<PAGE> 1
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 June 30, 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 21,961,598 shares
outstanding as of August 13, 1998
<PAGE> 2
ICO, INC.
INDEX TO QUARTERLY REPORT FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and
September 30, 1997 ........................................... 3
Consolidated Statements of Operations for the Three
and Nine Months Ended June 30, 1998 and 1997 ................. 4
Consolidated Statements of Cash Flows for the Nine
Months Ended June 30, 1998 and 1997 .......................... 5
Notes to Consolidated Financial Statements ................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risks
(no response required) ....................................... --
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 14
Item 2. Changes in Securities ........................................ 15
Item 3. Defaults upon Senior Securities (no response required) ....... --
Item 4. Submission of Matters to a Vote of Security Holders (no
response required) ........................................... --
Item 5. Other Information (no response required) ..................... --
Item 6. Exhibits and Reports on Form 8-K ............................. 15
</TABLE>
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<PAGE> 3
ICO, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 50,892 $ 83,892
Trade receivables (less allowance for doubtful accounts of
$1,792 and $967, respectively) 57,384 49,963
Inventories 30,957 20,709
Deferred tax asset 3,553 3,812
Prepaid expenses and other 5,570 4,382
------------ ------------
Total current assets 148,356 162,758
------------ ------------
Property, plant and equipment, at cost 175,145 152,440
Less - accumulated depreciation and amortization (63,565) (54,661)
------------ ------------
111,580 97,779
------------ ------------
Other assets:
Goodwill (less accumulated amortization of
$6,142 and $5,056, respectively) 57,128 49,761
Investment in joint ventures -- 1,871
Debt offering costs 4,273 4,790
Other 4,636 4,794
------------ ------------
$ 325,973 $ 321,753
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current portion of long-term debt $ 12,346 $ 10,719
Accounts payable 24,818 21,923
Accrued interest 1,191 4,033
Accrued insurance 2,015 2,095
Accrued salaries and wages 1,914 2,204
Accrued litigation costs 1,549 1,046
Income taxes payable 2,316 1,092
Other accrued expenses 9,339 9,357
------------ ------------
Total current liabilities 55,488 52,469
Deferred income taxes 9,042 7,463
Long-term liabilities 2,043 1,649
Long-term debt, net of current portion 132,278 133,034
------------ ------------
Total liabilities 198,851 194,615
------------ ------------
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;
21,961,598 and 21,598,658 shares issued and outstanding,
respectively 38,794 36,966
Additional paid-in capital 109,718 109,814
Cumulative translation adjustment (3,896) (1,953)
Accumulated deficit (17,507) (17,702)
------------ ------------
127,122 127,138
------------ ------------
$ 325,973 $ 321,753
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
ICO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Petrochemical processing sales and services $ 46,718 $ 29,544 $ 128,813 $ 65,025
Oilfield sales and services 26,466 25,772 80,937 72,105
---------- ---------- ---------- ----------
Total net revenues 73,184 55,316 209,750 137,130
---------- ---------- ---------- ----------
Cost and expenses:
Cost of sales and services 55,419 39,851 157,475 96,662
Selling, general and administrative 10,009 8,591 33,553 22,182
Non-recurring litigation charges -- -- 1,200 --
Depreciation and amortization 3,544 2,646 10,210 7,325
Goodwill amortization 392 257 1,087 687
---------- ---------- ---------- ----------
69,364 51,345 203,525 126,856
---------- ---------- ---------- ----------
Operating income 3,820 3,971 6,225 10,274
---------- ---------- ---------- ----------
Other income and expense:
Gain on sale of equity investment -- -- 11,805 --
Interest income 772 381 2,929 616
Interest expense (3,374) (1,382) (10,339) (2,148)
Other 13 -- 8 33
---------- ---------- ---------- ----------
(2,589) (1,001) 4,403 (1,499)
---------- ---------- ---------- ----------
Income before taxes 1,231 2,970 10,628 8,775
Provision for income taxes 564 1,341 5,187 3,568
---------- ---------- ---------- ----------
Net income $ 667 $ 1,629 $ 5,441 $ 5,207
---------- ---------- ---------- ----------
Preferred Dividends 544 544 1,632 1,632
---------- ---------- ---------- ----------
Net income applicable to common stock $ 123 $ 1,085 $ 3,809 $ 3,575
========== ========== ========== ==========
Basic earnings per share (see Note 2) $ .01 $ .05 $ .17 $ .17
========== ========== ========== ==========
Diluted earnings per share (see Note 2) $ .01 $ .05 $ .17 $ .17
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
ICO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
---------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,441 $ 5,207
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 11,297 8,012
Gain on sale of equity investment (11,805) --
Changes in assets and liabilities, net of the effects
of business acquisitions:
Receivables (5,305) (4,678)
Inventories (6,721) (3,581)
Prepaid expenses and other (1,835) 438
Income taxes payable 642 384
Deferred taxes 2,100 2,342
Accounts payable 891 3,028
Accrued interest (2,842) 694
Accrued expenses (755) (4,695)
---------- ----------
Total adjustments (14,333) 1,944
---------- ----------
Net cash provided by (used for) operating activities (8,892) 7,151
---------- ----------
Cash flows from investing activities:
Capital expenditures (19,369) (9,832)
Acquisitions, net of cash acquired (17,137) (10,377)
Disposition of equity investment 13,679 --
Dispositions of property, plant and equipment 2,198 332
---------- ----------
Net cash provided by (used for) investing activities (20,629) (19,877)
---------- ----------
Cash flows from financing activities:
Net proceeds from sale of stock 1,173 251
Payment of dividend on preferred stock (1,632) (1,632)
Payment of dividend on common stock (3,614) (3,375)
Additional debt 4,044 121,702
Reductions of debt (3,433) (15,356)
---------- ----------
Net cash provided by (used for) financing activities (3,462) 101,590
---------- ----------
Effect of exchange rates on cash (17) --
---------- ----------
Net increase (decrease) in cash and equivalents (33,000) 88,864
Cash and equivalents at beginning of period 83,892 13,414
---------- ----------
Cash and equivalents at end of period $ 50,892 $ 102,278
========== ==========
Supplemental disclosures of cash flow information:
Cash received (paid) during the period for:
Interest received 2,962 616
Interest paid (12,413) (1,402)
Income taxes paid (3,348) (1,320)
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 June 30, 1998, the
results of operations for the three and nine months ended June 30, 1998 and
1997 and the changes in its cash position for the nine months ended June 30,
1998 and 1997. Results of operations for the three month and nine month periods
ended June 30, 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.
In June 1998, the Financial Accounting Standards board issued Statement of
financial Accounting Standards No. 133, "Accounting for Derivative Investments
and Hedging Activities" (SFAS 133), which is effective for all fiscal years
beginning after June 15, 1999. Due to the Company's limited use of derivative
instruments, management anticipates that adoption of SFAS 133 will not have a
significant effect on the Company's results of operations or its financial
position.
Certain reclassifications have been made to prior year amounts in order to
conform to current year classifications.
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 three and
nine months ended June 30, 1998, the potentially dilutive effects of the
Company's exchangeable preferred stock (would have an anti-dilutive effect) and
common stock options, with exercise prices exceeding fair market value of the
underlying common shares, have been excluded from diluted earnings per share.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -------------------------------------------
(In thousands, except share data)
Income Shares Amount Income Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 667 $ 1,629
Less: Preferred stock dividends 544 544
----------- -----------
BASIC EPS 123 21,943,713 $ .01 1,085 21,307,288 $ .05
=========== ===========
EFFECT OF DILUTIVE SECURITIES
Options -- 20,543 -- 57,538
Warrants -- -- -- 28,755
----------- ----------- ----------- -----------
DILUTED EPS $ 123 21,964,256 $ .01 $ 1,085 21,393,581 $ .05
=========== =========== =========== =========== =========== ===========
</TABLE>
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<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -------------------------------------------
(In thousands, except share data)
Income Shares Amount Income Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 5,441 $ 5,207
Less: Preferred stock dividends 1,632 1,632
----------- -----------
BASIC EPS 3,809 21,847,670 $ .17 3,575 20,727,532 $ .17
=========== ===========
Effect of dilutive securities
Options -- 101,068 -- 120,299
Warrants -- 64,393 -- 98,275
----------- ----------- ----------- -----------
DILUTED EPS $ 3,809 22,013,131 $ .17 $ 3,575 20,946,106 $ .17
=========== =========== =========== =========== =========== ===========
</TABLE>
NOTE 3. ACQUISITIONS
During June 1998, the Company acquired Soreco S.A. ("Soreco") and its wholly
owned subsidiary for approximately $1,600,000 in cash and the assumption of
approximately $236,000 in debt. The Company will account for the acquisition
using the purchase method of accounting. Soreco, which is strategically
located in the French "Plastics Valley", provides high quality color matching
and color compounding services for engineering plastics. Soreco's customer
base includes manufacturers of consumer products such as appliances,
electronics, cosmetics and other products which require colors with high
consistency. Soreco uses sophisticated single pigment coloration techniques to
provide rapid turnaround for color matching and compounding services and has an
extensive library of proprietary color formulations.
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,
subject to adjustment. The Company will account for the acquisition using the
purchase method of accounting and, as such, the consolidated results of
operations of JRC have been included from the date of acquisition forward. 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(TM) 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 material acquisition
of JRC and subsidiaries occurred as of the beginning of the period presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
1998 1997
------------ ------------
(In thousands, except share data)
<S> <C> <C>
Revenues $ 220,533 $ 154,777
Net income 5,585 5,456
Basic earnings per share .18 .18
Diluted earnings per share .18 .18
</TABLE>
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1998 SEPTEMBER 30, 1997
--------------- ------------------
(In thousands)
<S> <C> <C>
Finished Goods $ 12,264 $ 7,958
Raw Materials 12,353 9,023
Work in Progress 1,806 835
Supplies 4,534 2,893
--------------- ---------------
$ 30,957 $ 20,709
=============== ===============
</TABLE>
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in all parts of this document, including, but not
limited to, availability of liquidity for future capital expenditures, effects
of the Year 2000 issue, the effect of legal proceedings, future acquisitions,
future growth plans, financial results and any other statements which are not
historical facts are 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 due to a number of
factors, including those described in 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 is, generally, significantly lower than those generated by
the Company's size reduction services. Bayshore, and the Company's distribution
operations typically buy raw materials, improve the material and then sell 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 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 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. Distribution revenues also include a majority of the
revenues generated by J.R. Courtenay (NZ) Ltd. which operates in New Zealand
and Australia. The Company's distribution operations utilize the Company's
size reduction and compounding facilities to process petrochemical products
prior to sale. Revenues in both 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:
<TABLE>
<CAPTION>
JUNE 30, 1998 SEPTEMBER 30, 1997
--------------- ------------------
<S> <C> <C>
Cash and cash equivalents $ 50,892,000 $ 83,892,000
Working capital 92,868,000 110,289,000
Current ratio 2.7 3.1
Debt-to-capitalization .53 to 1 .53 to 1
</TABLE>
Cash and cash equivalents decreased $33,000,000 during the nine months ended
June 30, 1998 due to the factors described below.
