<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-10068
ICO, INC.
---------------------------------------
(Exact name of registrant as specified in its charter)
Texas 76-0566682
- ----------------------------- ------------------------------------
(State of incorporation) (IRS Employer Identification Number)
11490 Westheimer, Suite 1000, Houston, Texas 77077
- -------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(281) 721-4200
--------------------
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [_]
Common stock, without par value: 21,934,530 shares
outstanding as of May 14, 1998
<PAGE>
ICO, INC.
INDEX TO QUARTERLY REPORT FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 and
September 30, 1997.................................... 3
Consolidated Statements of Operations for the Three
and Six Months Ended March 31, 1998 and 1997.......... 4
Consolidated Statements of Cash Flows for the Six
Months Ended March 31, 1998 and 1997.................. 5
Notes to Consolidated Financial Statements............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 14
Item 2. Changes in Securities................................. 16
Item 3. Defaults upon Senior Securities (no response
required)............................................. -
Item 4. Submission of Matters to a Vote of Security Holders... 16
Item 5. Other Information (no response required).............. -
Item 6. Exhibits and Reports on Form 8-K...................... 17
The accompanying notes are an integral part of these financial statements.
2
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ICO, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
ASSETS 1998 1997
- ------ --------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 64,473 $ 83,892
Trade receivables (less allowance for doubtful accounts of
$1,472 and $967, respectively) 57,849 49,963
Inventories 28,495 20,709
Deferred tax asset 3,697 3,812
Prepaid expenses and other 5,108 4,382
-------- --------
Total current assets 159,622 162,758
-------- --------
Property, plant and equipment, at cost 165,718 152,440
Less - accumulated depreciation and amortization (60,343) (54,661)
-------- --------
105,375 97,779
-------- --------
Other assets:
Goodwill (less accumulated amortization of
$5,749 and $5,056, respectively) 57,555 49,761
Investment in joint ventures -- 1,871
Debt offering costs 4,392 4,790
Other 4,516 4,794
-------- --------
$331,460 $321,753
======== ========
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
- -----------------------------------------------------------------------
Current liabilities:
Short term borrowings and current portion of long-term debt $ 8,522 $ 10,719
Accounts payable 26,209 21,923
Accrued interest 4,321 4,033
Accrued insurance 1,879 2,095
Accrued salaries and wages 2,597 2,204
Accrued litigation costs 1,685 1,046
Income taxes payable 5,076 1,092
Other accrued expenses 10,037 9,357
-------- --------
Total current liabilities 60,326 52,469
Deferred income taxes 8,118 7,463
Long-term liabilities 1,623 1,649
Long-term debt, net of current portion 133,079 133,034
-------- --------
Total liabilities 203,146 194,615
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, without par value - 500,000 shares authorized;
322,500 shares issued and outstanding with a liquidation
preference of $32,250 13 13
Junior participating preferred stock, without par value --
50,000 shares authorized; 0 shares issued and outstanding -- --
Common Stock, without par value - 50,000,000 shares authorized;
21,929,211 and 21,598,658 shares issued and outstanding,
respectively 38,666 36,966
Additional paid-in capital 109,718 109,814
Cumulative translation adjustment (3,661) (1,953)
Accumulated deficit (16,422) (17,702)
-------- --------
128,314 127,138
-------- --------
$331,460 $321,753
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ICO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
---------------------------- --------------------------
1998 1997 1998 1997
--------- --------- ------- ------
<S> <C> <C> <C> <C>
Revenues:
Oilfield sales and services $28,251 $23,586 $ 54,471 $46,334
Petrochemical processing sales and services 42,751 21,707 82,095 35,480
------- ------- -------- -------
Total net revenues 71,002 45,293 136,566 81,814
------- ------- -------- -------
Cost and expenses:
Cost of sales and services 52,900 32,572 101,957 56,810
Selling, general and administrative 10,199 6,718 23,543 13,591
Non-recurring litigation charges -- -- 1,200 --
Depreciation and amortization 3,248 2,380 6,666 4,679
Goodwill amortization 359 228 696 430
Write-down of inventories -- -- 100 --
------- ------- -------- -------
66,706 41,898 134,162 75,510
------- ------- -------- -------
Operating income 4,296 3,395 2,404 6,304
------- ------- -------- -------
Other income and expense:
Gain on sale of equity investment -- -- 11,805 --
Interest income 1,072 56 2,157 236
Interest expense (3,470) (388) (6,965) (767)
Equity in income (loss) of joint ventures -- (4) -- 15
Other (35) (7) (4) 18
------- ------- -------- -------
(2,433) (343) 6,993 (498)
------- ------- -------- -------
Income before taxes 1,863 3,052 9,397 5,806
Provision for income taxes 769 1,320 4,623 2,227
------- ------- -------- -------
Net income $ 1,094 $ 1,732 $ 4,774 $ 3,579
======= ======= ======== =======
Preferred Dividends 544 544 1,088 1,088
------- ------- -------- -------
Net income applicable to common stock $ 550 $ 1,188 $ 3,686 $ 2,491
======= ======= ======== =======
Basic earnings per common and common
equivalent shares (see Note 2) $.03 $.06 $.17 $.12
======= ======= ======== =======
Diluted earnings per common and common
equivalent shares (see Note 2) $.03 $.06 $.17 $.12
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ICO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,774 $ 3,579
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 7,362 5,109
Gain on disposition of property, plant, and equipment (53) (23)
Gain on sale of equity investment (11,805) --
Writedown of inventories 100 --
Equity in income of joint ventures -- (15)
Changes in assets and liabilities, net of the effects
of business acquisitions:
Receivables (5,410) 911
Inventories (5,103) (1,775)
Prepaid expenses and other (933) 593
Income taxes payable 3,501 446
Deferred taxes 1,085 814
Accounts payable 3,553 1,236
Accrued interest 288 (20)
Accrued expenses (417) (3,123)
-------- --------
Total adjustments (7,832) 4,153
-------- --------
Net cash provided by (used for) operating activities (3,058) 7,732
-------- --------
Cash flows from investing activities:
Capital expenditures (12,054) (5,172)
Acquisitions, net of cash acquired (15,939) (6,843)
Disposition of equity investment 13,679 --
Dispositions of property, plant and equipment 2,128 43
-------- --------
Net cash used for investing activities (12,186) (11,972)
-------- --------
Cash flows from financing activities:
Net proceeds from sale of stock 1,046 244
Payment of dividend on preferred stock (1,088) (1,088)
Payment of dividend on common stock (2,406) (2,196)
Additional debt 773 3,656
Reductions of debt (2,446) (3,657)
-------- --------
Net cash used for financing activities (4,121) (3,041)
-------- --------
Effect of exchange rates on cash (54) --
-------- --------
Net decrease in cash and equivalents (19,419) (7,281)
Cash and equivalents at beginning of period 83,892 13,414
-------- --------
Cash and equivalents at end of period $ 64,473 $ 6,133
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
---------------------------
1998 1997
--------- --------
(In thousands)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash received (paid) during the period for:
Interest received 2,202 236
Interest paid (6,209) (777)
Income taxes paid (1,152) (860)
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with Rule 10-01 of Regulation S-X, "Interim Financial Statements,"
and accordingly do not include all information and footnotes required under
generally accepted accounting principles for complete financial statements. The
financial statements have been prepared in conformity with the accounting
principles and practices as disclosed in the Annual Report on Form 10-K for the
year ended September 30, 1997 for ICO, Inc. (the "Company"). In the opinion of
management, these interim financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position as of March 31, 1998, the
results of its operations for the three months and six months ended March 31,
1998 and 1997 and the changes in its cash position for the six months ended
March 31, 1998 and 1997. Results of operations for the three-month and six-
month period ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1998. For additional
information, refer to the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1997.
NOTE 2. EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
Earnings per share is based on earnings applicable to common shareholders and
is calculated using the weighted average number of common shares outstanding and
in accordance with SFAS 128, "Earnings per Share". During the first quarter of
fiscal 1998, the potentially dilutive effects of the Company's exchangeable
preferred stock and common stock options, with exercise prices exceeding fair
market value of the underlying common shares, have been excluded from diluted
earnings per share since these items have an anti-dilutive effect.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------
1998 1997
------------------------------- ----------------------------
(In thousands, except share data)
Income Shares Amount Income Shares Amount
------ ---------- ------ ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Income $1,094 $1,732
Less: Preferred stock dividends 544 544
------ ------
BASIC EPS
Income available to common
shareholders 550 21,839,831 $.03 1,188 20,908,819 $ .06
==== =====
EFFECT OF DILUTIVE SECURITIES
Options -- 49,996 -- 136,547
Warrants -- 26,457 -- 132,070
------ ---------- ------ ----------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions $ 550 21,916,284 $.03 $1,188 21,177,436 $ .06
====== ========== ==== ====== ========== =====
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
---------------------------------------------------------------
1998 1997
-------------------------------- ---------------------------
(In thousands, except share data)
Income Shares Amount Income Shares Amount
------- ---------- ------ ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Income $4,774 $3,579
Less: Preferred stock dividends 1,088 1,088
------ ------
BASIC EPS
Income available to common
shareholders 3,686 21,799,648 $.17 2,491 20,437,655 $ .12
==== =====
EFFECT OF DILUTIVE SECURITIES
Options -- 141,331 -- 151,679
Warrants -- 96,590 -- 133,034
------ ---------- ------ ----------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions $3,686 22,037,569 $.17 $2,491 20,722,368 $ .12
====== ========== ==== ====== ========== =====
</TABLE>
NOTE 3. ACQUISITIONS
On March 31, 1998 the Company acquired J.R. Courtenay (N.Z.) Ltd. ("JRC") and
its wholly owned subsidiary, Courtenay Polymers Pty. Ltd. ("CPPL"), for
$14,052,000 in cash and the assumption of approximately $814,000 in debt. The
purchase price is subject to adjustment following completion of an audit of the
acquired company's year end March 31, 1998 financial statements. The Company
will account for the acquisition using the purchase method of accounting and, as
such, the consolidated results of operations of JRC have not been included in
the Company's consolidated results for the six and three months ended March 31,
1998. JRC and CPPL are located in Auckland, New Zealand and Melbourne,
Australia, respectively, and are leading providers of polymer powders to the
rotational molding and metal coating industries in New Zealand and Australia.
These companies sell an extensive line of materials using proprietary
formulations under the Cotene brand name and also provide a complete range of
size reduction and compounding services.
During December 1997, the Company acquired the operating assets of Curley's
Inspection Service, Inc ("Curley's"). The consideration consisted of $2,000,000
and is subject to adjustment based upon future operating revenues. Curley's
provides drill pipe and casing inspection services from locations in Texas and
New Mexico.
The following unaudited pro forma information assumes the acquisition of JRC and
subsidiaries occurred as of the beginning of the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
1998 1997 1998 1997
-------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Revenues $76,464 $51,283 $147,363 $92,854
Net income 931 1,581 4,702 3,623
Basic earnings per share .02 .05 .17 .12
Diluted earnings per share $ .02 $ .05 $ .16 $ .12
</TABLE>
8
<PAGE>
NOTE 4. INVENTORIES
Inventories consisted of the following:
MARCH 31, 1998 SEPTEMBER 30, 1997
-------------- ------------------
(In thousands)
Finished Goods $10,305 $ 7,958
Raw Materials 12,714 9,023
Work in Progress 2,087 835
Supplies 3,389 2,893
------- -------
$28,495 $20,709
======= =======
NOTE 5. SUBSEQUENT EVENTS
On April 1, 1998, the registrant underwent a corporate restructuring to create a
holding company structure. The purpose of the reorganization was to improve
financial and internal operating flexibility. The reorganization was affected by
a holding company merger pursuant to which a new parent holding company was
created which owns the former publicly-held company. The restructuring did not
require action by the Company's shareholders whose rights, privileges and
interests will remain the same with respect to the new parent corporation. The
reorganization was a tax-free transaction for the registrant's common
shareholders. The Company's oilfield service business units will operate through
subsidiary corporations rather than as divisions of the parent company.
Otherwise, the business operations of the Company will not change as a result of
implementing the new legal structure. In the holding company merger, each share
of outstanding common stock of the former publicly-held company was exchanged
for a share of common stock of the new parent company. The name of the new
parent company is ICO, Inc. Existing ICO, Inc. common stock certificates will
remain in force and effect; no exchange of certificates will take place. The new
parent company will continue to be traded with the ticker symbol "ICOC" on the
Nasdaq National Market system. The CUSIP number for the Company's common stock
changed as a result of the reorganization and terms of the Company's 10 3/8%
Senior Notes due 2007 were unchanged .
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This material contains "Forward-Looking Statements" within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve substantial risks and uncertainties. When
words such as "anticipate", "believe", "estimate", intend", "expect", "plan" and
similar expressions are used, they are intended to identify the statements as
forward-looking. Actual results, performance or achievements can differ
materially from results suggested by these forward-looking statements. Also, see
exhibit 99 to the Company's fiscal 1997 Form 10-K dated December 29, 1997.
INTRODUCTION
- ------------
The Company's net revenues in recent years have increased due to a variety of
factors, including acquisitions and increased sales volumes in both existing and
acquired business lines.
The acquisition of Bayshore in December 1996 and the expansion of the Company's
distribution business within the petrochemical processing segment had the effect
of reducing overall petrochemical processing margins as a percentage of
revenues. The gross margin percentage for the distribution business and
Bayshore's business was generally significantly lower than those generated by
the Company's size reduction services because Bayshore typically buys raw
materials, improves the material and then sells the finished product. In
contrast, the Company's size reduction services typically involve processing
customer-owned material.
The Company's revenue is classified within two operating segments: oilfield
services and petrochemical processing. Oilfield services revenues include
revenues derived from (i) exploration sales and services (new tubular goods
inspection), (ii) production sales and services (reclamation, reconditioning and
inspection of used tubular goods and
9
<PAGE>
sucker rods), (iii) corrosion control services (coating of tubular goods and
sucker rods), and (iv) other sales and services (oilfield engine sales and
services in Canada). Petrochemical processing revenues include revenues derived
from (i) grinding petrochemicals into powders (size reduction), including other
ancillary services and the sale of grinding equipment manufactured by the
Company, (ii) compounding sales and services, which includes the manufacture and
sale of concentrates, and (iii) distributing plastic powders. Distribution
revenues primarily include the operating results of the ICO Polymers companies
and the distribution operations of Rotec and Verplast, all of which are wholly-
owned subsidiaries of the Company and operate in Europe. These operations
utilize the Company's size reduction and compounding facilities to process
petrochemical products prior to sale. Revenues, in each of the Company's
business segments, are recorded as the services are performed or, in the case of
product sales, upon shipment to third parties.
Cost of sales and services is primarily comprised of compensation and benefits
to non-administrative employees, occupancy costs, repair and maintenance,
electricity and equipment costs and supplies, and, in the case of Bayshore and
the Company's distribution business, purchased raw materials. Selling, general
and administrative expenses consist primarily of compensation and related
benefits to the sales and marketing, executive management, accounting, human
resources and other administrative employees of the Company, other sales and
marketing expenses, communications costs, systems costs, insurance costs and
legal and accounting professional fees.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The following are considered by management as key measures of liquidity
applicable to the Company:
MARCH 31, 1998 SEPTEMBER 30, 1997
-------------- ------------------
Cash and cash equivalents $64,473,000 $ 83,892,000
Working capital 99,296,000 110,289,000
Current ratio 2.6 3.1
Debt-to-capitalization .52 to 1 .53 to 1
Cash and cash equivalents decreased $19,419,000 during the six months ended
March 31, 1998 due to the factors described below.
