--------------------------------------------------------------------------------

 
CREDIT AGREEMENT
 
dated as of
October 27, 2006
 
Among
 
ICO, INC.,
BAYSHORE INDUSTRIAL, L.P. and
ICO POLYMERS NORTH AMERICA, INC.,
as Borrowers,
 

KEYBANK NATIONAL ASSOCIATION,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
AND THE OTHER LENDING INSTITUTIONS NAMED HEREIN,
as Lenders,

and

KEYBANK NATIONAL ASSOCIATION,
as an LC Issuer, Lead Arranger, Bookrunner,
Administrative Agent and Syndication Agent

 
$30,000,000 Revolving Facility
$15,000,000 Term Facility

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TABLE OF CONTENTS

   
Page
ARTICLE I.
DEFINITIONS AND TERMS
1

 
Section 1.01
Certain Defined Terms
1
 
Section 1.02
Computation of Time Periods
24
 
Section 1.03
Accounting Terms
24
 
Section 1.04
Terms Generally
25
 
Section 1.05
Borrower Representative
25

ARTICLE II.
THE TERMS OF THE CREDIT FACILITY
25

 
Section 2.01
Establishment of the Credit Facility
25
 
Section 2.02
Revolving Facility
25
 
Section 2.03
Term Loan
26
 
Section 2.04
[Reserved]
26
 
Section 2.05
Letters of Credit
26
 
Section 2.06
Notice of Borrowing
30
 
Section 2.07
Funding Obligations; Disbursement of Funds
31
 
Section 2.08
Evidence of Obligations
32
 
Section 2.09
Interest; Default Rate
32
 
Section 2.10
Conversion and Continuation of Loans
33
 
Section 2.11
Fees
34
 
Section 2.12
Termination and Reduction of Revolving Commitments
35
 
Section 2.13
Voluntary, Scheduled and Mandatory Prepayments of Loans
36
 
Section 2.14
Method and Place of Payment
37
 
Section 2.15
Joint and Several Liability of the Borrowers
38

 
ARTICLE III.
INCREASED COSTS, ILLEGALITY AND TAXES
39

 

 
Section 3.01
Increased Costs, Illegality, etc.
39
 
Section 3.02
Breakage Compensation
40
 
Section 3.03
Net Payments
41
 
Section 3.04
Increased Costs to LC Issuers
42
 
Section 3.05
Change of Lending office; Replacement of Lenders
43

 
ARTICLE IV.
CONDITIONS PRECEDENT
44

 
Section 4.01
Conditions Precedent at Closing Date
44
 
Section 4.02
Conditions Precedent to All Credit Events
47

ARTICLE V.
REPRESENTATIONS AND WARRANTIES
47

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TABLE OF CONTENTS
(continued)

 

   
Page

 
Section 5.01
Corporate Status
47
 
Section 5.02
Power and Authority
47
 
Section 5.03
No Violation
48
 
Section 5.04
Governmental Approvals
48
 
Section 5.05
Litigation
48
 
Section 5.06
Use of Proceeds; Margin Regulations
48
 
Section 5.07
Financial Statements
48
 
Section 5.08
Solvency
49
 
Section 5.09
No Material Adverse Change
49
 
Section 5.10
Tax Returns and Payments
49
 
Section 5.11
Title to Properties, etc.
50
 
Section 5.12
Lawful Operations, etc.
50
 
Section 5.13
Environmental Matters
50
 
Section 5.14
Compliance with ERISA
51
 
Section 5.15
Intellectual Property, etc.
51
 
Section 5.16
Investment Company Act, etc.
51
 
Section 5.17
Insurance
51
 
Section 5.18
Burdensome Contracts; Labor Relations
51
 
Section 5.19
Security Interests
52
 
Section 5.20
True and Complete Disclosure
52
 
Section 5.21
Defaults
52
 
Section 5.22
Anti-Terrorism Law Compliance
52
 
Section 5.23
Mexico Subsidiary; ICO Minerals, Inc.; RE Holdings Entities
52

ARTICLE VI.
AFFIRMATIVE COVENANTS
53

 
Section 6.01
Reporting Requirements
53
 
Section 6.02
Books, Records and Inspections
56
 
Section 6.03
Insurance
56
 
Section 6.04
Payment of Taxes and Claims
57
 
Section 6.05
Corporate Franchises
57
 
Section 6.06
Good Repair
57
 
Section 6.07
Compliance with Statutes, etc.
57
 
Section 6.08
Compliance with Environmental Laws
58

 

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TABLE OF CONTENTS
(continued)

 

   
Page

 
Section 6.09
Certain Subsidiaries to Join in Subsidiary Guaranty
58
 
Section 6.10
Additional Security; Real Estate Matters; Further Assurances
59
 
Section 6.11
Fiscal Years, Fiscal Quarters
61
 
Section 6.12
Senior Debt
61
 
Section 6.13
Federal Tax Liens
62
 
Section 6.14
ICO Minerals
62
 
Section 6.15
Australian Loan Defaults
62

ARTICLE VII.
NEGATIVE COVENANTS
62

 
Section 7.01
Changes in Business
62
 
Section 7.02
Consolidation, Merger, Acquisitions, Asset Sales, etc.
62
 
Section 7.03
Liens
63
 
Section 7.04
Indebtedness
64
 
Section 7.05
Investments and Guaranty Obligations
64
 
Section 7.06
Restricted Payments
65
 
Section 7.07
Financial Covenants
66
 
Section 7.08
Limitation on Certain Restrictive Agreements
66
 
Section 7.09
Transactions with Affiliates
67
 
Section 7.10
Plan Terminations, Minimum Funding, etc.
67
 
Section 7.11
RE Holdings Entities
67
 
Section 7.12
JPMorgan Securities Account
67
 
Section 7.13
Anti-Terrorism Laws
68

ARTICLE VIII.
EVENTS OF DEFAULT
68

 
Section 8.01
Events of Default
68
 
Section 8.02
Remedies
70
 
Section 8.03
Application of Certain Payments and Proceeds
70

ARTICLE IX.
THE ADMINISTRATIVE AGENT
71

 
Section 9.01
Appointment
71
 
Section 9.02
Delegation of Duties
71
 
Section 9.03
Exculpatory Provisions
71
 
Section 9.04
Reliance by Administrative Agent
72
 
Section 9.05
Notice of Default
72
 
Section 9.06
Non-Reliance
72

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TABLE OF CONTENTS
(continued)

 

   
Page

 
Section 9.07
No Reliance on Administrative Agent’s Customer Identification Program
73
 
Section 9.08
USA Patriot Act
73
 
Section 9.09
Indemnification
73
 
Section 9.10
The Administrative Agent in Individual Capacity
74
 
Section 9.11
Successor Administrative Agent
74
 
Section 9.12
Other Agents
74

ARTICLE X.
GUARANTY
75

 
Section 10.01
Guaranty by the Borrowers
75
 
Section 10.02
Additional Undertaking
75
 
Section 10.03
Guaranty Unconditional
75
 
Section 10.04
Borrowers Obligations to Remain in Effect; Restoration
76
 
Section 10.05
Waiver of Acceptance, etc.
76
 
Section 10.06
Subrogation
76
 
Section 10.07
Effect of Stay
76

ARTICLE XI.
MISCELLANEOUS
77

 
Section 11.01
Payment of Expenses etc.
77
 
Section 11.02
Indemnification
77
 
Section 11.03
Right of Setoff
78
 
Section 11.04
Equalization
78
 
Section 11.05
Notices
78
 
Section 11.06
Successors and Assigns
79
 
Section 11.07
No Waiver; Remedies Cumulative
82
 
Section 11.08
Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial
82
 
Section 11.09
Counterparts
83
 
Section 11.10
Integration
83
 
Section 11.11
Headings Descriptive
83
 
Section 11.12
Amendment or Waiver
83
 
Section 11.13
Survival of Indemnities
85
 
Section 11.14
Domicile of Loans
85
 
Section 11.15
Confidentiality
85
 
Section 11.16
Limitations on Liability of the LC Issuers
85

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TABLE OF CONTENTS
(continued)

 

   
Page

 
Section 11.17
General Limitation of Liability
86
 
Section 11.18
No Duty
86
 
Section 11.19
Lenders and Agent Not Fiduciary to Borrowers, etc.
86
 
Section 11.20
Survival of Representations and Warranties
86
 
Section 11.21
Severability
87
 
Section 11.22
Independence of covenants
87
 
Section 11.23
Interest Rate Limitation
87
 
Section 11.24
USA Patriot Act
87

 

EXHIBITS

Exhibit A-1
Form of Revolving Facility Note
Exhibit A-2
Form of Term Note
Exhibit B-1
Form of Notice of Borrowing
Exhibit B-2
Form of Notice of Continuation or Conversion
Exhibit B-3
Form of LC Request
Exhibit C-1
form of Subsidiary Guaranty
Exhibit C-2
Form of Security Agreement
Exhibit D
Form of Compliance Certificate
Exhibit E
Form of Closing Certificate
Exhibit F
Form of Solvency Certificate
Exhibit G
Form of Assignment Agreement
Exhibit H
Form of Mortgage

-v -

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THIS CREDIT AGREEMENT, dated as of October 27, 2006, among the following:
 
(i)   ICO, INC., a Texas corporation (“ICO”), BAYSHORE INDUSTRIAL, L.P., a Texas
limited partnership (“Bayshore”), and ICO POLYMERS NORTH AMERICA, INC., a New
Jersey corporation (“ICO Polymers,” and together with ICO and Bayshore, the
“Borrowers” and individually, each a “Borrower”);
 
(ii)   KEYBANK NATIONAL ASSOCIATION, a national banking association, WELLS FARGO
BANK, NATIONAL ASSOCIATION, a national banking association, and the other
lending institutions from time to time party hereto (each a “Lender” and
collectively, the “Lenders”); and
 
(iii)   KEYBANK NATIONAL ASSOCIATION, a national banking association, as an LC
Issuer, lead arranger, bookrunner, and administrative agent (in such capacity as
administrative agent, the “Administrative Agent”).
 
RECITALS:

(1)   The Borrowers have requested that the Lenders and each LC Issuer extend
credit to the Borrowers to refinance existing senior debt facilities, finance
the Preferred Stock Transaction and provide working capital and funds for other
general corporate purposes permitted pursuant to this Agreement.
 
(2)   Subject to and upon the terms and conditions set forth herein, the Lenders
and each LC Issuer are willing to extend credit and make available to the
Borrowers the credit facility provided for herein for the foregoing purposes.
 

 
AGREEMENT:
 
In consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
 
 
ARTICLE I.
 
 

 
 
DEFINITIONS AND TERMS
 
Section 1.01     Certain Defined Terms. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires:
 
“Accounts” means any present or future right to payment for goods sold or leased
or for services rendered, whether now existing or hereafter arising and whether
or not earned by performance.
 
“Acquisition” means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (i) the acquisition of all
or substantially all of the assets of any Person, or any business or division of
any Person, (ii) the acquisition or ownership of in excess of 50% of the Equity
Interest of any Person, or (iii) the acquisition of another Person by a merger,
consolidation, amalgamation or any other combination with such Person.
 
“Additional Security Document” has the meaning provided in Section 6.10(a).
 

 

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“Adjusted December Tax Payment” means, (i) for the four fiscal quarter period
ending March 31, 2007, an amount equal to 25% of the December Tax Payment, (ii)
for the four fiscal quarter period ending June 30, 2007, an amount equal to 50%
of the December Tax Payment, and (iii) for the four fiscal quarter period ending
September 30, 2007, an amount equal to 75% of the December Tax Payment.
 
“Adjusted Eurodollar Rate” means with respect to each Interest Period for a
Eurodollar Loan, (i) the rate per annum equal to the offered rate appearing on
the applicable electronic page of Reuters (or on the appropriate page of any
successor to or substitute for such service, or, if such rate is not available,
on the appropriate page of any generally recognized financial information
service, as selected by the Administrative Agent from time to time) that
displays an average British Bankers Association Interest Settlement Rate at
approximately 11:00 A.M. (London time) two Business Days prior to the
commencement of such Interest Period, for deposits in Dollars with a maturity
comparable to such Interest Period, divided (and rounded to the nearest 1/16th
of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves and without benefit of
credits for proration, exceptions or offsets that may be available from time to
time) applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency liabilities as defined in Regulation D (or any successor category
of liabilities under Regulation D); provided, however, that if the rate referred
to in clause (i) above is not available at any such time for any reason, then
the rate referred to in clause (i) shall instead be the interest rate per annum,
as determined by the Administrative Agent, to be the average (rounded to the
nearest 1/16th of 1%) of the rates per annum at which deposits in Dollars in an
amount equal to the amount of such Eurodollar Loan are offered to major banks in
the London interbank market at approximately 11:00 A.M. (London time), two
Business Days prior to the commencement of such Interest Period, for contracts
that would be entered into at the commencement of such Interest Period for the
same duration as such Interest Period.
 
“Administrative Agent” has the meaning provided in the first paragraph of this
Agreement and includes any successor to the Administrative Agent appoint
pursuant to Section 9.11.
 
“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person, or, in the case of any Lender that is an investment
fund, the investment advisor thereof and any investment fund having the same
investment advisor. A Person shall be deemed to control a second Person if such
first Person possesses, directly or indirectly, the power (i) to vote 10% or
more of the securities having ordinary voting power for the election of
directors or managers of such second Person or (ii) to direct or cause the
direction of the management and policies of such second Person, whether through
the ownership of voting securities, by contract or otherwise. Notwithstanding
the foregoing, neither the Administrative Agent nor any Lender shall in any
event be considered an Affiliate of any Borrower or any Borrower’s Subsidiaries.
 
“Aggregate Credit Facility Exposure” means, at any time, the sum of (i) the
Aggregate Revolving Facility Exposure at such time and (ii) the aggregate
principal amount of the Term Loans outstanding at such time.
 
“Aggregate Revolving Facility Exposure” means, at any time, the sum of (i) the
principal amounts of all Revolving Loans made by all Lenders and outstanding at
such time and (ii) the aggregate amount of the LC Outstandings at such time.
 
“Agreement” means this Credit Agreement, as the same may from time to time be
amended, restated, supplemented or otherwise modified.
 
“Allocable Amount” means, as of any date of determination, for any Borrower, the
maximum
 

2

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amount of liability that could be asserted against such Borrower under this
Agreement with respect to the applicable Borrower Payment without (a) rendering
such Borrower “insolvent” within the meaning of Section 101(31) of the
Bankruptcy Code or Section 2 of either the Uniform Fraudulent Transfer Act (as
in effect in any applicable State, the “UFTA”) or the Uniform Fraudulent
Conveyance Act (as in effect in any applicable State, the “UFCA”), (ii) leaving
such Borrower with unreasonably small capital, within the meaning of Section 548
of the Bankruptcy Code or Section 4 of the UFTA or Section 5 of the UFCA, or
(iii) leaving such Borrower unable to pay its debts as they become due within
the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA or
Section 6 of the UFCA.
 
“Anti-Terrorism Law” means the USA Patriot Act or any other law pertaining to
the prevention of future acts of terrorism, in each case as such law may be
amended from time to time.
 
“Applicable Lending Office” means, with respect to each Lender, the office
designated by such Lender to the Administrative Agent as such Lender’s lending
office for all purposes of this Agreement. A lender may have a different
Applicable Lending Office for Base Rate Loans and Eurodollar Loans.
 
“Applicable Margin” means:
 
(i)   Initially, until changed hereunder in accordance with the following
provisions, the Applicable Margin shall be (A) 0.0 basis points for Base Rate
Loans, and (B) 150.0 basis points for Eurodollar Loans;
 
(ii)   Commencing with the fiscal quarter of the Borrowers ended on December 31,
2006, and continuing with each fiscal quarter thereafter, the Administrative
Agent shall determine the Applicable Margin in accordance with the following
matrix, based on the Leverage Ratio:
 
 
Leverage Ratio
 
 
Applicable Margin for Base Rate Loans
 
 
Applicable Margin for Eurodollar Loans
 
 
Less than or equal to 1.50 to 1.00
 
0.0 basis points
 
125.0 basis points
 
Greater than 1.50 to 1.00 but less than or equal to 2.50 to 1.00
 
0.0 basis points
 
150.0 basis points
 
Greater than 2.50 to 1.00
 
25.0 basis points
 
200.0 basis points

(iii)   Changes in the Applicable Margin based upon changes in the Leverage
Ratio shall become effective on the first day of the month following each
Financial Statement Due Date based upon the Leverage Ratio in effect at the end
of the applicable period covered (in whole or in part) by the financial
statements to be delivered by the applicable Financial Statement Due Date.
Notwithstanding the foregoing provisions, during any period when (A) the
Borrower Representative has failed to timely deliver the consolidated financial
statements referred to in Section 6.01(a) or (b), accompanied by the certificate
and calculations referred to in Section 6.01(c) or (B) a Default under Section
8.01(a) has occurred and is continuing, the Applicable Margin shall be the
highest rate per annum indicated therefor in the above matrix, regardless of the
Leverage Ratio at such time. Upon the remedy or cure of any such failure or
Default, the Applicable Margin shall be adjusted as of the date of such remedy
or cure based on the then applicable Leverage Ratio. Any changes in the
Applicable Margin shall be determined by the Administrative Agent in accordance
with the provisions set forth in this definition and the Administrative Agent
will promptly provide notice of such determinations to the Borrower
Representative and the
 

3

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Lenders. Any such determination by the Administrative Agent shall be conclusive
and binding absent manifest error.
 
“Approved Bank” has the meaning provided in subpart (ii) of the definition of
“Cash Equivalents.”
 
“Approved Fund” means a fund that is engaged in making, purchasing, holding or
otherwise investing in bank loans and similar extensions of credit and that is
administered or managed by a Lender or an Affiliate of a Lender.
 
“Asset Coverage Ratio” means at any time the ratio of (i) the sum of (A)
Domestic Cash, (B) Domestic Accounts Receivable and (C) Domestic Inventory to
(ii) the Aggregate Revolving Facility Exposure.
 
“Asset Sale” means the sale, lease, transfer or other disposition (including by
means of Sale and Lease-Back Transactions, and by means of mergers,
consolidations, amalgamations and liquidations of a corporation, partnership or
limited liability company of the interests therein of any Borrower or any
Subsidiary) by any Borrower or any Subsidiary to any Person of any of such
Borrower’s or such Subsidiary’s respective assets, provided that the term Asset
Sale specifically excludes (i) any sales, transfers or other dispositions of
inventory, or obsolete, worn-out or excess furniture, fixtures, equipment or
other property, real or personal, tangible or intangible, in each case in the
ordinary course of business, and (ii) the actual or constructive total loss of
any property or the use thereof resulting from any Event of Loss.
 
“Assignment Agreement” means an Assignment Agreement substantially in the form
of Exhibit G hereto.
 
“Australian Lender” means National Australia Bank Ltd.
 
“Australian Loan Defaults” means violations of the capital adequacy ratio and
financial charges coverage ratio covenants measured as of the fiscal quarter
ended September 30, 2006 by the Australian Subsidiary in connection with certain
loan agreements by and between the Australian Subsidiary and the Australian
Lender.
 
“Australian Subsidiary” means Courtenay Polymers Pty. Ltd.
 
“Authorized Officer” means (i) with respect to a Borrower or the Borrower
Representative, any of the following officers of such Borrower or the Borrower
Representative, as applicable: the Chief Financial Officer, the Chief Accounting
Officer or the Treasurer; and (ii) with respect to any other Loan Party, the
President, the Chief Financial Officer or the Treasurer of such Loan Party, or
such other Person as is authorized in writing to act on behalf of such Loan
Party and is acceptable to the Administrative Agent. Unless otherwise qualified,
all references herein to an Authorized Officer shall refer to an Authorized
Officer of the Borrower Representative.
 
“Back-to-Back Letter of Credit” means the Letter of Credit Number S312020 issued
to Wachovia Bank, N.A. by KeyBank National Association as an LC Issuer on the
Closing Date in the face amount of $2,178,598.
 
“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now or hereafter in effect, or any successor thereto, as
hereafter amended.
 

4

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“Base Rate” means, for any day, a fluctuating interest rate per annum as shall
be in effect from time to time which rate per annum shall at all times be equal
to the greater of (i) the rate of interest established by KeyBank National
Association, from time to time, as its “prime rate,” whether or not publicly
announced, which interest rate may or may not be the lowest rate charged by it
for commercial loans or other extensions of credit; or (ii) the Federal Funds
Effective Rate in effect from time to time, determined one Business Day in
arrears, plus 1/2 of 1% per annum.
 
“Base Rate Loan” means any Loan bearing interest at a rate based upon the Base
Rate in effect from time to time.
 
“Bayshore RE Holdings” means Bayshore RE Holdings, Inc., a Delaware corporation.
 
“Benefited Creditors” means, with respect to the Borrower Guaranteed Obligations
pursuant to Article X, each of the Administrative Agent, the Lenders, each LC
Issuer and each Designated Hedge Creditor, and the respective successors and
assigns of each of the foregoing.
 
“Borrower” and “Borrowers” have the meaning specified in the first paragraph of
this Agreement.
 
“Borrower Guaranteed Obligations” has the meaning provided in Section 10.01.
 
“Borrower Payment” has the meaning provided in Section 2.15(b).
 
“Borrower Representative” means ICO in its capacity as Borrower Representative
pursuant to Section 1.5.
 
“Borrowing” means a Revolving Borrowing or a Term Borrowing.
 
“Business Day” means (i) any day other than Saturday, Sunday or any other day on
which commercial banks in Cleveland, Ohio are authorized or required by law to
close and (ii) with respect to any matters relating to Eurodollar Loans, any day
on which dealings in U.S. Dollars are carried on in the London interbank market.
 
“Capital Distribution” means a payment made, liability incurred or other
consideration given for the purchase, acquisition, repurchase, redemption or
retirement of any Equity Interest of any Borrower or any Subsidiary or as a
dividend, return of capital or other distribution in respect of any of such
Borrower’s or such Subsidiary’s Equity Interest.
 
“Capital Lease” as applied to any Person means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, should be accounted for as a capital lease on the balance sheet of
that Person.
 
“Capitalized Lease Obligations” means all obligations under Capital Leases of
the Borrowers or any of their Subsidiaries, without duplication, in each case
taken at the amount thereof accounted for as liabilities identified as “capital
lease obligations” (or any similar words) on a consolidated balance sheet of the
Borrowers and their Subsidiaries prepared in accordance with GAAP.
 
“Cash Dividend” means a Capital Distribution of a Borrower payable in cash to
the shareholders of such Borrower with respect to any class or series of Equity
Interest of such Borrower.
 
“Cash Equivalents” means any of the following:
 

5

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(i)   securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof) having maturities of not more than one year from the date of
acquisition;
 
(ii)   U.S. dollar denominated time deposits, certificates of deposit and
bankers’ acceptances of (x) any Lender, (y) any domestic commercial bank of
recognized standing having capital and surplus in excess of $500,000,000 or (z)
any bank (or the parent company of such bank) whose short-term commercial paper
rating from S&P is at least A-1, A-2 or the equivalent thereof or from Moody’s
is at least P-1, P-2 or the equivalent thereof (any such bank, an “Approved
Bank”), in each case with maturities of not more than 180 days from the date of
acquisition;
 
(iii)   commercial paper issued by any Lender or Approved Bank or by the parent
company of any Lender or Approved Bank and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody’s, or guaranteed by any industrial company with
a long-term unsecured debt rating of at least A or A2, or the equivalent of each
thereof, from S&P or Moody’s, as the case may be, and in each case maturing
within 180 days after the date of acquisition;
 
(iv)   fully collateralized repurchase agreements entered into with any Lender
or Approved Bank having a term of not more than 30 days and covering securities
described in clause (i) above;
 
(v)   investments in money market funds substantially all the assets of which
are comprised of securities of the types described in clauses (i) through (iv)
above;
 
(vi)   investments in money market funds access to which is provided as part of
“sweep” accounts maintained with a Lender or an Approved Bank;
 
(vii)   investments in industrial development revenue bonds that (A) “re-set”
interest rates not less frequently than quarterly, (B) are entitled to the
benefit of a remarketing arrangement with an established broker dealer, and (C)
are supported by a direct pay letter of credit covering principal and accrued
interest that is issued by an Approved Bank; and
 
(viii)   investments in pooled funds or investment accounts consisting of
investments of the nature described in the foregoing clause (vii).
 
“Cash Proceeds” means, with respect to (i) any Asset Sale, the aggregate cash
payments (including any cash received by way of deferred payment pursuant to a
note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, but only as and when so
received) received by any Borrower or any Subsidiary from such Asset Sale, and
(ii) any Event of Loss, the aggregate cash payments, including all insurance
proceeds and proceeds of any award for condemnation or taking, received in
connection with such Event of Loss.
 
“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. §
9601 et seq.
 
“Change of Control” means (i) the acquisition of, or, if earlier, the
shareholder or director approval of the acquisition of, ownership or voting
control, directly or indirectly, beneficially or of
 

6

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record, on or after the Closing Date, by any Person or group (within the meaning
of Rule 13d-3 of the SEC under the 1934 Act, as then in effect), of shares
representing more than 50% of the aggregate ordinary Voting Power represented by
the issued and outstanding capital stock of ICO; (ii) the occupation of a
majority of the seats (other than vacant seats) on the board of directors of ICO
by Persons who were neither (A) nominated by the Board of Directors of ICO nor
(B) appointed by directors so nominated; (iii) the occurrence of a change in
control, or other similar provision, under or with respect to any Material
Indebtedness Agreement; or (iv) the failure of ICO to own, directly or
indirectly, all of the outstanding Equity Interests of each other Borrower.
 
“Charges” has the meaning provided in Section 11.23.
 
“China RE Holdings” means China RE Holdings, Inc., a Delaware corporation.
 
“CIP Regulations” has the meaning provided in Section 9.07.
 
“Claims” has the meaning set forth in the definition of “Environmental Claims.”
 
“Closing Date” means October 27, 2006.
 
“Closing Date Mortgaged Property” has the meaning provided in Section 6.10(c).
 
“Closing Fee Letter” means the Closing Fee Letter dated as of the Closing Date
between the Borrowers and the Administrative Agent, for the benefit of the
Lenders.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated and the rulings issued thereunder. Section
references to the Code are to the Code as in effect at the Closing Date and any
subsequent provisions of the Code, amendatory thereof, supplemental thereto or
substituted therefor.
 
“Collateral” means the “Collateral” as defined in the Security Agreement,
together with any other collateral (whether real property or personal property)
covered by any Security Document.
 
“Collateral Assignments” has the meaning specified in the Security Agreement.
 
“Commercial Letter of Credit” means any letter of credit or similar instrument
issued for the purpose of providing the primary payment mechanism in connection
with the purchase of materials, goods or services in the ordinary course of
business.
 