The Company's working capital decreased during the nine months ended June 30,
1998 from $110,289,000 at September 30, 1997 to $92,868,000 at June 30, 1998 as
a result of the factors described below.
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<PAGE> 10
For the nine months ended June 30, 1998 cash provided by (used for) operating
activities decreased to $(8,892,000) compared to $7,151,000 for the nine months
ended June 30, 1997. Despite higher net income and increased depreciation and
amortization expenses, the decrease was primarily 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, accrued liabilities and taxes payable).
Capital expenditures totaled $19,369,000 and $7,315,000 during the nine and
three months ended June 30, 1998, respectively, of which $6,125,000 for the
nine month period and $3,146,000 for the three month period related to the
oilfield services segment and the remaining $13,244,000 for the nine month
period and $4,169,000 for the three month period related to the petrochemical
processing business. Specifically, $3,936,000 of the expenditures incurred
during the nine months ended June 30, 1998 were used to expand the Company's
Laporte, Texas compounding facility. This project was completed in May 1998.
Most of the capital expenditures made during the three and nine months ended
June 30, 1998 were intended to expand the Company's existing base of
operations, as opposed to maintaining current operating facilities. The
Company anticipates that available cash and/or existing credit facilities will
be sufficient to fund remaining fiscal 1998 capital expenditure requirements.
Cash flows provided by (used for) financing activities declined to uses of
$(3,462,000) during the nine months ended June 30, 1998 compared to proceeds of
$101,590,000 during the first nine months of fiscal 1997. The decline was
primarily due to the issuance in June 1997 of the $120,000,000 10 3/8% Senior
Notes. The debt matures June 1, 2007, without prior principle amortization,
and interest is payable on June 1 and December 1 of each year beginning
December 1, 1997.
During the period commencing on October 1, 1995 and ended on June 30, 1998, the
Company acquired nineteen businesses. These acquisitions were made 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.
As of July 31, 1998, the Company had approximately $23,179,000 of additional
borrowing capacity available under various credit arrangements. $15,000,000 is
available under the Company's domestic credit facility and the remaining amount
is available under various foreign facilities. Currently, the Company has no
outstanding indebtedness under the domestic credit facility.
The terms of the Company's domestic credit facility and the Senior Notes limit
the amount of additional liens and indebtedness incurred by the Company. The
domestic credit facility is secured by certain receivables and inventories and
requires maintenance of certain financial ratios including minimum tangible net
worth, profitability and maximum total debt to capitalization.
YEAR 2000
The Company is working to resolve the potential impact of the year 2000 on the
ability of the Company's computerized information systems to accurately process
information that may be date-sensitive. Any of the Company's programs that
recognize a date using "00" as the year 1900 rather than the year 2000 could
result in errors or system failures. The Company utilizes a number of computer
programs across its entire operation. The Company has not completed its
assessment, but currently believes that costs of addressing this issue will not
have a material adverse impact on the Company's financial position. However,
if the Company and third parties upon which it relies are unable to address
this issue in a timely manner, it could result in a material financial risk to
the Company. In order to assure that this does not occur, the company plans to
devote all resources required to resolve any significant year 2000 issues in a
timely manner.
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<PAGE> 11
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
---------------------------------------------- -----------------------------------------------
% 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>
Distribution $ 20,309 43 4,892 16 $ 52,946 41 6,156 9
Size Reduction Services and
Other Sales and Services 12,942 28 11,732 40 39,097 30 33,104 51
Compounding Sales and Services 13,467 29 12,920 44 36,770 29 25,765 40
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Petrochemical Processing 46,718 100 29,544 100 128,813 100 65,025 100
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Exploration Sales and Services 10,689 40 $ 9,886 38 31,083 38 $ 27,621 38
Production Sales and Services 8,922 34 8,570 33 27,261 34 24,440 34
Corrosion Control Sales and
Services 6,393 24 6,472 25 19,548 24 17,270 24
Other Sales and Services 462 2 844 4 3,045 4 2,774 4
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Oilfield Services Revenues 26,466 100 25,772 100 80,937 100 72,105 100
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 73,184 $ 55,316 $ 209,750 $ 137,130
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
------------------------------------------ ----------------------------------------
% of % of % of % of
OPERATING PROFIT (000'S) 1998 Total 1997 Total 1998 Total 1997 Total
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petrochemical Processing $ 2,010 37 $ 2,212 37 $ 7,435 42 $ 5,404 35
Oilfield Services 3,393 63 3,749 63 10,250 58 10,083 65
-------- -------- -------- -------- -------- -------- -------- --------
Total Operations 5,403 100 5,961 100 17,685 100 15,487 100
General Corporate Expenses (1,583) (1,990) (11,460) (5,213)
-------- -------- -------- --------
Total $ 3,820 $ 3,971 $ 6,225 $ 10,274
======== ======== ======== ========
</TABLE>
REVENUES.
Consolidated revenues increased $72,620,000 (53%) and $17,868,000 (32%) during
the nine and three months ended June 30, 1998, respectively, as compared to the
same periods in the last fiscal year. These improvements were primarily due to
the fiscal 1997 and 1998 acquisitions, and, to a lesser extent, internal growth
within both of the Company's business segments, particularly petrochemical
distribution in Europe.
Oilfield service revenues increased $8,832,000 (12%) and $694,000 (3%) during
the nine and three months ended June 30, 1998, respectively, compared to the
same periods in fiscal 1997. The increase during the nine months ended June 30,
1998 was primarily due to internal growth. Revenues from exploration sales and
services increased $3,462,000 (13%) and $803,000 (8%) from the nine and three
months ended June 30, 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 approximately 7% during the nine
months ended June 30, 1998, but declined approximately 8% during the quarter
ended June 30, 1998, as compared to the fiscal 1997 periods. The weakening oil
and gas environment has had a particularly adverse effect on the Company's
inspection business with oil country tubular producers and processors. Despite
lower oil prices and, to a lesser extent, lower gas prices, during fiscal 1998
compared to fiscal 1997, revenues from production sales and services increased
$2,821,000 (12%) and $352,000 (4%) for the nine and three months ended June 30,
1998, respectively, compared to the same periods in fiscal 1997. As a result of
lower demand for the Company's products and services during the quarter ended
June 30, 1998, the Company experienced a decline in revenues within the West
Texas and Canadian production service divisions. These declines were more than
offset by revenues resulting from the acquisition of Curley's and internal
growth in certain geographical markets. Corrosion control revenues increased
$2,278,000 (13%) and decreased $79,000 (1%) during the nine and three months
ended June 30, 1998, respectively, compared to the same periods of
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<PAGE> 12
fiscal 1997. All corrosion control divisions generated increased revenues
during the nine months ended June 30, 1998 compared to 1997. During the third
quarter 1998, compared to the same quarter of 1997, however, revenues declined
within the West Texas corrosion control market. 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. While these revenues increased during the nine months ended June
30, 1998, compared to fiscal 1997, during the third quarter, other sales and
service revenues declined due to relatively lower production activity in Western
Canada.
Petrochemical processing revenues were $128,813,000 and $46,718,000 for the
nine and three months ended June 30, 1998, respectively. These results
represented increases of $63,788,000 (98%) and $17,174,000 (58%), respectively,
as compared to the fiscal 1997 periods. The revenue growth was driven
by the fiscal 1998 and 1997 acquisitions, the establishment of the European
distribution operations and, to a lesser extent, internal growth. Distribution
revenues increased $46,790,000 to $52,946,000 during the nine months ended
June 30, 1998, compared to the same period of fiscal 1997. During the
quarter ended June 30, 1998, revenues increased $15,417,000 to $20,309,000,
compared to the third quarter of fiscal 1997. The increases are the result of
establishing the European distribution operations during fiscal 1997 and the
acquisitions made during fiscal 1998 and 1997. Size reduction services and
other sales and services revenues were $39,097,000 and $12,942,000 for the nine
and three months ended June 30, 1998, respectively, compared to $33,104,000 and
$11,732,000 for the same periods in fiscal 1997. These results represented
increases of $5,993,000 (18%) and $1,210,000 (10%), respectively, and were
primarily attributable to the fiscal 1997 and 1998 acquisitions. Compounding
revenues increased $11,005,000 (43%) and $547,000 (4%) during the nine and
three months ended June 30, 1998, respectively. The increases to $36,770,000
for the nine months ended June 30, 1998 and to $13,467,000 for the three months
ended June 30, 1998 were primarily the result of the fiscal 1997 acquisitions,
particularly the acquisition of Bayshore in December 1996.
COSTS AND EXPENSES
Gross margin (calculated as net revenues minus cost of sales) as a percentage
of revenues declined to 24.9% and 24.3% during the nine and three months ended
June 30, 1998, respectively, compared to 29.5% and 28.0%, of revenues, for the
nine and three months ended June 30, 1997, respectively. The declines resulted
primarily from revenue growth within the petrochemical processing business
segment which, in the aggregate, generates lower gross profits as a percentage
of revenues. Within the oilfield services business, gross margins as a
percentage of revenues declined 0.6% to 30.6%, during the nine months ended
June 30, 1998, compared to the year earlier period and declined 0.9% to 31.3%,
during the quarter ended June 30, 1998, compared to the quarter ended June 30,
1997. The decline in oilfield service gross margins as a percentage of
revenues, resulted primarily from a change in product sales mix rather than a
change in sales prices. Petrochemical gross profit margins declined to 21.4%
and 20.2%, of revenues, during the nine and three months ended June 30, 1998,
respectively, compared to 27.9% and 24.5%, of revenues, during the nine and
three months ended June 30, 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,
due in large part to the fiscal 1998 and 1997 petrochemical processing
acquisitions. In addition, European distribution gross profits, as a
percentage of revenues, softened materially during the third quarter of fiscal
1998, due to a decline in polymer prices and the subsequent liquidation of
relatively higher cost inventories. Generally, gross margins, as a percentage
of revenues of the Company's size reduction operations, are higher than the
gross 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 $11,371,000 (51%) and
$1,418,000 (17%) during the nine and three months ended June 30, 1998,
respectively, as compared to the same periods of fiscal 1997. The increase,
during the nine months ended June 30, 1998 compared to the same period in
fiscal 1997, was primarily the result of the fiscal 1997 and 1998 acquisitions
and increased sales expenses within the oilfield service business.
Additionally, the Company incurred more legal, workers' compensation, bonus and
corporate administrative expenses during fiscal year-to-date 1998 compared to
1997. The increase during the quarter ended June 30, 1998, compared to the
same quarter of 1997, was caused by the acquisitions during fiscal 1997 and
1998 and an increase in oilfield service sales expenses. For the quarter ended
June 30, 1998, legal expenses also increased, offset by lower bonus expenses.