The Company's working capital declined from $110,289,000 at September 30, 1997
to $99,296,000 at March 31, 1998 as a result of the factors described below.
For the six months ended March 31, 1998 cash provided by (used for) operating
activities decreased to $(3,058,000) compared to $7,732,000 for the six months
ended March 31, 1997. Despite higher net income and increased depreciation and
amortization expenses, the decrease occurred due to the gain on sale of the
WedTech equity investment (classified as an investing activity) and various
changes in working capital accounts (particularly changes in accounts
receivable, inventory, accounts payable and taxes payable).
Capital expenditures totaled $12,054,000 and $5,734,000 during the six and three
months ended March 31, 1998, respectively, of which $2,979,000 for the six
month period and $2,031,000 for the three month period related to the oilfield
services segment and the remaining $9,075,000 for the six month period and
$4,289,000 for the three month period related to the petrochemical processing
business. The expenditures were incurred primarily to enhance and expand
existing facilities as opposed to replacement of existing operating assets.
Specifically, $3,551,000 of the expenditures incurred during the six months
ended March 31, 1998 were used to expand the Company's Laporte, Texas
compounding facility. This project was completed in May 1998. The Company
anticipates that available cash and/or existing credit facilities will be
sufficient to fund remaining fiscal 1998 capital expenditure requirements.
Cash flows used for financing activities declined to uses of $(4,121,000) during
the six months ended March 31, 1998 compared to uses of $(3,041,000) during the
first six months of fiscal 1997. The decline was due primarily to increased
debt repayments, net of borrowings.
During the period commencing on October 1, 1995 and ended on March 31, 1998, the
Company has acquired eighteen businesses. These acquisitions were effected
through using available cash, the issuance of the Company's Common Stock and the
assumption of outstanding debt of the acquired business. The Company anticipates
it will continue to seek acquisitions in the future.
10
<PAGE>
As of April 30, 1998, the Company had approximately $25,694,000 of additional
borrowing capacity available under various credit arrangements. $15,000,000 is
available under the Company's domestic credit facility and the remaining is
available under various foreign facilities. Currently the Company has no
outstanding indebtedness under the domestic credit facility.
The Company issued 120,000,000 10 3/8% Senior Notes in June 1997 . The debt
matures June 1, 2007 and interest is payable on June 1 and December 1 of each
year beginning December 1, 1997.
RESULTS OF OPERATIONS
- ---------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
---------------------------------------- -----------------------------------
% of % of % of % of
NET REVENUES (000'S) 1998 Total 1997 Total 1998 Total 1997 Total
---------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exploration Sales and Services $10,667 38 $ 8,790 37 $ 20,394 37 $17,727 38
Production Sales and Services 9,401 33 8,218 35 18,339 34 15,870 34
Corrosion Control Sales and
Services 6,853 24 5,420 23 13,155 24 10,798 23
Other Sales and Services 1,330 5 1,158 5 2,583 5 1,939 5
------- --- ------- --- -------- --- ------- ---
Total Oilfield Services Revenues 28,251 100 23,586 100 54,471 100 46,334 100
------- ------- -------- -------
Size Reduction Services and
Other Sales and Services 12,977 30 10,685 49 26,156 32 21,371 60
Compounding Sales and Services 12,235 29 9,881 46 23,303 28 12,705 36
Distribution 17,539 41 1,141 5 32,636 40 1,404 4
------- --- ------- --- -------- --- ------- ---
Total Petrochemical Processing 42,751 100 21,707 100 82,095 100 35,480 100
------- ------- -------- -------
Total $71,002 $45,293 $136,566 $81,814
======= ======= ======== =======
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
---------------------------------------- -----------------------------------
% of % of % of % of
OPERATING PROFIT (000'S) 1998 Total 1997 Total 1998 Total 1997 Total
---------------------------------------- -----------------------------------
Oilfield Services $ 3,936 54 $ 2,968 62 $ 6,856 52 $ 6,321 67
Petrochemical Processing 3,393 46 1,838 38 5,425 48 3,160 33
------- --- ------- --- -------- --- ------- ---
Total Operations 7,329 100 4,806 100 12,281 100 9,481 100
General Corporate Expenses (3,033) (1,411) (9,877) (3,177)
------- ------- -------- -------
Total $ 4,296 $ 3,395 $ 2,404 $ 6,304
======= ======= ======== =======
</TABLE>
11
<PAGE>
Six and Three Months Ended March 31, 1998 Compared to Six and Three Months Ended
March 31, 1997
REVENUES.
- --------
Consolidated revenues increased $54,752,000 (67%) and $25,709,000 (57%) during
the six and three months ended March 31, 1998, respectively, as compared to the
same periods last year. These improvements were primarily due to the fiscal
1997 and 1998 acquisitions, however, internal growth within each of the
Company's business segments was also a contributing factor.
Oilfield service revenues increased $8,137,000 (18%) and $4,665,000 (20%) during
the six and three months ended March 31, 1998, respectively, compared to the
same periods in fiscal 1997.
Revenues from exploration services increased $2,667,000 (15%) and $1,877,000
(21%) from the six and three months ended March 31, 1997, respectively, compared
to the same periods of fiscal 1998. Demand for the Company's exploration
services is driven, in part, by the average domestic rig count which increased
15% and 12% during the six and three months ended March 31, 1998, respectively,
versus the comparable fiscal 1997 periods. Despite lower oil prices during
fiscal 1998 compared to fiscal 1997, revenues from production services increased
$2,469,000 (16%) and $1,183,000 (14%) for the six and three months ended March
31, 1998, respectively, compared to the same periods in fiscal 1997. Corrosion
control revenues increased $2,357,000 (22%) and $1,433,000 (26%) during the six
and three months ended March 31, 1998, respectively, compared to the same
periods of fiscal 1997. The revenue growth within each of the business lines
above resulted from increased volumes within most of the Company's oilfield
service facilities. Corrosion control services revenues also improved due to
the continued success of the Company's powdered coating products. Other sales
and services consist of revenues generated by the Company's Canadian subsidiary
relating to the reconditioning and selling of engines used in connection with
oil well pumping units. These revenues increased due to greater production
activity in Western Canada during fiscal 1998 versus the comparable fiscal 1997
periods.
Petrochemical processing revenues were $82,095,000 and $42,751,000 for the six
and three months ended March 31, 1998, respectively. These results represented
increases of $46,615,000 (131%) and $21,044,000 (97%), respectively, as compared
to the comparable fiscal 1997 periods. The revenue growth was driven by the
fiscal 1997 acquisitions, the establishment of the European distribution
operations and, to a lesser extent, internal growth.
Grinding services and other sales and services revenues were $26,156,000 and
$12,977,000 for the six and three months ended March 31, 1998, respectively,
compared to $21,371,000 and $10,685,000 for the same periods in fiscal 1997.
These results represented increases of $4,785,000 (22%) and $2,292,000 (21%),
respectively, and were primarily attributable to the Micronyl and Verplast
acquisitions in fiscal 1997, and to a lesser extent, internal growth.
Compounding revenues increased $10,598,000 (83%) and $2,354,000 (24%) during the
first six and three months of fiscal 1998, respectively. The increases to
$23,303,000 for the six months ended March 31, 1998 and to $12,235,000 for the
three months ended March 31, 1998 were primarily the result of the fiscal 1997
acquisitions, particularly the acquisition of Bayshore in December 1996.
Distribution revenues increased $31,232,000 to $32,636,000 during the first six
months of fiscal 1998, compared to the same period of fiscal 1997. During the
quarter ended March 31, 1998, these revenues increased $16,135,000 to
$17,539,000, compared to the same quarter of fiscal 1997. The increases are
primarily the result of the fiscal 1997 acquisitions of Rotec, Verplast and the
micropowders distribution business of Exxon Chemical Belgium and the
establishment of the European distribution operations, also in fiscal 1997.
COSTS AND EXPENSES
- ------------------
Gross profit (calculated as net revenues minus cost of sales) as a percentage of
revenues declined to 25.3% and 25.5% during the six and three months ended March
31, 1998, respectively, compared to 30.6% and 28.1%, of revenues, for the six
and three months ended March 31, 1997, respectively. The declines resulted
primarily from revenue growth within the petrochemical processing business
segment which, in the aggregate, generate lower gross profits as a percentage of
revenues. Within the oilfield services business, gross margins as a percentage
of revenues declined .5% to 30.1%, of revenues, during the six months ended
March 31, 1998, compared to the year earlier period and increased 1.4% to 31.4%,
of revenues, during the quarter ended March 31, 1998, compared to the quarter
ended March 31, 1997. The decline in oilfield service gross profit margins
during the six month period ended March 31, 1998, compared to the six months
ended March 31, 1997, resulted from weak first quarter fiscal 1998 results,
relative to the first quarter fiscal 1997, offset by strong second quarter
fiscal 1998 results, as compared to the second quarter of fiscal 1997. The
improvement of oilfield service gross profit margins during the three months
ended March 31, 1998, compared to the same period in fiscal 1997, was due to an
overall increase in sales volumes and modest price improvements within some
12
<PAGE>
of the Company's oilfield service markets, without a proportionate increase in
costs and expenses. Petrochemical gross profit margins declined to 22.0% and
21.6%, of revenues, during the six and three months ended March 31, 1998,
respectively, compared to 30.6% and 26.2%, of revenues, during the six and three
months ended March 31, 1997, respectively. The decline was primarily due to
significant increases in lower margin compounding and distribution revenues as a
percentage of total petrochemical processing revenues during fiscal 1998.
Generally, gross margins, as a percentage of revenues, of the Company's size
reduction operations are higher than the margins of the oilfield service
operations. Conversely, the gross margins of the Company's concentrate
manufacturing and distribution businesses are generally lower due to the higher
raw material cost component included in these revenues, as compared to the
Company's other petrochemical services.
Selling, general and administrative costs increased $9,952,000 (73%) and
$3,481,000 (52%) during the six and three months ended March 31, 1998,
respectively, as compared to the same periods of fiscal 1997. The overall
increases in these costs were primarily the result of acquisitions during fiscal
1997 and higher: bonus expenses, workers' compensation expenses, legal costs,
oilfield service expenses, corporate administrative costs and bad debt expenses
during the six and three months ended March 31, 1998, versus the same periods of
fiscal 1997. Selling, general and administrative costs as a percentage of
revenues increased to 17.2% and decreased to 14.4% during the six and three
months ended March 31, 1998, respectively, from 16.6% and 14.8% for the six and
three months ended March 31, 1997. The changes were the result of the increases
of selling, general and administrative expenses described above, offset by the
effect of increased distribution and compounding revenues. The Company's
distribution and compounding operations generate less selling, general and
administrative expenses, as a percentage of revenues, than the Company's other
services.
Non-recurring litigation charges of $1,200,000 were recognized during the first
quarter of fiscal 1998 as the Company determined that it was probable that
certain legal matters of the Company would likely result in a charge to income
and that these charges could be reasonably estimated.
Depreciation and amortization expense increased from $5,109,000 and $2,608,000
for the six and three months ended March 31, 1997, respectively, to $7,362,000
and $3,607,000 for the six and three months ended March 31, 1998. The increase
resulted from additions of property, plant and equipment and goodwill primarily
due to the acquisitions made during the year ended March 31, 1998.
OPERATING INCOME
- ----------------
Operating income changed from $6,304,000 and $3,395,000 for the six and three
months ended March 31, 1997, respectively, to $2,404,000 and $4,296,000 for the
same periods of fiscal 1998, respectively. The fluctuations were due to the
changes in revenues and costs and expenses discussed above. Bonus expenses of
$1,300,000 and non-recurring litigation charges, described above increased
corporate operating expenses during the first quarter of fiscal 1998. The
bonuses were paid to over 300 salaried employees and over 500 hourly employees.
GAIN ON SALE OF EQUITY INVESTMENT
- ---------------------------------
During the first quarter of fiscal 1998, the Company recognized a pretax gain
of $11,805,000 on the sale of the Company's 50% equity ownership in WedTech Inc.
The Company received cash of $14,484,000 and recorded an after tax gain of
$6,684,000 on the sale.
INTEREST INCOME/EXPENSE
- -----------------------
Net interest expense was $4,808,000 and $2,398,000 during the six and three
months ended March 31, 1998, respectively. For the six and three months ended
March 31, 1997, the Company had net interest expense of $531,000 and $332,000,
respectively. This change was the result of the June 1997 issuance of
$120,000,000 10 3/8% Senior Notes and, to a lesser extent, debt assumed in
connection with the fiscal 1997 acquisitions.
INCOME TAXES
- ------------
The Company's effective income tax increased to 49.2% during the six months
ended March 31, 1998, compared to 38% during the six months ended March 31,
1997. During the second quarter of fiscal 1998, the Company's effective rate
13
<PAGE>
declined to 41.3% from 43.3% during the same quarter of fiscal 1997. The year-
to-date increase was primarily the result of the sale of the Company's equity
investment in WedTech which created tax expense equal to 43% of the pre-tax
gain. The effective income tax rate decline during the second quarter of fiscal
1998 in comparison to the second quarter of fiscal 1997 was due, in part, to a
decline of Italian income tax rates. Generally, the Company's overall tax rate
varies depending upon the mixture of pre-tax income generated by the Company's
operations in various taxing jurisdictions.
NET INCOME
- ----------
For the six and three months ended March 31, 1998, the Company had net income of
$4,774,000 and $1,094,000, respectively, as compared to net income of $3,579,000
and $1,732,000 for the same periods in fiscal 1997, due to the factors described
above.
FOREIGN CURRENCY TRANSLATION
- ----------------------------
The fluctuations of the U.S. dollar against the Dutch guilder, Swedish krona,
British pound, Italian lira, Canadian dollar and the French franc have impacted
the translation of the Company's results of operations during fiscal 1998 and
1997. The table below summarizes the impact of foreign currency fluctuations
during the six and three months ended March 31, 1998 compared to the exchange
rates used to translate the operating results of the six and three months ended
March 31, 1997.
SIX MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1998
---------------- ------------------
Net Revenues (1,767,000) (915,000)
Operating Income (185,000) (125,000)
Pre-tax Income (166,000) (116,000)
Net Income (103,000) (79,000)
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a named defendant in 9 cases involving 9 plaintiffs, for personal
injury claims alleging exposure to silica resulting in silicosis-related
disease. The Company is generally protected under worker's compensation law from
claims under these suits except to the extent a judgment is awarded against the
Company for intentional tort. In fiscal 1993, the Company settled two other
suits, both of which alleged wrongful death caused by silicosis-related
diseases, which resulted in a total charge of $605,000. In 1994, the Company was
dismissed without liability from two suits alleging intentional tort against the
Company for silicosis-related disease. In 1996, the Company obtained a non-suit
in two other intentional tort cases and in early 1997 was non-suited in an
additional tort case. During the second quarter of fiscal 1998, three cases
involving alleged silicosis-related deaths were settled. The Company was fully
insured for all three cases and, as a result, did not incur any settlement
costs. The Company currently has no pending cases in which wrongful death is
alleged. Also, during the second quarter of fiscal 1998, the Company was non-
suited in an intentional tort case, and the court approved the non-suit of the
Company in a second intentional tort. Final documentation is currently pending
in the latter case. The standard of liability applicable to all of the
Company's pending cases is intentional tort, a stricter standard than the gross
negligence standard applicable to the wrongful death cases. The Company and its
counsel cannot at this time predict with any reasonable certainty the outcome of
any of the remaining suits or whether or in what circumstances additional suits
may be filed. Except as described below, the Company does not believe, however,
that such suits will have a material adverse effect on its financial condition,
results of operations or cash flows. The Company has in effect in some instances
general liability and employer's liability insurance policies applicable to the
referenced suits; however, the extent and amount of coverage is limited and the
Company has been advised by certain insurance carriers of a reservation of
rights with regard to policy obligations pertaining to the suits because of
various exclusions in the policies. If an adverse judgment is obtained against
the Company 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, results of operations and/or cash
flows of the Company.
