cast at the Wedco Special Meeting is required to approve the Merger Agreement.
Voting Agreement. Certain shareholders of Wedco, including William E.
Willoughby, William C. Willoughby and Fred R. Feder, who own in the aggregate
1,948,064 shares, or approximately 55%, of the Wedco Common Stock have entered
into an agreement, substantially identical to the ICO Voting Agreement (the
"Wedco Voting Agreement" and together with the ICO Voting Agreement, the "Voting
Agreements"),
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with ICO to vote all of such shares in favor of the proposal to approve the
Merger Agreement and have granted to ICO, Sylvia A. Pacholder and Dr. Asher O.
Pacholder irrevocable proxies to vote all of such shares in favor of such
proposal. The authorizations by the Wedco shareholders set forth in the Wedco
Voting Agreement are subject to the registration by ICO under the Securities Act
of the ICO Common Stock included in the Merger Consideration.
NO APPRAISAL RIGHTS
Neither the shareholders of Wedco nor the shareholders of ICO will have
dissenters' or appraisal rights with respect to the Merger. See "THE MERGER
AGREEMENT -- No Appraisal Rights."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF ICO AND WEDCO
The Boards of Directors of ICO and Wedco each believe that the terms of the
Merger are in the best interests of their respective shareholders and each have
unanimously approved the Merger Agreement and the transactions contemplated
thereby. The Boards of Directors of ICO and Wedco each recommend that their
respective shareholders vote, in the case of ICO, for approval of the Share
Issuance and the Charter Amendment and, in the case of Wedco, for approval of
the Merger Agreement. See "THE MERGER -- Background of the Merger; ICO's Reasons
for the Merger; Wedco's Reasons for the Merger."
ELECTION OF MERGER CONSIDERATION BY SHAREHOLDERS OF WEDCO
If the Merger is consummated, shareholders of Wedco will be required to
elect on a Letter of Transmittal to be provided whether they desire to receive
the Cash/Stock Consideration or the Stock Consideration. IF NO ELECTION IS MADE
WITH RESPECT TO A SHARE OF WEDCO COMMON STOCK WITHIN THIRTY DAYS AFTER THE DATE
THE LETTER OF TRANSMITTAL IS MAILED, THE HOLDER OF SUCH SHARE WILL BE DEEMED TO
HAVE ELECTED THE STOCK CONSIDERATION. See "WEDCO SPECIAL MEETING -- Election of
Merger Consideration by Shareholders of Wedco."
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ICO, INC.
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following unaudited pro forma financial information, including the
notes thereto, give effect to the Merger and are qualified in their entirety by
reference to, and should be read in conjunction with the historical consolidated
financial statements and the notes thereto of ICO and Wedco incorporated herein
by reference.
The pro forma combined financial statements are based on the purchase
method of accounting. The unaudited pro forma consolidated condensed balance
sheet assumes the Merger was consummated as of December 31, 1995 and the
unaudited pro forma consolidated condensed statements of income assume the
Merger was consummated as of the beginning of each of the periods presented.
The pro forma data is presented for informational purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred had the Merger been consummated at the dates indicated, nor is
such data necessarily indicative of future operating results or financial
position. There is no assurance that similar results will be achieved in the
future.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED
DECEMBER SEPTEMBER
31, 30,
INCOME STATEMENT(1) 1995 1995
------------------- ----------- -----------
<S> <C> <C>
Revenue................................................... $ 31,743 $ 133,295
----------- -----------
Gross Profit.............................................. 10,020 45,487
Income before depreciation, interest and taxes............ 4,317 20,807
Income before interest and taxes.......................... 1,797 11,389
Interest, net............................................. 143 717
----------- -----------
Income before taxes....................................... 1,654 10,672
Income taxes.............................................. 767 4,738
----------- -----------
Net income(2)............................................. 887 5,934
Preferred stock dividends................................. 544 2,176
----------- -----------
Net income available for common stockholders.............. 343 3,758
=========== ===========
Earnings per share(2)..................................... $ .02 $ .21
=========== ===========
Weighted average common shares outstanding................ 17,797,304 17,571,783
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER
31,
BALANCE SHEET(1) 1995
---------------- -----------
<S> <C>
Cash and Cash Equivalents............................................... 14,271
Working Capital......................................................... 26,095
Property, Plant and Equipment, net...................................... 77,305
Total Assets............................................................ 163,636
Long-Term Debt.......................................................... 15,931
Stockholders' Equity.................................................... 123,583
Book Value per common share(3).......................................... 5.13
Shares outstanding...................................................... 17,789,841
</TABLE>
- ---------------
(1) Unaudited pro forma selected income statements and balance sheet data has
been derived from the Unaudited Pro Forma Condensed Combined Financial
Statements appearing elsewhere in this Joint Proxy Statement/Prospectus.
(2) In fiscal year 1995, $.30 of ICO's $.41 earnings per share were attributable
to its recognition of certain tax benefits. During the quarter ended
December 31, 1995, $.06 of ICO's $.11 earnings per share were attributed to
the recognition of net operating loss carry forward benefits. While ICO
will continue to realize a cash savings from $8,085,000 (i.e., a tax
benefit of $2,830,000) in net operating loss carry forwards (at December
31, 1995) for tax purposes after the Merger, future benefits resulting from
the utilization of these loss carry forwards will no longer be recognized
in the income statements prepared in accordance with generally accepted
accounting principles. See "COMPARATIVE PER SHARE DATA", "RISK
FACTORS -- Effect of Merger on Income Statement" and "Notes to Unaudited
Pro Forma Condensed Financial Statements -- Note 3 -- Pro Forma
Adjustments."
(3) Calculated as pro forma stockholders equity of $123,583 less liquidation
preference of ICO's preferred shares outstanding of $32,250 divided by pro
forma common shares outstanding of 17,789,841 at December 31, 1995.
10
<PAGE> 13
CAPITALIZATION
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ICO/WEDCO
----------------- PRO FORMA
ICO WEDCO ADJUSTMENTS(1) COMBINED
------- ------- -------------- ---------
<S> <C> <C> <C> <C>
Current portion of long-term debt................. 598 1,647 2,245
------- ------- ---------
Long-term debt.................................... 1,059 14,872 15,931
------- ------- ---------
Stockholders' Equity
Preferred Stock................................. 13 13
Common Stock.................................... 35,237 409 89 35,326
(409)
Additional paid-in capital...................... 55,988 11,159 48,389 104,377
(11,159)
Cumulative translation adjustment............... (117) 1,650 (1,650) (117 )
Retained earnings (deficit)..................... (16,016) 17,434 (17,434) (16,016 )
Treasury Stock.................................. (3,278) 3,278
------- ------- ---------
Total Stockholders' Equity.............. 75,105 27,374 123,583
------- ------- ---------
TOTAL CAPITALIZATION.............................. $76,762 $43,893 $141,759
======= ======= ==========
</TABLE>
- ---------------
(1) See unaudited pro forma financial statements and related notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus.
11
<PAGE> 14
ICO, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER 31, YEAR ENDED SEPTEMBER 30,
--------------------- ---------------------------------------------------------
1995(4) 1994 1995(1) 1994(1) 1993 1992(2) 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Exploration Sales and Services............ $ 8,364 $ 7,627 $ 34,953 $ 30,096 $ 25,290 $ 12,171 $ 13,018
Production Sales and Services............. 7,176 7,256 28,749 28,919 24,936 18,569 19,667
Corrosion Control Services................ 5,560 4,518 20,562 14,549 9,991 3,895 4,805
Other sales and services.................. 651 834 3,623 2,406 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total revenues...................... $ 21,751 $ 20,235 $ 87,887 $ 75,970 $ 60,217 $ 34,635 $ 37,490
======== ======== ======== ======== ======== ======== ========
Gross Profit................................ $ 6,606 $ 5,943 $ 28,002 $ 21,779 $ 17,355 $ 10,482 $ 12,755
Selling, general and administrative
expenses.................................. 4,054 3,767 17,840 15,202 12,730 8,055 9,320
--------- --------- --------- --------- --------- --------- ---------
Income before interest, taxes, depreciation
and amortization, unusual and
extraordinary items....................... 2,552 2,176 10,162 6,577 4,625 2,427 3,435
Depreciation and amortization............... 1,339 1,223 5,112 4,357 3,669 2,616 2,864
Interest (income) expense, net.............. (376) (282) (1,307) (431) 2,352 740 632
Unusual items............................... -- -- -- -- 605 (467) 4,108
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item........................ $ 1,589 $ 1,235 $ 6,357 $ 2,651 $ (2,001) $ (462) $ (4,169)
======== ======== ======== ======== ======== ======== ========
Income Taxes................................ 89 30 567 55 -- -- --
Net income (loss)........................... $ 1,500 $ 1,205 $ 5,790 $ 1,225 $ (2,001) $ (383) $ (3,562)
Preferred dividends......................... 544 544 2,176 1,826 -- -- --
Net income (loss) available for common
shareholders.............................. 956 661 3,614 (601) (2,001) (383) (3,562)
======== ======== ======== ======== ======== ======== ========
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Income (loss) before extraordinary item..... $ .11 $ .08 $ .41 $ .09 $ (.49) $ (.15) $ (1.48)
Net income (loss)........................... $ .11 $ .08 $ .41 $ (.08) $ (.49) $ (.12) $ (1.27)
Cash dividends declared..................... $ .05 -- -- -- -- -- --
Weighted average shares outstanding......... 8,908,797 8,610,168 8,709,303 8,299,559 4,052,325 3,093,964 2,809,088
BALANCE SHEET DATA:
Working capital............................. $ 37,222 $ 37,780 $ 37,284 $ 37,656 $ 17,787 $ 3,321 $ 4,019
Property, plant and equipment, net.......... 30,689 27,882 29,824 27,513 24,431 25,435 18,529
Total assets........................ 87,858 81,312 88,183 78,969 51,353 40,713 27,491
Long-term debt.............................. 1,059 451 1,047 456 10,676 19,376 13,685
Stockholders' Equity........................ 75,205 70,031 74,471 69,204 32,293 10,304 7,928
OTHER FINANCIAL INFORMATION:
Capital expenditures(3)..................... $ 2,264 $ 1,296 $ 5,838 $ 4,782 $ 2,252 $ 642 $ 1,344
Common stock dividends...................... 447 -- -- -- -- -- --
</TABLE>
- ---------------
(1) See discussion of fiscal year acquisitions in Item 7 of ICO's Annual Report
on Form 10-K for the fiscal year ended September 30, 1995.
(2) Due to the completion of the acquisition of Baker Hughes Tubular Services,
Inc. on September 30, 1992, the result of such acquisition is reflected in
the balance sheet data at September 30, 1992, but not in the income
statement data for the year ended September 30, 1992.
(3) Consists of cash used for capital expenditures, excluding property, plant
and equipment obtained in acquisitions.
(4) See "RISK FACTORS -- Risk Factors Relating to ICO -- Legal Proceedings."
12
<PAGE> 15
WEDCO TECHNOLOGY, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31(1),
--------------------- ---------------------------------------------------------
1995 1994 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Revenues.................... $ 32,119 $ 31,843 $ 43,575 $ 38,307 $ 32,817 $ 30,292 $ 29,099
Operating income, before other
income (expenses) and income
taxes......................... 2,713 4,764 6,626 5,493 4,080 3,888 4,076
Income before income taxes...... 1,273 4,253 6,059 4,964 3,578 3,013 2,105
Net income...................... 694 2,802 3,906 3,354 2,540 2,013 1,416
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Net income per common share..... $ .19 $ .78 $ 1.08 $ .94 $ .71 $ .58 $ .40
Average common shares
outstanding................... 3,629,391 3,607,850 3,611,150 3,580,998 3,575,184 3,494,934 3,535,385
BALANCE SHEET DATA:
Working capital................. $ (1,827) $ 1,463 $ 663 $ 704 $ 1,193 $ 698 $ 1,713
Property, plant and
equipment -- net.............. 39,028 33,407 37,217 30,024 29,031 25,898 25,989
Total Assets.................... 56,818 52,886 57,993 48,209 45,432 41,009 40,209
Long-term debt, less current
maturities.................... 14,872 15,570 15,721 15,404 17,770 16,881 18,573
Stockholders' Equity............ 27,374 25,819 27,110 21,597 18,507 15,765 13,631
</TABLE>
- ---------------
(1) Amounts have been stated to reflect the 5% and 10% stock dividends
distributed on September 30 and March 24, 1994, respectively.
13
<PAGE> 16
COMPARATIVE PER SHARE DATA
The following table presents certain unaudited per share data derived from
historical financial statements of ICO and Wedco and pro forma per share data,
adjusted to reflect the consummation of the Merger. This pro forma information
is not necessarily indicative of actual or future operating results or financial
position that would occur upon consummation of the Merger. The equivalent pro
forma combined data per share of Wedco is based upon a conversion ratio of 2.456
shares of ICO Common Stock for each share of Wedco Common Stock. The conversion
ratio assumes that Wedco shareholders owning 60% of the outstanding shares of
Wedco Common Stock will select the Cash/Stock Consideration and the remaining
shareholders of Wedco will select the Stock Consideration. See "THE
MERGER -- Merger Consideration." This information should be read in conjunction
with the pro forma financial information appearing herein under "Unaudited Pro
Forma Financial Information" and the separate historical consolidated financial
statements of ICO and Wedco which are included herein or annexed hereto. Prior
to December 31, 1995, no dividends had been paid on ICO Common Stock or Wedco
Common Stock. See "SUMMARY -- Dividend Policy."
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
SEPTEMBER 30, DECEMBER 31,
ICO(1) 1995 1995
----------------------------------------------------------- ------------- -------------
<S> <C> <C>
Income from continuing operations.......................... $0.41 $0.11
Cash dividends declared.................................... -- .05
Book Value per common share at period end.................. 4.75 4.80
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED QUARTER ENDED
SEPTEMBER 30, DECEMBER 31,
WEDCO(2) 1995 1995
---------------------------------------------------------- ------------- -------------
<S> <C> <C>
Income from continuing operations......................... $0.74 $0.00
Cash dividends declared................................... -- .05
Book Value, per share at period end....................... 7.69 7.67
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
DECEMBER 31,
PRO FORMA COMBINED(1)(3) 1995
----------------------------------------------------------- YEAR ENDED -------------
SEPTEMBER 30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Income from continuing operations.......................... $0.21 $0.02
Cash dividends declared.................................... -- .05
Book Value at period end................................... 4.99 5.13
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
EQUIVALENT PRO FORMA COMBINED SEPTEMBER 30, DECEMBER 31,
PER WEDCO COMMON SHARE 1995 1995
----------------------------------------------------------- ------------- -------------
<S> <C> <C>
Income from continuing operations.......................... $ .52 $ .05
Cash dividends declared.................................... .12
Book Value at period end................................... 12.26 12.60
</TABLE>
- ---------------
(1) In fiscal year 1995, $0.30 of ICO's $0.41 earnings per share were
attributable to its recognition of certain tax benefits. During the quarter
ended December 31, 1995, $.06 of ICO's $.11 earnings per share were
attributable to the recognition of net operating loss carry forward
benefits. While ICO will continue to realize a cash savings from $8,085,000
(i.e., a tax benefit of $2,830,000) in net operating loss carry forwards
(at September 30, 1995) for tax purposes after the Merger, future benefits
resulting from the utilization of these loss carry forwards will no longer
be recognized in the income statements prepared in accordance with
generally accepted accounting principles. See "RISK FACTORS -- Effect of
Merger on Income Statement" and "Notes to Unaudited Pro Forma Condensed
Financial Statements -- Note 3 -- Pro Forma Adjustments."
(2) Wedco amounts were derived from the unaudited quarterly financial statements
of Wedco for the applicable period to conform to ICO's fiscal year end.
(3) Derived from the unaudited pro forma financial statements and related notes
thereto included elsewhere in this Joint Proxy Statement/Prospectus.
14
<PAGE> 17
COMPARATIVE MARKET PRICE DATA
ICO Common Stock and Wedco Common Stock are traded on the Nasdaq Stock
Market. The following table sets forth the high and low closing prices of ICO
Common and Wedco Common Stock as reported on the Nasdaq Stock Market for the
calendar periods indicated.
<TABLE>
<CAPTION>
ICO COMMON WEDCO
STOCK COMMON STOCK
------------ -------------
HIGH LOW HIGH LOW
---- --- ---- ----
<S> <C> <C> <C> <C>
Calendar 1993
First Quarter...................................... 8 1/8 3 7/16 16 3/4 9 1/4
Second Quarter..................................... 8 1/2 6 7/8 11 7
Third Quarter...................................... 9 3/4 6 1/4 10 1/4 6 3/4
Fourth Quarter..................................... 10 5 3/4 11 8
Calendar 1994
First Quarter...................................... 9 1/4 6 3/4 13 9
Second Quarter..................................... 7 1/4 4 1/4 13 1/4 10
Third Quarter...................................... 5 3/4 4 1/4 13 9 1/2
Fourth Quarter..................................... 5 3/8 3 3/4 10 3/4 9 1/2
Calendar 1995
First Quarter...................................... 6 3 3/4 11 1/2 9 5/8
Second Quarter..................................... 6 1/4 5 1/8 10 3/4 9 1/2
Third Quarter...................................... 5 7/8 4 5/8 14 9 3/8
Fourth Quarter..................................... 5 1/2 4 1/2 15 1/2 10 1/4
Calendar 1996
First Quarter (through March 14, 1996)............. 5 7/8 4 7/8 15 12 1/4
</TABLE>
On December 8, 1995, the last full trading day before the public
announcement of the execution and delivery of the Merger Agreement, the last
reported sale price of ICO Common Stock was $5.375 and the last reported sale
price of Wedco Common Stock was $10.875. On March 14, 1996, the last reported
sales prices were $5.25 for ICO and $13.25 for Wedco. Shareholders of ICO and
Wedco are urged to obtain current market quotations for the ICO Common Stock and
Wedco Common Stock.
DIVIDEND POLICY
On November 1, 1995, ICO established a quarterly dividend of $0.05 per
share of ICO Common Stock. Prior to such time, ICO had not paid dividends on its
common stock. The first dividend was paid on December 31, 1995 to shareholders
of ICO of record on December 21, 1995. On March 7, 1996, ICO declared a
quarterly dividend of $0.05 per share of ICO Common Stock payable April 1, 1996
to shareholders of record on March 18, 1996. Following the Merger, if
consummated, ICO intends to continue payment of comparable quarterly dividends
on ICO Common Stock; however, no payment of dividends on the Common Stock can be
made until and unless dividends have been paid on the Preferred Stock (as
hereinafter defined). Furthermore, the payment of dividends on the Common Stock
will depend upon, among other things, future earnings, capital requirements, the
general financial condition of ICO, general business conditions and other
factors. See "RISK FACTORS -- Risk Factors Relating to the Merger-Restrictions
on Payment of Dividends."
During Wedco's fiscal years ended March 31, 1995, 1994 and 1993, Wedco did
not declare or pay any cash dividends. On September 30, 1994, Wedco distributed
a 5% stock dividend to its shareholders. On March 24, 1994, Wedco distributed a
10% stock dividend to its shareholders.
15
<PAGE> 18
INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
ICO in connection with the solicitation of proxies by the ICO Board of Directors
for use at the ICO Special Meeting to be held at the Wyndham Greenspoint Hotel,
1240 Greenspoint Drive, Houston, Texas on Monday, April 29, 1996 at 10:00 a.m.,
Central Standard Time, and any postponement or adjournment thereof.
This Joint Proxy Statement/Prospectus is also being furnished to
shareholders of Wedco in connection with the solicitation of proxies by the
Wedco Board of Directors for use at the Wedco Special Meeting to be held at
Wedco's corporate headquarters at Route 173, West Portal, New Jersey 08802 on
Monday, April 29, 1996 at 10:00 a.m., Eastern Standard Time, and any
postponement or adjournment thereof.
At the ICO Special Meeting, ICO shareholders will be asked to approve the
Share Issuance and the Charter Amendment. Approval of the Charter Amendment is
not a condition to the consummation of the Merger.
At the Wedco Special Meeting, Wedco shareholders will be asked to approve
the Merger Agreement. The Merger Agreement provides for the acquisition by ICO
of all the outstanding Wedco Common Stock by means of the merger of Wedco with
and into W Acquisition Corp., a wholly-owned subsidiary of ICO. W Acquisition
Corp. would survive the Merger as a wholly-owned subsidiary of ICO and would
change its corporate name in connection therewith to "Wedco Technology, Inc."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of ICO
with respect to up to 10,132,609 shares of ICO Common Stock issuable to Wedco
shareholders pursuant to the Merger Agreement.
16
<PAGE> 19
RISK FACTORS
In considering whether to approve the Share Issuance or to approve and
adopt the Merger Agreement, as the case may be, the shareholders of ICO and
Wedco should consider carefully the following matters.
RISK FACTORS RELATING TO ICO
Industry Conditions
Demand for ICO's products and services depends primarily on the level of
oil and gas drilling and production activity, including the level of workover
activity. These activities have been, and will continue to be, influenced by
factors that have rendered the market for ICO's products and services somewhat
volatile; over which ICO has no control. These factors include the price and
availability of oil and gas, exploration and production capital expenditures by
major and independent oil and gas companies, the ability of the members of the
Organization of Petroleum Exporting Countries to maintain price stability
through voluntary production limits, worldwide demand for oil and gas and
general economic and political conditions. In particular, demand for ICO's
internal coating services and used tubular and sucker rod services tends to
fluctuate with the price of oil and the level of workover activity, and demand
for ICO's new tubular services tends to fluctuate with the domestic drilling rig
count. Domestic drilling activity declined significantly over the several years
culminating in June 1992 when the average monthly rig count reached a post-World
War II low of 596 rigs. Since June 1992, the rig count has tended to fluctuate
in a range of approximately 600 rigs to approximately 900 rigs, depending on
demand, seasonal conditions and other factors. As of March 8, 1996, the domestic
rig count was 719. There can be no assurance that detrimental industry factors
will not adversely impact ICO's business.
Recent Losses and Financial Condition
ICO reported net losses in fiscal years 1991, 1992 and 1993. The
restructuring of ICO's management commenced early in fiscal year 1994. See
"-- Risk Factors Relating to the Merger -- Control of the Combined Company after
the Merger." ICO reported net profits in fiscal years 1994 and 1995. ICO's net
profit for the fiscal year ended September 30, 1995 was $5,790,000. There can be
no assurance that ICO will be profitable in the future.
Environmental Regulations
ICO's services routinely involve the handling of chemical substances and
waste materials, some of which may be considered to be hazardous wastes. ICO is
subject to numerous local, state and federal laws and regulations concerning the
use and handling of hazardous materials and restricting releases of pollutants
and contaminants into the environment. Many of these laws and regulations
provide for strict liability for the costs of cleaning up contamination
resulting from releases of regulated materials into the environment. ICO's
insurance policies do provide coverage for environmental or other damages caused
as a result of, among other things, defective casing or tubing inspected by ICO.
Although management of ICO believes that ICO is in substantial compliance with
these laws and regulations and also believes continued compliance with existing
laws and regulations and estimated capital expenditures for environmental
remediation will not have a material adverse effect on ICO's results of
operations or financial condition, there can be no such assurance that such an
effect will not occur. See "-- Legal Proceedings."
Competition
The principal competitive factors in ICO's business are price, availability
and quality of service. Consolidation in the tubular inspection, reconditioning
and coating industry has resulted in the elimination of many of ICO's
competitors and reduced ICO's competition in some product lines in some markets
to a single competitor. This consolidation has reduced the capacity which exists
in the domestic market to some extent, but the tubular inspection,
reconditioning and coating industry continues to be highly competitive. ICO's
ability to compete effectively is also dependent upon timely and reliable
performance of its services at competitive rates. If the level of domestic
exploration and production-related activity declines, the prices
17
<PAGE> 20
received by ICO for its services could be adversely affected. Further, ICO's
ability to use certain technology granted under a license in connection with the
acquisition of Baker Hughes Tubular Services, Inc. ("BHTS") on September 30,
1992 is restricted in most foreign markets. There can be no assurance ICO will
not encounter increased competition which could adversely affect its business,
results of operation or financial condition.
Legal Proceedings
ICO is a named defendant in thirteen suits involving fourteen plaintiffs,
filed between June 1988 and February 1996, for personal injury claims alleging
exposure to silica resulting in silicosis-related disease. ICO is generally
protected under workers' compensation law from claims under these suits except
to the extent a judgment is awarded against ICO for intentional tort. In 1994,
ICO was dismissed without liability from two suits alleging intentional tort
against ICO for silicosis-related disease. In fiscal 1993, ICO settled two other
suits, both of which alleged wrongful death caused by silicosis-related
diseases, which resulted in a total charge of $605,000. Two of the pending
personal injury cases involve three alleged silicosis-related deaths, which are
premised upon allegations of gross negligence. The standard of liability
applicable to the remainder of the pending cases is intentional tort, a stricter
standard than the gross negligence standard applicable to the wrongful death
cases. ICO and its counsel cannot at this time predict with any reasonable
certainty the outcome of any of the remaining suits. Except as described below,
ICO does not believe, however, that such suits will have a material adverse
effect on the financial conditions or results of operations of ICO. ICO does
have in effect general liability and employer's liability insurance policies
applicable to the referenced suits; however, ICO has been advised by each of the
involved insurance carriers of a reservation of rights with regard to policy
obligations pertaining to the suits because of various exclusions in the
policies, with the exception of a consolidated wrongful death case filed in
February 1996 by the heirs of two former employees, but not yet served upon ICO,
as to which no position has been asserted by the pertinent insurance carriers.
If an adverse judgment is obtained against ICO in any of the referenced suits
which is ultimately determined not to be covered by insurance, the amount of
such judgment could have a material adverse effect on the financial condition or
results of operations of ICO.
In connection with ICO's acquisition of BHTS in September 1992, Baker
Hughes, Incorporated ("Baker Hughes") agreed to reimburse ICO for 50% of BHTS
environmental remediation costs in excess of $318,000, with Baker Hughes' total
reimbursement obligation being limited to $1,000,000. BHTS is a responsible
party at two hazardous waste disposal sites that are currently undergoing
remediation pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, the French Limited site northeast of Houston, Texas, and the
Sheridan site near Hempstead, Texas. Based on the relatively advanced status of
the remediation at these sites and BHTS's minimal contribution of wastes at each
site, management believes that ICO's future liability under the agreement with
Baker Hughes with respect to these two sites will not be material to ICO.
RISK FACTORS RELATING TO WEDCO
Cyclicality of Business
Wedco's business cycles are created by changes in the cost of the plastic
pellets produced by the major petrochemical companies; as a result, the cycles
are relatively unpredictable. Because plastic pellets are fungible, the various
producers of plastic pellets tend to charge substantially similar prices. When
resin prices are increasing, users often build inventories to hedge against
further price increases, with the result that Wedco's processing activity also
increases. When prices decline, customers of the petrochemical companies often
delay purchasing resin and utilize existing inventory in the anticipation of
price reductions, thus reducing requirements for Wedco's processing. Wedco's
customers, in most cases, are the major petrochemical companies which produce
these materials.
18
<PAGE> 21
Foreign Currency Translation
The fluctuations of the U.S. dollar against certain foreign currencies,
particularly the Dutch guilder and British pound, impact the translation of
revenue and income of Wedco's foreign subsidiaries into U.S. dollars. Such
fluctuations may be significant and may have a material effect on Wedco's
financial statements, which may be positive or negative in any given period. The
increases (decreases) in certain income statement accounts resulting from these
fluctuations as shown on Wedco's Consolidated Statements of Income over the past
two fiscal years are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------
1995 VS. 1994 1994 VS. 1993
------------- -------------
<S> <C> <C>
Net revenues................................................ $ 1,183,000 $ (1,174,000)
Operating income............................................ 228,000 (197,000)
Pre-tax income.............................................. 210,000 (155,000)
Net income.................................................. 147,000 (131,000)
</TABLE>
Gains and losses from the translation of certain balance sheet accounts are
not included in determining net income, but are accumulated as a separate
component of shareholders' equity. These unrealized gains and losses are also
subject to deferred income taxes. As a result of the dollar's fluctuation
against the Dutch guilder and British pound and changes in the net assets of
foreign subsidiaries, shareholders' equity increased, net of deferred income
taxes, by $1,349,000 in fiscal 1995.
Competition
In its basic business of plastics grinding, Wedco's primary competitors in
the U.S. are smaller, local firms that lack the multiple plant locations,
technology and/or production capacity of Wedco. More substantial competition in
size-reduction services of plastics exists in Europe. End users of ground
plastic pellets may also perform grinding services themselves rather than
purchase materials that have been ground by outside contractors. Due to Wedco's
technical expertise and equipment manufacturing capabilities, Wedco believes
that it can provide plastics grinding services at a lower cost than most of its
customers and competitors. In addition, Wedco's ability to provide convenient
service to its customers is greatly enhanced due to its network of facilities
throughout North America and Western Europe. Wedco also experiences greater
competition in its other major processing service sectors, such as cryogenic
grinding, air-jet milling and compounding.
Wedco also manufactures grinding equipment. Until recently, it supplied
virtually all of such equipment for the North American market. However,
competition in the manufacturing and sale of such equipment has developed.
Decline in Earnings in Fiscal 1996
Wedco reported an increase of less than 1% and a decrease of 13.5% in net
revenues for the nine-month and three-month periods ended December 31, 1995,
respectively, when compared to the same periods in fiscal 1995. Operating income
decreased by 43.1% and 72.6% during these same periods, respectively. The
cyclical downturn in the worldwide plastics industry experienced during the
current fiscal year resulted in declines in the utilization of machinery and
equipment and an increase in unit costs as a result of the inability to spread
certain fixed costs over as many units. Furthermore, a portion of the increase
in revenues reported during the nine-month period ended December 31, 1995, is
attributed to an increase in compounding sales rendered by Wedco's Dutch
subsidiary. Such compounding revenues yield lower margins than traditional
processing services. Income from Wedco's investment in joint ventures decreased
from $450,535 to $61,734 and increased from $94,415 to $151,325 during the
nine-month and three-month periods ended December 31, 1995, respectively, the
decrease resulting primarily from a decline in earnings experienced by Wedco's
Canadian joint venture. See "-- Recent Results of Joint Ventures." Interest
expense increased 10.7% and 12.7% during the nine-month and three-month periods,
respectively, when compared to the same periods of fiscal 1995. The decreases in
operating income and joint venture earnings, coupled with an increase in other
expenses, resulted in a 75.2% and 99.6% decline in net income for the nine-month
and three-month periods
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ended December 31, 1995, respectively, when compared to the same periods of the
prior fiscal year. There can be no assurance that such decreases in operating
income and joint venture earnings and increase in expenses will not continue.
See Wedco's Quarterly Report on Form 10-Q for the quarter ended December 31,
1995 annexed hereto as Annex E.
Recent Results of Joint Ventures
Income from Wedco's investment in joint ventures decreased from $450,535 to
$61,734 or 86.3% and increased from $94,415 to $151,325 or 60.3% during the
nine-month and three-month periods ended December 31, 1995, respectively, when
compared to the same periods of the prior year. The increase in income to
$151,325 for the three-month period ended December 31, 1995 from $94,415 for the
corresponding period in the prior year, an increase of approximately $57,000 or
60.3%, is not necessarily indicative of future results. Both of Wedco's joint
ventures reported a decline in earnings during the nine-month and three-month
periods. In France, Micronyl-Wedco S.A.'s earnings have been affected by the
current decline in the plastics industry, resulting in a decrease in the volume
of materials processed during the current period. In Canada, WedTech Inc.'s
("WedTech") earnings have been negatively impacted significantly by ongoing
costs associated with its sales, marketing and administrative office in Toronto,
Canada and repetitive monthly losses associated with its research and production
facility in Dewey, Oklahoma. Furthermore, the current market for grinding and
compounding services in Canada has become increasingly competitive and these
revenues are yielding lower margins than in prior periods. Under the equity
method of accounting, net revenues of the joint ventures are not included in the
consolidated net revenues of the Company. There can be no assurance that such
declines in earnings from Wedco's investment in joint ventures will not
continue. See "THE COMPANIES -- Wedco -- Recent Litigation" with respect to an
action commenced by Wedco against WedTech and certain persons affiliated with
WedTech.
Other Contingent Liabilities
In conjunction with the sale of real estate owned by a former subsidiary,
the New Jersey Department of Environmental Protection and Energy ("DEPE") issued
an Administrative Consent Order ("ACO") to Wedco, under the New Jersey
Environmental Cleanup Responsibility Act ("ECRA"). Under ECRA, property title
cannot pass to a new owner until the DEPE is satisfied that the property meets
defined environmental standards or an ACO has been issued. Under the terms of
the ACO, Wedco is required to clean this site.
Inspections have shown the groundwater at this site contains contaminates
which must be removed. Accordingly, a remediation plan was prepared and
subsequently approved by the DEPE. Wedco has established reserves of $1,400,000
for costs related to cleanup activities, of which approximately $1,129,163 has
been paid as of December 31, 1995. Recent sampling results indicate that Wedco's
groundwater remediation program is working effectively to reduce the level of
groundwater contamination. Expenses in excess of what Wedco has recorded could
be incurred due to the inherent uncertainty surrounding the extent of
contamination, the complexity of governmental regulations and their
interpretations, and the varying costs and effectiveness of cleanup
technologies. However, Wedco believes that its reserve is sufficient.
RISK FACTORS RELATING TO THE MERGER
Control of the Combined Company After the Merger
Five of ICO's six directors are currently associated with Pacholder
Associates, Inc., an investment advisory firm headquartered in Cincinnati, Ohio,
or USF&G Pacholder Fund, Inc., an affiliate of Pacholder Associates, Inc. After
the Merger, these persons will constitute five of the combined company's nine
directors. See "MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER."
Because they will continue to constitute a majority of the combined company's
Board of Directors after the Merger, these persons will collectively be in a
position to direct the business and policies of the combined company and take
certain actions without the necessity of obtaining the vote of other
shareholders, such as approving mergers, to the extent authorized by the Texas
Business Corporation Act.
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Four of these five directors (Dr. Asher O. Pacholder, Sylvia A. Pacholder,
Robin E. Pacholder and William J. Morgan), together with Pacholder Associates,
Inc. and certain Wedco shareholders with whom these persons will enter into a
Shareholders Agreement, may own a number of shares of the combined company's
Common Stock sufficient to control the election of the combined company's Board
of Directors. See "THE MERGER AGREEMENT -- Ancillary Agreements -- Shareholders
Agreement."
Fixed Exchange Ratio Despite Change in Relative Stock Prices
The Merger Consideration is expressed in the Merger Agreement as a fixed
ratio. Accordingly, the Merger Consideration will not be adjusted in the event
of any increase or decrease in the price of either ICO Common Stock or Wedco
Common Stock unless the weighted average of the closing prices for ICO Common
Stock on the Nasdaq Stock Market for the last five trading days immediately
preceding the Effective Time is less than $4.00 per share. See "THE MERGER
AGREEMENT -- Conditions." The price of ICO Common Stock at the Effective Time
may vary from its price at the date of this Joint Proxy Statement/Prospectus and
at the dates of the Special Meetings. Such variations may be the result of
changes in the business, operations or prospects of ICO or Wedco, market
assessments of the likelihood that the Merger will be consummated and the timing
thereof, general market and economic conditions and other factors. Because the
Effective Time may occur at a date later than the Special Meetings, there can be
no assurance that the price of ICO Common Stock on the dates of the Special
Meetings will be indicative of its price at the Effective Time. The Effective
Time will occur as soon as practicable following the Special Meetings and the
satisfaction or waiver of the other conditions set forth in the Merger
Agreement. Shareholders of ICO and Wedco are urged to obtain current market
quotations for ICO Common Stock and Wedco Common Stock. See "THE MERGER
AGREEMENT -- Conditions."
Management after the Merger; Competition from Former Wedco Management
The Merger involves the integration of two companies that have previously
operated independently. ICO and Wedco operate in different industries with
different operating, technical and competitive conditions. ICO's operations are
conducted primarily in the United States and Canada, whereas Wedco has
substantial European operations. Two of the six members of Wedco's senior
management, William E. Willoughby, Wedco's founder and its current Chairman of
the Board and Chief Executive Officer, and William C. Willoughby, Director and
Executive Vice President, will retire from Wedco if the Merger is approved.
Management of the combined company will be controlled by current ICO management.
There can be no assurance that management will be successful, after the Merger,
in managing the combined company or operating it in a profitable manner. See
"-- Control of the Combined Company after the Merger."