Selling, general and administrative costs as a percentage of revenues decreased
to 16.0% and 13.7% during the nine and three months ended June 30, 1998,
respectively, from 16.2% and 15.5% for the nine and three months ended June 30,
1997. The changes were primarily the result of the increases and decreases of
selling, general and administrative expenses described above, offset by the
effect of increased distribution and compounding revenues. Generally, the
Company's distribution and compounding operations generate lower 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.
-12-
<PAGE> 13
Depreciation and amortization expense increased from $8,012,000 and $2,903,000
for the nine and three months ended June 30, 1997, respectively, to $11,297,000
and $3,936,000 for the nine and three months ended June 30, 1998. The increase
resulted from additions of property, plant and equipment and goodwill primarily
due to the acquisitions made during the fiscal 1998 and 1997.
OPERATING INCOME
Operating income declined from $10,274,000 and $3,971,000 for the nine and
three months ended June 30, 1997, respectively, to $6,225,000 and $3,820,000
for the same periods of fiscal 1998, respectively. The decreases 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 $7,410,000 and $2,602,000 during the nine and three
months ended June 30, 1998, respectively. For the nine and three months ended
June 30, 1997, the Company had net interest expense of $1,532,000 and
$1,001,000, 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 1998 and 1997 acquisitions.
INCOME TAXES
The Company's effective income tax rate increased to 49% during the nine months
ended June 30, 1998, compared to 41% during the nine months ended June 30,
1997. During the third quarter of fiscal 1998, the Company's effective rate
increased to 46% from 45% 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 increase during the third quarter of
fiscal 1998, in comparison to the third quarter of fiscal 1997, was due to an
increase in permanent book to tax differences relative to pre-tax income,
offset by the effect of a decline in 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 nine and three months ended June 30, 1998, the Company had net income
of $5,441,000 and $667,000, respectively, as compared to net income of
$5,207,000 and $1,629,000 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 nine and three months ended June 30, 1998 compared to the exchange
rates used to translate the operating results of the nine and three months
ended June 30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
----------------- ------------------
<S> <C> <C>
Net Revenues $ (2,706,000) $ (882,000)
Operating Income (273,000) (77,000)
Pre-tax Income (248,000) (69,000)
Net Income (149,000) (52,000)
</TABLE>
-13-
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 case. 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.
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. The Wood Group is currently appealing the judgment. 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.
-14-
<PAGE> 15
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"), John Lefas ("Lefas"), the principal shareholder of Polyvector,
and Fred Feder ("Feder"), a former director of Wedco, which is pending in the
federal district court for the District of New Jersey. Wedco alleges, among
other things, that Lefas and Polyvector have breached the terms of the
shareholders' agreement among Wedco and the defendants and seeks performance of
the terms of such agreement. Wedco also alleges, among other things, that
Feder has breached his fiduciary duty to Wedco. 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. Discovery is scheduled to end in the New Jersey
action later this year and a jury trial should occur in early 1999. The
outcome of this litigation cannot be predicted, but the Company believes it has
meritorious defenses to the counterclaims and third party claims. A proceeding
has been brought in the Ontario Court (General Division) by WedTech Inc. and
Polyvector against the Company and others for damages and other relief. The
proceeding is at a very early stage, but it would appear that the factual
complaints raised in the Canadian litigation duplicate the claims raised in the
New Jersey litigation. It is the intention of the Company to seek an order
staying the Canadian litigation.
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 August 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.
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- Reference is hereby made to the exhibit index which appears
on page 16.
(b) On April 15, 1998, the Company filed a Form 8-K Current Report regarding
the acquisition of J.R. Courtenay (N.Z.) Ltd.
(c) On April 16, 1998, the Company filed a Form 8-K Current Report regarding
the restructuring of the Company.
(d) On June 12, 1998, the Company filed a Form 8-K/A Amendment Number 1 to
Current Report regarding the acquisition of J.R. Courtenay (N.Z.) Ltd.
-15-
<PAGE> 16
The following instruments and documents are included as Exhibits to this
Form 10-Q. Exhibits incorporated by reference are so indicated by parenthetical
information.
EXHIBIT NO. EXHIBIT
----------- -----------------------------------------------------------------
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)
2.4** -- Plan of Merger of ICO Merger Sub, Inc. with and into ICO, Inc.
3.1** -- Amended and Restated Articles of Incorporation of the Company
dated March 20, 1998.
3.2** -- By-Laws of the Company dated March 30, 1998.
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 (filed as Exhibit 4.2 to Form 10-Q dated
May 15, 1998).
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
(filed as Exhibit 4.3 to Form 10-Q dated May 15, 1998).
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 (filed as Exhibit 4.7 to Form 10-Q for the quarter
ended March 31, 1998).
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)
-16-
<PAGE> 17
EXHIBIT NO. EXHIBIT
----------- -----------------------------------------------------------------
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)
10.4** -- Third Amendment to Amended and Restated Business Loan
Agreement between the Registrant and Bank of America, Texas, N.A.
dated July 17, 1998.
10.5 -- 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)
10.6 -- 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc.
(filed as Exhibit 99 to the Registrant's Form S-8 dated
September 13, 1993)
10.7 -- 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)
10.8 -- 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)
10.9 -- 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)
10.10 -- 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)
10.11 -- Willoughby International Stockholders Agreement dated April
30, 1996 (filed as Exhibit 10.9 to Form S-4 dated May 15, 1996)
10.12 -- Consulting Agreement -- William E. Willoughby (filed as
Exhibit 10.13 to Form S-4 dated May 15, 1996)
10.13 -- Salary Continuation Agreement -- William E. Willoughby (filed
as Exhibit 10.14 to Form S-4 dated May 15, 1996)
10.14 -- Addendum to Salary Continuation Agreement -- William E.
Willoughby (filed as Exhibit 10.15 to form S-4 dated May 15,
1996)
10.15 -- Non-Competition Covenant William E. Willoughby (filed as
Exhibit 10.11 to Form S-4 dated May 15, 1996)
10.16 -- 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)
10.17 -- Stockholders Agreement respecting voting of shares of certain
ICO common shareholders (filed as Exhibit 10.22 to Form S-4 dated
May 15, 1996)
10.18 -- 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)
10.19 -- 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
27** -- Financial Data Schedule
99 -- Safe Harbor Disclosure (filed as Exhibit 99 to Form 10-K dated
December 29, 1997).
** Filed herewith
-17-
<PAGE> 18
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
-----------------------------------------
August 13, 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)
-18-
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -----------------------------------------------------------------
<S> <C>
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)
2.4** -- Plan of Merger of ICO Merger Sub, Inc. with and into ICO, Inc.
3.1** -- Amended and Restated Articles of Incorporation of the Company
dated March 20, 1998.
3.2** -- By-Laws of the Company dated March 20, 1998.
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 (filed as Exhibit 4.2 to Form 10-Q dated
May 15, 1998).
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
(filed as Exhibit 4.3 to Form 10-Q dated May 15, 1998).
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 (filed as Exhibit 4.7 to Form 10-Q for the quarter
ended March 31, 1998).
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)
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -----------------------------------------------------------------
<S> <C>
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)
10.4** -- Third Amendment to Amended and Restated Business Loan
Agreement between the Registrant and Bank of America, Texas, N.A.
dated July 17, 1998.
10.5 -- 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)
10.6 -- 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc.
(filed as Exhibit 99 to the Registrant's Form S-8 dated
September 13, 1993)
10.7 -- 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)
10.8 -- 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)
10.9 -- 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)
10.10 -- 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)
10.11 -- Willoughby International Stockholders Agreement dated April
30, 1996 (filed as Exhibit 10.9 to Form S-4 dated May 15, 1996)
10.12 -- Consulting Agreement -- William E. Willoughby (filed as
Exhibit 10.13 to Form S-4 dated May 15, 1996)
10.13 -- Salary Continuation Agreement -- William E. Willoughby (filed
as Exhibit 10.14 to Form S-4 dated May 15, 1996)
10.14 -- Addendum to Salary Continuation Agreement -- William E.
Willoughby (filed as Exhibit 10.15 to form S-4 dated May 15,
1996)
10.15 -- Non-Competition Covenant William E. Willoughby (filed as
Exhibit 10.11 to Form S-4 dated May 15, 1996)
10.16 -- 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)
10.17 -- Stockholders Agreement respecting voting of shares of certain
ICO common shareholders (filed as Exhibit 10.22 to Form S-4 dated
May 15, 1996)
10.18 -- 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)
10.19 -- 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
27** -- Financial Data Schedule
99 -- Safe Harbor Disclosure (filed as Exhibit 99 to Form 10-K dated
December 29, 1997).
</TABLE>
** Filed herewith
<PAGE> 1
EXHIBIT 2.4
PLAN OF MERGER
OF
ICO MERGER SUB, INC.
WITH AND INTO
ICO, INC.
This Plan of Merger is made as of the 30th day of March, 1998 pursuant
to Article 5.03(H) of the Business Corporation Act of the State of Texas
("TBCA"), by and among ICO, Inc., a Texas corporation (the "Company"), ICO
Merger Sub, Inc., a Texas corporation ("Merger Sub"), and ICO Holdings, Inc., a
Texas corporation ("Holding Company"), both the Company and Merger Sub are
hereinafter sometimes collectively referred to as the "Constituent
Corporations" in the merger ("Merger").
NOW THEREFORE, for the purpose of prescribing the terms and conditions
of the Merger, the mode of carrying it into effect, the manner and basis of
converting shares of each of the Constituent Corporations into shares of the
Surviving Corporation (as defined below) and such other details and provisions
of the Merger as are deemed necessary or desirable are outlined as follows:
1. On the Effective Date (as hereinafter defined) Merger Sub shall
be merged with and into the Company and the Company, as the surviving
corporation (the "Surviving Corporation") in the Merger, shall continue its
corporate existence under the laws of the State of Texas. The Merger shall
have the effect set forth in Article 5.03(H) of the TBCA. As a result of the
Merger, the Surviving Corporation shall become a wholly-owned subsidiary of
Holding Company. The date and time when the Merger becomes effective is
hereafter called the "Effective Date."
2. This Plan of Merger shall be submitted as promptly as practicable
to the Board of Directors of the Company for its approval and adoption in
accordance with the provisions of the Article 5.03(H) of the TBCA.
3. On the Effective Date:
(a) Merger Sub shall be merged with and into the Company and
the Company shall, as provided in the TBCA, be merged into and continued in the
Surviving Corporation and the Surviving Corporation shall be deemed a
continuation in entity and identity of each of the Constituent Corporations.
The separate existence of Merger Sub shall cease. The Surviving Corporation
shall have all the rights, privileges, immunities and powers and shall be
subject to all the duties and liabilities of a corporation organized under the
TBCA. The Surviving Corporation shall be subject to all the liabilities,
obligations, duties and relations of each Constituent Corporation, and shall
without the necessity of any conveyance, assignment or transfer become the
owner of all of the assets of every kind and character formerly belonging to
the Company.