14
<PAGE>
The Company's agreement with Baker Hughes, Incorporated ("Baker Hughes"),
pursuant to which Baker Hughes Tubular Services ("BHTS") was acquired by the
Company, provides that Baker Hughes will reimburse the Company for 50% of the
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 ("CERCLA"). Under CERCLA, persons who were
responsible for generating the hazardous waste disposed of at a site where
hazardous substances are being released into the environment are jointly and
severally liable for the costs of cleaning up environmental contamination, and
it is not uncommon for neighboring landowners and other third parties to file
claims for personal injuries and property damage allegedly caused by hazardous
substances released into the environment. The two sites where BHTS is a
responsible party are the French Limited site northeast of Houston, Texas, and
the Sheridan site near Hempstead, Texas. Remediation of the French Limited site
has been completed, with only natural attenuation of contaminants in groundwater
occurring at this time. Remediation has not yet commenced at the Sheridan site;
current plans for cleanup of the site as set forth in the federal Record of
Decision, for cleanup of the site call for on-site bioremediation of the soils
in tanks and natural attenuation of contaminants in the groundwater. However,
treatability studies to evaluate possible new remedies for the soils, such as
in-place bioremediation, are being conducted as part of a Remedial Technology
Review Program. Based on the completed status of the remediation at the French
Limited site and BHTS's minimal contribution of wastes at both of the sites, the
Company believes that its future liability under the agreement with Baker Hughes
with respect to these two sites will not be material.
During December 1996, an agreement was signed by the Company and Baker Hughes to
settle the litigation of a dispute concerning the assumption of certain
liabilities in connection with the acquisition of BHTS in 1992. The agreement
stipulates that with regard to future occupational health claims, the parties
shall share costs equally with the Company's obligations being limited to
$500,000 for each claim and a maximum contingent liability of $4,500,000 (net of
current accruals) in the aggregate, for all claims.
On November 21, 1997, a Texas state court jury awarded the Company approximately
$13 million in the trial of its case against John Wood Group PLC relating to the
1994 contract for the purchase of the operating assets of NDT Systems, Inc. and
certain related entities. The court subsequently entered a judgment for
$15,750,000 in ICO's favor. This amount includes pre-judgment interest on the
jury award. The Company may also be entitled to post-judgment interest. This
gain has not been reflected in the Company's operating results. The Company was
represented on a contingency fee basis, and its attorneys will receive a portion
of the amount awarded to the Company.
Wedco is a plaintiff and a counterclaim defendant and the Company is a third
party defendant in a lawsuit filed by Wedco against Polyvector Corporation
("Polyvector") and John Lefas ("Lefas"), the principal shareholder of
Polyvector, which is pending in the federal district court for the District of
New Jersey. An action is also pending in the Ontario Court, General Division.
Wedco alleges, among other things, that the various defendants have breached the
terms of the shareholders' agreement among Wedco and the defendants and seeks
performance of the terms of such agreement. WedTech, Polyvector and Lefas have
asserted various counterclaims and third party claims against the Company
allegedly arising out of the Company's merger with Wedco and the conduct of
WedTech's affairs under the shareholders' agreement. The defendants are seeking,
among other things, reimbursement for alleged damages. On January 16, 1998,
Polyvector finalized its purchase of Wedco's 50% ownership interest in WedTech
for CDN $20.8 million. Initial discovery is to start in the New Jersey action
later this year. The outcome of this litigation cannot be predicted, but the
Company believes it has meritorious defenses to the counterclaims and third
party claims.
Permian Enterprises, Inc. ("Permian") a wholly-owned subsidiary of the Company,
is a defendant in a case filed by Tidelands Oil Production Company ("Tidelands")
pending in the Superior Court of Los Angeles County, California (Long Beach
division) alleging Permian is liable for damages exceeding $1.1 million, plus
interest, suffered by Tidelands and third parties resulting from the failure of
a pipe owned by Tidelands and which was allegedly lined by Permian. Discovery in
this case is ongoing, and a jury trial in the case is currently scheduled for
1998. The outcome of this litigation cannot be predicted, but the Company
believes Permian has meritorious defenses in this matter.
The Company is also named as a defendant in certain lawsuits arising in the
ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, ICO does not expect these matters to have a material
adverse effect on its financial condition, cash flows or results of operations.
15
<PAGE>
ITEM 2. CHANGES IN SECURITIES
The Company's agreement relating to the Senior Notes due 2007 restricts the
Company's ability to pay dividends on preferred and common stock. The terms of
the Senior Notes, however, do allow for dividend payments on currently
outstanding preferred stock, in accordance with the terms of the preferred
stock, and up to $.22 per share, per annum on common stock in the absence of any
default or event of default on the Senior Notes. The above limitations may not
be decreased, but may be increased based upon the Company's results of
operations and other factors.
During the quarter ended March 31, 1998, the Company issued the following
unregistered common shares which were exempt pursuant to Section 4(2) of the
Securities Act of 1933:
Number of Shares
Date of Common Stock Transaction
---- ---------------- -----------
March 12,1998 114,917 Issued in exchange for $562,000 of
debt which was payable upon demand.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on March 6, 1998 for
the following purposes:
1) To elect three Class I Directors to serve until the 2001 Annual Meeting of
Shareholders and until their respective successors are elected and
qualified;
2) To approve the ICO, Inc. 1998 Stock Option Plan;
3) To ratify and approve the selection of Price Waterhouse LLP as the
Company's independent accountants for the ensuing fiscal year; and
4) To consider and act upon any matters incidental to the foregoing purposes
and transact such other business as may properly come before the meeting or
any adjournment thereof.
Holders of shares of Common Stock of record on the books of the Company at the
close of business on January 16, 1998 were entitled to vote at the meeting.
William E. Cornelius, Robin E. Pacholder, and George S. Sirusas were elected as
Class I Directors at the annual meeting with 19,117,695; 18,914,528; and
19,117,769 votes for; and 861,700; 1,064,867; and 861,626 votes withheld,
respectively. There were zero votes against and zero abstentions.
The ICO, Inc. 1998 Stock Option Plan was approved by the following vote:
18,463,762 votes for, 1,284,489 votes against, 125,890 abstentions, and 105,254
votes withheld.
The selection of Price Waterhouse LLP as the Company's auditors for the 1998
fiscal year was approved by the following vote: 19,826,538 votes for, 25,903
votes against, 24,701 abstentions and 105,253 votes withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On April 15, 1998 the Company filed a Form 8-K Current Report regarding the
acquisition of J.R. Courtenay (N.Z.) Ltd.
On April 16, 1998 the Company filed a Form 8-K Current Report regarding the
restructuring of the Company.
16
<PAGE>
The following instruments and documents are included as Exhibits to
this Form 10-Q. Exhibits incorporated by reference are so indicated by
parenthetical information.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------------------------------------------------
<C> <S>
2.1 -- Share Purchase Agreement between Rotec Chemicals Ltd. and the Registrant (filed as Exhibit 99.2 to
Form 8-K dated May 12, 1997)
2.2 -- Framework Agreement and Stock Sale & Purchase Agreements dated July 21, 1997 among ICO, Inc.,
Wedco Italy, S.p.A. (a wholly owned subsidiary of the Company), DARAC's S.p.A., Mr. Francesco Panzini,
and Mr. Massimo Viviani (filed as Exhibit 2 to Form 8-K dated August 5, 1997 )
2.3 -- Agreement for sale & purchase of all the share capital of J.R. Courtenay (N.Z.) Ltd. dated March 20, 1998
among ICO, Inc., ICO Technology, Inc. (a wholly owned subsidiary of the Company), Mr. J. R. Courtenay,
Mr. Dario Masutti and Mr. R. Narev and Mr. J. R. Courtenay, together as trustees.
(Filed as Exhibit 2 to Form 8-K dated April 15, 1998)
3.1 -- Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 4 to Form S-3
dated September 13, 1993)
3.2 -- By-Laws of the Company (filed as Exhibit 3(ii) to Form 10-Q for the quarter ended June 30, 1996)
4.1 -- Indenture dated as of June 9, 1997 between the Company, as issuer, and Fleet National Bank, as
trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.1 to Form S-4 dated June 17, 1997)
4.2** -- First Supplemental Indenture and Amendment dated April 1,1998 between the Company, as
issuer, and State Street and Trust Company (formerly Fleet National Bank), as trustee, relating to
Senior Notes due 2007.
4.3** -- Second Supplemental Indenture and Amendment dated April 1, 1998 between ICO P&O, Inc., a
wholly owned subsidiary of the Registrant, and State Street and Trust Company (formerly Fleet
National Bank), as trustee, relating to Senior Notes due 2007.
4.4 -- Warrant Agreement -- Series A, dated as of September 1, 1992, between the Registrant and
Society National Bank (filed as Exhibit 4 of the Registrant's Annual Report on Form 10-K for
1992)
4.5 -- Stock Registration Rights Agreement dated April 30, 1996 by and between the Company, a
subsidiary of the company and the Wedco Shareholders Group, as defined (filed as Exhibit 4.4 to
Form S-4 dated May 15, 1996)
4.6 -- Shareholders' Rights Agreement dated November 20, 1997 by and between the Company and
Harris Trust and Savings Bank, as rights agent (filed as Exhibit 1 to Form 8-A dated December 22,
1997.)
4.7** -- Shareholder Rights Agreement dated April 1, 1998 by and between the Registrant and Harris Trust
and Savings Bank, as rights agent.
10.1 -- Amended and Restated Business Loan Agreement dated February 21, 1997 between the Registrant
and Bank of America, Texas, N.A. (filed as Exhibit 10 to Form 10-Q dated May 14, 1997)
10.2 -- Substituted First Amendment to Amended and Restated Business Loan Agreement by and between
the Company and Bank of America Texas, N.A. dated June 6, 1997 (filed as Exhibit 10 to Form
10-Q dated August 14, 1997)
10.3 -- Second Amendment to Amended and Restated Business Loan Agreement between the Registrant
and Bank of America, Texas, N.A. dated August 29, 1997 (filed as Exhibit 10.3 to Form S-4 dated
October 3, 1997)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------------------------------------------------
<C> <S>
10.4 -- ICO, Inc. 1985 Stock Option Plan, as amended (filed as Exhibit B to the Registrant's Definitive
Proxy Statement dated April 27, 1987 for the Annual Meeting of Shareholders)
10.5 -- 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc. (filed as Exhibit 99 to the
Registrant's Form S-8 dated September 1,3 1993)
10.6 -- 1994 Stock Option Plan of ICO, Inc. (filed as Exhibit A to Registrant's Definitive Proxy
Statement dated June 24, 1994 for the Annual Meeting of Shareholders)
10.7 -- ICO, Inc. 1995 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement
dated August 10, 1995 for the Annual Meeting of Shareholders)
10.8 -- ICO, Inc. 1996 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement
dated August 29, 1996 for the annual Meeting of Shareholders)
10.9 -- ICO, Inc. 1998 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement
dated January 23, 1998 for the annual Meeting of Shareholders)
10.10 -- Willoughby International Stockholders Agreement dated April 30, 1996 (filed as Exhibit 10.9 to
Form S-4 dated May 15, 1996)
10.11 -- Consulting Agreement -- William E. Willoughby (filed as Exhibit 10.13 to Form S-4 dated
May 15, 1996)
10.12 -- Salary Continuation Agreement -- William E. Willoughby (filed as Exhibit 10.14 to Form S-4
dated May 15, 1996)
10.13 -- Addendum to Salary Continuation Agreement -- William E. Willoughby (filed as Exhibit 10.15 to
form S-4 dated May 15, 1996)
10.14 -- Non-Competition Covenant William E. Willoughby (filed as Exhibit 10.11 to Form S-4 dated
May 15, 1996)
10.15 -- Stockholders Agreement respecting voting of shares of certain former Wedco common
shareholders (filed as Exhibit 10.21 to Form S-4 dated May 15, 1996)
10.16 -- Stockholders Agreement respecting voting of shares of certain ICO common shareholders
(filed as Exhibit 10.22 to Form S-4 dated May 15, 1996)
10.17 -- Employment Agreement dated April 1, 1995 by and between the Registrant and Asher O.
Pacholder and amendments thereto (filed as Exhibit 10.16 to Form 10-K dated December 29, 1997)
10.18 -- Employment Agreement dated April 1, 1995 by and between the Registrant and Sylvia A.
Pacholder and amendments thereto (filed as Exhibit 10.17 to Form 10-K dated December 29, 1997).
21 -- Subsidiaries of the Company (filed as Exhibit 21 to Form 10-K dated December 29, 1997).
27** -- Financial Data Schedule
99 -- Safe Harbor Disclosure (filed as Exhibit 99 to Form 10-K dated December 29, 1997).
</TABLE>
__________________
** Filed herewith
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ICO, Inc.
----------------------------------
(Registrant)
/s/ Asher O. Pacholder
---------------------------------
May 14, 1998 Asher O. Pacholder
Chairman and Chief Financial Officer
(Principal Financial Officer)
/s/ Jon C. Biro
---------------------------------
Jon C. Biro
Senior Vice President and Treasurer
(Principal Accounting Officer)
19
<PAGE>
==============================================================================
Exhibit 4.2
ICO, INC.
and
the Additional Obligor named herein
________________________________________
SERIES A AND SERIES B
10 3/8% SENIOR NOTES DUE 2007
________________________________________
___________________
FIRST SUPPLEMENTAL INDENTURE
AND AMENDMENT
DATED AS OF APRIL 1, 1998
___________________
STATE STREET BANK AND TRUST COMPANY
(formerly Fleet National Bank)
Trustee
___________________
===============================================================================
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE, dated as of April 1, 1998, is among
ICO, Inc., a Texas corporation (the "Company"), the party identified under the
caption "Additional Obligor" on the signature page hereto (the "Additional
Obligor") and State Street Bank and Trust Company (formerly Fleet National
Bank), as Trustee.
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated as
of June 9, 1997 (the "Indenture"), pursuant to which the Company has originally
issued $120,000,000 in principal amount of 10 3/8% Senior Notes due 2007 (the
"Notes"); and
WHEREAS, Section 9.1 of the Indenture provides that the Company and the
Trustee may amend or supplement the Indenture in order to make any change that
would provide any additional rights or benefits to the Holders of the Notes
without the consent of the Holders of the Notes; and
WHEREAS, the Additional Obligor has agreed to assume and become liable
as an additional obligor with respect to all the Obligations of the Company
under the Notes and the Indenture; and
WHEREAS, all acts and things prescribed by the Indenture, by law and by
the Articles of Incorporation and the Bylaws (or comparable constituent
documents) of the Company, of the Additional Obligor and of the Trustee
necessary to make this First Supplemental Indenture a valid instrument legally
binding on the Company, the Additional Obligor and the Trustee, in accordance
with its terms, have been duly done and performed;
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Additional Obligor and the
Trustee covenant and agree for the equal and proportionate benefit of the
respective Holders of the Notes as follows:
ARTICLE 1
Section 1.01. This First Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be construed
in connection with and as part of, the Indenture for any and all purposes.