William C. Willoughby is also the owner of a company engaged in the
business of providing plastic grinding services with annual revenues estimated
by Wedco of approximately $1,600,000. Mr. Willoughby and that company will not
be subject to any restrictions concerning competition with the combined company
following the Merger.
Uncertainties of Achieving Cost Savings
In determining that the Merger is advisable and in the best interests of
its shareholders, each of the ICO Board and the Wedco Board considered
opportunities for cost savings and other benefits expected to result from the
consummation thereof. While ICO and Wedco expect to achieve cost savings as a
result of the Merger, no assurance can be given that difficulties will not be
encountered in integrating the operations of ICO and Wedco or that the benefits
expected from such integration will be realized. Any delays or unexpected costs
incurred in connection with such integration could have a material adverse
effect on the business, results of operations or financial condition of the
combined company.
Effect of Merger on Income Statement
In fiscal year 1995, ICO recognized on its income statement significant tax
benefits relating to the reversal of the valuation allowance on certain deferred
tax assets and also relating to the utilization of net
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operating loss carry forwards. See "Notes to Unaudited Pro Forma Condensed
Financial Statements -- Note 3 -- Pro Forma Adjustments." As a result of the
Merger, the combined company will no longer be able to recognize these benefits
on its income statement, although this will not affect the availability of these
benefits for income tax purposes. This will reduce the combined company's net
income and per share earnings relative to ICO's recent net income and per share
earnings and such reduction will be significant. See "SUMMARY -- Comparative Per
Share Data" and -- Unaudited Pro Forma Financial Information."
Increased Debt Obligations
As of December 31, 1995, ICO had total indebtedness (including total
short-term and long-term debt) of approximately $1,657,000. On a pro forma basis
after giving effect to the Merger, ICO's total indebtedness as of December 31,
1995, would have been $21,894,000 and its net interest expense would have been
$143,000 for the fiscal quarter ended December 31, 1995.
Restrictions on Payment of Dividends
The ICO Common Stock to be issued in the Merger will rank junior as to
dividends and upon any liquidation, dissolution or winding up of ICO to ICO's
1,290,000 outstanding Depositary Shares, each of which represents 1/4 of a share
of $6.75 Convertible Exchangeable Preferred Stock (the "Preferred Stock"). See
"DESCRIPTION OF ICO CAPITAL STOCK -- ICO Preferred Stock." Dividends payable on
the Preferred Stock total $2,176,875 per year. Unless all Preferred Stock
dividends have been paid, no cash dividends may be paid on shares of ICO Common
Stock. Under Texas law, ICO may declare and pay dividends or make other
distributions on its capital stock only out of surplus, as defined in the Texas
Business Corporation Act. As of December 31, 1995, ICO had available surplus of
approximately $39,855,000 (or approximately $88,244,000 after giving pro forma
effect to the Merger).
Shares Eligible for Future Sale
Future sales of substantial amounts of ICO Common Stock in the public
market could adversely affect the prevailing market price of the ICO Common
Stock.
Pacholder Associates, Inc. and certain of the officers, directors and
principal shareholders of ICO associated with Pacholder Associates, Inc.
beneficially own an aggregate of 1,075,213 shares of ICO Common Stock, or
approximately 5.7% and 6.4% of the outstanding ICO Common Stock, after the
Merger, assuming all Wedco shareholders elect to receive the Stock Consideration
and the Cash/Stock Consideration respectively. Additionally, William E.
Willoughby, William C. Willoughby, and members of their families will own
5,472,373 and 4,299,722 shares of ICO Common Stock, or approximately 28.9% and
25.6% of the ICO Common Stock outstanding after the Merger, assuming all Wedco
shareholders, including them, elect to receive the Stock Consideration and
Cash/Stock Consideration respectively.
ICO has outstanding the Depositary Shares as well as warrants and stock
options that are convertible or exercisable, as the case may be, into an
aggregate of 3,534,600 shares of ICO Common Stock, or approximately 15.7 and
17.4% of the ICO Common Stock outstanding after the Merger, assuming all Wedco
shareholders elect to receive the Stock Consideration and Cash/Stock
Consideration respectively. See "DESCRIPTION OF ICO CAPITAL STOCK -- ICO
Depositary Shares and -- ICO Options and Warrants." ICO has filed with the
Commission registration statements, which in the aggregate, register 976,591
shares of ICO Common Stock which may be issued pursuant to exercise of the stock
options issued under ICO's various stock option plans. To date, options to
purchase 648,241 shares of ICO Common Stock have been issued under these plans.
ICO has 853,000 shares of ICO Common Stock issuable upon the exercise of
warrants, subject to registration rights. See "DESCRIPTION OF ICO CAPITAL
STOCK -- Registration Rights."
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THE COMPANIES
ICO
General. ICO provides inspection, reconditioning and corrosion control
services for new and used tubular goods and sucker rods utilized in the oil and
gas industry. ICO's inspection, reconditioning and corrosion control services
are designed to extend the useful lives and reduce the downhole failure of
sucker rods and tubular goods. ICO also sells equipment and supplies used in the
inspection, reconditioning and corrosion control of tubular goods and sucker
rods.
ICO's services are designed to reduce its customers' cost of drilling and
production by (1) preventing faulty material from being placed downhole
(exploration services), (2) reclaiming tubular goods and sucker rods used
downhole and restoring them to near their original condition, on a cost
effective basis (production services) and (3) preventing premature failure of
tubular goods and sucker rods from occurring due to downhole environment
(corrosion control services). Removal of tubulars or sucker rods for repair or
replacement is expensive and results in an interruption of production and loss
of revenues to the well owner. ICO's principal executive offices are located at
100 Glenborough Drive, Suite 250, Houston, Texas 77067, telephone (713)
872-4994.
Exploration Services. ICO provides inspection services for new tubular
goods to identify tubular goods which are defective or which do not meet
American Petroleum Institute ("API") standards or other specifications set by
the customer. These services are used by customers as a quality assurance and
control measure to reduce the risk of paying for defective tubular goods and to
reduce the risk of downhole failure, which is especially important when drilling
deep oil and natural gas wells with high downhole temperatures and pressures and
when drilling in environmentally sensitive areas such as offshore. ICO provides
these services at fifteen ICO facilities in five states. ICO also has the
capability to provide mobile inspection services in the field and manufactures
inspection and quality control equipment which is sold or leased to steel
producers and processors.
Production Services. ICO reconditions and inspects used tubular goods and
sucker rods. This reduces the customer's well operating costs because
reconditioning used materials is less expensive than the purchase of new
materials. Tubular goods reconditioned by ICO must generally meet the same API
or customer standards as new tubular goods. ICO performs these services for
tubulars at eight facilities in six states. ICO's sucker rod reconditioning and
inspection services are provided at six facilities in four states and in
Alberta, Canada.
Corrosion Control Services. Corrosive conditions exist inside most wells.
To combat these conditions, ICO offers its customers a variety of corrosion
control services which reduce well operating costs by extending the useful life
of downhole tubular goods and sucker rods and by improving the well's hydraulic
efficiency. ICO has five coating facilities located in Louisiana and Texas.
WEDCO
General. The business of Wedco Technology, Inc. was founded by its current
Chairman of the Board and Chief Executive Officer, William E. Willoughby, who
began manufacturing plastics grinding machinery and providing plastics grinding
services in 1960. Wedco's principal business is providing size-reduction and
related processing services primarily to the plastics industry and to other
industries which require powder in their operation. Wedco also manufactures
equipment designed for grinding and providing certain auxiliary processes.
Wedco's principal executive offices are located at Route 173, West Portal, New
Jersey 08802, telephone (908) 479-4181.
Processing Services. Wedco operates seven plants in five states in the
United States and plants in The Netherlands, England and Sweden. In addition,
Wedco owns 50% of its Canadian joint venture company, WedTech, which provides
similar services in Ontario and Alberta, and 50% of a French company, which
provides similar services at two locations in France. Customers' materials are
shipped by rail or truck to Wedco's plants for processing according to customer
specifications. After processing, materials are packaged in bags, drums, boxes,
super sacks, bulk trucks or rail hopper cars and shipped via rail or truck to
the customer
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or end user. The size-reduction of plastics can normally be performed with the
conventional line of Wedco-manufactured equipment, but in some cases, due to the
physical characteristics of the materials, cryogenic grinding is required. Wedco
developed specifically designed equipment and techniques for cryogenic grinding.
Wedco also provides ultra-fine size reduction, utilizing air-jet milling
equipment. This size-reduction technique utilizes high-velocity, compressed air
to process materials to sizes between 0.5 and 50 microns. Materials processed
with Wedco's equipment include polyethylene, polyester, polypropylene, nylon,
fluorocarbons, cellulose acetate, vinyls, phenolics, polyurethane, acrylics,
epoxies and many others. The resulting powders are used in the manufacture of
paint and metal coatings, fabric coating and in certain processes such as
rotational molding, blending and compounding. Materials that are air-jet milled
include additives for printing ink, plastics and paint, as well as a variety of
other applications requiring very fine particle size. Wedco provides a broad
range of processing services which are integrated with the primary
size-reduction services discussed above. These other services include
granulating, compounding, de-agglomerating, blending, mixing, heat treating,
separating and screening as well as packaging, warehousing and certain
distribution services.
Manufacturer of Related Processing Equipment. Wedco manufactures a
substantial amount of the equipment used in providing its size-reduction
services. This equipment primarily includes pulverizers and grinders designed
specifically for plastic materials. In addition, Wedco manufactures accessory
equipment, such as high production, high intensity blenders and material
handling equipment, including hydraulic drum and box dumping devices. Wedco also
sells the size-reduction machinery it manufactures to customers who wish to do
the tasks performed by this equipment in-house.
Recent Litigation. On February 16, 1996, Wedco commenced litigation in the
United States District Court for the District of New Jersey against WedTech,
Polyvector Corporation, a Canadian corporation ("Polyvector"), and certain
persons affiliated with Polyvector and WedTech. WedTech is owned 50% by Wedco
and 50% by Polyvector. Wedco alleged that the terms of a shareholders' agreement
among Wedco and certain of the defendants had been breached as a result of the
defendants failing to obtain Wedco's approval of certain actions, including
changing the business of WedTech, encumbering assets of WedTech, making certain
expenditures, the organization of WedTech USA, a wholly-owned subsidiary of
WedTech, and causing WedTech USA to compete with certain of Wedco's customers.
Wedco also alleged Polyvector and certain other defendants breached fiduciary
duties to Wedco. Wedco seeks to enjoin the defendants from continuing to violate
the shareholders' agreement and to obtain a judgment in the amount of
approximately $177,000, plus interest and costs, for monies due and owing by
WedTech to Wedco for goods and services. Wedco received payment of approximately
$174,000 subsequent to the commencement of the action. The defendants have not
yet filed answers; discovery is scheduled to commence in the near future.
W ACQUISITION
W Acquisition is a New Jersey corporation organized recently as a
wholly-owned subsidiary of ICO for the sole purpose of effecting the Merger. W
Acquisition has no material assets and has not engaged in any activities except
in connection with the Merger. If the Merger is consummated, the corporate name
of W Acquisition would be changed to "Wedco Technology, Inc."
W Acquisition's principal executive offices are located at 100 Glenborough
Drive, Suite 250, Houston, Texas 77067, telephone (713) 872-4994.
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<PAGE> 27
ICO SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is provided to shareholders of ICO in
connection with the ICO Special Meeting as described below. The Board of
Directors of ICO is soliciting proxies for use at the ICO Special Meeting, and
forms of proxy are being provided with this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to shareholders of ICO on or about March 21, 1996.
PURPOSE OF MEETING
At the ICO Special Meeting, the shareholders of ICO will be asked to
consider and vote on proposals to approve the Share Issuance and the Charter
Amendment. Approval of the Charter Amendment is not a condition to the
consummation of the Merger. Pursuant to the Merger Agreement, (i) Wedco would
merge with and into W Acquisition, a wholly-owned subsidiary of ICO, and (ii)
each share of Wedco Common Stock would by virtue of the Merger and without the
need for any further action on the part of the holder thereof, be converted in
the right to receive, at the option of the holder thereof, either the Cash/Stock
Consideration or the Stock Consideration. If the Merger is consummated and the
Charter Amendment approved, ICO would amend its Articles of Incorporation to
change its name to "Willoughby International, Inc." and thereafter would
continue to operate ICO's existing oil and gas industry services business under
the name of ICO. A copy of the Merger Agreement is attached as Annex A. The
proposed amendment to the Articles of Incorporation of ICO will read in its
entirety as follows:
ARTICLE ONE
The name of the Corporation is Willoughby International, Inc.
The Board of Directors of ICO has unanimously approved the transactions
contemplated in the Merger Agreement and recommends that the shareholders of ICO
vote FOR approval of the Share Issuance and FOR approval of the Charter
Amendment.
DATE, PLACE AND TIME; RECORD DATE
The ICO Special Meeting will be held at 10:00 a.m., Central Standard Time,
on Monday, April 29, 1996 at the Wyndham Greenspoint Hotel, 1240 Greenspoint
Drive, Houston, Texas.
The ICO Board of Directors has fixed the close of business on March 15,
1996 as the record date for the determination of holders of ICO Common Stock
entitled to notice of, and to vote at, the ICO Special Meeting. As of March 15,
1996, there were 8,927,361 shares of ICO Common Stock outstanding and entitled
to vote which were held by approximately 500 holders of record.
VOTING RIGHTS
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of ICO Common Stock entitled to vote is
necessary to constitute a quorum at the ICO Special Meeting.
Under the Texas Business Corporation Act ("TBCA"), the affirmative vote of
the holders of at least 66 2/3 of the outstanding shares of ICO Common Stock is
required to approve the Charter Amendment. The TBCA does not require the Merger
Agreement to be approved by ICO's shareholders. However, the rules and
regulations of the Nasdaq Stock Market require that the Share Issuance be
approved by ICO's shareholders. The affirmative vote of a majority of the shares
of ICO Common Stock cast at the ICO Special Meeting is required under these
rules to approve the Share Issuance.
Each share of ICO Common Stock will be entitled to one vote at the meeting.
Under the TBCA, an abstention and a broker non-vote will have the same legal
effect as a vote against the adoption of the Charter
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Amendment. Abstentions and broker non-votes will have no effect on the outcome
of the vote of the approval of the Share Issuance. A broker-non vote occurs if a
broker or other nominee present in person or by proxy does not have
discretionary authority and has not received instructions with respect to a
particular item or does not cast a vote on that item for any reason.
VOTING AGREEMENT
Pursuant to the Merger Agreement, certain shareholders of ICO, who own in
the aggregate 1,075,213 shares, or approximately 12% of the ICO Common Stock,
entered into the ICO Voting Agreement with Wedco to vote all of such shares in
favor of the Share Issuance and Charter Amendment and have granted to Wedco and
Walter L. Leib and Edward N. Barol irrevocable proxies to vote all of such
shares in favor of such proposals. The authorizations by the ICO shareholders
set forth in the ICO Voting Agreement are subject to the registration by ICO
under the Securities Act of the ICO Common Stock included in the Merger
Consideration.
PROXIES
Shares of ICO Common Stock represented by properly executed proxies
received by ICO prior to or at the ICO Special Meeting, and not revoked, will be
voted in accordance with the instructions specified in the proxies. If no
instructions are specified in such proxies, shares will be voted FOR approval of
the Share Issuance and FOR approval of the Charter Amendment.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to voting of the proxy by the execution and submission of a
revised proxy; by written notice to the Secretary of ICO; or by voting in person
at the Special Meeting.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by ICO. Following the mailing
of proxy solicitation materials, proxies may be solicited by directors, officers
and employees of ICO and its subsidiaries personally, by telephone or otherwise.
Such persons will not receive any fees or other compensation for such
solicitation. In addition, ICO will reimburse brokers, custodians, nominees and
other persons holding shares of ICO Common Stock for others for their reasonable
expenses in sending proxy materials to the beneficial owners of such shares and
in obtaining their proxies.
ADJOURNMENT OF ICO SPECIAL MEETING
If there are not sufficient votes to approve the Share Issuance or the
Charter Amendment at the time of the ICO Special Meeting, the meeting may be
adjourned in order to permit further solicitation of votes. Proxies that are
being solicited by the ICO Board of Directors grant the discretionary authority
to vote for any such adjournment, if necessary, although executed proxy cards
that are properly marked to vote against the Share Issuance and the Charter
Amendment will not be counted as a vote for any adjournment, unless it is
specifically so indicated. If it is necessary to adjourn the ICO Special
Meeting, no notice of the time and place of the adjourned meeting is required to
be given to shareholders other than an announcement of such time and place at
the ICO Special Meeting. A majority of the shares represented and voting at the
Special Meeting is required to approve any such adjournment.
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WEDCO SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is also provided to shareholders of
Wedco in connection with the Wedco Special Meeting as described below. The Board
of Directors of Wedco is soliciting proxies for use at the Wedco Special
Meeting, and forms of proxy are being provided with this Joint Proxy Statement/
Prospectus.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to shareholders of Wedco on or about March 21, 1996.
PURPOSE OF MEETING
At the Wedco Special Meeting, the shareholders of Wedco will be asked to
consider and vote on a proposal to approve the Merger Agreement pursuant to
which ICO would acquire by merger all of the outstanding Wedco Common Stock.
Pursuant to the Merger Agreement, (i) Wedco would merge with and into W
Acquisition, a wholly-owned subsidiary of ICO, with W Acquisition surviving the
Merger as a wholly-owned subsidiary of ICO, (ii) each share of Wedco Common
Stock would, by virtue of the Merger and without the need for any further action
on the part of the holder thereof, be converted into the right to receive, at
the option of the holder thereof, either the Cash/Stock Consideration or the
Stock Consideration, and (iii) W. Acquisition Corp. would amend its Articles of
Incorporation to change its name to "Wedco Technology, Inc." A copy of the
Merger Agreement is attached as Annex A.
The Board of Directors of Wedco has unanimously approved the Merger
Agreement and recommends that the shareholders of Wedco vote FOR approval and
adoption of the Merger Agreement.
DATE, PLACE AND TIME; RECORD DATE
The Wedco Special Meeting will be held at 10:00 a.m., Eastern Standard
Time, on Monday, April 29, 1996, at Wedco's corporate headquarters on Route 173,
West Portal, New Jersey.
The Wedco Board of Directors has fixed the close of business on March 15 as
the record date for the determination of holders of Wedco Common Stock entitled
to notice of, and to vote at, the Wedco Special Meeting. As of March 15, 1996,
there were 3,567,785 shares of Wedco Common Stock outstanding and entitled to
vote which were held by approximately 525 holders of record.
VOTING RIGHTS
The presence, in person or by properly executed proxy, of the holders of
shares of Wedco Common Stock entitled to cast a majority of the votes at the
Wedco Special Meeting is necessary to constitute a quorum.
Under the New Jersey Business Corporation Act (the "NJBCA"), the
affirmative vote of the holders of at least 66 2/3% of the votes cast by holders
of Wedco Common Stock is required to approve the Merger Agreement.
Each share of Wedco Common Stock will be entitled to one vote at the
meeting. Under the NJBCA, an abstention will have the same legal effect as a
vote against approving the Merger Agreement. A broker non-vote will be deemed
absent from the meeting.
VOTING AGREEMENT
Pursuant to the Merger Agreement, certain shareholders of Wedco, who own in
the aggregate 1,948,064 shares, or approximately 54.6% of Wedco Common Stock,
have entered into the Wedco Voting Agreement with ICO to vote all of such shares
in favor of the proposal to approve the Merger Agreement and have granted to ICO
and Sylvia A. Pacholder and Dr. Asher O. Pacholder irrevocable proxies to vote
all of such shares in favor of such proposal. The authorizations by the Wedco
shareholders set forth in the Wedco Voting
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Agreement are subject to the registration by ICO under the Securities Act of the
ICO Common Stock included in the Merger Consideration.
PROXIES
Shares of Wedco Common Stock represented by properly executed proxies
received by Wedco prior to or at the Wedco Special Meeting, and not revoked,
will be voted in accordance with the instructions specified in the proxies. If
no instructions are specified in such proxies, shares will be voted FOR approval
and adoption of the Merger Agreement and the terms of the Merger.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to voting of the proxy by the execution and submission of a
revised proxy; by written notice to the Secretary of Wedco; or by voting in
person at the Special Meeting.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by Wedco. Following the
mailing of proxy solicitation materials, proxies may be solicited by directors,
officers and employees of Wedco and its subsidiaries personally, by telephone or
otherwise. Such persons will not receive any fees or other compensation for such
solicitation. In addition, Wedco will reimburse brokers, custodians, nominees
and other persons holding shares of Wedco Common Stock for others, for their
reasonable expenses in sending proxy materials to the beneficial owners of such
shares and in obtaining their proxies.
ADJOURNMENT OF WEDCO SPECIAL MEETING
If there are not sufficient votes to approve and adopt the Merger Agreement
at the time of the Wedco Special Meeting, the meeting may be adjourned in order
to permit further solicitation of votes. Proxies that are being solicited by the
Wedco Board of Directors grant the discretionary authority to vote for any such
adjournment, if necessary, although executed Proxy Cards that are properly
marked to vote against the proposal to approve and adopt the Merger Agreement
will not be counted as a vote for any adjournment, unless it is specifically so
indicated. If it is necessary to adjourn the Wedco Special Meeting and a new
record date is not fixed for the adjourned meeting, no notice of the time and
place of the adjourned meeting is required to be given to shareholders other
than an announcement of such time and place at the Wedco Special Meeting. The
meeting may be adjourned for a period of not more than 20 days. A majority of
the voting power represented and voting at the Wedco Special Meeting is required
to approve any such adjournment.
ELECTION OF MERGER CONSIDERATION BY SHAREHOLDERS OF WEDCO
If the Merger is consummated, shareholders of Wedco will be promptly
provided with a Letter of Transmittal for the purpose of tendering certificates
and electing whether they desire to receive the Cash/Stock Consideration or the
Stock Consideration. SHAREHOLDERS OF WEDCO MUST MAKE THIS ELECTION ON THE LETTER
OF TRANSMITTAL WHETHER THEY VOTE FOR OR AGAINST THE PROPOSAL TO APPROVE AND
ADOPT THE MERGER AGREEMENT. IF NO ELECTION IS MADE WITH RESPECT TO A SHARE OF
WEDCO COMMON STOCK WITHIN THIRTY DAYS AFTER THE DATE THE LETTER OF TRANSMITTAL
IS MAILED, THE HOLDER OF SUCH SHARE WILL BE DEEMED TO HAVE ELECTED TO RECEIVE
THE STOCK CONSIDERATION.
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MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER
The Merger Agreement provides that Wedco will merge with and into W
Acquisition, a wholly-owned subsidiary of ICO, with W Acquisition surviving the
Merger as a wholly-owned subsidiary of ICO. W Acquisition would, as a result of
the Merger, amend its Articles of Incorporation to change its name to "Wedco
Technology, Inc." Also, the Merger Agreement provides that if the Merger is
consummated and the Charter Amendment is approved, ICO would amend its Articles
of Incorporation to change its name to "Willoughby International, Inc." The
Merger, then, will result in Wedco Technology, Inc., formerly known as W
Acquisition Corp., becoming a wholly-owned subsidiary of Willoughby
International, Inc., formerly known as ICO, Inc.
The directors and executive officers of Willoughby International, Inc. upon
consummation of the Merger are set forth below. The Merger Agreement provides
that the persons listed below shall serve in the positions set forth opposite
their respective names with the exception of Messrs. Cave and Lancaster who will
continue to hold the positions indicated. See "THE MERGER AGREEMENT -- Ancillary
Agreements -- Shareholders Agreement."
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Dr. Asher O. Pacholder...... 58 Chairman of the Board of Directors
(a Class III Director) and Chief Financial Officer
Sylvia A. Pacholder......... 53 President, Chief Executive Officer, Secretary and Class II
Director
Jon C. Biro................. 29 Controller and Treasurer
Jack C. Cave................ 61 Senior Vice President
William E. Cornelius........ 47 Class I Director
Isaac Joseph................ 40 Senior Vice President
Gary L. Lancaster........... 41 Senior Vice President and General Counsel
Walter L. Leib.............. 66 Class III Director
Curtis Matthews............. 52 Senior Vice President
Kenneth Miller.............. 52 Senior Vice President
William J. Morgan........... 41 Class II Director
Robin E. Pacholder.......... 29 Class I Director
George S. Sirusas........... 56 Class I Director
John F. Williamson.......... 57 Class III Director
William E. Willoughby....... 75 Class II Director
</TABLE>
The directors and executive officers of Wedco Technology, Inc. upon
consummation of the Merger are set forth below. The Merger Agreement provides
that the persons listed below shall serve in the positions set forth opposite
their respective names with the exception of Mr. Verhoeff who will continue to
hold the position indicated. See "THE MERGER AGREEMENT -- Ancillary
Agreements -- Shareholders Agreement."
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Dr. Asher O. Pacholder...... 58 Chairman of the Board of Directors and Chief Operating Officer
Sylvia A. Pacholder......... 53 President, Chief Executive Officer, and Director
Robert F. Bush.............. 70 Vice President of Finance
Donald C. Cuomo............. 62 Vice President of Sales and Marketing
Fred R. Feder............... 56 Vice President
Timothy J. Kita............. 35 Manager of Human Resources
Mark L. Kuna................ 32 Vice President and Principal Accounting Officer
Theo J.M.L. Verhoeff........ 45 Vice President -- European Operations
William E. Willoughby....... 75 Director
</TABLE>
Dr. Asher O. Pacholder has been Chairman of the Board of Directors and
Chief Financial Officer of ICO since February 1995. Dr. Pacholder has been a
Director of ICO since 1990. Dr. Pacholder has been Chairman of the Board and
Managing Director of Pacholder Associates, Inc. since 1983. He serves on the
Boards of
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<PAGE> 32
Directors of USF&G Pacholder Fund, Inc., a closed-end investment company,
Southland Corporation, which owns and operates convenience stores, Trump's
Castle Associates, which owns and operates the Trump's Castle Casino Resort in
Atlantic City, New Jersey, and AM International, Inc., a manufacturer and
distributor of graphics equipment and supplies. Dr. Pacholder is the spouse of
Sylvia A. Pacholder and the father of Robin E. Pacholder.
Sylvia A. Pacholder has been Chief Executive Officer of ICO since February
1995, President since November 1994 and Secretary since December 1993. From July
1994 to November 1994, Ms. Pacholder served as Executive Vice
President -- Operations of ICO, and from January 1994 to July 1994, she served
as Vice President -- Corporate Development of ICO. Ms. Pacholder has been a
Director of ICO since 1993. During 1993, Ms. Pacholder was Senior Vice President
of Pacholder Associates, Inc. Ms. Pacholder was a member of the faculty at the
University of Cincinnati from 1984 to 1993, most recently as the head of the
Department of Mathematics and Applied Sciences.
Jon C. Biro, a certified public accountant, has been principally employed
as Controller of ICO since October 1994 and as Controller and Treasurer of ICO
since April 1995. Prior to that time, Mr. Biro was a certified public accountant
with Price Waterhouse LLP.
Robert F. Bush has been employed as Controller of Wedco since 1992,
becoming Vice President -- Finance in July 1994. Prior to 1992, he was employed
as the Controller-Treasurer of Auxilec Air-Equipment, Inc. and Vice
President -- Finance of National Hose Co., a division of Dayco Corporation. A
certified public accountant, he served eight years with the accounting firm of
Touche, Ross & Co. (now Deloitte & Touche).
Jack C. Cave has been principally employed as Senior Vice
President -- Production Services of ICO since January 1996. From August 1995 to
January 1996, Mr. Cave was Director of Asset Utilization for ICO. From April
1994 to August 1995 he was Division Manager of Frontier Inspection Services for
ICO. Prior to April 1994 Mr. Cave was President and General Manager of Frontier
Inspection Services.
William E. Cornelius has been an independent manufacturing consultant since
1991. For more than five years prior to such time, Mr. Cornelius was Vice
President/Partner of Young & Klein Technicraft, Inc., a printing company. Mr.
Cornelius currently serves as a Director of Novare Services, Inc., a healthcare
services company. Mr. Cornelius has been a Director of ICO since 1992.
Donald C. Cuomo has been continuously employed by Wedco since 1963,
becoming Vice President in 1974.
Isaac Joseph has been principally employed as Senior Vice
President -- Sales of ICO since March 1995. From November 1994 to March 1995, he
was ICO's Louisiana Division Manager. Mr. Joseph was ICO's Division Sales
Manager for Louisiana from June 1994 to November 1994. From March 1992 to June
1994, Mr. Joseph was the Louisiana Sales Manager for Tuboscope Vetco
International. From September 1991 to March 1994, he was a sales representative
for Completion Accessories, Inc., an oilfield service company, in Louisiana.
Prior to that time, he was Senior Sales Representative for Baker Hughes Vetco
Services, an oilfield service company.
Fred R. Feder has been continuously employed by Wedco since 1961, becoming
General Manager in 1972 and Vice President in 1974.
Timothy J. Kita has been employed by Wedco since 1989, becoming Manager of
Human Resources in 1992. Prior to joining Wedco, he was employed by the US Gauge
Division of Ametek Corporation.
Mark L. Kuna, a certified public accountant, has been Corporate Controller
of Wedco since July 1994. From July 1989 to July 1994, Mr. Kuna served as
Assistant Corporate Controller of Wedco.
Gary L. Lancaster has been principally employed as Senior Vice President
and General Counsel of ICO since December 1995. For more than five years prior
to that time, Mr. Lancaster was employed with Scurlock Permian Corporation, a
subsidiary of Ashland Inc., including employment as Senior Attorney from July
1991 to December 1995.
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<PAGE> 33
Walter L. Leib has been Senior Partner in the law firm of Leib, Kraus,
Grispen & Roth, in Scotch Plains, New Jersey since its inception in 1971. Mr.
Leib has served as a Director and General Counsel to Wedco since its inception
in 1960.
Curtis Matthews has been principally employed as Senior Vice
President -- Corporate Development of ICO since July 1995. From October 1994 to
June 1995, Mr. Matthews was Vice President -- Exploration Services of ICO. From
October 1992 to September 1994, Mr. Matthews was employed as Regional Manager of
ICO. For more than five years prior to that time, Mr. Matthews served as
Domestic Inspection Manager for Baker Hughes Tubular Services, Inc.
Kenneth Miller has been principally employed as Senior Vice
President -- Corrosion Control Services of ICO since October 1995. From November
1994 to October 1995, Mr. Miller served ICO as Assistant Vice
President -- Corrosion Control Products. From October 1993 to October 1994, he
was ICO's Louisiana Division Manager, and for the three years prior to October
1993, Mr. Miller served as the Gulf Coast Area Manager for Baker Hughes Tubular
Services, Inc.
William J. Morgan has been the President and a Managing Director of
Pacholder Associates, Inc. for more than five years. He serves as a Director of
USF&G Pacholder Fund, Inc., Duckwall-Alco Stores, Inc., a midwestern retailer,
and Kaiser Ventures, Inc., an environmental resources company. Mr. Morgan has
been a Director of ICO since 1992.
Robin E. Pacholder has been Senior Vice President and Associate General
Counsel of Pacholder Associates, Inc. since 1994. Ms. Pacholder was an Associate
with the law firm of Pachulski, Stang, Ziehl & Young from 1992 to 1994. Prior to
such time, Ms. Pacholder attended and graduated with honors from the UCLA School
of Law and was admitted to practice law in California in 1992. Ms. Pacholder has
been a Director of ICO since 1993.
George S. Sirusas has been continuously employed by New Jersey Savings
Bank, Somerville, New Jersey from 1983 and until the bank's merger with United
Jersey Bank on September 22, 1995. He served as senior lending officer of the
merged bank since 1986 and presently holds the position of Vice President and
commercial lending officer with the United Jersey Bank. Prior to joining New
Jersey Savings Bank, he served as Vice President of Town and Country Bank,
Flemington, New Jersey.
Theo J.M.L. Verhoeff became President of Wedco Holland B.V. in 1984. Mr.
Verhoeff became Vice President of European Operations of Wedco in 1987. Prior to
1984, he was employed by Shell International Petroleum Corporation as a Sales
Representative and later became Product Manager and Head of External Relations.
John F. Williamson has been Executive Vice President and Chief Financial
Officer of Asset Allocation Concepts, Inc., an investment management company,
since May 1995. From 1993 to 1994, Mr. Williamson served as Vice
President/Manager of Investments for American Life and Casualty Insurance
Company. From 1990 to 1993, he was a financial consultant. From 1985 to 1990,
Mr. Williamson was Senior Vice President/ Treasurer and member of the Operating
Committee for Community Federal Savings and Loan Association. Mr. Williamson
serves on the Director of USF&G Pacholder Fund. Mr. Williamson was appointed by
the Board of Directors of ICO in June 1995 to fill the vacancy on the Board
resulting from the death of John R. Howard.
William E. Willoughby has been employed by Wedco since 1960 as its Chairman
of the Board and President. He is also a Director of TDT, Inc., which acquired
the assets of Tri-Delta Technology, Inc. and the Bottle Division of Wedco, Inc.
from Wedco in 1988.
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<PAGE> 34
THE MERGER
BACKGROUND OF THE MERGER
Over the past several years, ICO's Board of Directors and management have
followed a strategy focused on (i) reduction of overhead and operating costs,
(ii) development of new products and services and (iii) acquisitions to expand
product and service lines, expand geographic coverage and take advantage of
consolidation opportunities. Pursuant to this acquisition strategy, ICO acquired
BHTS in September 1992 and seven other businesses in fiscal years 1994 and 1995.
ICO's management also has reviewed a number of other possible acquisitions in
various businesses serving the energy and petrochemical markets.
In 1993, William E. Willoughby, Wedco's founder, Chairman of the Board and
Chief Executive Officer, then in his 70's, recognized that he would soon be
interested in retiring from an active role in Wedco's business. He also
recognized that there previously had not been a concerted effort on the part of
Wedco's management to increase its depth or to develop new management to take
over subsequent to his retirement and the retirement of Robert F. Bush, Wedco's
Vice President -- Finance.
It also appeared that in order for Wedco to maintain its dominant position
in its domestic markets, an additional plant should be built in the mid-western
United States to better serve growing customer demand in that area in the next
few years. Also in 1993, discussions commenced with a major company in Europe
regarding an acquisition by Wedco in Europe. Completion of either of these
projects would have required substantial funds.
Messrs. Willoughby and Bush had meetings with various financial advisers,
who advised them that, based on the market prices of Wedco Common Stock and
prevailing market conditions, the raising of capital in the public or private
markets could have had an adverse effect on the market prices of Wedco Common
Stock and such efforts were discouraged.
It became apparent to Wedco's Board of Directors as well as its management
that Wedco should seek a company to acquire Wedco that could provide both the
management and capital resources necessary in order for Wedco to continue its
growth. From time to time over many years, Wedco had held informal discussions
with several parties concerning the possible acquisition of Wedco. None of those
discussions, however, went beyond the preliminary stage.
Accordingly, commencing in late 1993 and early 1994, the efforts to find a
purchaser for Wedco were significantly intensified. Wedco entered into
non-exclusive contracts with several brokers and investment banks, including, in
August 1994, New York-based Brenner Securities Corporation ("Brenner"), which
led to discussions between Wedco's management and certain parties identified by
those agents. However, while some of those discussions resulted in the
performance of due diligence examinations by the parties, none progressed to the
signing of a letter of intent or any other agreement for the acquisition of
Wedco.
In March 1995, Dr. Asher O. Pacholder learned that Wedco had retained
Brenner to find a purchaser for Wedco. Dr. Pacholder obtained from Brenner a
confidential memorandum regarding Wedco and the possible sale of Wedco. After
reviewing the confidential memorandum, Dr. Pacholder requested that James P.
Shanahan, Jr. and Howard T. Rice, advisers to ICO's Board of Directors, obtain
the confidential memorandum and meet with Wedco's representatives to obtain
additional information concerning Wedco and to explore the possible parameters
of a business combination between ICO and Wedco.
Over the course of the next few months, there followed an extensive series
of meetings, conference calls and exchanges of information between management
and representatives of the two companies involving due diligence investigations
and negotiations related to a business combination. ICO management visited
facilities and met the management of Wedco's operating subsidiaries and joint
venture affiliates in Europe and Canada. Wedco management visited ICO facilities
and met ICO's operating management. Wedco and its advisors also performed
various due diligence reviews of ICO.