<PAGE> 2
(b) The Articles of Incorporation of the Company, as amended,
in effect on the Effective Date, shall be the Articles of Incorporation of the
Surviving Corporation in the Merger until amended in accordance with the
provisions thereof and the TBCA; provided, however, that, effective on the
Effective Date, the Articles of Incorporation of the Surviving Corporation
shall be, and hereby are, amended as follows:
(i) Article One of the Articles of Incorporation of the
Surviving Corporation is hereby amended to read in its entirety as
follows:
"ARTICLE ONE
The name of the corporation is ICO P&O, Inc."
(ii) Article Ten of the Articles of Incorporation of the
Surviving Corporation is hereby amended to add the following additional
provision as the last paragraph of such Article Ten:
"Any act or transaction of the corporation that requires
the approval of the shareholders under either the Texas Business
Corporation Act or these Articles of Incorporation, as amended,
shall require the approval of the shareholders of ICO Holdings,
Inc. (or any successor by merger) pursuant to Article
5.03(H)(6)(a) of the Texas Business Corporation Act by the same
vote as is required under either the Texas Business Corporation
Act or these Articles of Incorporation, as amended, as the case
may be."
(c) The Bylaws of the Company, as in effect on the Effective
Date, shall be the Bylaws of the Surviving Corporation in the Merger until
amended in accordance with the provisions of the TBCA.
(d) The established office and facilities of the Company
immediately prior to the Effective Date shall be the established office and
facilities of the Surviving Corporation after the Effective Date.
(e) The directors of the Surviving Corporation shall be the
directors of Merger Sub in office immediately prior to the Effective Date.
(f) The officers of the Surviving Corporation shall be the
officers of Merger Sub in office immediately prior to the Effective Date.
(g) The assets, liabilities, reserves and accounts of the
Constituent Corporations on the Effective Date shall be taken up on the books
of the Surviving Corporation at the amounts at which they are then carried on
the respective books of the Constituent Corporations, subject to such
adjustments or eliminations of intercompany items as may be appropriate in
giving effect to the Merger.
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<PAGE> 3
(h) All corporate acts, plans, policies, approvals and
authorizations of the Company, its shareholders, Board of Directors, committees
elected or appointed by the Board of Directors, officers and agents, which were
valid and effective immediately prior to the Effective Date shall be taken for
all purposes as the acts, plans, policies, approvals and authorizations of the
Surviving Corporation and shall be as effective and binding thereon as the same
were with respect to the Company.
4. The mode of carrying the Merger into effect and the manner and
basis of converting or exchanging the shares of the Company into shares of
Holding Company, shall be as follows:
(a) In accordance with Article 5.03 (H)(3) of the TBCA, each
share or fraction of a share of capital stock of the Company outstanding
immediately prior to the effectiveness of the Merger will be converted
pursuant to the Merger into a share or fraction of a share of capital
stock of Holding Company, having the same designations, preferences,
limitations, and relative rights as a share of capital stock of the
Company being converted in the Merger;
(b) Each share of Company Common Stock or Preferred Stock held
in the treasury of the Company on the Effective Date, if any, shall be
canceled on the Effective Date;
(c) The shares of Merger Sub Common Stock issued and
outstanding on the Effective Date shall be canceled; and
(d) After the Effective Date, each holder of an outstanding
certificate or certificates which prior thereto represented shares of
Company Common or Preferred Stock may surrender the same, and such
holder shall be entitled, upon such surrender, to receive in exchange
therefor a certificate or certificates representing the number of whole
shares of Holding Company Common Stock and Preferred Stock into and for
which the shares of Company Common Stock or Preferred Stock so
surrendered shall have been converted and exchanged as aforesaid. Until
so surrendered, each such outstanding certificate which prior to the
Effective Date represented shares of Company Common Stock or Preferred
Stock shall for all purposes, evidence the ownership of the shares of
Holding Company Common Stock and Preferred Stock into and for which such
shares have been so converted and exchanged.
5. On the Effective Date, the Company shall execute and file such
documents and take such other actions as may be necessary or appropriate to
effect the transactions contemplated by this Plan of Merger. The Merger shall
become effective upon the delivery of Articles of Merger to, and issuance of a
Certificate of Merger by, the Secretary of State of Texas pursuant to Article
5.16 of the Texas Business Corporation Act.
6. Each of the Constituent Corporations hereby agrees that at any
time, or from time to time, as and when requested by the Surviving Corporation,
or by its successors and assigns, it will execute and deliver, or cause to be
executed and delivered in its name by its last acting officers or by the
corresponding officers of the Surviving Corporation, all such conveyances,
assignments,
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<PAGE> 4
transfers, deeds or other instruments, and will take or cause to be taken such
further or other action, as the Surviving Corporation, its successors or
assigns, may deem necessary or desirable in order to evidence the transfer,
vesting or devolution of any property, right, privilege or franchise referred
to herein, or to vest or perfect in or confirm to the Surviving Corporation,
its successors and assigns, title to and possession of all the property,
rights, privileges, powers, franchises and interests referred to herein, and
otherwise to carry out the intent and purpose hereof.
IN WITNESS WHEREOF, the undersigned has executed this Plan of Merger as
of the date and year first above written.
ICO, INC.
By: /s/ Robin E. Pacholder
--------------------------------
Robin E. Pacholder
Senior Vice President
ICO MERGER SUB, INC.
By: /s/ Robin E. Pacholder
--------------------------------
Robin E. Pacholder
President and Secretary
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<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
ICO, INC.
The undersigned natural person of the age of eighteen years or more,
acting as the sole incorporator of a corporation under the Texas Business
Corporation Act, does hereby adopt the following Articles of Incorporation for
such corporation:
ARTICLE ONE
The name of the corporation is ICO, Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized
are:
To transact any and all lawful business for which
corporations may be incorporated under the Texas Business
Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have
authority to issue is 50,500,000 shares, of which 500,000 shall be
Preferred Stock, with no par value, and 50,000,000 shall be Common
Stock, with no par value.
The description of the authorized classes of stock and the
preferences, designations, rights, privileges and powers, and the
restrictions, limitations and qualifications thereof are as follows:
(a) The holders of Common Stock shall have identical
rights and privileges in every respect.
(b) Each holder of Common Stock of record shall have
one vote for each share of stock standing in his name on the
books of the corporation. Cumulative voting shall not be allowed
in the election of Directors or for any other purpose.
<PAGE> 2
(c) With respect to the 500,000 shares of Preferred
Stock, with no par value, the Board of Directors of the
corporation shall be expressly authorized to establish series and
fix and determine the variations and the relative rights and
preferences as between series, and the Board of Directors of the
corporation shall have authority to divide any or all of such
classes into series and to fix and determine the relative rights
and preferences of the shares of any series so established, all
in accordance with V.A.T.S., Business Corporation Act, Article
2.13.
(d) No shareholder, either common or preferred, shall
be entitled, as a matter of right, to exercise preemptive rights
to acquire, purchase or subscribe for any unissued or treasury
stock of the corporation.
ARTICLE FIVE
The corporation will not commence business until it has received
for the issuance of its shares consideration of the value of One
Thousand Dollars ($1,000), consisting of money paid, labor done, or
property actually received.
ARTICLE SIX
The address of its initial registered office is 811 Dallas
Avenue, Houston, Texas, 77002 and the name of its initial registered
agent at such address is CT Corporation System.
ARTICLE SEVEN
The number of directors constituting the initial Board of
Directors is ten (10) and the names and addresses of the persons who are
to serve as directors of the corporation until the first annual meeting
of the shareholders or until their successors are elected and qualified
are:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C> <C>
Sylvia A. Pacholder 11490 Westheimer, Suite 1000
Houston, Texas 77077
Asher O. Pacholder 11490 Westheimer, Suite 1000
Houston, Texas 77077
William E. Cornelius 11490 Westheimer, Suite 1000
Houston, Texas 77077
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C>
James E. Gibson 11490 Westheimer, Suite 1000
Houston, Texas 77077
Walter L. Leib 11490 Westheimer, Suite 1000
Houston, Texas 77077
William J. Morgan 11490 Westheimer, Suite 1000
Houston, Texas 77077
George S. Sirusas 11490 Westheimer, Suite 1000
Houston, Texas 77077
John F. Williamson 11490 Westheimer, Suite 1000
Houston, Texas 77077
William E. Willoughby 11490 Westheimer, Suite 1000
Houston, Texas 77077
Robin E. Pacholder 11490 Westheimer, Suite 1000
Houston, Texas 77077
</TABLE>
ARTICLE EIGHT
The name and address of the incorporator is Edward G. Zizmont,
Jr., c/o Vinson & Elkins L.L.P., 2300 First City Tower, 1001 Fannin,
Houston, Texas 77002-6760.
ARTICLE NINE
1. If Paragraph 2 (below) is satisfied, no contract or other
transaction between the corporation and any of its directors, officers
or shareholders (or any corporation or firm in which any of them are
directly or indirectly interested) shall be invalid solely because of
this relationship or because of the presence of such director, officer
or shareholder at the meeting authorizing such contract or transaction,
or his participation in such meeting or authorization.
2. Paragraph 1 (above) shall apply only if:
(a) the material facts of the relationship or interest
of each such director, officer or shareholder are known or
disclosed:
(i) to the Board of Directors and it
nevertheless authorizes or ratifies the contract or
transaction by a majority of the directors present, each
such interested director to be counted in determining
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<PAGE> 4
whether a quorum is present but not in calculating the
majority necessary to carry the vote; or
(ii) to the shareholders and they nevertheless
authorize or ratify the contract or transaction by a
majority of the shares present, each such interested
person to be counted for quorum and voting purposes; or
(b) the contract or transaction is fair to the
corporation as of the time it is authorized or ratified by the
Board of Directors, a committee of the Board, or the
shareholders.
3. This provision shall not be construed to invalidate a
contract or transaction which would be valid in the absence of this
provision.
ARTICLE TEN
The shareholders of the corporation hereby delegate to the Board
of Directors power to adopt, alter, amend or repeal the Bylaws of the
corporation; the power shall be vested exclusively in the Board of
Directors and shall not be exercised by the shareholders.
ARTICLE ELEVEN
No director of the corporation shall be liable to the corporation
or its shareholders for monetary damages for an act or omission in such
director's capacity as a director of the corporation, except that this
Article Eleven shall not eliminate or limit the liability of a director
of the corporation for:
(i) a breach of such director's duty of loyalty to the
corporation or its shareholders;
(ii) an act or omission not in good faith or that
involves intentional misconduct or a knowing violation of the
law;
(iii) a transaction from which a director received an
improper benefit, whether or not the benefit resulted from an
action taken within the scope of the director's office;
(iv) an act or omission for which the liability of a
director is expressly provided by statute; or
(v) an act related to an unlawful stock repurchase or
payment of a dividend.