Section 1.02. This First Supplemental Indenture shall become effective
immediately upon its execution and delivery by each of the Company, the
Additional Obligor and the Trustee.
ARTICLE 2
From this date, in accordance with Section 9.1 and by executing this
First Supplemental Indenture, the Additional Obligor whose signature appears
below agrees, as an additional obligor, to be responsible for and to pay all the
Obligations of the Company under the Notes and the Indenture to the same extent
as though the Additional Obligor were an original signatory thereto.
<PAGE>
ARTICLE 3
Section 3.01. Except as specifically modified herein, the Indenture and
the Notes are in all respects ratified and confirmed (mutatis mutandis) and
shall remain in full force and effect in accordance with their terms with all
capitalized terms used herein without definition having the same respective
meanings ascribed to them as in the Indenture.
Section 3.02. Except as otherwise expressly provided herein, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this First Supplemental Indenture. This
First Supplemental Indenture is executed and accepted by the Trustee subject to
all the terms and conditions set forth in the Indenture with the same force and
effect as if those terms and conditions were repeated at length herein and made
applicable to the Trustee with respect hereto.
Section 3.03. THIS FIRST SUPPLEMENTAL INDENTURE AND THE NOTES AND THE
GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
FIRST SUPPLEMENTAL INDENTURE, THE NOTES OR THE GUARANTEES.
Section 3.04. The parties may sign any number of copies of this First
Supplemental Indenture. Each signed copy shall be an original, but all of such
executed copies together shall represent the same agreement.
[NEXT PAGE IS SIGNATURE PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, all as of the date first written
above.
ICO, INC.
By /s/ Robin E. Pacholder
-------------------------------------
Name: Robin E. Pacholder
Title: Senior Vice President and
General Counsel
ADDITIONAL OBLIGOR
ICO HOLDINGS, INC.
By /s/ Robin E. Pacholder
------------------------------------
Name: Robin E. Pacholder
Title: Senior Vice President and
General Counsel
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By /s/ Dennis Fisher
----------------------------------
Name: Dennis Fisher
Title: Assistant Vice President
<PAGE>
===============================================================================
Exhibit 4.3
ICO P&O, INC.
(formerly ICO, Inc.)
(a Delaware corporation),
the Additional Obligor named herein
and
the Successor named herein
________________________________________
SERIES A AND SERIES B
10 3/8% SENIOR NOTES DUE 2007
________________________________________
___________________
SECOND SUPPLEMENTAL INDENTURE
AND AMENDMENT
DATED AS OF APRIL 1, 1998
___________________
STATE STREET BANK AND TRUST COMPANY
(formerly Fleet National Bank)
Trustee
___________________
===============================================================================
<PAGE>
This SECOND SUPPLEMENTAL INDENTURE, dated as of April 1, 1998, is among
ICO P&O, Inc., a Texas corporation and formerly ICO, Inc. (the "Company"), the
party identified under the caption "Guarantor" on the signature page hereto (the
"Additional Obligor"), the party identified under the caption "Successor" on the
signature page hereto (the "Successor") and State Street Bank and Trust Company
(formerly Fleet National Bank), as Trustee .
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated as
of June 9, 1997 (the "Indenture"), pursuant to which the Company has originally
issued $120,000,000 in principal amount of 10 3/8% Senior Notes due 2007 (the
"Notes"), and the Additional Obligor, pursuant to a First Supplemental Indenture
dated April 1, 1998, has assumed and agreed to pay as an additional obligor all
the Obligations of the Company under the Notes and the Indenture; and
WHEREAS, all conditions precedent set forth in the Indenture to the
execution and delivery of this Second Supplemental Indenture, including without
limitation the conditions of Section 5.1 of the Indenture, have been complied
with. Specifically, (i) the Successor is a corporation organized and existing
under the laws of the State of Delaware; (ii) pursuant to this Second
Supplemental Indenture, the Successor is assuming all of the Company's
Obligations under the Notes and the Indenture; (iii) immediately before and
immediately after giving effect to the Merger (including any Indebtedness
incurred or anticipated to be incurred in connection with the Merger) no Default
or Event of Default shall have occurred and be continuing; (iv) the Consolidated
Net worth of the Successor is equal or greater than the Consolidated Net Worth
of the Company immediately preceding the Merger; and (v) immediately after
giving pro forma effect to the Merger as if the Merger had been made at the
beginning of the applicable Reference Period, the Successor would have been
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of Section 4.8 of the
Indenture; and
WHEREAS, Section 9.1 of the Indenture provides that the Company and the
Trustee may amend or supplement the Indenture in order to comply with Article 5
thereof without the consent of the Holders of the Notes; and
WHEREAS, the Company is merging with and into ICO P&O, Inc., a Delaware
corporation ("P&O Delaware"), with P&O Delaware to be the surviving corporation
in the Merger (the "Successor" or "P&O"), and P&O intends to expressly assume
all the Obligations of the Company under the Notes and the Indenture pursuant to
this Second Supplemental Indenture; and
WHEREAS, all acts and things prescribed by the Indenture, by law and by
the Articles of Incorporation and the Bylaws (or comparable constituent
documents) of the Company, of the Additional Obligor, of the Successor and of
the Trustee necessary to make this Second Supplemental Indenture a valid
instrument legally binding on the Company, the Additional Obligor, the Successor
and the Trustee, in accordance with its terms, have been duly done and
performed;
<PAGE>
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Additional Obligor, the
Successor and the Trustee covenant and agree for the equal and proportionate
benefit of the respective Holders of the Notes as follows:
ARTICLE 1
Section 1.01. This Second Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be construed
in connection with and as part of, the Indenture for any and all purposes.
Section 1.02. This Second Supplemental Indenture shall become effective
immediately upon its execution and delivery by each of the Company, the
Additional Obligor, the Successor and the Trustee.
ARTICLE 2
From this date, in accordance with Section 9.1 and by executing this
Second Supplemental Indenture, the Successor whose signature appears below
hereby expressly assumes all the Obligations of the Company under the Notes and
the Indenture as fully as though the Successor is the Company named therein and
agrees that it is subject to the provisions of the Indenture to the extent
provided for in Section 5.2 thereunder.
ARTICLE 3
Section 3.01. Except as specifically modified herein, the Indenture and
the Notes are in all respects ratified and confirmed (mutatis mutandis) and
shall remain in full force and effect in accordance with their terms with all
capitalized terms used herein without definition having the same respective
meanings ascribed to them as in the Indenture.
Section 3.02. Except as otherwise expressly provided herein, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this Second Supplemental Indenture. This
Second Supplemental Indenture is executed and accepted by the Trustee subject to
all the terms and conditions set forth in the Indenture with the same force and
effect as if those terms and conditions were repeated at length herein and made
applicable to the Trustee with respect hereto.
Section 3.03. THIS SECOND SUPPLEMENTAL INDENTURE AND THE NOTES AND THE
GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SECOND SUPPLEMENTAL INDENTURE, THE NOTES OR THE GUARANTEES.
<PAGE>
Section 3.04. The parties may sign any number of copies of this Second
Supplemental Indenture. Each signed copy shall be an original, but all of such
executed copies together shall represent the same agreement.
[NEXT PAGE IS SIGNATURE PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed, all as of the date first written above.
ICO P&O, INC., a Texas corporation
By /s/ Robin E. Pacholder
----------------------------------------
Name: Robin E. Pacholder
Title: Senior Vice President and
General Counsel
ADDITIONAL OBLIGOR
ICO, INC., a Texas corporation
(formerly ICO Holdings, Inc.)
By /s/ Robin E. Pacholder
----------------------------------------
Name: Robin E. Pacholder
Title: Senior Vice President and
General Counsel
SUCCESSOR
ICO P&O, INC., a Delaware corporation
(successor to ICO P&O, Inc. (Texas)
in the merger described herein)
By /s/ Brad Leuschner
-----------------------------------------
Name: Brad Leuschner
Title: President
STATE STREET BANK AND
TRUST COMPANY, as Trustee
By /s/ Dennis Fisher
---------------------------------------
Name: Dennis Fisher
Title: Assistant Vice President
<PAGE>
Exhibit 4.7
===================================================================
Rights Agreement
between
ICO, INC.
AND
HARRIS TRUST & SAVINGS BANK
April 1, 1998
===================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Section 1. Certain Definitions..................................................... 1
Section 2. Appointment of Rights Agent............................................. 6
Section 3. Issue of Right Certificates............................................. 6
Section 4. Form of Right Certificates.............................................. 7
Section 5. Execution, Authentication and Delivery.................................. 8
Section 6. Registration, Registration of Transfer and Exchange..................... 9
Section 7. Mutilated, Destroyed, Lost and Stolen Right Certificates................ 10
Section 8. Exercise of Rights; Purchase Price; Expiration Date of Rights........... 10
Section 9. Cancellation and Destruction of Right Certificates...................... 11
Section 10. Reservation and Availability of Shares................................. 11
Section 11. Record Date............................................................ 12
Section 12. Adjustment of Purchase Price, Number of Shares or Number of Rights..... 12
Section 13. Certificate of Adjusted Purchase Price or Number of Shares............. 18
Section 14. Consolidation, Merger or Sale or Transfer of Assets or Earning Power... 18
Section 15. Fractional Rights and Fractional Shares................................ 19
Section 16. Rights of Action....................................................... 20
Section 17. Agreement of Right Holders............................................. 21
Section 18. Right Certificate Holder Not Deemed a Stockholder...................... 21
Section 19. Concerning the Rights Agent............................................ 21
Section 20. Duties of Rights Agent................................................. 22
Section 21. Merger or Consolidation or Change of Name of Rights Agent.............. 24
Section 22. Change of Rights Agent................................................. 25
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 23. Issuance of New Right Certificates..................................... 25
Section 24. Redemption............................................................. 25
Section 25. Mandatory Redemption and Exchange...................................... 26
Section 26. Notice of Certain Events............................................... 27
Section 27. Securities Laws Registrations.......................................... 28
Section 28. Notices................................................................ 28
Section 29. Supplements and Amendments............................................. 29
Section 30. Successors............................................................. 29
Section 31. Benefits of this Agreement............................................. 30
Section 32. Severability........................................................... 30
Section 33. Governing Law.......................................................... 30
Section 34. Counterparts........................................................... 30
Section 35. Descriptive Headings................................................... 30
</TABLE>
Exhibits
- --------
Exhibit A -- Certificate of Designation of Preferred Shares
Exhibit B -- Right Certificate
Exhibit C -- Summary of Rights
-ii-
<PAGE>
RIGHTS AGREEMENT
This Rights Agreement, dated as of April 1, 1998, is between ICO, Inc., a
Texas corporation, formerly ICO Holdings, Inc. (the "Company"), and Harris Trust
& Savings Bank, a national banking association, as Rights Agent.
WHEREAS, the Board of Directors of the Company, having determined its
actions to be in the interests of the Company, has authorized the creation of
Rights, has authorized and directed the issuance to the Holders of record of
Common Shares of the Company outstanding on April 1, 1998 of one Right with
respect to each Common Share of the Company outstanding on April 1, 1998, and
has further authorized and directed the issuance of one Right with respect to
each Common Share that shall become outstanding between April 1, 1998 and the
earlier of the Distribution Date, the Redemption Date and the Final Expiration
Date; and
WHEREAS, the Board of Directors of the Company has authorized and directed
that the terms and conditions under which the Rights are to be distributed,
including without limitation those affecting the exercise thereof, the
securities or other property to be acquired thereby and the purchase price to be
paid therefor, shall be set forth in a written agreement between the Company and
a rights agent made for the benefit of the holders of the Rights to the extent
so provided therein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Voting Shares of the Company then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any
trustee of or fiduciary with respect to any such plan when acting in such
capacity. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Voting Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or
more of the Voting Shares of the Company then outstanding; provided,
however, that, if a Person shall become the Beneficial Owner of 15% or more
of the Voting Shares of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the
Company and at a time when such Person is the Beneficial Owner of 15% or
more of the Voting Shares of the Company then outstanding, become the
Beneficial Owner of any additional Voting Shares of the Company, then such
Person shall be deemed to be an "Acquiring Person". Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an "Acquiring Person", as
defined pursuant to the foregoing provisions of this paragraph (a), has
become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would
no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this
-1-
<PAGE>
paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
"Agreement" shall mean this Rights Agreement as hereafter amended from
time to time.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "own beneficially" any securities which (without duplication):
(i) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly, within the meaning of either
Section 13 or 16 of the Exchange Act;
(ii) such Person or any of such Person's Affiliates or Associates has
(A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; or (B) the right to vote pursuant to any agreement, arrangement
or understanding; or
(iii) are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting or disposing of any securities of the
Company; provided, however, that, for purposes of each clause of this
definition, a Person shall not be deemed the Beneficial Owner of, or to own
beneficially, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; and provided, further, that, for purposes of each clause of this
definition, a Person shall not be deemed the Beneficial Owner of, or to own
beneficially, any security as a result of any agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor
report).
Notwithstanding anything in this definition to the contrary, the
phrase "then outstanding", when used with reference to a Person's
Beneficial Ownership of securities of the Company (or to the number of such
securities "beneficially owned"), shall mean the
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<PAGE>
number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which
such Person would be deemed to own beneficially hereunder.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of Texas or Illinois are
authorized or obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 P.M., Houston or
Chicago time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Houston or Chicago time, on the next
succeeding Business Day.
"Closing Price", with respect to any security, shall mean the last
sale price, regular way, on a specific Trading Day or, in case no such sale
takes place on such Trading Day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if such security
is not then listed or admitted to trading on the New York Stock Exchange,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which such security is listed or admitted to trading or, if such
security is not then listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System or such other system then in use, or, if on any
such Trading Day such security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such security selected by the Board of
Directors of the Company. If such security is not publicly held or so
listed or traded, "Closing Price" shall mean the fair value per unit of
such security as determined in good faith by the Board of Directors of the
Company, whose determination shall be described and the Closing Price set
forth in a statement filed with the Rights Agent.
"Common Shares" when used with reference to the Company shall mean
shares of capital stock of the Company which have no preference over any
other class of stock with respect to dividends or assets, which are not
redeemable at the option of the Company and with respect to which no
sinking, purchase or similar fund is provided and shall initially mean the
shares of Common Stock, no par value, of the Company. "Common Shares" when
used with reference to any Person other than the Company shall, if used
with reference to a corporation, mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person and, if used with reference
to any other Person, mean the equity interest in such Person (or, if the
net worth determined in accordance with generally accepted accounting
principles of another Person (other than an individual) which controls such
first-mentioned Person is greater than such first-mentioned Person, then
such other Person) with the greatest voting power or managerial power with
respect to the business and affairs of such Person.
-3-
<PAGE>
"Company" shall mean ICO, Inc., a Texas corporation, and its
successors.
"Company Order" means a written request or order signed in the name of
the Company by its Chairman of the Board, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary, and delivered to the Rights Agent.