Representatives of the two companies, in consultation with their respective
management groups, negotiated the principal terms of a merger of Wedco into a
wholly-owned subsidiary of ICO, which was described in a joint press release on
August 14, 1995 (the "August 14 Press Release"), pursuant to which
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<PAGE> 35
Wedco shareholders would receive $5.71 cash and 1.8 shares of ICO Common Stock
for each share of Wedco Common Stock.
After the August 14 Press Release, as the companies and their
representatives were continuing due diligence and negotiating definitive
documentation for the transaction, Wedco's financial results, which had declined
during the quarter ended June 30, 1995 compared to the prior quarters and prior
year period, showed further declines which Wedco attributed to, among other
factors, the cyclical world-wide nature of Wedco's business and losses incurred
by Wedco's Canadian joint venture affiliate in its start-up U.S. operation.
In August 1995, the Board of Directors of Wedco engaged Mesirow Financial,
Inc. ("Mesirow") as its independent financial advisor to evaluate the fairness,
from a financial point of view, to the Wedco shareholders of the consideration
which would be received by them in the proposed merger. See "-- Opinion of
Wedco's Financial Advisor."
These results caused ICO to reevaluate the anticipated requirements for
capital related to Wedco and the proposed structure of the consideration to be
paid in the transaction. As a result of extensive due diligence performed by ICO
and its advisers during September, October and November, 1995, ICO determined
that it would be desirable to structure the transaction in such a way as to
allow the combined company to retain a larger cash position than would have been
the case under the terms described in the August 14 Press Release. During this
time, representatives of the two companies substantially completed negotiation
of the Merger Agreement and related documents.
On November 27, 1995, representatives of ICO and Wedco met to discuss a
revised proposal from ICO which changed the consideration for each share of
Wedco Common Stock to either the Stock Consideration or the Cash/Stock
Consideration at the election of each Wedco shareholder. At the meeting, the
Wedco representatives indicated their support for the proposal.
On November 29, 1995, ICO's Board of Directors met and received detailed
descriptions and analyses of the Merger and related transactions by management
and the Board's advisers. At the meeting, after consideration of the various
factors and for the reasons described below, the Board of Directors, by
unanimous vote, approved the Merger, the issuance of ICO Common Stock pursuant
to the Merger Agreement, the Charter Amendment and authorized ICO's management
to enter into the Merger Agreement.
On November 30, 1995, Dr. Pacholder, Ms. Pacholder, Mr. Shanahan and Mr.
Rice met with Wedco's Board of Directors to present the revised merger proposal
to Wedco's full Board of Directors. At the meeting, Wedco's Board of Directors
indicated their support for the proposal and requested that Mesirow complete its
review of the fairness of the Merger to the Wedco shareholders for a meeting of
the Wedco Board of Directors to be held the following week.
On December 5, 1995, Wedco's Board of Directors met with representatives of
Brenner and Mesirow. Mesirow reviewed the Merger and related transactions, as
modified, and reported to the Board that in its opinion the Merger was fair to
Wedco's shareholders from a financial point of view. The Board, taking into
consideration Mesirow's report and its knowledge of the reasons why Wedco had
intensified its effort for its sale, unanimously approved the Merger and the
definitive Merger Agreement and related agreements which had previously been
delivered to the Board.
The Merger Agreement and the Voting Agreements were executed by the parties
thereto on December 8, 1995 and the Merger Agreement was amended on March 13,
1996.
Pursuant to its contract with Wedco, Brenner will receive a fee of one
percent of the net aggregate purchase price for Wedco plus $100,000, half of
which will be paid upon consummation of the Merger and the other half of which
will be paid within six months thereafter. Wedco has also agreed to reimburse
Brenner for all necessary out-of-pocket expenses, not to exceed $500 per month,
and to indemnify Brenner and certain related persons and entities against
certain liabilities under the federal securities laws, relating to or arising
out of its engagement. Brenner's fee is contingent upon consummation of the
Merger.
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<PAGE> 36
ICO'S REASONS FOR THE MERGER
The Board of Directors of ICO has unanimously approved the Merger. The
Board of Directors of ICO believes that the Merger is in the best interests of
ICO and its shareholders and unanimously recommends that the shareholders of ICO
vote FOR approval of the Share Issuance and FOR the Charter Amendment.
In evaluating the proposed Merger, the Board of Directors of ICO considered
a variety of factors, including, but not limited to, the following:
1. Wedco provides size reduction and other services to the
petrochemical industry, which has a long-term record of growth and is
expected to continue to grow in the future.
2. Wedco has a long history of significant revenue and earnings
growth.
3. Wedco is the dominant provider of size reduction services in the
markets it serves. ICO's management believes that Wedco may have attractive
opportunities for acquisition and expansion of product and service lines
which could further leverage Wedco's market leadership position.
4. Wedco has a strong business presence in Europe, providing
geographic diversification to ICO's predominantly North American business.
This geographic diversification may provide a counterbalance to the
exposure to business cycles in North America, and particularly the United
States.
5. Wedco will provide ICO with diversification of business lines.
Although ICO and Wedco serve many of the same customers, especially the
large integrated oil companies, they are in different businesses driven by
different factors. This may provide a counterbalance to the historical
volatility of the demand for the oilfield services provided by ICO.
6. ICO's strong financial position will provide Wedco with better
access to the financial resources necessary to take advantage of
opportunities which may become available to Wedco, including possible
acquisitions and expansion of product and service lines.
7. ICO's management expects to realize certain synergistic benefits
from the Merger and to realize reductions in the expenses associated with
Wedco operating and reporting as an independent publicly-owned company.
8. Information regarding the financial position and results of
operations of ICO and Wedco on a historical and pro forma basis, including
a review of information relating to balance sheets, income statements,
statements of cash flows, cash flow analysis relating to debt service,
capital expenditures and dividends, information relating to historical and
pro forma earnings per share for ICO and Wedco, and information relating to
Wedco's and its affiliates' current operating results.
9. The terms of the Merger and a review of the Merger Agreement and
ancillary agreements, including the circumstances under which either ICO or
Wedco can terminate the Merger Agreement and the fees triggered by such a
termination and the conditions to closing the Merger.
10. The extensive due diligence examination which had been conducted
with regard to Wedco, its affiliates, their financial position, results of
operations, competitive position, the customers Wedco serves and other
matters.
11. The judgment, advice and analyses of ICO's management and the
advisers to the Board of Directors of ICO.
12. The increased size, larger market capitalization and expanded
distribution of the stock of the combined company expected to result from
the Merger may provide shareholders with increased liquidity and enhance
the market visibility of the combined company.
The foregoing discussion of the information and factors considered by the
Board of Directors of ICO is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Merger,
the Board of Directors of ICO did not quantify or otherwise assign relative
weights to the specific
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<PAGE> 37
factors considered in reaching its determination. In addition, individual
members of the Board of Directors of ICO may have given different weights to
different factors.
WEDCO'S REASONS FOR THE MERGER
The Board of Directors of Wedco has unanimously approved the Merger.
Wedco's Board of Directors believes that the Merger is in the best interests of
Wedco and its shareholders and unanimously recommends that the shareholders of
Wedco vote FOR approval of the Merger. The Board believes the Merger will enable
Wedco to have the opportunity to provide for the orderly succession of its most
senior management and to increase the depth of its management generally; to
obtain additional capital, on terms satisfactory to Wedco, needed to fund the
expansion of Wedco's business; and, to provide the potential for increased value
and liquidity for its shareholders in the future.
In evaluating the proposed Merger, the Board of Directors of Wedco
considered, in addition to the foregoing, a variety of factors, including, but
not limited to, the following:
1. Under ICO's new management, ICO has dramatically improved its
results during the last three years. ICO has made a number of acquisitions
over the last few years, although none as large as Wedco. ICO has satisfied
Wedco that its management has been able to integrate these acquired
companies successfully into ICO's system and to provide the necessary
management for the acquired companies. Wedco is also satisfied that the
experience gained by ICO in its prior acquisitions will lead to the
achievement of Wedco's goal of obtaining expanded management for the
future.
2. ICO has also demonstrated through its raising of substantial funds
in 1993 that it has the ability to provide the necessary capital for the
future expansion of Wedco.
3. Wedco's Board of Directors believes that the business combination
of ICO and Wedco will afford the combined company greater access to the
capital markets than would be available to either company on a stand-alone
basis.
4. ICO will provide Wedco with a diversification of its business,
which may afford Wedco some protection against the effects of the cyclical
nature of Wedco's business.
5. The Board anticipates that Wedco and ICO, as a combined entity,
will benefit from the elimination of certain costs and expenses
historically incurred by Wedco as a publicly-owned company, including,
among others, the costs associated with preparing and filing periodic
reports with the Securities and Exchange Commission and conducting annual
meetings of shareholders.
6. The shareholders of Wedco will achieve a value for their Wedco
Common Stock substantially in excess of that which they have otherwise been
able to receive in the market since the time that Wedco first became public
in 1984.
7. Wedco's Board believes that the shares of ICO Common Stock to be
received by Wedco's shareholders in the Merger will provide its
shareholders with more liquidity than that associated with their shares of
Wedco Common Stock.
In determining that the Merger is in the best interests of Wedco and its
shareholders, Wedco's Board of Directors also considered a number of other
factors, including among other things, the terms and conditions of the Merger
Agreement; information with respect to the financial condition and business
operations of both Wedco and ICO; and the views and opinions of their respective
managements and advisors, including the fairness opinion of Mesirow.
The foregoing discussion of the information and factors considered and
given weights by the Wedco Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger, the Wedco Board did not find it practicable and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of the Wedco Board may have
given different weights to different factors. However, the members of
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<PAGE> 38
the Wedco Board generaly recognized that the factors described above relating to
the goals of obtaining expanded management and additional capital were the most
important factors.
OPINION OF WEDCO'S FINANCIAL ADVISER
In August 1995, Mesirow was retained by the Board of Directors of Wedco to
act as its independent financial adviser in connection with the Merger. Mesirow
is a nationally recognized investment banking firm and was selected by the Board
of Directors based on its experience and expertise. As part of its investment
banking business, Mesirow is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes.
In connection with Mesirow's engagement, the Board of Directors of Wedco
requested that Mesirow evaluate the fairness, from a financial point of view, to
the holders of Wedco Common Stock of the consideration to be received in the
Merger by such holders. On December 5, 1995, Mesirow rendered to Wedco's Board
of Directors its oral opinion, subsequently confirmed in writing, to the effect
that, as of such date, the consideration to be received in the Merger by the
holders of Wedco Common Stock was fair to such holders from a financial point of
view.
The full text of Mesirow's written opinion addressed to the Board of
Directors of Wedco, dated February 7, 1996, which sets forth the assumptions
made, matters considered and limitations on the review undertaken, is set forth
below. Wedco shareholders are urged to read this opinion carefully in its
entirety. Mesirow's opinion addresses only the fairness of the Merger from a
financial point of view to the shareholders of Wedco and does not constitute a
recommendation to any shareholder of Wedco as to how such shareholder should
vote with respect to the approval of the Merger.
We understand that Wedco Technology, Inc. ("Wedco") has agreed to
merge with a subsidiary of ICO, Inc. ("ICO") in an exchange of Wedco
stock for cash and ICO stock. The Merger Agreement dated December 8,
1995 between Wedco, Inc.; ICO, Inc.; and W Acquisition Corp.
(including all schedules and annexes thereto, the "Merger Agreement"),
provides that holders of Wedco common stock may receive at their
option for each share of Wedco common stock that they hold, either (i)
2.2 shares of ICO stock plus $3.50 cash or (ii) 2.84 shares of ICO
stock. In addition, holders of vested options to acquire Wedco common
stock will receive $16.50 cash per share less the exercise price per
share of such options.
We further understand that the Merger Agreement is subject to
approval and adoption by the stockholders of Wedco, and the issuance
of the ICO Common Stock pursuant to the Merger Agreement is subject to
approval by the stockholders of ICO.
The foregoing summary of the transactions contemplated by the
parties is qualified in its entirety by the more detailed information
appearing in the Merger Agreement.
You have requested our opinion as investment bankers as to
whether or not the terms of the Merger Agreement are fair to Wedco's
common stockholders from a financial point of view.
Mesirow Financial, Inc., as part of its investment banking
business, is regularly engaged in structuring financings and the
valuations of businesses and their securities in connection with
mergers, acquisitions and leveraged buyout transactions, negotiated
underwritings, competitive biddings, secondary distributions of listed
and unlisted securities, and private placements.
In conducting our investigation and analysis, and in arriving at
the opinion set forth below, we have reviewed the Merger Agreement
dated December 8, 1995, and related documents prepared by the parties,
and have taken into account such accepted financial and investment
banking procedures as we have deemed relevant. We have, among other
things (i) reviewed publicly available information concerning Wedco
and ICO, including audited and interim, unaudited financial statements
of Wedco and ICO; (ii) reviewed Wedco's financial projections provided
by senior management of Wedco, which are not publicly available; (iii)
reviewed the efforts made to date by
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<PAGE> 39
various agents, brokers, investment bankers and others to sell Wedco
to a third party; (iv) reviewed the premiums paid in transactions we
deemed relevant; (v) prepared a valuation analysis of public companies
we deemed relevant in the plastics industry; (vi) prepared a valuation
analysis of public companies we deemed relevant in the oilfield
services industry; (vii) reviewed public financial and transaction
information relating to the merger and acquisition transactions we
deemed to be comparable to the Merger, (viii) reviewed the current and
historical market prices and trading volumes of the Wedco common stock
and of the ICO common stock; (ix) evaluated the pro forma financial
impact of the Merger on ICO and Wedco as a combined entity; and (x)
made or considered such other analyses, studies and investigations as
we deemed appropriate.
In addition, we have met and held discussions with Wedco's
management concerning Wedco's business and operations, assets,
financial condition, and future prospects, and we visited two of
Wedco's plant facilities. We also met and held discussions with ICO's
management concerning ICO's business and operations, assets, financial
condition and future prospects, and we visited two of ICO's plant
facilities. In addition, we discussed with the management of ICO and
Wedco the potential for operational synergies in a merger between the
two companies.
We requested financial projections from ICO; however, according
to ICO's senior management, ICO does not prepare financial
projections. We believe that other due diligence performed on ICO was
sufficient for purposes of rendering this opinion.
In arriving at our opinion, we have not assumed any
responsibility for independent verification of any of the foregoing
information and have relied on its being complete and accurate in all
material respects. We have neither made nor obtained independent
evaluations or appraisals of the assets of either Wedco or ICO. With
respect to the financial projections provided us by Wedco, we assumed
they have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of Wedco's management as
to the future financial performance of Wedco. Our opinion is
necessarily based upon market, economic and other conditions as they
exist and can be evaluated as of the date of this opinion. It should
be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise or reaffirm this
opinion. We are not rendering any opinion regarding the future
performance of the merged companies.
We have acted as financial adviser to Wedco in connection with
the Merger and will receive a fee for our services, including
rendering this opinion, and Wedco has agreed to indemnify us against
certain liabilities. We did not participate in negotiations with
respect to the terms of the merger and related transactions. In the
ordinary course of business, we and our affiliates may actively trade
the equity securities of Wedco and ICO for our own account or for the
accounts of customers and, accordingly, may at any time hold long or
short positions in such securities.
This letter is provided solely for the benefit of the Board of
Directors of Wedco in connection with and for the purposes of its
evaluation of the Merger. This letter does not constitute a
recommendation to any stockholder with respect to whether to vote in
favor of the Merger. This opinion is based on the business and
operations of the Company as represented to us as of December 31,
1995, and does not purport to take into consideration any information
or event arising subsequent to such date. The information contained in
this opinion may not be used for any other purpose, or reproduced,
disseminated, quoted, referred to or disclosed or otherwise made
available to, or relied upon by any other party nor may reference be
made hereto to our firm without our prior written consent, which
consent will not be unreasonably withheld; provided, however, that it
is understood that the opinion may be referred to in the joint press
release to be issued by Wedco and ICO on the closing of the Merger,
the joint proxy statement/prospectus to be filed by Wedco and ICO with
the Securities and Exchange Commission describing the Merger for the
respective special shareholders' meetings of Wedco and ICO at which
the requisite shareholder approvals will be sought, and as otherwise
required by law or by judicial or regulatory authorities or in
connection with any judicial or regulatory proceeding.
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Based upon the foregoing and our experience as investment
bankers, we are of the opinion that the terms of the Merger Agreement
are fair to the holders of Wedco's common stock from a financial point
of view, as of the date of this letter.
Sincerely,
MESIROW FINANCIAL, INC.
Mesirow has informed the Wedco Board of Directors that it has reviewed the
Merger Agreement, as amended, and that there is nothing therein which would
cause it to modify the opinion set forth above. In connection with its review,
Mesirow did not assume responsibility for independent verification of any of the
information provided to or otherwise reviewed by Mesirow and relied upon its
being complete and accurate in all respects. With respect to financial forecasts
and other data reviewed, including, without limitation, estimates of liability
for environmental matters and reserves established with respect thereto, Wedco
advised Mesirow that such forecasts and other data were reasonably prepared on
bases reflecting the best currently available estimates and judgments of Wedco's
management as to the future financial performance of Wedco. In addition, Mesirow
did not make an independent evaluation of the assets or liabilities (contingent
or otherwise) of Wedco, ICO, or their affiliates, nor was Mesirow furnished with
any such evaluations or appraisals. Mesirow's opinion is necessarily based upon
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of its opinion. Although Mesirow evaluated the
fairness of the consideration to be received in the Merger by the holders of
Wedco Common Stock from a financial point of view, Mesirow was not asked to and
did not recommend the specific consideration payable in the Merger. The
consideration to be received by the Wedco shareholders as a result of the Merger
was determined by negotiation between Wedco and ICO.
In preparing its opinion to Wedco's Board of Directors, Mesirow performed a
variety of financial and comparative analyses, including those described below,
and provided the Board with a written presentation with respect to such
analyses. The summary of Mesirow's analyses set forth below does not purport to
be a complete description of the analyses underlying Mesirow's opinion or
presentation to the Board. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the most appropriate and
relevant methods of financial analyses and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. In arriving at its opinion, Mesirow did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Mesirow believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying such analyses and its opinion. In
its analyses, Mesirow made numerous assumptions with respect to Wedco, ICO and
their affiliates, industry performance, general business, economic, market and
financial conditions and other matters. Such assumptions were used in developing
estimates of future results that are not necessarily indicative of actual values
or predictive of future results or values. In addition, analyses relating to the
value of businesses or securities do not purport to be appraisals or to reflect
the prices at which businesses or securities actually may be sold. Accordingly,
such estimates are inherently subject to substantial uncertainty.
Wedco Shares
In analyzing the value of the Wedco Common Stock to be exchanged in the
Merger, Mesirow (i) analyzed the market prices at which Wedco Common Stock
traded in the six- and 12-month period immediately preceding the announcement of
the transaction on August 14, 1995 (the "Announcement Date") and the implied
purchase price premiums over those market prices to be paid to Wedco
shareholders in the Merger, based on Mesirow's valuation of the consideration
offered by ICO (the "Market Price Premium Analysis"); (ii) performed a
discounted cash flow analysis and a comparable company analysis; and (iii)
reviewed attempts made by Wedco, investment bankers and others to sell Wedco
since March 1994.
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Purchase Price Premium Analysis
Mesirow analyzed the closing prices of the Wedco Common Stock at certain
dates over the 12-month period preceding the Announcement Date and the purchase
price premiums implied by ICO's offer as of such dates based upon the concluded
valuation range for the consideration offered by ICO. This analysis resulted in
a range of purchase price premiums for the Wedco Common Stock of (i) 12% to 69%
based upon the $11.25 closing price of Wedco Common Stock five days prior to the
Announcement Date; (ii) 32% to 101% based upon the $9.50 closing price of Wedco
Common Stock 10 days prior to the Announcement Date; and (iii) 31% to 98% based
upon the $9.625 closing price of Wedco Common Stock 21 days prior to the
Announcement Date. Based upon the high closing price for Wedco Common Stock
during the 52-week period prior to the Announcement Date ($11.50 on February 24,
1995), the implied range of purchase price premiums is 9% to 66%. Mesirow noted
that the range of indicated purchase price premiums compared favorably with the
mean premiums reported in a study of similarly sized and otherwise relevant
transactions as reported in the Mergerstat Review 1994 study published by
Merrill Lynch.
Discounted Cash Flow Analysis
Mesirow performed a discounted cash flow analysis of the projected net
leveraged cash flows of Wedco for the fiscal years ended March 31, 1996 through
1999, based upon certain operating and financial assumptions, forecasts and
other information provided by the management of Wedco. Mesirow adjusted Wedco's
projections based upon its shortfall versus management's plan in fiscal year
1996. The net effect of this adjustment was to reduce the baseline revenues and
earnings for fiscal 1996, which in turn lowered the dollar amounts of revenues
and earnings in future years. Other than this adjustment, the projections
provided by Wedco's management used in Mesirow's analysis were substantially
unchanged. Mesirow applied discount rates of 7.5%, 8.0% and 8.5%, and terminal
year capitalization multiples of 10.5x, 10.0x and 9.5x to the projected net
leveraged cash flows. This analysis resulted in a range of values for Wedco of
$10.70 to $14.22 per share, with a mean value of $12.29.
Mesirow requested projections from ICO, and ICO stated that it did not have
projections nor was it ICO's policy to prepare them. Hence, Mesirow was unable
to prepare a discounted cash flow analysis for ICO. Mesirow believes that the
other valuation analyses it completed on ICO were sufficient for purposes of
rendering its opinion.
Comparable Company Analysis
Mesirow reviewed and compared certain actual and estimated financial,
operating and stock market information of Wedco and ICO and selected companies
in the plastics and oilfield services industries. Plastics companies selected as
comparable to Wedco were Wellman, Inc. and Farrell Corporation. Oil field
services companies selected as comparable to ICO were Tuboscope Vetco
International Corporation, Newpark Resources, Inc., Offshore Logistics, Inc. and
Petroleum Helicopters Incorporated. Mesirow compared invested capital values as
a multiple of trailing earnings before interest, taxes, depreciation and
amortization and trailing earnings before interest and taxes. Mesirow also
compared equity values as a multiple of estimated current fiscal year net income
and projected next fiscal year net income. All multiples were calculated using
closing stock prices at December 1, 1995. Using the comparable company analysis,
the indicated value for each share of Wedco Common Stock ranged from $7.62 to
$12.73, with a mean value of $12.29; the indicated values for each share of ICO
Common Stock ranged from $2.52 to $5.95, with a mean value of $5.32.
Comparable Transaction Analysis
Using publicly available information, Mesirow analyzed the purchase prices
and multiples paid in the following selected transactions in the oilfield
services industry. Weatherford International, Inc./H&H Oil Tool Co., Nabors
Industries, Inc./Sundowner Offshore Services Inc. and Nowsco Well Service
Ltd./Service Fracturing Co. Mesirow compared purchase prices as a multiple of
latest available 12 months EBITDA and net income. This analysis resulted in a
range of concluded values for each share of ICO Common Stock from $5.74 to
$8.20, with a mean of $6.97. Mesirow also reviewed a number of completed
transactions in the
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plastics industry. Due to Wedco's unique nature, none of the reviewed
transactions were judged to be comparable for purposes of valuing Wedco.
The comparable company analysis and discounted cash flow analysis for Wedco
resulted in an overall value range for each share of Wedco Common Stock of $9.16
to $13.48, with a mean of $11.38. The comparable company analysis and comparable
transaction analysis resulted in an overall value range for each share of ICO
Common Stock of $4.13 to $7.08, with a mean of $6.15. Using the exchange ratios
stipulated in the Merger Agreement, under the Stock Consideration option, the
indicated consideration for each share of Wedco Common Stock ranged from $11.73
to $20.09, with a mean of $17.45; under the Cash/Stock Consideration option, the
indicated consideration for each share of Wedco Common Stock ranged from $12.59
to $19.07, with a mean value of $17.02.
Pro Forma Impact of the Merger
Based upon discussions with the respective managements of Wedco and ICO and
review of the Merger Agreement, Mesirow concluded that the potential cost
savings and synergies arising from the Merger had a minimal impact on the values
of both Wedco and ICO. Mesirow's pro forma merger analysis indicated that
assuming all Wedco shareholders elected to receive Cash/Stock Consideration,
consolidated net debt (i.e., debt minus cash) would represent 13.9% of total
capitalization of the combined entity as of closing. It was noted by Mesirow
that the merged entity would, by virtue of its greater size and earnings,
probably be able to raise equity or debt capital at less expensive rates and on
more favorable terms than could be obtained by Wedco alone.
Pursuant to the terms of Mesirow's engagement, Wedco has agreed to pay
Mesirow for its services in connection with the Merger a financial advisory fee
of $75,000, whether or not the Merger is consummated. Wedco paid the
aforementioned fee in 1995. Wedco has also agreed to reimburse Mesirow for its
reasonable out-of-pocket expenses, including the fees and expenses of legal
counsel, and to indemnify Mesirow and certain related persons or entities
against certain liabilities, including liabilities under the federal securities
laws, relating to or arising out of its engagement.
MERGER CONSIDERATION
Each share of Wedco Common Stock will, by virtue of the Merger and without
the need for any further action on the part of the holder thereof, be converted
into the right to receive, at the option of the holder thereof, either (i) the
Cash/Stock Consideration, consisting of 2.20 shares of ICO Common Stock and
$3.50 in cash, or (ii) the Stock Consideration, consisting of 2.84 shares of ICO
Common Stock. SHAREHOLDERS OF WEDCO MUST MAKE AN ELECTION ON THE LETTER OF
TRANSMITTAL TO BE SENT PROMPTLY UPON CONSUMMATION OF THE MERGER. IF NO ELECTION
IS MADE WITHIN THIRTY DAYS AFTER THE LETTER OF TRANSMITTAL HAS BEEN MAILED, THE
HOLDER OF SUCH SHARES WILL BE DEEMED TO HAVE ELECTED TO RECEIVE THE STOCK
CONSIDERATION.
If the weighted average of the closing prices for ICO Common Stock on the
Nasdaq Stock Market for the last five trading days immediately preceding the
effective date of the Merger is less than $4.00 per share, Wedco may elect
either to consummate the Merger or to notify ICO it will require ICO to provide
the Additional Merger Consideration, which if ICO agrees to proceed with the
Merger, will consist of cash and/or ICO Common Stock which shall increase the
value of the Merger Consideration to $12.30 for each share of Wedco Common
Stock. All ICO Common Stock issued as Additional Merger Consideration shall be
valued at the weighted average price pursuant to the formula set forth above. If
these conditions arise, ICO and Wedco will each resolicit proxies and a new vote
will be taken unless, in the opinion of the Boards of Directors of the
companies, the amount by which the average weighted price of ICO Common Stock is
less than $4.00 per share is immaterial.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Merger by the Wedco Board of
Directors, the shareholders of Wedco should be aware that certain directors and
officers of Wedco have substantial interests in the
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consummation of the Merger. As a result, these persons may have personal
interests in the Merger which may not be identical to the interests of other
Wedco shareholders. Such interests, together with other relevant factors, were
considered by the Wedco Board of Directors in recommending the Merger to the
shareholders of Wedco and approving the Merger Agreement. See "THE MERGER
AGREEMENT -- Indemnification and Insurance, -- Ancillary Agreements and -- Cash
Redemption of Wedco Stock Options."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Effects on ICO, ICO Shareholders, Wedco and W Acquisition. The Merger is
expected to qualify as a tax-free reorganization within the meaning of Section
368(a) of the Code, as a result of which no gain or loss will be recognized by
ICO, Wedco or W Acquisition as a result of the Merger. Additionally, no gain or
loss will be recognized by ICO shareholders as a result of the Merger.
Based on certain assumptions, including the accuracy of certain
certificates and representations to be provided by ICO, W Acquisition, Wedco and
certain shareholders of Wedco regarding the satisfaction of certain requirements
to a reorganization within the meaning of Section 368(a) of the Code (including
the absence of any plan or intention by certain holders of Wedco Common Stock to
sell, exchange or otherwise dispose of shares of ICO Common Stock to be received
by them in the Merger), Dilworth, Paxson, Kalish & Kauffman and Keating,
Muething & Klekamp intend to deliver their respective opinions as of the
Effective Time to the effect that the Merger will qualify as a reorganization
described in Section 368(a) of the Code.
Effects on Wedco Shareholders. The following is a summary description of
the material federal income tax consequences of the Merger to the Wedco
shareholders. This summary is not intended to be a complete description of the
federal income tax consequences of the Merger. The following discussion does not
cover all aspects of federal income taxation that may be relevant to Wedco
shareholders in light of such shareholder's particular individual circumstances
or to certain Wedco shareholders subject to special treatment under the federal
income tax laws (for example, insurance companies, dealers in securities,
financial institutions, tax-exempt investors, foreign corporations and
individuals who are not citizens or residents of the United States and
shareholders who acquired shares pursuant to the exercise of an employee stock
option or otherwise as compensation) and does not discuss any aspects of state,
local or foreign taxation. This discussion is based upon laws, regulations,
rulings and decisions now in effect and upon proposed regulations, all of which
are subject to change (possibly with retroactive effect) by legislation,
administrative action or judicial decision. No ruling has been or will be
requested from the Internal Revenue Service (the "Service") with respect to any
of the matters discussed herein, and the opinions of counsel described elsewhere
herein regarding the status of the Merger under Section 368(a) of the Code are
not binding on the Service. EACH WEDCO SHAREHOLDER IS ADVISED TO CONSULT WITH
SUCH SHAREHOLDER'S OWN TAX ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER.
Receipt of Only ICO Common Stock. A holder of Wedco Common Stock who
receives only ICO Common Stock in the Merger (except for cash in lieu of
fractional shares as described below) in exchange for all shares of Wedco Common
Stock owned by such holder will not recognize gain or loss upon such exchange
for federal income tax purposes. The tax basis of the ICO Common Stock actually
received in such an exchange will be equal to the tax basis of the Wedco Common
Stock exchanged therefor (except for the basis attributable to any fractional
shares of ICO Common Stock to which the holder would otherwise have been
entitled, as discussed below). The holding period of the ICO Common Stock
received by a Wedco shareholder in the Merger (including any fractional share
interest to which the holder would otherwise have been entitled) will include
the holding period of the Wedco Common Stock exchanged therefor (provided that
such Wedco Common Stock was held as a capital asset as of the effective time of
the Merger).
Exchange of Wedco Common Stock for a Combination of ICO Common Stock and
Cash. Except as discussed below under "Cash in Lieu of Fractional Shares," a
holder of Wedco Common Stock who receives a combination of ICO Common Stock and
cash in exchange for Wedco Common Stock (by reason of an
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effective election to receive the Cash/Stock Consideration) will recognize all
or part of the gain realized in the transaction but will not recognize any loss
realized in the transaction. The amount of gain that is recognized will be
calculated separately for each block of Wedco Common Stock surrendered, in an
amount equal to the lesser of (i) the amount of gain realized in respect of such
block (i.e., the excess of (a) the sum of the amount of cash and the fair market
value of ICO Common Stock received that is allocable to such block of Wedco
Common Stock over (b) the tax basis of such block) and (ii) the amount of cash
received that is allocable to such block. Subject to the different consequences
that may apply to a Wedco shareholder who owns directly or indirectly, more than
a minimal interest in Wedco, as discussed further below, such recognized gain
will constitute long-term capital gain if such block of Wedco Common Stock has
been held for more than one year at the effective time of the Merger, and short
term capital gain if held for not more than one year. For this purpose, all of
the cash and ICO Common Stock received by a holder will be allocated
proportionately among the blocks of Wedco Common Stock surrendered by such
holder. The tax basis of the ICO Common Stock received in exchange for a block
of Wedco Common Stock will be equal to the tax basis of such surrendered block
of Wedco Common Stock, decreased by the amount of cash received in respect of
such block and increased by the amount of gain recognized in respect of such
block. The holding period of the ICO Common Stock will include the holding
period of such block of Wedco Common Stock surrendered.
The tax consequences of receipt of cash pursuant to a Cash/Stock
Consideration Election to certain holders of Wedco Common Stock could be
different from those described above with respect to capital gain reporting if
such holders are considered to own more than a minimal percentage of the
outstanding Wedco Common Stock immediately before the Merger. In that event, the
gain recognized by such a holder of Wedco Common Stock pursuant to the
Cash/Stock Consideration Elections might be treated as a dividend rather than
capital gain. The Service has indicated, however, that, in the case of a
minority shareholder in a publicly held corporation whose relative stock
interest is minimal and who exercises no control over the corporation's affairs,
a minimal reduction in the percentage of stock owned by such stockholder will
avoid dividend treatment. Accordingly, cash received by such a minority holder
of Wedco Common Stock should not be treated as constituting a dividend. For
purposes of determining such percentages, however, stock owned by certain
persons related to the holder or which the holder can acquire pursuant to the
exercise of options would be treated as owned by the holder.
Holders of Wedco Common Stock should consult with their tax advisor to
determine whether they should report any gain realized as capital gain or as a
dividend. No tax opinion has been provided with respect to this issue.
Cash Received in Lieu of Fractional Shares. A holder of Wedco Common Stock
who receives cash in the Merger in lieu of a fractional share interest in ICO
Common Stock will be treated for federal income tax purposes as having received
such fractional share interest and having sold it for the cash received. Such
shareholder will recognize gain or loss as of the effective time of the Merger
equal to the difference between the amount of cash received and the portion of
the shareholder's adjusted tax basis in the shares of Wedco Common Stock
properly allocable to such fractional share interest. Such gain or loss will be
long-term capital gain or loss if such Wedco Common Stock is considered to have
been held for more than one year as of the effective time of the Merger.
Backup Withholding and Information Reporting. Under the federal income tax
law concerning "backup withholding", ICO may be required to withhold, and may
withhold 31% of any cash payments to which a shareholder may be entitled
pursuant to the Merger unless the holder provides its taxpayer identification
number and certifies that such number is correct or otherwise establishes that
the holder is an exempt holder (such as a corporation or certain foreign
individuals, partnerships or trusts). Each holder should sign the Substitute
Form W-9 included as part of the transmittal letter to be sent by the Transfer
Agent (or in the case of a nonresident alien or foreign entity, a Form W-8) to
prevent backup withholding. Most Wedco shareholders will receive a Form 1099,
which will reflect the amount of cash received on account of the Merger. Holders
who receive ICO Common Stock must also comply with the information reporting
requirements of the Treasury regulations under Section 368 of the Code.
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If the Merger does not qualify as a reorganization under Section 368(a) of
the Code (whether due to the inaccuracy of certain assumptions or
representations regarding the continuing ownership interest on the part of
former Wedco shareholders in ICO Common Stock or otherwise), the Merger would be
a taxable transaction, and (i) each Wedco shareholder would recognize gain or
loss as a result of the Merger in an amount equal to the difference, if any,
between the fair market value of ICO Common Stock (plus cash received pursuant
to election to receive the Cash/Stock Consideration and any cash received in
lieu of fractional shares) received in the Merger minus such shareholder's basis
in the Wedco Common Stock exchanged therefor, (ii) the basis of the ICO Common
Stock received would equal the fair market value of such shares as of the
effective time of the Merger, and (iii) the holding period of the ICO Common
Stock received would begin on the effective time of the Merger. Any gain or loss
recognized by a Wedco shareholder in the event that the Merger failed to qualify
as a tax-free reorganization generally would be capital gain or loss, and would
be long-term capital gain or loss, if the shares of Wedco Common Stock were held
by such shareholder for more than one year as of the effective time of the
Merger. Further, if the Merger does not qualify as a reorganization under
Section 368(a) of the Code, gain or loss could be recognized by ICO, Wedco or W
Acquisition as a result of the Merger.
ACCOUNTING TREATMENT
For financial reporting purposes, the Merger will be accounted for as a
purchase business combination with Wedco being treated as the acquired company.
See "UNAUDITED PRO FORMA FINANCIAL INFORMATION."
LISTING ON STOCK EXCHANGE
ICO has agreed to use its best efforts to list the ICO Common Stock for
trading on the New York Stock Exchange if the Merger is consummated. It is a
condition precedent to Wedco's obligation to consummate the Merger that the
shares of ICO Common Stock to be received as Merger Consideration shall have
been listed on either the Nasdaq Stock Market or the New York Stock Exchange.