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<PAGE> 5
Any repeal or amendment of this Article Eleven by the
shareholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director
of the corporation existing at the time of such repeal or amendment.
Anything herein to the contrary notwithstanding, if the Texas
Miscellaneous Corporation Laws Act is amended after approval by the
shareholders of this Article Eleven to authorize corporate action
further eliminating or limiting the personal liability of directors,
then the liability of a director of the corporation shall be eliminated
or limited to the fullest extent permitted by the Texas Miscellaneous
Corporation Laws Act, as so amended from time to time.
IN WITNESS WHEREOF, the undersigned has set his hand this 20th day of
March, 1998.
/s/ EDWARD G. ZIZMONT, JR.
-----------------------------
Edward G. Zizmont, Jr.
Incorporator
-5-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
ICO, INC.
Date of Adoption: March 20, 1998
ARTICLE 1: OFFICES
1.01 REGISTERED OFFICE. The registered office of the Corporation required by
the Texas Business Corporation Act (the "TBCA") to be maintained in the State
of Texas shall be as designated from time to time by the Board of Directors in
the manner provided by law.
1.02 OTHER OFFICES. The corporation may also have offices at such other
places both within and without the State of Texas as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE 2: SHAREHOLDERS
2.01 PLACE OF MEETINGS. Meetings of shareholders shall be held at the time
and place, within or without the State of Texas, stated in the notice of the
meeting or in a waiver of notice.
2.02 ANNUAL MEETINGS. An annual meeting of the shareholders, for the
election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held on such date, and at such time as the Board of Directors shall
fix and set forth in the notice of the meeting, which date shall be within
thirteen (13) months subsequent to the last annual meeting of shareholders. At
the annual meeting of the shareholders, only such business shall be conducted
as shall have been properly brought before the annual meeting. To be properly
brought before the annual meeting of shareholders, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a shareholder of the
Corporation who is a shareholder of record at the time of giving of notice
provided for in this Section 2.02, who shall be entitled to vote at such
meeting and who complies with the notice procedures set forth in this Section
2.02. For business to be properly brought before an annual meeting by a
shareholder, the shareholder, in addition to any other applicable requirements,
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of shareholders of the Corporation. A shareholder's
notice to the Secretary shall set forth as to each matter the shareholder
proposes to bring before the annual meeting: (a) a brief description of the
business desired to be brought before the annual meeting
<PAGE> 2
and the reasons for conducting such business at the annual meeting, (b) the
name and address, as they appear on the Corporation's books, of the shareholder
proposing such business, (c) the class and number of shares of voting stock of
the Corporation which are beneficially owned by the shareholder, (d) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to bring the proposed business before the annual meeting, and (e) a
description of any material interest of the shareholder in such business.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2.02. The presiding officer of an annual meeting shall,
if the facts warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with the provisions of
this Section 2.02, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Notwithstanding the foregoing provisions of this Section 2.02, a
shareholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section 2.02.
2.03 SPECIAL MEETINGS. Unless otherwise provided in the Articles of
Incorporation, special meetings of the shareholders for any purpose or purposes
may be called at any time by the Chairman of the Board, by the President or by
a majority of the Board of Directors, by a majority of the executive committee
(if any), or by the holders of at least ten percent (10%) of all the shares
entitled to vote at the proposed special meeting, but such special meetings may
not be called by any other person or persons.
2.04 NOTICE OF MEETINGS. Written or printed notice stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the officer or person calling the meeting, to
each shareholder entitled to vote at such meeting. If mailed, any such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the share transfer
records of the Corporation, with postage thereon prepaid.
2.05 QUORUM. The holders of a majority of the shares entitled to vote
(counting for such purposes all abstentions and broker nonvotes), represented
in person or by proxy, shall constitute a quorum at meetings of the
shareholders, except as otherwise provided in the Articles of Incorporation.
If, however, such quorum shall be not present or represented at a meeting of
the shareholders, the holders of a majority of the shares entitled to vote
thereat, and represented in person or by proxy, shall have power to recess the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such recessed
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
convened had a quorum been present. Shareholders present at a duly organized
meeting with a quorum present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
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<PAGE> 3
2.06 VOTING AT MEETINGS. With respect to any matter other than the election
of directors or a matter for which the affirmative vote of the holders of a
specified portion of the shares entitled to vote is required by the TBCA, the
act of the shareholders shall be the affirmative vote of the holders of a
majority of the shares entitled to vote, and voted for or against, the matter
at a meeting of shareholders at which a quorum is present; provided that, for
purposes of this sentence, all abstentions and broker nonvotes shall not be
counted as voted either for or against such matter. With respect to the
election of directors, directors shall be elected by a plurality of the votes
cast by the holders of shares entitled to vote in the election of directors at
a meeting of shareholders at which a quorum is present; provided that
abstentions and broker nonvotes shall not be counted as votes cast either for
or against any nominee for director.
2.07 METHOD OF VOTING. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the Articles of Incorporation. At
any meeting of the shareholders, every shareholder having the right to vote may
vote either in person, or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. Voting for Directors shall be in
accordance with Section 3.06 of these Bylaws. Any vote may be taken by voice
or by show of hands unless someone entitled to vote objects, in which case
written ballots shall be used.
2.08 FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive a distribution by the corporation
(other than a distribution involving a purchase or redemption by the
corporation of any of its own shares) or a share dividend or in order to make a
determination of shareholders for any other purpose, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than sixty (60) days, and,
in the case of a meeting of shareholders, not less than ten (10) days, prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive a distribution by the corporation (other
than a distribution involving a purchase or redemption by the corporation of
any of its own shares) or a share dividend, the date on which such notice of
the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such distribution or share dividend is adopted, as the case
may be, shall be the record date for such determination of shareholders. When
a determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 2.08, such determination shall apply
to any adjournment thereof.
2.09 ACTION WITHOUT MEETING. Any action required by statute to be taken at a
meeting of shareholders, or any action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof and such consent shall have
the force and effect as a unanimous vote of the shareholders. The signed
consent, or a signed copy, shall be placed in the minute book.
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<PAGE> 4
2.10 VOTING LIST. The officer or agent having charge of the share transfer
records of the Corporation shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the registered office
or principal place of business of the Corporation and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The
original share transfer records shall be prima-facie evidence as to who are the
shareholders entitled to examine such list or transfer records or to vote at
any meeting of shareholders. Failure to comply with the requirements of this
Section shall not affect the validity of any action taken at such meeting.
2.11 PROXIES. A shareholder may vote either in person or by proxy executed
in writing by the shareholder. A telegram, telex, cablegram or similar
transmission by the shareholder, or a photographic, photostatic, facsimile or
similar reproduction of a writing executed by the shareholder shall be treated
as an execution in writing for purposes of this Section. Proxies for use at
any meeting of shareholders or in connection with the taking of any action by
written consent shall be filed with the Secretary, or such other officer as the
Board of Directors may from time to time determine by resolution, before or at
the time of the meeting or execution of the written consent, as the case may
be. All proxies shall be received and taken charge of and all ballots shall be
received and canvassed by the secretary of the meeting who shall decide all
questions touching upon the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions.
No proxy shall be valid after 11 months from the date of its execution
unless otherwise provided in the proxy. A proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest. Proxies coupled with an interest shall include the
appointment as proxy of any of the persons set forth in the TBCA, including
without limitation:
(a) a pledgee;
(b) a person who purchased or agreed to purchase, or owns or holds an
option to purchase, the shares;
(c) a creditor of the Corporation who extended it credit under terms
requiring the appointment;
(d) an employee of the Corporation whose employment contract requires
the appointment; or
(e) a party to a voting agreement executed under Section B, Article
2.30 of the TBCA.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide to the contrary, a majority of such persons
present at any meeting at which their powers thereunder are to be exercised
shall have and may exercise all the powers of voting or giving consents thereby
conferred, or if only one be present, then such powers may be exercised by that
one; or, if an even number attend and a majority do not agree on any particular
issue, the Corporation shall not be required to recognize such proxy with
respect to such issue if such proxy
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<PAGE> 5
does not specify how the shares that are the subject of such proxy are to be
voted with respect to such issue.
2.12 INSPECTORS OF ELECTION. The chairman of each meeting of shareholders
shall appoint one or more persons to act as inspectors of election. The
inspectors of election shall report to the meeting the number of shares of each
class and series of stock, and of all classes, represented either in person or
by proxy. The inspectors of election shall oversee the vote of the
shareholders for the election of directors and for any other matters that are
put to a vote of shareholders at the meeting; receive a ballot evidencing votes
cast by the proxy committee of the Board of Directors; judge the qualifications
of shareholders voting; collect, count and report the results of ballots cast
by any shareholders voting in person; and perform such other duties as may be
required by the chairman of the meeting or the shareholders.
2.13 NOMINATIONS FOR ELECTION AS A DIRECTOR. Only persons who are nominated
in accordance with the procedures set forth in these bylaws shall be eligible
for election by shareholders as, and to serve as, directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made
at a meeting of shareholders (a) by or at the direction of the Board of
Directors or (b) by any shareholder of the Corporation who is a shareholder of
record at the time of giving of notice provided for in this Section 2.13, who
shall be entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this Section 2.13. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation
(i) with respect to an election to be held at the annual meeting of the
shareholders of the Corporation, not less than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of shareholders of
the Corporation, and (ii) with respect to an election to be held at a special
meeting of shareholders of the Corporation for the election of directors not
later than the close of business on the tenth (10th) day following the day on
which notice of the date of the special meeting was mailed to shareholders of
the Corporation as provided in these bylaws or public disclosure of the date of
the special meeting was made, whichever first occurs. Such shareholder's
notice to the Secretary shall set forth (x) as to each person whom the
shareholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named in the proxy
statement as a nominee and to serve as a director if elected), and (y) as to
the shareholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such shareholder and (ii) the class and number of
shares of voting stock of the Corporation which are beneficially owned by such
shareholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. In the event
that a person is validly designated as a nominee to the Board of Directors in
accordance with the procedures set forth in this Section 2.13 and shall
thereafter become unable or unwilling to stand for election to the Board of
Directors, the Board of Directors or the shareholder who proposed such nominee,
as the case may be, may designate
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a substitute nominee. Other than directors chosen pursuant to the provisions
of Section 3.03, no person shall be eligible to serve as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 2.13. The presiding officer of the meeting of shareholders shall,
if the facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the procedures prescribed by these bylaws, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Section 2.13, a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this
Section 2.13.
ARTICLE III: DIRECTORS
3.01 MANAGEMENT. The business and affairs of the corporation shall be
managed by the Board of Directors who may exercise all such powers of the
corporation and do all such lawful acts and things as are not (by statute or by
the Articles of Incorporation or by these Bylaws) directed or required to be
exercised or done by the shareholders.