"Corporate Trust Office" means the principal office of the Rights
Agent at which it administers its corporate trust business, which, in the
case of Harris Trust & Savings Bank shall, until hereafter changed, be its
office at 1601 Elm Street, Suite 2320, Dallas, Texas, 75201.
"Distribution Date" shall mean the earlier of (i) the tenth Business
Day after the Shares Acquisition Date or (ii) the tenth Business Day (or
such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the
date of commencement by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any trustee of or fiduciary with respect to
any such plan when acting in such capacity) of, or after the date of the
first public announcement of the intent of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any trustee of or fiduciary
with respect to any such plan when acting in such capacity) to commence, a
tender or exchange offer the consummation of which would result in any
Person becoming the Beneficial Owner of 15% or more of the then outstanding
Voting Shares of the Company; provided, however, that an occurrence
described in clause (ii) of this definition above shall not cause the
occurrence of the Distribution Date if the Board of Directors of the
Company shall, prior to such tenth Business Day (or such later date as
described in clause (ii) above), determine that such tender or exchange
offer is spurious, unless, thereafter, the Board of Directors of the
Company shall make a contrary determination, in which event the
Distribution Date shall occur on the later to occur of such tenth Business
Day (or such later date as described in clause (ii) above) and the date of
such latter determination.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute thereto.
"Final Expiration Date" shall mean the Close of Business on November
21, 2007.
"Person" shall mean any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Preferred Shares" shall mean shares of Series C Junior Participating
Preferred Stock, no par value, of the Company having the rights and
preferences set forth in the form of Certificate of Designation of Series C
Junior Participating Preferred Stock attached hereto as Exhibit A.
-4-
<PAGE>
"Purchase Price" shall mean the initial price at which the holder of a
Right may, subject to the terms and conditions of this Agreement, purchase
one one-thousandth (1/1000) of a Preferred Share (which initial price is
set forth in Section 8(b) hereof), as such price shall be adjusted pursuant
to the terms of this Agreement.
"Redemption Date" shall mean the time at which the Rights are redeemed
pursuant to Section 24 herein or the time at which all of the Rights are
mandatorily redeemed and exchanged pursuant to Section 25 hereof.
"Redemption Price" shall have the meaning specified in Section 24(b)
herein.
"Right" shall mean one preferred share purchase right which initially
represents the right of the registered holder thereof to purchase one one-
thousandth (1/1000) of a Preferred Share upon the terms and subject to the
conditions herein set forth.
"Right Certificate" shall mean a certificate, in substantially the
form of Exhibit B attached to this Rights Agreement, evidencing the Rights
registered in the name of the holder thereof.
"Rights Agent" shall mean Harris Trust & Savings Bank, a national
banking association, and any successor thereto appointed in accordance with
the terms hereof, in its capacity as agent for the Company and the holders
of the Rights pursuant to this Agreement.
"Rights Register" and "Rights Registrar" shall have the meanings
specified in Section 6.
"Shares Acquisition Date" shall mean the first date of public
announcement (which for purposes of this definition shall include without
limitation a report filed pursuant to Sec tion 13(d) or Section 16(a) of
the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
"Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the outstanding capital stock or other equity
interests having ordinary voting power in the election of directors or
similar officials is owned, directly or indirectly, by such Person.
"Summary of Rights" shall mean a Summary of Rights to Purchase
Preferred Shares in substantially the form attached as Exhibit C to this
Agreement.
"Trading Day" shall mean a day on which the principal national
securities exchange on which any of the Voting Shares of the Company are
listed or admitted to trading is open for the transaction of business or,
if none of the Voting Shares of the Company is listed or admitted to
trading on any national stock exchange, a Business Day.
"Voting Shares" shall mean (i) the Common Shares of the Company and
(ii) any other shares of capital stock of the Company entitled to vote
generally in the election of
-5-
<PAGE>
directors or entitled to vote together with the Common Shares in respect of
any merger or consolidation of the Company, any sale of all or
substantially all of the Company's assets or any liquidation, dissolution
or winding up of the Company. Whenever any provision of this Agreement
requires a determination of whether a number of Voting Shares comprising a
specified percentage of such Voting Shares is, was or will be beneficially
owned or has been voted, tendered, acquired, sold or otherwise disposed of
or a determination of whether a Person has offered or proposed to acquire a
number of Voting Shares comprising such specified percentage, the number of
Voting Shares comprising such specified percentage of Voting Shares shall
in every such case be deemed to be the number of Voting Shares comprising
the specified percentage of all the Company's then outstanding Voting
Shares.
"Wholly-Owned Subsidiary" of a Person shall mean any corporation or
other entity all the outstanding capital stock or other equity interests of
which having ordinary voting power in the election of directors or similar
officials (other than directors' qualifying shares or similar interests)
are owned, directly or indirectly, by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares of the Company) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates. (a) From and after April 1, 1998
until the Distribution Date, (i) outstanding Rights will be evidenced (subject
to the provisions of paragraph (b) of this Section 3) by the certificates for
outstanding Common Shares of the Company and not by separate Right Certificates,
and (ii) the right to receive Right Certificates will be transferable only in
connection with the transfer of Common Shares of the Company. As soon as
practicable after the Distribution Date, the Rights Agent will send at the
expense of the Company, by first-class, insured, postage-prepaid mail, to each
record holder of Common Shares of the Company as of the Close of Business on the
Distribution Date, at the address of such holder shown on the stock transfer
records of the Company, a Right Certificate evidencing one Right for each Common
Share so held. From and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) On April 1, 1998, or as soon thereafter as practicable, the
Company will send a copy of a Summary of Rights, by first-class, postage-prepaid
mail, to each record holder of Common Shares of the Company as of the Close of
Business on April 1, 1998, at the address of such holder shown on the stock
transfer records of the Company. With respect to Common Shares outstanding on
April 1, 1998, the certificates evidencing such Common Shares shall, together
with copies of such Summary of Rights, thereafter also evidence the outstanding
Rights (as such Rights may be amended or supplemented) distributed with respect
thereto until the earlier of the Distribution Date or the date of surrender
thereof to the Company's transfer agent for registration of transfer or exchange
of Common Shares. Until the Distribution Date (or, if earlier, the Redemption
Date or Final Expiration Date), the surrender for registration of transfer or
exchange of any certificate for Common Shares outstanding as of the Close of
Business on April 1, 1998, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the surrender for
-6-
<PAGE>
registration of transfer or exchange of the outstanding Rights associated with
the Common Shares represented thereby.
(c) The Company agrees that, at any time after April 1, 1998 and prior
to the Distribution Date (or, if earlier, the Redemption Date or Final
Expiration Date) at which it issues any of its Common Shares upon original issue
or out of treasury, it will concurrently distribute to the holder of such Common
Shares one Right for each such Common Share, which Right shall be subject to the
terms and provisions of this Agreement and will evidence the right to purchase
the same number of one one-thousandths (1/1000) of a Preferred Share at the same
Purchase Price as the Rights then outstanding.
(d) Certificates for Common Shares issued after April 1, 1998 but
prior to the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date, whether upon registration of transfer or exchange of
Common Shares outstanding on April 1, 1998 or upon original issue or out of
treasury thereafter, shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between ICO, Inc. and
Harris Trust & Savings Bank, dated as of April 1, 1998 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive offices of ICO,
Inc. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. ICO, Inc. will mail to the holder of
this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. As described in the Rights
Agreement, Rights issued to or acquired by any Acquiring Person or any
Affiliate or Associate thereof (each as defined in the Rights Agreement)
shall, under certain circumstances, become null and void.
With respect to certificates containing the foregoing legend, until the
Distribution Date, outstanding Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender of any such certificate for registration of transfer or
exchange of the Common Shares evidenced thereby shall also constitute surrender
for registration of transfer or exchange of outstanding Rights (as such Rights
may be amended or supplemented) associated with the Common Shares represented
thereby.
(e) If the Company purchases or acquires any of its Common Shares after
April 1, 1998, but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common Shares
which are no longer outstanding.
Section 4. Form of Right Certificates. The form of Right Certificates
(and the forms of election to purchase Preferred Shares (or other securities)
and of assignment to be printed on the reverse thereof) shall in form and
substance be substantially the same as Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the
-7-
<PAGE>
provisions of this Agreement, as may be required to comply with any applicable
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed or as may be necessary to conform to usage. Subject to the provisions of
Section 23 hereof, the Right Certificates, whenever issued, shall be dated as of
the date of authentication thereof, but, regardless of any adjustments of the
Purchase Price or the number of Preferred Shares (or other securities) as to
which a Right is exercisable (whether pursuant to this Agreement or any future
amendments or supplements to this Agreement), or both, occurring after April 1,
1998 and prior to the date of such authentication, such Right Certificates may,
on their face, without invalidating or otherwise affecting any such adjustment,
expressly entitle the holders thereof to purchase such number of Preferred
Shares at the Purchase Price per one one-thousandth (1/1000) of a Preferred
Share as to which a Right would be exercisable if the Distribution Date were
April 1, 1998; no adjustment of the Purchase Price or the number of Preferred
Shares (or other securities) as to which a Right is exercisable, or both,
effected subsequent to the date of authentication of any Right Certificate shall
be invalidated or otherwise affected by the fact that such adjustment is not
expressly reflected on the face or in the provisions of such Right Certificate.
Pending the preparation of definitive Right Certificates, the Company may
execute, and upon Company Order the Rights Agent shall authenticate and send, by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares of the Company as of the Close of Business on the Distribution Date,
temporary Right Certificates which are printed, lithographed, typewritten,
mimeographed or otherwise produced substantially of the tenor of the definitive
Right Certificates in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Right Certificates may determine, as evidenced by their execution
of such Right Certificates.
If temporary Right Certificates are issued, the Company will cause
definitive Right Certificates to be prepared without unreasonable delay. After
the preparation of definitive Right Certificates, the temporary Right
Certificates shall be exchangeable for definitive Right Certificates, upon
surrender of the temporary Right Certificates at the Corporate Trust Office of
the Rights Agent, without charge to the holder. Upon surrender for cancellation
of any one or more temporary Right Certificates, the Company shall execute and
the Rights Agent shall authenticate and deliver in exchange therefor one or more
definitive Right Certificates, evidencing a like number of Rights. Until so
exchanged, the temporary Right Certificates shall in all respects be entitled to
the same benefits under this Agreement as definitive Right Certificates.
Section 5. Execution, Authentication and Delivery. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Right Certificates
may be manual or facsimile.
Right Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Right
Certificates or did not hold such offices at the date of authentication of such
Right Certificates. At any time and from time to time after the execution and
delivery of this Agreement
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and prior to the Distribution Date, the Company may deliver Right Certificates
executed by the Company to the Rights Agent for authentication, together with a
Company Order for the authentication and delivery of such Right Certificates;
and the Rights Agent in accordance with such Company Order shall authenticate
and deliver such Right Certificates as in this Agreement provided and not
otherwise.
No Right Certificate shall be entitled to any benefit under this Agreement
or be valid or obligatory for any purpose unless there appears on such Right
Certificate a certificate of authentication substantially in the form provided
for herein executed by the Rights Agent by manual signature, and such
certificate upon any Right Certificate shall be conclusive evidence, and the
only evidence, that such Right Certificate has been duly authenticated and
delivered hereunder.
Section 6. Registration, Registration of Transfer and Exchange. From and
after the Distribution Date and prior to the earlier of the Redemption Date and
the Final Expiration Date, the Company shall cause to be kept at the Corporate
Trust Office of the Rights Agent a Rights Register (a "Rights Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Right Certificates and of transfers of
Rights. The Rights Agent is hereby appointed the registrar and transfer agent
(the "Rights Registrar") for the purpose of registering Right Certificates and
transfers of Rights as herein provided and the Rights Agent agrees to maintain
such Rights Register in accordance with such regulations so long as it continues
to be designated as Rights Registrar hereunder.
Upon surrender to the Rights Agent for registration of transfer of any
Right Certificate, the Company shall execute, and the Rights Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Right Certificates evidencing a like number of
Rights.
At the option of the holder, Right Certificates may be exchanged for other
Right Certificates upon surrender of the Right Certificates to be exchanged to
the Rights Agent. Whenever any Right Certificates are so surrendered for
exchange, the Company shall execute, and the Rights Agent shall authenticate and
deliver, the Right Certificates which the holder making the exchange is entitled
to receive.
All Right Certificates issued upon any registration of transfer or exchange
of Right Certificates shall be the valid obligations of the Company, evidencing
the same Rights, and entitled to the same benefits under this Agreement, as the
Right Certificates surrendered upon such registration of transfer or exchange.
Every Right Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Rights Agent)
be duly endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Rights Registrar duly executed, by the
holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Right Certificates, but the Company may require payment of a sum
sufficient to cover any tax or other
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governmental charge that may be imposed in connection with any registration of
transfer or exchange of Right Certificates, other than exchanges not involving
any transfer.
The provisions of this Section 6 shall be subject to the provisions of
Section 15.
Section 7. Mutilated, Destroyed, Lost and Stolen Right Certificates. If
any mutilated Right Certificate is surrendered to the Rights Agent, the Company
shall execute and the Rights Agent shall authenticate and deliver in exchange
therefor a new Right Certificate of like tenor, for a like number of Rights and
bearing a registration number not contemporaneously outstanding.
If there shall be delivered to the Company and the Rights Agent (i)
evidence to their satisfaction of the destruction, loss or theft of a Right
Certificate and (ii) such security or indemnity, if any, as may be required by
them to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Rights Agent that such Right Certificate
has been acquired by a bona fide purchaser, the Company shall execute and upon
its request the Rights Agent shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Right Certificate, a new Right Certificate of like
tenor, for a like number of Rights and bearing a registration number not
contemporaneously outstanding.
Upon the issuance of any new Right Certificate under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Rights Agent) connected
therewith.
Every new Right Certificate issued pursuant to this Section in lieu of any
destroyed, lost or stolen Right Certificate shall constitute an additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Right Certificate shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and proportionately
with any and all other Right Certificates duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Right Certificates.
Section 8. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at its Corporate Trust Office, together with payment of the
Purchase Price for each one one-thousandth (1/1000) of a Preferred Share (or
other securities) as to which the Rights are exercised, at or prior to the
earliest of (i) the Close of Business on the Final Expiration Date, (ii) the
time of redemption on the Redemption Date or (iii) the time at which such Rights
are mandatorily redeemed and exchanged as provided in Section 25 hereof.
(b) The Purchase Price for each one one-thousandth (1/1000) of a
Preferred Share pursuant to the exercise of a Right shall initially be Thirty
and no\hundredths dollars ($30.00), shall
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be subject to adjustment from time to time as provided in Sections 12 and 14
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the securities to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 10 in cash, or by certified check
or cashier's check payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or other securities) certificates for such number of one one-thousandths
of a Preferred Share (or other securities) as are to be purchased and registered
in such name or names as may be designated by the registered holder of such
Right Certificate or, if appropriate, in the name of a depositary agent or its
nominee, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, and (B) requisition from a depositary agent
appointed by the Company, if any, depositary receipts representing such number
of one one-thousandths of a Preferred Share as are to be purchased and
registered in such name or names as may be designated by such holder (in which
case certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with such depositary agent), and the Company
hereby directs such depositary agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 15, (iii) promptly
after receipt of such certificates or depositary receipts registered in such
name or names as may be designated by such holder, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate and (iv) when appropriate, after receipt, promptly deliver such cash
to or upon the order of such holder.