“Commitment” means with respect to each Lender, (i) its Revolving Commitment or
(ii) its Term Commitment, if any, or, in the case of such Lender, all of such
Commitments.
 
“Commitment Fees” has the meaning provided in Section 2.11(b).
 
“Commodities Hedge Agreement” means a commodities contract purchased by any
Borrower or any Subsidiary in the ordinary course of business, and not for
speculative purposes, with respect to raw materials necessary to the
manufacturing or production of goods in connection with the business of the
Borrowers and their Subsidiaries.
 
“Compliance Certificate” has the meaning provided in Section 6.01(c).
 
“Confidential Fee Letter” means the Confidential Fee Letter, dated September 28,
2006, between ICO and the Administrative Agent.
 

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“Confidential Information” has the meaning provided in Section 11.15(b).
 
“Consideration” means, in connection with an Acquisition, the aggregate
consideration paid, including borrowed funds, cash, the issuance of securities
or notes, the assumption or incurring of liabilities (direct or contingent), the
payment of consulting fees (excluding any fees payable to any investment banker
in connection with such Acquisition) or fees for a covenant not to compete and
any other consideration paid for the purchase.
 
“Consolidated Capital Expenditures” means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities) made by the
Borrowers and their Subsidiaries to acquire or lease (pursuant to a Capital
Lease) fixed or capital assets, or additions to equipment (including
replacements, capitalized repairs and improvements during such period).
 
“Consolidated Depreciation and Amortization Expense” means, for any period, all
depreciation and amortization expenses of the Borrowers and their Subsidiaries,
all as determined for the Borrowers and their Subsidiaries on a consolidated
basis in accordance with GAAP.
 
“Consolidated EBITDA” means, for any period, Consolidated Net Income for such
period, plus (i) the sum (without duplication) of the amounts for such period
included in determining such Consolidated Net Income of, (A) Consolidated
Interest Expense, (B) Consolidated Income Tax Expense, (C) Consolidated
Depreciation and Amortization Expense, (D) non-cash losses and non-cash charges,
(E) non-cash expenses relating to stock option plans of ICO, and (F) any
extraordinary and non-recurring non-cash losses, less (ii) the sum (without
duplication) of the amounts for such period included in determining such
Consolidated Net Income of, (A) credits received or earned in respect of taxes,
(B) non-cash gains, (C) extraordinary and non-recurring non-cash gains and (D)
expenses relating to discontinued operations in an aggregate amount not
exceeding $1,000,000 in any fiscal year, all as determined for the Borrowers and
their Subsidiaries on a consolidated basis in accordance with GAAP; provided,
however, that Consolidated EBITDA for any Testing Period shall (y) include the
EBITDA for any Person or business unit that has been acquired by the Borrowers
or any of their Subsidiaries for any portion of such Testing Period prior to the
date of acquisition, so long as such EBITDA has been verified by appropriate
audited financial statements or other financial statements acceptable to the
Administrative Agent and (z) exclude the EBITDA for any Person or business unit
that has been disposed of by the Borrowers or any of their Subsidiaries, for the
portion of such Testing Period prior to the date of disposition.
 
“Consolidated Fixed Charges” means, for any period, as determined on a
consolidated basis and in accordance with GAAP, without duplication, the
aggregate of (i) Consolidated Interest Expense, (ii) Consolidated Income Tax
Expense paid (excluding in the case of each of the four fiscal quarter periods
ending March 31, 2007, June 30, 2007 and September 30, 2007, the Adjusted
December Tax Payment), (iii) scheduled principal payments on Consolidated Funded
Indebtedness due in the twelve months preceding the measurement date (other than
optional prepayments of the Revolving Loans), (iv) Capital Distributions made by
ICO in respect of its Equity Interests, (v) Consolidated Capital Expenditures
that are made for the purpose of maintaining existing fixed assets, and (vi)
Rental Expense.
 
“Consolidated Income Tax Expense” means, for any period, all provisions for
taxes based on the net income of the Borrowers or any of their Subsidiaries
(including, without limitation, any additions to such taxes, and any penalties
and interest with respect thereto), all as determined for the Borrowers and
their Subsidiaries on a consolidated basis in accordance with GAAP.
 
“Consolidated Interest Expense” means, for any period, total interest expense
(including, without limitation, that which is capitalized and that which is
attributable to Capital Leases or Synthetic Leases)
 

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of the Borrowers and their Subsidiaries on a consolidated basis with respect to
all outstanding Indebtedness of the Borrowers and their Subsidiaries.
 
“Consolidated Net Income” means for any period, the net income (or loss) of the
Borrowers and their Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP.
 
“Consolidated Net Working Capital” means current assets (excluding cash and Cash
Equivalents), minus current liabilities, all as determined for the Borrowers and
their Subsidiaries on a consolidated basis in accordance with GAAP.
 
“Consolidated Tangible Net Worth” means at any time, all amounts that, in
conformity with GAAP, would be included under the caption “total stockholders’
equity” (or any like caption) on a consolidated balance sheet of the Borrowers
at such time, adjusted to eliminate the effect of foreign currency translations
after the Closing Date less the aggregate amount of intangible assets of the
Borrowers and its Subsidiaries, determined in accordance with GAAP.
 
“Consolidated Total Debt” shall mean the sum (without duplication) of all
Indebtedness of the Borrowers and each of their Subsidiaries, all as determined
on a consolidated basis.
 
“Contemplated Protective Life Loan” means the Indebtedness contemplated to be
incurred by Bayshore RE Holdings, Inc. with Protective Life as the lender, in an
aggregate principal amount not to exceed $1,400,000.
 
“Continue,” “Continuation” and “Continued” each refers to a continuation of a
Eurodollar Loan for an additional Interest Period as provided in Section 2.10.
 
“Control Agreements” has the meaning set forth in the Security Agreement.
 
“Convert,” “Conversion” and “Converted” each refers to a conversion of Loans of
one Type into Loans of another Type.
 
“Convertible Exchangeable Preferred Stock” means ICO’s Convertible Exchangeable
Preferred Stock, no par value.
 
“Credit Event” means the making of any Borrowing, any Conversion or Continuation
or any LC Issuance.
 
“Credit Facility” means the credit facility established under this Agreement
pursuant to which (i) the Lenders shall make Revolving Loans to the Borrowers
and shall participate in LC Issuances under the Revolving Facility pursuant to
the Revolving Commitment of each such Lender, (ii) each Lender with a Term
Commitment shall make a Term Loan to the Borrowers pursuant to such Term
Commitment of such Lender, and (iii) each LC Issuer shall issue Letters of
Credit for the account of the LC Obligors in accordance with the terms of this
Agreement.
 
“Credit Facility Exposure” means, for any Lender at any time, the sum of (i)
such Lender’s Revolving Facility Exposure at such time, and (ii) the outstanding
aggregate principal amount of the Term Loan made by such Lender, if any.
 
“December Tax Payment” means an amount equal to the Consolidated Income Tax
Expense actually paid in cash for the four fiscal quarter period ending December
31, 2006.
 

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“Default” means any event, act or condition that with notice or lapse of time,
or both, would constitute an Event of Default.
 
“Default Rate” means, for any day, (i) with respect to any Loan, a rate per
annum equal to 2% per annum above the interest rate that is or would be
applicable from time to time to such Loan pursuant to Section 2.09(a)(i) or
Section 2.09(b)(i), as applicable and (ii) with respect to any other amount, a
rate per annum equal to 2% per annum above the rate that would be applicable to
Revolving Loans that are Base Rate Loans pursuant to section 2.09(a)(i).
 
“Designated Hedge Agreement” means any Hedge Agreement (other than a Commodities
Hedge Agreement) to which any Borrower or any Subsidiary is a party and as to
which a Lender or any of its Affiliates is a counterparty, which Administrative
Agent shall designate by written instrument as a Designated Hedge Agreement so
that such Borrower’s or such Subsidiary’s counterparty’s credit exposure
thereunder will be entitled to share in the benefits of the Subsidiary Guaranty
and the Security Documents to the extent the Subsidiary Guaranty and such
Security Documents provide guarantees or security for creditors of any Borrower
or any Subsidiary under Designated Hedge Agreements.
 
“Designated Hedge Creditor” means each Lender or Affiliate of a Lender that
participates as a counterparty to any Loan Party pursuant to any Designated
Hedge Agreement with such Lender or Affiliate of such Lender.
 
“Dollars,” “U.S. Dollars” and the sign “$” each means lawful money of the United
States.
 
“Domestic Accounts Receivable” means, as of any date, the gross outstanding
balance on such date, determined in accordance with GAAP and stated on a basis
consistent with the historical practices of the Domestic Loan Parties as of the
Closing Date, of Accounts of the Domestic Loan Parties, net of intercompany
Accounts.
 
“Domestic Cash” means the sum of (i) cash and (ii) Cash Equivalents, in each
case to the extent subject to a Control Agreement.
 
“Domestic Inventory” means, as of any date, the aggregate value of the Inventory
of the Domestic Loan Parties, in each case to the extent such Inventory is
located in the United States.
 
“Domestic Loan Party” means any Borrower or any Subsidiary Guarantor.
 
“Domestic Subsidiary” means any Subsidiary organized under the laws of the
United States of America, any State thereof, or the District of Columbia.
 
“EBITDA” means, with respect to any Person for any period, the net income for
such Person for such period plus the sum of the amounts for such period included
in determining such net income in respect of (i) interest expense, (ii) income
tax expense, and (iii) depreciation and amortization expense, in each case as
determined in accordance with GAAP.
 
“Eligible Assignee” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund, and (iv) any other Person (other than a natural Person) approved
by (A) the Administrative Agent, (B) each LC Issuer, and (C) unless an Event of
Default has occurred and is continuing, the Borrower Representative (each such
approval not to be unreasonably withheld, conditioned or delayed); provided,
however, that notwithstanding the foregoing, “Eligible Assignee” shall not
include the Borrowers or any of their Affiliates or Subsidiaries.
 

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“Environmental Claims” means any and all global, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of non-compliance or
violation, investigations or proceedings relating in any way to any
Environmental Law or any permit issued under any such law (hereafter “Claims”),
including, without limitation, (i) any and all Claims by any Governmental
Authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law, and (ii) any and all
Claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the storage,
treatment or Release (as defined in CERCLA) of any Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or the
environment.
 
“Environmental Law” means any applicable Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy and rule of common law now or
hereafter in effect and in each case as amended, and any binding and enforceable
judicial or global interpretation thereof, including any judicial or global
order, consent, decree or judgment issued to or rendered against any Borrower or
any Subsidiary relating to the environment, employee health and safety or
Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42
U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.;
the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning
and the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq., the
Hazardous Material Transportation Act, 49 U.S.C. § 5101 et seq. and the
Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); and any state and local
or foreign counterparts or equivalents, in each case as amended from time to
time.
 
“Equity Interest” means with respect to any Person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or non-voting) of equity of such Person,
including, if such Person is a partnership, partnership interests (whether
general or limited) or any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership, but in no event will Equity
Interest include any debt securities convertible or exchangeable into equity
unless and until actually converted or exchanged.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the
Closing Date and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
 
“ERISA Affiliate” means each Person (as defined in Section 3(9) of ERISA), which
together with a Borrower or a Subsidiary, would be deemed to be a “single
employer” (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code
or Section 4001(a)(14) or 4001(b)(i) of ERISA or (ii) as a result of any
Borrower or a Subsidiary of any Borrower being or having been a general partner
of such Person.
 
“Eurodollar Loan” means each Loan bearing interest at a rate based upon the
Adjusted Eurodollar Rate.
 
“Event of Default” has the meaning provided in Section 8.01.
 
“Event of Loss” means, with respect to any property, (i) the actual or
constructive total loss of such property or the use thereof, resulting from
destruction, damage beyond repair, or the rendition of such property permanently
unfit for normal use from any casualty or similar occurrence whatsoever, (ii)
the destruction or damage of a portion of such property from any casualty or
similar occurrence
 

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whatsoever under circumstances in which such damage cannot reasonably be
expected to be repaired, or such property cannot reasonably be expected to be
restored to its condition immediately prior to such destruction or damage,
within 90 days after the occurrence of such destruction or damage, (iii) the
condemnation, confiscation or seizure of, or requisition of title to or use of,
any property, or (iv) in the case of any property located upon a leasehold, the
termination or expiration of such leasehold.
 
“Existing Credit Agreement” means the Loan and Security Agreement, dated April
9, 2002, by and among Bayshore and ICO Polymers, as borrowers, and ICO, ICO
Polymers, Inc., Wedco Technology, Inc., Wedco Petrochemicals, Inc., ICO
Technology, Inc. and Bayshore Industrial LP L.L.C., as guarantors, and ICO P&O,
ICO Global Services, Inc., and as a lender, Wachovia Bank, National Association
(successor by merger to Congress Financial Corporation (Southwest)), as amended.
 
“Federal Funds Effective Rate” means, for any period, a fluctuating interest
rate equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
 
“Fees” means all amounts payable pursuant to, or referred to in, Section 2.11.
 
“Financial Statement Due Date” means each date by which annual or quarterly
financial statements are required to be delivered pursuant to Section 6.01(a) or
(b), as the case may be.
 
“Fixed Charge Coverage Ratio” means, for any Testing Period, the ratio of (i)
the sum of (A) Consolidated EBITDA and (B) Rental Expense to (ii) Consolidated
Fixed Charges.
 
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
 
“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time.
 
“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, global tribunal, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or global powers or
functions of or pertaining to government.
 
“Guaranty Obligations” means as to any Person (without duplication) any
obligation of such Person guaranteeing any Indebtedness (“primary Indebtedness”)
of any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary Indebtedness or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds for the purchase or payment of any such primary Indebtedness or to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary Indebtedness of the ability of the primary obligor to make
payment of such primary Indebtedness, or (iv) otherwise to assure or hold
harmless the owner of such primary Indebtedness against loss in respect thereof,
provided, however, that the definition of Guaranty Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guaranty Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary
 

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Indebtedness in respect of which such Guaranty Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder).
 
“Hazardous Materials” means (i) any petrochemical or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
and (ii) any chemicals, materials or substances defined as or included in the
definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,”
“restricted hazardous materials,” “extremely hazardous wastes,” “restrictive
hazardous wastes,” “toxic substances,” “toxic pollutants,” “contaminants” or
“pollutants,” or words of similar meaning and regulatory effect, under any
applicable Environmental Law.
 
“Hedge Agreement” means (i) any interest rate swap agreement, any interest rate
cap agreement, any interest rate collar agreement or other similar interest rate
management agreement or arrangement, (ii) any currency swap or option agreement,
foreign exchange contract, forward currency purchase agreement or similar
currency management agreement or arrangement or (iii) any Commodities Hedge
Agreement.
 
“ICO” has the meaning specified in the first paragraph of this Agreement.
 
“ICO Minerals” means ICO Minerals, Inc., a Delaware corporation.
 
“Indebtedness” of any Person means without duplication (i) all indebtedness of
such Person for borrowed money; (ii) all bonds, notes, debentures and similar
debt securities of such Person; (iii) the deferred purchase price of capital
assets or services that in accordance with GAAP would be shown on the liability
side of the balance sheet of such Person; (iv) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder; (v) all obligations, contingent or otherwise, of such
Person in respect of bankers’ acceptances; (vi) all indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed; (vii) all Capitalized Lease
Obligations of such Person; (viii) the present value, determined on the basis of
the implicit interest rate, of all basic rental obligations under all Synthetic
Leases of such Person; (ix) all obligations of such Person with respect to asset
securitization financing; (x) all obligations of such Person to pay a specified
purchase price for goods or services whether or not delivered or accepted, i.e.,
take-or-pay and similar obligations; (xi) all net obligations of such Person
under Hedge Agreements; (xii) the full outstanding balance of trade receivables,
notes or other instruments sold with full recourse (and the portion thereof
subject to potential recourse, if sold with limited recourse), other than in any
such case any thereof sold solely for purposes of collection of delinquent
accounts; and (xiii) all Guaranty Obligations of such Person; provided, however,
that (y) neither trade payables, deferred revenue, taxes nor other similar
accrued expenses, in each case arising in the ordinary course of business, shall
constitute Indebtedness; and (z) the Indebtedness of any Person shall in any
event include (without duplication) the Indebtedness of any other entity
(including any general partnership in which such Person is a general partner) to
the extent such Person is liable thereon as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide expressly that such Person is not liable
thereon.
 
“Indemnitees” has the meaning provided in Section 11.02.
 
“Insolvency Event” means, with respect to any Person, (i) the commencement of a
voluntary case by such Person under the Bankruptcy Code or the seeking of relief
by such Person under any bankruptcy or insolvency or analogous law in any
jurisdiction outside of the United States; (ii) the commencement of
 

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an involuntary case against such Person under the Bankruptcy Code and the
petition is not controverted within 10 days, or is not dismissed within 60 days,
after commencement of the case; (iii) a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of such Person; (iv) such Person commences (including by way of
applying for or consenting to the appointment of, or the taking of possession
by, a rehabilitator, receiver, custodian, trustee, conservator or liquidator
(collectively, a “conservator”) of such Person or all or any substantial portion
of its property) any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency, liquidation,
rehabilitation, conservatorship or similar law of any jurisdiction whether now
or hereafter in effect relating to such Person; (v) any such proceeding of the
type set forth in clause (iv) above is commenced against such Person to the
extent such proceeding is consented to by such Person or remains undismissed for
a period of 60 days; (vi) such Person is adjudicated insolvent or bankrupt;
(vii) any order of relief or other order approving any such case or proceeding
is entered; (viii) such Person suffers any appointment of any conservator or the
like for it or any substantial part of its property that continues undischarged
or unstayed for a period of 60 days; (ix) such Person makes a general assignment
for the benefit of creditors or generally does not pay its debts as such debts
become due; or (x) any corporate (or similar organizational) action is taken by
such Person for the purpose of effecting any of the foregoing.
 
“Interest Period” means, with respect to each Eurodollar Loan, a period of one,
two, three or six months as selected by the Borrower Representative; provided,
however, that (i) the initial Interest Period for any Borrowing of such
Eurodollar Loan shall commence on the date of such Borrowing (the date of a
Borrowing resulting from a Conversion or Continuation shall be the date of such
Conversion or Continuation) and each Interest Period occurring thereafter in
respect of such Borrowing shall commence on the day on which the next preceding
Interest Period expires; (ii) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last Business Day of
such calendar month; (iii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the month
after which no further Business Day occurs in such month, such Interest Period
shall expire on the next preceding Business Day; (iv) no Interest Period for any
Eurodollar Loan may be selected that would end after the Revolving Facility
Termination Date or the Term Loan Maturity Date, as the case may be; and (v) if,
upon the expiration of any Interest Period, the Borrower Representative has
failed to (or may not) elect a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower
Representative shall be deemed to have elected to Convert such Borrowing to Base
Rate Loans effective as of the expiration date of such current Interest Period.
 
“Inventory” means, as of any date, the net book value of the inventory of the
Borrowers and its Domestic Subsidiaries as reflected on the Borrowers’ most
recent financial statements.
 
“Investment” means (i) any direct or indirect purchase or other acquisition by a
Person of any Equity Interest of any other Person; (ii) any loan, advance (other
than deposits with financial institutions available for withdrawal on demand) or
extension of credit to, guarantee or assumption of debt or purchase or other
acquisition of any other Indebtedness of, any Person by any other Person; or
(iii) the purchase, acquisition or investment of or in any stocks, bonds, mutual
funds, notes, debentures or other securities, or any deposit account,
certificate of deposit or other investment of any kind.
 
“JPMorgan Securities Account” means ICO’s account number 36054146 with JPMorgan
Securities, Inc.
 

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“Landlord’s Agreement” means a landlord’s waiver or mortgagee’s waiver, each in
form and substance satisfactory to the Administrative Agent, and providing,
among other things, for waiver of Lien, certain notices and opportunity to cure
and access to Collateral, delivered by a Loan Party in connection with this
Agreement, as the same may from time to time be amended, restated or otherwise
modified.
 
“LC Commitment Amount” means $10,000,000.
 
“LC Documents” means, with respect to any Letter of Credit, any documents
executed in connection with such Letter of Credit, including the Letter of
Credit itself.
 
“LC Fee” means any of the fees payable pursuant to Section 2.11(c) or Section
2.11(d) in respect of Letters of Credit.
 
“LC Issuance” means the issuance of any Letter of Credit by any LC Issuer for
the account of an LC Obligor in accordance with the terms of this Agreement, and
shall include any amendment thereto that increases the Stated Amount thereof or
extends the expiry date of such Letter of Credit.
 
“LC Issuer” means KeyBank National Association or any of its Affiliates, or such
other Lender that is requested by the Borrowers and agrees to be an LC Issuer
hereunder and is approved by the Administrative Agent.
 
“LC Obligor” means, with respect to each LC Issuance, the Borrower or the
Subsidiary Guarantor for whose account such Letter of Credit is issued.
 
“LC Outstandings” means, at any time, the sum, without duplication, of (i) the
aggregate Stated Amount of all outstanding Letters of Credit and (ii) the
aggregate amount of all Unpaid Drawings with respect to Letters of Credit.
 
“LC Participant” has the meaning provided in Section 2.05(g)(i).
 
“LC Participation” has the meaning provided in Section 2.05(g).
 
“LC Request” has the meaning provided in Section 2.05(b).
 
“Leaseholds” of any Person means all the right, title and interest of such
Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
 
“Lender” and “Lenders” have the meaning provided in the first paragraph of this
Agreement and includes any other Person that becomes a party hereto pursuant to
an Assignment Agreement, other than any such Person that ceases to be a party
hereto pursuant to an Assignment Agreement.
 
“Lender Register” has the meaning provided in Section 2.08(b).
 
“Letter of Credit” means any Standby Letter of Credit or Commercial Letter of
Credit, in each case issued by any LC Issuer under this Agreement pursuant to
Section 2.05 for the account of any LC Obligor.
 
“Leverage Ratio” means, for any Testing Period, the ratio of (i) Consolidated
Total Debt to (ii) Consolidated EBITDA.
 

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“Lien” means any mortgage, pledge, security interest, hypothecation,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
 
“Loan” means any Revolving Loan or a Term Loan.
 
“Loan Documents” means this Agreement, the Notes, the Subsidiary Guaranty, the
Security Documents, the Confidential Fee Letter, the Closing Fee Letter, and
each Letter of Credit and each other LC Document.
 
“Loan Party” means any Borrower or any Subsidiary Guarantor.
 
“Margin Stock” has the meaning provided in Regulation U.
 
“Material Adverse Effect” means any or all of the following: (i) any material
adverse effect on the business, operations, property, assets, liabilities,
financial or other condition or prospects of the Borrowers or the Borrowers and
their Subsidiaries, taken as a whole; (ii) any material adverse effect on the
ability of the Borrowers and the other Loan Parties, taken as a whole, to
perform their obligations under any of the Loan Documents to which they are
parties; or (iii) any material adverse effect on the validity, effectiveness or
enforceability, as against the Borrowers and the other Loan Parties, taken as a
whole, of any of the Loan Documents to which they are parties.
 
“Material Foreign Indebtedness” means any Indebtedness of any Foreign Subsidiary
or Foreign Subsidiaries in excess of, individually or in the aggregate, a
principal amount of $5,000,000
 
“Material Domestic Indebtedness” means, as to the Borrowers or any of their
Domestic Subsidiaries, any particular Indebtedness of such Borrower or such
Subsidiary (including any Guaranty Obligations) in excess of the aggregate
principal amount of $500,000.
 
“Material Indebtedness Agreement” means any agreement governing or evidencing
any Material Indebtedness.
 
“Maximum Rate” has the meaning provided in Section 11.23.
 
“Mexico Subsidiary” means The Innovation Company, S.A. de C.V., a company
organized under the laws of Mexico.
 
“Minimum Borrowing Amount” means (i) with respect to any Base Rate Loan,
$500,000, with minimum increments thereafter of $250,000, and (ii) with respect
to any Eurodollar Loan, $2,000,000, with minimum increments thereafter of
$1,000,000.
 
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
 
“Mortgage” means a Mortgage, Deed of Trust or other instrument, substantially in
the form of Exhibit H hereto and otherwise in form and substance reasonably
satisfactory to the Administrative Agent, executed by a Loan Party with respect
to a Mortgaged Real Property, as the same may from time to time be amended,
restated or otherwise modified.
 
“Mortgaged Real Property” means each of the parcels of real property set forth
on Schedule 3 hereto, or interests therein, owned or leased by a Loan Party,
together with each other parcel of Real Property that shall become subject to a
Mortgage after the Closing Date, in each case together with all of
 

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such Loan Party’s right, title and interest in the improvements and buildings
thereon and all appurtenances, easements or other rights belonging thereto.
 
“Multi-Employer Plan” means a multi-employer plan, as defined in Section
4001(a)(3) of ERISA to which the Borrowers or any Subsidiary or any ERISA
Affiliate is making or accruing an obligation to make contributions or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
 
“Multiple Employer Plan” means an employee benefit plan, other than a
Multi-Employer Plan, to which any Borrower or any Subsidiary or any ERISA
Affiliate, and one or more employers other than a Borrowers or a Subsidiary or
an ERISA Affiliate, is making or accruing an obligation to make contributions
or, in the event that any such plan has been terminated, to which a Borrower or
a Subsidiary or an ERISA Affiliate made or accrued an obligation to make
contributions during any of the five plan years preceding the date of
termination of such plan.
 
“Net Cash Proceeds” means, with respect to (i) any Asset Sale, the Cash Proceeds
resulting therefrom net of (A) reasonable and customary expenses of sale
incurred in connection with such Asset Sale, and other reasonable and customary
fees and expenses incurred, and all state and local taxes paid or reasonably
estimated to be payable by such person as a consequence of such Asset Sale and
the payment of principal, premium and interest of Indebtedness (other than the
Obligations) secured by the asset which is the subject of the Asset Sale and
required to be, and which is, repaid under the terms thereof as a result of such
Asset Sale, and (B) incremental federal, state and local income taxes paid or
payable as a result thereof; and (ii) any Event of Loss, the Cash Proceeds
resulting therefrom net of (A) reasonable and customary expenses incurred in
connection with such Event of Loss, and local taxes paid or reasonably estimated
to be payable by such person as a consequence of such Event of Loss and the
payment of principal, premium and interest of Indebtedness (other than the
Obligations) secured by the asset which is the subject of the Event of Loss and
required to be, and which is, repaid under the terms thereof as a result of such
Event of Loss, and (B) incremental federal, state and local income taxes paid or
payable as a result thereof.
 
“1934 Act” means the Securities Exchange Act of 1934, as amended.
 
“Note” means a Revolving Facility Note or a Term Note, as applicable.
 
“Notice of Borrowing” has the meaning provided in Section 2.06(b).
 
“Notice of Continuation or Conversion” has the meaning provided in Section
2.10(b).
 