3.02 NUMBER; QUALIFICATION. The number of Directors of the corporation shall
be not less than six nor more than twelve, the exact number to be set from time
to time by the Board of Directors; provided, further, however, that none of
said Directors need be shareholders or residents of any particular state.
3.03 CHANGE IN NUMBER. The number of Directors may be increased or decreased
from time to time by amendment to these Bylaws, but no decrease shall have the
effect of shortening the term of any incumbent Director. Any directorship to
be filled by reason of an increase in the number of Directors may be filled by
election at an annual or special meeting of shareholders called for that
purpose, or may be filled by the Board of Directors.
3.04 CLASSIFICATION. The Board of Directors shall be divided into three
classes: Class I, Class II and Class III. The number of directors in each
class shall be the whole number contained in the quotient arrived at by
dividing the authorized number of Directors by three and if a fraction is also
contained in such quotient and if such fraction is one-third, the extra
Director shall be a member of Class III, and if the fraction is two-thirds, one
extra Director shall be a member of Class III and the other shall be a member
of Class II. Except as otherwise provided in this Section 3.04, each Director
elected at an annual meeting shall serve for a term ending on the date of the
third annual meeting following the meeting at which such Director was elected;
provided, however, that the Directors first elected to Class I shall serve for
a term ending on the annual meeting immediately following the annual meeting at
which such Directors were first elected, the Directors first elected to Class
II shall serve for a term ending on the second annual meeting following the
meeting at which such Directors were first elected and the Directors first
elected to Class III shall serve a full term as hereinabove provided. The
foregoing notwithstanding, each Director shall serve until his successor shall
have been duly elected and qualified or until his earlier death, resignation or
removal. For purposes of this Section 3.04, reference to the first election of
Directors shall signify the election of Directors at the annual meeting held in
1994. At each annual election held after 1994, the Directors chosen to succeed
those whose terms have
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expired shall be identified as being of the same class as the Directors they
succeed. If for any reason the number of Directors in the various classes
shall not conform with the formula set forth in this Section, the Board of
Directors may redesignate any Director in a different class in order that the
balance of Directors in such class shall conform thereto; provided, however,
that no such redesignation may have the effect of reducing the term to which a
Director was elected.
3.05 VACANCIES; INCREASES IN THE NUMBER OF DIRECTORS; REMOVAL. Any vacancy
occurring in the Board of Directors may be filled in accordance with the
following paragraph of this Section 3.05 or may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of the
Board of Directors. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office.
Any vacancy occurring in the Board of Directors or any directorship to
be filled by reason of an increase in the number of directors (i) may be filled
by election at an annual or special meeting of shareholders called for that
purpose or (ii) may be filled by the Board of Directors; provided that, with
respect to any directorship to be filled by the Board of Directors by reason of
an increase in the number of directors (a) such directorship shall be for a
term of office continuing only until the next election of one or more directors
by shareholders and (b) the Board of Directors may not fill more than two such
directorships during the period between any two successive annual meetings of
shareholders. If the Board of Directors is classified, any director elected at
an annual or special meeting of shareholders to fill a directorship created by
reason of an increase in the number of directors shall be elected for a term
coterminous with the remaining term of the other members of the class to which
he has been designated in accordance with the provisions of these Bylaws.
At any meeting of shareholders at which a quorum of shareholders is
present called expressly for that purpose, any director may be removed, but
only for cause, by vote of the holders of two-thirds of the shares then
entitled to vote for the election of such director.
3.06 ELECTION OF DIRECTORS. Directors shall be elected by plurality vote.
Cumulative voting shall not be permitted.
3.07 PLACE OF MEETINGS. Meetings of the Board of Directors, regular or
special, may be held either within or without the State of Texas.
3.08 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be
determined by the Board.
3.09 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman on three day's notice to each Director, either
personally or by mail or by telegram. Special meetings shall be called by the
Chairman of the Board or Secretary in like manner and on like notice on the
written request of a majority of the Board of Directors. Except as otherwise
expressly provided by statute, Articles of Incorporation, or these Bylaws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in a notice or waiver of notice.
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3.10 QUORUM -- MAJORITY VOTE. At meetings of the Board of Directors a
majority of the number of Directors fixed by these Bylaws shall constitute a
quorum for the transaction of business. The act of a majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, except as otherwise specifically provided by statute, the
Articles of Incorporation, or these Bylaws. If a quorum is not present at a
meeting the Board of Directors, the Directors present, may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present.
3.11 COMPENSATION. By resolution of the Board of Directors, the Directors
may be paid their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director, and such other compensation
as may be established from time to time by the Board of Directors. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of the executive
committee or of special or standing committees may be allowed like compensation
for attending committee meetings.
3.12 PROCEDURE. The Board of Directors shall keep regular minutes of its
proceedings. The minutes shall be placed in the minute book of the
corporation.
3.13 ACTION BY WRITTEN CONSENT OR TELEPHONE CONFERENCE. Any action permitted
or required by the TBCA, the Articles of Incorporation or these bylaws to be
taken at a meeting of the Board of Directors or any committee designated by the
Board of Directors may be taken without a meeting if a consent in writing,
setting forth the action to be taken, is signed by all the members of the Board
of Directors or committee, as the case may be. Such consent shall have the
same force and effect as a unanimous vote at a meeting and may be stated as
such in any document or instrument filed with the Secretary of State, and the
execution of such consent shall constitute attendance or presence in person at
a meeting of the Board of Directors or any such committee, as the case may be.
Subject to the requirements of the TBCA, the Articles of Incorporation or these
bylaws for notice of meetings, unless otherwise restricted by the Articles of
Incorporation, members of the Board of Directors, or members of any committee
designated by the Board of Directors, may participate in and hold a meeting of
the Board of Directors or any committee of directors, as the case may be, by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
3.14 APPROVAL AND RATIFICATION OF ACTS OR CONTRACTS BY SHAREHOLDERS. The
Board of Directors in its discretion may submit any act or contract for
approval or ratification at any annual meeting of the shareholders, or at any
special meeting of the shareholders called for the purpose of considering any
such act or contract, and any act or contract that shall be approved or be
ratified by the vote of the shareholders holding a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote and present in
person or by proxy at such meeting (provided that a quorum is present), shall
be as valid and as binding upon the Corporation and upon all the shareholders
as if it has been approved or ratified by every shareholder of the
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Corporation. In addition, any such act or contract may be approved or ratified
by the written consent of shareholders holding a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote and
such consent shall be as valid and as binding upon the Corporation and upon all
the shareholders as if it had been approved or ratified by every shareholder of
the Corporation.
ARTICLE 4: COMMITTEES
4.01 DESIGNATION; POWERS. The Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more committees, including,
if they shall so determine, an executive committee, an audit committee, a
compensation committee, and one or more special committees, each such committee
to consist of one or more of the Directors of the Corporation. Any such
designated committee shall have and may exercise such of the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation as may be provided in such resolution, except that
no such committee shall have the power or authority of the Board of Directors
in reference to amending the Articles of Incorporation, adopting an agreement
of merger or consolidation, recommending to the shareholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution of the Corporation, or amending, altering or
repealing the bylaws or adopting new bylaws for the Corporation and, unless
such resolution or the Articles of Incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Any such designated committee may authorize
the seal of the Corporation to be affixed to all papers which may require it.
In addition to the above such committee shall have such other powers and
limitations of authority as may be determined from time to time by resolution
adopted by the Board of Directors.
4.02 PROCEDURE; MEETINGS; QUORUM. Any committee designated pursuant to
Section 4.01 shall choose its own chairman, shall keep regular minutes of its
proceedings and report the same to the Board of Directors when requested, shall
fix its own rules or procedures, and shall meet at such times and at such place
or places as may be provided by such rules, or by resolution of such committee
or resolution of the Board of Directors. At every meeting of any such
committee, the presence of a majority of all the members thereof shall
constitute a quorum and the affirmative vote of a majority of the members
present shall be necessary for the adoption by it of any resolution.
4.03 SUBSTITUTION OF MEMBERS. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of such committee. In the absence
or disqualification of a member of a committee, the member or members present
at any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of the absent or disqualified member.
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ARTICLE 5: NOTICE
5.01 METHOD OF NOTICE. Whenever any notice is required to be given by law,
the Articles of Incorporation or under the provisions of these bylaws, said
notice shall be deemed to be sufficient if given (i) by telegraphic, cable or
wireless transmission or (ii) by deposit of the same in a post office box in a
sealed prepaid wrapper addressed to the person entitled thereto at his post
office address, as it appears on the records of the Corporation, and such
notice shall be deemed to have been given on the day of such transmission or
mailing, as the case may be.
5.02 WAIVER OF NOTICE. Whenever notice is required to be given by law, the
Articles of Incorporation or under any of the provisions of these bylaws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
shareholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Articles of
Incorporation or the bylaws.
ARTICLE 6: OFFICERS
6.01 NUMBER, TITLES AND TERM OF OFFICE. The officers of the Corporation
shall be a Chairman of the Board, President, one or more Vice Presidents (any
one or more of whom may be designated Executive Vice President or Senior Vice
President), a Chief Financial Officer, a Treasurer, a Secretary and such other
officers as the Board of Directors may from time to time elect or appoint.
Each officer shall hold office until his successor shall be duly elected and
shall qualify or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Any number of offices may be held
by the same person, unless the Articles of Incorporation provides otherwise.
Except for the Chairman of the Board, no officer need be a director.
6.02 SALARIES. The salaries or other compensation of the officers and agents
of the Corporation shall be fixed from time to time by the Board of Directors.
6.03 REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed, either with or without cause, by the vote of a
majority of the whole Board of Directors at a special meeting called for the
purpose, or at any regular meeting of the Board of Directors, provided the
notice for such meeting shall specify that the matter of any such proposed
removal will be considered at the meeting but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create contract
rights.
6.04 VACANCIES. Any vacancy occurring in any office of the Corporation may
be filled by the Board of Directors.
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6.05 POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside at all meetings of the shareholders and of the Board of
Directors. Subject to the control of the Board of Directors and the executive
committee (if any), the Chairman of the Board shall have general executive
charge, management and control of the properties, business and operations of
the Corporation with all such powers as may be reasonably incident to such
responsibilities; he may agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the Corporation
and may sign all certificates for shares of capital stock of the Corporation;
and shall have such other powers and duties as designated in accordance with
these bylaws and as from time to time may be assigned to him by the Board of
Directors. The Chairman of the Board shall be elected to a term of office
which is the same as his term of office as a director.
6.06 POWERS AND DUTIES OF THE PRESIDENT. Unless the Board of Directors
otherwise determines, the President shall be the chief executive officer of the
Corporation and may sign all certificates for shares of capital stock of the
Corporation; and he or she shall have such other powers and duties as
designated in accordance with these bylaws and as from time to time may be
assigned to him or her by the Board of Directors.
6.07 VICE PRESIDENTS. The Vice Presidents shall perform such duties and have
such powers as the Board of Directors may from time to time prescribe.