(d) If the registered holder of the Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equal to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 15 hereof.
Section 9. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer or exchange
shall, if surrendered to the Company or to any of its other agents, be delivered
to the Rights Agent for such purpose and for cancellation or, if surrendered to
the Rights Agent for such purpose, shall be canceled by it. No Right
Certificates shall be authenticated in lieu of or in exchange for any Right
Certificates canceled as provided in this Section 9 except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation, and the Rights Agent shall so cancel, any
other Right Certificate purchased or acquired by the Company. The Rights Agent
shall deliver all canceled Right Certificates to the Company, or shall, pursuant
to a Company Order, destroy such canceled Right Certificates and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 10. Reservation and Availability of Shares. The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights; provided, however, that the Company
will not be required to reserve and keep available Common Shares or other
securities sufficient to permit the
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exercise in full of all outstanding Rights pursuant to the adjustments set forth
in Section 12(a)(ii) or Section 14 until such time as the Rights become
exercisable pursuant to such adjustments.
The Company covenants and agrees that it will take all such action as may
be necessary to ensure that all Preferred Shares or Common Shares of the Company
issued upon exercise of Rights shall (subject to payment of the Purchase Price)
be duly authorized, validly issued, fully paid and nonassessable. The Company
further covenants and agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Right Certificates or of any Preferred Shares
(or depositary receipts therefor) or Common Shares of the Company upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or in respect of the issuance or
delivery of certificates or depositary receipts for the Preferred Shares or
Common Shares of the Company upon exercise of Rights evidenced by Right
Certificates in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for transfer or exercise or to issue
or deliver any certificates or depositary receipts for Preferred Shares or
Common Shares of the Company upon the exercise of any Rights until any such tax
shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender thereof) or until it has been established
to the Company's satisfaction that no such tax is due.
Section 11. Record Date. Each Person in whose name any certificate for
Preferred Shares or Common Shares of the Company is issued upon the exercise of,
or upon mandatory redemption and exchange of, Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares or Common
Shares represented thereby on, and such certificate shall be dated, (i) in the
case of the exercise of Rights, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made, or (ii) in the case of the
mandatory redemption and exchange of Rights, the date of such mandatory
redemption and exchange; provided, however, that, if the date of such surrender
and payment or mandatory redemption and exchange is a date upon which the
transfer books of the Company for its Preferred Shares or Common Shares, as the
case may be, are closed, such Person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which such transfer books of the Company are open.
Prior to the exercise of (or the mandatory redemption and exchange of) the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares (or Common Shares of the
Company) for which the Rights shall be exercisable, including without limitation
the rights to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 12. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number and kind of shares of capital stock of
the Company covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 12.
(a) (i) If the Company shall at any time (A) declare a dividend on
the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding
Preferred Shares, (C) combine the
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outstanding Preferred Shares into a smaller number of Preferred Shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 12(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised thereafter shall be entitled to
receive, upon payment of the Purchase Price for the number of one one-
thousandths of a Preferred Share for which a Right was exercisable immediately
prior to such date, the aggregate number and kind of shares of capital stock
which, if such Right had been duly exercised immediately prior to such date (at
a time when the Preferred Shares transfer books of the Company were open), such
holder would have acquired upon such exercise and been entitled to receive upon
payment or effectuation of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under both Section 12(a)(i)
and Section 12(a)(ii), the adjustment provided for in this Section 12(a)(i)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 12(a)(ii).
(ii) Subject to action of the Board of Directors of the Company
pursuant to Section 25 of this Agreement, if any Person shall become an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of the
Company as shall equal the result obtained by (x) multiplying the then current
Purchase Price by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable and dividing that product by (y) 50% of the
then current per share market price of the Company's Common Shares (determined
pursuant to Section 12(d)) on the date such Person became an Acquiring Person.
If any Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
Notwithstanding any other provision of this Agreement, from and after the
time any Person shall become an Acquiring Person, any Rights that are or were
acquired or beneficially owned by any such Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be null and void and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
this Agreement that represents Rights beneficially owned by an Acquiring Person
whose Rights would be null and void pursuant to the preceding sentence or by any
Associate or Affiliate thereof; no Right Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights would be
null and void pursuant to the preceding sentence or to any Associate or
Affiliate thereof or to any nominee (acting in its capacity as such) of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be null
and void pursuant to the preceding sentence or to any Associate or Affiliate
thereof or to any nominee (acting in its capacity as such) of such Acquiring
Person, Associate or Affiliate shall be canceled.
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<PAGE>
(iii) If on or after the Distribution Date there shall not be sufficient
Common Shares issued but not outstanding, or authorized but unissued, to permit
the exercise in full of all outstanding Rights in accordance with the foregoing
subparagraph (ii), the Company agrees to take all such action as is within its
power, including without limitation appropriate action by its Board of
Directors, as may be necessary to amend the Company's articles of incorporation
to authorize additional Common Shares for issuance upon exercise of the Rights.
If, notwithstanding the foregoing, the shareholders shall not approve an
amendment to the Company's articles of incorporation authorizing such additional
Common Shares, the adjustment prescribed in Section 12(a)(ii) shall not be made
but, in lieu thereof, each holder of a Right shall thereafter have the right to
receive, upon exercise thereof in accordance with the terms of this Agreement,
such number of one one-thousandths of Preferred Shares as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable and
dividing that product by (y) 50% of the then current per share market price of
one one-thousandth of a Preferred Share (determined pursuant to Section 12(d))
on the date such Person became an Acquiring Person.
(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares ("equivalent preferred shares")) or
securities convertible into or exchangeable for Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(together with any additional consideration required upon conversion or exchange
in the case of a security convertible into or exchangeable for Preferred Shares
or equivalent preferred shares), less than the current per share market price of
the Preferred Shares (determined pursuant to Section 12(d) on such record date),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (together with the aggregate of any
additional consideration required upon conversion or exchange in the case of any
convertible or exchangeable securities so to be offered) would purchase at such
current market price and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into or for which the convertible or exchangeable
securities so to be offered are initially convertible or exchangeable);
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. In case all
or part of such subscription or purchase price may be paid in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent. Preferred Shares owned by or held for
the account of the Company or any of its Subsidiaries shall not be deemed
outstanding for the purpose of any computation described in this Section 12(b).
The adjustment described in this Section 12(b) shall be made successively
whenever such a record date is fixed; and, if none of such rights, options or
warrants is so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
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(c) If the Company shall fix a record date for the making of a distribution
to all holders of the Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebt edness or assets (other than a
regular quarterly cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 12(b)),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the then current per share market
price of the Preferred Shares (determined pursuant to Section 12(d)) on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon the exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and, if such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, the "current per
share market price" of the Common Shares on any date shall be deemed to be the
average of the daily Closing Prices per share of such Common Shares for the 30
consecutive Trading Days immediately prior to such date; provided, however,
that, if the issuer of such Common Shares shall announce (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares or (B) any subdivision, combination or
reclassification of such Common Shares, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, shall occur during such period of 30 Trading Days, then,
and in each such case, the current per share market price of the Common Shares
shall be appropriately adjusted to reflect the current market price per Common
Share equivalent.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in the same
manner as set forth above for Common Shares in paragraph (i) of this Section
12(d). If the current per share market price of the Preferred Shares cannot be
determined in the manner provided above, the "current per share market price" of
the Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares (determined in the manner provided above)
multiplied by one thousand.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided; however, that any adjustments which by reason of this Section
12(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 12
shall be made to the nearest cent or to the nearest ten-thousandth of a Common
Share or other share or one ten-millionth of a Preferred Share, as the case may
be, and references herein to the "number of one one-thousandths of a Preferred
Share" (or similar phrases) shall be construed to include fractions of one one-
thousandth of a Preferred Share. Notwithstanding the first sentence of this
Section 12(e), any adjustment required by this Section 12 shall be made no later
than the earlier of
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(i) three years from the date of the transaction which requires such adjustment
or (ii) the thirtieth day preceding the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 12(a), the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares contained
in this Section 12, and the provisions of this Agreement, including without
limitation Sections 8, 10, 11 and 14, with respect to the Preferred Shares shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall, whether or not the Right
Certificate evidencing such Rights reflects such adjusted Purchase Price,
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-thousandths of a Preferred Share purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as provided in
Section 12(i), upon each adjustment of the Purchase Price pursuant to Section
12(b) or 12(c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price per one one-thousandth of a Preferred Share, that number of one
one-thousandths of a Preferred Share obtained by (i) multiplying (x) the number
of one-thousandths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights outstanding in lieu of any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each Right outstanding after such adjustment of
the number of Rights shall be exercisable for the number of one one-thousandths
of a Preferred Share for which a Right was exercisable immediately prior to such
adjustment of the Purchase Price. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price.
The Company shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announce ment. Until such record date, however, any
adjustment in the number of one one-thousandths of a Preferred Share for which a
Right shall be exercisable made as required by this Agreement shall remain in
effect. If Right Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Section 12(i), the Company shall, as promptly
as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 15 hereof, the additional Rights to which such holders shall be entitled
as a
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result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and authenticated in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-thousandths of
a Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the amount of consideration per
Preferred Share determined by the Board of Directors of the Company to be
capital, or below one one-thousandth of the par value, if any, per Preferred
Share issuable upon exercise of the Rights, the Company agrees to take such
corporate action as is within its power, including without limitation
appropriate action by its Board of Directors, and which is, in the opinion of
its counsel, necessary in order that the Company may validly and legally issue
fully paid and nonassessable one one-thousandths of Preferred Shares at such
adjusted Purchase Price.
(l) In any case in which this Section 12 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date of the
Preferred Shares or other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares or other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 12 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 12, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any combination or subdivision of the Preferred Shares, issuance
wholly for cash of any of the Preferred Shares at less than the current market
price, issuance wholly for cash of Preferred Shares or securities which by their
terms are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to in subsection (b) of this Section 12, hereafter effected by
the Company to holders of its Preferred Shares shall not be taxable to such
shareholders.
(n) If at any time prior to the Distribution Date, the Company shall (i)
declare or pay any dividend on the Common Shares payable in Common Shares or
(ii) effect a subdivision or combination of the Common Shares (by
reclassification or otherwise than by payment of dividends
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in Common Shares) into a greater or lesser number of Common Shares, then in any
such case (i) the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision or combination shall
be adjusted by multiplying such Purchase Price by a fraction, the numerator of
which is the number of Common Shares outstanding immediately before such event
and the denominator of which is the number of Common Shares outstanding
immediately after such event, and (ii) the number of Rights outstanding
immediately after such event shall be adjusted, either through cancellation of
outstanding Rights or through distribution of additional Rights (but without
duplication of the Company's obligations under Section 3(c)), so that the
certificate evidencing each Common Share outstanding immediately after such
event shall also evidence the associated Right to purchase the same number of
one one-thousandths of a Preferred Share as to which a Right would have entitled
the holder thereof to purchase immediately prior to such event. The adjustment
provided for in this Section 12(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision or combination is effected.
If an event occurs which would require an adjustment under Section 12(a)(ii) and
this Section 12(n), the adjustments provided for in this Section 12(n) shall be
in addition and prior to any adjustment required pursuant to Section 12(a)(ii).
Section 13. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 12 or 14 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares of
the Company and the Preferred Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of record of a Right Certificate in
accordance with Section 28 hereof. The Rights Agent shall be fully protected in
relying on any adjustment therein contained and shall not be obligated or
responsible for calculating any adjustments nor shall it be deemed to have
knowledge of such an adjustment unless and until it shall have received such
certificate.
Section 14. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. If, directly or indirectly, (a) the Company shall consolidate
with, or merge with and into, any other Person, (b) any Person shall merge with
and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with any such merger, all or part
of the Common Shares of the Company shall be changed into or exchanged for stock
or other securities of any other Person (or the Company) or cash or any other
property, or (c) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one or a series of two or
more transactions, assets of the Company or its Subsidiaries which constitute
more than 50% of the assets or which produce more than 50% of the earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or any
Affiliate or Associate of such Person other than the Company or one or more of
its Wholly-Owned Subsidiaries, then, and in each such case, the Company agrees
that, as a condition to engaging in any such transaction, it will make or cause
to be made proper provision so that (i) each holder of a Right (except as
otherwise provided herein) shall thereafter have the right to receive, upon the
exercise thereof in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of such other Person (including
the Company as successor thereto or as the surviving corporation) or, if such
other Person is a Subsidiary of another Person, of the Person or Persons (other
than individuals) which ultimately control such first-mentioned Person, as shall
be equal to the result obtained by (X) multiplying the then current Purchase
Price by the number of one one-thousandths of a Preferred
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Share for which a Right is then exercisable (without taking into account any
adjustment previously made pursuant to Section 12(a)(ii)) and dividing that
product by (Y) 50% of the current per share market price of the Common Shares of
such other Person (determined pursuant to Section 12(d)) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) the issuer of
such Common Shares shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company", as used
herein, shall thereafter be deemed to refer to such issuer; and (iv) such issuer
shall take such steps (including without limitation the reservation of a
sufficient number of shares of its Common Shares in accordance with Section 10)
in connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not enter into any transaction of the kind
referred to in this Section 14 if at the time of such transaction there are
outstanding any rights, warrants, instruments or securities or any agreement or
arrangements which, as a result of the consummation of such transaction, would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights. The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Company and such issuer shall
have executed and delivered to the Rights Agent an agreement supplemental to
this Agreement complying with the provisions of this Section 14. The provisions
of this Section 14 shall similarly apply to successive mergers or consolidations
or sales or other transfers. For the purposes of this Section 14, 50% of the
assets of the Company and its Subsidiaries shall be determined by reference to
the book value of such assets as set forth in the most recent consolidated
balance sheet of the Company and its Subsidiaries (which need not be audited)
and 50% of the earning power of the Company and its Subsidiaries shall be
determined by reference to the mathematical average of the operating income
resulting from the operations of the Company and its Subsidiaries for the two
most recent full fiscal years as set forth in the consolidated and consolidating
financial statements of the Company and its Subsidiaries for such years;
provided, however, that, if the Company has, during such period, engaged in one
or more transactions to which purchase accounting is applicable, such
determination shall be made by reference to the pro forma operating income of
the Company and its Subsidiaries giving effect to such transactions as if they
had occurred at the commencement of such two-year period.
Section 15. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue or distribute Right Certificates which evidence
fractional Rights. If, on the Distribution Date or thereafter, as a result of
any adjustment effected pursuant to Section 12(i) or otherwise hereunder, a
Person would otherwise be entitled to receive a Right Certificate evidencing a
fractional Right, the Company shall, in lieu thereof, pay or cause to be paid to
such Person an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purpose of this Section 15(a), the current
market value of a whole Right shall be the Closing Price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election
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of the Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares. If, on the Distribution Date or
thereafter, as a result of any adjustment effected hereunder in the number of
one one-thousandths of a Preferred Share as to which a Right has become
exercisable, a Person would otherwise be entitled to receive a fractional
Preferred Share that is not an integral multiple of one one-thousandth of a
Preferred Share, the Company shall, in lieu thereof, pay to such Person at the
time such Right is exercised as herein provided an amount in cash equal to the
same fraction (which is not an integral multiple of one one-thousandth of a
Preferred Share) of the current market value of one Preferred Share. For
purposes of this Section 15(b), the current market value of a Preferred Share
shall be the Closing Price of a Preferred Share for the Trading Day immediately
prior to the date of such exercise.