“Notice Office” means the office of the Administrative Agent at Key Tower, 127
Public Square, Cleveland, Ohio 44114, Attention: Chris Diorio (Telecopier No.
(216) 689-4814; Telephone No. (216) 689-8327); email:
Christina_Diorio@keybank.com, or such other office as the Administrative Agent
may designate in writing to the Borrower Representative from time to time.
 
“Obligations” means all amounts, indemnities and reimbursement obligations,
direct or indirect, contingent or absolute, of every type or description, and at
any time existing, owing by the Borrowers or any other Loan Party to the
Administrative Agent, any Lender or any LC Issuer pursuant to the terms of this
Agreement or any other Loan Document (including, but not limited to, interest
and fees that accrue after the commencement by or against any Loan Party of any
insolvency proceeding, regardless of whether allowed or allowable in such
proceeding or subject to an automatic stay under Section 362(a) of the
Bankruptcy Code).
 

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“Operating Lease” as applied to any Person means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is not accounted for as a Capital Lease on the balance sheet of that
Person.
 
“Organizational Documents” means, with respect to any Person (other than an
individual), such Person’s Articles (Certificate) of Incorporation, or
equivalent formation documents, and Regulations (Bylaws), or equivalent
governing documents, and, in the case of any partnership, includes any
partnership agreement and any amendments to any of the foregoing.
 
“Payment Office” means the office of the Administrative Agent at Key Tower, 127
Public Square, Cleveland, Ohio 44114, Attention: Chris Diorio (Telecopier No.
(216) 689-4814; Telephone No. (216) 689-8327); email:
Christina_Diorio@keybank.com, or such other office as the Administrative Agent
may designate in writing to the Borrower Representative from time to time.
 
“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to
Section 4002 of ERISA, or any successor thereto.
 
“Perfection Certificate” has the meaning provided in the Security Agreement.
 
“Permitted Acquisition” means any Acquisition as to which all of the following
conditions are satisfied:
 
(i)   such Acquisition involves a line or lines of business that is or are
complementary to the lines of business in which the Borrowers and their
Subsidiaries, considered as an entirety, are engaged on the Closing Date;
 
(ii)   the aggregate Consideration for such Acquisition shall not exceed
$5,000,000 and, when added together with the aggregate Consideration for all
other Permitted Acquisitions made since the Closing Date, shall not exceed
$5,000,000;
 
(iii)   no Default or Event of Default shall exist prior to or immediately after
giving effect to such Acquisition;
 
(iv)   the Borrowers would, after giving effect to such Acquisition, on a pro
forma basis (as determined in accordance with subpart (v) below), (A) have a
Leverage Ratio of less than 2.50 to 1.00 and (B) otherwise be in compliance with
the financial covenants contained in Section 7.07; and
 
(v)   at least five Business Days prior to the consummation of any such
Acquisition, the Borrower Representative shall have delivered to the
Administrative Agent and the Lenders (A) a certificate of an Authorized Officer
demonstrating, in reasonable detail, the computation of the financial covenants
referred to in Section 7.07 on a pro forma basis, such pro forma ratios being
determined as if (y) such Acquisition had been completed at the beginning of the
most recent Testing Period for which financial information for the Borrowers and
the business or Person to be acquired, is available, and (z) any such
Indebtedness, or other Indebtedness incurred to finance such Acquisition, had
been outstanding for such entire Testing Period, and (B) historical financial
statements relating to the business or Person to be acquired and such other
information as the Administrative Agent may reasonably request.
 
“Permitted Creditor Investment” means any securities (whether debt or equity)
received by the Borrowers or any of their Subsidiaries in connection with the
bankruptcy or reorganization of any
 

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customer or supplier of the Borrowers or any such Subsidiary and in settlement
of delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business.
 
“Permitted Foreign Subsidiary Loans and Investments” means (i) loans and
investments by a Loan Party to or in a Foreign Subsidiary made on or after the
Closing Date in the ordinary course of business, provided that the aggregate
amount of all Guaranty Obligations of the Loan Parties in respect of the
aggregate amount of Indebtedness of all Foreign Subsidiaries shall not be
increased beyond the amount in existence on the Closing Date; and (ii) loans to
a Foreign Subsidiary by any Person (other than a Borrower or any Subsidiary).
 
“Permitted Lien” means any Lien permitted by Section 7.03.
 
“Person” means any individual, partnership, joint venture, firm, corporation,
limited liability company, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
 
“Plan” means any Multi-Employer Plan or Single-Employer Plan.
 
“Preferred Stock Transaction” means the redemption and/or repurchase of ICO’s
Convertible Exchangeable Preferred Stock in one or more series of transactions.
 
“primary Indebtedness” has the meaning provided in the definition of “Guaranty
Obligations.”
 
“primary obligor” has the meaning provided in the definition of “Guaranty
Obligations.”
 
“Prohibited Transaction” means a transaction with respect to a Plan that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.
 
“Purchase Date” has the meaning provided in Section 2.04(c).
 
“Quarterly Payment Date” means the last Business Day of each September,
December, March and June of each year.
 
“RCRA” means the Resource Conservation and Recovery Act, as the same may be
amended from time to time, 42 U.S.C. § 6901 et seq.
 
“RE Holdings Entities” means, collectively, China RE Holdings and Bayshore RE
Holdings.
 
“Real Property” of any Person means all of the right, title and interest of such
Person in and to land, improvements and fixtures, including Leaseholds.
 
“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing reserve requirements.
 
“Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
 
“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the directors, officers, employees, agents and advisors of such Person and
of such Person’s Affiliates.
 

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“Rental Expense” means, for any period, the aggregate rent expense (both accrued
and paid but without duplication) of the Borrowers and their Subsidiaries for
such period (excluding any such rent expense included in the calculation of
Consolidated Interest Expense) under leases (other than Capital Leases) having a
maximum lease term (after giving effect to any option relating to the renewal or
extension thereof) in excess of one year, determined in accordance with GAAP.
 
“Reportable Event” means an event described in Section 4043 of ERISA or the
regulations thereunder with respect to a Plan, other than those events as to
which the notice requirement is waived under subsection .22, .23, .25, .27, .28,
.29, .30, .31, .32, .34, .35, .62, .63, .64, .65 or .67 of PBGC Regulation
Section 4043.
 
“Required Lenders” means, at any time when there are no more than two Lenders,
Lenders whose Credit Facility Exposure and Unused Revolving Commitments
constitute at least 66 2/3% of the sum of the Aggregate Credit Facility Exposure
and the Unused Total Revolving Commitment, and at any time when there are three
or more Lenders, Lenders whose Credit Facility Exposure and Unused Revolving
Commitments constitute at least 51% of the sum of the Aggregate Credit Facility
Exposure and the Unused Total Revolving Commitment.
 
“Restricted Payment” means (i) any Capital Distribution; or (ii) any amount paid
by the Borrower or any of its Subsidiaries in repayment, redemption, retirement,
repurchase, direct or indirect, of any Subordinated Indebtedness.
 
“Revolving Borrowing” means the incurrence of Revolving Loans consisting of one
Type of Revolving Loan by the Borrowers from all of the Lenders having Revolving
Commitments in respect thereof on a pro rata basis on a given date (or resulting
from Conversions or Continuations on a given date) in the same currency, having
in the case of any Eurodollar Loans the same Interest Period.
 
“Revolving Commitment” means, with respect to each Lender, the amount set forth
opposite such Lender’s name in Schedule 1 hereto as its “Revolving Commitment,”
or in the case of any Lender that becomes a party hereto pursuant to an
Assignment Agreement, the amount set forth in such Assignment Agreement, as such
commitment may be reduced from time to time pursuant to Section 2.12(b) or (c)
or adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 11.06.
 
“Revolving Facility” means the credit facility established under Section 2.02
pursuant to the Revolving Commitment of each Lender.
 
“Revolving Facility Availability Period” means the period from the Closing Date
until the Revolving Facility Termination Date.
 
“Revolving Facility Exposure” means, for any Lender at any time, the sum of (i)
the principal amount of Revolving Loans made by such Lender and outstanding at
such time, and (ii) such Lender’s share of the LC Outstandings at such time.
 
“Revolving Facility Note” means a promissory note substantially in the form of
Exhibit A-1 hereto.
 
“Revolving Facility Percentage” means, at any time for any Lender, the
percentage obtained by dividing such Lender’s Revolving Commitment by the Total
Revolving Commitment, provided, however, that if the Total Revolving Commitment
has been terminated, the Revolving Facility Percentage for each Lender shall be
determined by dividing such Lender’s Revolving Commitment immediately prior to
such
 

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termination by the Total Revolving Commitment immediately prior to such
termination. The Revolving Facility Percentage of each Lender as of the Closing
Date is set forth on Schedule 1 hereto.
 
“Revolving Facility Termination Date” means the earlier of (i) October 27, 2011,
or (ii) the date that the Commitments have been terminated pursuant to Section
8.02.
 
“Revolving Loan” means, with respect to each Lender, any loan made by such
Lender pursuant to Section 2.02.
 
“Sale and Lease-Back Transaction” means any arrangement with any Person
providing for the leasing by a Borrower or any Subsidiary of any property
(except for temporary leases for a term, including any renewal thereof, of not
more than one year and except for leases between Borrowers or between a Borrower
and a Subsidiary or between Subsidiaries), which property has been or is to be
sold or transferred by such Borrower or such Subsidiary to such Person.
 
“S&P” means Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc.,
and its successors.
 
“Scheduled Repayment” has the meaning provided in Section 2.13(b).
 
“SEC” means the United States Securities and Exchange Commission.
 
“SEC Regulation D” means Regulation D as promulgated under the Securities Act of
1933, as amended, as the same may be in effect from time to time.
 
“Secured Creditors” has the meaning provided in the Security Agreement.
 
“Security Agreement” has the meaning provided in Section 4.01(iv).
 
“Security Documents” means the Security Agreement, each Landlord’s Agreement,
each Additional Security Document, any UCC financing statement, any Control
Agreement, any Collateral Assignment, any Perfection Certificate and any
document pursuant to which any Lien is granted or perfected by any Loan Party to
the Administrative Agent as security for any of the Obligations.
 
“Single Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, to which a Borrower, any Subsidiary or any ERISA Affiliate
is making or accruing an obligation to make contributions or, in the event that
any such plan has been terminated, to which a Borrower, any Subsidiary or any
ERISA Affiliate made or accrued an obligation to make contributions during any
of the five plan years preceding the date of termination of such plan.
 
“Standard Permitted Lien” means any of the following: (i) Liens for taxes not
yet delinquent or Liens for taxes, assessments or governmental charges being
contested in good faith and by appropriate proceedings for which adequate
reserves in accordance with GAAP have been established; (ii) Liens in respect of
property or assets imposed by law that were incurred in the ordinary course of
business, such as carriers’, suppliers’, warehousemen’s, materialmen’s and
mechanics’ Liens and other similar Liens arising in the ordinary course of
business, that do not in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the operation of the
business of the Borrowers or any of their Subsidiaries and do not secure any
Indebtedness; (iii) Liens created by this Agreement or the other Loan Documents;
(iv) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 8.01(g); (v) Liens (other than
any Lien imposed by ERISA) incurred or deposits made in the ordinary course of
business in connection with
 

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workers compensation, unemployment insurance and other types of social security,
and mechanic’s Liens, carrier’s Liens, and other Liens to secure the performance
of tenders, statutory obligations, contract bids, government contracts, surety,
appeal, customs, performance and return-of-money bonds and other similar
obligations, incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money), whether pursuant to
statutory requirements, common law or consensual arrangements; (vi) leases or
subleases granted in the ordinary course of business to others not interfering
in any material respect with the business of the Borrowers or any of their
Subsidiaries and any interest or title of a lessor under any lease not in
violation of this Agreement; (vii) easements, rights-of-way, zoning or other
restrictions, charges, encumbrances, defects in title, prior rights of other
persons, and obligations contained in similar instruments, in each case that do
not secure Indebtedness and do not involve, and are not likely to involve at any
future time, either individually or in the aggregate, (A) a substantial and
prolonged interruption or disruption of the business activities of the Borrowers
and their Subsidiaries considered as an entirety, or (B) a Material Adverse
Effect; (viii) Liens arising from the rights of lessors under leases (including
financing statements regarding property subject to lease) not in violation of
the requirements of this Agreement, provided that such Liens are only in respect
of the property subject to, and secure only, the respective lease (and any other
lease with the same or an affiliated lessor); and (ix) rights of consignors of
goods, whether or not perfected by the filing of a financing statement under the
UCC.
 
“Standby Letter of Credit” means any standby letter of credit issued for the
purpose of supporting workers compensation, liability insurance, releases of
contract retention obligations, contract performance guarantee requirements and
other bonding obligations or for other lawful purposes.
 
“Stated Amount” of each Letter of Credit means the maximum amount available to
be drawn thereunder (regardless of whether any conditions or other requirements
for drawing could then be met).
 
“Subordinated” means, as applied to any Indebtedness, that the Indebtedness
shall have been subordinated (by written terms or written agreement being, in
either case, in form and substance reasonably satisfactory to the Administrative
Agent and the Required Lenders) in favor of the prior payment in full of the
Obligations.
 
“Subordinated Indebtedness” means any Indebtedness that has been subordinated to
the prior payment in full of all of the Obligations pursuant to a written
agreement or written terms reasonably acceptable to the Administrative Agent and
the Required Lenders.
 
“Subsidiary” of any Person means (i) any corporation more than 50% of whose
stock of any class or classes having by the terms thereof ordinary Voting Power
to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have Voting Power by reason of the happening of any
contingency) is at the time owned by such Person directly or indirectly through
Subsidiaries, and (ii) any partnership, limited liability company, association,
joint venture or other entity in which such Person directly or indirectly
through Subsidiaries, owns more than 50% of the Equity Interests of such Person
at the time or in which such Person, one or more other Subsidiaries of such
Person or such Person and one or more Subsidiaries of such Person, directly or
indirectly, has the power to direct the policies, management and affairs
thereof. Unless otherwise expressly provided, all references herein to
“Subsidiary” means a Subsidiary of the Borrower.
 
“Subsidiary Guarantor” means any Subsidiary that is or hereafter becomes a party
to the Subsidiary Guaranty. Schedule 2 hereto lists each Subsidiary Guarantor as
of the Closing Date.
 
“Subsidiary Guaranty” has the meaning provided in Section 4.01(iii).
 

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“Synthetic Lease” means any lease (i) that is accounted for by the lessee as an
Operating Lease, and (ii) under which the lessee is intended to be the “owner”
of the leased property for federal income tax purposes.
 
“Taxes” has the meaning provided in Section 3.03(a).
 
“Term Borrowing” means the incurrence of Term Loans consisting of one Type of
Term Loan by the Borrowers from all of the Lenders having Term Commitments in
respect thereof on a pro rata basis on a given date (or resulting from
Conversions or Continuations on a given date), having in the case of Eurodollar
Loans the same Interest Period.
 
“Term Commitment” means, with respect to each Lender, the amount, if any, set
forth opposite such Lender’s name in Schedule 1 hereto as its “Term Commitment.”
 
“Term Lender” means a Lender with a Term Commitment.
 
“Term Loan” means, with respect to each Lender that has a Term Commitment, any
loan made by such Lender pursuant to Section 2.03.
 
“Term Loan Commitment Period” means the period from and including the Closing
Date through and including the date that is 180 days after the Closing Date
 
“Term Loan Maturity Date” means October 27, 2011 or such earlier date on which
the Total Term Loan Commitment is terminated.
 
“Term Note” means a promissory note substantially in the form of Exhibit A-2
hereto.
 
“Testing Period” means a single period consisting of the four consecutive fiscal
quarters of the Borrowers then last ended (whether or not such quarters are all
within the same fiscal year), except that if a particular provision of this
Agreement indicates that a Testing Period shall be of a different specified
duration, such Testing Period shall consist of the particular fiscal quarter or
quarters then last ended that are so indicated in such provision.
 
“Title Company” has the meaning provided in Section 6.10(c).
 
“Title Policy” has the meaning provided in Section 6.10(d).
 
“Total Credit Facility Amount” means the aggregate of the Total Revolving
Commitment and the Total Term Loan Commitment. As of the Closing Date, the Total
Credit Facility Amount is $45,000,000.
 
“Total Revolving Commitment” means the sum of the Revolving Commitments of the
Lenders as the same may be decreased pursuant to Section 2.12(b) or (c) hereof.
As of the Closing Date, the amount of the Total Revolving Commitment is
$30,000,000.
 
“Total Term Loan Commitment” means the sum of the Term Commitments of the
Lenders. As of the Closing Date, the amount of the Total Term Loan Commitment is
$15,000,000.
 
“Type” means any type of Loan determined with respect to the interest option and
currency denomination applicable thereto, which in each case shall be a Base
Rate Loan or a Eurodollar Loan.
 
“UCC” means the Uniform Commercial Code as in effect from time to time. Unless
otherwise specified, the UCC shall refer to the UCC as in effect in the State of
New York.
 

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“Unfunded Benefit Liabilities” of any Plan means the amount, if any, of its
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.
 
“United States” and “U.S.” each means United States of America.
 
“Unpaid Drawing” means, with respect to any Letter of Credit, the aggregate
amount of the draws made on such Letter of Credit that have not been reimbursed
by the Borrowers or the applicable LC Obligor or converted to a Revolving Loan
pursuant to Section 2.05(f)(i), and, in each case, all interest that accrues
thereon pursuant to this Agreement.
 
“Unused Revolving Commitment” means, for any Lender at any time, the excess of
(i) such Lender’s Revolving Commitment at such time over (ii) such Lender’s
Revolving Facility Exposure at such time.
 
“Unused Total Revolving Commitment” means, at any time, the excess of (i) the
Total Revolving Commitment at such time over (ii) the Aggregate Revolving
Facility Exposure at such time.
 
“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act)
Act of 2001.
 
“Varco Indemnification Claims” refers to the claims described in ICO’s Form 10K
for the fiscal year ended September 30, 2005 in Part I, Item 3 thereof under the
subheading “Varco Indemnification Claims” and in ICO’s Form 10Q for the fiscal
quarter ended June 30, 2006 in Part II, Item 1 thereof.
 
“Voting Power” means, with respect to any Person, the exclusive ability to
control, through the ownership of shares of capital stock, partnership
interests, membership interests or otherwise, the election of members of the
board of directors or other similar governing body of such Person, and the
holding of a designated percentage of Voting Power of a Person means the
ownership of shares of capital stock, partnership interests, membership
interests or other interests of such Person sufficient to control exclusively
the election of that percentage of the members of the board of directors or
similar governing body of such Person.
 
Section 1.02     Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including,” the words “to” and “until” each
means “to but excluding” and the word “through” means “through and including.”
 
Section 1.03     Accounting Terms. Except as otherwise specifically provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time, provided that if the
Borrower Representative notifies the Administrative Agent and the Lenders that
the Borrowers wish to amend any covenant in Article VII to eliminate the effect
of any change in GAAP that occurs after the Closing Date on the operation of
such covenant (or if the Administrative Agent notifies the Borrower
Representative that the Required Lenders wish to amend Article VII for such
purpose), then the Borrowers’ compliance with such covenant shall be determined
on the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Borrowers, the Administrative Agent and
the Required Lenders, the Borrowers, the Administrative Agent and the Lenders
agreeing to enter into negotiations to amend any such covenant immediately upon
receipt from any party entitled to send such notice.
 

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Section 1.04     Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include,” “includes” and “including” shall
be deemed to be followed by the phrase “without limitation.” The word “will”
shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
restated, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth herein), (b) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Sections, Schedules and Exhibits shall be construed to refer to Sections of,
and Schedules and Exhibits to, this Agreement, (e) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all Real Property, tangible and intangible assets and properties,
including cash, securities, accounts and contract rights, and interests in any
of the foregoing, and (f) any reference to a statute, rule or regulation is to
that statute, rule or regulation as now enacted or as the same may from time to
time be amended, re-enacted or expressly replaced.
 
Section 1.05     Borrower Representative. For purposes of this Agreement, each
of Bayshore and ICO Polymers (i) authorizes ICO to make such requests, give such
notices or furnish such certificates to the Administrative Agent or any Lender
as may be required or permitted by this Agreement for the benefit of the
Borrowers and (ii) authorizes the Administrative Agent to treat such requests,
notices, certificates or consents given or made by ICO to have been made, given
or furnished by the Borrowers for purposes of this Agreement. The Administrative
Agent and each Lender shall be entitled to rely on each such request, notice,
certificate or consent made, given or furnished by the Borrower Representative
pursuant to the provisions of this Agreement or any other Loan Document as being
made or furnished on behalf of, and with the effect of irrevocably binding, such
Borrower. Each warranty, covenant, agreement and undertaking made on its behalf
by the Borrower Representative shall be deemed for all purposes to have been
made by each Borrower and shall be binding upon and enforceable against each
Borrower to the same extent as if the same had been made directly by each
Borrower.
 
 
ARTICLE II.
 
THE TERMS OF THE CREDIT FACILITY
 
Section 2.01     Establishment of the Credit Facility. On the Closing Date, and
subject to and upon the terms and conditions set forth in this Agreement and the
other Loan Documents, the Administrative Agent, the Lenders and each LC Issuer
agree to establish the Credit Facility for the benefit of the Borrower;
provided, however, that at no time will (i) the Aggregate Credit Facility
Exposure exceed the Total Credit Facility Amount, or (ii) the Credit Facility
Exposure of any Lender exceed the aggregate amount of such Lender’s Commitment.
 
Section 2.02     Revolving Facility. During the Revolving Facility Availability
Period, each Lender severally agrees, on the terms and conditions set forth in
this Agreement, to make a Revolving Loan or Revolving Loans to the Borrowers
from time to time pursuant to such Lender’s Revolving Commitment, which
Revolving Loans (i) may, except as set forth herein, at the option of the
Borrower Representative, be incurred and maintained as, or Converted into,
Revolving Loans that are Base Rate Loans or Eurodollar Loans, provided that all
Revolving Loans made as part of the same Revolving Borrowing shall consist of
Revolving Loans of the same Type; (ii) may be repaid or prepaid and reborrowed
in accordance with the provisions hereof; and (iii) shall not be made if, after
giving effect to
 

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any such Revolving Loan, (A) the Revolving Facility Exposure of any Lender would
exceed such Lender’s Revolving Commitment, or (B) the Borrowers would be
required to prepay Loans or cash collateralize Letters of Credit pursuant to
Section 2.13(c). The Revolving Loans to be made by each Lender will be made by
such Lender on a pro rata basis based upon such Lender’s Revolving Facility
Percentage of each Revolving Borrowing, in each case in accordance with Section
2.07 hereof.
 
Section 2.03    Term Loan. During the Term Loan Commitment Period, each Lender
that has a Term Commitment severally agrees, on the terms and conditions set
forth in this Agreement, to make a Term Loan to the Borrowers pursuant to such
Lender’s Term Commitment, which Term Loans: (i) can only be incurred in a single
Term Borrowing during the Term Loan Commitment Period in the entire amount of
each Lender’s Term Commitment; (ii) once prepaid or repaid, may not be
reborrowed, (iii) may, except as set forth herein, at the option of the Borrower
Representative, be incurred and maintained as, or Converted into, Term Loans
that are Base Rate Loans or Eurodollar Loans, in each case denominated in
Dollars, provided that all Term Loans made as part of the same Term Borrowing
shall consist of Term Loans of the same Type; (iv) shall be repaid in accordance
with Section 2.13(b); and (v) shall not exceed (A) for any Lender at the time of
incurrence thereof the aggregate principal amount of such Lender’s Term
Commitment, if any, and (B) for all the Lenders at the time of incurrence
thereof the Total Term Loan Commitment. The Term Loans to be made by each Lender
will be made by such Lender in the aggregate amount of its Term Commitment in
accordance with Section 2.07 hereof. The Term Commitments shall automatically
terminate on the earlier to occur of (x) the date of the initial Term Borrowing
and (y) the last day of the Term Loan Commitment Period.
 
Section 2.04     [Reserved].
 
Section 2.05    Letters of Credit.
 
(a)   LC Issuances. During the Revolving Facility Availability Period, the
Borrower Representative may request an LC Issuer at any time and from time to
time to issue, for the account of any Borrower or any Subsidiary Guarantor, and
subject to and upon the terms and conditions herein set forth, each LC Issuer
agrees to issue from time to time Letters of Credit denominated and payable in
Dollars and in each case in such form as may be approved by such LC Issuer and
the Administrative Agent; provided, however, that notwithstanding the
foregoing, no LC Issuance shall be made if, after giving effect thereto, (i) the
LC Outstandings would exceed the LC Commitment Amount, (ii) the Revolving
Facility Exposure of any Lender would exceed such Lender’s Revolving Commitment,
or (iii) the Borrowers would be required to prepay Loans or cash collateralize
Letters of Credit pursuant to Section 2.13(c) hereof. Subject to Section 2.05(c)
below, each Letter of Credit shall have an expiry date (including any renewal
periods) occurring not later than the earlier of (y) one year from the date of
issuance thereof, or (z) 30 Business Days prior to the Revolving Facility
Termination Date.
 
(b)   LC Requests. Whenever the Borrowers desire that a Letter of Credit be
issued for its account or the account of any eligible LC Obligor, the Borrower
Representative shall give the Administrative Agent and the applicable LC Issuer
written or telephonic notice (in the case of telephonic notice, promptly
confirmed in writing if so requested by the Administrative Agent) which, if in
the form of written notice, shall be substantially in the form of Exhibit B-3
(each such request, a “LC Request”), or transmit by electronic communication (if
arrangements for doing so have been approved by the applicable LC Issuer), prior
to 11:00 A.M. (local time at the Notice Office) at least three Business Days (or
such shorter period as may be acceptable to the relevant LC Issuer) prior to the
proposed date of issuance (which shall be a Business Day), which LC Request
shall include such supporting documents that such LC Issuer customarily requires
in connection therewith (including, in the case of a Letter of Credit for an
account party other than a Borrower, an application for, and if applicable a
reimbursement agreement with respect to, such Letter of Credit). In the event of
any inconsistency between any of the terms or
 

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provisions of any LC Document and the terms and provisions of this Agreement
respecting Letters of Credit, the terms and provisions of this Agreement shall
control.
 
(c)   Auto-Renewal Letters of Credit. If an LC Obligor so requests in any
applicable LC Request, each LC Issuer shall agree to issue a Letter of Credit
that has automatic renewal provisions; provided, however, that any Letter of
Credit that has automatic renewal provisions must permit such LC Issuer to
prevent any such renewal at least once in each twelve-month period (commencing
with the date of issuance of such Letter of Credit) by giving prior notice to
the beneficiary thereof not later than a day in each such twelve-month period to
be agreed upon at the time such Letter of Credit is issued. Once any such Letter
of Credit that has automatic renewal provisions has been issued, the Lenders
shall be deemed to have authorized (but may not require) such LC Issuer to
permit the renewal of such Letter of Credit at any time to an expiry date not
later than 30 Business Days prior to the Revolving Facility Termination Date;
provided, however, that such LC Issuer shall not permit any such renewal if (i)
such LC Issuer has determined that it would have no obligation at such time to
issue such Letter of Credit in its renewed form under the terms hereof, or (ii)
it has received notice (which may be by telephone or in writing) on or before
the day that is two Business Days before the date that such LC Issuer is
permitted to send a notice of non-renewal from the Administrative Agent, any
Lender or the Borrower Representative that one or more of the applicable
conditions specified in Section 4.02 is not then satisfied.
 