THE MERGER AGREEMENT
GENERAL
The respective Boards of Directors of ICO and Wedco have approved the
Merger Agreement, which provides for ICO to acquire Wedco through a merger of
Wedco with and into W Acquisition with W Acquisition surviving the Merger as a
wholly-owned subsidiary of ICO. If the Merger is consummated, W Acquisition
would change its name to "Wedco Technology, Inc." In addition, ICO is submitting
a proposal to its shareholders to change its corporate name to "Willoughby
International, Inc." Willoughby International, Inc. would operate ICO's existing
oil and gas industry services business under the ICO name. Pursuant to the
Merger Agreement, each share of Wedco Common Stock would be converted into the
right to receive, at the option of the holder, either (i) 2.20 shares of ICO
Common Stock and $3.50 in cash or (ii) 2.84 shares of ICO Common Stock.
This section of this Joint Proxy Statement/Prospectus describes certain
aspects of the proposed Merger, including the principal terms of the Merger
Agreement. A copy of the Merger Agreement is attached to the Joint Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference. The
description set forth below of the terms of the Merger Agreement is qualified in
its entirety by reference thereto. All shareholders of ICO and Wedco are urged
to read the Merger Agreement in its entirety.
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger shall be the date and time at which the
Merger shall have become effective pursuant to the laws of the state of New
Jersey. If the requisite favorable votes are obtained at the respective special
meetings of ICO and Wedco shareholders, ICO and Wedco expect the Merger would be
consummated shortly thereafter subject to the satisfaction of the other
conditions to the Merger. See "-- Conditions."
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EFFECT ON ICO COMMON STOCK
The Merger will have no effect on the rights and privileges of the
outstanding shares of ICO Common Stock. If all holders of Wedco Common Stock
were to elect to receive the Stock Consideration and no Additional Merger
Consideration was to be issued, 10,132,609 shares of ICO Common Stock would be
issued in the Merger.
By virtue of the Merger, each outstanding share of Wedco Common Stock will
be converted into the right to receive the specific type of Merger Consideration
elected or deemed to have been elected by the holder thereof upon surrender of
certificates representing Wedco Common Stock to Society National Bank (the
"Exchange Agent").
No fractional shares of ICO Common Stock will be issued in the Merger. In
lieu of the issuance of any fractional share of ICO Common Stock, an amount in
cash will be paid determined by multiplying the weighted average of the mean
between the closing representative bid and asked prices for ICO Common Stock on
the Nasdaq Stock Market for the last five (5) trading days immediately preceding
the Effective Date by the fraction of a share of ICO Common Stock to which the
holder thereof would otherwise be entitled.
CONDITIONS
Consummation of the Merger is subject to the satisfaction, at or prior to
the effective time of the Merger ("Effective Time"), of the following
conditions: (i) the absence of any statute, rule, regulation, judgment,
injunction, decree or order issued by any federal, state or local legislative,
administrative or regulatory body or any court that prohibits, makes illegal or
restricts the Merger or relates to the business of Wedco and its subsidiaries or
ICO and its subsidiaries after consummation of the Merger; (ii) the approval of
the Merger Agreement by the requisite affirmative vote of the shareholders of
Wedco; (iii) the approval of the Share Issuance by the requisite affirmative
vote of the shareholders of ICO; (iv) cash redemption of all outstanding options
to purchase Wedco Common Stock; and (v) the execution and delivery of certain
ancillary agreements, including a Shareholders Agreement among certain of the
shareholders of ICO and Wedco, a Legal Services Retainer Agreement with Edward
N. Barol, Non-Competition Covenants of William E. Willoughby and Fred R. Feder,
a Consulting Agreement with William E. Willoughby, Employment Agreements with
Fred R. Feder, Donald Cuomo, Robert F. Bush, Mark Kuna and Timothy Kita and a
Registration Rights Agreement for the benefit of certain shareholders of Wedco.
See "-- Ancillary Agreements."
In addition, if the weighted average of the closing prices for ICO Common
Stock on the Nasdaq Stock Market for the last five (5) trading days immediately
preceding the Effective Time is less than $4.00 per share, Wedco has the option
either to waive the condition precedent that the weighted average of such
closing price exceed $4.00 per share and proceed to the consummation of the
Merger or to give notice to ICO that it desires to proceed with the consummation
but will require the Additional Merger Consideration. If Wedco chooses to
proceed, ICO has the option to either terminate the Merger Agreement or proceed
to closing, provided ICO agrees to provide the Additional Merger Consideration.
If these conditions arise, ICO and Wedco will each resolicit proxies and a new
vote will be taken unless, in the opinion of the Boards of Directors of each of
the companies, the amount by which the average weighted price of ICO Common
Stock is less than $4.00 per share is immaterial.
Additional conditions precedent to Wedco's obligation to close the Merger
include receipt of a favorable "fairness opinion" from an investment banking
firm in form and substance customary in merger transactions and acceptable to
Wedco, confirmation that certain director indemnification provisions have been
put in place prior to the Effective Time, confirmation that the shares of ICO
Common Stock to be received as Merger Consideration shall have been listed on
either the Nasdaq Stock Market or the New York Stock Exchange and the receipt of
certain favorable legal and tax opinions with respect to the Merger. See "THE
MERGER -- Opinion of Wedco's Financial Advisor."
The obligation of ICO to consummate the Merger is subject to the additional
conditions precedent that all outstanding options to purchase Wedco Common Stock
shall have been redeemed by Wedco for cash prior
44
<PAGE> 47
to the Effective Time, all material permits, consents, waivers, clearances,
approvals and authorizations shall have been obtained that are required to
consummate the Merger or to prevent a breach, default or right of termination
under any agreement to which Wedco is a party or by which it is bound and the
receipt of favorable legal and tax opinions.
INDEMNIFICATION AND INSURANCE
The Merger Agreement requires ICO to indemnify all persons who are
"corporate agents" of Wedco (as defined in Article VII of Wedco's By-Laws)
against all expenses and liabilities in connection with any proceeding involving
any matter existing or occurring at any time at or prior to the consummation of
the Merger to the same extent provided by Wedco's By-Laws as in effect at the
Effective Time. In addition, ICO will also indemnify such corporate agents in
their individual or shareholder capacities to the fullest extent permitted by
applicable law, regardless of whether the By-laws of Wedco so provide.
The Merger Agreement also requires ICO to obtain and maintain in effect
directors' and officers' liability insurance with respect to claims arising from
facts or events at or before the Effective Time of the Merger in at least the
same amounts and containing coverage, terms and conditions no less advantageous
to the corporate agents of Wedco, as the insurance currently provided by Wedco.
AMENDMENT AND TERMINATION
The Merger Agreement may be amended by the parties thereto at any time
before or after the approval and adoption of the Merger Agreement by the
shareholders of Wedco or the approval of the Share Issuance by the shareholders
of ICO but, after any such shareholder approval, no amendment shall be made that
adversely affects the rights of the respective shareholders of ICO or Wedco
without the approval of the affected shareholders. The Merger Agreement may not
be amended, modified or supplemented except by a written instrument that
expressly states that it amends, modifies or supplements the Merger Agreement.
The Merger Agreement may be terminated and the transactions thereby
contemplated may be abandoned at any time prior to the Effective Time,
notwithstanding the approval of the Merger Agreement by the shareholders of
Wedco or the approval of the Share Issuance by the shareholders of ICO: (i) by
mutual written consent of the Board of Directors of each of Wedco and ICO; (ii)
by Wedco or ICO if the transactions contemplated by the Merger Agreement shall
not have been consummated by July 31, 1996, provided, that the right to
terminate the Merger Agreement under this provision shall not be available to
any party, failure of which to fulfill any obligation under the Merger Agreement
is the cause of, or resulted in, the failure of the Effective Time to occur on
or before July 31, 1996; (iii) by either Wedco or ICO if a court of competent
jurisdiction or other governmental body shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; (iv) by Wedco if, notwithstanding its compliance with the
restrictions on negotiations with third parties contained in the Merger
Agreement, a higher offer to acquire Wedco is received and accepted by Wedco
prior to the Effective Time; provided, however, that in the event of any such
termination, Wedco shall promptly pay ICO, as liquidated damages and not a
penalty, the sum of $2,000,000; (v) by ICO if the shareholders of ICO do not
approve the Share Issuance; provided, however, that in the event of any such
termination, ICO shall promptly pay Wedco, as liquidated damages and not as a
penalty, the sum of $350,000; or (vi) by either Wedco or ICO if the other
materially breaches a warranty, representation or covenant contained in the
Merger Agreement or suffers a Material Adverse Change (as defined in the Merger
Agreement); provided, however, that the non-breaching party not suffering a
Material Adverse Change may, at its option, either waive a material breach or
Material Adverse Change or be entitled to receive from the breaching party or
parties suffering the Material Adverse Change, as liquidated damages and not as
a penalty, the sum of $350,000 or (vii) except as provided in clause (iv) above
by either Wedco or ICO if, in the case of Wedco, it desires not to consummate
the transactions contemplated by the Merger Agreement notwithstanding the
absence of any material breach by ICO or any Material Adverse Change affecting
ICO or any other condition or event that would entitle Wedco not to consummate
such transactions or, in the case of ICO, it desires not to consummate the
transactions hereby notwithstanding the absence of any material breach by Wedco
or any Material Adverse Change
45
<PAGE> 48
affecting Wedco or any other condition or event that would entitle ICO not to
consummate the transactions; provided, however, that the party other than the
party desiring not to consummate the Merger shall have the right, at its option,
to elect in its sole discretion, either (x) to seek and obtain a specific
performance of the transactions contemplated by the Merger Agreement or (y) to
obtain prompt payment from the party desiring not to consummate the
transactions, as liquidated damages and not as a penalty, the sum of $1,000,000;
or (vii) in accordance with Section 8.1(f)(A) of the Merger Agreement,
pertaining to the share price of ICO Common Stock prior to the Effective Time
being less than $4.00 per share.
In the event of any termination of the Merger Agreement, the Merger
Agreement shall become void and have no effect without any liability on the part
of any party thereto except that nothing shall relieve any party from any
liability, including any liability for liquidated damages, set forth in the
termination provisions of the Merger Agreement and except that certain
provisions relating to confidentiality of information shall survive termination
and continue to be binding on the parties to the Merger Agreement.
ANCILLARY AGREEMENTS
Among the conditions to the consummation of the Merger are the execution
and delivery of certain ancillary agreements. The following summaries of the
ancillary agreements do not purport to be complete and are subject to and
qualified by reference to the ancillary agreements which are included as
exhibits to the Registration Statement of which this Joint Proxy
Statement/Prospectus forms a part.
Shareholders Agreement. The shareholders of ICO and Wedco, who are also
parties to the Voting Agreements, see "ICO SPECIAL MEETING -- Voting Agreement"
and "WEDCO SPECIAL MEETING -- Voting Agreement", will enter into a shareholders
agreement (the "Shareholders Agreement") concerning the makeup of the Board of
Directors of the combined company after the Merger. The shareholders will agree
to take all actions necessary or appropriate to cause the election of William E.
Willoughby, Walter L. Leib and George S. Sirusas to the Board of Directors of
the combined company for terms beginning immediately after the Effective Time
and ending on the date of the combined company's annual shareholders meeting in
1996 in the case of Mr. Willoughby, the date of its annual shareholders meeting
in 1997 in the case of Mr. Leib and the date of its annual shareholders meeting
in 1997 in the case of Mr. Sirusas and to cause the reelection of Messrs.
Willoughby and Leib to the Board of Directors of the combined company for
additional three year terms when their respective initial terms expire. The
shareholders will also agree that after the foregoing terms of Messrs.
Willoughby, Leib and Sirusas have expired, they will continue to take all
actions necessary or appropriate to cause their reelections to the Board of
Directors of the combined company until the earlier of the time the Wedco
shareholders who are parties to the Shareholders Agreement, taken as a whole,
beneficially own less than 1,500,000 shares of Common Stock of the combined
company (or as adjusted) or there is a "change in control" of the combined
company (as defined), when the ICO shareholders who are parties to the
Shareholders Agreement shall no longer be obligated to cause the reelection of
such persons to its Board of Directors ("Termination Date"). In addition, if Mr.
Willoughby, Mr. Leib or Mr. Sirusas shall cease to serve as a director of the
combined company at any time prior to the Termination Date, the shareholders
will agree to take all actions necessary or appropriate to ensure that the
vacancy created shall be filled by a person nominated by the others, subject to
the consent of a majority of the full Board of Directors of the combined
company.
In addition to the foregoing, all the ICO shareholders who are parties to
the Shareholders Agreement will grant irrevocable proxies coupled with an
interest to Mr. Leib and Edward N. Barol to vote their shares of Common Stock of
the combined company in favor of the slate of nominees for its Board of
Directors selected by the then incumbent members of the Board of Directors of
the combined company (the "Nominated Slate") and all the Wedco shareholders who
are parties to the Shareholders Agreement will grant substantially identical
proxies to Sylvia A. Pacholder and Dr. Asher O. Pacholder to vote their shares
of Common Stock of the combined company also in favor of the Nominated Slate.
The Shareholders Agreement also provides that after the Merger and with
respect to Wedco, Sylvia A. Pacholder will be its President and Chief Executive
Officer and Dr. Asher O. Pacholder will be its Chairman of the Board and Chief
Operating Officer. Wedco's Articles of Incorporation will be amended to provide
that
46
<PAGE> 49
the Chairman of the Board, President, CEO, COO or any person who shall hold any
other office, position or title having similar functions or authority to the
functions of the Chairman of the Board, President, CEO or COO or who shall have
equivalent operating authority of Wedco will be elected by an unanimous vote of
the Wedco Board of Directors. In addition, the combined company will elect Mr.
Willoughby as a director of Wedco. If he is unable or ceases to serve, it will
elect Mr. Leib. If he is unable or ceases to serve, it will elect Mr. Barol. If
he is unable or ceases to serve, a person nominated by Messrs. Willoughby, Leib
and Sirusas and/or their respective successors on the Board of Directors of the
combined company will be elected.
The Shareholders Agreement also provides that if one or more of the ICO or
Wedco shareholders who are parties to the agreement desire to sell 500,000 or
more shares of Common Stock of the combined company, other than in connection
with an underwritten public offering that would not result in a transfer or
transfers of 500,000 or more shares of Common Stock of the combined company to
any person or group of persons, such proposed sale shall not be effective unless
the proposed transferee agrees to be bound as the successor to the transferor
under the agreement.
Legal Services Retainer Agreement. The combined company will agree to
retain Mr. Barol as legal counsel to its Board of Directors for a period to
extend until at least the Termination Date under the Shareholders Agreement. Mr.
Barol will be compensated by the combined company for his legal services at
usual and customary hourly billing rates charged by him from time to time. The
combined company will pay Mr. Barol annually a nonrefundable advance against
legal fees in an amount equal to the annual fee paid by it to its directors plus
the amount paid by it to its directors for attending all meetings of the Board
of Directors.
Non-Competition Covenants. William E. Willoughby and Fred R. Feder will
execute and deliver to the combined company at the closing of the Merger
Agreement Non-Competition Covenants pursuant to which they will agree not to
compete with Wedco for a period of ten years after the Effective Time in
consideration of the combined company's payment to them of $300,000 and $6,000,
respectively, in 60 equal monthly installments.
Consulting Agreement. William E. Willoughby will enter into a five-year
Consulting Agreement with Wedco pursuant to which he will perform consulting
services as requested by Wedco in consideration of consulting fees of $240,000
per year.
Mr. Willoughby and Wedco are parties to a Salary Continuation Agreement
which provides that Mr. Willoughby's spouse will be paid a survivorship benefit
of $150,000 for five years if Mr. Willoughby predeceases his spouse at a time
when he was employed by Wedco or was serving as a consultant to Wedco or ICO,
provided however, such payment shall terminate upon the earlier to occur of the
death of his spouse or April 30, 2001.
Employment Agreements. Fred R. Feder, Donald Cuomo, Robert F. Bush, Mark
Kuna and Timothy Kita will enter one-year Employment Agreements with Wedco. Mr.
Feder will be employed in the position of Vice President at an annual salary of
$160,000. Mr. Cuomo will be employed in the position of Vice President of Sales
and Marketing at an annual salary of $105,000. Mr. Bush will be employed in the
position of Vice President of Finance at an annual salary of $100,000. Mr. Kuna
will be employed in the position of Vice President and Principal Accounting
Officer at an annual salary of $85,000. Mr. Kita will be employed in the
position of Manager of Human Resources at an annual salary of $49,200. The terms
of the Employment Agreements will be renewable, at Wedco's option, for
successive terms of one year each. These employees will be prohibited from
competing with Wedco for a period of one year after the termination or
expiration of their respective Employment Agreement. If Wedco terminates any of
the Employment Agreements without cause or if any of the employees terminates
his employment at any time and for any reason, Wedco will pay the employee eight
months of severance pay and benefits.
Registration Rights Agreement. The combined company will agree with Mr.
Feder and the Wedco shareholders who are parties to the Shareholders Agreement
to provide them, for a period of five years after the Effective Time, with
certain demand and "piggyback" registration rights to enable them to dispose of
the shares of Common Stock of the combined company received by them in the
Merger. See "-- Transferability of Common Stock of the Combined Company to be
Received in the Merger."
47
<PAGE> 50
CASH REDEMPTION OF WEDCO STOCK OPTIONS
Under the Merger Agreement, Wedco is required to redeem for cash all
outstanding options to purchase Wedco Common Stock as a condition to the
consummation of the Merger. Holders of Wedco stock options would be paid a
redemption price equal to $16.50 minus the exercise price for each option. If
the Merger is consummated, approximately $2,167,000 would be paid in the
aggregate for the redemption of a total of approximately 285,700 stock options,
including approximately $480,000 to Theo J.M.L. Verhoeff, $300,000 to Fred R.
Feder, $184,000 to William C. Willoughby, $178,000 to Donald C. Cuomo, $124,000
to Walter L. Leib, $113,000 to Edward N. Barol, $99,000 to William E.
Willoughby, $70,500 to George S. Sirusas, $40,000 to Robert F. Bush, $27,500 to
Mark L. Kuna, and $14,000 to Timothy J. Kita.
TRANSFERABILITY OF COMMON STOCK TO BE RECEIVED IN THE MERGER
The shares of Common Stock of the combined company issuable to shareholders
of Wedco upon consummation of the Merger have been registered under the
Securities Act. Such shares may be traded freely without restriction by all
shareholders who are not deemed to be "affiliates" of ICO or Wedco, as that term
is defined in the rules under the Securities Act.
Shares of Common Stock of the combined company received by those
shareholders of Wedco who are deemed to be "affiliates" of Wedco may be resold
without registration under the Securities Act only as permitted by Rule 145
under the Securities Act or as otherwise permitted under the Securities Act.
Wedco has agreed in the Merger Agreement to use its reasonable best efforts to
cause each person who is an "affiliate" of Wedco to deliver to ICO prior to the
Effective Time, the written agreement of such affiliate not to offer to sell,
sell or otherwise dispose of any of the shares of Common Stock of the combined
company received by them pursuant to the Merger, except in compliance with Rule
145 or in a transaction that is otherwise exempt from the registration
requirements of the Securities Act. This Joint Proxy Statement/ Prospectus does
not cover any resales of Common Stock of the combined company received by
persons who are deemed to be "affiliates" of Wedco. However, in connection with
the closing of the Merger Agreement, ICO will enter into the Registration Rights
Agreement to provide certain of the "affiliates" with certain registration
rights to enable them to dispose of the shares of Common Stock of the combined
company received by them in the Merger in compliance with the requirements of
the Securities Act. See "-- Ancillary Agreements -- Registration Rights
Agreement."
NO APPRAISAL RIGHTS
Neither the shareholders of ICO nor the shareholders of Wedco will have
dissenters' rights or appraisal rights with respect to the Merger.
REGULATORY MATTERS
No approvals, consents or authorizations are required to be obtained by ICO
or Wedco from any federal or state governmental authority in connection with the
consummation of the Merger except in connection with compliance with federal and
state securities laws with respect to the transactions contemplated by the
Merger Agreement, including the issuance of shares of ICO Common Stock in
connection with the Merger.
EXPENSES
All expenses incurred by ICO or Wedco in connection with the Merger
Agreement will be paid by the party incurring such expenses.
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<PAGE> 51
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information, including the
notes thereto, give effect to the Merger and are qualified in their entirety by
reference to, and should be read in conjunction with the historical consolidated
financial statements and the notes thereto of ICO and Wedco incorporated herein
by reference.
The pro forma combined financial statements are based on the purchase
method of accounting. The unaudited pro forma consolidated condensed balance
sheet at September 30, 1995, assumes the Merger was consummated as of September
30, 1995 and the unaudited pro forma consolidated condensed statements of
operations assume the Merger was consummated as of the beginning of each of the
periods presented.
The pro forma data is presented for informational purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred had the Merger been consummated at the dates indicated, nor is
such data necessarily indicative of future operating results or financial
position. There is no assurance that similar results will be achieved in the
future.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL
--------------------- PRO FORMA
ICO WEDCO(1) ADJUSTMENTS COMBINED
--------- --------- ----------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales and services revenues.............. $ 87,887 $ 45,408 $ 133,295
--------- --------- ----------
Costs and Expenses:
Cost of sales and services................... 59,885 27,923 87,808
Selling, general and administrative.......... 17,840 8,020 (1,180)(a) 24,680
--------- --------- ----------- ----------
Income before interest, taxes depreciation
and amortization........................... 10,162 9,465 (1,180) 20,807
--------- --------- ----------- ----------
Depreciation and Amortization................ 5,112 3,786 603(b) 9,501
Interest, net................................ (1,307) 1,434 590(c) 717
Equity loss of Joint Ventures................ (179) (179)
Other, net................................... 96 96
--------- --------- ----------
Income before income taxes................... 6,357 4,328 10,672
--------- --------- ----------
Current provision for income taxes........... 2,200 1,456 (234)(d) 3,422
Deferred tax expense (benefit)............... (1,633) 198 2,751(d) 1,316
--------- --------- ----------
Total tax expense............................ 567 1,654 4,738
--------- --------- --------- ----------
Net Income................................... $ 5,790 $ 2,67 $ 2,530 $ 5,934
========= ========= ========= ==========
Earnings per common and common equivalent
share...................................... $ 0.41 $ 0.74 $ 0.21
========= ========= ==========
Weighted average shares outstanding.......... 8,709,303 3,616,038 5,246,442(e) 17,571,783
========= ========= ==========
</TABLE>
- ---------------
(1) Wedco historical amounts were derived from the unaudited quarterly financial
statements of Wedco for the applicable period to conform to ICO's fiscal
year-end.
49
<PAGE> 52
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
--------------------- PRO FORMA
ICO WEDCO(1) ADJUSTMENTS COMBINED
--------- --------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales and services revenues.............. $ 21,751 $ 9,992 $ 31,743
Costs and Expenses:
Cost of sales and services................... 15,145 6,578 21,723
Selling, general and administrative.......... 4,054 1,974 (325)(a) 5,703
---------- --------- ----------- ----------
Income before interest, taxes, depreciation
and amortization........................... 2,552 1,440 (325) 4,317
---------- --------- ----------- ----------
Depreciation and Amortization................ 1,339 1,022 165 (b) 2,526
Interest, net................................ (376) 371 148 (c) 143
Equity loss of Joint Ventures................ (151) (151)
Other, net................................... 145 145
---------- --------- ----------
Net income before income taxes............... 1,589 53 1,654
---------- --------- ----------
Current provision for income taxes........... 89 67 45 (d) 201
Deferred tax expense (benefit)............... 0 (17) 583 (d) 566
---------- --------- ---------- ----------
Total tax expense............................ 89 50 767
---------- --------- ----------
Net Income................................... $ 1,500 $ 3 $ 616 $ 887
========== ========= ========== ==========
Earnings per common and common equivalent
share...................................... $ 0.11 $ 0.00 $ 0.02
========== ========= ==========
Weighted average shares outstanding.......... 8,908,797 3,642,065 5,246,442 (e) 17,797,304
========== ========= ==========
</TABLE>
50
<PAGE> 53
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
----------------- PRO FORMA
ICO WEDCO RECLASSIFICATIONS ADJUSTMENTS COMBINED
------- ------- ----------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents..................... 24,492 148 (10,369)(f) $ 14,271
Trade Receivables, net........................ 16,172 6,669 22,841
Inventories................................... 5,277 2,055 7,332
Prepaid Expenses and Other.................... 2,975 1,019 3,994
Current deferred tax asset.................... 112(k) 1,345
1,233(j)
------- ------- ---------
Total Current Assets................ 48,916 9,891 49,783
------- ------- ---------
Property, Plant and Equipment, net............ 30,689 41,326 5,290(g) 77,305
Investment in joint ventures.................. 4,779 (1,174)(h) 3,605
Due from related parties...................... 779 779
Goodwill...................................... 4,401 25,095(i) 29,496
Deferred tax asset............................ 1,633 (2,419)(1) 2,732(j) 156
(1,790)(k)
Other assets.................................. 2,219 43 250(l) 2,512
------- ------- ---------
TOTAL ASSETS.................................. $87,858 $56,818 $ 163,636
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable................................. $ 3,718 $ 3,718
Current portion of long-term debt............. 598 1,647 2,245
Accounts payable.............................. 7,223 2,800 10,023
Accrued Expenses and other liabilities........ 3,873 3,554 275(m) 7,702
------- ------- ---------
Total Current Liabilities........... 11,694 11,719 23,688
------- ------- ---------
Long-term debt................................ 1,059 14,872 15,931
------- ------- ---------
Deferred income taxes......................... 2,419 (2,419)(1)
Other Liabilities............................. 434 434
Stockholders Equity
Preferred stock............................. 13 13
Common stock................................ 35,237 409 89(n) 35,326
(409)(n)
Additional paid-in capital.................. 55,988 11,159 48,389(n) 104,377
(11,159)(n)
Cumulative translation adjustment........... (117) 1,650 (1,650)(n) (117)
Retained earnings (deficit)................. (16,016) 17,434 (17,434)(n) (16,016)
Treasury Stock.............................. 0 (3,278) 3,278(n) 0
------- ------- ------- ----------- ---------
Total Stockholders' Equity.......... 75,105 27,374 123,583
======= ======= ========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $87,858 $56,818 $ 0 $ 0 $ 163,636
======= ======= ============ ========= ========
</TABLE>
- ---------------
(1) To net deferred tax liabilities with deferred tax assets.
51
<PAGE> 54
NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- PRO FORMA FINANCIAL STATEMENTS
The basis of the unaudited pro forma consolidated condensed income
statement and balance sheet reflects the assumption that Wedco shareholders
owning 60% of the outstanding shares of Wedco Common Stock will select the
Cash/Stock Consideration and the remaining shareholders of Wedco will select the
Stock Consideration. See "THE MERGER -- Merger Consideration". Regardless of
which option is selected by Wedco shareholders, the pro forma combined condensed
income statement will be materially equivalent to the pro forma income statement
presented.
In the event that approximately 48% or more of the outstanding shares of
Wedco Common Stock are exchanged for the Stock Consideration, the total number
of shares of ICO Common Stock issued to Wedco shareholders in connection with
the Merger would exceed the number of shares of ICO Common Stock outstanding
immediately prior to the consummation of the Merger. Nevertheless, management
believes the Merger will be properly accounted for as a forward merger (i.e.,
ICO being the acquirer) as opposed to a reverse merger. This conclusion is based
upon the following factors that clearly indicate ICO should be treated as the
acquirer: (i) the current chairman of ICO will be the chairman of the combined
company, (ii) the combined company's board of directors will consist of three
directors selected by former Wedco controlling shareholders and six selected by
ICO management, (iii) the execution of a shareholders agreement regarding (i)
and (ii) above (See "THE MERGER AGREEMENT -- Ancillary Agreements --
Shareholders Agreement") and (iv) the assets, revenues, recent net earnings and
current market value of ICO significantly exceeds those of Wedco.
The following summarizes the possible stock and cash consideration
combinations which could be exchanged for outstanding shares of Wedco Common
Stock:
<TABLE>
<CAPTION>
MERGER
CONSIDERATION
SELECTED ICO SHARES CASH
------------------------------------------------------------- ---------- -----------
<S> <C> <C>
100% Stock................................................... 10,132,509 $ 0
100% Cash/Stock.............................................. 7,849,127 $12,487,248
60% Cash/Stock, 40% Stock.................................... 8,762,480 $ 7,492,349
</TABLE>
Regardless of which option is selected by Wedco shareholders, the pro forma
combined condensed income statement will be materially equivalent to the pro
forma income statement presented.
The following summarizes the estimated purchase price:
<TABLE>
<S> <C>
ICO Common Stock issued to Wedco shareholders (fair value based on
most recent 30 day trading average).............................. $47,930
Cash paid to Wedco shareholders.................................... 7,492
Direct acquisition costs incurred by ICO........................... 1,172
-------
56,594
-------
Assumption of Wedco's liabilities.................................. 29,444
Liabilities assumed, pro forma adjustments......................... 2,065
-------
Total purchase price............................................... $88,103
=======
</TABLE>
NOTE 2 -- WEDCO HISTORICAL PRESENTATION
Certain amounts reported in Wedco's historical financial statements have
been reclassified to conform to the ICO presentations in the accompanying
unaudited pro forma financial statements.
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<PAGE> 55
NOTE 3 -- PRO FORMA ADJUSTMENTS
Statements of Income:
(a) To remove merger costs expensed by Wedco ($440,000 for the twelve
months ended September 30, 1995 and $140,000 for the three months ended December
31, 1995), incremental cost savings for Wedco no longer being a separate public
company ($250,000 per year) and to reflect cost savings resulting from the
retirement of certain Wedco executives ($490,000 per year).
(b) To increase amortization for intangibles (including goodwill) and
reduce depreciation for machinery and equipment. Historically, Wedco depreciated
machinery and equipment over 10 years. Select assets which have useful lives in
excess of this time period will be depreciated over their estimated useful life
after the Merger. Goodwill is amortized over a useful life of 40 years and value
allocated to non-compete agreements is amortized over the 10-year term of the
agreement.
ICO has analyzed the past and expected future operating performance of
Wedco, the competitive and regulatory environment in which Wedco operates and
has assessed the expected future life of Wedco's basic technology concluding
that, as of the acquisition date, the future life of goodwill is forty years or
greater. Accordingly, goodwill is amortized over an estimated useful life of 40
years, the maximum allowable life under APB 17. ICO's policy is to periodically
review goodwill and other intangibles to assess recoverability and review the
impact of events and circumstances which may warrant a revision to the estimated
useful life. Impairments would be recognized in operating results if a permanent
diminution in value were to occur.
(c) To reflect the reduced interest income on cash to be used to consummate
the Merger.
(d) To reflect the tax effect of pro forma income statement adjustments and
increase income tax expense resulting from pro forma adjustments to deferred tax
balances including the reversal of ICO's valuation allowance on deferred tax
assets at September 30, 1995. In fiscal year 1995, ICO recognized a $1,633,000
($.18 per share) tax benefit as a reversal of the valuation allowance to the
extent taxes had been paid. ICO also recognized a tax benefit of $1,035,000
($.12 per share) resulting from the utilization of approximately $2.9 million of
net operating loss carry forwards in fiscal year 1995. During the quarter ended
December 31, 1995 $.06 of ICO's $.11 earnings per share were attributable to the
recognition of a net operating loss carryforward benefit. These amounts are
reversed in the pro forma income statement.
While ICO will continue to realize a cash savings from $8,085,000 (i.e., a
tax benefit of $2,830,000) in net operating loss carry forwards (at December 31,
1995) for tax purposes after the Merger, future benefits resulting from the
utilization of these loss carry forwards will no longer be recognized in the
income statements prepared in accordance with generally accepted accounting
principles.
(e) To give effect to weighted average shares issued in connection with the
Merger, including 100,000 shares issued to advisers of ICO.
Balance Sheet:
(f) To reflect estimated cash consideration and expected direct expenses to
be paid by ICO and Wedco in connection with the Merger.
(g) To increase Wedco's property, plant and equipment to estimated fair
market value.
(h) To decrease Wedco's investment in the Wedtech/Canadian joint venture to
estimated fair market value.
(i) To reflect the excess purchase price over fair value of net tangible
assets acquired allocated to goodwill.
(j) To remove ICO's December 31, 1995 valuation allowance on deferred tax
assets. In accordance with Financial Accounting Standard 109, the need for the
valuation allowance will no longer exist as of the effective date of the Merger.
(k) To increase Wedco's deferred tax balances to reflect purchase price
accounting adjustments.
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(l) To reflect the fair value of non-compete agreements with former Wedco
executives.
(m) ICO will incur integration costs pertaining to the management
information systems estimated to be $275,000. These costs will be recorded as
liabilities assumed and will have the effect of increasing goodwill.
(n) To eliminate Wedco stockholders' equity accounts and reflect the
estimated value of shares issued in connection with the acquisition.
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DESCRIPTION OF ICO CAPITAL STOCK
GENERAL
ICO is authorized to issue up to 50,000,000 shares of ICO Common Stock, no
par value, 8,927,361 shares of which were issued and outstanding at March 15,
1996 and held of record by approximately 500 shareholders. In addition, ICO is
authorized to issue up to 500,000 shares of preferred stock, no par value,
322,500 shares of which have been divided into a series and underlie ICO's
Depositary Shares. Each of ICO's 1,290,000 Depositary Shares represents
ownership of 1/4 of a share of ICO's $6.75 Convertible Exchangeable Preferred
Stock (the "Preferred Stock").
ICO COMMON STOCK
Holders of ICO Common Stock are entitled to one vote per share on all other
matters submitted to a vote of shareholders. Such holders do not have the right
to cumulate their votes in the election of directors. Holders of ICO Common
Stock have no redemption or conversion rights and no preemptive or other rights
to subscribe for securities of ICO. In the event of a liquidation, dissolution
or winding up of ICO, holders of ICO Common Stock are entitled to share equally
and ratably in all of the assets remaining, if any, after satisfaction of all
debts and liabilities of the ICO, and of the preferential rights of any series
of preferred stock then outstanding. The outstanding shares of ICO Common Stock
are, and the shares of ICO Common Stock issuable in connection with the Merger
will be, upon issuance thereof, validly issued, fully paid and nonassessable.
Holders of ICO Common Stock are entitled to receive dividends when, as and if
declared by the ICO Board of Directors out of funds legally available therefor.
See "SUMMARY -- Dividend Policy." Society National Bank is transfer agent and
registrar for the ICO Common Stock.
ICO PREFERRED STOCK
ICO is authorized to issue, without any action on the part of its
shareholders, 500,000 shares of preferred stock, no par value per share. The
Board of Directors has the authority to divide the preferred stock into one or
more series and to fix and determine the relative rights and preferences of the
shares of each such series, including dividend rates, terms of redemption,
sinking funds, the amount payable in the event of voluntary liquidation,
dissolution or winding up of the affairs of ICO, conversion rights and voting
powers.
ICO has authorized the issuance of a series, consisting of 345,000 shares
of $6.75 Convertible Exchangeable Preferred Stock in connection with the
issuance and sale by public offering of the Depositary Shares in November, 1993,
prior to which, no shares of preferred stock were outstanding. The following is
a description of the Preferred Stock.
Dividend Rights
Holders of the Preferred Stock are entitled to receive when and if declared
by the ICO Board of Directors, out of the funds of ICO legally available
therefor, an annual cash dividend of $6.75 per share, payable quarterly in each
year. Dividends on the Preferred Stock are cumulative. Unless full cumulative
dividends on all outstanding shares of the Preferred Stock have been paid, no
dividends (other than in ICO Common Stock or other stock ranking junior to the
Preferred Stock as to dividends) may be paid, declared or set aside for payment,
or any other distributions made on the ICO Common Stock or on any other stock of
ICO ranking junior to the Preferred Stock as to dividends. See
"SUMMARY -- Dividend Policy" and "RISK FACTORS -- Risk Factors Relating to the
Merger -- Restrictions on Payment of Dividends."
Conversion Rights
Each share of Preferred Stock is convertible, at any time, at the option of
the holder thereof, into ICO Common Stock, at a conversion rate of 10.96 shares
of ICO Common Stock for each share of Preferred Stock (equivalent to a
conversion rate of 2.74 shares of Common Stock for each Depositary Share). The
initial conversion price is $9.125 per share which, at a liquidation preference
of $100 per share of Preferred Stock, entitles each share of Preferred Stock to
be convertible into 10.96 shares of Common Stock. The conversion price is
subject to adjustment upon certain events.