(c) Should any adjustment contemplated by Section 12(a)(ii) or any
mandatory redemption and exchange contemplated by Section 25 occur, the Company
shall not be required to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates which evidence fractional Common Shares.
If after any such adjustment or mandatory redemption and exchange, a Person
would otherwise be entitled to receive a fractional Common Share of the Company
upon exercise of any Right Certificate or upon mandatory redemption and exchange
as contemplated by Section 25, the Company shall, in lieu thereof, pay to such
Person at the time such Right is exercised as herein provided or upon such
mandatory redemption and exchange an amount in cash equal to the same fraction
of the current market value of one Common Share. For purposes of this Section
15(c), the current market value of a Common Share shall be the Closing Price of
a Common Share for the Trading Day immediately prior to the date of such
exercise or the date of such mandatory redemption and exchange.
(d) The holder of a Right by the acceptance thereof expressly waives his
right to receive any fractional Rights or any fractional shares upon exercise or
mandatory redemption and exchange of a Right (except as provided above).
Section 16. Rights of Action. (a) All rights of action in respect of the
obligations and duties owed to the holders of the Rights under this Agreement
are vested in the registered holders of the Rights; and, without the consent of
the Rights Agent or of the holder of any other Rights, any registered holder of
any Rights may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding, judicial or otherwise,
against the Company to enforce, or otherwise to act in respect of, such holder's
right to exercise such Rights in the manner provided in the Right Certificate
evidencing such Rights and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations of any Person subject to this Agreement.
(b) No right or remedy herein conferred upon or reserved to the registered
holder of Rights is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment
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of any right or remedy, whether hereunder or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
(c) No delay or omission of any registered holder of Rights to exercise any
right or remedy accruing hereunder shall impair any such right or remedy or
constitute a waiver of any default hereunder or an acquiescence therein. Every
right and remedy given hereunder or by law to such holders may be exercised from
time to time, and as often as may be deemed expedient, by such holders.
Section 17. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares of the Company;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the Corporate Trust Office of the Rights Agent duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights
Agent) for all purposes, and neither the Company nor the Rights Agent shall
be affected by any notice to the contrary.
Section 18. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right (whether or not then evidenced by a Right
Certificate) shall be entitled to vote, receive dividends or be deemed for any
purpose the holder of Preferred Shares, Common Shares of the Company or any
other securities of the Company which may at any time be issuable on the
exercise (or mandatory redemption and exchange) of the Rights represented
thereby, nor shall anything contained herein or in any Right Certificate be
construed to confer upon any such holder, as such, any of the rights of a
stockholder of the Company, including without limitation any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, to give or withhold consent to any corporate action, to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 26) or to receive dividends or subscription rights until the Right or
Rights evidenced by such Right Certificate shall have been exercised (or
mandatorily redeemed and exchanged) in accordance with the provisions hereof.
Section 19. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless
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against, any loss, liability or expense, incurred without negligence, bad faith
or willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending against any
claim of liability in the premises. The costs and expenses of enforcing this
right of indemnification shall also be paid by the Company; provided, however,
that if the Rights Agent is found by a final judgment of a tribunal having
jurisdiction not to be entitled to indemnity in respect of any claim of
liability because its conduct constituted negligence, bad faith or willful
misconduct, the Rights Agent will not be entitled to reimbursement hereunder for
the costs and expenses of defending such claim and will reimburse the Company
for any costs and expenses previously paid on behalf of the Rights Agent. The
indemnification provided for hereunder shall survive the expiration of the
Rights and termination of this Agreement.
The Rights Agent may conclusively rely upon and shall be protected and
shall incur no liability for, or in respect of any action taken, suffered or
omitted by it in connection with, its administration of this Agreement in
reliance upon any Right Certificate or certificate for Preferred Shares, Common
Shares of the Company or other securities of the Company, Company Order,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be executed and, where necessary,
verified or acknowledged, by the proper person or persons, or otherwise upon the
advice of its counsel as set forth in Section 20 hereof. Notwithstanding
anything in this Agreement to the contrary, in no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of the action.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement (and no implied duties or
obligations shall be read into this Agreement against the Right Agent) upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, the Rights Agent
may consult with legal counsel (who may be legal counsel for the Company), and
the opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
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(c) The Rights Agent shall be liable hereunder to the Company or any other
Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its authentication thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not have any responsibility with respect to the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or with respect to the validity or
execution of any Right Certificate (except its authentication thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 12(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Sections 3, 12, 14, 24 and 25, or the ascertainment of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares or Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when issued, be duly authorized, validly
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith or lack of action in accordance with
instructions of any such officer or for any delay in acting while waiting for
instruction. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Agreement
and the date on or after which such action shall be taken or such omission shall
be effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than ten Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application subject to the proposed
action or omission and/or specifying the action to be taken or omitted.
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(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss of the Company resulting from any such act, default,
neglect or misconduct provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) The Rights Agent shall not be required to take notice or be deemed to
have notice of any fact, event or determination (including, without limitation,
any dates or events defined in this Agreement or the designation of any Person
as an Acquiring Person, Affiliate or Associate) under this Agreement unless and
until the Rights Agent shall be specifically notified in writing by the Company
of such fact, event or determination.
Section 21. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 22. If at the time such successor
Rights Agent shall succeed to the agency created by this Agreement any of the
Right Certificates shall have been authenticated but not delivered, any such
successor Rights Agent may adopt the authentication of the predecessor Rights
Agent and deliver such Right Certificates so authenticated, and, if at that time
any of the Right Certificates shall not have been authenticated, any successor
Rights Agent may authenticate such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
If at any time the name of the Rights Agent shall be changed and at such
time any of the Right Certificates shall have been authenticated but not
delivered, the Rights Agent may adopt the authentication under its prior name
and deliver Right Certificates so authenticated; and, in case at that time any
of the Right Certificates shall not have been authenticated, the Rights Agent
may authenticate such Right Certificates either in its prior name or in its
changed name; and in all such
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cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
Section 22. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
for the Common Shares of the Company and the Preferred Shares by registered or
certified mail at the expense of the Company, and to the holders of the Right
Certificates by first-class mail at the expense of the Company. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent for the Common Shares of the Company and the
Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall other wise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the registered holder of a Right
Certificate (or, prior to the Distribution Date, of Common Shares), then any
registered holder of a Right Certificate (or, prior to the Distribution Date, of
Common Shares) may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of any state of the
United States, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent for the Common Shares of the Company and the Preferred
Shares, and mail a notice thereof in writing to the registered holders of the
Right Certificates. Failure to give any notice provided for in this Section 22,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 23. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price per share and the number or kind or class of shares or
other securities purchasable under the Right Certificates made in accordance
with the provisions of this Agreement.
Section 24. Redemption. (a) The Rights may be redeemed by action of the
Board of Directors of the Company pursuant to paragraph (b) of this Section 24,
or may be redeemed and exchanged by action of the Board of Directors of the
Company pursuant to Section 25 herein, but shall not be redeemed in any other
manner.
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(b) The Board of Directors of the Company may, at its option, at any time
prior to the time any Person becomes an Acquiring Person redeem all but not less
than all the then outstanding Rights at a redemption price of one cent ($0.01)
per Right then outstanding, appropriately adjusted to reflect any adjustment in
the number of Rights outstanding pursuant to Section 12(i) herein (such
redemption price being hereinafter referred to as the "Redemption Price"). Any
such redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.
(c) The right of the registered holders of Right Certificates to exercise
the Rights evidenced thereby or, if the Distribution Date has not theretofore
occurred, the inchoate right of the registered holders of Rights to exercise the
same shall, without notice to such holders or to the Rights Agent and without
further action, terminate and be of no further force or effect effective as of
the time of adoption by the Board of Directors of the Company of a resolution
authorizing and directing the redemption of the Rights pursuant to paragraph (b)
of this Section 24 (or, alternatively, if the Board of Directors qualified such
action as to time, basis or conditions, then at such time, on such basis and
with such conditions as the Board of Directors may have established pursuant to
such paragraph (b)); thereafter, the only right of the holders of Rights shall
be to receive the Redemption Price. The Company shall promptly give public
notice of any redemption resolution pursuant to paragraph (b) of this Section
24; provided, however, that the failure to give, or any defect in, any such
notice shall not affect the validity of such redemption. Within 10 days after
the adoption of any redemption resolution pursuant to paragraph (b) of this
Section 24, the Company shall give notice of such redemption to the holders of
the then outstanding Rights by mailing such notice to all such holders at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agents for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption shall state the method by which the payment of the
Redemption Price will be made.
(d) Neither the Company nor any of its Affiliates or Associates may acquire
(other than, in the case of such Affiliates and Associates, in their capacity as
holders of Common Shares of the Company), redeem or purchase for value any
Rights at any time in any manner other than as specif ically set forth in this
Section 24 or in Section 25 herein, and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
Section 25. Mandatory Redemption and Exchange. (a) The Board of
Directors of the Company may, at its option, at any time after any Person
becomes an Acquiring Person, issue Common Shares of the Company in mandatory
redemption of, and in exchange for, all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become null and
void pursuant to the provisions of Section 12(a)(ii) hereof) at an exchange
ratio of one Common Share for each two Common Shares for which each Right is
then exercisable pursuant to the provisions of Section 12(a)(ii) hereof.
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such redemption and exchange at any time after any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any such Subsidiary, or any trustee of or fiduciary with respect to any
such plan when acting in such capacity), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Voting Shares then outstanding.
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<PAGE>
(b) Immediately upon the action of the Board of Directors of the Company
ordering the mandatory redemption and exchange of any Rights pursuant to
subsection (a) of this Section 25 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive such number of Common
Shares as is provided in paragraph (a) of this Section 25. The Company shall
promptly give public notice of any such redemption and exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such redemption and exchange. The Company promptly shall
mail a notice of any such redemption and exchange to all the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of mandatory redemption and exchange shall state the method by which the
redemption and exchange of the Common Shares for Rights will be effected and, in
the event of any partial redemption and exchange, the number of Rights which
will be redeemed and exchanged. Any partial redemption and exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become null and void pursuant to the provisions of Section 12(a)(ii) hereof)
held by each holder of Rights.
(c) In any mandatory redemption and exchange pursuant to this Section 25,
the Company, at its option, may substitute Preferred Shares (or equivalent
preferred shares, as such term is defined in Section 12(b) hereof) for Common
Shares, at the initial rate of one one-thousandth of a Preferred Share (or
equivalent preferred share) for each Common Share, as appropriately adjusted.
Section 26. Notice of Certain Events. If the Company shall, on or after
the Distribution Date, propose (a) to pay any dividend or other distribution
payable in stock of any class of the Company or any Subsidiary of the Company to
the holders of its Preferred Shares, (b) to distribute to the holders of its
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (c) to make any other distribution to the holders
of its Preferred Shares (other than a regular quarterly cash dividend), (d) to
effect any reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding Preferred
Shares), (e) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of more than
50% of the assets or earning power of the Company and its Subsidiaries
(determined as provided in Section 14 herein) to, any other Person (other than
the Company or a Wholly-Owned Subsidiary or Wholly-Owned Subsidiaries), (f) to
effect the liquidation, dissolution or winding up of the Company or (g) if the
Rights have theretofore become exercisable with respect to Common Shares
pursuant to Sec tion 12(a)(ii) herein, to declare or pay any dividend or other
distribution on the Common Shares payable in Common Shares or in stock of any
other class of the Company or any Subsidiary of the Company or to effect a
subdivision or combination of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) then, in each such
case, the Company shall give to each holder of a Right Certificate, in
accordance with Section 28 hereof, notice of such proposed action, which shall
specify the date of authorization by the Board of Directors of the Company of,
and record date for, such stock dividend or such distribution of rights or
warrants or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, winding up, subdivision or combination
is to take place and the date of participation therein by the holders of the
Common Shares of the Company or the Preferred Shares, or both, if any such date
is
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<PAGE>
to be fixed. Such notice shall be so given in the case of any action covered by
clause (a), (b) or (g) above at least 20 days prior to the record date for
determining holders of the Preferred Shares or of the Common Shares of the
Company, as the case may be, for purposes of such action, and in the case of any
such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Preferred Shares or Common Shares of the Company, as the case may be, whichever
shall be the earlier.
If any of the events set forth in Section 12(a)(ii) of this Agreement shall
occur, then, in any such case, the Company shall as soon as practicable
thereafter give to each holder of a Right Certificate, in accordance with
Section 28 hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under Section
12(a)(ii) hereof.
Section 27. Securities Laws Registrations. To the extent legally
required, the Company agrees that it will prepare and file, no later than the
Distribution Date, and will use its best efforts to cause to be declared
effective, a registration statement under the Securities Act of 1933, as
amended, registering the offering, sale and delivery of the Preferred Shares
issuable upon exercise of the Rights, and the Company will, thereafter, use its
best efforts to maintain such registration statement (or another) continuously
in effect so long as any Rights remain outstanding and exercis able with
respect to Preferred Shares. Should the Rights become exercisable with respect
to securities of the Company or one of its Subsidiaries other than Preferred
Shares, the Company agrees that it will, to the extent legally required,
promptly thereafter prepare and file, or cause to be prepared and filed, and
will use its best efforts to cause to be declared effective, a registration
statement under such Act registering the offering, sale and delivery of such
other securities and the Company will, thereafter, use its best efforts to
maintain such registration statement (or another) continuously in effect so long
as any outstanding Rights are exercisable with respect to such securities. The
Company further agrees to use its best efforts, from and after the Distribution
Date, to qualify or register for sale the Preferred Shares or other securities
of the Company or one of its Subsidiaries issuable upon exercise of the Rights
under the securities or "blue sky" laws (to the extent legally required
thereunder) of all jurisdictions in which registered holders of Right
Certificates reside determined by reference to the Rights Register.
Section 28. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
ICO, Inc.
11490 Westheimer Road
Suite 1000
Houston, Texas 77077
Attention: Chief Executive Officer
Attention: Treasurer
Subject to the provisions of Section 22 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights
-28-
<PAGE>
Agent shall be sufficiently given or made if sent by registered or certified
mail and shall be deemed given upon receipt, addressed (until another address is
filed in writing with the Company) as follows:
Harris Trust & Savings Bank
1601 Elm Street
Suite 2320
Dallas, Texas 75201
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the Rights
Register of the Company or, prior to the Distribution Date, on the stock
transfer records for the Common Shares of the Company.
Section 29. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement (which supplement or amendment shall be
evidenced by a writing signed by the Company and the Rights Agent) without the
approval of any holders of Right Certificates in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, to make any other provisions in
regard to matters or questions arising hereunder, or to add, delete, modify or
otherwise amend any provision, which the Company may deem necessary or
desirable, including without limitation extending the Final Expiration Date and,
provided that at the time of such amendment or supplement the Distribution Date
has not occurred, the period during which the Rights may be redeemed; provided,
however, that, from and after such time as any Person becomes an Acquiring
Person, any such amendment or supplement shall not materially and adversely
affect the interests of the holders of Right Certificates. Without limiting the
foregoing, the Board of Directors of the Company may by resolution adopted at
any time prior to such time as any Person becomes an Acquiring Person amend this
Agreement to lower the threshold set forth in the definitions of Acquiring
Person and Distribution Date herein from 15% to a percentage not less than the
greater of (i) any percentage greater than the largest percentage of the
outstanding Voting Shares then known to the Company to be beneficially owned by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any trustee
of or fiduciary with respect to any such plan when acting in such capacity), and
(ii) 10% if the Board of Directors shall determine that a Person whose interests
are adverse to the Company and its shareholders may seek to acquire control of
the Company. Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the Rights Agent
under this Agreement will be effective against the Rights Agent without the
execution of such supplement or amendment by the Rights Agent.