(d)   Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the
applicable LC Issuer and the applicable LC Obligor, when a Letter of Credit is
issued, (i) the rules of the “International Standby Practices 1998” published by
the Institute of International Banking Law & Practice (or such later version
thereof as may be in effect at the time of issuance) shall apply to each Standby
Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for
Documentary Credits, as most recently published by the International Chamber of
Commerce at the time of issuance (including the International Chamber of
Commerce’s decision published by the Commission on Banking Technique and
Practice on April 6, 1998 regarding the European single currency (euro)) shall
apply to each Commercial Letter of Credit.
 
(e)   Notice of LC Issuance. Each LC Issuer shall, on the date of each LC
Issuance by it, give the Administrative Agent, each applicable Lender and the
Borrower Representative written notice of such LC Issuance, accompanied by a
copy to the Administrative Agent of the Letter of Credit or Letters of Credit
issued by it. Each LC Issuer shall provide to the Administrative Agent a
quarterly (or monthly if requested by any applicable Lender) summary describing
each Letter of Credit issued by such LC Issuer and then outstanding and an
identification for the relevant period of the daily aggregate LC Outstandings
represented by Letters of Credit issued by such LC Issuer.
 
(f)   Reimbursement Obligations.
 
(i)   The Borrowers hereby agree to reimburse (or cause any LC Obligor for whose
account a Letter of Credit was issued to reimburse) each LC Issuer, by making
payment directly to such LC Issuer in immediately available funds at the payment
office of such LC Issuer, for any Unpaid Drawing with respect to any Letter of
Credit immediately after, and in any event on the date on which, such LC Issuer
notifies the Borrower Representative (or any such other LC Obligor for whose
account such Letter of Credit was issued) of such payment or disbursement (which
notice to the Borrower Representative (or such other LC Obligor) shall be
delivered reasonably promptly after any such payment or disbursement), such
payment to be made in Dollars, with interest on the amount so paid or disbursed
by such LC Issuer, to the extent not reimbursed prior to 1:00 P.M. (local time
at the payment office of the applicable LC Issuer) on the date of such payment
or disbursement, from and including the date paid or disbursed to but not
including the date such LC Issuer is reimbursed therefor at a rate per annum
that shall be the
 

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rate then applicable to Revolving Loans pursuant to Section 2.09(a)(i) that are
Base Rate Loans or, if not reimbursed on the date of such payment or
disbursement, at the Default Rate, any such interest also to be payable on
demand. If by 11:00 A.M. on the Business Day immediately following notice to it
of its obligation to make reimbursement in respect of an Unpaid Drawing, the
Borrower Representative or the relevant LC Obligor has not made such
reimbursement out of its available cash on hand or, in the case of a Borrower, a
contemporaneous Borrowing hereunder (if such Borrowing is otherwise available to
the Borrowers), (x) the Borrower Representative will in each case be deemed to
have given a Notice of Borrowing for Revolving Loans that are Base Rate Loans in
an aggregate principal amount sufficient to reimburse such Unpaid Drawing (and
the Administrative Agent shall promptly give notice to the Lenders of such
deemed Notice of Borrowing), (y) the Lenders shall, unless they are legally
prohibited from doing so, make the Revolving Loans contemplated by such deemed
Notice of Borrowing (which Revolving Loans shall be considered made under
Section 2.02), and (z) the proceeds of such Revolving Loans shall be disbursed
directly to the applicable LC Issuer to the extent necessary to effect such
reimbursement and repayment of the Unpaid Drawing, with any excess proceeds to
be made available to the Borrowers in accordance with the applicable provisions
of this Agreement.
 
(ii)   Obligations Absolute. Each LC Obligor’s obligation under this Section to
reimburse each LC Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
that such LC Obligor may have or have had against such LC Issuer, the
Administrative Agent or any Lender, including, without limitation, any defense
based upon the failure of any drawing under a Letter of Credit to conform to the
terms of the Letter of Credit or any non-application or misapplication by the
beneficiary of the proceeds of such drawing; provided, however, that no LC
Obligor shall be obligated to reimburse an LC Issuer for any wrongful payment
made by such LC Issuer under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such LC
Issuer.
 
(g)   LC Participations.
 
(i)   Immediately upon each LC Issuance, the LC Issuer of such Letter of Credit
shall be deemed to have sold and transferred to each Lender with a Revolving
Commitment, and each such Lender (each an “LC Participant”) shall be deemed
irrevocably and unconditionally to have purchased and received from such LC
Issuer, without recourse or warranty, an undivided interest and participation
(an “LC Participation”), to the extent of such Lender’s Revolving Facility
Percentage of the Stated Amount of such Letter of Credit in effect at such time
of issuance, in such Letter of Credit, each substitute Letter of Credit, each
drawing made thereunder, the obligations of any LC Obligor under this Agreement
with respect thereto (although LC Fees relating thereto shall be payable
directly to the Administrative Agent for the account of the Lenders as provided
in Section 2.11 and the LC Participants shall have no right to receive any
portion of any fees of the nature contemplated by Section 2.11(c) or Section
2.11(e)), the obligations of any LC Obligor under any LC Documents pertaining
thereto, and any security for, or guaranty pertaining to, any of the foregoing.
 
(ii)   In determining whether to pay under any Letter of Credit, an LC Issuer
shall not have any obligation relative to the LC Participants other than to
determine that any documents required to be delivered under such Letter of
Credit have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by an LC Issuer under or in connection with any Letter of Credit, if taken or
omitted
 

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in the absence of gross negligence or willful misconduct, shall not create for
such LC Issuer any resulting liability.
 
(iii)   If an LC Issuer makes any payment under any Letter of Credit and the
applicable LC Obligor shall not have reimbursed such amount in full to such LC
Issuer pursuant to Section 2.05(f), such LC Issuer shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each LC
Participant of such failure, and each LC Participant shall promptly and
unconditionally pay to the Administrative Agent for the account of such LC
Issuer, the amount of such LC Participant’s Revolving Facility Percentage of
such payment in Dollars and in same-day funds; provided, however, that no LC
Participant shall be obligated to pay to the Administrative Agent its Revolving
Facility Percentage of such unreimbursed amount for any wrongful payment made by
such LC Issuer under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such LC
Issuer. If the Administrative Agent so notifies any LC Participant required to
fund a payment under a Letter of Credit prior to 11:00 A.M. (local time at its
Notice Office) on any Business Day, such LC Participant shall make available to
the Administrative Agent for the account of the relevant LC Issuer such LC
Participant’s Revolving Facility Percentage of the amount of such payment on
such Business Day in same-day funds. If and to the extent such LC Participant
shall not have so made its Revolving Facility Percentage of the amount of such
payment available to the Administrative Agent for the account of the relevant LC
Issuer, such LC Participant agrees to pay to the Administrative Agent for the
account of such LC Issuer, forthwith on demand, such amount, together with
interest thereon, for each day from such date until the date such amount is paid
to the Administrative Agent for the account of such LC Issuer at the Federal
Funds Effective Rate. The failure of any LC Participant to make available to the
Administrative Agent for the account of the relevant LC Issuer its Revolving
Facility Percentage of any payment under any Letter of Credit shall not relieve
any other LC Participant of its obligation hereunder to make available to the
Administrative Agent for the account of such LC Issuer its Revolving Facility
Percentage of any payment under any Letter of Credit on the date required, as
specified above, but no LC Participant shall be responsible for the failure of
any other LC Participant to make available to the Administrative Agent for the
account of such LC Issuer such other LC Participant’s Revolving Facility
Percentage of any such payment.
 
(iv)   Whenever an LC Issuer receives a payment of a reimbursement obligation as
to which the Administrative Agent has received for the account of such LC Issuer
any payments from the LC Participants pursuant to subpart (iii) above, such LC
Issuer shall pay to the Administrative Agent and the Administrative Agent shall
promptly pay to each LC Participant that has paid its Revolving Facility
Percentage thereof, in same-day funds, an amount equal to such LC Participant’s
Revolving Facility Percentage of the principal amount thereof and interest
thereon accruing after the purchase of the respective LC Participations, as and
to the extent so received.
 
(v)   The obligations of the LC Participants to make payments to the
Administrative Agent for the account of each LC Issuer with respect to Letters
of Credit shall be irrevocable and not subject to counterclaim, set-off or other
defense or any other qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
 
(A)   any lack of validity or enforceability of this Agreement or any of the
other Loan Documents;
 

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(B)   the existence of any claim, set-off defense or other right that any LC
Obligor may have at any time against a beneficiary named in a Letter of Credit,
any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Administrative Agent, any LC Issuer, any Lender,
or other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the applicable LC Obligor and the
beneficiary named in any such Letter of Credit), other than any claim that the
applicable LC Obligor may have against any applicable LC Issuer for gross
negligence or willful misconduct of such LC Issuer in making payment under any
applicable Letter of Credit;
 
(C)   any draft, certificate or other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
 
(D)   the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents; or
 
(E)   the occurrence of any Default or Event of Default.
 
(vi)   To the extent any LC Issuer is not indemnified by the Borrowers or any LC
Obligor, the LC Participants will reimburse and indemnify such LC Issuer, in
proportion to their respective Revolving Facility Percentages, for and against
any and all liabilities, obligations, losses, damages, penalties, claims,
actions, judgments, costs, expenses or disbursements of whatsoever kind or
nature that may be imposed on, asserted against or incurred by such LC Issuer in
performing its respective duties in any way related to or arising out of LC
Issuances by it; provided, however, that no LC Participants shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements resulting from such
LC Issuer’s gross negligence or willful misconduct.
 
Section 2.06     Notice of Borrowing.
 
(a)   Time of Notice. Each Borrowing of a Loan (other than a Continuation or
Conversion) shall be made upon notice in the form provided for below which shall
be provided by the Borrower Representative to the Administrative Agent at its
Notice Office not later than (i) in the case of each Borrowing of a Eurodollar
Loan, 11:00 A.M. (local time at its Notice Office) at least three Business Days’
prior to the date of such Borrowing and (ii) in the case of each Borrowing of a
Base Rate Loan, prior to 11:00 A.M. (local time at its Notice Office) on the
proposed date of such Borrowing.
 
(b)   Notice of Borrowing. Each request for a Borrowing (other than a
Continuation or Conversion) shall be made by an Authorized Officer by delivering
written notice of such request substantially in the form of Exhibit B-1 hereto
(each such notice, a “Notice of Borrowing”) or by telephone (to be confirmed
immediately in writing by delivery by an Authorized Officer of a Notice of
Borrowing), and in any event each such request shall be irrevocable and shall
specify (i) the aggregate principal amount of the Loans to be made pursuant to
such Borrowing, (ii) the date of the Borrowing (which shall be a Business Day),
and (iii) the Type of Loans such Borrowing will consist of. Without in any way
limiting the obligation of the Borrower Representative to confirm in writing any
telephonic notice permitted to be given hereunder, the Administrative Agent may
act prior to receipt of written confirmation without liability upon the basis of
such telephonic notice believed by the Administrative Agent in good faith to be
from an Authorized Officer entitled to give telephonic notices under this
 

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Agreement on behalf of the Borrowers. In each such case, the Administrative
Agent’s record of the terms of such telephonic notice shall be conclusive absent
manifest error.
 
(c)   Minimum Borrowing Amount. The aggregate principal amount of each Borrowing
by the Borrowers shall not be less than the Minimum Borrowing Amount.
 
(d)   Maximum Borrowings. More than one Borrowing may be incurred by the
Borrowers on any day; provided, however, that (i) if there are two or more
Borrowings on a single day (other than with respect to a Term Borrowing made on
the Closing Date) by the Borrowers that consist of Eurodollar Loans, each such
Borrowing shall have a different initial Interest Period, and (ii) at no time
shall there be more than five Borrowings of Eurodollar Loans outstanding
hereunder.
 
Section 2.07     Funding Obligations; Disbursement of Funds. 
 
(a)   Several Nature of Funding Obligations. The Commitments of each Lender
hereunder and the obligation of each Lender to make Loans and fund LC
Participations, as the case may be, are several and not joint obligations. No
Lender shall be responsible for any default by any other Lender in its
obligation to make Loans or fund any participation hereunder and each Lender
shall be obligated to make the Loans provided to be made by it and fund its
participations required to be funded by it hereunder, regardless of the failure
of any other Lender to fulfill any of its Commitments hereunder. Nothing herein
and no subsequent termination of the Commitments pursuant to Section 2.12 shall
be deemed to relieve any Lender from its obligation to fulfill its commitments
hereunder and in existence from time to time or to prejudice any rights that the
Borrowers may have against any Lender as a result of any default by such Lender
hereunder.
 
(b)   Borrowings Pro Rata. All Loans hereunder shall be made as follows: (i) all
Revolving Loans made, and LC Participations acquired by each Lender, shall be
made or acquired, as the case may be, on a pro rata basis based upon each
Lender’s Revolving Facility Percentage of the amount of such Revolving Borrowing
or Letter of Credit in effect on the date the applicable Revolving Borrowing is
to be made or the Letter of Credit is to be issued, and (ii) all Term Loans
shall be made by the Lenders having Term Commitments pro rata on the basis of
their respective Term Commitments.
 
(c)   Notice to Lenders. The Administrative Agent shall promptly give each
Lender, as applicable, written notice (or telephonic notice promptly confirmed
in writing) of each proposed Borrowing, or Conversion or Continuation thereof,
and LC Issuance, and of such Lender’s proportionate share thereof or
participation therein and of the other matters covered by the Notice of
Borrowing, Notice of Continuation or Conversion, or LC Request, as the case may
be, relating thereto.
 
(d)   Funding of Loans. No later than 2:00 P.M. (local time at the Payment
Office) on the date specified in each Notice of Borrowing, each Lender will make
available its amount, if any, of each Borrowing requested to be made on such
date to the Administrative Agent at the Payment Office in Dollars and in
immediately available funds and the Administrative Agent promptly will make
available to the Borrowers by depositing to its account at the Payment Office
(or such other account as the Borrower Representative shall specify) the
aggregate of the amounts so made available in the type of funds received.
 
(e)   Advance Funding. Unless the Administrative Agent shall have been notified
by any Lender prior to the date of Borrowing that such Lender does not intend to
make available to the Administrative Agent its portion of the Borrowing or
Borrowings to be made on such date, the Administrative Agent may assume that
such Lender has made such amount available to the Administrative Agent on such
date of Borrowing, and the Administrative Agent, in reliance upon such
 

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assumption, may (in its sole discretion and without any obligation to do so)
make available to the Borrowers a corresponding amount. If such corresponding
amount is not in fact made available to the Administrative Agent by such Lender
and the Administrative Agent has made the same available to the Borrowers, the
Administrative Agent shall be entitled to recover such corresponding amount from
such Lender. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent’s demand therefor, the Administrative Agent shall
promptly notify the Borrower Representative, and the Borrowers shall immediately
pay such corresponding amount to the Administrative Agent. The Administrative
Agent shall also be entitled to recover from such Lender or the Borrowers, as
the case may be, interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the Administrative
Agent to the Borrowers to the date such corresponding amount is recovered by the
Administrative Agent at a rate per annum equal to (i) if paid by such Lender,
the overnight Federal Funds Effective Rate or (ii) if paid by the Borrowers, the
then applicable rate of interest, calculated in accordance with Section 2.09,
for the respective Loans (but without any requirement to pay any amounts in
respect thereof pursuant to Section 3.02).
 
Section 2.08     Evidence of Obligations.
 
(a)   Loan Accounts of Lenders. Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the Obligations of the
Borrowers to such Lender resulting from each Loan made by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
 
(b)  Loan Accounts of Administrative Agent; Lender Register. The Administrative
Agent shall maintain accounts in which it shall record (i) the amount of each
Loan and Borrowing made hereunder, the Type thereof, the currency in which such
Loan is denominated, the Interest Period and applicable interest rate, (ii) the
amount and other details with respect to each Letter of Credit issued hereunder,
(iii) the amount of any principal due and payable or to become due and payable
from the Borrowers to each Lender hereunder, (iv) the amount of any sum received
by the Administrative Agent hereunder for the account of the Lenders and each
Lender’s share thereof, and (v) the other details relating to the Loans, Letters
of Credit and other Obligations. In addition, the Administrative Agent shall
maintain a register (the “Lender Register”) on or in which it will record the
names and addresses of the Lenders, and the Commitments from time to time of
each of the Lenders. The Administrative Agent will make the Lender Register
available to any Lender or the Borrowers upon request.
 
(c)   Effect of Loan Accounts, etc. The entries made in the accounts maintained
pursuant to Section 2.08(b) shall be prima facie evidence of the existence and
amounts of the Obligations recorded therein; provided, that the failure of the
Administrative Agent to maintain such accounts or any error (other than manifest
error) therein shall not in any manner affect the obligation of any Loan Party
to repay or prepay the Loans or the other Obligations in accordance with the
terms of this Agreement.
 
(d)   Notes. Upon request of any Lender, the Borrowers will execute and deliver
to such Lender (i) a Revolving Facility Note with blanks appropriately completed
in conformity herewith to evidence the Borrowers’ obligation to pay the
principal of, and interest on, the Revolving Loans made to it by such Lender and
(ii) a Term Note with blanks appropriately completed in conformity herewith to
evidence their obligation to pay the principal of, and interest on, the Term
Loan made to it by such Lender.
 
Section 2.09     Interest; Default Rate.
 
(a)   Interest on Revolving Loans. The outstanding principal amount of each
Revolving Loan made by each Lender shall bear interest at a fluctuating rate per
annum that shall at all times be equal to
 

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(i)   during such periods as such Revolving Loan is a Base Rate Loan, the Base
Rate plus the Applicable Margin in effect from time to time, and (ii) during
such periods as such Revolving Loan is a Eurodollar Loan, the relevant Adjusted
Eurodollar Rate for such Eurodollar Loan for the applicable Interest Period plus
the Applicable Margin in effect from time to time.
 
(b)   Interest on Term Loans. The outstanding principal amount of each Term Loan
made by each Lender shall bear interest at a fluctuating rate per annum that
shall at all times be equal to (i) during such periods as such Term Loan is a
Base Rate Loan, the Base Rate plus the Applicable Margin in effect from time to
time, and (ii) during such periods as such Term Loan is a Eurodollar Loan, the
relevant Adjusted Eurodollar Rate for such Eurodollar Loan for the applicable
Interest Period plus the Applicable Margin in effect from time to time.
 
(c)   Default Interest. Notwithstanding the above provisions, if an Event of
Default is in existence, upon written notice by the Administrative Agent (which
notice the Administrative Agent shall give at the direction of the Required
Lenders), (i) all outstanding amounts of principal and, to the extent permitted
by law, all overdue interest, in respect of each Loan shall bear interest,
payable on demand, at a rate per annum equal to the Default Rate, and (ii) the
LC Fees shall be increased by an additional 2% per annum in excess of the LC
Fees otherwise applicable thereto. In addition, if any amount (other than
amounts as to which the foregoing subparts (i) and (ii) are applicable) payable
by the Borrowers under the Loan Documents is not paid when due, upon written
notice by the Administrative Agent (which notice the Administrative Agent shall
give at the direction of the Required Lenders), such amount shall bear interest,
payable on demand, at a rate per annum equal to the Default Rate.
 
(d)   Accrual and Payment of Interest. Interest shall accrue from and including
the date of any Borrowing to but excluding the date of any prepayment or
repayment thereof and shall be payable by the Borrowers: (i) in respect of each
Base Rate Loan, quarterly in arrears on the last Business Day of each March,
June, September and December, (ii) in respect of each Eurodollar Loan, on the
last day of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on the dates that are successively
three months after the commencement of such Interest Period, and (iii) in
respect of all Loans, other than Revolving Loans accruing interest at a Base
Rate, on any repayment, prepayment or Conversion (on the amount repaid, prepaid
or Converted), at maturity (whether by acceleration or otherwise), and, after
such maturity or, in the case of any interest payable pursuant to Section
2.09(c), on demand.
 
(e)   Computations of Interest. All computations of interest on Eurodollar Loans
hereunder shall be made on the actual number of days elapsed over a year of 360
days. All computations of interest on Base Rate Loans and Unpaid Drawings
hereunder shall be made on the actual number of days elapsed over a year of 365
or 366 days, as applicable.
 
(f)   Information as to Interest Rates. The Administrative Agent, upon
determining the interest rate for any Borrowing, shall promptly notify the
Borrower Representative and the Lenders thereof. Any changes in the Applicable
Margin shall be determined by the Administrative Agent in accordance with the
provisions set forth in the definition of “Applicable Margin” and the
Administrative Agent will promptly provide notice of such determinations to the
Borrower Representative and the Lenders. Any such determination by the
Administrative Agent shall be conclusive and binding absent manifest error.
 
Section 2.10     Conversion and Continuation of Loans.
 
(a)   Conversion and Continuation of Revolving Loans. The Borrowers shall have
the right, subject to the terms and conditions of this Agreement, to (i) Convert
all or a portion of the outstanding
 

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principal amount of Loans of one Type made to it into a Borrowing or Borrowings
of another Type of Loans that can be made to it pursuant to this Agreement and
(ii) Continue a Borrowing of Eurodollar Loans at the end of the applicable
Interest Period as a new Borrowing of Eurodollar Loans with a new Interest
Period; provided, however, that any Conversion of Eurodollar Loans into Base
Rate Loans shall be made on, and only on, the last day of an Interest Period for
such Eurodollar Loans.
 
(b)   Notice of Continuation and Conversion. Each Continuation or Conversion of
a Loan shall be made upon notice in the form provided for below provided by the
Borrower Representative to the Administrative Agent at its Notice Office not
later than (i) in the case of each Continuation of or Conversion into a
Eurodollar Loan, prior to 11:00 A.M. (local time at its Notice Office) at least
three Business Days’ prior to the date of such Continuation or Conversion, and
(ii) in the case of each Conversion to a Base Rate Loan, prior to 11:00 A.M.
(local time at its Notice Office) on the proposed date of such Conversion. Each
such request shall be made by an Authorized Officer delivering written notice of
such request substantially in the form of Exhibit B-2 hereto (each such notice,
a “Notice of Continuation or Conversion”) or by telephone (to be confirmed
immediately in writing by delivery by an Authorized Officer of a Notice of
Continuation or Conversion), and in any event each such request shall be
irrevocable and shall specify (A) the Borrowings to be Continued or Converted,
(B) the date of the Continuation or Conversion (which shall be a Business Day),
and (C) the Interest Period or, in the case of a Continuation, the new Interest
Period. Without in any way limiting the obligation of the Borrowers to confirm
in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer entitled to
give telephonic notices under this Agreement on behalf of the Borrower. In each
such case, the Administrative Agent’s record of the terms of such telephonic
notice shall be conclusive absent manifest error.
 
Section 2.11     Fees.
 
(a)   Closing Fees. The Borrowers agree to pay to the Administrative Agent, for
the ratable benefit of each Lender, the closing fees set forth in the Closing
Fee Letter.
 
(b)   Commitment Fees.
 
(i)   The Borrowers agree to pay to the Administrative Agent, for the ratable
benefit of each Lender based upon each such Lender’s Revolving Facility
Percentage, as consideration for the Revolving Commitments of the Lenders,
commitment fees (the “Commitment Fees”) for the period from the Closing Date to,
but not including, the Revolving Facility Termination Date, computed for each
day at a rate per annum equal to (i) 37.5 basis points times (ii) the Unused
Total Revolving Commitment in effect on such day. Accrued Commitment Fees shall
be due and payable in arrears on the last Business Day of each March, June,
September and December and on the Revolving Facility Termination Date.
 
(ii)   The Borrowers agree to pay to the Administrative Agent, for the ratable
benefit of each Lender based upon each such Lender’s Term Commitment, as
consideration for the Term Commitments of the Lenders, commitment fees (the
“Term Commitment Fees”) for the period from the Closing Date to, but not
including, the last day the Term Loan Commitment Period, computed for each day
at a rate per annum equal to (i) 37.5 basis points times (ii) the Total Term
Loan Commitment in effect on such day. Accrued Term Commitment Fees shall be due
and payable in arrears on the last Business Day of each fiscal quarter and on
the last day of the Term Loan Commitment Period.
 

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(c)   LC Fees.
 
(i)   Standby Letters of Credit. The Borrowers agree to pay to the
Administrative Agent, for the ratable benefit of each Lender with a Revolving
Commitment based upon each such Lender’s Revolving Facility Percentage, a fee in
respect of each Letter of Credit issued hereunder that is a Standby Letter of
Credit for the period from the date of issuance of such Letter of Credit until
the expiration date thereof (including any extensions of such expiration date
that may be made at the election of the account party or the beneficiary),
computed for each day at a rate per annum equal to (A) the Applicable Margin for
Revolving Loans that are Eurodollar Loans in effect on such day times (B) the
Stated Amount of such Letter of Credit on such day. The foregoing fees shall be
payable quarterly in arrears on the last Business Day of each March, June,
September and December and on the Revolving Facility Termination Date.
 
(ii)   Commercial Letters of Credit. The Borrowers agree to pay to the
Administrative Agent for the ratable benefit of each Lender based upon each such
Lender’s Revolving Facility Percentage, a fee in respect of each Letter of
Credit issued hereunder that is a Commercial Letter of Credit in an amount equal
to (A) the Applicable Margin for Revolving Loans that are Eurodollar Loans in
effect on the date of issuance times (B) the Stated Amount of such Letter of
Credit. The foregoing fees shall be payable on the date of issuance of such
Letter of Credit.
 
(d)   Fronting Fees. The Borrowers agree to pay directly to each LC Issuer, for
its own account, a fee in respect of each Letter of Credit issued by it, payable
on the date of issuance (or any increase in the amount, or renewal or extension)
thereof, computed at the rate of 1/8th of 1% per annum on the Stated Amount
thereof for the period from the date of issuance (or increase, renewal or
extension) to the expiration date thereof (including any extensions of such
expiration date which may be made at the election of the beneficiary thereof).
 
(e)    Additional Charges of LC Issuer. The Borrowers agree to pay directly to
each LC Issuer upon each LC Issuance, drawing under, or amendment, extension,
renewal or transfer of, a Letter of Credit issued by it such amount as shall at
the time of such LC Issuance, drawing under, amendment, extension, renewal or
transfer be the processing charge that such LC Issuer is customarily charging
for issuances of, drawings under or amendments, extensions, renewals or
transfers of, letters of credit issued by it.
 