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Special Conversion Rights
The Preferred Stock has special conversion rights that become effective
upon the occurrence of certain types of significant transactions affecting
ownership or control of ICO or the market for the ICO Common Stock. The purpose
of the special conversion rights is to provide (subject to certain exceptions)
partial loss protection upon the occurrence of a change of control or a
fundamental change of ICO at a time when the market value of the ICO Common
Stock is less than the then prevailing conversion price. In such situations, the
special conversion right would, for a limited period, reduce the then prevailing
conversion price to the market value of the ICO Common Stock, subject to a
minimum conversion price of $5.17 per share of ICO Common Stock (subject to
certain adjustments).
Exchange Provisions
The Preferred Stock may be exchanged, in whole but not in part, at the
option of ICO, for Debentures of ICO on any dividend payment date beginning
December 31, 1995, at the rate of $100 principal amount of Debentures for each
share of Preferred Stock (equivalent to $25 principal amount of Debentures for
each Depositary Share), provided that all accrued and unpaid dividends through
the date of exchange have been paid and certain other conditions have been met.
The Debentures are issuable in denominations of $1,000 and integral multiples
thereof.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of ICO, after
payment or provision for payment of the debts and other liabilities of ICO and
the payment in full of any preferential amounts to which the holders of the
Preferred Stock shall be entitled, the holders of the Preferred Stock are
entitled to receive, out of the remaining net assets of ICO available for
distribution to shareholders, liquidating distributions in the amount of $100
per share (equivalent to $25 for each Depositary Share), plus an amount equal to
all dividends accrued and unpaid on each such share (whether or not declared) to
the date fixed for distribution, before any distribution is made to holders of
the Common Stock or any other class of stock of the Company ranking junior to
the Preferred Stock.
Optional Redemption
The Preferred Stock is not redeemable prior to December 31, 1996.
Thereafter, the Preferred Stock may be redeemed for cash, in whole or in part,
at the option of ICO at any time or from time to time, at redemption prices
beginning at $105.00 per share in 1997 and reducing to $100.00 in 2001 and
thereafter, in each case, with an amount equal to all dividends (whether or not
declared) accrued and unpaid to the date fixed for redemption.
Voting Rights
Except as required by law or indicated below, holders of Preferred Stock
have no voting rights.
Whenever dividends on the Preferred Stock are in arrears in an amount equal
to or exceeding six quarterly dividends (whether or not consecutive), the number
of directors of ICO will automatically be increased by two and the holders of
the Preferred Stock (voting separately as a class) will be entitled to elect the
additional two directors until all dividends that were accrued and unpaid have
been paid or declared and funds set aside to provide for payment in full. Upon
any termination of such rights to vote for directors, the term of office of all
directors so elected shall terminate.
Without the affirmative vote or consent of the holders of at least
two-thirds of the number of shares of Preferred Stock then outstanding, ICO may
not (1) create or issue or increase the authorized number of shares of any class
or classes or series of stock ranking prior to the Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or (2) alter, change
or repeal any of the powers, rights or preferences of the holders of the
Preferred Stock so as to affect adversely such powers, preferences or rights of
the Preferred Stock. Accordingly, the voting rights of the holders of Preferred
Stock could, under certain
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circumstances, operate to restrict the flexibility ICO would otherwise have in
connection with any future issuances of equity securities or changes to its
capital structure.
ICO DEPOSITARY SHARES
General
Each Depositary Share represents ownership of 1/4 of a share of Preferred
Stock. The shares of Preferred Stock underlying the Depositary Shares have been
deposited with Society National Bank as depositary. Depositary receipts issued
by the depositary evidence the Depositary Shares. Each owner of a Depositary
Share is entitled, proportionately, to all the rights, preferences and
privileges of a share of Preferred Stock (including dividend, voting,
redemption, exchange, conversion and liquidation rights) summarized above under
the caption "Preferred Stock."
Since each share of Preferred Stock entitles the holder thereof to one vote
on matters on which the Preferred Stock is entitled to vote, each Depositary
Share, in effect, entitles the holder thereof to one quarter of a vote thereon,
rather than one full vote. There is no public trading market for the Preferred
Stock except as represented by the Depositary Shares. The ICO's Depositary
Shares are traded on the Nasdaq Stock Market.
Withdrawal of Shares of Preferred Stock
Upon surrender of depositary receipts, the owner of the Depositary Shares
evidenced thereby is entitled to delivery of certificates evidencing the number
of whole shares of Preferred Stock and any money or other property represented
by such Depositary Shares.
Conversion of Preferred Stock
The Depositary Shares, as such, are not convertible into ICO Common Stock
or any other securities or property of ICO. Nevertheless, the depositary
receipts may be surrendered by holders to the depositary to cause conversion of
the Preferred Stock represented by the Depositary Shares into whole shares of
ICO Common Stock.
Exchange of Preferred Stock
If ICO elects to exchange all the shares of Preferred Stock for Debentures,
the depositary will exchange all Depositary Shares representing the shares of
the Preferred Stock so exchanged for Debentures. The exchange rate per
Depositary Share will be one quarter of the exchange rate per share of the
Preferred Stock, plus all accrued and unpaid dividends.
ICO OPTIONS AND WARRANTS
At March 8, 1996, warrants for the purchase of 853,000 shares of ICO Common
Stock and options covering an aggregate of 648,241 shares of ICO Common Stock
were outstanding. The warrants have exercise prices of $5.00 per share and
expiration dates ranging from June 1997 to July 2002. The options have exercise
prices ranging from $3.75 per share to $8.25 per share, with a weighted average
exercise price of $5.03 per share, and expiration dates ranging from October
1997 to October 2005.
REGISTRATION RIGHTS
Certain warrantholders of ICO presently possess registration rights with
respect to 853,000 shares of ICO Common Stock issuable upon exercise of
warrants. Additional registration rights will be granted under the terms of the
Merger Agreement to certain former Wedco shareholders with respect to a total of
5,472,373 and 4,299,722 shares of ICO Common Stock, assuming all of these
shareholders elect to receive the Stock Consideration and Cash/Stock
Consideration respectively. See "THE MERGER AGREEMENT -- Ancillary
Agreements -- Registration Rights Agreement.
Concurrently with the filing of the Registration Statement of which this
Joint Proxy Statement/ Prospectus forms a part, ICO will file on behalf of
certain ICO shareholders, who would not be deemed
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"affiliates" of ICO and who have exercised certain registration rights, a
registration statement relating to 311,550 shares of ICO Common Stock subject to
registration rights.
COMPARISON OF SHAREHOLDER RIGHTS
The statements set forth under this heading with respect to the NJBCA,
TBCA, the Wedco Certificate of Incorporation, the Wedco By-Laws, the ICO
Articles of Incorporation, and the ICO By-Laws (copies of which have been filed
as Exhibits to the Registration Statement) are brief summaries thereof and do
not purport to be complete; such statements are subject to the detailed
provisions of the NJBCA, the TBCA, the Wedco Certificate of Incorporation, the
Wedco By-Laws, the ICO Articles of Incorporation, and the ICO By-Laws. See
"AVAILABLE INFORMATION."
The rights of holders of Wedco Common Stock are governed by New Jersey law,
whereas those of holders of ICO Common Stock are governed by Texas law. The
rights and obligations of shareholders are also governed by the Articles or
Certificate of Incorporation and By-Laws of the respective companies. In
general, many of the rights and obligations of the shareholders of Wedco Common
Stock and the shareholders of ICO Common Stock are similar.
VOTING OF SHARES OF COMMON STOCK
Each share of Wedco Common Stock and each share of ICO Common Stock is
entitled to one vote on each matter submitted to a vote of shareholders. In
addition, neither cumulative voting nor pre-emptive rights are provided for the
shareholders of either company.
DIVIDEND RIGHTS
The rights of the shareholders of Wedco Common Stock and ICO Common Stock
to the receipt of dividends are limited by the NJBCA and the TBCA, respectively.
Under both the NJBCA and the TBCA, a corporation may not declare a dividend if,
after giving effect to the distribution, the corporation would be unable to pay
its debts as they become due in the usual course of business or the
corporation's total assets would be less than its total liabilities. The holders
of Wedco Common Stock and the holders of ICO Common Stock are thus entitled to
receive ratably, from funds legally available for the payments thereof,
dividends when and as declared by resolution of their respective boards of
directors.
SHAREHOLDER APPROVAL
Under Texas law amendments to the Articles or Certificate of Incorporation
and the approval of plans of merger, sales of substantially all assets and
similar transactions require the approval of two-thirds of the outstanding
shares of Common Stock. Under New Jersey law applicable to corporations which
were incorporated prior to January 1, 1969, including Wedco, the affirmative
vote of two-thirds of the votes cast by the holders of shares of Common Stock is
required for approval of such matters. Texas law, however, provides that the
board of directors of a Texas corporation not a party to a merger need not
submit the plan of merger to shareholders for approval. ICO has been advised by
legal counsel that under the TBCA, ICO is not a party to the Merger. See "ICO
SPECIAL MEETING -- Voting Rights."
Wedco's By-Laws provide that amendments thereto require the approval of
either a majority of shares of Wedco Common Stock voting at a meeting of
shareholders or a majority of the entire Board of Directors. However, by-laws
made or amended by the Board may be amended or repealed by the stockholders.
Under the NJBCA, the Certificate of Incorporation may reserve such power to
amend by-laws to the shareholders. Amendments to ICO's By-Laws require the
approval of either a majority of shares of ICO Common Stock or the Board of
Directors, except where the Articles of Incorporation or the TBCA reserve the
power exclusively to the shareholders in whole or in part or the shareholders
expressly prohibit the Board of Directors' action with respect to a particular
By-Law adopted by the shareholders.
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APPRAISAL RIGHTS
Subject to certain specified exceptions, appraisal rights are provided
under both New Jersey and Texas law for plans of merger to which the corporation
is a party, sales of substantially all assets, and similar transactions. Under
New Jersey law, a shareholder shall not have the right to dissent from any plan
of merger or consolidation with respect to shares of a class or series listed on
a national securities exchange or held of record by at least 1,000 holders and
also denies such rights to shareholders who will receive cash and/or such
securities in the proposed transaction. Texas law contains a similar provision.
Specifically, Texas law denies appraisal rights to shareholders holding a class
of shares listed on a national securities exchange or held of record by at least
2,000 holders and to shareholders who will receive shares of a class or series
listed or authorized for listing on a national securities exchange or held of
record by not less than 2,000 holders.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Under New Jersey law, Wedco shareholders may take action without a meeting
on matters other than the election of directors and mergers and similar
transactions upon the written consent of shareholders who would have been
entitled to cast the minimum number of votes which would be necessary to
authorize such action at a meeting at which all shareholders entitled to vote
thereon were present and voting. Texas law permits a company's articles of
incorporation to contain a similar provision. ICO's By-Laws, however, provide
that shareholders may act without meeting only if all shareholders entitled to
vote on the matter consent in writing to the action.
SHAREHOLDER PROPOSALS
None of the NJBCA, the Wedco Certificate of Incorporation, or the Wedco
By-Laws limit the ability of Wedco shareholders to bring business before a
meeting of shareholders. The ICO By-Laws establish certain requirements that
must be satisfied by a shareholder in order to nominate a person for director or
bring other business before a meeting of shareholders.
CALL OF SPECIAL MEETINGS
Under the NJBCA, special meetings of Wedco shareholders may be called by
the president or the board, or by such other officers, directors or shareholders
as may be provided in the by-laws. Notwithstanding any such provision, upon the
application of the holder or holders of not less than 10% of all the shares
entitled to vote at a meeting, the New Jersey Superior Court, in an action in
which the court may proceed in a summary manner, for good cause shown, may order
a special meeting of the shareholders to be called and held at such time and
place, upon such notice and for the transaction of such business as may be
designated in such order. In addition, Wedco's By-Laws obligate the Chairman of
the Board or the Board of Directors to order and call such meetings whenever
persons holding 25% of the outstanding capital stock of the corporation request
in writing such a meeting.
Special meetings of the shareholders of ICO Common Stock may be called at
any time by the Chairman of the Board, the President, a majority of the Board of
Directors, a majority of the executive committee (if any), or the holders of at
least ten percent (10%) of all the shares entitled to vote at the proposed
special meeting.
ANTI-TAKEOVER PROVISIONS
The New Jersey Shareholders Protection Act provides that no "resident
domestic corporation," such as Wedco, may engage in a "business combination"
with an "interested stockholder" for a period of five years after the date of
the transaction in which the interested stockholder becomes an interested
stockholder, unless the business combination has been approved by Wedco's Board
of Directors prior to that date. In addition, Wedco may not engage in any
"business combination" with any "interested stockholder" after the expiration of
the five-year period unless: (i) the business combination is approved by the
Board of Directors in a prescribed manner, (ii) two-thirds of the shares not
beneficially owned by the interested stockholder vote in favor of the business
combination, or (iii) the combination meets certain objective tests designed to
ensure
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that shareholders receive a fair price for their shares. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within five years preceding the date of such determination,
did own, ten percent (10%) or more of Wedco's voting stock. Texas law contains
no similar provisions.
CLASSIFICATION OF BOARD OF DIRECTORS
Although the NJBCA permits for the classification of directors, the Wedco
Certificate of Incorporation and the Wedco By-Laws do not provide for the
classification of the Board of Directors of Wedco, which, accordingly, consists
of a single class of directors who are elected annually.
ICO's By-Laws provide for the classification of the Board of Directors of
ICO into three classes, with directors serving staggered three-year terms. As a
result, one-third of ICO's Board of Directors will be elected each year. The
classified board provision could increase the likelihood that, in the event of
an attempted takeover of ICO, incumbent directors would retain their positions
and, consequently, may have the effect of discouraging, delaying or preventing a
change of control.
REMOVAL OF DIRECTORS
New Jersey law provides, subject to certain qualifications, for the removal
of directors for cause or, unless otherwise provided in the certificate of
incorporation, without cause by the shareholders by the affirmative vote of the
majority of the votes cast by the holders of shares entitled to vote for the
election of directors.
The TBCA does not specifically address the matter of the removal of
directors. ICO's By-Laws, however, provide for the removal of directors for
cause at a special shareholder meeting called expressly for the purpose, by a
vote of two-thirds of the shares entitled to vote for the election of directors.
INDEMNIFICATION OF DIRECTORS; DIRECTOR'S LIABILITY
As authorized by the TBCA, ICO's By-Laws provide that to the fullest extent
permitted by Texas law, as the same exists or may hereafter by amended,
directors and former directors of ICO will not be liable to ICO or its
shareholders for monetary damages for acts or omissions occurring in their
capacity as directors. Texas law does not authorize the elimination or
limitation of the liability of a director to the extent the director is found
liable (1) for any breach of the director's duty of loyalty to the company or
its shareholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (3) for transactions from
which the director received an improper benefit, whether or not the benefit
resulted from action taken within the scope of the director's office, and (4)
for acts or omissions for which the liability of a director is expressly
provided by law.
Texas law does, however, permit a company to indemnify a director found
liable to the company to the extent of the director's reasonable expenses
incurred in connection with the proceeding, though not where the director is
found liable for a violation of the duty of loyalty. Pursuant to ICO's By-Laws,
the liability of directors and former directors will be further limited or
eliminated without action by shareholders if Texas law is amended to limit or
eliminate further the personal liability of directors.
New Jersey law is substantially similar to Texas law with respect to the
extent to which a company may limit or eliminate the personal liability of
directors for breaches of directors' duties to the company. Under the NJBCA, a
corporation shall have the power to indemnify a corporate agent against his
expenses and liabilities in connection with any proceeding involving the
corporate agent by reason of his being or having been such a corporate agent,
other than a proceeding by or in the right of the corporation, if (1) Such
corporate agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation; and (2) with respect
to any criminal proceeding, such corporate agent had no reasonable cause to
believe his conduct was unlawful. As with ICO's By-laws, Wedco's By-laws also
provide indemnification to directors and former directors to the fullest extent
permitted by state law.
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LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for ICO
by Keating, Muething & Klekamp, Cincinnati, Ohio. Members of that firm do not
beneficially own any shares of ICO Common Stock.
Keating, Muething & Klekamp, counsel to ICO, and Dilworth, Paxson, Kalish &
Kauffman LLP, counsel to Wedco, have been engaged pursuant to the Merger
Agreement to render certain opinions as of the Effective Time concerning certain
federal income tax consequences of the Merger. See "THE MERGER -- Certain Future
Income Tax Consequences." Edward N. Barol, a partner in Dilworth, Paxson, Kalish
& Kauffman LLP, has been a director of Wedco since 1984. Members of Dilworth,
Paxson, Kalish & Kauffman LLP own 5,775 shares of Wedco Common Stock. As noted
above, Mr. Barol will be paid, pursuant to the Merger Agreement, $113,000 for
the redemption of Wedco Stock Options.
EXPERTS
The consolidated financial statements of ICO as of September 30, 1994 and
1995 and for each of the three years in the period ended September 30, 1995
incorporated by reference into this Joint Proxy Statement/Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. Representatives of Price Waterhouse LLP are expected to be present
at the ICO Special Meeting, are expected to be available to respond to
appropriate questions and will have the opportunity to make a statement, if they
desire to do so.
The consolidated balance sheet as of March 31, 1995 and 1994 and the
consolidated statements of income, retained earnings and cash flows for each of
the three years in the period ended March 31, 1995 incorporated by reference
into this Joint Proxy Statement/Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Wedco Special Meeting, are expected to be available to respond to appropriate
questions and will have the opportunity to make a statement, if they desire to
do so.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
A shareholder of ICO intending to submit a proposal to be presented at the
1996 Annual Meeting of Shareholders must have delivered such proposal in writing
to ICO's executive offices no later than April 15, 1996.
If the Merger is not consummated, Wedco will hold its regularly scheduled
Annual Meeting of Shareholders. A shareholder of Wedco intending to submit a
proposal to be presented at the 1996 Annual Meeting of Shareholders must deliver
such proposal in writing to Wedco's executive offices no later than March 26,
1996.
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<PAGE> 65
ANNEX A
MERGER AGREEMENT
AMONG
WEDCO TECHNOLOGY, INC.,
W ACQUISITION CORP.
AND
ICO, INC.
________________________________________________________________________________
DATED AS OF DECEMBER 8, 1995, AS AMENDED ON MARCH 13, 1996
________________________________________________________________________________
<PAGE> 66
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effects of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.3 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.4 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.5 Surviving Corporation Officers; Directors;
Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2 STOCKHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1 Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Correction of Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 THE MERGER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2 Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3 Filing of Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
OF WEDCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 Organization and Qualification; Active Subsidiaries . . . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.9 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.10 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.12 Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.13 Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.16 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
OF ICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.1 Organization and Qualification; Active Subsidiaries . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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<TABLE>
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Section 5.4 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.6 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.9 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.12 Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.13 Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.15 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.16 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.2 New York Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 7 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.1 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.5 Rule 145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.6 Post-Merger Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.7 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.8 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 8 CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.1 Conditions to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.2 Additional Conditions to the Obligations of Wedco . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.3 Additional Conditions to the Obligations of ICO . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 9 TERMINATION; AMENDMENTS; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.3 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.1 Survival of Representations, Warranties, Covenants
and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.2 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
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<TABLE>
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Section 10.3 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.6 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.8 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.10 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
<PAGE> 69
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") dated as of December 8, 1995, as
amended on March 13, 1996, is made by and among WEDCO TECHNOLOGY, INC., a New
Jersey corporation ("Wedco"), W ACQUISITION CORP., a New Jersey corporation ("W
Acquisition"), and ICO, INC., a Texas corporation ("ICO").
R E C I T A L S:
WHEREAS, the Board of Directors of each of Wedco and ICO has
determined that it is advisable and in the best interests of their respective
stockholders that Wedco become a subsidiary of ICO by merger with and into W
Acquisition, a Subsidiary (as hereinafter defined) of ICO, pursuant to the
merger hereinafter provided for; and
WHEREAS, William E. Willoughby, Peggy S. Willoughby, William C.
Willoughby, Regina S. Willoughby, Fred R. Feder, Theo J.M.L. Verhoeff,
Catherine Willoughby Stevens, William C. Willoughby, as custodian for William
B. Willoughby, and Regina S. Willoughby, as custodian for William B.
Willoughby (collectively, the "Wedco Shareholder Group") have signed an
agreement of even date herewith ("Wedco Shareholder Group Agreement") in which
they have: (i) granted to Sylvia A. Pacholder and Dr. Asher O. Pacholder,
acting as representatives of ICO, an irrevocable proxy with respect to the
shares of Wedco common stock controlled by them (which shares are further
described on Schedule 1 attached hereto); and (ii) agreed not to transfer such
shares from and after the date hereof until the Effective Time (as hereinafter
defined), except in accordance with such Wedco Shareholder Group Agreement; and
WHEREAS, Sylvia A. Pacholder, Dr. Asher O. Pacholder, Robin E.
Pacholder, Pacholder Associates, Inc., William J. Morgan and P M Delaware, Inc.
(collectively, the "ICO Shareholder Group") have signed an agreement of even
date herewith (the "ICO Shareholder Group Agreement") in which they have: (i)
granted to Walter L. Leib and Edward N. Barol, acting as representatives of
Wedco, an irrevocable proxy with respect to the shares of ICO capital stock
controlled by them (which shares are further described on Schedule 2 attached
hereto); and (ii) agreed not to transfer such shares from and after the date
hereof until the Effective Time, except in accordance with such ICO Shareholder
Group Agreement; and
WHEREAS, Wedco and ICO desire to make certain representations,
warranties and agreements in connection with such merger; and
WHEREAS, immediately after the Effective Time, ICO shall take all
actions necessary to give effect to the change of its corporate name to
"Willoughby International, Inc.;" and
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WHEREAS, promptly after execution and delivery of this Agreement, ICO
shall initiate and thereafter diligently pursue the process of applying for a
listing of Willoughby International, Inc. stock on the New York Stock Exchange.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger.
(a) ICO shall cause W Acquisition to execute and deliver,
and Wedco shall execute and deliver, a certificate of merger and any other
documents required under the New Jersey Business Corporation Act (the "New
Jersey Law") to effect the merger of Wedco with and into W Acquisition (the
"Merger") consistent with this Agreement. The closing and consummation of the
Merger shall be governed by the provisions of Article 3 of this Agreement.
(b) In the Merger:
(i) Each share of common stock, no par value per
share, and each share of preferred stock, no par value per share, of ICO issued
and outstanding prior to the Effective Time shall remain outstanding;
(ii) Each share of common stock, $0.10 par value
per share, of Wedco ("Wedco Common Stock") issued and outstanding immediately
prior to the Effective Time shall be converted, by virtue of the Merger and
without the need for any further action on the part of the holder thereof, into
the right to receive either: (X) (1) 2.20 shares of common stock, no par value
per share, of ICO ("ICO Common Stock"); and (2) $3.50 in cash (the "Cash/Stock
Consideration"), or (Y) 2.84 shares of ICO Common Stock (the "Stock
Consideration;" the Cash/Stock Consideration and Stock Consideration
collectively, the "Merger Consideration"). Promptly after the Effective Time,
ICO shall furnish to all persons who were holders of Wedco Common Stock
immediately prior to the Effective Time with forms of election, including a
related letter of transmittal, to enable them to elect the Cash/Stock
Consideration or the Stock Consideration. In the event that such a holder of
Wedco Common Stock shall fail to make an election hereunder with respect to any
or all of such holder's shares of Wedco Common Stock within 30 days after the
date on which
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such forms of election are mailed by ICO to such holders, such holder shall be
deemed for all purposes of this Agreement to have elected to receive Stock
Consideration with respect to those shares of Wedco Common Stock as to which no
election was made. A holder shall be deemed to have made the requisite
election when the properly completed forms of election are mailed by such
holder in the United States by certified or registered mail, return receipt
requested, when given to a commercial overnight delivery or courier service of
nationally recognized standing or when delivered to ICO or its agent designated
for such purpose;
(iii) Each vested option to acquire a share of
Wedco Common Stock shall be converted into an amount in cash ("Merger Option
Consideration") equal to the following:
(A) $16.50 cash, less
(B) the exercise price of such options.
(iv) Each share of Wedco Common Stock held in
treasury or otherwise by Wedco or any of its Subsidiaries shall immediately be
cancelled; and
(v) Each share of common stock, no par value per
share, of W Acquisition ("W Acquisition Common Stock") shall be converted, by
virtue of the Merger and without the need for any action on the part of the
holder thereof, into one share of the common stock, no par value, of the
corporation surviving the Merger (the "Surviving Corporation").
(c) No fractional shares of ICO Common Stock shall be
issued in the Merger. All fractional shares of ICO Common Stock that a holder
of Wedco Common Stock would otherwise be entitled to receive as a result of the
Merger shall be aggregated. Such holder shall be entitled to receive, in lieu
of any fractional share of ICO Common Stock, an amount in cash determined by
multiplying the weighted average of the mean between the closing representative
bid and asked prices for such ICO Common Stock on the NASD National Market
System for the last five (5) trading days immediately preceding the date on
which the Effective Time occurs by the fraction of a share of ICO Common Stock
to which such holder is entitled pursuant to the provisions hereof.
(d) As the sole stockholder of W Acquisition, ICO shall
promptly execute a written consent under Section 14A:5-6 of the New Jersey Law
to the execution, delivery and performance by W Acquisition of the Merger and
this Agreement. Each of ICO and Wedco shall promptly submit to its respective
stockholders proposals, in the case of ICO, for the approval of the issuance
of shares of ICO Common Stock in accordance with Section 1.1(b) and, in the
case of Wedco, for adoption and approval of this Agreement and the
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Merger in accordance with Article 2 hereof. Each of ICO and Wedco shall use
its best efforts to cause the Merger to be consummated in accordance with the
terms hereof.
<PAGE> 73
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Section 1.2 Effects of Merger.
When the Merger has been effected, the separate existence of
Wedco and W Acquisition shall cease and Wedco shall be merged with and into W
Acquisition (W Acquisition and Wedco are sometimes referred to herein as the
"Constituent Corporations"), with W Acquisition being the Surviving
Corporation. At and after the Effective Time, the Surviving Corporation shall
thereupon and thereafter possess all the rights, privileges, powers,
immunities, purposes and franchises, of a public as well as of a private
nature, of the Constituent Corporations, and, all and singular, the rights,
privileges, powers, immunities, purposes and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, tangible
and intangible, and all debts due to either of said Constituent Corporations,
on whatever account, as well as for stock subscriptions and all other things in
action or belonging to each of such corporations, shall be vested in the
Surviving Corporation without further act or deed; and all property, rights,
privileges, powers, immunities, purposes and franchises, and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations; and the title to any
real estate vested by deed or otherwise or any other interest in real estate
vested by any instrument or otherwise in either of such Constituent
Corporations shall not revert or become in any way impaired by reason of the
Merger, but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and shall be enforceable against it to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by it; all of the foregoing in accordance with the applicable provisions of the
New Jersey Law.
Section 1.3 Exchange of Certificates.
From and after the Effective Time, each holder of an
outstanding certificate which immediately prior to the Effective Time
represented outstanding shares of Wedco Common Stock shall be entitled to
receive in exchange therefor, upon surrender thereof to Society Shareholder
Services, Inc., 3200 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270:
(i) a certificate or certificates representing the number of whole shares of
ICO Common Stock into which such holder's shares were converted in accordance
with Section 1.1(b)(ii); and (ii) a check representing any cash payable in lieu
of any fractional share of ICO Common Stock computed as set forth in Section
1.1(c) hereof; and (iii) if the holder thereof has elected to receive
Cash/Stock Consideration, any cash to be received in connection therewith. No
holder of a certificate or certificates which immediately prior to the
Effective Time represented shares of Wedco Common Stock shall be entitled to
receive any dividend or other distribution from ICO until surrender of such
holder's certificate or certificates for a certificate or certificates
representing shares of ICO Common Stock. Upon
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such surrender, each holder who has so surrendered such holder's certificate or
certificates shall be deemed retroactively to have been a holder of record of
ICO Common Stock as of the Effective Time. Accordingly, there shall be paid to
the holder the amount of any dividends or other distributions (without
interest) which became payable at any time on or after the Effective Time to
holders of record of ICO Common Stock, but which were not paid by reason of the
foregoing, with respect to the number of whole shares of ICO Common Stock
represented by the certificates issued upon such surrender. After the
Effective Time, there shall be no further registration of transfers of Wedco
Common Stock. If, after the Effective Time, certificates representing Wedco
Common Stock are presented to ICO, they shall be cancelled and exchanged for
the Merger Consideration to be received in accordance with Section 1.1(b)(ii).
From and after the Effective Time, ICO shall, however, be entitled to treat
certificates for shares of Wedco Common Stock which have not yet been
surrendered for exchange as evidencing solely the right to receive the Merger
Consideration for such certificates in accordance with Section 1.1(b)(ii),
notwithstanding any failure to surrender such certificates in exchange
therefor. If any certificate for shares of ICO Common Stock is to be issued in
a name other than that in which the certificate for shares of Wedco Common
Stock surrendered in exchange therefor is registered, it shall be a condition
of such issuance that the person requesting such issuance shall pay any
transfer or other tax required by reason of the issuance of certificates for
such shares of ICO Common Stock in a name other than that of the registered
holder of the certificate surrendered, or shall establish to the satisfaction
of ICO or its agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, ICO shall not be liable to any holder of shares
of Wedco Common Stock for any shares of ICO Common Stock (or dividends or
distributions with respect thereto) or cash in lieu of fractional shares
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 1.4 Effective Time.
The term "Effective Time" shall mean the date and time at
which the Merger shall have become effective pursuant to the laws of the State
of New Jersey.
Section 1.5 Surviving Corporation Officers; Directors; Certificate of
Incorporation and Bylaws.
The respective officers and directors of ICO and the Surviving
Corporation immediately following the Effective Time shall be as set forth on
Schedule 3 attached hereto. The Certificate of Incorporation of W Acquisition
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, except that it shall be amended
hereby to provide that the corporate name of the Surviving Corporation shall be
"Wedco Technology, Inc." The Bylaws of W Acquisition immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation. Nothing in
<PAGE> 75
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this Section 1.5 shall be construed to grant to any person any contractual or
other right to hold office or a directorship in the Surviving Corporation or to
preclude the shareholders or Board of Directors of the Surviving Corporation
from further amending or modifying the Certificate of Incorporation or Bylaws
of the Surviving Corporation.
ARTICLE 2
STOCKHOLDER APPROVAL
Section 2.1 Stockholders' Meetings.
(a) This Agreement contemplates the amendment of ICO's
Certificate of Incorporation to change its corporate name immediately after the
Effective Time (but only if the transactions contemplated hereby are
consummated) to 'Willoughby International, Inc.' and the issuance of shares of
ICO Common Stock in accordance with Section 1.1(b). Accordingly, pursuant to
the applicable provisions of the Texas General Corporation Act (the 'Texas
Act') and the rules of the National Association of Securities Dealers
applicable to corporations with securities quoted on the NASD Stock Market, the
proposed amendment of ICO's Certificate of Incorporation and issuance of ICO
Common Stock contemplated by this Agreement shall be submitted for approval to
the holders of shares of ICO Common Stock, at a meeting to be duly held for
this purpose by ICO (the 'ICO Stockholders' Meeting'). ICO shall endeavor to
hold the ICO Stockholders' Meeting as soon as practicable after the date
hereof. ICO, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold
the ICO Stockholders' Meeting;
(ii) include in the Proxy Statement/Prospectus (as
hereinafter defined) the recommendation of its Board of Directors that the
stockholders of ICO vote in favor of the approval of the transactions
contemplated by this Agreement; and
(iii) use its best efforts to solicit from the
stockholders of ICO proxies in favor of the approval of the transactions
contemplated by this Agreement, and take all other actions necessary or
advisable to secure the approval by ICO's stockholders of the transactions
contemplated by this Agreement.
(b) This Agreement (which constitutes a Plan of Merger
under Section 14A:10-1 of the New Jersey Law) shall be submitted for adoption
and approval to the holders of shares of Wedco Common Stock, at a meeting to be
duly held for this purpose
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by Wedco (the "Wedco Stockholders' Meeting"). Wedco shall endeavor to hold the
Wedco Stockholders' Meeting as soon as practicable after the date hereof.
Wedco, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold
the Wedco Stockholders' Meeting;
(ii) include in the Proxy Statement/Prospectus the
recommendation of its Board of Directors that the stockholders of Wedco vote in
favor of the approval and adoption of this Agreement and the transactions
contemplated hereby; and
(iii) use its best efforts to solicit from the
stockholders of Wedco proxies in favor of the approval and adoption of this
Agreement and the transactions contemplated hereby, and take all other actions
necessary or advisable to secure the approval and adoption by Wedco's
stockholders of this Agreement and the transactions contemplated hereby.
(c) In the event that the name change of ICO contemplated
by Section 2.1(a) shall not be approved by ICO's shareholders, all references
to "Willoughby International, Inc." in this Agreement shall be deemed to be
references to ICO, Inc.
Section 2.2 Proxy Statement/Prospectus.
In connection with: (i) any solicitations of approval by the
stockholders of ICO of the amendment to ICO's Certificate of Incorporation and
of the issuance of ICO Common Stock contemplated by this Agreement; and (ii)
any solicitations of approval by the stockholders of Wedco of this Agreement
and the transactions contemplated hereby, ICO and Wedco shall file with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and with the appropriate
state governmental offices under the securities or "blue sky" laws of such
states, shall use all reasonable efforts to respond to the comments of the
staff of the Commission (the "Staff") or such state governmental offices and
have cleared by the Commission under the Exchange Act and shall promptly
thereafter mail to their respective stockholders, proxy solicitation materials,
including a letter to stockholders, notice of meeting, proxy statement and
appropriate related forms of proxies with respect to the ICO Stockholders'
Meeting and the Wedco Stockholders' Meeting, as the case may be. Such proxy
statement shall also constitute a prospectus of ICO with respect to the shares
of ICO Common Stock to be issued in the Merger (such proxy statement and
prospectus, together with all amendments and supplements thereto, are referred
to herein as the "Proxy Statement/Prospectus"), and shall be a part of a
registration statement (the "Registration Statement") to be filed by ICO with
the Commission for the purpose of registering the public offering of such
shares of ICO
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Common Stock under the Securities Act of 1933, as amended (the "Securities
Act"). ICO shall file promptly such Registration Statement and shall use its
best efforts to respond to the comments of the Staff with respect thereto and
to have it declared effective by the Commission. ICO shall notify Wedco
promptly of the receipt of any comments of the Staff and of any request by the
Staff for amendments or supplements to the Proxy Statement/Prospectus or the
Registration Statement or for additional information, and shall supply Wedco
with copies of all correspondence between ICO or its representatives, on the
one hand, and the Commission or members of the Staff, on the other hand, with
respect to the Proxy Statement/Prospectus, the Registration Statement or the
transactions contemplated hereby.
Section 2.3 Correction of Statements.
Each of ICO and Wedco shall correct promptly any information
specifically provided by it for inclusion in the Proxy Statement/Prospectus
which shall have become false or misleading in any material respect. Each of
ICO and Wedco shall take all steps necessary to file or to cause to be filed
with the Commission and have declared effective or cleared by the Commission
any amendment or supplement to the Registration Statement or the Proxy
Statement/Prospectus so as to correct the same and to cause the Registration
Statement or the Proxy Statement/Prospectus as so corrected to be disseminated
to the respective stockholders of ICO and Wedco, in each case as and to the
extent required by applicable law. The Registration Statement and the Proxy
Statement/Prospectus shall comply as to form in all material respects with the
provisions of the Securities Act, the Exchange Act and other applicable law.
ARTICLE 3
THE MERGER CLOSING
Section 3.1 Time and Place.
The consummation of the Merger (the "Closing") shall take
place at the offices of Messrs. Dilworth, Paxson, Kalish & Kauffman, 3200
Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania 19109-7595,
at 10:00 a.m. local time on the date of the satisfaction or waiver of all
conditions set forth in Article 8 of this Agreement, or at such other place and
time as the parties hereto may agree.
Section 3.2 Deliveries at Closing.
(a) At the Closing, Wedco shall deliver or cause to be
delivered to ICO:
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(i) an officer's certificate of Wedco in the
form attached hereto as Annex I (Wedco);
(ii) the Non-Competition Covenants of William E.
Willoughby and Fred R. Feder in the form attached as Annex II (Wedco);
(iii) the legal opinion of Messrs. Leib, Kraus,
Grispin & Roth in the form annexed hereto as Annex III (Wedco);
(iv) [Intentionally Omitted]; and
(v) all other documents required to be delivered
or caused to be delivered by Wedco hereunder and such other documents and
instruments as ICO shall reasonably request in order to effect or evidence the
transactions contemplated hereby.