Section 30. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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<PAGE>
Section 31. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights.
Section 32. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 33. GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF TEXAS AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE EXCEPT AS TO THE RIGHTS AND DUTIES OF THE
RIGHTS AGENT WHICH SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS.
Section 34. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 35. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ICO, INC.
Attest:
By /s/ Sylvia A. Pacholder By /s/ Robin E. Pacholder
----------------------------- -------------------------------
Name: Sylvia A. Pacholder Name: Robin E. Pacholder
------------------------ --------------------------
Title: Secretary Title: Senior Vice President and
General Counsel
HARRIS TRUST & SAVINGS BANK
As Rights Agent
Attest:
By /s/ Mark Asbury By /s/ Jill Wessell
----------------------------- -------------------------------
Name: Mark Asbury Name: Jill Wessell
------------------------ --------------------------
Title: Authorized Officer Title: Authorized Officer
-31-
<PAGE>
Exhibit A
CERTIFICATE OF DESIGNATION
OF
JUNIOR PARTICIPATING PREFERRED STOCK
OF
ICO HOLDINGS, INC.
Pursuant to Article 2.13 of the
Texas Business Corporation Act
ICO Holdings, Inc., a Texas corporation (the "Corporation"), through the
undersigned duly authorized officer, in accordance with the provisions of
Article 2.13 of the Texas Business Corporation Act, DOES HEREBY CERTIFY:
1. The name of the Corporation is ICO Holdings, Inc.
2. The Board of Directors of the Corporation on March 30, 1998, pursuant
to the authority conferred upon the Board of Directors by the Articles of
Incorporation, as amended, of the Corporation (the "Articles of Incorporation")
and in accordance with the provisions of Article 2.13 of the Texas Business
Corporation Act, adopted the following resolution creating a series of 50,000
shares of Preferred Stock, no par value:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation in accordance with the
provisions of Article Four of the Articles of Incorporation, a series of
the Preferred Stock of the Corporation, no par value, be, and it hereby is,
created and that the voting powers, designations, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualification, limitations or restrictions thereof are as
follows:
Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Junior Participating Preferred Stock" (the "Junior
Preferred Stock") and the number of shares constituting the Junior
Preferred Stock shall be 50,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Junior Preferred Stock to a
number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Junior Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Junior Preferred Stock with respect to dividends, the holders of shares of
Junior Preferred Stock, in preference to the holders of Common Stock, no
par value (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board
of
<PAGE>
Directors out of funds legally available for the purpose, quarterly
dividends payable on the first business day of February, May, August and
November in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date") as provided in para graphs (B) and (C)
of this Section 2 in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 in cash or (b) subject to the provision
for adjustment hereinafter set forth, 1,000 times the aggregate per share
amount (payable in cash) of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Junior Preferred Stock. If the Corporation
shall at any time declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of shares
of Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that was
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, if no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share payable in cash on the Junior Preferred Stock shall nevertheless
accrue and be cumulative on the outstanding shares of Junior Preferred
Stock as provided in paragraph (C) of this Section 2.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Junior Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Junior
Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive payment of
a dividend or
2
<PAGE>
distribution declared thereon, which record date shall be not more than 60
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Junior Preferred
Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. If the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes per share to which
holders of shares of Junior Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that was outstanding immediately prior to such
event.
(B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Junior Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein or as otherwise provided by law,
holders of Junior Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, or declared and a sum sufficient
for the payment therefor be set apart for payment and be in the process of
payment, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Junior Preferred
Stock, except dividends paid ratably on the Junior Preferred Stock and
all such parity stock on which dividends are
3
<PAGE>
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (as to both
dividends and upon dissolution, liquidation or winding up) to the
Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Junior Preferred Stock or any shares of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the holders of the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Junior Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Articles of Incorporation, or in any other Certificate
of Designation creating a series of Preferred Stock or any similar stock or
as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolu tion or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either
as to dividends or as to amounts payable upon liqui dation, dissolution or
winding up) to the Junior Preferred Stock unless, prior thereto, the
holders of Junior Preferred Stock shall have received an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1,000 per share,
or (b) an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock, plus, in either case, an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, or (2) to the holders
of stock ranking on a parity (either as to dividends or as to amounts
payable upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except distributions made ratably on the Junior Preferred
Stock
4
<PAGE>
and all such parity stock in proportion to the total amounts to which
the holders of all such Shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time declare or
pay any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1)(b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that was outstanding immediately prior
to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash or any other property, or any combination
thereof, then in any such case each share of Junior Preferred Stock shall
at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal
to 1,000 times the aggregate amount of stock, securities, cash or any other
property (payable in kind), or any combination thereof, as the case may be,
into which or for which each share of Common Stock is changed or exchanged.
If the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that was outstanding immediately prior to such
event.
Section 8. Redemption. The shares of Junior Preferred Stock shall
not be redeemable. So long as any shares of Junior Preferred Stock remain
outstanding, the Corporation shall not purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Preferred Stock
unless the Corporation shall substantially concurrently also purchase or
acquire for consideration a proportionate number of shares of Junior
Preferred Stock.
Section 9. Rank. The Junior Preferred Stock shall rank, with respect
to payment of dividends and the distribution of assets, junior to all
series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Articles of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences, privileges or special rights of the
Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Junior Preferred Stock, voting together as a single class.
5
<PAGE>
3. The adoption of the foregoing resolution by the Board of Directors of
the Corporation constituted all necessary action on the part of the Corporation
necessary to create the Junior Preferred Stock described therein.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Senior Vice President this 30th day of March,
1998.
ICO HOLDINGS, INC.
By /s/ Robin E. Pacholder
--------------------------------------
Robin E. Pacholder
Senior Vice President
6
<PAGE>
EXHIBIT B
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER NOVEMBER 21, 2007 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY ACQUIRING
PERSONS (AS DEFINED IN SECTION 1 OF THE RIGHTS AGREEMENT) OR ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
RIGHT CERTIFICATE
ICO, INC.
This certifies that _____________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of April 1, 1998 (the "Rights Agreement"),
between ICO, INC., a Texas corporation, formerly ICO Holdings, Inc (the
"Company"), and HARRIS TRUST AND SAVINGS BANK (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 p.m., Houston, Texas time, on
April 1, 1998, at the Corporate Trust Office of the Rights Agent (or at the
office of its successor as Rights Agent), one one-thousandth (1/1000) of a fully
paid non-assessable share of Junior Participating Preferred Stock, no par value
(the "Preferred Shares"), of the Company, at a purchase price of $30.00 per one
one-thousandth (1/1000) of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of April 1, 1998, based on
the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-thousandths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon that
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file
B-1
<PAGE>
at the principal executive offices of the Company and the Corporate Trust Office
of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the Corporate Trust Office of the Rights Agent, may be exchanged
for another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged by the Company in whole or in part for
Preferred Shares or shares of the Company's common stock, no par value.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be entitled to any benefit under the
Rights Agreement or be valid or obligatory for any purpose until it shall have
been authenticated by the Right Agent.
WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.
Dated as of ___________________, ____.
ATTEST: ICO, INC.
[SEAL]
By:
------------------------------- ------------------------
B-2
<PAGE>
Secretary President
Authentication:
This is one of the Right Certificates referred to in the within-mentioned Rights
Agreement.
__________________________________, as Rights Agent
By: _________________________________________________
Authorized Signature
B-3
<PAGE>
[Form of Reverse Side of Right Certificate)
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate)
FOR VALUE RECEIVED,
_____________________________________________________________________ hereby
sells, assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
_______________________
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
________________________________________________ Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.
Dated as of ___________________, ____.
--------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
______________________________________________________________________________
[To be executed if statement is correct]
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
--------------------------------
Signature
- ------------------------------------------------------------------------------
B-4
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate)
TO ICO, INC.:
The undersigned hereby irrevocably elects to exercise _____________ Rights
represented by this Right Certificate to purchase the Preferred Shares (or other
securities) issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares (or other securities) be issued in the
name of:
Please insert social security
or other identifying number:
- --------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
- -------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated as of ___________________, ____.
--------------------------------
Signature
B-5
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
[To be executed if statement is correct]
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
--------------------------------
Signature
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
NOTICE
------
The signature in the foregoing Form of Assignment or Form of Election to
Purchase must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
B-6
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 30, 1998, the Board of Directors of ICO, Inc., formerly ICO
Holdings, Inc. (the "Company"), authorized the issuance of one preferred share
purchase right (a "Right") with respect to each outstanding share of common
stock, no par value (the "Common Shares"), of the Company. The rights were
issued to holders of record of Common Shares on April 1, 1998. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Junior Participating Preferred Stock, no par value (the "Preferred
Shares"), of the Company at a price of $30.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") dated as of April 1, 1998 between the Company and Harris Trust &
Savings Bank, as Rights Agent (the "Rights Agent").
Detachment of Rights; Exercise. Initially, the Rights will attach to all
Common Share certificates representing outstanding shares and no separate Right
Certificate will be distributed. The Rights will separate from the Common
Shares and a Distribution Date will occur upon the earlier of (i) the tenth
business day following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of 15% or more of the outstanding Voting Shares (as defined in the
Rights Agreement) of the Company, or (ii) the tenth business day following the
commencement or announcement of an intention to commence a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding Voting Shares.
Until the Distribution Date (or earlier redemption or expiration of the
Rights) (i) the Rights will be evidenced, with respect to any of the Common
Shares outstanding on April 1, 1998 by the certificates representing such Common
Shares with a copy of this Summary of Rights attached thereto, (ii) the Rights
will be transferred with and only with the Common Shares, (iii) new Common Share
certificates issued after April 1, 1998, upon transfer or new issuance of the
Common Shares will contain a notation incorporating the Rights Agreement by
reference, and (iv) the surrender for transfer of any certificates for Common
Shares outstanding as of April 1, 1998, even without such notation or a copy of
this Summary of Rights being attached thereto, will also constitute the transfer
of the Rights associated with the Common Shares represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will thereafter
evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on November 21, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or the Rights are earlier redeemed or exchanged by
the Company as described below.
<PAGE>
If a person or group were to acquire 15% or more of the Voting Shares of
the Company, each Right then outstanding (other than Rights beneficially owned
by the acquiring person which would become null and void) would become a right
to buy that number of Common Shares (or under certain circumstances, the
equivalent number of one one-thousandths of a Preferred Share) that at the time
of such acquisition would have a market value of two times the Purchase Price of
the Right.
If the Company were acquired in a merger or other business combination
transaction or more than 50% of its consolidated assets or earning power were
sold, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the Purchase Price of the Right.
Preferred Shares. The dividend and liquidation rights, and the non-
redemption feature, of the Preferred Shares are designed so that the value of
one one-thousandth of a Preferred Share purchasable upon exercise of each Right
will approximate the value of one Common Share. The Preferred Shares issuable
upon exercise of the Rights will be non-redeemable and rank junior to all other
series of the Company's preferred stock. Each whole Preferred Share will be
entitled to receive a quarterly preferential dividend in an amount per share
equal to the greater of (i) $1.00 in cash, or (ii) in the aggregate, 1,000 times
the dividend declared on the Common Shares. In the event of liquidation, the
holders of the Preferred Shares will be entitled to receive a preferential
liquidation payment equal to the greater of (i) $1,000 per share, or (ii) in the
aggregate, 1,000 times the payment made on the Common Shares. In the event of
any merger, consolidation or other transaction in which Common Shares are
exchanged for or changed into other stock or securities, cash or other property,
each whole Preferred Share will be entitled to receive 1,000 times the amount
received per Common Share. Each whole Preferred Share shall be entitled to
1,000 votes on all matters submitted to a vote of the stockholders of the
Company, and Preferred Shares shall generally vote together as one class with
the Common Stock and any other capital stock on all matters submitted to a vote
of stockholders of the Company.
The offer and sale of the Preferred Shares issuable upon exercise of the
Rights will be registered with the Securities and Exchange Commission, but such
registration will not be effective until the Rights become exercisable. The
Rights themselves are listed on the NASDAQ National Market System.
Antidilution and Other Adjustments. The number of one one-thousandths of a
Preferred Share or other securities or property issuable upon exercise of the
Rights, and the Purchase Price payable, are subject to customary adjustments
from time to time to prevent dilution.
The number of outstanding Rights and the number of one one-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
<PAGE>
Exchange Option. At any time after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or more of the
outstanding Voting Shares of the Company and before the acquisition by a person
or group of 50% or more of the outstanding Voting Shares of the Company, the
Board of Directors may, at its option, issue Common Shares in mandatory
redemption of, and in exchange for, all or part of the then outstanding and
exercisable Rights (other than Rights owned by such person or group which would
become null and void) at an exchange ratio of one Common Share (or one one-
thousandth of a Preferred Share) for each two Common Shares for which each Right
is then exercisable, subject to adjustment.
Redemption of Rights. At any time prior to the first public announcement
that a person or group has become the beneficial owner of 15% or more of the
outstanding Voting Shares, the Board of Directors of the Company may redeem all
but not less than all the then outstanding Rights at a price of $0.01 per Right
(the "Redemption Price"). The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish. Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
No Rights as Stockholder. Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
Amendment of Rights. The terms of the Rights may be amended by the Board
of Directors of the Company without the consent of the holders of the Rights,
including an amendment to extend the Final Expiration Date, and, provided a
Distribution Date has not occurred, to extend the period during which the Rights
may be redeemed, except that after the first public announcement that a person
or group has become the beneficial owner of 15% or more of the outstanding
Voting Shares, no such amendment may materially and adversely affect the
interests of the holders of the Rights.
THIS SUMMARY DESCRIPTION OF THE RIGHTS DOES NOT PURPORT TO BE COMPLETE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, WHICH IS
HEREBY INCORPORATED HEREIN BY REFERENCE.
A copy of the Rights Agreement between the Company's predecessor and the
Rights Agent, identical in all respects other than certain dates to the Rights
Agreement discussed herein, has been filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A dated December
22, 1997. A copy of the Rights Agreement is available free of charge from the
Company.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly filing on Form 10-Q for the period ended March 31, 1998 and is
qualififed in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 64,473
<SECURITIES> 0
<RECEIVABLES> 60,288
<ALLOWANCES> (1,472)
<INVENTORY> 28,495
<CURRENT-ASSETS> 159,622
<PP&E> 165,718
<DEPRECIATION> (60,343)
<TOTAL-ASSETS> 331,460
<CURRENT-LIABILITIES> 60,326
<BONDS> 0
0
38,666
<COMMON> 13
<OTHER-SE> 89,635
<TOTAL-LIABILITY-AND-EQUITY> 331,460
<SALES> 136,566
<TOTAL-REVENUES> 136,566
<CGS> 101,957
<TOTAL-COSTS> 134,162
<OTHER-EXPENSES> 32,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,808
<INCOME-PRETAX> 9,397
<INCOME-TAX> 4,623
<INCOME-CONTINUING> 4,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,686
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