(f)     Administrative Agent Fees. The Borrowers shall pay to the Administrative
Agent, on the Closing Date and thereafter, for its own account, the fees set
forth in the Confidential Fee Letter.
 
(g)    Computations of Fees. All computations of Commitment Fees, LC Fees and
other Fees hereunder shall be made on the actual number of days elapsed over a
year of 360 days.
 
Section 2.12     Termination and Reduction of Revolving Commitments.
 
(a)   Mandatory Termination of Revolving Commitments. All of the Revolving
Commitments shall terminate on the Revolving Facility Termination Date.
 
(b)   Voluntary Termination of the Total Revolving Commitment. Upon at least
three Business Days’ prior irrevocable written notice (or telephonic notice
confirmed in writing) to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Lenders),
the Borrowers shall have the right to terminate in whole the Total Revolving
Commitment, provided that (i) all outstanding Revolving Loans and Unpaid
Drawings are contemporaneously prepaid in accordance with Section 2.13 and (ii)
either there are no outstanding
 

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Letters of Credit or the Borrowers shall contemporaneously cause all outstanding
Letters of Credit to be surrendered for cancellation (any such Letters of Credit
to be replaced by letters of credit issued by other financial institutions
reasonably acceptable to each LC Issuer and the Revolving Lenders).
 
(c)   Partial Reduction of Total Revolving Commitment. Upon at least three
Business Days’ prior irrevocable written notice (or telephonic notice confirmed
in writing) to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Lenders), the
Borrowers shall have the right to partially and permanently reduce the Unused
Total Revolving Commitment; provided, however, that (i) any such reduction shall
apply to proportionately (based on each Lender’s Revolving Facility Percentage)
and permanently reduce the Revolving Commitment of each Lender, (ii) such
reduction shall apply to proportionately and permanently reduce the LC
Commitment Amount, but only to the extent that the Unused Total Revolving
Commitment would be reduced below any such limits, (iii) no such reduction shall
be permitted if the Borrowers would be required to make a mandatory prepayment
of Loans or cash collateralize Letters of Credit pursuant to Section 2.13, and
(iv) any partial reduction shall be in the amount of at least $5,000,000 (or, if
greater, in integral multiples of $1,000,000).
 
Section 2.13     Voluntary, Scheduled and Mandatory Prepayments of Loans.
 
(a)   Voluntary Prepayments. The Borrowers shall have the right to prepay any of
the Loans owing by it, in whole or in part, without premium or penalty, except
as specified in subparts (d) and (e) below, from time to time. The Borrower
Representative shall give the Administrative Agent at the Notice Office written
or telephonic notice (in the case of telephonic notice, promptly confirmed in
writing if so requested by the Administrative Agent) of its intent to prepay the
Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the
specific Borrowing(s) pursuant to which the prepayment is to be made, which
notice shall be received by the Administrative Agent by (y) 11:00 A.M. (local
time at the Notice Office) three Business Days prior to the date of such
prepayment, in the case of any prepayment of Eurodollar Loans, or (z) 11:00 A.M.
(local time at the Notice Office) one Business Day prior to the date of such
prepayment, in the case of any prepayment of Base Rate Loans, and which notice
shall promptly be transmitted by the Administrative Agent to each of the
affected Lenders, provided that:
 
(i)   each partial prepayment shall be in an aggregate principal amount of at
least (A) in the case of any prepayment of a Eurodollar Loan, $10,000,000 (or,
if less, the full amount of such Borrowing), or an integral multiple of
$1,000,000 in excess thereof, and (B) in the case of any prepayment of a Base
Rate Loan, $1,000,000 (or, if less, the full amount of such Borrowing, or an
integral multiple of $500,000 in excess thereof;
 
(ii)   no partial prepayment of any Loans made pursuant to a Borrowing shall
reduce the aggregate principal amount of such Loans outstanding pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto; and
 
(iii)   in the case of any prepayment of Term Loans, such prepayment shall be
applied to the Scheduled Repayments in respect of the Term Loans in the inverse
order of maturity.
 
(b)   Scheduled Repayments of Term Loans. Commencing on the first Quarterly
Payment Date after the expiration of the Term Loan Commitment Period and
continuing on each Quarterly Payment Date thereafter, the Borrowers shall make
principal payments of the Term Loans in an amount equal to $833,333 for each
such quarterly payment, except that the payment due on the Term Loan Maturity
Date shall in any event be in the amount of the entire remaining principal
amount of the outstanding Term Loans (each such repayment, a “Scheduled
Repayment”).
 

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(c)   Mandatory Payments. The Loans shall be subject to mandatory repayment or
prepayment (in the case of any partial prepayment conforming to the requirements
as to the amounts of partial prepayments set forth in Section 2.13(a) above),
and the LC Outstandings shall be subject to cash collateralization requirements,
in accordance with the following provisions:
 
(i)   Revolving Facility Termination Date. The entire principal amount of all
outstanding Revolving Loans shall be repaid in full on the Revolving Facility
Termination Date.
 
(ii)   Loans Exceed the Commitments. If on any date (after giving effect to any
other payments on such date) (A) the Aggregate Credit Facility Exposure exceeds
the Total Credit Facility Amount, or (B) the Revolving Facility Exposure of any
Lender exceeds such Lender’s Revolving Commitment, then, in the case of each of
the foregoing, the Borrowers shall, on such day, prepay on such date the
principal amount of Loans and, after Loans have been paid in full, Unpaid
Drawings, in an aggregate amount at least equal to such excess.
 
(iii)  LC Outstandings Exceed LC Commitment If on any date the LC Outstandings
exceed the LC Commitment Amount, then the applicable LC Obligor or the Borrowers
shall, on such day, pay to the Administrative Agent an amount in cash equal to
such excess and the Administrative Agent shall hold such payment as security for
the reimbursement obligations of the applicable LC Obligors hereunder in respect
of Letters of Credit pursuant to a cash collateral agreement to be entered into
in form and substance reasonably satisfactory to the Administrative Agent, each
LC Issuer and the Borrowers (which shall permit certain investments in Cash
Equivalents satisfactory to the Administrative Agent, each LC Issuer and the
Borrowers until the proceeds are applied to any Unpaid Drawings or to any other
Obligations in accordance with any such cash collateral agreement).
 
(d)   Particular Loans to be Prepaid. With respect to each repayment or
prepayment of Loans made or required by this Section, the Borrower
Representative shall designate the Types of Loans that are to be repaid or
prepaid and the specific Borrowing(s) pursuant to which such repayment or
prepayment is to be made; provided, however, that (i) the Borrower
Representative shall first so designate all Loans that are Base Rate Loans and
Eurodollar Loans with Interest Periods ending on the date of repayment or
prepayment prior to designating any other Eurodollar Loans for repayment or
prepayment, and (ii) if the outstanding principal amount of Eurodollar Loans
made pursuant to a Borrowing is reduced below the applicable Minimum Borrowing
Amount as a result of any such repayment or prepayment, then all the Loans
outstanding pursuant to such Borrowing shall, in the case of Eurodollar Loans,
be Converted into Base Rate Loans. In the absence of a designation by the
Borrower Representative as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in its
sole discretion with a view, but no obligation, to minimize breakage costs owing
under Article III.
 
(e)   Breakage and Other Compensation. Any prepayment made pursuant to this
Section 2.13 shall be accompanied by any amounts payable in respect thereof
under Article III hereof.
 
Section 2.14     Method and Place of Payment.
 
(a)   Generally. All payments made by the Borrowers hereunder (including any
payments made with respect to the Borrower Guaranteed Obligations under
Article X) under any Note or any other Loan Document, shall be made without
setoff, counterclaim or other defense.
 
(b)   Application of Payments. Except as specifically set forth elsewhere in
this Agreement and subject to Section 8.03, (i) all payments and prepayments of
Revolving Loans and Unpaid Drawings with respect to Letters of Credit shall be
applied by the Administrative Agent on a pro rata basis based
 

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upon each Lender’s Revolving Facility Percentage of the amount of such
prepayment, and (ii) all payments and prepayments of Term Loans shall be applied
by the Administrative Agent to reduce the principal amount of the Term Loans
made by each Lender with a Term Commitment, pro rata on the basis of their
respective Term Commitments.
 
(c)   Payment of Obligations. Except as specifically set forth elsewhere in this
Agreement, all payments under this Agreement with respect to any of the
Obligations shall be made to the Administrative Agent on the date when due and
shall be made at the Payment Office in immediately available funds and, except
as set forth in the next sentence, shall be made in Dollars.
 
(d)   Timing of Payments. Any payments under this Agreement that are made later
than 11:00 A.M. (local time at the Payment Office) shall be deemed to have been
made on the next succeeding Business Day. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such extension.
 
(e)   Distribution to Lenders. Upon the Administrative Agent’s receipt of
payments hereunder, the Administrative Agent shall promptly distribute to each
Lender or the applicable LC Issuer, as the case may be, its ratable share, if
any, of the amount of principal, interest, and Fees received by it for the
account of such Lender. Payments received by the Administrative Agent in Dollars
shall be delivered to the Lenders or the applicable LC Issuer, as the case may
be, in Dollars in immediately available funds; provided, however, that if at any
time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, Unpaid Drawings, interest and Fees
then due hereunder then, except as specifically set forth elsewhere in this
Agreement and subject to Section 8.03, such funds shall be applied, first,
towards payment of interest and Fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and Fees
then due to such parties, and second, towards payment of principal and Unpaid
Drawings then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and Unpaid Drawings then due to such
parties.
 
Section 2.15     Joint and Several Liability of the Borrowers.
 
(a)   Each request by the Borrower Representative for a Borrowing, Continuation
or Conversion of any Loan shall be deemed to be a joint and several request by
all of the Borrowers. Each Borrower acknowledges and agrees that the Lenders are
entering into this Agreement at the request of each Borrower and with the
understanding that each Borrower is and shall remain fully liable, jointly and
severally, for payment in full of all of the Obligations.
 
(b)   To the extent that a Borrower shall make a payment (each a “Borrower
Payment”) of all or any portion of the Obligations, then such Borrower shall be
entitled to contribution and indemnification from, and be reimbursed by, each of
the other Borrowers in an amount equal to a fraction of such Borrower Payment,
the numerator of which fraction is the sum of such other Borrowers’ Allocable
Amounts and the denominator of which is the sum of the Allocable Amounts of all
of the Borrowers.
 
(c)   This Section 2.15 is intended only to define the relative rights of the
Borrowers, and nothing set forth in this Section 2.15 is intended to or shall
impair the obligations of the Borrowers, jointly and severally, to pay any
amounts, as and when the same shall become due and payable in accordance with
the terms of this Agreement and the other Loan Documents.
 

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(d)   The Borrowers acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets in favor of each Borrower to
which such contribution and indemnification is owing.
 
(e)   Any right of contribution of any of the Borrowers shall be subject and
subordinate to the prior indefeasible payment in full of the Obligations.
 
 
ARTICLE III.
 
INCREASED COSTS, ILLEGALITY AND TAXES
 
Section 3.01     Increased Costs, Illegality, etc.
 
(a)   In the event that (y) in the case of clause (i) below, the Administrative
Agent or (z) in the case of clauses (ii) and (iii) below, any Lender, shall have
determined on a reasonable basis (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto):
 
(i)   on any date for determining the interest rate applicable to any Eurodollar
Loan for any Interest Period that, by reason of any changes arising after the
Closing Date, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in this Agreement for such
Eurodollar Loan; or
 
(ii)   at any time, that such Lender shall incur increased costs or reductions
in the amounts received or receivable by it hereunder in an amount that such
Lender deems material with respect to any Eurodollar Loans (other than any
increased cost or reduction in the amount received or receivable resulting from
the imposition of or a change in the rate of taxes or similar charges) because
of (x) any change since the Closing Date in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having the force
of law), or in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline, order
or request (such as, for example, but not limited to, a change in official
reserve requirements, but, in all events, excluding reserves already includable
in the interest rate applicable to such Eurodollar Loan pursuant to this
Agreement) or (y) other circumstances adversely affecting the London interbank
market or the position of such Lender in any such market; or
 
(iii)   at any time, that the making or continuance of any Eurodollar Loan has
become unlawful by compliance by such Lender in good faith with any change since
the Closing Date in any law, governmental rule, regulation, guideline or order,
or the interpretation or application thereof, or would conflict with any thereof
not having the force of law but with which such Lender customarily complies, or
has become impracticable as a result of a contingency occurring after the
Closing Date that materially adversely affects the London interbank market;
 
then, and in each such event, such Lender (or the Administrative Agent in the
case of clause (i) above) shall (1) on or promptly following such date or time
and (2) within 10 Business Days of the date on which such event no longer exists
give notice (by telephone confirmed in writing) to the Borrower Representative
and to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Lenders).
Thereafter (x) in the case of clause (i) above, the affected Type of Eurodollar
Loans shall no longer be available until such time as the Administrative Agent
notifies the Borrower Representative and the Lenders that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Continuation or Conversion given by the
Borrower Representative with respect to such Type of
 

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Eurodollar Loans that have not yet been incurred, Converted or Continued shall
be deemed rescinded by the Borrower Representative or, in the case of a Notice
of Borrowing, shall, at the option of the Borrower Representative, be deemed
converted into a Notice of Borrowing for Base Rate Loans to be made on the date
of Borrowing contained in such Notice of Borrowing, (y) in the case of clause
(ii) above, the Borrowers shall pay to such Lender, upon written demand
therefor, such additional amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender shall
determine) as shall be required to compensate such Lender for such increased
costs or reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Lender, showing the basis for the calculation
thereof, which basis must be reasonable, submitted to the Borrower
Representative by such Lender shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) and (z) in the case of clause
(iii) above, the Borrowers shall take one of the actions specified in Section
3.01(b) as promptly as possible and, in any event, within the time period
required by law.
 
(b)   At any time that any Eurodollar Loan is affected by the circumstances
described in Section 3.01(a)(ii) or (iii), the Borrower Representative may (and
in the case of a Eurodollar Loan affected pursuant to Section 3.01(a)(iii) the
Borrower Representative shall) either (i) if the affected Eurodollar Loan is
then being made pursuant to a Borrowing, by giving the Administrative Agent
telephonic notice (confirmed promptly in writing) thereof on the same date that
the Borrower Representative was notified by a Lender pursuant to Section
3.01(a)(ii) or (iii), cancel said Borrowing, or convert the related Notice of
Borrowing into one requesting a Borrowing of Base Rate Loans or require the
affected Lender to make its requested Loan as a Base Rate Loan, or (ii) if the
affected Eurodollar Loan is then outstanding, upon at least one Business Day’s
notice to the Administrative Agent, require the affected Lender to Convert each
such Eurodollar Loan into a Base Rate Loan; provided, however, that if more than
one Lender is affected at any time, then all affected Lenders must be treated
the same pursuant to this Section 3.01(b).
 
(c)   If any Lender shall have determined that after the Closing Date, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
by law with the interpretation or administration thereof, or compliance by such
Lender or its parent corporation with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank, or comparable agency, in each case made subsequent to the Closing Date,
has or would have the effect of reducing by an amount reasonably deemed by such
Lender to be material to the rate of return on such Lender’s or its parent
corporation’s capital or assets as a consequence of such Lender’s commitments or
obligations hereunder to a level below that which such Lender or its parent
corporation could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Lender’s or its parent corporation’s
policies with respect to capital adequacy), then from time to time, within 15
days after demand by such Lender (with a copy to the Administrative Agent), the
Borrowers shall pay to such Lender such additional amount or amounts as will
compensate such Lender or its parent corporation for such reduction. Each
Lender, upon determining in good faith that any additional amounts will be
payable pursuant to this Section 3.01(c), will give prompt written notice
thereof to the Borrower Representative, which notice shall set forth, in
reasonable detail, the basis of the calculation of such additional amounts,
which basis must be reasonable, although the failure to give any such notice
shall not release or diminish any of the Borrowers’ obligations to pay
additional amounts pursuant to this Section 3.01(c) upon the subsequent receipt
of such notice.
 
Section 3.02     Breakage Compensation. The Borrowers shall compensate each
Lender, upon its written request (which request shall set forth the detailed
basis for requesting and the method of calculating such compensation), for all
reasonable losses, costs, expenses and liabilities (including, without
limitation, any loss, cost, expense or liability incurred by reason of the
liquidation or
 

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reemployment of deposits or other funds required by such Lender to fund its
Eurodollar Loans and costs associated with foreign currency hedging obligations
incurred by such Lender in connection with any Eurodollar Loan) which such
Lender may sustain in connection with any of the following: (i) if for any
reason (other than a default by such Lender or the Administrative Agent) a
Borrowing of Eurodollar Loans does not occur on a date specified therefor in a
Notice of Borrowing or a Notice of Continuation or Conversion (whether or not
withdrawn by the Borrower Representative or deemed withdrawn pursuant to Section
3.01(a)); (ii) if any repayment, prepayment, Conversion or Continuation of any
Eurodollar Loan occurs on a date that is not the last day of an Interest Period
applicable thereto; (iii) if any prepayment of any of its Eurodollar Loans is
not made on any date specified in a notice of prepayment given by the Borrower;
(iv) as a result of an assignment by a Lender of any Eurodollar Loan other than
on the last day of the Interest Period applicable thereto pursuant to a request
by the Borrower Representative pursuant to Section 3.05(b); or (v) as a
consequence of (y) any other default by the Borrowers to repay or prepay any
Eurodollar Loans when required by the terms of this Agreement or (z) an election
made pursuant to Section 3.05(b). The written request of any Lender setting
forth any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the Borrower Representative and shall be
conclusive absent manifest error. The Borrowers shall pay such Lender the amount
shown as due on any such request within 10 days after receipt thereof.
 
Section 3.03     Net Payments.
 
(a)   Except as provided for in Section 3.03(b), all payments made by the
Borrowers hereunder, under any Note or any other Loan Document, including all
payments made by the Borrowers pursuant to its guaranty obligations under
Article X, will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding, except as provided in this Section 3.03(a), any
tax imposed on or measured by the net income or net profits of a Lender and
franchise taxes imposed on it pursuant to the laws of the jurisdiction under
which such Lender is organized or the jurisdiction in which the principal office
or Applicable Lending Office of such Lender, as applicable, is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such non-excluded taxes, levies imposts, duties,
fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as “Taxes”). If any Taxes are so levied or imposed, the Borrowers
agree to pay the full amount of such Taxes and such additional amounts
(including additional amounts to compensate for withholding on amounts paid
pursuant to this Section 3.03) as may be necessary so that every payment by it
of all amounts due hereunder, under any Note or under any other Loan Document,
after withholding or deduction for or on account of any Taxes will not be less
than the amount provided for herein or in such Note or in such other Loan
Document. The Borrowers will indemnify and hold harmless the Administrative
Agent and each Lender, and reimburse the Administrative Agent or such Lender
upon its written request, for the amount of any Taxes imposed on and paid by
such Lender. If any amounts are payable in respect of Taxes pursuant to this
Section 3.03(a), the Borrowers agree to reimburse each Lender, upon the written
request of such Lender, for taxes imposed on or measured by the net income,
profits or franchise of such Lender pursuant to the laws of the jurisdiction in
which such Lender is organized or in which the principal office or Applicable
Lending Office of such Lender is located, as the case may be, or under the laws
of any political subdivision or taxing authority therein, and for any
withholding of taxes as such Lender shall determine are payable by, or withheld
from, such Lender in respect of such reimbursement of taxes, which request shall
be accompanied by a statement from such Lender setting forth, in reasonable
detail, the computations used in determining such amounts. The Borrowers will
furnish to the Administrative Agent within 45 days after the date the payment of
any Taxes, or any withholding or deduction on account thereof, is due pursuant
to applicable law certified
 

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copies of tax receipts, or other evidence satisfactory to the respective Lender,
evidencing such payment by the Borrower.
 
(b)   Each Lender that is not a United States Person (as such term is defined in
Section 7701(a)(30) of the Code) for federal income tax purposes and that is
entitled to claim an exemption from or reduction in United States withholding
tax with respect to a payment by Borrowers agree to provide to the Borrower
Representative and the Administrative Agent on or prior to the Closing Date, or
in the case of a Lender that is an assignee or transferee of an interest under
this Agreement pursuant to Section 11.06 (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or transfer and
such Lender is in compliance with the provisions of this Section), on the date
of such assignment or transfer to such Lender, and from time to time thereafter
if required by the Borrower Representative or the Administrative Agent two
accurate and complete original signed copies of Internal Revenue Service Forms
W-8BEN, W-8ECI, W-8EXP or W-8IMY (or successor, substitute or other appropriate
forms and, in the case of Form W-8IMY, complete with accompanying Forms W-8BEN
with respect to beneficial owners of the payment) certifying to such Lender’s
entitlement to exemption from or a reduced rate of withholding of United States
withholding tax with respect to payments to be made under this Agreement, any
Note or any other Loan Document, along with any other appropriate documentation
establishing such exemption or reduction (such as statements certifying
qualification for exemption with respect to portfolio interest). In addition,
each Lender agrees that from time to time after the Closing Date, when a lapse
in time or change in circumstances renders the previous certification obsolete
or inaccurate in any material respect, it will deliver to the Borrower
Representative and the Administrative Agent two new accurate and complete
original signed copies of the applicable Internal Revenue Service form
establishing such exemption or reduction (such as statements certifying
qualification for exemption with respect to portfolio interest) and any related
documentation as may be required in order to confirm or establish the
entitlement of such Lender to a continued exemption from or reduction in United
States withholding tax if the Lender continues to be so entitled. No Lender
shall be required by this Section 3.03(b) to deliver a form or certificate that
it is not legally entitled to deliver. The Borrowers shall not be obligated
pursuant to Section 3.03(a) hereof to pay additional amounts on account of or
indemnify with respect to United States withholding taxes to the extent that
such taxes arise solely due to a Lender's failure to deliver forms that it was
legally entitled to but failed to deliver under this Section 3.03(b). The
Borrowers agree to pay additional amounts and indemnify each Lender in the
manner set forth in Section 3.03(a) in respect of any Taxes deducted or withheld
by it as a result of any changes after the Closing Date in any applicable law,
treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of income or
similar Taxes.
 
(c)   If any Lender, in its sole opinion, determines that it has finally and
irrevocably received or been granted a refund in respect of any Taxes as to
which indemnification has been paid by the Borrowers pursuant to this Section
3.03, it shall promptly remit such refund (including any interest received in
respect thereof), net of all out-of-pocket costs and expenses to the Borrower;
provided, however, that the Borrowers agree to promptly return any such refund
(plus interest) to such Lender in the event such Lender is required to repay
such refund to the relevant taxing authority. Any such Lender shall provide the
Borrower Representative with a copy of any notice of assessment from the
relevant taxing authority (redacting any unrelated confidential information
contained therein) requiring repayment of such refund. Nothing contained herein
shall impose an obligation on any Lender to apply for any such refund.
 
Section 3.04     Increased Costs to LC Issuers. If after the Closing Date, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any LC Issuer or any Lender with any
request or directive (whether or not having the force of law) by any such
authority, central bank or
 

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comparable agency (in each case made subsequent to the Closing Date) shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by such LC
Issuer or such Lender’s participation therein, or (ii) impose on such LC Issuer
or any Lender any other conditions affecting this Agreement, any Letter of
Credit or such Lender’s participation therein; and the result of any of the
foregoing is to increase the cost to such LC Issuer or such Lender of issuing,
maintaining or participating in any Letter of Credit, or to reduce the amount of
any sum received or receivable by such LC Issuer or such Lender hereunder (other
than any increased cost or reduction in the amount received or receivable
resulting from the imposition of or a change in the rate of taxes or similar
charges), then, upon demand to the Borrower Representative by such LC Issuer or
such Lender (a copy of which notice shall be sent by such LC Issuer or such
Lender to the Administrative Agent), the Borrowers shall pay to such LC Issuer
or such Lender such additional amount or amounts as will compensate any such LC
Issuer or such Lender for such increased cost or reduction. A certificate
submitted to the Borrower Representative by any LC Issuer or any Lender, as the
case may be (a copy of which certificate shall be sent by such LC Issuer or such
Lender to the Administrative Agent), setting forth, in reasonable detail, the
basis for the determination of such additional amount or amounts necessary to
compensate any LC Issuer or such Lender as aforesaid shall be conclusive and
binding on the Borrowers absent manifest error, although the failure to deliver
any such certificate shall not release or diminish the Borrowers’ obligations to
pay additional amounts pursuant to this Section 3.04.
 
Section 3.05     Change of Lending Office; Replacement of Lenders. 
 
(a)   Each Lender agrees that, upon the occurrence of any event giving rise to
the operation of Sections 3.01(a)(ii) or (iii), 3.01(c), 3.03 or 3.04 requiring
the payment of additional amounts to the Lender, such Lender will, if requested
by the Borrower Representative, use reasonable efforts (subject to overall
policy considerations of such Lender) to designate another Applicable Lending
Office for any Loans or Commitments affected by such event; provided, however,
that such designation is made on such terms that such Lender and its Applicable
Lending Office suffer no economic, legal or regulatory disadvantage, with the
object of avoiding the consequence of the event giving rise to the operation of
any such Section.
 
(b)   If (i) any Lender requests any compensation, reimbursement or other
payment under Sections 3.01(a)(ii) or (iii), 3.01(c) or 3.04 with respect to
such Lender, or (ii) the Borrowers are required to pay any additional amount to
any Lender or Governmental Authority pursuant to Section 3.03, then the
Borrowers may, at their sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with the restrictions contained in Section 11.06(c)),
all its interests, rights and obligations under this Agreement to an Eligible
Assignee that shall assume such obligations; provided, however, that (1) the
Borrower Representative shall have received the prior written consent of the
Administrative Agent, which consent shall not be unreasonably withheld or
delayed, (2) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrowers (in
the case of all other amounts, including any breakage compensation under Section
3.02 hereof), and (3) in the case of any such assignment resulting from a claim
for compensation, reimbursement or other payments required to be made under
Section 3.01(a)(ii) or (iii), Section 3.01(c) or Section 3.04 with respect to
such Lender, or resulting from any required payments to any Lender or
Governmental Authority pursuant to Section 3.03, such assignment will result in
a reduction in such compensation, reimbursement or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrowers to require such assignment and delegation cease to apply.
 

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(c)   Nothing in this Section 3.05 shall affect or postpone any of the
obligations of the Borrowers or the right of any Lender provided in Sections
3.01, 3.03 or 3.04.
 
 
ARTICLE IV.
 
CONDITIONS PRECEDENT
 
Section 4.01     Conditions Precedent at Closing Date. The obligation of the
Lenders to make Loans, and of any LC Issuer to issue Letters of Credit, is
subject to the satisfaction of each of the following conditions on or prior to
the Closing Date:
 
(i)   Credit Agreement. This Agreement shall have been executed by the
Borrowers, the Administrative Agent, each LC Issuer and each of the Lenders.
 