(b) At the Closing, ICO or Surviving Corporation, as the
case may be, shall deliver or cause to be delivered to Wedco or the holders of
Wedco Common Stock, as the case may be:
(i) the Merger Consideration in accordance with
Section 1.3;
(ii) the officer's certificate of ICO in the form
attached hereto as Annex V (ICO);
(iii) the legal opinions of Messrs. Keating,
Muething & Klekamp and Vinson & Elkins in the forms annexed hereto as Annex
VI-A (ICO) and Annex VI-B (ICO), respectively;
(iv) the Consulting Agreement with William E.
Willoughby in the form attached hereto as Annex VII (ICO);
(v) the Employment, Consulting and Severance
Agreement with Robert F. Bush in the form attached hereto as Annex VIII
(Surviving Corporation);
(vi) Employment Agreements and Severance
Agreements with the following persons:
(A) Fred R. Feder in the form attached
hereto as Annex IX-A (Surviving Corporation); and
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(B) Donald Cuomo, Timothy Kite and Mark
Kuna in the forms attached hereto as Annexes IX-B, IX-C and IX-D (Surviving
Corporation);
(vii) the Continuing Willoughby International, Inc.
Stockholders' Agreement in the form attached hereto as Annex X (Willoughby
International, Inc.);
(viii) the Registration Rights Agreement in the form
attached hereto as Annex XI (Willoughby International, Inc.);
(ix) [Intentionally Omitted];
(x) the letter agreement with Edward N. Barol in
the form attached hereto as Annex XIII (Willoughby International, Inc.); and
(xi) all other documents required to be delivered
or caused to be delivered by ICO hereunder and such other documents and
instruments as Wedco shall reasonably request in order to effect or evidence
the transactions contemplated hereby.
Section 3.3 Filing of Certificate of Merger.
Contemporaneously with the deliveries pursuant to Section 3.2
above, Wedco shall, and ICO shall cause W Acquisition to cause agents
acceptable to both Wedco and ICO to deliver to the Secretary of State of the
State of New Jersey for filing a Certificate of Merger duly executed by Wedco
and W Acquisition and shall make all other deliveries, filings or recordings
required by applicable law to consummate the Merger.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF WEDCO
Wedco represents and warrants to ICO as follows:
Section 4.1 Organization and Qualification; Active Subsidiaries.
(a) Each of Wedco and each active domestic Subsidiary of
Wedco is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and each has all
requisite corporate power and authority to own, lease or operate the properties
that it purports to own, lease or operate and to carry on its business as it is
now being conducted. Section 4.01(a) of the Disclosure Schedule
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which is being delivered by Wedco to ICO herewith (the "Wedco Disclosure
Schedule") lists all active domestic Subsidiaries of Wedco. Each of Wedco and
each of its active domestic Subsidiaries is duly qualified or licensed as a
foreign corporation to do business and is in good standing in each jurisdiction
where the property owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing which, when
taken together with all other such failures and all such failures of Wedco's
active alien Subsidiaries referred to in Section 4.1(b) below, would not have a
material adverse effect on the business, operations or financial condition of
Wedco and its Subsidiaries, taken as a whole. Wedco has heretofore delivered
to ICO true and complete copies of its Certificate of Incorporation and Bylaws,
and the charter and bylaws of each of its active domestic Subsidiaries as
currently in effect. None of Wedco or any of its active domestic Subsidiaries
is in violation of any of the provisions of its respective charter or bylaws.
(b) Each active alien Subsidiary corporation (or other
business entity) of Wedco is a corporation (or other business entity) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (or other organization). Each active alien
Subsidiary of Wedco has all requisite corporate (or other) power and authority
to own, lease or operate the properties that it purports to own, lease or
operate and to carry on its business as it is now being conducted. Section
4.01(b) of the Wedco Disclosure Schedule lists all active alien Subsidiary
corporations (and other business entities) of Wedco. Each active alien
Subsidiary corporation (or other business entity) of Wedco is duly qualified or
licensed as a foreign or alien corporation (or other business entity) to do
business and is in good standing in each jurisdiction where the property owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which, when taken together with all
other such failures and all such failures of Wedco's active domestic
Subsidiaries referred to in Section 4.1(a) above, would not have a material
adverse effect on the business, operations or financial condition of Wedco and
its Subsidiaries, taken as a whole. Wedco has heretofore delivered to ICO true
and complete copies of the charter and bylaws (or other organizational or
governing documents) of each active alien Subsidiary corporation (or other
business entity) of Wedco, as currently in effect. None of the active alien
Subsidiary corporations (or other business entities) of Wedco is in violation
of any of the provisions of its respective charter or bylaws (or other
organizational or governing documents).
Section 4.2 Capitalization.
(a) The authorized capital stock of Wedco consists of Ten
Million Four Hundred Ninety-Five Thousand (10,495,000) shares of common stock,
having $0.10 par value per share. As of the date hereof, there are (i) Three
Million Five Hundred Sixty-Seven
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Thousand Seven Hundred Eighty-Five (3,567,785) shares of Wedco Common Stock
issued, all of which are duly authorized, validly issued, fully paid,
nonassessable and are not subject to and were not issued in violation of any
preemptive rights; (ii) Five Hundred Twenty-Seven Thousand One Hundred Six
(527,106) shares of Wedco Common Stock held by Wedco in its treasury; and (iii)
no shares of Wedco's Common Stock held by any of Wedco's Subsidiaries. Except
as set forth in Section 4.02(a) of the Wedco Disclosure Schedule, there are no
options, warrants, calls, rights, subscriptions, convertible securities or
other rights or other agreements, arrangements or commitments of any kind
relating to the issued or unissued capital stock of Wedco or otherwise
obligating Wedco or any Subsidiary of Wedco to issue, transfer or sell any
securities of Wedco, or securities or other instruments convertible into or
exchangeable or exercisable for any securities of Wedco. The Wedco Shareholder
Group is the holder of record, in the aggregate, of One Million Nine Hundred
Forty-Four Thousand Two Hundred Seventy-Nine (1,944,279) outstanding shares of
Wedco Common Stock and, subject to the matters disclosed in Section 4.02(a) of
the Wedco Disclosure Schedule, owns such shares free and clear of all
liabilities, obligations, claims, liens, pledges, security interests, options,
charges, encumbrances and interests of any third party of any nature
whatsoever. Except as set forth in Section 4.02(a) of the Wedco Disclosure
Schedule, there are no stockholder agreements, voting trusts or other
agreements or understandings to which Wedco is a party or is bound relating to
the voting or transfer of any of such shares. There are no outstanding
contractual or other obliga- tions of Wedco or any of Wedco's Subsidiaries to
purchase, redeem or otherwise acquire any shares of Wedco Common Stock.
(b) Section 4.02(b) of the Wedco Disclosure Schedule
lists all the Subsidiaries of Wedco and indicates the number and class of
shares of the capital stock (or other equity interest) of such Subsidiary
outstanding and the record holders or owners thereof, all as of the date of
this Agreement. Except as disclosed in Section 4.02(b) of the Wedco Disclosure
Schedule, all the outstanding shares (or other equity interests) of each of
Wedco's Subsidiaries are validly issued and are fully paid and non-assessable,
and are not subject to and were not issued in violation of any preemptive
rights. Except as disclosed in Section 4.02(b) of the Wedco Disclosure
Schedule, there are no options, warrants, calls, rights, subscriptions,
convertible securities or other rights or other agreements, arrangements or
commitments of any kind relating to the issued or unissued capital stock (or
other equity interest) or other securities of any Subsidiary of Wedco or
otherwise obligating Wedco or any Subsidiary of Wedco to issue, transfer or
sell any securities of (or other equity interest in) any such Subsidiary, or
any securities or other instruments convertible into or exchangeable or
exercisable for any securities of (or other equity interest in) any such
Subsidiary. Except as disclosed in Section 4.02(b) of the Wedco Disclosure
Schedule, the shares of (or other equity interests in) each of Wedco's
Subsidiaries are owned by the persons indicated in Section 4.02(b) of the Wedco
Disclosure Schedule free and clear of all liabilities, obligations, claims,
liens, pledges, security interests, options, charges, encumbranc-
<PAGE> 82
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es and interests of any third party of any nature whatsoever. Except as
disclosed in Section 4.02(b) of the Wedco Disclosure Schedule, there are no
stockholder agreements, voting trusts or other agreements or understandings
relating to the voting or transfer of any shares (or other equity interests)
held by Wedco, or by any other person, with respect to any Subsidiary of Wedco.
Except as disclosed in Section 4.02(b) of the Wedco Disclosure Schedule, there
are no outstanding contractual or other obligations of Wedco or any of Wedco's
Subsidiaries to purchase, redeem or otherwise acquire any shares of (or other
equity interest in) any Subsidiary of Wedco.
(c) None of Wedco or any of its Subsidiaries has any
equity investment in any corporation, association, partnership, joint venture
or other entity, other than the Subsidiaries identified in Section 4.02(b) of
the Wedco Disclosure Schedule and the joint ventures identified in Section 4.16
of this Agreement or in Section 4.16 of the Wedco Disclosure Schedule.
(d) It is acknowledged that there is a loan from Wedco to
T.D.T. Inc. (the "TDT Loan") and that William E. Willoughby and Peggy S.
Willoughby, his wife, are securing that loan with shares of Wedco Common Stock.
It is understood that, at Closing, the Wedco Common Stock will be released for
exchange and William E. Willoughby and Peggy S. Willoughby will secure the TDT
Loan by pledging shares of ICO Common Stock having a value of 1.5 times the
remaining unpaid principal balance of the TDT Loan. In the event, on the end
of a given quarter, the value of the pledged ICO Common Stock shall exceed 1.5
times the remaining unpaid principal balance of the TDT loan, then, upon their
written request, the excess shares shall be released to William E. Willoughby
and Peggy S. Willoughby. In the event on said date, the value of the pledged
ICO Common Stock does not equal or exceed 1.5 times the remaining unpaid
principal balance of the TDT Loan, then, upon the written request of ICO, the
number of pledged shares of ICO Common Stock will be increased by William E.
Willoughby and Peggy S. Willoughby to equal 1.5 times the remaining unpaid
principal balance of the TDT loan.
Section 4.3 Authority Relative to this Agreement.
Wedco has the corporate power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery by Wedco of this Agreement and the consummation by Wedco
of the transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of Wedco. The Board of Directors of Wedco has
directed that this Agreement be submitted to the stockholders of Wedco for
approval at a meeting of such stockholders and, except for such approval, no
other corporate proceedings on the part of Wedco are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. The
authorizations by the Wedco Shareholder Group set forth in and contemplated by
the Wedco Shareholder
<PAGE> 83
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Group Agreement are subject to the registration by ICO under the Securities Act
of the ICO Common Stock included in the Merger Consideration. This Agreement
has been duly executed and delivered by Wedco and, assuming the due
authorization, execution and delivery of this Agreement by ICO, constitutes a
legal, valid and binding agreement of Wedco, enforceable against Wedco in
accordance with its terms.
Section 4.4 Consents and Approvals; No Violation.
Except, in the case of clauses (ii) through (iv) below, as set
forth in Section 4.04 of the Wedco Disclosure Schedule and for such failures to
obtain consents, approvals, authorizations or permits for, or make filings with
or notifications to, or such violations, conflicts, breaches, defaults,
terminations, accelerations and rights of termination, cancellation, amendment
or acceleration which, individually or in the aggregate, would not have a
material adverse effect on the business, operations or financial condition of
Wedco and its Subsidiaries, taken as a whole, none of the execution and
delivery of this Agreement by Wedco, the consummation by Wedco of the
transactions contemplated hereby, or compliance by Wedco with any of the
provisions hereof will: (i) conflict with or result in a breach of any
provision of the charter or bylaws (or other organizational or governing
documents) of Wedco or any of Wedco's active domestic or alien Subsidiary
corporations (and other business entities); (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) pursuant to the Exchange Act, the
Securities Act, the securities or "blue sky" laws of certain states and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) for filing a Certificate of Merger pursuant to the New Jersey Law,
(C) pursuant to New Jersey environmental laws, including the Industrial Site
Recovery Act, and (D) as set forth in Section 4.04 of the Wedco Disclosure
Schedule; (iii) violate or conflict with any judgment, order, writ, injunction,
decree, statute, rule or regulation applicable to Wedco or any active
Subsidiary of Wedco or any of their respective assets; or (iv) conflict with,
result in a breach of any provisions of, constitute a default (or an event
which with notice or lapse of time or both would become a default) under,
result in a termination of, accelerate the performance required by, give to any
third party any right of termination, cancellation, amendment or acceleration
under, or result in the creation of a lien, security interest, charge or other
encumbrance on any of the assets of Wedco or any of its active Subsidiary
corporations (or other business entities) pursuant to any note, bond, mortgage,
indenture, license, lease, agreement or other instrument or obligation to which
Wedco or any of its active Subsidiaries is a party or by which Wedco or any of
its active Subsidiaries or any of their respective assets may be bound or
affected.
<PAGE> 84
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Section 4.5 SEC Filings; Financial Statements.
(a) Since January 1, 1991, Wedco has filed with the SEC
all forms, reports and documents required to be filed with the Commission by it
(collectively, the "Wedco SEC Reports"), all of which were prepared in
compliance in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder. None of the Wedco SEC Reports, including, without limitation, any
financial statements or schedules included therein, at the time filed,
contained any untrue statement of a material fact with respect to Wedco or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements made therein with respect to Wedco, in light of
the circumstances under which they were made, not misleading.
(b) Wedco has heretofore provided to ICO a consolidated
balance sheet of Wedco and its Subsidiaries as at March 31, 1995 (including the
notes, schedules and other attachments thereto, the "Wedco Balance Sheet," a
copy of which being delivered with the Wedco Disclosure Schedule) and
consolidated statements of income and statements of cash flow for the years
ended March 31, 1993, March 31, 1994 and March 31, 1995, and for the six-month
period ended September 30, 1995 (including the notes, schedules and other
attachments thereto) (collectively with the Wedco Balance Sheet, the "Wedco
Financial Statements"), all of which, other than the consolidated income
statement, balance sheet and statement of cash flow for the period ended
September 30, 1995, have been audited by Coopers & Lybrand. The Wedco
Financial Statements have been prepared in conformity with generally accepted
accounting principles, applied on a consistent basis during the periods
involved (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments), and each presents fairly either the consolidated
financial position of Wedco and its Subsidiaries as of its date, or the
consolidated results of operations and changes in consolidated financial
position of Wedco and its Subsidiaries for the periods presented therein, as
the case may be. Except as and to the extent set forth on the Wedco Balance
Sheet or in Section 4.05(b) of the Wedco Disclosure Schedule, none of Wedco or
any of its Subsidiaries has any liabilities or obligations (whether absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise and whether
due or to become due), except for liabilities and obligations incurred since
the date of the Wedco Balance Sheet in the ordinary course of business,
consistent with past practices, that are not, in the aggregate, material to
Wedco and its Subsidiaries, taken as a whole.
(c) Wedco has heretofore furnished to ICO a complete and
correct copy of all amendments and modifications, which have not yet been filed
with the Commission, to all agreements, documents and other instruments which
had previously been filed by Wedco with the Commission since January 1, 1991.
<PAGE> 85
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(d) Wedco has heretofore furnished to ICO financial
statements as of March 31, 1995 pertaining to each of its Subsidiaries. These
financial statements fairly present the financial positions of such
Subsidiaries as of the respective dates of the financial statements and the
results of operations and changes in the financial positions of such
Subsidiaries. Except as set forth on such financial statements, Wedco is
subject to no further capital call or other funding requirement with respect to
any of its Subsidiaries.
Section 4.6 Absence of Certain Changes and Events.
Except as disclosed prior to the execution hereof in the Wedco
SEC Reports or as disclosed in Section 4.06 of the Wedco Disclosure Schedule,
since March 31, 1995: (i) there has not occurred or arisen any event having a
material adverse effect on, and there has not been any material adverse change
in the business, operations or financial condition of Wedco, its Subsidiaries
and, to Wedco's knowledge without further investigation, the Wedco Joint
Ventures taken as a whole and, to Wedco's knowledge, no fact or condition
exists which could reasonably be expected to cause such a material adverse
change; (ii) Wedco and each of its active Subsidiaries has conducted its
business only in the ordinary course, consistent with past practices; and (iii)
none of Wedco or any of its active Subsidiaries has taken any of the actions
described in Section 6.1(e) through (p) hereof.
Section 4.7 Litigation.
Except as may have been disclosed prior to the execution
hereof in the Wedco SEC Reports or as disclosed in Section 4.07 of the Wedco
Disclosure Schedule, there are no claims, actions, suits, proceedings,
arbitrations or investigations pending or, to Wedco's knowledge, threatened,
against or affecting Wedco or any of its Subsidiaries or, to Wedco's knowledge
without further investigation, any of the Wedco Joint Ventures or any
properties or rights of any of them before any court, arbitrator,
administrative, governmental or regulatory body, which, if determined adversely
to Wedco or any of its Subsidiaries or any of the Wedco Joint Ventures, would
have a material adverse effect on the business, operations or financial
condition of Wedco, its Subsidiaries and the Wedco Joint Ventures, taken as a
whole, or would adversely affect any action taken or to be taken by Wedco under
this Agreement, or which seeks to enjoin, or otherwise prevent, the
consummation of any of the transactions contemplated by this Agreement or to
recover any damages or to obtain any other relief as a result of this Agreement
or the transactions contemplated hereby, nor is there any judgment, decree,
injunction, rule or order of any court, arbitrator, administrative,
governmental or regulatory body outstanding against Wedco or any of its
Subsidiaries or, to Wedco's knowledge without further investigation, any of the
Wedco Joint Ventures having, or which would be reasonably likely to have, any
such effect.
<PAGE> 86
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Section 4.8 Employee Benefit Plans.
(a) As used in this Agreement:
(i) "Benefit Plan" means with respect to any
person, any ERISA Plan or any other plan, agreement, trust or program for any
bonus, severance, hospitalization, vacation, deferred compensation, severance,
pension or profit-sharing, retirement, payroll savings, stock option, group
insurance, death benefit, fringe benefit, welfare or any other employee benefit
plan or fringe benefit arrangement of any nature whatsoever, including those
benefitting former employees, maintained by such person and/or any of its
Subsidiaries (currently or at any time within the last three (3) years) or any
of their affiliates or to which such person and/or any of its Subsidiaries (or
any of their affiliates) has contributed or has been obligated to contribute
within the last three (3) years.
(ii) "ERISA" means the Employee Retirement Income
Security Act of 1974 and the regulations issued thereunder.
(iii) "ERISA Plan" means with respect to any
person, any employee benefit plan within the meaning of Section 3(3) of ERISA
maintained by such person and/or any of its Subsidiaries (currently or at any
time within the last three (3) years) or any of their affiliates or to which
such person and/or any of its Subsidiaries (or any of their affiliates) has
contributed or has been obligated to contribute within the last three (3)
years.
(iv) "Qualified Plan" means with respect to any
person, any employee pension benefit plan as defined in Section 3(2) of ERISA
which is intended to meet the qualification requirements under Section 401 of
the Internal Revenue Code ("Code") or for which the tax benefits or treatment
applicable to qualified plans under the Code has ever been claimed and which is
or has been maintained by such person and/or any of its Subsidiaries (currently
or at any time within the last three (3) years) or any of their affiliates or
to which such person and/or any of its Subsidiaries (or any of their
affiliates) has contributed or has been obligated to contribute within the last
three (3) years.
(b) Set forth beneath its name on Section 4.08 of the
Wedco Disclosure Schedule is a complete and accurate list of Wedco's and its
Subsidiaries' Benefit Plans, including all Benefit Plans governed or mandated
by non- United States law. A complete and correct copy of each of the Benefit
Plans and of any related trust agreements, insurance or annuity contracts,
valuations, and other funding agreements for each Benefit Plan has been
delivered to ICO.
(c) All of Wedco's and its Subsidiaries' ERISA Plans are
listed in Part I of Section 4.08 of the Wedco Disclosure Schedule. All of
Wedco's and its Subsidiaries'
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Benefit Plans that are not ERISA Plans, if any, are listed in Part II of
Section 4.08 of the Wedco Disclosure Schedule. Section 4.08 of the Wedco
Disclosure Schedule includes a listing of all expected annual contributions to
the Qualified Plans and ERISA Plans. Neither Wedco nor any of its Subsidiaries
maintains nor has maintained in the past any defined benefit pension plan, and
is not and has not been a party to any agreement requiring it to contribute to
a multi- employer plan within the meaning of Section 3(37) of ERISA except as
disclosed in Section 4.08 of the Wedco Disclosure Schedule. There are not
unfunded vested benefits under any Qualified Plan which is subject to the
vesting and funding standards of ERISA and no unfunded liabilities for all
benefits accrued through the date of the last actuarial valuation of such Plan
(calculated on the basis of the Plan's normal funding assumptions on such
valuation). Wedco and its Subsidiaries have operated in good faith compliance
with a reasonable interpretation of the continuation coverage requirements of
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Other
than claims for benefits in the ordinary course, there are no pending claims
involving the ERISA Plans or Qualified Plans by any participant covered under
the ERISA Plans or Qualified Plans or otherwise involving the ERISA Plans or
Qualified Plans which allege a breach of fiduciary duties or violation of the
applicable state or federal law which may result in material liability on the
part of ICO or any Qualified Plan or ERISA Plan under ERISA or any other law,
nor is there any reasonable basis for such a claim.
(d) To the knowledge of Wedco, none of the ERISA Plans or
Qualified Plans or any of their related trusts, or Wedco or any trustee,
administrator or other "party in interest" or "disqualified person" (within the
meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code,
respectively) with respect to the ERISA Plans or Qualified Plans, has engaged
in any "prohibited transaction" (within the meaning of Section 406 of ERISA or
Section 4975(c) of the Code), which could subject any of the ERISA Plans or
Qualified Plans or related trusts, or any trustee, administrator or other
fiduciary of any ERISA Plan or Qualified Plan, or Surviving Corporation or any
other party dealing with the ERISA Plans or Qualified Plans, to the penalties
or excise tax imposed on prohibited transactions by Section 502(i) of ERISA or
Section 4975 of the Code.
(e) All of Wedco's or its Subsidiaries' Qualified Plans
are listed in Part III of Section 4.08 of the Wedco Disclosure Schedule. In
the reasonable belief of Wedco, each of the Qualified Plans meets the
requirements of Section 401(a) of the Code, and the trust, if any, forming a
part of each Qualified Plan is exempt from federal income tax under Section
501(a) of the Code. A favorable determination letter has been issued by the
Internal Revenue Service within the past ten (10) years as to the qualification
under Section 401(a) of the Code (including, but not limited to, amendments
made by ERISA), with respect to each Qualified Plan, and Wedco has delivered to
ICO true and correct copies of all such determination letters. None of the
determination letters has been revoked or modified by the Internal Revenue
Service.
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(f) All contributions required by law or required in
accordance with the terms of the Qualified Plans to have been made prior to the
Closing will have been made.
(g) Except pursuant to the Benefit Plans listed on
Section 4.08 of the Wedco Disclosure Schedule and under COBRA, Wedco and its
Subsidiaries do not have any present or future liability to former employees or
to their dependents, survivors or beneficiaries in connection with or arising
out of any plan, compensation arrangement or practice which Wedco and its
Subsidiaries contributed prior to the date hereof, and Wedco and its
Subsidiaries have not maintained, adopted or contributed to any plan that
provides benefits or payments to former employees or their dependents,
survivors or beneficiaries, except pursuant to the Benefit Plans listed on
Section 4.08 of the Wedco Disclosure Schedule and under COBRA.
(h) Wedco and its Subsidiaries have satisfied in all
material respects all reporting and disclosure requirements applicable under
ERISA, and the Department of Labor and Internal Revenue Service and Pension
Benefit Guaranty Corporation regulations promulgated thereunder, with respect
to all ERISA Plans and Qualified Plans, and Wedco has delivered to ICO a true
and complete copy of the most recently filed and disclosed Forms 5500, Forms
5500-C/R (with exhibits), and summary plan descriptions and summaries of
material modification for the ERISA Plans and Qualified Plans. In the event
that a Form 5500 for any of Wedco's or its Subsidiaries' Qualified Plans and
ERISA Plans for the 1994 plan year has not been filed prior to the Effective
Time, a proper extension will be filed if necessary.
(i) No Qualified Plan has had any "unrelated business
taxable income" as defined in Sections 512 through 514 of the Code. There have
been no claims, or notice of claims, filed under any fiduciary liability
insurance policy covering any Benefit Plan. With respect to any Qualified Plan
that has been terminated, it was terminated in compliance with the requirements
of the Code and ERISA and the liabilities to such Qualified Plan were fully
satisfied.
(j) The Trustees of each of the Qualified Plans have
completed their required annual accountings for the plan years ended on or
before March 31, 1993, such accountings accurately reflect the financial
positions of the Qualified Plans as of their respective date, and true and
complete copies of the Trustees' reports or schedules of such accountings have
been delivered to ICO.
Section 4.9 Labor Relations.
Except as disclosed in Section 4.09 of the Wedco Disclosure
Schedule: (a) none of Wedco or any of its Subsidiaries is in violation of any
applicable laws respecting
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employment and employment practices, terms and conditions of employment, wages
and hours, nor is Wedco or any of its Subsidiaries engaged in any unfair labor
practice, except where such violations and unfair labor practices, individually
or in the aggregate, would not have a material adverse effect on the business,
operations or financial condition of Wedco and its Subsidiaries, taken as a
whole; (b) there is no unfair labor practice charge or complaint against Wedco
or any of its Subsidiaries pending before the National Labor Relations Board or
the comparable authority in any non-United States jurisdiction, nor is there
any arbitration proceeding arising out of or under any Wedco Labor Agreement
(as hereinafter defined) pending against Wedco or any of its Subsidiaries, and,
to the knowledge of Wedco, no claim therefor exists or is threatened; (c) no
charges are pending before the Equal Employment Opportunity Commission or any
state, local or foreign agency responsible for the prevention of unlawful
employment practices; and (d) none of Wedco or any of its Subsidiaries has
received notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation of or relating to Wedco or any of its Subsidiaries and, to the
knowledge of Wedco, no such investigation is in progress. Except as disclosed
in Section 4.09 of the Wedco Disclosure Schedule and except where the failure
to obtain such consent or consents, individually or in the aggregate, would not
have a material adverse effect on the business, operations or financial
conditions of Wedco and its Subsidiaries, taken as a whole, no consent of any
labor organization or other person is required pursuant to any of the Wedco
Labor Agreements for the execution of this Agreement or the consummation of the
transactions contemplated hereby. As used herein, the term "Wedco Labor
Agreements" means all collective bargaining agreements (including agreements
governed by non-United States law), individual employment agreements and
written personnel policies applicable to any of the employees of Wedco or any
of its Subsidiaries.
Section 4.10 Material Contracts.
Section 4.10 of the Wedco Disclosure Schedule sets forth a
list of all lease agreements, loan agreements, promissory notes, guarantees,
mortgages, security and pledge agreements; all Wedco Labor Agreements; all
agreements which resulted in annual gross revenues to Wedco and its
Subsidiaries, or required annual payment by Wedco or any of its Subsidiaries of
at least One Hundred Thousand Dollars ($100,000); and any other agreements
material to the business, operations or financial condition of Wedco and its
Subsidiaries, taken as a whole, to which Wedco or any of its Subsidiaries is a
party or to or by which any of their respective assets is subject or bound.
Except as set forth in Section 4.10 of the Wedco Disclosure Schedule or
reserved for in the Wedco Financial Statements, each of such agreements is in
full force and effect and is valid, binding and enforceable, and none of Wedco,
its Subsidiaries or, to the knowledge of Wedco, any other party thereto, is in
breach or default (and, to the knowledge of Wedco, no event has occurred which,
with the giving of notice or passage of time or both would become a breach or
default) under,
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or has received notice of a default under, any such agreement, nor is Wedco or
any of its Subsidiaries in any material dispute with any third party under any
such agreement.
Section 4.11 Taxes.
(a) For purposes of this Agreement, (i) "Taxes" shall
mean all taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign; and (ii) "Tax Return" shall mean any return, report,
information return or other document (including any related or supporting
information) filed or required to be filed with any governmental entity or
other authority in connection with the determination, assessment or collection
of any Tax (whether or not such Tax is imposed on the entity filing, or
required to file, such return) or the administration of any laws, regulations
or administrative requirements relating to any Tax.
(b) Each of Wedco and Wedco's Subsidiaries and
affiliates, and any affiliated, combined or unitary group of which any such
corporation (or other business entity) is or was a member, as the case may be
(individually, an "Affiliate" of Wedco and, collectively, Wedco's "Affiliates")
has: (i) prepared and timely filed all Tax Returns (as hereinafter defined)
(A) the non-filing of which would have a material adverse effect on Wedco and
its Subsidiaries, taken as a whole, and (B) which are required to be filed by
or with respect to, or which include the income or operations of, Wedco or any
Wedco Subsidiary, in respect of any Taxes (as hereinafter defined); (ii) timely
and properly paid all Taxes that are shown to be due on such Tax Returns or are
otherwise due and payable; (iii) established on its books and records reserves
that are in all material respects adequate for the payment of all Taxes not yet
due and payable; and (iv) complied in all respects with all applicable laws,
rules and regulations the non-compliance with which would have a material
adverse effect on Wedco and its Subsidiaries, taken as a whole, relating to the
payment and withholding of Taxes and has timely and properly withheld from
individual employee wages and paid over to the proper governmental authorities
or deposited as required by law all amounts required to be so withheld and paid
over or deposited under all applicable laws.
(c) All Tax Returns filed by or with respect to, or which
include the income or operations of, Wedco or any Wedco Subsidiary, were, to
the extent applicable to Wedco or any Wedco Subsidiary, true, complete and
correct in all material respects when filed.
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(d) There are no liens for Taxes upon the assets of Wedco
or any of its Subsidiaries except liens for Taxes not yet due.
(e) The statute of limitations for the assessment of
federal income taxes has expired for all consolidated federal income tax
returns which include Wedco or any Subsidiary of Wedco, or such returns have
been examined by the Internal Revenue Service ("IRS"), for all periods through
March 31, 1990. Except as set forth in Section 4.11 of the Wedco Disclosure
Schedule, there are no outstanding waivers or comparable consents given by or
with respect to, or with respect to any Tax Return which includes the income or
operations of, Wedco or any Wedco Subsidiary regarding the application of the
statute of limitations with respect to any federal income Taxes or federal
income Tax Returns. Except as set forth in Section 4.11 of the Wedco
Disclosure Schedule, no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of or with respect to, or which include the
income or operations of, Wedco or any Wedco Subsidiary.
Section 4.12 Compliance with Applicable Law.
Each of Wedco and its active Subsidiaries holds all material
licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business under and pursuant to all, and has complied with and is
not in default in any respect under any, applicable law, statute, order, rule,
regulation, policy or guideline of any federal, state or local governmental
authority relating to Wedco or any of its Subsidiaries (other than where such
default or noncompliance would not result in a material limitation on the
conduct of the business of Wedco or any of its active Subsidiaries, or not
cause Wedco or any of its Subsidiaries to incur a material financial penalty,
or would not be likely otherwise to have a material adverse effect on the
business, operations or financial condition of Wedco and its Subsidiaries,
taken as a whole) and none of Wedco or any of its Subsidiaries has received
written notice of violation of, or knows of any violation of, any of the above.
Section 4.13 Fees and Commissions.
Except as disclosed on Section 4.13 of the Wedco Disclosure
Schedule, none of Wedco or any of Wedco's Subsidiaries or any of their
respective officers, directors, or employees has employed any broker, finder,
investment banker, consultant, financial or legal advisor or, incurred any
liability for any brokerage, finders' or other fees or commissions in
connection with the transactions contemplated by this Agreement.
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Section 4.14 Insurance.
Section 4.14 of the Wedco Disclosure Schedule sets forth a
complete and accurate list of all insurance policies maintained by Wedco and
its Subsidiaries, identifying in each case: (i) the name of the insurance
company; (ii) the nature and limits of the coverage; (iii) the annual premiums
paid thereunder; and (iv) the coverage period applicable thereto. All such
insurance policies are in full force and effect and provide for coverages which
are usual and customary in the business of Wedco and its Subsidiaries as to
amount and scope. Each of Wedco and Wedco's Subsidiaries has properly paid or
will properly pay all premiums due under such policies of insurance on or prior
to the Effective Time. None of Wedco or its Subsidiaries is aware of any
coverage dispute or claim under or relating to any of such policies.
Section 4.15 Environmental Matters.
(a) As defined herein:
(i) "Release" shall mean any exposure to past or
current spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing, abandonment, or any other
release, however defined, whether intentional or unintentional, of any
Hazardous Substances into the environment in violation of applicable
Environmental Laws, or which otherwise gives rise to any liability under any
Environmental Laws, and includes any suspected or threatened Release;
(ii) "Environmental Laws" shall mean all foreign,
federal, state and local laws, statutes, codes, ordinances, regulations, rules,
policies, consent decrees, judicial or administrative orders, permits,
approvals, or other requirements relating to the protection of human health or
the environment, all as amended or modified from time to time, including
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Solid
Waste Disposal Act, as amended (42 U.S.C. Section 6901 et seq.), the Hazardous
Waste Materials Transportation Act, as amended (49 U.S.C. Section 1801 et
seq.), the Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.), the
Federal Water Pollution Control Act, as amended 33 U.S.C. Section 1251, et
seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et
seq.), the Safe Drinking Water Act, as amended (42 U.S.C. Section 300f et
seq.), the Atomic Energy Act, as amended (42 U.S.C. Section 2014 et seq.), the
Federal Insecticide Fungicide and Rodenticide Act, as amended (7 U.S.C. Section
136, et seq.), the Oil Pollution Act of 1990, as amended (33 U.S.C. Section
2701, et seq.), the Emergency Planning and Community Right-to-Know Act of 1986,
as amended (42 U.S.C. Section 11001, et seq.), the Occupational Safety and
Health Act, as amended (29 U.S.C. Section 651 et seq.), and the regulations
adopted and publications promulgated pursuant
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thereto, and shall also include any common law theory based on nuisance,
trespass, negligence or other tortious conduct;
(iii) "Hazardous Substances" shall mean any and all
hazardous and toxic substances, wastes or materials, any pollutants,
contaminants, or dangerous materials (including, but not limited to,
polychlorinated biphenyls, friable asbestos, volatile and semi-volatile organic
compounds, oils, petroleum products and fractions, and any materials which
include hazardous constituents or become hazardous, toxic, or dangerous when
their composition or state is changed), or any other similar substances or
materials which are included under or regulated by any Envi- ronmental Laws;
(iv) "Contamination" shall mean the presence of,
or Release on, under, from, or to any real property, of any Hazardous Substance
in the environment. Contamination does not include a Release which occurred
during the routine storage, use or sale of Hazardous Substances from time to
time in the ordinary course of business, in compliance with Environmental Laws,
in compliance with good commercial practice and which does not otherwise give
rise to any liability under any Environmental Laws;
(v) "Regulatory Action" shall mean any formal and
adverse claim, demand, action or proceeding brought, prosecuted or instigated
by any governmental authority in connection with any Environmental Laws
(including without limitation civil, criminal and/or administrative
proceedings), whether or not seeking costs, damages, penalties or expenses; and
(vi) "Third Party Claim" shall mean third party
claims, actions, demands or proceedings based on any violation of or liability
under any Environmental Laws, or based on negligence, trespass, strict
liability, nuisance, toxic tort or detriment to human health, safety or welfare
due to any Release of Hazardous Substances or Contamination, and whether or not
seeking costs, damages, penalties or expenses.
(b) Except as disclosed on Section 4.15 of the Wedco
Disclosure Schedule, to Wedco's knowledge, no third party claims and/or
regulatory actions have been asserted or assessed against Wedco, any Wedco
Subsidiary or any of their real property and, to Wedco's knowledge, no third
party claims and/or regulatory actions are pending or threatened against Wedco,
any Wedco Subsidiary or any of their real property, arising out of or due to,
or allegedly arising out of or due to, (i) the Release on, under or from the
real property of any Hazardous Substances; (ii) any contamination of the real
property, including without limitation, the presence of any Hazardous Substance
which has come to be located on or under the real property from another
location; (iii) any material violation or alleged violation of any
Environmental Laws with respect to the real property or Wedco's or any Wedco
Subsidiary's business operations; (iv) any injury to human health or safety or
to the
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environment by reason of the past or present condition of, or past or present
activities on or under, the real property; or (v) the generation, manufacture,
storage, treatment, handling, transportation or other use, however defined, of
any Hazardous Substance on the real property; and, as a result of any such
conditions, whether individually or in the aggregate, there has been a material
adverse change in the business, operations or financial condition of Wedco and
its Subsidiaries, taken as a whole; (any acts, omissions, circumstances, status
or condition described in or contemplated by clauses (i) through (v) of this
Section 4.15(b) are hereinafter referred to collectively as an "Environmental
Condition").