6.08 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have the
responsibility for the management and coordination of the financing, borrowing
and financial planning and budgeting activities of the Corporation, and he
shall have such other powers and duties as designated in these bylaws and as
from time to time may be assigned to him by the Board of Directors.
6.09 TREASURER. The Treasurer shall have responsibility for the custody and
control of all the funds and securities of the Corporation, and he shall have
such other powers and duties as designated in these bylaws or as from time to
time assigned to him by the Board of Directors. He shall perform all acts
incident to the position of Treasurer, subject to the control of the Chairman
of the Board and the Board of Directors; and he shall, if required by the Board
of Directors, give such bond for the faithful discharge of his duties in such
form as the Board of Directors may require.
6.10 ASSISTANT TREASURERS. Each Assistant Treasurer shall have the usual
powers and duties pertaining to his office, together with such powers and
duties as designated in these bylaws and as from time to time may be assigned
to him by the Chairman of the Board or the Board of Directors. The Assistant
Treasurers shall exercise the powers of the Treasurer during that officer's
absence or inability or refusal to act.
6.11 SECRETARY. The Secretary shall keep the minutes of all meetings of the
Board of Directors, committees of directors and the shareholders, in books
provided for that purpose; he shall attend to the giving and serving of all
notices; he may in the name of the Corporation affix the seal of the
Corporation to all contracts of the Corporation and attest the affixation of
the seal of the Corporation thereto; he may sign with the other appointed
officers all certificates for shares of
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capital stock of the Corporation; he shall have charge of the certificate
books, transfer books and stock ledgers, and such other books and papers as the
Board of Directors may direct, all of which shall at all reasonable times be
open to inspection of any director upon application at the office of the
Corporation during business hours; he shall have such other powers and duties
as designated in these bylaws and as from time to time may be assigned to him
by the Board of Directors; and he shall in general perform all acts incident to
the office of Secretary, subject to the control of the Board of Directors.
6.12 ASSISTANT SECRETARIES. Each Assistant Secretary shall have the usual
power and duties pertaining to his office, together with such other powers and
duties as designated in these bylaws and as from time to time may be assigned
to him by the Chairman of the Board or the Board of Directors. The Assistant
Secretaries shall exercise the powers of the Secretary during that officer's
absence or inability or refusal to act.
6.13 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless
otherwise directed by the Board of Directors, the Chairman of the Board shall
have power to vote and otherwise act on behalf of the Corporation, in person or
by proxy, at any meeting of security holders of or with respect to any action
of security holders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
corporation.
6.14 INTERESTED PARTY TRANSACTIONS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for
this reason, solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purpose, if : (i) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the shareholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE 7: INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
7.01 RIGHT TO INDEMNIFICATION. Subject to the limitations and conditions as
provided in this Article 7, each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil,
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criminal, administrative, arbitrative or investigative (hereinafter a
"proceeding"), or any appeal in such a proceeding or any inquiry or
investigation that could lead to such a proceeding, by reason of the fact that
he or she, or a person of whom he or she is the legal representative, is or was
a director or officer of the Corporation or while a director or officer of the
Corporation is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise
shall be indemnified by the Corporation to the fullest extent permitted by the
TBCA, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against judgments, penalties
(including excise and similar taxes and punitive damages), fines, settlements
and reasonable expenses (including, without limitation, attorneys' fees)
actually incurred by such person in connection with such proceeding, and
indemnification under this Article 7 shall continue as to a person who has
ceased to serve in the capacity which initially entitled such person to
indemnity hereunder. The rights granted pursuant to this Article 7 shall be
deemed contract rights, and no amendment, modification or repeal of this
Article 7 shall have the effect of limiting or denying any such rights with
respect to actions taken or proceedings arising prior to any such amendment,
modification or repeal. It is expressly acknowledged that the indemnification
provided in this Article 7 could involve indemnification for negligence or
under theories of strict liability.
7.02 ADVANCE PAYMENT. The right to indemnification conferred in this Article
7 shall include the right to be paid or reimbursed by the Corporation the
reasonable expenses incurred by a person of the type entitled to be indemnified
under Section 7.01 who was, is or is threatened to be made a named defendant or
respondent in a proceeding in advance of the final disposition of the
proceeding and without any determination as to the person's ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by any such person in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of a written
affirmation by such director or officer of his or her good faith belief that he
or she has met the standard of conduct necessary for indemnification under this
Article 7 and a written undertaking, by or on behalf of such person, to repay
all amounts so advanced if it shall ultimately be determined by a court of
competent jurisdiction that such indemnified person is not entitled to be
indemnified under this Article 7 or otherwise.
7.03 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation, by adoption
of a resolution of the Board of Directors, may indemnify and advance expenses
to an employee or agent of the Corporation to the same extent and subject to
the same conditions under which it may indemnify and advance expenses to
directors and officers under this Article 7; and, the Corporation may indemnify
and advance expenses to persons who are not or were not directors, officers,
employees or agents of the Corporation but who are or were serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in such capacity or arising out of his status
as such a person to the same extent that it may indemnify and advance expenses
to directors under this Article 7.
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7.04 APPEARANCE AS A WITNESS. Notwithstanding any other provision of this
Article 7, the Corporation may pay or reimburse expenses incurred by a director
or officer in connection with his or her appearance as a witness or other
participation in a proceeding at a time when he or she is not a named defendant
or respondent in the proceeding.
7.05 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this Article 7 shall not be
exclusive of any other right which a director or officer or other person
indemnified pursuant to Section 7.03 may have or hereafter acquire under any
law (common or statutory), provision of the Articles of Incorporation of the
Corporation or these bylaws, agreement, vote of shareholders or disinterested
directors or otherwise.
7.06 INSURANCE. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, proprietorship, employee
benefit plan, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under this Article 7.
7.07 SHAREHOLDER NOTIFICATION. To the extent required by law, any
indemnification of or advance of expenses to a director or officer in
accordance with this Article 7 shall be reported in writing to the shareholders
with or before the notice or waiver of notice of the next shareholders' meeting
or with or before the next submission to shareholders of a consent to action
with a meeting and, in any case, within the 12-month period immediately
following the date of the indemnification or advance.
7.08 SAVINGS CLAUSE. If this Article 7 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify and hold harmless each director,
officer or any other person indemnified pursuant to this Article 7 as to costs,
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative to the full extent permitted
by any applicable portion of this Article 7 that shall not have been
invalidated and to the fullest extent permitted by applicable law.
ARTICLE 8: CAPITAL STOCK
8.01 CERTIFICATES OF STOCK. The certificates for shares of the capital stock
of the Corporation shall be in such form, not inconsistent with that required
by law and the Articles of Incorporation, as shall be approved by the Board of
Directors. The Chairman of the Board, President or a Vice President (if any)
shall cause to be issued to each shareholder one or more certificates, which
shall be signed by the Chairman of the Board, President or a Vice President (if
any) and the Secretary or an Assistant Secretary (if any) or the Treasurer or
an Assistant Treasurer (if any) certifying the number of shares (and, if the
stock of the Corporation shall be divided into classes or series, the class and
series of such shares) owned by such shareholder in the Corporation; provided,
however, that any of or all the signatures on the certificate may be facsimile.
If the Board of Directors shall
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have provided for a seal, such certificates shall bear such seal or a facsimile
thereof. The stock record books and the blank stock certificate books shall be
kept by the Secretary, or at the office of such transfer agent or transfer
agents as the Board of Directors may from time to time by resolution determine.
In case any officer, transfer agent or registrar who shall have signed or whose
facsimile signature or signatures shall have been placed upon any such
certificate or certificates shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued by the Corporation, such
certificate may nevertheless be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue. The stock certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued and shall exhibit
the holder's name and number of shares.
Each certificate shall conspicuously bear any legend required pursuant
to Article 2.19 or Article 2.22 of the TBCA, as well as any other legend
required by law.
8.02 TRANSFER OF SHARES. The shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives, upon
surrender and cancellation of certificates for a like number of shares (or upon
compliance with the provisions of Section 8.05, if applicable). Upon such
surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer (or upon compliance with the
provisions of Section 8.05, if applicable) and of compliance with any transfer
restrictions applicable thereto contained in an agreement to which the
Corporation is a party or of which the Corporation has knowledge by reason of
legend with respect thereto placed on any such surrendered stock certificate,
it shall be the duty of the Corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books.
8.03 OWNERSHIP OF SHARES. Unless otherwise provided in the TBCA, and subject
to the provisions of Chapter 8 -- Investment Securities of the Texas Business &
Commerce Code:
(i) the Corporation may regard the person in whose name any shares
issued by the Corporation are registered in the share transfer records
of the Corporation at any particular time (including, without
limitation, as of a record date fixed pursuant to Article 2.26B or 2.26C
of the TBCA) as the owner of those shares at that time for purposes of
voting those shares, receiving distributions thereon or notices in
respect thereof, transferring those shares, exercising rights of dissent
with respect to those shares, exercising or waiving any preemptive right
with respect to those shares, entering into agreements with respect to
those shares in accordance with Article 2.22 or 2.30 of the TBCA, or
giving proxies with respect to those shares; and
(ii) neither the Corporation nor any of its officers, directors,
employees, or agents shall be liable for regarding that person as the
owner of those shares at that time for those purposes, regardless of
whether that person does not possess a certificate for those shares.
8.04 REGULATIONS REGARDING CERTIFICATES. The Board of Directors shall have
the power and authority to make all such rules and regulations as they may deem
expedient concerning the
-15-
<PAGE> 16
issuance, transfer and registration or the replacement of certificates for
shares of capital stock of the Corporation.
8.05 LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. The Board of
Directors may determine the conditions upon which a new certificate of stock
may be issued in place of a certificate that is alleged to have been lost,
stolen, destroyed or mutilated; and may, in its discretion, require the owner
of such certificate or his legal representative to give bond, with sufficient
surety, to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the issuance
of a new certificate in the place of the one so lost, stolen, destroyed or
mutilated.
ARTICLE 9: MISCELLANEOUS PROVISIONS
9.01 FISCAL YEAR. The fiscal year of the Corporation shall be such as
established from time to time by the Board of Directors.
9.02 CORPORATE SEAL. The Board of Directors may provide a suitable seal,
containing the name of the Corporation. The Secretary shall have charge of the
seal (if any). If and when so directed by the Board of Directors, duplicates
of the seal may be kept and used by the Treasurer, if any, or by any Assistant
Secretary or Assistant Treasurer.