(ii)   Notes. The Borrowers shall have executed and delivered to the
Administrative Agent the appropriate Note or Notes for the account of each
Lender that has requested the same.
 
(iii)   Subsidiary Guaranty. The Subsidiary Guarantors shall have duly executed
and delivered a Guaranty of Payment (the “Subsidiary Guaranty”), substantially
in the form attached hereto as Exhibit C-1. 
 
(iv)   Security Agreement. The Borrowers and each Subsidiary Guarantor shall
have duly executed and delivered a Pledge and Security Agreement (the “Security
Agreement”), substantially in the form attached hereto as Exhibit C-2, and shall
have executed and delivered all of the following in connection therewith, each
of which shall be in form and substance satisfactory to the Administrative
Agent: (A) the Control Agreements required pursuant to the terms of the Security
Agreement, duly executed by the appropriate depositary institution, securities
intermediary or issuer as the case may be, (B) the Collateral Assignment
Agreements required pursuant to the terms of the Security Agreement, and (C) a
Perfection Certificate.
 
(v)   Closing Date Mortgages. Each Loan Party, as appropriate, shall have (A)
executed and delivered to the Administrative Agent a Mortgage, in form and
substance satisfactory to the Administrative Agent, with respect to each
Mortgaged Real Property of such Loan Party owned or leased as of the Closing
Date, and (B) provided to the Administrative Agent all of the other items
required to be provided with respect to each such Mortgaged Real Property
pursuant to Section 6.10(c), each of which shall be in form and substance
satisfactory to the Administrative Agent.
 
(vi)   Fees and Fee Letters. The Borrowers shall have (A) paid to the
Administrative Agent, for its own account, the fees required to be paid by them
on the Closing Date pursuant to the Confidential Fee Letter, (B) executed and
delivered to the Administrative Agent the Closing Fee Letter and shall have paid
to the Administrative Agent, for the benefit of the Lenders, the fees required
to be paid therein, and (C) paid or caused to be paid all reasonable fees and
expenses of the Administrative Agent and of special counsel to the
Administrative Agent that have been invoiced on or prior to the Closing Date in
connection with the preparation, execution and delivery of this Agreement and
the other Loan Documents and the consummation of the transactions contemplated
hereby and thereby.
 
(vii)   Resolutions and Approvals. The Administrative Agent shall have received
certified copies of the resolutions of the Board of Directors or other approving
body of the Borrowers and each Subsidiary Guarantor approving the Loan Documents
to which the
 

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Borrowers or any such Subsidiary Guarantor, as the case may be, are or may
become a party, and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the execution, delivery and
performance by the Borrowers or any such Subsidiary Guarantor of the Loan
Documents to which it is or may become a party.
 
(viii)   Incumbency Certificates. The Administrative Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower and of
each Subsidiary Guarantor certifying the names and true signatures of the
officers of such Borrower or such Subsidiary Guarantor, as the case may be,
authorized to sign the Loan Documents to which such Borrower or such Subsidiary
Guarantor is a party and any other documents to which such Borrower or any such
other Subsidiary Guarantor is a party that may be executed and delivered in
connection herewith.
 
(ix)   Opinions of Counsel. The Administrative Agent shall have received such
opinions of counsel from counsel to the Borrowers and the Subsidiary Guarantors
as the Administrative Agent shall request, each of which shall be addressed to
the Administrative Agent and each of the Lenders and dated the Closing Date and
in form and substance reasonably satisfactory to the Administrative Agent.
 
(x)   Recordation of Security Documents, Delivery of Collateral, Taxes, etc. The
Security Documents (or proper notices or UCC financing statements in respect
thereof) shall have been duly recorded, published and filed in such manner and
in such places as is required by law to establish, perfect, preserve and protect
the rights, Liens and security interests of the parties thereto and their
respective successors and assigns, all Collateral items required to be
physically delivered to the Administrative Agent thereunder shall have been so
delivered, accompanied by any appropriate instruments of transfer, and all
taxes, fees and other charges then due and payable in connection with the
execution, delivery, recording, publishing and filing of such instruments and
the issuance of the Obligations and the delivery of the Notes shall have been
paid in full.
 
(xi)   Evidence of Insurance. The Administrative Agent shall have received
certificates of insurance and other evidence, satisfactory to it, of compliance
with the insurance requirements of this Agreement and the Security Documents.
 
(xii)   Search Reports. The Administrative Agent shall have received the results
of UCC and other search reports from one or more commercial search firms
acceptable to the Administrative Agent, listing all of the effective financing
statements filed against any Loan Party, together with copies of such financing
statements.
 
(xiii)   Corporate Charter, Partnership Agreement and Good Standing
Certificates. The Administrative Agent shall have received: (A) an original
certified copy of the Certificate or Articles of Incorporation or equivalent
formation document of each Loan Party and any and all amendments and
restatements thereof, certified as of a recent date by the relevant Secretary of
State; (B) an original good standing certificate from the Secretary of State of
the state of incorporation, dated as of a recent date, listing all charter
documents affecting such Loan Party and certifying as to the good standing of
such Loan Party; and (C) original certificates of good standing from each other
jurisdiction in which each Loan Party is authorized or qualified to do business.
 
(xiv)   Closing Certificate. The Administrative Agent shall have received a
certificate substantially in the form of Exhibit E hereto, dated the Closing
Date, of an Authorized Officer to the effect that, at and as of the Closing Date
and both before and after giving effect to the initial
 

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Borrowings hereunder and the application of the proceeds thereof: (A) no Default
or Event of Default has occurred or is continuing; and (B) all representations
and warranties of the Loan Parties contained herein or in the other Loan
Documents are true and correct in all material respects as of the Closing Date.
 
(xv)   Solvency Certificate. The Administrative Agent shall have received a
solvency certificate substantially in the form attached hereto as Exhibit F,
dated as of the Closing Date, and executed by the Chief Financial Officer of the
Borrower Representative.
 
(xvi)   Repayment of Existing Indebtedness. The Administrative Agent shall have
received a fully executed payoff letter satisfactory to the Administrative Agent
confirming that all obligations under the Existing Credit Agreement will be
repaid in full from the proceeds of the initial extension of credit, all Liens
upon any of the property of the Loan Parties constituting Collateral will be
terminated immediately upon such payment and all letters of credit issued or
guaranteed under the Existing Credit Agreement shall have been cash
collateralized or supported by a Letter of Credit as mutually agreed upon by the
Administrative Agent, the Borrowers and the lenders under the Existing Credit
Agreement; and the Loan Parties shall have delivered UCC termination statements
with respect to any filings against the Collateral as may be requested by the
Administrative Agent and shall have authorized the filing of such termination
statements or amendments.
 
(xvii)   Proceedings and Documents. All corporate and other proceedings and all
documents incidental to the transactions contemplated hereby (including, but not
limited to, the Preferred Stock Transaction) shall be satisfactory in substance
and form to the Administrative Agent and the Lenders and the Administrative
Agent and its special counsel and the Lenders shall have received all such
counterpart originals or certified or other copies of such documents as the
Administrative Agent or its special counsel or any Lender may reasonably
request.
 
(xviii)  Approvals, etc. The Administrative Agent shall have received evidence
that all necessary consents, permits, licenses and approvals (governmental or
otherwise) required for the execution, delivery and performance by each Loan
Party of the Loan Documents and the Preferred Stock Transaction have been duly
obtained and are in full force and effect.
 
(xix)   Absence of Litigation.  There shall not be any action, suits or
proceedings pending or threatened with respect to any Loan Party or its
Subsidiaries (other than in the case of subclause (i), the Varco Indemnification
Claims) (i) that have, or could reasonably be expected to have, a Material
Adverse Effect, or (ii) that question the validity or enforceability of any of
the Loan Documents, or of any action to be taken by the Borrowers or any of the
other Loan Parties pursuant to any of the Loan Documents.
 
(xx)   No Material Adverse Change. There shall not have occurred a change in the
business, assets, properties, liabilities (actual or contingent), operations,
condition (financial or otherwise) or prospects of the Borrowers and its
Subsidiaries since September 30, 2005 that could reasonably be expected to have
a Material Adverse Effect.
 
(xxi)   Miscellaneous. The Loan Parties shall have provided to the
Administrative Agent and the Lenders such other items and shall have satisfied
such other conditions as may be reasonably required by the Administrative Agent
or the Lenders.
 

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Section 4.02     Conditions Precedent to All Credit Events. The obligations of
the Lenders and each LC Issuer to make or participate in each Credit Event is
subject, at the time thereof, to the satisfaction of the following conditions:
 
(a)   Notice. The Administrative Agent (and in the case of subpart (iii) below,
the applicable LC Issuer) shall have received, as applicable, (i) a Notice of
Borrowing meeting the requirements of Section 2.06(b) with respect to any
Borrowing (other than a Continuation or Conversion), (ii) a Notice of
Continuation or Conversion meeting the requirements of Section 2.10(b) with
respect to a Continuation or Conversion, or (iii) an LC Request meeting the
requirements of Section 2.05(b) with respect to each LC Issuance.
 
(b)   No Default; Representations and Warranties. At the time of each Credit
Event and also after giving effect thereto, (i) there shall exist no Default or
Event of Default and (ii) all representations and warranties of the Loan Parties
contained herein or in the other Loan Documents shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Credit Event, except to
the extent that such representations and warranties expressly relate to an
earlier specified date, in which case such representations and warranties shall
have been true and correct in all material respects as of the date when made.
 
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrowers to the Administrative Agent, each
LC Issuer and each of the Lenders that all of the applicable conditions
specified in Section 4.01 and Section 4.02 have been satisfied as of the times
referred to in such Sections.
 
 
ARTICLE V.
 
REPRESENTATIONS AND WARRANTIES
 
In order to induce the Administrative Agent, the Lenders and each LC Issuer to
enter into this Agreement and to make the Loans and to issue and to participate
in the Letters of Credit provided for herein, the Borrowers make the following
representations and warranties to, and agreements with, the Administrative
Agent, the Lenders and each LC Issuer, all of which shall survive the execution
and delivery of this Agreement and each Credit Event:
 
Section 5.01     Corporate Status. Each Borrower and each of their respective
Subsidiaries (i) is a duly organized or formed and validly existing corporation,
partnership or limited liability company, as the case may be, in good standing
or in full force and effect under the laws of the jurisdiction of its formation
and has the corporate, partnership or limited liability company power and
authority, as applicable, to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage, and (ii) has
duly qualified and is authorized to do business in all jurisdictions where it is
required to be so qualified or authorized except where the failure to be so
qualified would not have a Material Adverse Effect. Schedule 5.01 hereto lists,
as of the Closing Date, each Subsidiary (and the direct and indirect ownership
interest of the Borrowers therein).
 
Section 5.02     Power and Authority. Each Loan Party has the corporate or other
organizational power and authority to execute, deliver and carry out the terms
and provisions of the Loan Documents to which it is party and has taken all
necessary corporate or other organizational action to authorize the execution,
delivery and performance of the Loan Documents to which it is party. Each Loan
Party has duly executed and delivered each Loan Document to which it is party
and each Loan Document to which it is party constitutes the legal, valid and
binding agreement and obligation of such Loan Party enforceable in accordance
with its terms, except to the extent that the enforceability thereof
 

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may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws generally affecting creditors’ rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
 
Section 5.03     No Violation. Neither the execution, delivery and performance
by any Loan Party of the Loan Documents to which it is party nor compliance with
the terms and provisions thereof (i) will contravene any provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any Governmental
Authority applicable to such Loan Party or its properties and assets, (ii) will
conflict with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(other than the Liens created pursuant to the Security Documents) upon any of
the property or assets of such Loan Party pursuant to the terms of any
promissory note, bond, debenture, indenture, mortgage, deed of trust, credit or
loan agreement, or any other agreement or other instrument, to which such Loan
Party is a party or by which it or any of its property or assets are bound or to
which it may be subject, other than when consent has been obtained, or (iii)
will violate any provision of the Organizational Documents of such Loan Party.
 
Section 5.04     Governmental Approvals. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority is required to authorize or is required
as a condition to (i) the execution, delivery and performance by any Loan Party
of any Loan Document to which it is a party or any of its obligations
thereunder, or (ii) the legality, validity, binding effect or enforceability of
any Loan Document to which any Loan Party is a party, except the filing and
recording of financing statements and other documents necessary in order to
perfect the Liens created by the Security Documents.
 
Section 5.05     Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrowers, threatened with respect to the Borrowers
or any of their Subsidiaries (i) that have had, or could reasonably be expected
to have, a Material Adverse Effect, except for the Varco Indemnification Claims,
or (ii) that question the validity or enforceability of any of the Loan
Documents, or of any action to be taken by any Borrower or any of the other Loan
Parties pursuant to any of the Loan Documents.
 
Section 5.06     Use of Proceeds; Margin Regulations.
 
(a)   The proceeds of all Revolving Loans and LC Issuances shall be utilized to
refinance existing senior debt facilities, provide working capital and funds for
general corporate purposes, in each case, not inconsistent with the terms of
this Agreement. The proceeds of all Term Loans shall be utilized to provide
funds for the Preferred Stock Transaction.
 
(b)   No part of the proceeds of any Credit Event will be used directly or
indirectly to purchase or carry Margin Stock, or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock, in violation of any of
the provisions of Regulations U or X of the Board of Governors of the Federal
Reserve System. No Borrower is engaged in the business of extending credit for
the purpose of purchasing or carrying any Margin Stock. At no time would more
than 25% of the value of the assets of the Borrowers or of the Borrowers and
their consolidated Subsidiaries that are subject to any “arrangement” (as such
term is used in Section 221.2(g) of such Regulation U) hereunder be represented
by Margin Stock.
 
Section 5.07   Financial Statements. The Borrower Representative has furnished
to the Lenders and the Administrative Agent complete and correct copies of (i)
the audited consolidated balance sheets of the Borrowers and their consolidated
Subsidiaries as of September 30, 2005 and the related
 

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audited consolidated statements of income, shareholders’ equity, and cash flows
of the Borrowers and their consolidated subsidiaries for the fiscal years then
ended, accompanied by the report thereon of PricewaterhouseCoopers LLP; and (ii)
the consolidated balance sheets of the Borrowers and their consolidated
Subsidiaries as of June 30, 2006 and the related consolidated statements of
income and of cash flows of the Borrowers and their consolidated Subsidiaries
for the fiscal period then ended, as included in ICO’s Report on Form 10-Q for
the fiscal quarter ended June 30, 2006, filed with the SEC. All such financial
statements have been prepared in accordance with GAAP, consistently applied
(except as stated therein), and fairly present in all material respects the
financial position of the entities described in such financial statements as of
the respective dates indicated and the consolidated results of their operations
and cash flows for the respective periods indicated, subject in the case of any
such financial statements that are unaudited, to normal audit adjustments, none
of which will involve a Material Adverse Effect. The Borrowers and their
Subsidiaries did not have, as of the date of the latest financial statements
referred to above, and will not have as of the Closing Date after giving effect
to the incurrence of Loans hereunder, any material or significant contingent
liability or liability for taxes, long-term lease or unusual forward or
long-term commitment that is not reflected in the foregoing financial statements
or the notes thereto in accordance with GAAP and that in any such case is
material in relation to the business, operations, properties, assets, financial
or other condition or prospects of the Borrowers or any of their Subsidiaries.
 
Section 5.08     Solvency. The Borrowers have received consideration that is the
reasonable equivalent value of the obligations and liabilities that the
Borrowers have incurred to the Administrative Agent, each LC Issuer and the
Lenders under the Loan Documents. The Borrowers now have capital sufficient to
carry on their business and transactions and all business and transactions in
which it is about to engage and is now solvent and able to pay their debts as
they mature and the Borrowers, as of the Closing Date, owns property having a
value, both at fair valuation and at present fair salable value, greater than
the amount required to pay the Borrowers’ debts; and the Borrowers are not
entering into the Loan Documents with the intent to hinder, delay or defraud
their creditors. For purposes of this Section, “debt” means any liability on a
claim, and “claim” means (y) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (z)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
 
Section 5.09    No Material Adverse Change. Since September 30, 2005, there has
been no change in the financial or other condition, business, affairs or
prospects of the Borrowers and their Subsidiaries taken as a whole, or their
properties and assets considered as an entirety, except for changes none of
which, individually or in the aggregate, has had or could reasonably be expected
to have, a Material Adverse Effect.
 
Section 5.10     Tax Returns and Payments. Each of the Borrowers and their
Subsidiaries have filed all federal income tax returns and all other tax
returns, domestic and foreign, required to be filed by it and has paid all taxes
and assessments payable by it that have become due, other than those not yet
delinquent and except for those contested in good faith. Each of the Borrowers
and their Subsidiaries have established on its books such charges, accruals and
reserves in respect of taxes, assessments, fees and other governmental charges
for all fiscal periods as are required by GAAP. Neither the Borrowers nor any of
their Subsidiaries know of any proposed assessment for additional federal,
foreign or state taxes for any period, or of any basis therefor, which,
individually or in the aggregate, taking into account such charges, accruals and
reserves in respect thereof as the Borrowers and their Subsidiaries have made,
could reasonably be expected to have a Material Adverse Effect.
 

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Section 5.11     Title to Properties, etc. Each of the Borrowers and their
Subsidiaries has good and marketable title, in the case of Real Property, and
good title (or valid Leaseholds, in the case of any leased property), in the
case of all other property, to all of its properties and assets free and clear
of Liens other than Permitted Liens. The interests of the Borrowers and their
Subsidiaries in the properties reflected in the most recent balance sheet
referred to in Section 5.07, taken as a whole, were sufficient, in the judgment
of the Borrowers, as of the date of such balance sheet for purposes of the
ownership and operation of the businesses conducted by the Borrowers and their
Subsidiaries.
 
Section 5.12     Lawful Operations, etc. Each of the Borrowers and their
Subsidiaries: (i) holds all necessary foreign, federal, state, local and other
governmental licenses, registrations, certifications, permits and authorizations
necessary to conduct its business, except to the extent the failure to so hold
could not reasonably be expected to have a Material Adverse Effect; and (ii) is
in full compliance with all requirements imposed by law, regulation or rule,
whether foreign, federal, state or local, that are applicable to it, its
operations, or its properties and assets, including, without limitation,
applicable requirements of Environmental Laws, except for any failure to obtain
and maintain in effect, or noncompliance that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
 
Section 5.13     Environmental Matters.
 
(a)   Except in connection with the Varco Indemnification Claims, each of the
Borrowers and their Subsidiaries is in compliance with all Environmental Laws,
except to the extent that any such failure to comply (together with any
resulting penalties, fines or forfeitures) would not reasonably be expected to
have a Material Adverse Effect. All licenses, permits, registrations or
approvals required for the conduct of the business of the Borrowers and their
Subsidiaries under any Environmental Law have been secured and the Borrowers and
their Subsidiaries is in substantial compliance therewith, except for such
licenses, permits, registrations or approvals the failure to secure or to comply
therewith is not reasonably likely to have a Material Adverse Effect. Neither
the Borrowers nor any of their Subsidiaries have received written notice, or
otherwise knows, that it is in any respect in noncompliance with, breach of or
default under any applicable writ, order, judgment, injunction, or decree to
which such Borrower or such Subsidiary is a party or that would affect the
ability of such Borrower or such Subsidiary to operate any Real Property and no
event has occurred and is continuing that, with the passage of time or the
giving of notice or both, would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance, breaches or defaults
as would not reasonably be expected to, in the aggregate, have a Material
Adverse Effect. Except in connection with the Varco Indemnification Claims,
there are no Environmental Claims pending or, to the best knowledge of any
Borrower, threatened wherein an unfavorable decision, ruling or finding in
connection therewith would reasonably be expected to have a Material Adverse
Effect. Except in connection with the Varco Indemnification Claims, there are no
facts, circumstances, conditions or occurrences on any Real Property now or at
any time owned, leased or operated by the Borrowers or any of their Subsidiaries
or on any property adjacent to any such Real Property, that are known by the
Borrowers or as to which the Borrowers or any such Subsidiary has received
written notice, that could reasonably be expected: (i) to form the basis of an
Environmental Claim against the Borrowers or any of their Subsidiaries or any
Real Property of the Borrowers or any of their Subsidiaries; or (ii) to cause
such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any Environmental
Law, except in each such case, such Environmental Claims or restrictions that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
 
(b)   Hazardous Materials have not at any time been (i) generated, used, treated
or stored on, or transported to or from, any Real Property of the Borrowers or
any of their Subsidiaries or (ii) released
 

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on any such Real Property, in each case where such occurrence or event is not in
compliance with Environmental Laws and is reasonably likely to have a Material
Adverse Effect.
 
Section 5.14     Compliance with ERISA. Compliance by the Borrowers with the
provisions hereof and Credit Events contemplated hereby will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
The Borrowers and their Subsidiaries (i) have fulfilled all obligations under
minimum funding standards of ERISA and the Code with respect to each Plan that
is not a Multi-Employer Plan or a Multiple Employer Plan, (ii) have satisfied
all respective contribution obligations in respect of each Multi-Employer Plan
and each Multiple Employer Plan, (iii) are in compliance in all material
respects with all other applicable provisions of ERISA and the Code with respect
to each Plan, each Multi-Employer Plan and each Multiple Employer Plan, and (iv)
have not incurred any liability under the Title IV of ERISA to the PBGC with
respect to any Plan, any Multi-Employer Plan, any Multiple Employer Plan, or any
trust established thereunder. No Plan or trust created thereunder has been
terminated, and there have been no Reportable Events, with respect to any Plan
or trust created thereunder or with respect to any Multi-Employer Plan or
Multiple Employer Plan, which termination or Reportable Event will or could
result in the termination of such Plan, Multi-Employer Plan or Multiple Employer
Plan and give rise to a material liability of the Borrower or any ERISA
Affiliate in respect thereof. No Borrower or any ERISA Affiliate is at the date
hereof, or has been at any time within the two years preceding the date hereof,
an employer required to contribute to any Multi-Employer Plan or Multiple
Employer Plan, or a “contributing sponsor” (as such term is defined in Section
4001 of ERISA) in any Multi-Employer Plan or Multiple Employer Plan. No Borrower
or any ERISA Affiliate has any contingent liability with respect to any
post-retirement “welfare benefit plan” (as such term is defined in ERISA),
except as has been disclosed to the Lenders in writing.
 
Section 5.15     Intellectual Property, etc. The Borrowers and their
Subsidiaries have obtained or have the right to use all material patents,
trademarks, service marks, trade names, copyrights, licenses and other rights
with respect to the foregoing necessary for the present and planned future
conduct of its business, without any known conflict with the rights of others,
except for such patents, trademarks, service marks, trade names, copyrights,
licenses and rights, the loss of which, and such conflicts which, in any such
case individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
 
Section 5.16     Investment Company Act, etc. Neither the Borrowers nor any of
their Subsidiaries are subject to regulation with respect to the creation or
incurrence of Indebtedness under the Investment Company Act of 1940, as amended,
the Interstate Commerce Act, as amended, the Federal Power Act, as amended, the
Energy Policy Act of 2005, as amended, or any applicable state public utility
law.
 
Section 5.17     Insurance. The Borrowers and their Subsidiaries maintain
insurance coverage by such insurers and in such forms and amounts and against
such risks as are generally consistent with industry standards and in each case
in compliance with the terms of the Loan Documents.
 
Section 5.18     Burdensome Contracts; Labor Relations. Neither the Borrowers
nor any of their Subsidiaries (a) are subject to any burdensome contract,
agreement, corporate restriction, judgment, decree or order, (b) are a party to
any labor dispute affecting any bargaining unit or other group of employees
generally, (c) are subject to any strike, slowdown, walk out or other concerted
interruptions of operations by employees of any Borrower or any Subsidiary,
whether or not relating to any labor contracts, (d) are subject to any pending
or, to the knowledge of the Borrowers, threatened, unfair labor practice
complaint, before the National Labor Relations Board, (e) are subject to any
pending or, to the knowledge of the Borrowers, threatened grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement, (f) are subject to any significant pending or, to the knowledge of
the
 

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Borrowers, threatened strike, labor dispute, slowdown or stoppage, or (g) are,
to the knowledge of the Borrowers, involved or subject to any union
representation organizing or certification matter with respect to the employees
of the Borrowers or any of their Subsidiaries, except (with respect to any
matter specified in any of the above clauses) for such matters as, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
 
Section 5.19     Security Interests. Once executed and delivered, each of the
Security Documents creates, as security for the Secured Obligations (as defined
in the Security Agreement), a valid and enforceable, and upon making the filings
and recordings referenced in the next sentence, perfected security interest in
and Lien on all of the Collateral subject thereto from time to time, in favor of
the Administrative Agent for the benefit of the Secured Creditors, superior to
and prior to the rights of all third persons and subject to no other Liens,
except that the Collateral under the Security Documents may be subject to
Permitted Liens. No filings or recordings are required in order to perfect the
security interests created under any Security Document, except for filings or
recordings required in connection with any such Security Document that shall
have been made, or for which satisfactory arrangements have been made, upon or
prior to the execution and delivery thereof. All recording, stamp, intangible or
other similar taxes required to be paid by any Person under applicable legal
requirements or other laws applicable to the property encumbered by the Security
Documents in connection with the execution, delivery, recordation, filing,
registration, perfection or enforcement thereof have been paid.
 
Section 5.20    True and Complete Disclosure. All factual information (taken as
a whole) heretofore or contemporaneously furnished by or on behalf of the
Borrowers or any of their Subsidiaries in writing to the Administrative Agent or
any Lender for purposes of or in connection with this Agreement or any
transaction contemplated herein, is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of such Person in writing
to the Administrative Agent or any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided, except that any such
future information consisting of financial projections prepared by the Borrowers
or any of their Subsidiaries is only represented herein as being based on good
faith estimates and assumptions believed by such persons to be reasonable at the
time made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ materially from the
projected results.
 
Section 5.21     Defaults. No Default or Event of Default exists as of the
Closing Date hereunder, nor will any Default or Event of Default begin to exist
immediately after the execution and delivery hereof.
 
Section 5.22     Anti-Terrorism Law Compliance. Neither the Borrowers nor any of
their Subsidiaries are subject to or in violation of any law, regulation, or
list of any government agency (including, without limitation, the U.S. Office of
Foreign Asset Control list, Executive Order No. 13224 or the USA Patriot Act)
that prohibits or limits the conduct of business with or the receiving of funds,
goods or services to or for the benefit of certain Persons specified therein or
that prohibits or limits any Lender or LC Issuer from making any advance or
extension of credit to the Borrower or from otherwise conducting business with
the Borrower.
 
Section 5.23    Mexico Subsidiary; ICO Minerals, Inc.; RE Holdings Entities.
 
(a)   The Mexico Subsidiary does not conduct business and, to the extent that
the Mexico Subsidiary owns any assets, such assets have a fair market value of
no more than $5,000.
 