(c) Except as disclosed on Section 4.15 of the Wedco
Disclosure Schedule, to Wedco's knowledge, Wedco's and its Subsidiaries'
storage, transportation, handling, use or disposal, if any, of Hazardous
Substances on or under the real property or Hazardous Substances generated on
or from the real property is currently, and at all times has been, in
compliance in all material respects with all applicable Environmental Laws.
(d) To Wedco's knowledge, Wedco has delivered to or has
caused to be delivered to ICO, prior to the execution and delivery of this
Agreement, complete copies of any and all documents relating to compliance by
Wedco and its Subsidiaries with Environmental Laws or to Environmental
Conditions.
(e) Except as disclosed on Section 4.15 of the Wedco
Disclosure Schedule, to Wedco's knowledge: (i) none of Wedco or any Wedco
Subsidiary has transported or arranged for the transportation of any Hazardous
Substances to any location which is listed on the EPA's National Priorities
List of Hazardous Substance Sites (the "National Priorities List"), or (ii)
none of Wedco or any Wedco Subsidiary has been identified as a potentially
responsible party at any site proposed for inclusion on the National Priorities
List, CERCLIS or any similar state list.
(f) Except as disclosed on Section 4.15 of the Wedco
Disclosure Schedule and except where the occurrence of such events, whether
individually or in the aggregate, would result in a material adverse change in
the business, operations or financial condition of Wedco and its Subsidiaries,
taken as a whole, to Wedco's knowledge:
(i) None of Wedco's or its Subsidiaries' real
property is listed in the National Priorities List or any other list maintained
by any federal, state or local governmental agency with respect to sites from
which there is or has been a Release of any Hazardous Substance or any
Contamination.
(ii) No part of Wedco's or its Subsidiaries' real
property is now being used (A) as a landfill, dump or other disposal, storage,
transfer or handling area for Hazardous Substances, excepting, however, for the
routine storage, use and sale of
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Hazardous Substances from time to time in the ordinary course of business, in
compliance with Environmental Laws; (B) for military purposes; or (C) as a
gasoline service station or a similar facility for selling, dispensing,
storing, transferring or handling petroleum and/or petroleum products.
(iii) There are no underground or aboveground
storage tanks (whether or not currently in use), polychlorinated biphenyls
(PCBs) or nuclear fuels or wastes, located on or under Wedco's or its
Subsidiaries' real property.
(iv) There is no ongoing Release of any Hazardous
Substance on, under or from Wedco's or its Subsidiaries' real property.
(v) There is not now present any Contamination of
Wedco's or its Subsidiaries' real property caused by Wedco or its Subsidiaries.
(vi) Wedco's or its Subsidiaries' real property
and the ownership, use and operation thereof, are currently and, at all times
during Wedco's or its Subsidiaries' ownership or operation thereof, have been
in material compliance with all applicable Environmental Laws.
(g) To Wedco's knowledge, there are no liens against
Wedco's or its Subsidiaries' real property arising under any Environmental
Laws, or based upon a Regulatory Action and/or Third Party Claim.
Section 4.16 Joint Ventures.
No reference to a Subsidiary of Wedco in any Section of this Article 4
shall be deemed to be a reference to either Wedco's Canadian joint venture,
WedTech, Inc., a Canadian corporation (the "Canadian Joint Venture"), or to
Wedco's French joint venture, Micronyl-Wedco, S.A. (the "French Joint
Venture"). Other than the Canadian Joint Venture and the French Joint Venture
or as set forth in Sections 4.02(b) or 4.16 of the Wedco Disclosure Schedule,
Wedco has no equity investment in any joint venture (whether the joint venture
is in the form of a partnership, corporation or other entity). True, complete
and correct copies of all joint venture organizational documents to which Wedco
or any of its Subsidiaries is a party, including (without limitation) the
organizational documents for the Canadian Joint Venture and the French Joint
Venture (collectively, the "Joint Venture Organizational Documents"), are
attached to Section 4.16 of the Wedco Disclosure Schedule. The Joint Venture
Organizational Documents are in full force and effect and Wedco or the Wedco
Subsidiary that is a party thereto is not in breach thereof. True, complete
and correct copies of any agreements or arrangements pursuant to which any
joint venture in which Wedco or any of its Subsidiaries is a joint venturer
(individually, a "Wedco
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Joint Venture"; collectively, the "Wedco Joint Ventures") is obligated to repay
borrowed money are attached to Section 4.16 of the Wedco Disclosure Schedule.
To Wedco's knowledge, financial statements of the Wedco Joint Ventures attached
to Section 4.16 of the Wedco Disclosure Schedule have been prepared in
conformity with generally accepted accounting principles, applied on a
consistent basis during the periods involved (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments), and each presents
fairly either the financial position of the applicable Wedco Joint Venture as
of its date, or the results of operations and changes in consolidated financial
position of the applicable Wedco Joint Venture for the periods presented
therein, as the case may be. Except as and to the extent set forth in the
above described financial statements or in Section 4.16 of the Wedco Disclosure
Schedule, to Wedco's knowledge, none of the Wedco Joint Ventures has any
liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due), other
than liabilities and obligations incurred since the date of the most recent
balance sheet included in the Wedco Joint Venture financial statements in the
ordinary course of business, consistent with past practices, that are not, in
the aggregate, material to that Wedco Joint Venture.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF ICO
ICO represents and warrants to Wedco as follows:
Section 5.1 Organization and Qualification; Active Subsidiaries.
(a) Each of ICO and each active domestic Subsidiary of
ICO is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and each has all
requisite corporate power and authority to own, lease or operate the properties
that it purports to own, lease or operate and to carry on its business as it is
now being conducted. Section 5.01(a) of the Disclosure Schedule which is being
delivered by ICO to Wedco herewith (the "ICO Disclosure Schedule") lists all
active domestic Subsidiaries of ICO. Each of ICO and each of its active
domestic Subsidiaries is duly qualified or licensed as a foreign corporation to
do business and is in good standing in each jurisdiction where the property
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which, when taken together with all
other such failures and all such failures of ICO's active alien Subsidiaries
referred to in Section 5.1(b) below, would not have a material adverse effect
on the business,
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operations or financial condition of ICO and its Subsidiaries, taken as a
whole. ICO has heretofore delivered to Wedco true and complete copies of its
Articles of Incorporation and By-laws, and the charter and by-laws of each of
its active domestic Subsidiaries as currently in effect. None of ICO nor any
of its active domestic Subsidiaries is in violation of any of the provisions of
its respective charter or by-laws.
(b) Each active alien Subsidiary corporation (or other
business entity) of ICO is a corporation (or other business entity) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (or other organization). Each active alien
Subsidiary of ICO has all requisite corporate (or other) power and authority to
own, lease or operate the properties that it purports to own, lease or operate
and to carry on its business as it is now being conducted. Section 5.01(b) of
the ICO Disclosure Schedule lists all active alien Subsidiary corporations (and
other business entities) of ICO. Each active alien Subsidiary corporation (or
other business entity) of ICO is duly qualified or licensed as a foreign or
alien corporation (or other business entity) to do business and is in good
standing in each jurisdiction where the property owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing which, when taken together with all other such failures and all
such failures of ICO's active domestic Subsidiaries referred to in Section
5.1(a) above, would not have a material adverse effect on the business,
operations or financial condition of ICO and its Subsidiaries, taken as a
whole. ICO has heretofore delivered to Wedco true and complete copies of the
charter and bylaws (or other organizational or governing documents) of each
active alien Subsidiary corporation (or other business entity) of ICO, as
currently in effect. None of the active alien Subsidiary corporations (or
other business entities) of ICO is in violation of any of the provisions of its
respective charter or bylaws (or other organizational or governing documents).
Section 5.2 Capitalization.
(a) The authorized capital stock of ICO consists of Fifty
Million (50,000,000) shares of ICO Common Stock and Five Hundred Thousand
(500,000) shares of Preferred Stock, no par value ("ICO Preferred Stock"). As
of the date hereof, there are (i) Three Hundred Twenty-Two Thousand Five
Hundred (322,500) shares of ICO Preferred Stock issued and outstanding, and
Eight Million Eight Hundred Eighty Three Thousand Nine Hundred Eleven
(8,883,911) shares of ICO Common Stock issued and outstanding as of September
30, 1995, all of which shares of ICO Common Stock are duly authorized, validly
issued, fully paid, non-assessable and are not subject to and were not issued
in violation of any preemptive rights; (ii) no shares of ICO Common Stock held
by ICO as treasury stock; and (iii) no shares of ICO Common Stock held by any
of ICO's Subsidiaries. Except as set forth in Section 5.02(a) of the ICO
Disclosure Schedule, there are no options, warrants, calls, rights,
subscriptions, convertible securities or other rights or other
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agreements, arrangements or commitments of any kind relating to the issued or
unissued capital stock of ICO to which ICO or any of its Subsidiaries is a
party or otherwise obligating ICO or any Subsidiary of ICO to issue, transfer
or sell any securities of ICO, or securities or other instruments convertible
into or exchangeable or exercisable for any securities of ICO. Except as set
forth in Section 5.02(a) of the ICO Disclosure Schedule, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which ICO is a party or is bound relating to the voting or transfer of any of
such shares. Except as set forth in Section 5.02(a) of the ICO Disclosure
Schedule, there are no outstanding contractual or other obligations of ICO or
any of ICO's Subsidiaries to purchase, redeem or otherwise acquire any shares
of ICO Common Stock.
(b) Section 5.02(b) of the ICO Disclosure Schedule lists
all the Subsidiaries of ICO and indicates the number and class of shares of the
capital stock of each such Subsidiary outstanding and the record holders
thereof, all as of the date of this Agreement. All the outstanding shares of
each of ICO's Subsidiaries have been validly issued and are fully paid and
non-assessable, are not subject to and were not issued in violation of any
preemptive rights. There are no options, warrants, calls, rights,
subscriptions, convertible securities or other rights or other agreements,
arrangements or commitments of any kind (other than this Agreement) relating to
the issued or unissued capital stock or other securities of any Subsidiary of
ICO or otherwise obligating ICO or any Subsidiary of ICO to issue, transfer or
sell any securities of any such Subsidiary, or any securities or other
instruments convertible into or exchangeable or exercisable for any securities
of any such Subsidiary. Except as contemplated by this Agreement, the shares
of each of ICO's Subsidiaries are owned by the persons indicated in Section
5.02(b) of the ICO Disclosure Schedule free and clear of all liabilities,
obligations, claims, liens, pledges, security interests, options, charges,
encumbrances and interests of any third party of any nature whatsoever. Except
as contemplated by this Agreement, there are no stockholder agreements, voting
trusts or other agreements or understandings relating to the voting transfer of
any shares of any Subsidiary of ICO. Except as contemplated by this Agreement,
there are no outstanding contractual or other obligations of ICO or any of
ICO's Subsidiaries to purchase, redeem or otherwise acquire any shares of any
Subsidiary of ICO.
(c) Except as set forth in Section 5.02(c) the ICO
Disclosure Schedule, none of ICO or any of its Subsidiaries has any equity
investment in any corporation, association, partnership, joint venture or other
entity. Attached to Section 5.02(c) of the ICO Disclosure Schedule are true
and complete copies of the charter, articles, by-laws, partnership or other
organizational documents to which ICO or any of its Subsidiaries are a party.
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Section 5.3 Authority Relative to this Agreement.
(a) ICO has the corporate power and authority to execute
and deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by ICO and the consummation by ICO of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of ICO. The Board of Directors of ICO has directed that
this Agreement be submitted to the stockholders of ICO for approval at a
meeting of such stockholders and, except for such approval, no other corporate
proceedings on the part of ICO are necessary to consummate the transactions
contemplated hereby. The authorization by the ICO Shareholder Group set forth
in and contemplated by the ICO Shareholder Group Agreement are subject to the
registration by ICO under the Securities Act of the ICO Common Stock included
in the Merger Consideration. This Agreement has been duly executed and
delivered by ICO and, assuming the due authorization, execution and delivery of
this Agreement by Wedco, constitutes a legal, valid and binding agreement of
ICO, enforceable against ICO in accordance with its terms.
(b) W Acquisition has the corporate power and authority
to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution and delivery by W Acquisition of this Agreement and
the consummation by W Acquisition of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of W Acquisition and
shall be duly and validly authorized by ICO as the sole stockholder of W
Acquisition, and no other corporate proceedings on the part of W Acquisition
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby.
Section 5.4 Consents and Approvals; No Violation.
Except, in the case of clauses 5.4(b) through 5.4(d) below, as
set forth in Section 5.04 of the ICO Disclosure Schedule, and for such failure
to obtain consents, approvals, authorizations or permits for, or make filings
with or notifications to, or such violations, conflicts, breaches, defaults,
terminations, accelerations and rights of termination, cancellation, amendment
or acceleration which, individually or in the aggregate, would not have a
material adverse effect on the business, operations or financial condition of
ICO and its Subsidiaries, taken as a whole, none of the execution and delivery
of this Agreement by ICO, the consummation by ICO of the transactions
contemplated hereby or compliance by ICO or any of its Subsidiaries with any of
the provisions hereof will: (a) conflict with or result in a breach of any
provision of the charter or by-laws of ICO or any Subsidiary of ICO; (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (i) pursuant
to the Exchange Act, the Securities Act, the securities or "blue sky" laws of
certain states and the
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HSR Act, and (ii) for filing a certificate of merger under the New Jersey Law;
(c) violate or conflict with any judgment, order, writ, injunction, decree,
statute, rule or regulation applicable to ICO or any of its Subsidiaries or any
of their respective assets; or (d) conflict with, result in a breach of any
provisions of, constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in a termination of,
accelerate the performance required by, give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a lien, security interest, charge or other encumbrance on any of
the assets of ICO or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, license, lease, agreement or other instrument or
obligation to which ICO or any of its Subsidiaries is a party or by which ICO
or any of its Subsidiaries or any of their respective assets may be bound or
affected.
Section 5.5 SEC Filings; Financial Statements.
(a) Since January 1, 1991, ICO has filed with the SEC all
forms, reports and documents required to be filed with the SEC by it
(collectively, the "ICO SEC Reports"), all of which were prepared in compliance
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act and the rules and regulations promulgated thereunder.
None of the ICO SEC Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated balance sheet of ICO and its
Subsidiaries as of September 30, 1995 (including the notes, schedules and other
attachments thereto, the "ICO Balance Sheet"), and the consolidated statements
of income and statement of cash flow for the years ended September 30, 1995 and
September 30, 1994 (including the notes, schedules and other attachments
thereto) of ICO included in the Form 10-K filed by ICO with the Commission for
the fiscal years ended September 30, 1995 and September 30, 1994, as the case
may be, has been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved, except as
otherwise noted therein (subject, in the case of unaudited interim statements,
to normal year-end audit adjustments), and each presents fairly either the
consolidated financial position of ICO and its Subsidiaries as of its date, or
the consolidated results of operations and changes in consolidated financial
position of ICO and its Subsidiaries for the periods presented therein, as the
case may be. Except as and to the extent set forth on the ICO Balance Sheet,
none of ICO or any of its Subsidiaries has any liabilities or obligations
(whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due), except for liabilities and
obligations incurred since the date of the ICO Balance Sheet in the
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ordinary course of business, consistent with past practices, that are not, in
the aggregate, material to ICO and its Subsidiaries taken as a whole.
(c) ICO has heretofore furnished to Wedco a complete and
correct copy of all amendments and modifications, which have not yet been filed
with the Commission, to all agreements, documents and other instruments which
had previously been filed by ICO with the Commission.
Section 5.6 Absence of Certain Changes and Events.
Except as disclosed prior to the execution hereof in the ICO
SEC Reports or in Section 5.06 of the ICO Disclosure Schedule, since September
30, 1994, (a) there has not occurred or arisen any event having a material
adverse effect on, and there has not been any material adverse change in the
business, operations or financial condition of ICO and its Subsidiaries, taken
as a whole, and, to the knowledge of ICO, no fact or condition exists which
could reasonably be expected to cause such a material adverse change; (b) ICO
and each of its Subsidiaries has conducted its business only in the ordinary
course, consistent with past practices; and (c) none of ICO or any of its
Subsidiaries has taken any of the actions described in clauses (e) through (o)
of Article 6 hereof.
Section 5.7 Litigation.
Except as may have been disclosed prior to the execution
hereof in the ICO SEC Reports or in Section 5.07 of the ICO Disclosure
Schedule, there are no claims, actions, suits, proceedings, arbitrations or
investigations pending or, to the knowledge of ICO, threatened, against or
affecting ICO or any of its Subsidiaries or, to ICO's knowledge without further
investigation, any joint venture in which ICO or any of its Subsidiaries is a
joint venturer (individually, an "ICO Joint Venture;" collectively, the "ICO
Joint Ventures") or any properties or rights of any of them before any court,
arbitrator, administrative, governmental or regulatory body, which, if
determined adversely to ICO or any of its Subsidiaries, or any of the ICO Joint
Ventures, would have a material adverse effect on the business, operations or
financial condition of ICO, its Subsidiaries and the ICO Joint Ventures, taken
as a whole, or would adversely affect any action taken or to be taken by ICO
under this Agreement, or which seeks to enjoin, or otherwise prevent, the
consummation of any of the transactions contemplated by this Agreement or to
recover any damages or to obtain any other relief as a result of this Agreement
or the transactions contemplated hereby, nor is there any judgment, decree,
injunction, rule ororder of any court, arbitrator, administrative, governmental
or regulatory body outstanding against ICO or any of its Subsidiaries or, to
ICO's knowledge without further investigation, any of the ICO Joint Ventures
having, or which would be reasonably likely to have, any such effect.
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Section 5.8 Employee Benefit Plans.
(a) The definitions set forth in Section 4.8(a) hereof
shall apply to this Section 5.8.
(b) Set forth beneath its name in Section 5.08 of the ICO
Disclosure Schedule is a complete and accurate list of ICO's and its
Subsidiaries' Benefit Plans, including all Benefit Plans governed or mandated
by non-United States law. A complete and correct copy of each of the Benefit
Plans and of any related trust agreements, insurance or annuity contracts,
valuations, and other funding agreements for each Benefit Plan has been
delivered to Wedco.
(c) All of ICO's and its Subsidiaries' ERISA Plans are
listed in Part I of Section 5.08 of the ICO Disclosure Schedule. All of ICO's
and its Subsidiaries' Benefit Plans that are not ERISA Plans, if any, are
listed in Part II of Section 5.08 of the ICO Disclosure Schedule. Section 5.08
of the ICO Disclosure Schedule includes a listing of all expected annual
contributions to the Qualified Plans and ERISA Plans. Neither ICO nor any of
its Subsidiaries maintains nor has maintained in the past any defined benefit
pension plan, and is not and has not been a party to any agreement requiring it
to contribute to a multi-employer plan within the meaning of Section 3(37) of
ERISA, except as disclosed in Section 5.08 of the ICO Disclosure Schedule.
There are no unfunded vested benefits under any Qualified Plan which is subject
to the vesting and funding standards of ERISA and no unfunded liabilities for
all benefits accrued through the date of the last actuarial valuation of such
Plan (calculated on the basis of the Plan's normal funding assumptions on such
valuation). ICO and its Subsidiaries have operated in good faith compliance
with a reasonable interpretation of the continuation coverage requirements of
COBRA. Other than claims for benefits in the ordinary course, there are no
pending claims involving the ERISA Plans or Qualified Plans by any participant
covered under the ERISA Plans or Qualified Plans or otherwise involving the
ERISA Plans or Qualified Plans which allege a breach of fiduciary duties or
violation of the applicable state or federal law which may result in material
liability on the part of ICO or any Qualified Plan or ERISA Plan under ERISA or
any other law, nor is there any reasonable basis for such a claim.
(d) To the knowledge of ICO, none of the ERISA Plans or
Qualified Plans or any of their related trusts, or ICO or any trustee,
administrator or other "party in interest" or "disqualified person" (within the
meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code,
respectively) with respect to the ERISA Plans or Qualified Plans, has engaged
in any "prohibited transaction" (within the meaning of Section 406 of ERISA or
Section 4975(c) of the Code), which could subject any of the ERISA Plans or
Qualified Plans or related trusts, or any trustee, administrator or other
fiduciary of any ERISA Plan or Qualified Plan, or Surviving Corporation or any
other party dealing with the ERISA
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Plans or Qualified Plans, to the penalties or excise tax imposed on prohibited
transactions by Section 502(i) of ERISA or Section 4975 of the Code.
(e) All of ICO's or its Subsidiaries' Qualified Plans are
listed in Part III of Section 5.08 of the ICO Disclosure Schedule. In the
reasonable belief of ICO, each of the Qualified Plans meets the requirements of
Section 401(a) of the Code, and the trust, if any, forming a part of each
Qualified Plan is exempt from federal income tax under Section 501(a) of the
Code. A favorable determination letter has been issued by the Internal Revenue
Service within the past ten (10) years as to the qualification under Section
401(a) of the Code (including, but not limited to, amendments made by ERISA),
with respect to each Qualified Plan, and ICO has delivered to Wedco true and
correct copies of all such determination letters. None of the determination
letters has been revoked or modified by the Internal Revenue Service.
(f) All contributions required by law or required in
accordance with the terms of the Qualified Plans to have been made prior to the
Closing will have been made.
(g) Except pursuant to the Benefit Plans listed on
Section 5.08 of the ICO Disclosure Schedule and under COBRA, ICO and its
Subsidiaries do not have any present or future liability to former employees or
to their dependents, survivors or beneficiaries in connection with or arising
out of any plan, compensation arrangement or practice which ICO and its
Subsidiaries contributed prior to the date hereof, and ICO and its Subsidiaries
have not maintained, adopted or contributed to any plan that provides benefits
or payments to former employees or their dependents, survivors or
beneficiaries, except pursuant to the Benefit Plans listed on Section 5.08 of
the ICO Disclosure Schedule and under COBRA.
(h) ICO and its Subsidiaries have satisfied in all
material respects all reporting and disclosure requirements applicable under
ERISA, and the Department of Labor and Internal Revenue Service and Pension
Benefit Guaranty Corporation regulations promulgated thereunder, with respect
to all ERISA Plans and Qualified Plans, and ICO has delivered to Wedco a true
and complete copy of the most recently filed and disclosed Forms 5500, Forms
5500-C/R (with exhibits), and summary plan descriptions and summaries of
material modification for the ERISA Plans and Qualified Plans. In the event
that a Form 5500 for any of ICO's or its Subsidiaries' Qualified Plans and
ERISA Plans for the 1994 plan year has not been filed prior to the Effective
Time, a proper extension will be filed if necessary.
(i) No Qualified Plan has had any "unrelated business
taxable income" as defined in Sections 512 through 514 of the Code. There have
been no claims, or notice of claims, filed under any fiduciary liability
insurance policy covering any Benefit Plan.
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(j) The Trustees of each of the Qualified Plans have
completed their required annual accountings for the plan years ended on or
before September 30, 1994, such accountings accurately reflect the financial
positions of the Qualified Plans as of their respective date, and true and
complete copies of the Trustees' reports or schedules of such accountings have
been delivered to Wedco.
Section 5.9 Labor Relations.
Except as disclosed in Section 5.09 of the ICO Disclosure
Schedule, (a) none of ICO or any of its Subsidiaries is in violation of any
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, nor is ICO or any of its
Subsidiaries engaged in any unfair labor practice, except where such violations
and unfair labor practices, individually or in the aggregate, would not have a
material adverse effect on the business, operations or financial condition of
ICO and its Subsidiaries taken as a whole; (b) there is no unfair labor
practice charge or complaint against ICO or any of its Subsidiaries pending
before the National Labor Relations Board, nor is there any arbitration
proceeding arising out of or under any ICO Labor Agreements (as hereinafter
defined) pending against ICO or any of its Subsidiaries, and, to the knowledge
of ICO, no claim therefor exists or is threatened; (c) no charges are pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment practices;
and (d) none of ICO nor any of its Subsidiaries has received notice of the
intent of any federal, state or local agency responsible for the enforcement of
labor or employment laws to conduct an investigation of or relating to ICO or
any of its Subsidiaries and, to the knowledge of ICO, no such investigation is
in progress. Except as disclosed in Section 5.09 of the ICO Disclosure
Schedule and except where the failure to obtain such consent or consents,
individually or in the aggregate, would not have a material adverse effect on
the business, operations or financial conditions of ICO and its Subsidiaries,
taken as a whole, no consent of any labor organization or other person is
required pursuant to any of the ICO Labor Agreements for the execution of this
Agreement or the consummation of the transactions contemplated hereby. As used
herein, the term "ICO Labor Agreements" means all collective bargaining
agreements, individual employment agreements and written personnel policies
applicable to any of the employees of ICO or any of its Subsidiaries.
Section 5.10 Material Contracts.
Section 5.10 of the ICO Disclosure Schedule sets forth a list
of all lease agreements, loan agreements, promissory notes, guarantees,
mortgages, security and pledge agreements; all ICO Labor Agreements, all joint
venture agreements and all agreements which resulted in annual gross revenues
to ICO and its Subsidiaries or required annual expenditures or payment by ICO
or any of its Subsidiaries of advances or guarantees of at
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least One Hundred Thousand Dollars ($100,000), and any other agreements
material to the business, operations or financial condition of ICO and its
Subsidiaries, taken as a whole, to which ICO or any of its Subsidiaries is a
party or to which any of their respective assets is subject or bound. Each of
such agreements is in full force and effect and is valid, binding and
enforceable, and none of ICO, its Subsidiaries or, to the knowledge of ICO, any
other party thereto, is in breach or default (and, to the knowledge of ICO, no
event has occurred which, with the giving of notice or passage of time or both,
would become a breach or default) under, or has received notice of a default
under, any such agreement, nor is ICO or any of its Subsidiaries in any
material dispute with any third party under any such agreement.
Section 5.11 Taxes.
(a) The definitions set forth in Section 4.11(a) hereof
shall apply to this Section 5.11.
(b) Each of ICO and its Subsidiaries and affiliates, and
any affiliated, combined or unitary group of which any such corporation (or
other business entity) is or was a member, as the case may be (individually, an
"Affiliate of ICO" and, collectively, "ICO's Affiliates"), has: (i) prepared
and timely filed all Tax Returns (A) the non-filing of which would have a
material adverse effect on ICO and its Subsidiaries, taken as a whole, and (B)
which are required to be filed by or with respect to it in respect of any
Taxes; (ii) timely and properly paid all Taxes that are shown to be due on such
Tax Return or are otherwise due and payable; (iii) established on its books and
records reserves that are in all material respects adequate for the payment of
all Taxes not yet due and payable; and (iv) complied in all respects with all
applicable laws, rules and regulations, non-compliance with which would have a
material adverse effect on ICO and its Subsidiaries, taken as a whole, relating
to the payment and withholding of Taxes and has timely and properly withheld
from individual employee wages and paid over to the proper governmental
authorities or deposited as required by law, all amounts required to be so
withheld and paid over or deposited under all applicable laws.
(c) All Tax Returns filed by ICO were true, correct and
complete in all material respects when filed.
(d) There are no liens for Taxes upon the assets of ICO
or any of its Affiliates except liens for Taxes not yet due.
(e) The statute of limitations has expired for any
federal income tax returns of ICO through September 30, 1991. Except as set
forth in Section 5.11 of the ICO Disclosure Schedule, there are no outstanding
waivers or comparable consents given by ICO
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or any of its Affiliates regarding the application of the statute of
limitations with respect to any federal income Taxes or federal income Tax
Returns. Except as set forth in Section 5.11 of the ICO Disclosure Schedule,
no federal, state, local or foreign audits or other administrative proceedings
or court proceedings are presently pending with regard to any Taxes or Tax
Returns.
Section 5.12 Compliance with Applicable Law.
Each of ICO and its Subsidiaries holds all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
business under and pursuant to all, and has complied with and is not in default
in any respect under any, applicable law, statute, order, rule, regulation,
policy or guideline of any federal, state or local governmental authority
relating to ICO or any of its Subsidiaries (other than where such default or
noncompliance would not result in a material limitation on the conduct of the
business of ICO or any of its Subsidiaries, or not cause ICO or any of its
Subsidiaries to incur material financial penalty, or would not be likely to
otherwise have a material adverse effect on the business, operations or
financial condition of ICO and its Subsidiaries taken as a whole) and none of
ICO or any of its Subsidiaries has received written notice of violation of, or
knows of any violation of, any of the above.
Section 5.13 Fees and Commissions.
Except as disclosed on Section 5.13 of the ICO Disclosure
Schedule, none of ICO or any of ICO's Subsidiaries or any of their respective
officers, directors, or employees has employed any broker, finder, investment
banker, consultant, financial or legal advisor or, incurred any liability for
any brokerage, finders' or other fees or commissions in connection with the
transactions contemplated by this Agreement.
Section 5.14 Insurance.
Section 5.14 of the ICO Disclosure Schedule sets forth a
complete and accurate list of all insurance policies maintained by ICO and its
Subsidiaries, identifying in each case: (i) the name of the insurance company;
(ii) the nature and limits of the coverage; (iii) the annual premiums paid
thereunder; and (iv) the coverage period applicable thereto. All such
insurance policies are in full force and effect and provide for coverages which
are usual and customary in the business of ICO and its Subsidiaries as to
amount and scope. Each of ICO and ICO's Subsidiaries has properly paid or will
properly pay all premiums due under such policies of insurance on or prior to
the Effective Time. None of ICO or its Subsidiaries is aware of any coverage
dispute or claim under or relating to any of such policies.
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Section 5.15 Environmental Protection.
(a) The definitions set forth in Section 4.15(a) hereof
shall apply to this Section 5.15.
(b) Except as disclosed on Section 5.15 of the ICO
Disclosure Schedule, to ICO's knowledge no third party claims and/or regulatory
actions have been asserted or assessed against ICO, any ICO Subsidiary, or any
of their real property and, to ICO's knowledge, no third party claims and/or
regulatory actions are pending or threatened against ICO, any ICO Subsidiary or
the real property, arising out of or due to, or allegedly arising out of or due
to: (i) the Release on, under or from the real property of any Hazardous
Substances; (ii) any contamination of the real property, including without
limitation, the presence of any Hazardous Substance which has come to be
located on or under the real property from another location; (iii) any material
violation or alleged violation of any Environmental Laws with respect to the
real property or ICO's or any ICO Subsidiary's business operations; (iv) any
injury to human health or safety or to the environment by reason of the past or
present condition of, or past or present activities on or under, the real
property; or (v) the generation, manufacture, storage, treatment, handling,
transportation or other use, however defined, of any Hazardous Substance on the
real property; and, as a result of any such conditions, whether individually or
in the aggregate, there has been a material adverse change in the business,
operations or financial condition of ICO and its Subsidiaries, taken as a
whole; (any acts, omissions, circumstances, status or condition described in or
contemplated by clauses (i) through (v) of this Section 5.15(b) are hereinafter
referred to collectively as an "Environmental Condition").
(c) Except as disclosed on Section 5.15 of the ICO
Disclosure Schedule, to ICO's knowledge, ICO's and its Subsidiaries' storage,
transportation, handling, use or disposal, if any, of Hazardous Substances on
or under the real property of Hazardous Substances generated on or from the
real property is currently, and at all times has been, in compliance in all
material respects with all applicable Environmental Laws.
(d) To ICO's knowledge, ICO has delivered to or has
caused to be delivered to Wedco, prior to the execution and delivery of this
Agreement, complete copies of any and all documents relating to compliance by
ICO and its Subsidiaries with Environmental Laws or to Environmental
Conditions.
(e) Except as disclosed on Section 5.15 of the ICO
Disclosure Schedule, to ICO's knowledge: (i) none of ICO or any ICO Subsidiary
has transported or arranged for the transportation of any Hazardous Substances
to any location which is listed on the EPA's National Priorities List of
Hazardous Substance Sites (the "National Priorities List"); or (ii) none of ICO
or any ICO Subsidiary has been identified as a potentially responsible
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party at any site proposed for inclusion on the National Priorities List,
CERCLIS or any similar state list.
(f) Except as disclosed on Section 5.15 of the ICO
Disclosure Schedule, and except where the occurrence of such events, whether
individually or in the aggregate, would result in a material adverse change in
the business, operations or financial condition of ICO and its Subsidiaries,
taken as a whole, to ICO's knowledge:
(i) None of ICO's or its Subsidiaries' real
property is listed in the National Priorities List or any other list maintained
by any federal, state or local governmental agency with respect to sites from
which there is or has been a Release of any Hazardous Substance or any
Contamination.
(ii) No part of ICO's or its Subsidiaries' real
property is now being used (A) as a landfill, dump or other disposal, storage,
transfer or handling area for Hazardous Substances; excepting, however, for the
routine storage, use and sale of Hazardous Substances from time to time in the
ordinary course of business, in compliance with Environmental Laws; (B) for
military purposes; or (C) as a gasoline service station or a similar facility
for selling, dispensing, storing, transferring or handling petroleum and/or
petroleum products.
(iii) There are no underground or aboveground
storage tanks (whether or not currently in use), polychlorinated biphenyls
(PCBs) or nuclear fuels or wastes, located on or under ICO's or its
Subsidiaries' real property.
(iv) There is no ongoing Release of any Hazardous
Substance on, under or from ICO's or its Subsidiaries' real property.
(v) There is not now present any Contamination of
ICO's or its Subsidiaries' real property caused by ICO or its Subsidiaries.
(vi) ICO's or its Subsidiaries' real property and
the ownership, use and operation thereof, are currently and, at all times
during ICO's or its Subsidiaries' ownership or operation thereof, have been in
material compliance with all applicable Environmental Laws.
(g) To ICO's knowledge, there are no liens against ICO's
or its Subsidiaries' real property arising under any Environmental Laws, or
based upon a Regulatory Action and/or Third Party Claim.
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Section 5.16 Merger Consideration.
All shares of ICO Common Stock to be issued to the holders of
Wedco Common Stock pursuant to this Agreement at Closing shall, when issued, be
duly authorized, validly issued, fully paid and non-assessable and listed
either on the NASD National Market System automated quotation system or on the
New York Stock Exchange.
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business.