9.03 RESIGNATIONS. Any director, member of a committee or officer may resign
at any time. Such resignation shall be made in writing and shall take effect
at the time specified therein, or if no time be specified, at the time of its
receipt by the chief executive officer or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
9.04 FACSIMILE SIGNATURES. In addition to the provisions for the use of
facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
9.05 BOOKS AND RECORDS. The Corporation shall keep books and records of
account and shall keep minutes of the proceedings of its shareholders, its
Board of Directors and each committee of its Board of Directors. The
Corporation shall keep at its registered office or principal place of business,
or at the office of its transfer agent or registrar, a record of the original
issuance of shares issued by the Corporation and a record of each transfer of
those shares that have been presented to the Corporation for registration of
transfer. Such records shall contain the names and addresses of all past and
current shareholders of the Corporation and the number and class of shares
issued by the Corporation held by each of them. Any books, records, minutes
and share transfer records may be written form or in any other form capable of
being converted into written form within a reasonable time.
9.06 AMENDMENTS. The Board of Directors may amend or repeal the
Corporation's bylaws, or adopt new bylaws, unless: (a) the Articles of
Incorporation or the TBCA reserves the power exclusively to the shareholders in
whole or part; or (b) the shareholders, in amending, repealing
-16-
<PAGE> 17
or adopting a particular bylaw, expressly provide that the Board of Directors
may not amend or repeal that bylaw.
Unless the Articles of Incorporation or a bylaw adopted by the
shareholders provides otherwise as to all or some portion of the Corporation's
bylaws, the Corporation's shareholders may amend, repeal or adopt the
Corporation's bylaws even though the bylaws may also be amended, repealed or
adopted by the Board of Directors.
-17-
<PAGE> 1
EXHIBIT 10.4
THIRD AMENDMENT
TO
AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This THIRD AMENDMENT TO AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY) (this "Amendment") is entered into effective as of
the 17th day of July, 1998, by and between BANK OF AMERICA TEXAS, N.A. ("Bank")
and ICO P&O, INC., a Delaware corporation ("Borrower").
Borrower is the surviving corporation of (i) the merger (the "First
Merger") between ICO, Inc., a Texas corporation ("Original Borrower") and ICO
Merger Sub, Inc., a Texas corporation, with ICO, Inc. being the surviving
corporation and changing its name to ICO P&O, Inc., and (ii) the merger (the
"Second Merger") between ICO P&O, Inc., a Texas corporation and ICO P&O, Inc.,
a Delaware corporation ("ICO Delaware") with ICO Delaware being the surviving
corporation. The First Merger is evidenced by the Certificate of Merger, Filed
in the Office of the Secretary of State of Texas on March 31, 1998, effective
April 1, 1998, and the Second Merger is evidenced by the Certificate of Merger,
dated April 1, 1998, filed in the Office of the Secretary of State of Delaware
on March 31, 1998 and Articles of Merger, dated March 31, 1998, filed in the
Office of the Secretary of State of Texas on March 31, 1998.
REFERENCE:
Reference is made to the AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY) dated as of February 21, 1997, by and between Bank
and Original Borrower, as amended by the following (as amended, including all
prior amendments described below, the "Credit Agreement"):
(a) that certain FIRST AMENDMENT TO AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY) entered into
effective as of June 2, 1997;
(b) that certain SUBSTITUTED FIRST AMENDMENT TO AMENDED AND
RESTATED BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY) entered
into effective as of June 6, 1997; and
(c) that certain SECOND AMENDMENT TO AMENDED AND
RESTATED BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY) entered
into effective as of August 29, 1997.
<PAGE> 2
RECITALS
(a) Borrower is the successor to Original Borrower as a result
of the First Merger and the Second Merger; and
(b) Bank and Borrower are entering in to this Amendment to
acknowledge Borrower's succession to all rights and obligations of
Original Borrower and to again amend certain existing terms of the
Credit Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT
1.1 The definition of the term "Borrower" in the preamble of the
Credit Agreement is amended to mean Borrower as defined in this Amendment.
1.2 Subparagraph (a) of Article 1.2 of the Credit Agreement is
amended to read as follows:
(a) The account has resulted from the sale of goods or the
performance of services by Borrower or any subsidiary of Borrower
(each such subsidiary being herein called a "Pledging
Subsidiary") which has executed a Security Agreement (Receivables
and Inventory) on even date with that certain THIRD AMENDMENT TO
AMENDED AND RESTATED BUSINESS LOAN AGREEMENT (RECEIVABLES AND
INVENTORY) which amended this Agreement.
1.3 Article 1.2 of the Credit Agreement is amended to add a
subparagraph (n) to read as follows:
(n) no consent of any person or entity is required in connection with
any assignment of the account by Borrower.
1.4 The term "Expiration Date" contained in Section 2.2 of the Credit
Agreement is amended to mean April 17, 2000.
1.5 The date April 17,1999, contained in Section 2.4(b) of the Credit
Agreement is amended to be April 17, 2000.
1.6 Except as amended hereby, the Credit Agreement shall continue in
full force and effect in accordance with its provisions.
THIRD AMENDMENT- Page 2
<PAGE> 3
2. ASSUMPTION OF OBLIGATIONS
Borrower hereby expressly assumes all obligations of Original Borrower
under the Credit Agreement and promises to Bank that Borrower will timely
perform all such obligations.
3. CONDITIONS PRECEDENT
The effectiveness of this Amendment is expressly conditioned upon
delivery to Bank of each of the following, each document to be in form and
content acceptable to Bank in its sole discretion:
3.1 Corporate Documents. Appropriate corporate documentation,
including without limitation resolutions of the Board of Directors of Borrower,
Guarantor (hereinafter defined) and of each Pledging Subsidiary approving the
execution, delivery and performance by such entities of this Amendment and all
documents executed in connection herewith.
3.2 Other Loan Documents. The following loan documents:
(a) Notice of Final Agreement. A fully executed Notice of Final
Agreement in compliance with Section 26.02 of the Texas Business and
Commerce Code.
(b) UCC Documents. Security Agreements and UCC-1 Financing
Statements executed by Borrower and each of the Pledging Subsidiaries
identified on Schedule I which is attached hereto.
(c) Guaranty. A Guaranty executed by ICO, INC., a Texas corporation
("Guarantor") that is Borrower's parent corporation.
3.3 Legal Opinion. An opinion of legal counsel to Borrower,
Guarantor and each Pledging Subsidiary.
3.4 Other Documentation. Such other documents as Bank may request.
4. MISCELLANEOUS.
4.1 Representations. Borrower represents and warrants that the
execution, delivery and performance by Borrower of this Amendment and the
Credit Agreement as amended hereby have been duly authorized by all necessary
corporate action and that this Amendment and the Credit Agreement as amended
hereby are legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally, or by general principles of
equity limiting the availability of certain remedies.
THIRD AMENDMENT- Page 3
<PAGE> 4
4.2 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement, and, except as expressly modified and superseded
by this Amendment, the terms and provisions of the Credit Agreement are
ratified and confirmed and shall continue in full force and effect. Borrower
and Bank agree that the Credit Agreement as amended shall continue to be legal,
valid, binding and enforceable in accordance with its terms.
4.3 Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Texas.
4.4 Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
4.5 Definitions. Capitalized terms used in this Amendment and not
otherwise defined in this Amendment shall have the meanings given them in the
Credit Agreement.
4.6 WAIVER OF JURY TRIAL. BORROWER AND BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AMENDMENT, THE CREDIT AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. BORROWER AND BANK EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AMENDMENT, THE CREDIT AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
4.9 Successors and Assigns. This Amendment, the Credit Agreement and
all documents executed in connection with or as security for the Credit
Agreement, as amended hereby (the "Security Documents") are binding on
Borrower's and Bank's successors and assignees. Borrower agrees that it may
not assign any of its rights or obligations under the Credit Agreement without
Bank's prior consent.
THIRD AMENDMENT- Page 4
<PAGE> 5
4.10. Year 2000. Borrower represents that Borrower does not believe the
year 2000 problem will result in a material adverse change in Borrower's
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
IN WITNESS WHEREOF, Borrower and Bank have caused this Amendment to be
duly executed as of the day and year first above written.
BANK OF AMERICA TEXAS, N.A. ICO P&O, INC., a Delaware corporation,
formerly known as ICO, INC., a Texas
corporation
By: /s/ Victor Tekell By: /s/ Brad Leuschner
------------------------------- ------------------------------------
Name: Victor Tekell Name: Brad Leuschner
----------------------------- ----------------------------------
Title: Vice President Title: President
---------------------------- ---------------------------------
THIRD AMENDMENT- Page 5
<PAGE> 6
SCHEDULE I
ICO Worldwide, Inc.
ICO Permian, Inc.
Bayshore Industrial, Inc.
ICO Shearer (Canada)
SCHEDULE I TO
ICO THIRD AMENDMENT
TO LOAN AGREEMENT
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
ICO Worldwide, Inc.
ICO P&O, Inc.
ICO Shearer, Inc.
ICO Permian, Inc.
ICO Polymers, Inc.
ICO Global Services, Inc.
ICO Minerals, Inc.
ICO Technology, Inc.
ICO Holdings Australia Pty Ltd.
ICO Oilfield Cayman Islands
ICO Europe B.V.
ICO Polymers U.K., Ltd.
ICO Holdings New Zealand Limited
ICO U.K., Ltd.
ICO Polymers Cayman Islands
ICO Petrochemical Cayman Islands
ICO Italy Srl
ICO Polymers, B.V.
ICO Polymers France
ICO Polymers Scandinavia AB
Bayshore Industrial, Inc.
J.R. Courtenay (N.Z.) Ltd.
Courtenay Polymers Pty Ltd.
Fabri-Moulds Limited
Nandella Holdings Ltd.
Rotec Chemicals Ltd.
SCI Lomic
SCI du Port Pendue
SCI Azur Immobiliere Beau Cairoise
Soreco S.A.
Swavesey Colours Limited
Tec-Ma Srl
Tecron Industries Limited
The Innovation Company, S.A. de C.V.
Verplast SpA
Wedco Technology, Inc.
Wedco France S.A.
Wedco America do Sul Ltda.
Wedco Minerais Ltda.
Wedco Technology U.K. Ltd.
Wedco Italy Srl
Wedco, Inc.
Wedco Holland B.V.
Wedco Petrochemicals, Inc.
Wedco Sweden AB
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FILING ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 50,892
<SECURITIES> 0
<RECEIVABLES> 59,176
<ALLOWANCES> (1,792)
<INVENTORY> 30,957
<CURRENT-ASSETS> 148,356
<PP&E> 175,145
<DEPRECIATION> (63,565)
<TOTAL-ASSETS> 325,973
<CURRENT-LIABILITIES> 55,488
<BONDS> 0
38,794
0
<COMMON> 13
<OTHER-SE> 88,315
<TOTAL-LIABILITY-AND-EQUITY> 325,973
<SALES> 209,750
<TOTAL-REVENUES> 209,750
<CGS> 157,475
<TOTAL-COSTS> 203,525
<OTHER-EXPENSES> (11,813)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,410
<INCOME-PRETAX> 10,628
<INCOME-TAX> 5,187
<INCOME-CONTINUING> 5,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,441
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