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(b)   ICO Minerals does not conduct business and, to the extent ICO Minerals
owns any assets, such assets have a fair market value of no more than $5,000.
ICO Minerals will be dissolved or merged into a Loan Party no later than 90 days
following the Closing Date.
 
(c)   The only assets owned by the RE Holdings Entities are the Real Properties
located at 1300 McCabe Road, LaPorte, Texas; 10820 Hemlock Avenue, Fontana,
California; 4404 Euclid Avenue, East Chicago, Indiana; Route 173, 2 Vliet Farm
Road, Asbury, New Jersey; 706 W. Madison Street, Grand Junction, Tennessee; and
16646 Old Nome Road, China, Texas. No assets are leased by the RE Holdings
Entities.
 
 
ARTICLE VI.
 
AFFIRMATIVE COVENANTS
 
The Borrowers hereby covenant and agree that on the Closing Date and thereafter
so long as this Agreement is in effect and until such time as the Commitments
have been terminated, no Notes remain outstanding and the Loans, together with
interest, Fees and all other Obligations incurred hereunder and under the other
Loan Documents, have been paid in full:
 
Section 6.01     Reporting Requirements. The Borrower Representative will
furnish to the Administrative Agent and each Lender:
 
(a)   Annual Financial Statements. As soon as available and in any event within
90 days after the close of each fiscal year of the Borrowers, the consolidated
balance sheets of the Borrowers and their respective consolidated Subsidiaries
as at the end of such fiscal year and the related consolidated statements of
income, of stockholders’ equity and of cash flows for such fiscal year, in each
case setting forth comparative figures for the preceding fiscal year, all in
reasonable detail and accompanied by the opinion with respect to such
consolidated financial statements of independent public accountants of
recognized national standing selected by the Borrowers, which opinion shall be
unqualified and shall (i) state that such accountants audited such consolidated
financial statements in accordance with generally accepted auditing standards,
that such accountants believe that such audit provides a reasonable basis for
their opinion, and that in their opinion such consolidated financial statements
present fairly, in all material respects, the consolidated financial position of
the Borrowers and their respective consolidated subsidiaries as at the end of
such fiscal year and the consolidated results of their operations and cash flows
for such fiscal year in conformity with generally accepted accounting
principles, or (ii) contain such statements as are customarily included in
unqualified reports of independent accountants in conformity with the
recommendations and requirements of the American Institute of Certified Public
Accountants (or any successor organization).
 
(b)   Quarterly Financial Statements. As soon as available and in any event
within 45 days after the close of each of the first three quarterly accounting
periods in each fiscal year of the Borrowers, the unaudited consolidated balance
sheets of the Borrowers and their respective consolidated Subsidiaries as at the
end of such quarterly period and the related unaudited consolidated statements
of income and of cash flows for such quarterly period and/or for the fiscal year
to date, and setting forth, in the case of such unaudited consolidated
statements of income and of cash flows, comparative figures for the related
periods in the prior fiscal year, and which shall be certified on behalf of the
Borrowers by the Chief Financial Officer of the Borrower Representative, subject
to changes resulting from normal year-end audit adjustments.
 
(c)   Officer’s Compliance Certificates. At the time of the delivery of the
financial statements provided for in Sections 8.1(a) and (b) above, a
certificate (a “Compliance Certificate”) substantially in
 

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the form of Exhibit E to the effect that (i) no Default or Event of Default
exists or, if any Default or Event of Default does exist, specifying the nature
and extent thereof and the actions the Borrowers propose to take with respect
thereto and (ii) the representations and warranties of the Loan Parties are true
and correct in all material respects, except to the extent that any relate to an
earlier specified date, in which case, such representations and warranties shall
be true and correct in all material respects as of the date made, which
certificate shall set forth the calculations required to establish compliance
with the provisions of Section 7.07 of this Agreement.
 
(d)   Budgets and Forecasts. As soon as available but in any event not later
than 60 days after the commencement of any fiscal year of the Borrowers and
their Subsidiaries, commencing with the fiscal year ending September 30, 2007, a
consolidated budget in reasonable detail for each of the four fiscal quarters of
such fiscal year, and (if and to the extent prepared by management of the
Borrowers) for any subsequent fiscal years, as customarily prepared by
management for its internal use, setting forth, with appropriate discussion, the
forecasted balance sheet, income statement, operating cash flows and capital
expenditures of the Borrower and its Subsidiaries for the period covered
thereby, and the principal assumptions upon which forecasts and budget are
based.
 
(e)   Notices. Promptly, and in any event within three Business Days after,
notice of:
 
(i)   the occurrence of any event that constitutes a Default or Event of
Default, which notice shall specify the nature thereof, the period of existence
thereof and what action the Borrowers propose to take with respect thereto; or
 
(ii)   the commencement of, or any other material development concerning, any
litigation or governmental or regulatory proceeding pending against the
Borrowers or any of their Subsidiaries or the occurrence of any other event, if
the same would be reasonably likely to have a Material Adverse Effect.
 
(f)   ERISA. Promptly, and in any event within 10 days after any Borrower or any
Subsidiary of any Borrower or any ERISA Affiliate knows of the occurrence of any
of the following, the Borrower Representative will deliver to the Administrative
Agent a certificate of an Authorized Officer setting forth the full details as
to such occurrence and the action, if any, that such Borrower or such Subsidiary
of such Borrower or such ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by any Borrower, the Subsidiary or the ERISA Affiliate with the PBGC, a Plan
participant or the Plan administrator with respect thereto: (i) that a
Reportable Event has occurred with respect to any Plan; (ii) the institution of
any steps by any Borrower, any Subsidiary, any ERISA Affiliate, the PBGC or any
other Person to terminate any Plan or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the termination
of, or the appointment of a trustee to administer, a Plan; (iii) the institution
of any steps by any Borrower, any Subsidiary or any ERISA Affiliate to withdraw
from any Plan; (iv) the institution of any steps by any Borrower, any Subsidiary
or any ERISA Affiliate to withdraw from any Multi-Employer Plan or Multiple
Employer Plan, if such withdrawal could result in withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA or in Section 4063 of
ERISA) in excess of $500,000; (v) that a non-exempt “prohibited transaction”
within the meaning of Section 406 of ERISA in connection with any Plan has
occurred; (vi) that a Plan has Unfunded Benefit Liabilities exceeding $500,000;
(vii) the cessation of operations at a facility of the Borrower, any Subsidiary
of the Borrower or any ERISA Affiliate in the circumstances described in Section
4062(e) of ERISA; (viii) the conditions for imposition of a lien under Section
302(f) of ERISA shall have been met with respect to a Plan; (ix) the adoption of
an amendment to a Plan requiring the provision of security to such Plan pursuant
to Section 307 of ERISA; (x) the insolvency of or commencement of reorganization
proceedings with respect to a Multi-Employer Plan; (xi) any material increase in
the contingent liability of the Borrower or any Subsidiary with respect to any
 

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post-retirement welfare liability; or (xii) the taking of any action by, or the
threatening of the taking of any action by, the Internal Revenue Service, the
Department of Labor or the PBGC with respect to any of the foregoing.
 
(g)   Environmental Matters. Promptly upon, and in any event within 10 Business
Days after, an officer of the Borrowers or any of their Subsidiaries obtaining
knowledge thereof, notice of one or more of the following environmental matters
to the extent any of the following could reasonably be expected to have a
Material Adverse Effect: (i) any pending or threatened Environmental Claim
against the Borrowers or any of their Subsidiaries or any Real Property owned or
operated by the Borrowers or any of their Subsidiaries; (ii) any condition or
occurrence on or arising from any Real Property owned or operated by the
Borrowers or any of their Subsidiaries that (A) results in noncompliance in any
material respect by the Borrowers or any of their Subsidiaries with any
applicable Environmental Law or (B) would reasonably be expected to form the
basis of a Environmental Claim against the Borrowers or any of their
Subsidiaries or any such Real Property; (iii) any condition or occurrence on any
Real Property owned, leased or operated by the Borrowers or any of their
Subsidiaries that could reasonably be expected to cause such Real Property to be
subject to any restrictions on the ownership, occupancy, use or transferability
by the Borrowers or any of their Subsidiaries of such Real Property under any
Environmental Law; and (iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on any Real
Property owned, leased or operated by the Borrowers or any of their Subsidiaries
as required by any Environmental Law or any governmental or other administrative
agency. All such notices shall describe in reasonable detail the nature of the
Environmental Claim, such Borrower’s or such Subsidiary’s response thereto and
such Borrower’s or such Subsidiary’s estimate of the potential exposure in
Dollars of the Borrowers and their Subsidiaries with respect thereto.
 
(h)   SEC Reports and Registration Statements. Promptly after transmission or
other filing with the SEC of any registration statement or annual, quarterly or
current reports that any Borrower or any of its Subsidiaries files with the SEC
on Form 10-K, 10-Q or 8-K (or any successor forms), notice that the same has
been posted to ICO’s website or is otherwise available on the SEC’s website, and
if the same is not then available on either such website, a copy of such
registration statement or report.
 
(i)   Annual, Quarterly and Other Reports. Promptly after transmission to ICO’s
stockholders of any annual, quarterly and other report and all proxy statements,
notice that the same has been provided to its stockholders and posted to ICO’s
website, and if such report or statement is not then available on such website,
a copy of such report or statement.
 
(j)   Press Releases. Promptly after the release of any press releases and other
similar statements intended to be made available generally by any Borrower or
any Subsidiary to the public concerning material developments relating to any
Borrower or any Subsidiaries, notice that the same has been released and posted
to ICO’s website, and if such release is not then available on such website, a
copy of such release.
 
(k)   Information Relating to Collateral. At the time of the delivery of the
annual financial statements provided for in subpart (a) above, a certificate of
an Authorized Officer (i) setting forth any changes to the information required
pursuant to the Perfection Certificate or confirming that there has been no
change in such information since the date of the most recently delivered or
updated Perfection Certificate and (ii) certifying that neither the Borrowers
nor any of their Subsidiaries have taken any actions (and is not aware of any
actions so taken) to terminate any UCC financing statements or other appropriate
filings, recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral that have been filed
of record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (i) above to the extent
 

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necessary to protect and perfect the security interests and Liens under the
Security Documents for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
 
(l)   Other Notices. Promptly after the transmission or receipt thereof, as
applicable, copies of all notices received or sent by any Borrower or any
Subsidiary to or from the holders of any Material Indebtedness or any trustee
with respect thereto.
 
(m)   Other Information. Promptly, but in any event within 10 days after a
request therefor, such other information or documents (financial or otherwise)
relating to the Borrowers or any of their Subsidiaries as the Administrative
Agent or any Lender may reasonably request from time to time.
 
Section 6.02     Books, Records and Inspections. The Borrowers will, and will
cause each of their respective Subsidiaries to, (i) keep proper books of record
and account, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Borrowers or such Subsidiary, as
the case may be, in accordance with GAAP; and (ii) permit, upon reasonable prior
notice to the Borrower Representative and during normal business hours, officers
and designated representatives of the Administrative Agent or any of the Lenders
to visit and inspect any of the properties or assets of the Borrowers and their
Subsidiaries in whomsoever’s possession (but only to the extent the Borrowers or
such Subsidiary has the right to do so to the extent in the possession of
another Person), to examine the books of account of the Borrowers and any of its
Subsidiaries, and make copies thereof and take extracts therefrom, and to
discuss the affairs, finances and accounts of the Borrowers and of their
Subsidiaries with, and be advised as to the same by, its and their officers and
independent accountants and independent actuaries, if any, all at such
reasonable times and intervals and to such reasonable extent as the
Administrative Agent or any of the Lenders may request.
 
Section 6.03    Insurance.
 
(a)   The Borrowers will, and will cause each of their respective Subsidiaries
to, (i) maintain insurance coverage by such insurers and in such forms and
amounts and against such risks as are generally consistent with the insurance
coverage maintained by the Borrowers and their Subsidiaries as of the Closing
Date, and (ii) forthwith upon the Administrative Agent’s or any Lender’s written
request, furnish to the Administrative Agent or such Lender such information
about such insurance as the Administrative Agent or such Lender may from time to
time reasonably request, which information shall be prepared in form and detail
reasonably satisfactory to the Administrative Agent or such Lender and certified
by an Authorized Officer.
 
(b)   The Borrowers will, and will cause each of their Subsidiaries that is a
Loan Party to, at all times keep their respective property that is subject to
the Lien of any of the Security Documents insured in favor of the Administrative
Agent, and all policies or certificates (or certified copies thereof) with
respect to such insurance (and any other insurance maintained by any Borrower or
any such Subsidiary) (i) shall be endorsed to the Administrative Agent’s
satisfaction for the benefit of the Administrative Agent (including, without
limitation, by naming the Administrative Agent as an additional loss payee (with
respect to Collateral) or, to the extent permitted by applicable law, as an
additional insured as its interests may appear), (ii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Administrative Agent and the Lenders, (iii) shall in the case of
any such certificates or endorsements in favor of the Administrative Agent, be
delivered to or deposited with the Administrative Agent, and (iv) shall provide
that the interests of the Administrative Agent shall not be invalidated by an
act or negligence of any Borrower or any Subsidiary or any person having an
interest in any facility owned, leased or used by any Borrower or any of its
Subsidiaries nor by occupancy or use of any facility owned, leased or used by
any Borrower or any Subsidiary for purposes more hazardous than
 

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permitted by such policy nor by any foreclosure or other proceedings relating to
any facility owned, leased or used by any Borrower or any Subsidiary. The
Borrower will, and will cause each of their Subsidiaries that is a Loan Party
to, use commercially reasonable efforts to cause the policies or certificates
referred to in the preceding sentence to state that such insurance policies
shall not be canceled, reduced or expire without 30 days’ prior written notice
thereof (or 10 days’ prior written notice in the case of cancellation for the
non-payment of premiums) by the respective insurer to the Administrative Agent.
The Borrower Representative shall deliver to the Administrative Agent
contemporaneously with the expiration or replacement of any policy of insurance
required to be maintained by this Agreement a certificate as to the new or
renewal policy. The Borrower Representative shall advise the Administrative
Agent promptly upon the cancellation, reduction or amendment of any policy. If
requested to do so by the Administrative Agent at any time, the Borrower
Representative shall deliver copies of all insurance policies maintained by it
as required by this Agreement. The Administrative Agent shall deliver copies of
any certificates of insurance to a Lender upon such Lender’s reasonable request.
 
(c)   If the Borrowers or any other Loan Party shall fail to maintain any
insurance in accordance with this Section, or if the Borrower Representative or
any such Loan Party shall fail to so endorse and deliver or deposit all
endorsements or certificates with respect thereto, the Administrative Agent
shall have the right (but shall be under no obligation) to procure such
insurance and the Borrowers agree to reimburse the Administrative Agent on
demand for all costs and expenses of procuring such insurance.
 
Section 6.04     Payment of Taxes and Claims. The Borrowers will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims that, if unpaid, might
become a Lien or charge upon any properties of the Borrowers or any of their
Subsidiaries; provided, however, that neither the Borrowers nor any of their
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim that is being contested in good faith and by proper proceedings if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
Without limiting the generality of the foregoing, the Borrowers will, and will
cause each of its Subsidiaries to, pay in full all of its wage obligations to
its employees in accordance with the Fair Labor Standards Act (29 U.S.C.
Sections 206-207) and any comparable provisions of applicable law.
 
Section 6.05    Corporate Franchises. The Borrowers will do, and will cause each
of their Subsidiaries to do, or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
authority; provided, however, that nothing in this Section shall be deemed to
prohibit any transaction permitted by Section 7.02.
 
Section 6.06     Good Repair. The Borrowers will, and will cause each of their
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever’s possession they may be, are kept in good
repair, working order and condition, normal wear and tear and damage caused by
fire or other casualty event (solely to the extent covered by insurance)
excepted, and that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
customary for companies in similar businesses.
 
Section 6.07     Compliance with Statutes, etc. The Borrowers will, and will
cause each of their Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
Governmental Authorities in respect of the conduct of its business and the
ownership of its property, other than those the noncompliance with which would
not be reasonably expected to have a Material Adverse Effect.
 

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Section 6.08     Compliance with Environmental Laws. Without limitation of the
covenants contained in Section 6.07:
 
(a)   The Borrowers will comply, and will cause each of their Subsidiaries to
comply, with all Environmental Laws applicable to the ownership, lease or use of
all Real Property now or hereafter owned, leased or operated by the Borrowers or
any of their Subsidiaries, and will promptly pay or cause to be paid all costs
and expenses incurred in connection with such compliance, except to the extent
that such compliance with Environmental Laws is being contested in good faith
and by appropriate proceedings and for which adequate reserves have been
established to the extent required by GAAP, and an adverse outcome in such
proceedings is not reasonably expected to have a Material Adverse Effect.
 
(b)   The Borrowers will keep or cause to be kept, and will cause each of their
Subsidiaries to keep or cause to be kept, all such Real Property free and clear
of any Liens imposed pursuant to such Environmental Laws other than Permitted
Liens.
 
(c)   Neither the Borrowers nor any of their Subsidiaries will generate, use,
treat, store, release or dispose of, or permit the generation, use, treatment,
storage, release or disposal of, Hazardous Materials on any Real Property now or
hereafter owned, leased or operated by the Borrowers or any of their
Subsidiaries or transport or permit the transportation of Hazardous Materials to
or from any such Real Property other than in compliance with applicable
Environmental Laws, except for such noncompliance as would not be reasonably
expected to have a Material Adverse Effect.
 
(d)   If required to do so under any applicable order of any Governmental
Authority, the Borrowers will undertake, and cause each of their Subsidiaries to
undertake, any clean up, removal, remedial or other action necessary to remove
and clean up any Hazardous Materials from any Real Property owned, leased or
operated by the Borrowers or any of their Subsidiaries in accordance with, in
all material respects, the requirements of all applicable Environmental Laws and
in accordance with, in all material respects, such orders of all Governmental
Authorities, except to the extent that such Borrower or such Subsidiary is
contesting such order in good faith and by appropriate proceedings and for which
adequate reserves have been established to the extent required by GAAP.
 
(e)   At the written request of the Administrative Agent or the Required
Lenders, which request shall specify in reasonable detail the basis therefor, at
any time and from time to time after the Lenders receive notice under Section
6.01(g) for any Environmental Claim involving potential expenditures by any
Borrower or any of its Subsidiaries in excess of $500,000 in the aggregate
(after giving effect to any available insurance proceeds) for any Real Property,
the Borrower Representative will provide, at its sole cost and expense, an
environmental site assessment report concerning any such Real Property now or
hereafter owned, leased or operated by such Borrower or any of its Subsidiaries,
prepared by an environmental consulting firm reasonably acceptable to the
Administrative Agent, indicating the presence or absence of Hazardous Materials
in violation of Environmental Laws and the potential cost of any removal or a
remedial action in connection with any Hazardous Materials on such Real Property
in violation of Environmental Laws. If the Borrower Representative fails to
provide the same within 90 days after such request was made, the Administrative
Agent may order the same, and such Borrower shall grant and hereby grants, to
the Administrative Agent and the Lenders and their agents, access to such Real
Property and specifically grants the Administrative Agent and the Lenders an
irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment, all at the Borrowers’ expense.
 
Section 6.09     Certain Subsidiaries to Join in Subsidiary Guaranty.
 

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(a)   In the event that at any time after the Closing Date any Borrower creates,
holds, acquires or at any time has any Subsidiary (other than a Foreign
Subsidiary as to which Section 6.01(b) applies and other than ICO Minerals to
the extent that the representation and warranty set forth in Section 5.23(b) is
true and correct in all respects) that is not a party to the Subsidiary
Guaranty, such Borrower will immediately, but in any event within five Business
Days, notify the Administrative Agent in writing of such event, identifying the
Subsidiary in question and referring specifically to the rights of the
Administrative Agent and the Lenders under this Section. The Borrowers promptly,
and in any event within five Business Days, will cause such Subsidiary to
deliver to the Administrative Agent, in sufficient quantities for the Lenders,
(i) a joinder supplement, reasonably satisfactory in form and substance to the
Administrative Agent, duly executed by such Subsidiary, pursuant to which such
Subsidiary joins in the Subsidiary Guaranty as a guarantor thereunder, and (ii)
if such Subsidiary is a corporation, resolutions of the Board of Directors of
such Subsidiary, certified by the Secretary or an Assistant Secretary of such
Subsidiary as duly adopted and in full force and effect, authorizing the
execution and delivery of such joinder supplement, or if such Subsidiary is not
a corporation, such other evidence of the authority of such Subsidiary to
execute such joinder supplement as the Administrative Agent may reasonably
request.
 
(b)   Notwithstanding the foregoing or the provisions of Section 6.10 hereof, no
Borrower shall be required to pledge (or cause to be pledged) more than 66% of
the stock or other equity interests in any first tier Foreign Subsidiary, or any
of the stock or other equity interests in any other Foreign Subsidiary, or to
cause a Foreign Subsidiary to join in the Subsidiary Guaranty or to become a
party to the Security Agreement or any other Security Document, if to do so
would subject such Borrower to liability for additional United States income
taxes by virtue of Section 956 of the Code in an amount such Borrower considers
material.
 
Section 6.10     Additional Security; Real Estate Matters; Further Assurances. 
 
(a)   Additional Security. Subject to subpart (b) below, the Borrowers or any
Subsidiary Guarantor acquires, owns or holds an interest in any Real Property or
any personal property that is not at the time included in the Collateral and is
required to be included in the Collateral pursuant to any Security Document, the
Borrower Representative will promptly notify the Administrative Agent in writing
of such event, identifying the property or interests in question and referring
specifically to the rights of the Administrative Agent and the Lenders under
this Section, and the Borrower Representative will, or will cause such
Subsidiary to, within 10 Business Days following request by the Administrative
Agent, grant to the Administrative Agent for the benefit of the Lenders a Lien
on such Real Property or such personal property pursuant to the terms of such
security agreements, assignments or other documents as the Administrative Agent
deems appropriate (collectively, the “Additional Security Document”) or a
joinder in any existing Security Document. Furthermore, the Borrower
Representative shall cause to be delivered to the Administrative Agent such
opinions of local counsel, corporate resolutions, a Perfection Certificate,
consents of landlords, Landlord’s Agreements and other related documents as may
be reasonably requested by the Administrative Agent in connection with the
execution, delivery and recording of any such Additional Security Document or
joinder, all of which documents shall be in form and substance reasonably
satisfactory to the Administrative Agent.
 
(b)   Foreign Subsidiaries. No Domestic Loan Party shall be required to pledge
(or cause to be pledged) more than 66% of the Equity Interests in any first tier
Foreign Subsidiary, or any of the Equity Interests in any other Foreign
Subsidiary, or to cause a Foreign Subsidiary to join in the Subsidiary Guaranty
or to become a party to the Security Agreement or any other Security Document,
if to do so would subject the Borrowers or any of their Subsidiaries to
liability for additional United States income taxes by virtue of Section 956 of
the Code in an amount the Borrowers consider material.
 

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(c)   Real Estate Matters. The Borrowers shall have delivered to the
Administrative Agent (x) with respect to each parcel of Real Property subjected
to a Mortgage as of the Closing Date (each, a “Closing Date Mortgaged
Property”), and (y) within 30 days of the request therefor by the Administrative
Agent, with respect to each parcel of Real Property acquired by any Borrower or
any Subsidiary Guarantor after the Closing Date that becomes subject to a
Mortgage pursuant to Section 6.10(a) above, all of the following:
 
(i)   evidence, which may be in the form of a letter or other certification from
a title insurance company reasonably satisfactory to the Administrative Agent (a
“Title Company”) or from an insurance broker, surveyor, engineer or other
provider, as to whether (1) such Real Property is a Flood Hazard Property, and
(2) the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, and if such Closing Date
Mortgaged Property is a Flood Hazard Property, evidence that the applicable Loan
Party has obtained flood insurance in respect of such Flood Hazard Property to
the extent required under the applicable regulations of the Board of Governors
of the Federal Reserve System;
 
(ii)   a certificate of the Borrowers identifying any Phase I, Phase II or other
environmental report received in draft or final form by any Loan Party during
the five-year period prior to the date of execution of the Mortgage relating to
such Real Property and/or the operations conducted therefrom, or stating that no
such draft or final form reports have been requested or received by any Loan
Party (or its counsel), together with true and correct copies of all such
environmental reports so listed (in draft form, if not finalized), and all such
environmental reports shall be reasonably satisfactory in form and substance to
the Administrative Agent; and
 
(iii)   an opinion of local counsel admitted to practice in the jurisdiction in
which such Real Property is located, satisfactory in form and substance to the
Administrative Agent, as to the validity and effectiveness of such Mortgage as a
lien on such Real Property encumbered thereby, and covering such other matters
of law in connection with the execution, delivery, recording and enforcement of
such Mortgage as the Administrative Agent may reasonably request.
 
(d)   Other Real Estate Matters. At any time after an Event of Default has
occurred and is continuing, the Administrative Agent may require, with respect
to each parcel of Real Property that is subject to a Mortgage, the Borrowers to
deliver to the Administrative Agent, within 30 days of the request therefor, all
of the following with respect to each parcel of Real Property that becomes
subject to a Mortgage pursuant to Section 6.10(a) above:
 
(i)   an American Land Title Association ( ALTA) mortgagee title insurance
policy or policies, or unconditional commitments therefor (a “Title Policy”)
issued by a Title Company, in an amount not less than the amount reasonably
required therefor by the Administrative Agent (taking into account the estimated
value of the property involved), insuring fee simple title to, or a valid
leasehold interest in, such Real Property vested in the applicable Loan Party
and assuring the Administrative Agent that the applicable Mortgage creates a
valid and enforceable first priority mortgage lien on the respective Real
Property encumbered thereby, subject only to Permitted Liens and a standard
survey exception, which Title Policy (1) shall include an endorsement for
mechanics’ liens, for revolving, “variable rate” and future advances under this
Agreement and for any other matters reasonably requested by the Administrative
Agent and (2) shall provide for affirmative insurance and such reinsurance as
the Administrative Agent may reasonably request, all of the foregoing in form
and substance reasonably satisfactory to the Administrative Agent;
 

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(ii)   a title report issued by the Title Company with respect thereto, dated
not more than 30 days prior to the date of execution of the applicable Mortgage
and reasonably satisfactory in form and substance to the Administrative Agent;
 
(iii)   copies of all recorded documents listed as exceptions to title or
otherwise referred to in the Title Policy or in such title report relating to
such real Property;
 
(iv)   a survey, in form and substance reasonably satisfactory to the
Administrative Agent, of such Real Property, certified in a manner reasonably
satisfactory to the Administrative Agent by a licensed professional surveyor
reasonably satisfactory to the Administrative Agent; and
 
(v)   appraisals, satisfactory in form and substance to the Administrative Agent
and each Lender, dated not more than 60 days prior to the date of execution of
each Mortgage and addressed to the Administrative Agent and the Lenders or
accompanied by a separate letter indicating that the Administrative Agent and
the Lenders may rely thereon, from one or more nationally recognized appraisal
firms, satisfactory to the Administrative Agent, covering (i) the Real
Properties, and (ii) all other tangible property, plant and equipment owned by
any Borrower or any Subsidiary, that is to be subjected to the Lien of the
Security Agreement and is located at any plant or facility owned or leased by
any Borrower or any Subsidiary in the United States of America, which appraisals
shall set forth (A) the “fair market value” of such property (i.e., the amount
at which such property would equitably exchange between a willing buyer and a
willing seller, neither being under a compulsion and both having reasonable
knowledge of all relevant facts on the premise that such property will continue
in its present use as part of an ongoing business enterprise), (B) the “orderly
disposal value” of such property (i.e., the amount which may be realized through
a forced sale disposal of such property when a reasonable time to find a buyer
is allowed), and (C) the “forced liquidation value” of such property (i.e., the
amount which may be realized through an immediate forced sale disposal of such
property), in each case as determined in accordance with sound appraisal
standards.
 