Except as otherwise specifically provided in this Agreement,
from the date of this Agreement to the Effective Time, each of Wedco and ICO
shall cause its respective Subsidiaries to:
(a) conduct its business and engage in transactions only
in the ordinary and usual course consistent with past practices;
(b) use its best efforts, and cause its respective
Subsidiaries to use their best efforts, to preserve intact their respective
business organizations and good will, keep available the services of their
respective officers, employees and consultants and preserve their respective
relationships with licensors, licensees, customers, suppliers, employees, labor
organizations and others having business dealings with them including, where
consistent with the conduct of business in the ordinary course, consistent with
past practices, hiring additional personnel and promoting personnel;
(c) confer on a regular basis with one or more
representatives of one another to report operational matters of materiality and
the general status of ongoing operations;
(d) notify one another of any emergency or other change
in the normal course of its or its Subsidiaries' respective businesses or in
the operation of its or its Subsidiaries' respective properties and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency, change,
complaint, investigation or hearing would be material to the business,
operations or financial condition of either Wedco or ICO and their respective
Subsidiaries, as the case may be, taken as a whole;
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(e) not adopt or amend (other than amendments that reduce
amounts payable by it or its Subsidiaries) any employee benefit plan or enter
(or permit any of its Subsidiaries to enter) into any employment, severance or
similar contract with any person, or amend or supplement any such existing
agreements, plans or contracts to increase any amounts payable thereunder or
benefit provided thereunder, or grant or permit any increase in compensation to
any of its or its Subsidiaries' employees or pay any bonus, except in each
instance in accordance with past practice;
(f) except as otherwise permitted by this Section 6.1,
not enter into or become obligated by any agreement with any shareholder,
officer, director or employee;
(g) not, with respect to itself or any of its
Subsidiaries, authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement with respect to,
any merger, consolidation or business combination, any acquisition of material
amount of assets or securities, any disposition of a material amount of assets
or securities or any release or relinquishment of any material contract rights
not in the ordinary course of business, or any dissolution or liquidation;
(h) not propose or adopt any amendment or otherwise
change its charter or by-laws;
(i) except for the incurrence and establishment by ICO of
a secured revolving credit facility (to be secured by ICO's assets), not
create, incur or assume, or become or be liable (directly or indirectly) in
respect of: (i) any indebtedness for borrowed money; (ii) any indebtedness or
other obligation of another if the primary purpose is to guarantee that such
indebtedness or obligation of another will be paid or discharged; or (iii) any
capital or operating lease;
(j) except for liens issued by ICO or its Subsidiaries in
connection with the financing described above in Section 6(i), not create or
incur any encumbrance, lien or mortgage in respect of any of their property;
(k) not authorize for issuance, sale, pledge, disposition
or encumbrance, or issue, sell, pledge, dispose of or encumber (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase, convertible securities or otherwise), any of its capital
stock of any class or any other securities, or other ownership interest (except
for the authorization and issuance of shares of ICO Common Stock upon the
exercise of employee options pursuant to employee stock option plans
outstanding on the date hereof and the warrants and convertible preferred stock
as described on Section 5.02(a) of the ICO Disclosure Schedule and for the
authorization and issuance of shares of Wedco Common Stock upon the exercise of
employee options outstanding on the date
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hereof) or amend any of the terms of any such securities or agreements
outstanding on the date hereof;
(l) subject to Section 1.1 hereof, not reclassify,
combine, split or subdivide, any shares of its capital stock, or declare, set
aside or pay any dividend or other distribution (whether in cash, securities or
property or any combination thereof) in respect of any class or series of its
capital stock, other than cash dividends made by ICO to its stockholders not to
exceed $.05 per share of ICO Common Stock per quarter or $1.6875 per share of
ICO Preferred Stock per quarter, dividends made by Subsidiaries of ICO or Wedco
to such Subsidiaries' stockholders, and other than distributions made by joint
ventures in which ICO or Wedco has an interest to the parties to such joint
ventures;
(m) not redeem, purchase or otherwise acquire, or propose
or offer to redeem, purchase or otherwise acquire, any outstanding shares of
its capital stock or other securities;
(n) not make any tax election or settle or compromise any
federal, state, local or foreign income tax liability;
(o) not take any action other than in the ordinary course
of business and consistent with past practices with respect to accounting
policies or procedures except Wedco shall be entitled, in the exercise of its
reasonable business judgment, to commence litigation with respect to its
Canadian joint venture;
(p) not pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or satisfaction in
the ordinary course of business, consistent with past practices, of liabilities
reflected or reserved against in the Wedco Balance Sheet or the ICO Balance
Sheet, as the case may be, liabilities incurred in the ordinary course of
business existing on the date of such Balance Sheets but not required by
generally accepted accounting principles to be reflected therein, or incurred
in the ordinary course of business consistent with past practices since the
date thereof;
(q) not commit or agree (in writing or otherwise) to take
any of the actions described in clauses (e) through (p) above or any action
which would make any representation or warranty in this Agreement untrue or
incorrect, including as of the date hereof and as of the Effective Time, as if
made as of such time; and
(r) not make or incur any Capital Expenditure in any
three-month period in excess of the Capital Expenditures described on the
estimated capital budgets attached hereto as Schedule 6.1(r). For purposes of
this Agreement, "Capital Expenditure" shall
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mean any amount paid or incurred or which a party is obligated by contract to
pay in connection with the purchase of real estate, plant, machinery, equipment
or other similar expenditure which would be required to be capitalized in
accordance with generally accepted accounting principles.
Section 6.2 New York Stock Exchange Listing.
Promptly after execution and delivery of this Agreement, ICO
shall initiate, and thereafter diligently pursue, the process of applying for a
listing of Willoughby International, Inc. stock on the New York Stock Exchange.
ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.1 No Solicitation.
None of Wedco, ICO or any of their respective Subsidiaries or
any of such person's respective officers, directors, employees or agents or
affiliates shall, directly or indirectly initiate contact with, solicit or
encourage any inquiries, proposals or offers by any Third Party (as hereinafter
defined) in connection with any possible proposal (an "Acquisition Proposal")
regarding a sale of any of the capital stock or any other equity interest in
Wedco or ICO or any of their respective Subsidiaries, or a merger,
consolidation or business combination involving Wedco or ICO or any of their
respective Subsidiaries, or sale of all or (other than in the ordinary course
of business consistent with past practices) any portion of the assets of Wedco
or ICO or any of their respective Subsidiaries or any similar transaction, or
unless otherwise required by law, furnish to any other person any information
with respect to Wedco or ICO or any of their respective Subsidiaries or afford
access to the properties, books or records of Wedco or ICO or any of their
respective Subsidiaries for the purposes of, or cooperate with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person or entity to seek or effect an Acquisition Proposal; provided, however,
that in the event that, notwithstanding compliance by Wedco or ICO and their
respective Subsidiaries with the foregoing provisions of this Section 7.1,
Wedco or ICO receives from a Third Party an Acquisition Proposal, only to the
extent necessary to act in accordance with the fiduciary duties of the Wedco
Board of Directors or the ICO Board of Directors, as the case may be, under
applicable laws (as determined by the Wedco Board of Directors or the ICO Board
of Directors, as the case may be, in good faith after consultation with and
based upon advice of counsel), Wedco or ICO, as the case may be, may take
actions otherwise prohibited by the foregoing provisions of this Section 7.1.
Each of Wedco and ICO shall notify the others immediately in writing
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if any discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any such information is requested, with respect to an
Acquisition Proposal or potential Acquisition Proposal, and shall immediately
communicate in writing to the others the terms and conditions of any such
Acquisition Proposal or potential Acquisition Proposal, discussion, negotiation
or inquiry and the identity of the offeror or potential offeror. As used in
this Agreement, the term "Third Party" means any "person" or "group", as such
terms are defined in Section 13(d) of the Exchange Act, other than Wedco and
ICO.
Section 7.2 Access to Information.
(a) From the date of this Agreement, Wedco and ICO shall,
and shall cause their respective authorized officers, directors, employees,
auditors, agents and Subsidiaries, and the authorized officers, directors,
employees, auditors and agents of their respective Subsidiaries, to, give to
the other party and its authorized officers, employees, counsel, advisors and
representatives full access to all authorized officers, employees, agents,
properties, offices and other facilities and to all books and records of it and
its Subsidiaries and shall furnish the other party with such financial,
operating and other data and information as such other party, through its
authorized officers, employees, agents or representatives, may from time to
time reasonably request.
(b) All information furnished by either ICO or Wedco to
the other shall be treated as the sole property of the party furnishing the
information until consummation of the transactions contemplated hereby, and, if
such transactions shall not occur, the party receiving the information shall
return to the party which furnished such information all documents or other
materials containing, reflecting or referring to such information, shall keep
confidential all such information, and shall not directly or indirectly use
such information for any competitive or other commercial purpose. The
obligation to keep such information confidential shall continue for six (6)
years from the date this Agreement is terminated but such obligation shall not
apply to (i) any information which (A) the party receiving the information can
establish was already in its possession prior to the disclosure thereof by the
party furnishing the information; (B) was then generally known to the public;
(C) became known to the public through no fault of the party receiving the
information; or (D) was disclosed to the party receiving the information by, to
the knowledge of such party, a third party not bound by an obligation of
confidentiality or (ii) disclosures required by an order of a court of
competent jurisdiction, or by federal or state securities laws, or the rules or
regulations of any applicable securities exchange, as advised by counsel.
Section 7.3 Public Announcements.
Wedco and ICO shall promptly issue a joint press release to
announce the execution and delivery of this Agreement. Thereafter, Wedco and
ICO shall consult with
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each other before issuing any press release or otherwise making any public
statements with respect to any of the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law.
Section 7.4 Best Efforts.
Subject to the terms and conditions herein provided, each of
the parties hereto shall use its best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to obtain in a timely manner
all waivers, consents and approvals of, and to make all filings with and
notifications to, any third parties as are necessary in order to consummate the
transactions contemplated by this Agreement. Each party hereto shall have the
right to review and approve in advance all characterizations of it and its
Subsidiaries which appear in any filing made in connection with the
transactions contemplated by this Agreement with any governmental body. In
exercising the foregoing right, the parties hereto shall act as promptly as
possible.
Section 7.5 Rule 145.
Each of ICO and Wedco will use all reasonable efforts to cause
each person who is an affiliate of ICO or Wedco, as the case may be, to deliver
to ICO prior to the Effective Time a written agreement that such affiliate will
not offer to sell, sell or otherwise dispose of any ICO Common Stock issued to
such affiliate in connection with the Mergers otherwise than within the limits
and in accordance with the provisions of Rule 145 under the Securities Act, as
such rule may be amended from time to time, or except in a transaction that, in
the opinion of legal counsel reasonably satisfactory to ICO, is exempt from
registration under the Securities Act.
Section 7.6 Post-Merger Matters.
(a) If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take
all such necessary action.
(b) Immediately after the Effective Time, ICO shall take
all actions necessary to give effect to the change of its corporate name to
"Willoughby International, Inc."
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Section 7.7 Indemnification and Insurance.
(a) ICO shall indemnify each person who is or was a
"corporate agent" (as such term is defined in Article VII of the By-Laws of
Wedco as in effect on the date hereof ("Article VII") and also including, to
the fullest extent permitted by applicable law, as the subject or beneficiary
of such indemnity each "corporate agent" in his or her individual and
stockholder capacities regardless of whether the Bylaws of Wedco provide for
same) of Wedco against expenses (including, but not limited to, legal fees,
investigations, discovery costs, settlement and judgment) and liabilities in
connection with any proceeding involving the corporate agent of Wedco by reason
of his being or having been such a corporate agent at any time prior to and up
to and including the Effective Time, to the same extent provided by Article VII
unless such proceeding was initiated by the corporate agent without the
authorization of the Board of Directors of the Surviving Corporation and the
corporate agent was unsuccessful in such proceeding; a copy of Article VII
appears as Annex XIV to this Agreement.
(b) In addition thereto, ICO shall obtain and, commencing
as of the Effective Time, maintain in effect insurance on behalf of each such
corporate agent of Wedco against any expenses incurred in any proceeding and
any liabilities asserted against him by reason of his being or having been a
corporate agent of Wedco at any time prior to and up to and including the
Effective Time, whether or not Wedco would have the power to indemnify him
against such expenses and liabilities under the provisions of Article VII, to
the same extent such insurance was maintained in effect by Wedco immediately
prior to the Effective Time and to include, but not limited to, legal fees,
investigation and discovery costs, settlement and judgment.
(c) The indemnification and advancement of expenses and
insurance coverage provided by, or granted pursuant to, this Section 7.7 shall
continue as to each person who has ceased to be a director, officer, employee
or agent of Wedco and shall inure to the benefit of the heirs, executors and
administrators of such person, provided that upon the written demand of ICO
citing this Agreement, the corporate agent: (i) in the context of advancement
of expenses only, executes and delivers to ICO an undertaking to repay the
amount advanced if (and to the extent that) it shall ultimately be determined
in accordance with Article VII of the Bylaws of Wedco and the statutes of New
Jersey, that he is not entitled to be indemnified as provided in this Section
7.7 ("Undertaking"); and (ii) in the context of indemnification and of
advancement of expenses, agrees to cooperate reasonably with ICO concerning
such proceeding and executes and delivers to ICO an Undertaking to do so on
written demand of ICO citing this Agreement.
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Section 7.8 Notification of Certain Matters.
Each party hereto shall give prompt notice to the others of
the occurrence (or non-occurrence) of any event the occurrence (or
non-occurrence) of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect and of any material failure of any party to comply with or satisfy with
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that delivery of any notice pursuant to this
Section 7.8 shall not limit or otherwise affect the remedies available to
either party hereunder.
ARTICLE 8
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to the Obligations of Each Party.
The respective obligations of Wedco and ICO to effect the
Merger are subject to the satisfaction, at or prior to the Effective Time, of
the following conditions:
(a) Any applicable waiting period (and any extension
thereof) under the HSR Act relating to the Merger shall have expired or been
terminated;
(b) There shall not be in effect: (i) any judgment,
injunction, decree or order issued by any federal, state or local court or
arbitrator of competent jurisdiction; or (ii) any statute, rule, regulation or
order enacted or promulgated by any federal, state or local, legislative,
administrative or regulatory body of competent jurisdiction, that in either of
cases (i) or (ii) prohibits or restricts the consummation of the transactions
contemplated hereby or makes such consummation illegal or restricts in any
material respect or prohibits the effective operation of the business of Wedco
and its Subsidiaries or ICO and its Subsidiaries after the consummation of the
transactions contemplated hereby;
(c) The Registration Statement shall have been declared
effective under the Securities Act and no stop order suspending such
effectiveness shall have been issued or proceedings for such purpose shall have
been instituted;
(d) This Agreement and the Merger hereby contemplated
shall have been adopted and/or approved by the affirmative vote of the
stockholders of Wedco requisite and issuance of ICO Common Stock contemplated
hereby shall have been approved by the requisite affirmative vote of the
stockholders of ICO;
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(e) Cash redemption of Wedco options pursuant to Section
1.1(b)(iii) hereof; and
(f) The weighted average of the closing prices for ICO
Common Stock on the NASD National Market System for the last five (5) trading
days immediately preceding the date on which the Effective Time occurs, shall
be greater than or equal to Four Dollars ($4.00) (the "Collar Price"). In the
event that the weighted average closing price for ICO Common Stock as
determined above is less than the Collar Price, then Wedco shall have the
option to (i) waive this condition precedent and proceed to Closing
notwithstanding such event, or (ii) give notice to ICO that it desires to
proceed with the Closing, but will require additional consideration as set
forth below. In the event Wedco chooses to proceed and has given notice to ICO
in accordance with item (ii) above, ICO shall have the option to (A) terminate
this Agreement, or (B) proceed to Closing, provided ICO agrees to provide
additional consideration (cash and/or ICO Common Stock) in an amount necessary
to increase the value of the Merger Consideration payable under Section
1.1(b)(ii) to Twelve and 30/100 Dollars ($12.30) and, provided further, that
any ICO Common Stock issued as additional Merger Consideration in accordance
herewith shall be valued at such weighted average price as determined above.
Section 8.2 Additional Conditions to the Obligations of Wedco.
The obligation of Wedco to consummate the Merger is further
subject to the satisfaction (or waiver by Wedco), at or prior to the Effective
Time, of the following conditions:
(a) W Acquisition and ICO shall have performed in all
material respects all their respective obligations hereunder required to be
performed by them at or prior to the Closing;
(b) The representations and warranties of ICO contained
in this Agreement and in any certificate or other writing delivered by ICO
pursuant hereto which are qualified by the term "material" or "materiality"
shall be true and correct in all respects, and all other representations and
warranties of ICO contained in this Agreement and in any certificate or other
writing delivered by ICO pursuant hereto shall be true and correct in all
material respects, at and as of the date of this Agreement and at and as of the
Closing as if made at and as of such time (except as to any representation or
warranty which specifically relates to an earlier date);
(c) Wedco shall have received the deliveries described in
Section 3.2(b) and all agreements included in such deliveries shall have been
duly executed and delivered by all parties thereto;
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(d) Wedco shall have received all documents it may
reasonably request relating to the existence of ICO and W Acquisition and their
corporate authority for this Agreement, all in form and substance reasonably
satisfactory to Wedco;
(e) Any and all material permits, consents, waivers,
clearances, approvals and authorizations of and filings with all third parties
and governmental bodies shall have been obtained which are required to
consummate the transactions contemplated hereby;
(f) ICO shall have caused to be delivered to Wedco a
"bringdown" certificate executed by its Chairman of the Board of Directors and
Controller and Treasurer in their respective corporate capacities and not in
their individual capacities, dated the date on which the Registration Statement
(or last amendment thereto) shall become effective and dated the date of the
Effective Time, and addressed to Wedco, in form and substance customary in
transactions of the nature contemplated hereby;
(g) Wedco shall have received a favorable "fairness
opinion" from an investment banking firm in form and substance customary in
transactions of the nature contemplated hereby and acceptable to Wedco;
(h) ICO shall have provided or caused to be provided to
Wedco written confirmation or other evidence, in form and substance
satisfactory to Wedco, that the insurance required to be obtained by ICO
pursuant to Section 7.7 shall have been duly obtained and be in full force and
effect on and as of the Effective Time;
(i) The shares of ICO Common Stock to be received as
Merger Consideration shall have been listed either on the NASD National Market
System automated quotation system or on the New York Stock Exchange; and
(j) Wedco shall have received an opinion from Dilworth,
Paxson, Kalish & Kauffman in form and substance reasonably satisfactory to
Wedco, dated as of the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion which
are consistent with the state of facts existing at the Effective Time, the
Merger will be treated, for Federal income tax purposes, as a reorganization
within the meaning of Section 368(a) of the Code.
Section 8.3 Additional Conditions to the Obligations of ICO.
The obligation of ICO to consummate the Merger are further
subject to the satisfaction (or waiver by ICO), at or prior to the Effective
Time, of the following conditions:
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(a) Wedco shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior to
the Closing;
(b) The representations and warranties of Wedco contained
in this Agreement and in any certificate or other writing delivered by Wedco
pursuant hereto which are qualified by the term "material" or "materiality"
shall be true and correct in all respects, and all other representations and
warranties of Wedco contained in this Agreement and in any certificate or other
writing delivered by Wedco pursuant hereto shall be true and correct in all
material respects, at and as of the date of this Agreement and at and as of the
Closing as if made at and as of such time (except as to any representation or
warranty which specifically relates to an earlier date);
(c) ICO shall have received the deliveries described in
Section 3.2(a) and all agreements included in such deliveries and in the
deliveries described in Section 3.2(b) shall have been duly executed and
delivered by all parties thereto;
(d) ICO shall have received all documents they may
reasonably request relating to the existence of Wedco and their corporate
authority for this Agreement, all in form and substance reasonably satisfactory
to ICO;
(e) Any and all material permits, consents, waivers,
clearances, approvals and authorizations of and filings with all third parties
and governmental bodies shall have been obtained which are required (i) to
consummate the transactions contemplated hereby or (ii) to prevent a breach,
default or right of termination under any agreement to which Wedco is a party
or by which it is bound caused by consummation of the transactions contemplated
hereby;
(f) Except as set forth in Section 8.03(f) of the Wedco
Disclosure Schedule, all (i) options, warrants, calls, rights, subscriptions,
convertible securities and other rights and agreements, arrangements and
commitments of any kind relating to the issued or unissued capital stock (or
other equity interest) or other securities of Wedco or any Subsidiary of Wedco,
or otherwise obligating Wedco or any Subsidiary of Wedco to issue, transfer or
sell any securities of (or other equity interest in) Wedco or any of its
Subsidiaries, or securities or other instruments convertible into or
exchangeable or exercisable for any securities of (or other equity interests
in) Wedco or any of its Subsidiaries; (ii) liabilities, obligations, claims,
liens, pledges, security interests, options, charges, encumbrances and
interests of any nature whatsoever of any third party in the outstanding stock
of any of Wedco's Subsidiaries; (iii) stockholder agreements, voting trusts and
other agreements and understandings to which Wedco is a party or is bound
relating to the voting or transfer of any shares of (or other equity interests
in) Wedco or any of its
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Subsidiaries, including all of the foregoing set forth on the Wedco Disclosure
Schedule, shall have been terminated or canceled, as they relate to such shares
(or other equity interests);
(g) Wedco shall have caused to be delivered to ICO a
"bringdown" certificate executed by its Chairman of the Board of Directors and
Vice President-Finance in their respective corporate capacities and not in
their individual capacities, dated the date on which the Registration Statement
(or last amendment thereto) shall become effective and dated the date of the
Effective Time, and addressed to ICO, in form and substance customary in
transactions of the nature contemplated hereby;
(h) All necessary consents or permits from or filings
with state securities commissions shall have been obtained or made;
(i) [Intentionally Omitted]; and
(j) ICO shall have received an opinion from Messrs.
Keating, Muething & Klekamp in form and substance reasonably satisfactory to
ICO, dated as of the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set form in such opinion which
are consistent with the state of facts existing at the Effective Time, the
Merger will be treated, for Federal income tax purposes, as a reorganization
within the meaning of Section 368(a) of the Code.
ARTICLE 9
TERMINATION; AMENDMENTS; WAIVER
Section 9.1 Termination.
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of ICO or Wedco, but prior to the Effective Time:
(a) By the mutual written consent of the Board of
Directors of each of Wedco and ICO; or
(b) By Wedco, on the one hand, or ICO, on the other, if
the transactions contemplated hereby shall not have been consummated by July
31, 1996; provided, however, that the right to terminate this Agreement under
this Section 9.1(b) shall not be available to any party, failure of which to
fulfill any obligation under this Agreement has been the
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cause of, or resulted in, the failure of the Effective Time to occur on or
before such date; or
(c) By either Wedco, on the one hand, or ICO, on the
other, if a court of competent jurisdiction in the United States or any state
thereof or other United States governmental, regulatory or administrative body
shall have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties agree to use their best
efforts through appeals and otherwise to vacate) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; or
(d) By Wedco if, in compliance with Section 7.1 hereof, a
higher offer to acquire Wedco is received and accepted by Wedco prior to the
Effective Time; provided, however, that in the event of any such termination,
Wedco shall promptly pay ICO, as liquidated damages and not as a penalty, the
sum of Two Million Dollars ($2,000,000); or
(e) By ICO if the stockholders of ICO do not approve the
transactions contemplated by this Agreement; provided, however, that in the
event of any such termination ICO shall promptly pay Wedco, as liquidated
damages and not as a penalty, the sum of Three Hundred Fifty Thousand Dollars
($350,000); or
(f) By either Wedco or ICO if, in the case of Wedco, ICO
materially breaches a warranty, representation or covenant contained herein or
suffers a material adverse change to its operations or financial condition
("Material Adverse Change") or, in the case of ICO, Wedco materially breaches a
warranty, representation or covenant contained herein or suffers a Material
Adverse Change; provided, however, that the non-breaching party or party not
suffering a Material Adverse Change may, at its option, either waive the
material breach or material Adverse Change pursuant to Section 9.3 hereof or be
entitled to receive from the breaching party or party suffering the Material
Adverse Change, as liquidated damages and not as a penalty, the sum of Three
Hundred Fifty Thousand Dollars ($350,000); or
(g) Except as provided in Section 9.1(d) above, by either
Wedco or ICO if, in the case of Wedco, it desires not to consummate the
transactions contemplated hereby notwithstanding the absence of any material
breach by ICO of any warranty, representation or covenant contained herein or
any Material Adverse Change affecting ICO or any other condition or event that
would entitle Wedco not to consummate such transactions or, in the case of ICO,
it desires not to consummate the transactions contemplated hereby
notwithstanding the absence of any material breach by Wedco of any warranty,
representation or covenant contained herein or any Material Adverse Change
affecting Wedco or any other condition or event that would entitle ICO not to
consummate the transactions; provided,
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however, that the party other than the party desiring not to consummate the
transactions shall have the right, at its option, to be selected in its sole
discretion, either: (i) to seek and to obtain specific performance of the
transactions hereby contemplated (the parties hereto acknowledging and agreeing
that, given the nature of the transactions hereby contemplated, specific
performance is an appropriate remedy under this Section 9.1(g)); or (ii) to
obtain prompt payment from the party desiring not to consummate the
transactions, as liquidated damages and not as a penalty, the sum of One
Million Dollars ($1,000,000). If the parties hereto disagree as to whether a
Material Adverse Change has occurred or whether a party has materially breached
a warranty, representation or covenant contained herein, the disagreement shall
be referred for resolution to a panel of three (3) arbitrators in an
arbitration to be conducted in New York, New York pursuant to the commercial
arbitration rules of the American Arbitration Association; or
(h) In accordance with Section 8.1(f)(A).
In the event of the termination of this Agreement pursuant to
the terms of this Section 9.1, this Agreement shall forthwith become void and
have no effect, without any liability on the part of either party hereto,
except that: (A) the provisions of this Section 9.1 and Sections 7.2(b) and
10.7 hereof shall survive any such termination and shall continue to be binding
on the parties hereto; and (B) nothing contained in this Section 9.1 shall
relieve any party from any liability, if any, including any liability for
liquidated damages, for any termination of this Agreement under paragraphs (d),
(e), (f) and (g) above.
Section 9.2 Amendment.
This Agreement may be amended by the parties hereto at any
time before or after adoption of this Agreement by the stockholders of ICO or
Wedco but, after any such stockholder approval, no amendment shall be made
which adversely affects the rights of the stockholders of ICO or Wedco
hereunder without the approval of the affected stockholders. This Agreement
may not be amended, modified or supplemented except by an instrument in writing
signed by all the parties hereto that expressly states that it amends, modifies
or supplements this Agreement.
Section 9.3 Extension; Waiver.
At any time prior to the Effective Time, any party hereto may:
(i) extend the time for the performance of any of the obligations or other acts
of any other party hereto; (ii) waive any inaccuracies in the representations
and warranties contained herein by any other party or in any document or
writing delivered pursuant hereto by such other party; or (iii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations. Any agreement on the part of any party hereto to any
such extension
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or waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Survival of Representations, Warranties, Covenants and
Agreements.
Other than Sections 7.6 and 7.7 and any other covenant or
agreement herein, the nature of which is to be performed after the Closing, the
representations, warranties, covenants and agreements made in this Agreement or
in any certificate or Disclosure Schedule delivered pursuant to Articles 4 and
5 hereof shall only survive until the Effective Time.
Section 10.2 Entire Agreement; Assignment.
This Agreement (including the Schedules, Disclosure Schedules,
Exhibits and Annexes hereto) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof. This Agreement may not be
assigned, by operation of law or otherwise, by any of the parties hereto
without the prior written consent of each of the other parties hereto. Any
such purported assignment undertaken or occurring without such consent shall be
null and void and of no legal force and effect.
Section 10.3 Validity.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any of the other
provisions of this Agreement, each of which shall remain in full force and
effect.
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Section 10.4 Notices.
All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to ICO or W Acquisition, to:
ICO, Inc.
100 Glenborough Drive, Suite 250
Houston, Texas 77067
Attention: Dr. Asher O. Pacholder
Sylvia A. Pacholder
Telephone: (713) 872-4994
Facsimile: (713) 872-9610
with copies to:
Pacholder Associates, Inc.
Towers of Kenwood
8044 Montgomery Road, Suite 382
Cincinnati, Ohio 45236
Attention: James P. Shanahan, Jr.
Telephone: (513) 985-3200
Facsimile: (513) 985-3217
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Howard Rice
15645 Collins Avenue, Suite 606
N. Miami Beach, Florida 33160
Telephone: (305) 945-1030
Facsimile: (305) 945-5371
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If to Wedco, to:
P.O. Box 397
Bloomsbury, New Jersey 08804
Attention:
Telephone: (908) 479-4181
Facsimile: (908) 479-4876
with copies to:
Dilworth, Paxson, Kalish & Kauffman
3200 Mellon Bank Center
1735 Market Street
Philadelphia, Pennsylvania 19109-7595
Attention: Edward N. Barol
Telephone: (215) 575-7170
Facsimile: (215) 575-7200
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Leib, Kraus, Grispin & Roth
328 Park Avenue, Box 310
Scotch Plains, New Jersey 07076-0310
Attention: Walter L. Leib
Telephone: (908) 322-6200
Facsimile: (908) 322-6155
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided, that notice of any change of address shall be effective only upon
receipt thereof).
Section 10.5 Governing Law.
This Agreement shall: (i) with respect to interpretation or
construction of the parties' respective warranties and representations; (ii)
with respect to interpretation or construction of the terms "material" and
"materially" used in this Agreement; and (iii) with respect to remedies for a
breach of representations and warranties and the provisions of Article 9
hereof, including the availability and enforceability of liquidated damages
stipulated therein, be governed by and construed in accordance with the laws of
the State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. All other terms and
provisions of this Agreement shall be
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governed by and construed in accordance with the laws of the State of New
Jersey, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Any action for restraint relating to
items (i), (ii) and (iii) shall be governed by the law of the State of
Delaware. All other actions for restraint shall be governed by the laws of the
State of New Jersey.
Section 10.6 Arbitration.
Any controversy or claim arising out of or relating to the
breach of this Agreement, shall be settled by binding arbitration in accordance
with the rules of the American Arbitration Association that are in effect at
the time of the arbitration. The arbitration proceedings shall be conducted in
New York, New York. The arbitrator(s) shall have the authority to award any
remedy or relief a court could order or grant (in accordance with the terms of
Section 10.5 hereof), including, without limitation, specific performance of
any obligation created under this Agreement and the issuance of an injunction.
A judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, any party
hereto may seek injunctive relief under this Agreement solely to preserve the
status quo hereunder pending the initiation and completion of any arbitration
proceedings instituted in accordance with this Agreement. The parties agree
that any such action for injunctive relief may be brought only in a Federal
District Court.
Section 10.7 Expenses.
All expenses incurred by any party hereto in connection with
this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.
Section 10.8 Interpretation.
(a) The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
(b) Subject to Section 4.16 hereof, the term "Subsidiary"
when used herein with respect to any person means: (i) any corporation,
partnership or other business association or entity in which such person has an
equity interest; or (ii) any other corporation, partnership, limited liability
company or other business association or entity which is consolidated with such
person for financial reporting purposes. The term "person" when used herein
means any individual, corporation, partnership, joint venture, trust,
unincorporated association or other entity of any nature whatsoever. The term
"knowledge"
<PAGE> 127
- 59 -
when used herein with respect to ICO or Wedco means actual knowledge or
actually knowing after due inquiry within ICO or Wedco, as the case may be, and
their respective Subsidiaries (which due inquiry each party undertakes to
make).
(c) This Agreement (and each provision thereof) is a
document negotiated at arms length by sophisticated parties represented by
counsel and, therefore, shall not be construed against either party as the
drafter thereof.
Section 10.9 Counterparts.
This Agreement may be executed in multiple counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
Section 10.10 Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
THIS SPACE INTENTIONALLY LEFT BLANK
<PAGE> 128
- 60 -
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officer thereunto duly authorized on the day
and year first above written.
WEDCO TECHNOLOGY, INC.
By:___________________________________
Name:
Title:
W ACQUISITION CORP.
By:___________________________________
Name:
Title:
ICO, INC.
By:___________________________________
Name:
Title:
<PAGE> 129
i
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Initial Page/
Defined Term Section Reference
- ------------ -----------------
<S> <C>
Affiliate of ICO Section 5.11(b)
Agreement Page 1
Article VII Section 7.7
Benefit Plans Section 4.8(a)
Canadian Joint Venture Section 4.16
Capital Expenditure Section 6.1(r)
Cash/Stock Consideration Section 1.1(b)
Closing Section 3.1
Code Section 4.8(a)
Commission Section 2.2
Constituent Corporations Section 1.2
Contamination Section 4.15(a)
Effective Time Page 1
Environmental Condition Section 4.15(b)
Environmental Laws Section 4.15(a)
ERISA Plan Section 4.8(a)
French Joint Venture Section 4.16
Exchange Act Section 2.2
Hazardous Substances Section 4.15(a)
HSR Act Section 4.4
ICO Page 1
ICO Balance Sheet Section 5.5(b)
ICO Common Stock Section 1.1(b)
ICO Disclosure Schedule Section 5.1(a)
ICO Labor Agreements Section 5.9
ICO Preferred Stock Section 5.2(a)
ICO SEC Reports Section 5.5(a)
ICO Shareholder Group Page 1
ICO Shareholder Group Agreement Page 1
ICO Stockholders' Meeting Section 2.1(a)
IRS Section 4.11(e)
Joint Venture Organizational Documents Section 4.16
Knowledge Section 10.8(b)
Material Adverse Change Section 9.1(f)
Merger Section 1.1(a)
Merger Consideration Section 1.1(b)
Merger Option Consideration Section 1.1(b)
</TABLE>
<PAGE> 130
- ii -
<TABLE>
<S> <C>
National Priorities List Section 4.15(e)
New Jersey Law Section 1.1(a)
Proxy Statement/Prospectus Section 2.1(a)
Qualified Plan Section 4.8(a)
Registration Statement Section 2.2
Regulatory Action Section 4.15(a)
Release Section 4.15(a)
Securities Act Section 2.2
Stock Consideration Section 1.1(b)
Staff Section 2.2
Surviving Corporation Section 1.1(b)
Taxes Section 4.11(a)
Tax Return Section 4.11(a)
Texas Act Section 2.1(a)
Third Party Section 7.1
Third Party Claim Section 4.15(a)
W Acquisition Page 1
W Acquisition Common Stock Section 1.1(b)
Wedco Page 1
Wedco Balance Sheet Section 4.5(b)
Wedco Common Stock Section 1.1(b)
Wedco Disclosure Schedule Section 4.1(a)
Wedco Joint Venture Section 4.6
Wedco Labor Agreements Section 4.9
Wedco SEC Reports Section 4.5(a)
Wedco Shareholder Group Page 1
Wedco Shareholder Group Agreement Page 1
Wedco Stockholders' Meeting Section 2.1(b)
</TABLE>
<PAGE> 131
- iii -
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1 -- Wedco Common Stock controlled by Wedco Shareholder Group
Schedule 2 -- ICO Capital Stock controlled by ICO Shareholder Group
Schedule 3 -- Post-Effective Time Officers and Directors of ICO and of the
Surviving Corporation
Schedule 4 -- Intentionally Omitted
Schedule 6.1(r) -- Wedco Capital Budget
ANNEXES
-------
Annex I (Wedco) -- Officer's Certificate
Annex II (Wedco) -- Non-Competition Covenants
Annex III-A (Wedco) -- Opinion of DPK&K
Annex III-B (Wedco) -- Opinion of LKG&R
Annex IV -- Intentionally Omitted
Annex V (ICO) -- Officer's Certificate
Annex VI-A (ICO) -- Opinion of KMK
Annex VI-B (ICO) -- Opinion of V&E
Annex VII-A (ICO) -- Consulting Agreement with WEW
Annex VIII (SC)* -- Employment Agreement with RFB
Annex IX-A (SC) -- Employment Agreement with FRF
Annex IX-B (SC) -- Employment Agreement with DC
Annex IX-C (SC) -- Employment Agreement with TK
Annex IX-D (SC) -- Employment Agreement with MK
Annex X (WI)** -- Continuing Stockholders' Agreement
Annex XI (WI) -- Registration Rights Agreement
Annex XIII (WI) -- Attorney Agreement
Annex XIV (ICO) -- Article VII of By-Laws of Wedco
</TABLE>
*Surviving Corporation
**Willoughby International, Inc.
EXCEPT FOR ANNEXES II, VIII, IX-A, IX-B, IX-C, IX-D, X, XI and XIII WHICH HAVE
BEEN FILED AS EXHIBITS TO THE REGISTRATION STATEMENT, ALL OF THE ABOVE
SCHEDULES AND ANNEXES HAVE BEEN OMITTED.
<PAGE> 132
ANNEX B
Form 10-K for the fiscal year ended September 30, 1995 of ICO, Inc. is
attached to the Joint Proxy Statement/Prospectus as Annex B. Said document is
also incorporated by reference in the Joint Proxy Statement/Prospectus.
<PAGE> 133
ANNEX C
Form 10-Q for the quarter ended December 31, 1995 of ICO, Inc. is attached
to this Joint Proxy Statement/Prospectus as Annex C. Said document is also
incorporated by reference in the Joint Proxy Statement/Prospectus.
<PAGE> 134
ANNEX D
Form 10-K for the fiscal year ended March 31, 1995 of Wedco Technology,
Inc. is attached to the Joint Proxy Statement/Prospectus as Annex D. Said
document is also incorporated by reference in the Joint Proxy
Statement/Prospectus.
<PAGE> 135
ANNEX E
Form 10-Q for the quarter ended December 31, 1995 of Wedco Technology,
Inc. is attached to the Joint Proxy Statement/Prospectus as Annex E. Said
document is also incorporated by reference in the Joint Proxy
Statement/Prospectus.
<PAGE> 136
[WORLD MAP INDICATING
ICO AND WEDCO FACILITIES]
The geographic distribution of ICO and Wedco facilities and service
locations complement each other, creating logistical and technological
advantages that will drive further expansion into other international markets.
<PAGE> 137
[PICTURE OF PUMP JACK AND REFINERY]