(e)   Landlord Waivers. The Borrowers will promptly upon request of the
Administrative Agent obtain, and will maintain in effect, Landlord’s Agreements
on any Real Property on which any items of Collateral are located, in form and
substance reasonably acceptable to the Administrative Agent.
 
(f)   Further Assurances. The Borrowers will, and will cause each of their
respective Subsidiaries to, at the expense of the Borrowers, make, execute,
endorse, acknowledge, file and/or deliver to the Administrative Agent from time
to time such conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Administrative Agent may reasonably require. If at any time the
Administrative Agent determines, based on applicable law, that all applicable
taxes (including, without limitation, mortgage recording taxes or similar
charges) were not paid in connection with the recordation of any mortgage or
deed of trust, the Borrowers shall promptly pay the same upon demand.
 
Section 6.11     Fiscal Years, Fiscal Quarters No Borrower shall change its or
any of its Subsidiaries’ fiscal years or fiscal quarters (other than the fiscal
year or fiscal quarters of a person that becomes a Subsidiary, made at the time
such person becomes a Subsidiary to conform to such Borrower’s fiscal year and
fiscal quarters).
 
Section 6.12     Senior Debt. The Obligations shall, and the Borrowers shall
take all necessary action to ensure that the Obligations shall, at all times
rank at least pari passu in right of
 

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payment (to the fullest extent permitted by law) with all other senior secured
Indebtedness of the Borrowers and each Subsidiary Guarantor.
 
Section 6.13     Federal Tax Liens. The Borrowers shall, within 30 days of the
Closing Date, cause a Certificate of Release of Federal Tax Lien to be filed
with each of the Secretary of State of the State of Texas and the County Clerk
of Harris County, Texas, in each case with respect to the federal tax lien filed
against ICO on March 14, 2003 in the amount of $1,203,783.50.
 
Section 6.14     ICO Minerals. ICO Minerals will be dissolved or merged into a
Loan Party and evidence thereof shall have been provided to the Administrative
Agent as soon as available but in no event later than 90 days following the
Closing Date.
 
Section 6.15     Australian Loan Defaults. Within 120 days of the Closing Date,
the Australian Subsidiary shall receive a waiver from the Australian Lender of
the Australian Loan Defaults, and such waiver shall be in form and substance
satisfactory to the Administrative Agent.
 
 
ARTICLE VII.
 
NEGATIVE COVENANTS
 
The Borrowers hereby covenant and agree that on the Closing Date and thereafter
for so long as this Agreement is in effect and until such time as the
Commitments have been terminated, no Notes remain outstanding and the Loans,
together with interest, Fees and all other Obligations incurred hereunder and
under the other Loan Documents, have been paid in full:
 
Section 7.01     Changes in Business. Neither the Borrowers nor any of their
Subsidiaries will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Borrowers and their Subsidiaries, would be substantially changed from the
general nature of the business engaged in by the Borrowers and their
Subsidiaries on the Closing Date.
 
Section 7.02    Consolidation, Merger, Acquisitions, Asset Sales, etc. The
Borrowers will not, and will not permit any Subsidiary to, (i) wind up,
liquidate or dissolve its affairs, (ii) enter into any transaction of merger or
consolidation, (iii) make or otherwise effect any Acquisition, (iv) make or
otherwise effect any Asset Sale, or (v) agree to do any of the foregoing at any
future time, except that, each of the following shall be permitted:
 
(a)   ICO Minerals may be dissolved or merged with or into any Loan Party,
provided that the surviving or continuing or resulting corporation is Loan
Party, and if no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the merger, consolidation or amalgamation
of (i) any Subsidiary with or into any Borrower, provided such Borrower is the
surviving or continuing or resulting corporation; (ii) any Subsidiary with or
into any Subsidiary Guarantor, provided that the surviving or continuing or
resulting corporation is a Subsidiary Guarantor; or (iii) any Foreign Subsidiary
with or into any other Foreign Subsidiary;
 
(b)   if no Default or Event of Default shall have occurred and be continuing or
would result therefrom, any Asset Sale by (i) a Borrower to any other Domestic
Loan Party, (ii) any Subsidiary to any Domestic Loan Party, or (iii) any Foreign
Subsidiary to any other Foreign Subsidiary;
 
(c)   if no Default or Event of Default shall have occurred and be continuing or
would result therefrom, any Borrower or any Subsidiary may make any Acquisition
that is a Permitted Acquisition,
 

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provided that all of the conditions contained in the definition of the term
Permitted Acquisition are satisfied;
 
(d)   if no Default or Event of Default shall have occurred and be continuing or
would result therefrom, in addition to any Asset Sale permitted above, any
Borrower or any Subsidiary may consummate any Asset Sale, provided that (i) the
consideration for each such Asset Sale represents fair value and at least 90% of
such consideration consists of cash; (ii) in the case of any Asset Sale
involving consideration in excess of $500,000, at least five Business Days prior
to the date of completion of such Asset Sale, the Borrower Representative shall
have delivered to the Administrative Agent an officer’s certificate executed by
an Authorized Officer, which certificate shall contain (A) a description of the
proposed transaction, the date such transaction is scheduled to be consummated,
the estimated sale price or other consideration for such transaction, and (B) a
certification that no Default or Event of Default has occurred and is
continuing, or would result from consummation of such transaction; and (iii) the
aggregate amount of all Asset Sales made pursuant to this subpart during any
fiscal year of the Borrowers shall not exceed $1,000,000;
 
(e)   The Borrowers and their Subsidiaries shall be permitted to make
Consolidated Capital Expenditures, so long as no Default or Event of Default has
occurred and is continuing or will occur as a result of such Consolidated
Capital Expenditure; and
 
(f)   The Borrowers and their Subsidiaries shall be permitted to make and
dispose of the investments permitted pursuant to Section 7.05(a), (b), (c), or
(d).
 
Section 7.03     Liens. The Borrowers will not, and will not permit any of their
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of any of the Borrowers or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with or without
recourse to a Borrower or any of its Subsidiaries, other than for purposes of
collection of delinquent accounts in the ordinary course of business) or assign
any right to receive income, or file or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute, except that the foregoing restrictions shall not
apply to:
 
(a)   Standard Permitted Liens; and
 
(b)   Liens on the Borrowers’ and their Subsidiaries’ properties in existence on
the Closing Date that are listed in Schedule 7.03; and
 
(c)   Liens (i) that are placed upon fixed or capital assets, leased, acquired,
constructed or improved by any Borrower or any Subsidiary, provided that
(A) such Liens only secure Capital Lease Obligations permitted by Section
7.04(i), (B) such Liens and the Indebtedness secured thereby are incurred prior
to or within 120 days after such acquisition or the completion of such
construction or improvement, (C) the Indebtedness secured thereby does not
exceed 90% of the cost of acquiring, constructing or improving such fixed or
capital assets, and (D) such Liens shall not apply to any other property or
assets of any Borrower or any Subsidiary; or (ii) arising out of the
refinancing, extension, renewal or refunding of any Indebtedness secured by any
such Liens, provided that the principal amount of such Indebtedness is not
increased and such Indebtedness is not secured by any additional assets; and
 

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(d)   any Lien on the new building constructed in the fiscal year 2006 of the
Borrowers and located at 1300 McCabe Road, LaPorte, Texas and owned by Bayshore
RE Holdings, Inc., granted in connection with the Contemplated Protective Life
Loan; and
 
(e)   any Lien granted to the Administrative Agent securing any of the
Obligations or any other Indebtedness of the Loan Parties under the Loan
Documents or any Indebtedness under any Designated Hedge Agreement; and
 
(f)   any Lien granted to secure Indebtedness permitted by Section 7.04(h).
 
Section 7.04     Indebtedness. The Borrowers will not, and will not permit any
of its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness of the Borrowers or any of their Subsidiaries, except:
 
(a)   Indebtedness incurred under this Agreement and the other Loan Documents;
and
 
(b)   the Indebtedness set forth on Schedule 7.04 hereto, and any refinancing,
extension, renewal or refunding of any such Indebtedness not involving an
increase in the principal amount thereof; and
 
(c)   Indebtedness constituting Permitted Foreign Subsidiary Loans and
Investments; and 
 
(d)   any intercompany loans (i) made by any Borrower or any Subsidiary to any
Domestic Loan Party, or (ii) made by any Foreign Subsidiary to any other Foreign
Subsidiary; and
 
(e)   Indebtedness of the Borrowers and their Subsidiaries under Hedge
Agreements, provided such Hedge Agreements have been entered into in the
ordinary course of business and not for speculative purposes; and
 
(f)   Indebtedness constituting Guaranty Obligations permitted by Section 7.05;
and
 
(g)   the Contemplated Protective Life Loan;
 
(h)   Indebtedness incurred by any Foreign Subsidiary or Foreign Subsidiaries;
and
 
(i)   additional Indebtedness (including Capital Lease Obligations) of the
Borrowers or any of their Subsidiaries to the extent not permitted by any of the
foregoing clauses, provided that (i) the aggregate principal amount of all such
Indebtedness shall not exceed $5,000,000 per annum, (ii) after giving effect to
the incurrence of any such Indebtedness the Leverage Ratio is less than 2.50 to
1.00 and (iii) no Default or Event of Default has occurred and is continuing at
the time of or immediately after the incurrence of any such Indebtedness.
 
Section 7.05     Investments and Guaranty Obligations. The Borrowers will not,
and will not permit any of its Subsidiaries to, directly or indirectly, (i) make
or commit to make any Investment or (ii) be or become obligated under any
Guaranty Obligations, except:
 
(a)   Investments by any Borrower or any Subsidiaries in cash and Cash
Equivalents; and
 
(b)   any endorsement of a check or other medium of payment for deposit or
collection, or any similar transaction in the normal course of business; and
 

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(c)   the Borrowers and their Subsidiaries may acquire and hold receivables and
similar items owing to them in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; and
 
(d)   any Permitted Creditor Investment; and
 
(e)   loans and advances to employees for business-related travel expenses,
moving expenses, costs of replacement homes, business machines or supplies,
automobiles and other similar expenses, in each case incurred in the ordinary
course of business, provided the aggregate outstanding amount of all such loans
and advances shall not exceed $1,000,000 at any time; and
 
(f)   to the extent not permitted by any of the other subparts in this Section,
Investments existing as of the Closing Date and described on Schedule 7.05
hereto; and
 
(g)   any Guaranty Obligations of any Borrower or any Subsidiary in favor of the
Administrative Agent, each LC Issuer and the Lenders and any other benefited
creditors under any Designated Hedge Agreements pursuant to the Loan Documents;
and
 
(h)   Investments of the Borrowers and their Subsidiaries in Hedge Agreements
permitted to be entered into pursuant to this Agreement; and
 
(i)   Investments (i) of any Borrower or any Subsidiary in any Subsidiary
existing as of the Closing Date, (ii) of any Borrower in any Domestic Loan Party
made after the Closing Date, (iii) of any Domestic Loan Party in any other
Domestic Loan Party (other than a Borrower) made after the Closing Date, or (iv)
constituting Permitted Foreign Subsidiary Loans and Investments; and
 
(j)   Investments of any Foreign Subsidiary in any other Subsidiary; and
 
(k)   intercompany loans and advances permitted by Section 7.04(d); and
 
(l)   the Acquisitions permitted by Section 7.02; and
 
(m)   any Guaranty Obligation incurred by any Domestic Loan Party with respect
to Indebtedness of another Domestic Loan Party which Indebtedness is permitted
by Section 7.04; and
 
(n)   Investments constituting Restricted Payments permitted pursuant to Section
7.06; and
 
(o)   other Investments by any Borrower or any Subsidiary in any other Person
(other than a Borrower or any Subsidiary) made after the Closing Date and not
permitted pursuant to the foregoing subparts, provided that (i) at the time of
making any such Investment no Default or Event of Default shall have occurred
and be continuing, or would result therefrom, and (ii) the maximum cumulative
amount of all such Investments that are so made pursuant to this subpart and
outstanding at any time shall not exceed an aggregate of $5,000,000, taking into
account the repayment of any loans or advances comprising such Investments.
 
Section 7.06     Restricted Payments.  The Borrowers will not, and will not
permit any of their Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except:
 

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(a)   any Borrower or any of its Subsidiaries may declare and pay or make
Capital Distributions that are payable solely in additional shares of its common
stock (or warrants, options or other rights to acquire additional shares of its
common stock); and
 
(b)   (i) any Subsidiary may declare and pay or make Capital Distributions to
any Domestic Loan Party, and (ii) any Foreign Subsidiary may declare and pay or
make Capital Distributions to any other Foreign Subsidiary or to any Domestic
Loan Party; and
 
(c)   ICO may declare and pay or make Capital Distributions (including, but not
limited to any made in connection with the Preferred Stock Transaction),
provided that (i) no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (ii) the Borrowers will be in compliance
with the financial covenants set forth in Section 7.07 after giving pro forma
effect to each such Capital Distribution, and (iii) after giving pro forma
effect to each such Capital Distribution, the Leverage Ratio is less than 2.50
to 1.00.
 
Section 7.07     Financial Covenants.
 
(a)   Consolidated Tangible Net Worth. The Borrower will not permit its
Consolidated Tangible Net Worth at any time to be less than the sum of (i)
$50,000,000 plus (ii) 50% of Consolidated Net Income (to the extent a positive
number) for each fiscal quarter ending after the Closing Date.
 
(b)   Leverage Ratio. The Borrowers will not at any time permit the Leverage
Ratio to exceed 3.00 to 1.00.
 
(c)   Fixed Charge Coverage Ratio. The Borrowers will not permit at any time the
Fixed Charge Coverage Ratio to be less than 1.10 to 1.00.
 
(d)  Asset Coverage Ratio. The Borrowers will not permit at any time the Asset
Coverage Ratio to be less than the minimum ratio specified below during the
period opposite such maximum amount:
 
Period
Minimum Ratio
  Closing Date through September 30, 2008
1.15 to 1.00
  October 1, 2008 and thereafter
1.25 to 1.00

 
(e)   Maintenance of Profitability.  The Borrowers shall not permit Consolidated
EBITDA less Consolidated Interest Expense to be less than zero for two
consecutive fiscal quarters.
 
Section 7.08    Limitation on Certain Restrictive Agreements. Except as set
forth on Schedule 7.08, the Borrowers will not, and will not permit any of their
respective Subsidiaries to, directly or indirectly, enter into, incur or permit
to exist or become effective, any “negative pledge” covenant or other agreement,
restriction or arrangement that prohibits, restricts or imposes any condition
upon (a) the ability of a Borrower or any Subsidiary to create, incur or suffer
to exist any Lien upon any of its property or assets as security for
Indebtedness, or (b) the ability of any such Subsidiary to make Capital
Distributions or any other interest or participation in its profits owned by the
Borrowers or any Subsidiary, or pay any Indebtedness owed to the Borrowers or a
Subsidiary, or to make loans or advances to the Borrowers or any other
Subsidiaries, or transfer any of its property or assets to the Borrowers or any
other Subsidiaries, except for such restrictions existing under or by reason of
(i) applicable law, (ii) this Agreement and the other Loan Documents, (iii)
customary provisions restricting subletting or
 

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assignment of any lease governing a leasehold interest, (iv) customary
provisions restricting assignment of any licensing agreement entered into in the
ordinary course of business, (v) customary provisions restricting the transfer
or further encumbering of assets subject to Liens permitted under Section
7.03(c), (vi) customary restrictions affecting only a Subsidiary under any
agreement or instrument governing any of the Indebtedness of a Subsidiary
permitted pursuant to Section 7.04, (vii) restrictions affecting any Foreign
Subsidiary under any agreement or instrument governing any Indebtedness of such
Foreign Subsidiary permitted pursuant to Section 7.04, and customary
restrictions contained in “comfort” letters and guarantees of any such
Indebtedness, (viii) any document relating to Indebtedness secured by a Lien
permitted by Section 7.03, insofar as the provisions thereof limit grants of
junior liens on the assets securing such Indebtedness, and (ix) any Operating
Lease or Capital Lease, insofar as the provisions thereof limit grants of a
security interest in, or other assignments of, the related leasehold interest to
any other Person.
 
Section 7.09     Transactions with Affiliates. The Borrowers will not, and will
not permit any Subsidiary to, enter into any transaction or series of
transactions with any Affiliate (other than, in the case of the Borrowers, any
Subsidiary, and in the case of a Subsidiary, the Borrowers or another
Subsidiary) other than in the ordinary course of business of and pursuant to the
reasonable requirements of such Borrower’s or such Subsidiary’s business and
upon fair and reasonable terms no less favorable to such Borrower or such
Subsidiary than would be obtained in a comparable arm’s-length transaction with
a Person other than an Affiliate, except (i) sales of goods to an Affiliate for
use or distribution outside the United States that in the good faith judgment of
the Borrowers comply with any applicable legal requirements of the Code, or (ii)
agreements and transactions with and payments to officers, directors and
shareholders that are either (A) entered into in the ordinary course of business
and not prohibited by any of the provisions of this Agreement, or (B) entered
into outside the ordinary course of business, approved by the directors or
shareholders of the Borrowers, and not prohibited by any of the provisions of
this Agreement or in violation of any law, rule or regulation.
 
Section 7.10     Plan Terminations, Minimum Funding, etc. The Borrowers will
not, and will not permit any Subsidiary or ERISA Affiliate to, (i) terminate any
Plan or Plans so as to result in liability of the Borrowers or any ERISA
Affiliate to the PBGC in excess of, in the aggregate, the amount that is equal
to 5% of the Borrowers’ Consolidated Net Worth as of the date of the then most
recent financial statements furnished to the Lenders pursuant to the provisions
of this Agreement, (ii) permit to exist one or more events or conditions that
present a material risk of the termination by the PBGC of any Plan or Plans with
respect to which the Borrowers or any Subsidiary or ERISA Affiliate would, in
the event of such termination, incur liability to the PBGC in excess of such
amount in the aggregate, (iii) fail to comply with the minimum funding standards
of ERISA and the Code with respect to any Plan, or (iv) incur an obligation to
contribute to, or become a contributing sponsor (as such term is defined in
Section 4001 of ERISA) in, any Multi-Employer Plan or Multiple Employer Plan.
 
Section 7.11     RE Holdings Entities. From and after the Closing Date, the
Borrowers shall not permit the RE Holdings Entities to acquire any additional
assets, whether by purchase, lease or otherwise, that were not owned by such
Subsidiaries as of the Closing Date.
 
Section 7.12     JPMorgan Securities Account. Notwithstanding anything contained
in the Loan Documents to the contrary, the Borrowers shall not be permitted to
request a Revolving Borrowing (other than any Revolving Borrowing requested on
the Closing Date) or the issuance of any Letter of Credit (other than with
respect to the Back-to-Back Letter of Credit issued on the Closing Date and any
full or partial replacements thereof), and the Lenders shall not be required to
make any Revolving Loans (other than any Revolving Loans made on the Closing
Date) and the LC Issuer shall not be required to issue any Letter of Credit
(other than the Back-to-Back Letter of Credit issued on the Closing Date and any
full or partial replacements thereof), until such time as there is less than
$1,000,000 on deposit in the
 

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JPMorgan Securities Account or there has been delivered a Control Agreement with
respect to the JPMorgan Securities Account in form and substance satisfactory to
the Administrative Agent; provided, however, that if the Borrowers request a
Revolving Borrowing and the Lenders make a Revolving Loan or the Borrowers
request the issuance of any Letter of Credit and the LC Issuer issues any Letter
of Credit after the amount on deposit in the JPMorgan Securities Account is less
than $1,000,000 but a Control Agreement has not been delivered, if the amount on
deposit in the JPMorgan Securities Account at any time thereafter exceeds
$1,000,000, the Lenders shall not be required to make any additional Revolving
Loans and the LC Issuer shall not be required to issue any Letter of Credit
until such time as the Borrowers shall have delivered a Control Agreement with
respect to the JPMorgan Securities Account in form and substance satsifactory to
the Administrative Agent.
 
Section 7.13 Anti-Terrorism Laws. Neither the Borrowers nor any of their
Subsidiaries shall be subject to or in violation of any law, regulation, or list
of any government agency (including, without limitation, the U.S. Office of
Foreign Asset Control list, Executive Order No. 13224 or the USA Patriot Act)
that prohibits or limits the conduct of business with or the receiving of funds,
goods or services to or for the benefit of certain Persons specified therein or
that prohibits or limits any Lender or LC Issuer from making any advance or
extension of credit to the Borrowers or from otherwise conducting business with
the Borrowers.
 
 
ARTICLE VIII.
 
EVENTS OF DEFAULT
 
Section 8.01     Events of Default. Any of the following specified events shall
constitute an Event of Default (each an “Event of Default”):
 
(a)   Payments: the Borrowers shall (i) default in the payment when due (whether
at maturity, on a date fixed for a scheduled repayment, on a date on which a
required prepayment is to be made, upon acceleration or otherwise) of any
principal of the Loans or any reimbursement obligation in respect of any Unpaid
Drawing; or (ii) default, and such default shall continue for three or more
Business Days, in the payment when due of any interest on the Loans, any Fees or
any other Obligations; or
 
(b)   Representations, etc.: any representation, warranty or statement made by
the Borrowers or any other Loan Party herein or in any other Loan Document or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
 
(c)   Certain Covenants: the Borrowers shall default in the due performance or
observance by it of any term, covenant or agreement contained in Sections 6.01,
6.09, 6.10, 6.11, 6.12 or Article VII of this Agreement; or
 
(d)   Other Covenants: any Loan Party shall default in the due performance or
observance by it of any term, covenant or agreement contained in this Agreement
or any other Loan Document (other than those referred to in Section 8.01(a) or
(b) or (c) above) and such default is not remedied within 30 days after the
earlier of (i) an officer of any Loan Party obtaining knowledge of such default
or (ii) the Borrowers receiving written notice of such default from the
Administrative Agent or the Required Lenders (any such notice to be identified
as a “notice of default” and to refer specifically to this paragraph); or
 
(e)   Cross Default Under Other Agreements: the Borrowers or any of their
Subsidiaries shall (i) default in any payment with respect to any Material
Domestic Indebtedness (other than the
 

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Obligations), and such default shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Material
Domestic Indebtedness; or (ii) default in the observance or performance of any
agreement or condition relating to any such Material Domestic Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto (and all grace periods applicable to such observance, performance or
condition shall have expired), or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Material Domestic Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause any such Material
Domestic Indebtedness to become due prior to its stated maturity; or any such
Material Domestic Indebtedness of the Borrowers or any of their Subsidiaries
shall be declared to be due and payable, or shall be required to be prepaid
(other than by a regularly scheduled required prepayment or redemption, prior to
the stated maturity thereof); or (iii) default in any payment with respect to
any Material Foreign Indebtedness, and such default shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Material Foreign Indebtedness; or (iv) other than the
Australian Loan Defaults (so long as the Australian Lender shall not have taken
any enforcement action with respect thereto), default in the observance or
performance of any agreement or condition relating to any such Material Foreign
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto (and all grace periods applicable to such observance,
performance or condition shall have expired), or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Material Foreign Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause any such
Material Foreign Indebtedness to become due prior to its stated maturity; or any
such Material Foreign Indebtedness of the Borrowers or any of their Subsidiaries
shall be declared to be due and payable, or shall be required to be prepaid
(other than by a regularly scheduled required prepayment or redemption, prior to
the stated maturity thereof); or (v) without limitation of the foregoing
clauses, default in any payment obligation under a Designated Hedge Agreement,
and such default shall continue after the applicable grace period, if any,
specified in such Designated Hedge Agreement or any other agreement or
instrument relating thereto; or
 
(f)   Invalidity of Loan Documents or Liens: any provision of any Loan Document,
at any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or under such Loan Document or satisfaction in
full of all the Obligations, ceases to be in full force and effect; or any Loan
Party or any other Person contests in any manner the validity or enforceability
of any provision of any Loan Document; or any Loan Party denies that it has any
or further liability or obligation under any Loan Document, or purports to
revoke, terminate or rescind any Loan Document; or
 
(g)   Judgments: (i) one or more judgments, orders or decrees shall be entered
against any Borrower and/or any of its Subsidiaries involving a liability (other
than a liability covered by insurance, as to which the carrier has adequate
claims paying ability and has not effectively reserved its rights) of $1,000,000
or more in the aggregate for all such judgments, orders and decrees for the
Borrowers and their Subsidiaries, and any such judgments or orders or decrees
shall not have been vacated, discharged or stayed or bonded pending appeal
within 30 days (or such longer period, not in excess of 60 days, during which
enforcement thereof, and the filing of any judgment lien, is effectively stayed
or prohibited) from the entry thereof; or (ii) one or more judgments, orders or
decrees shall be entered against any Borrower and/or any of its Subsidiaries
involving a required divestiture of any material properties, assets or business
reasonably estimated to have a fair value in excess of $1,000,000, and any such
judgments, orders or decrees shall not have been vacated, discharged or stayed
or bonded pending appeal within 30 days (or such longer period, not in excess of
60 days, during which enforcement thereof, and the filing of any judgment lien,
is effectively stayed or prohibited) from the entry thereof; or
 
(h)   Insolvency Event: any Insolvency Event shall occur with respect to any
Borrower or any Subsidiary; or
 

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(i)   ERISA: (i) any of the events described in clauses (i) through (xi) of
Section 6.01(f) shall have occurred; and (ii) there shall result from any such
event or events the imposition of a Lien, the granting of a security interest,
or a liability or a material risk of incurring a liability; or
 
(j)   Change of Control: if there occurs a Change of Control.
 
Section 8.02     Remedies. Upon the occurrence of any Event of Default, and at
any time thereafter, if any Event of Default shall then be continuing, the
Administrative Agent shall, upon the written request of the Required Lenders, by
written notice to the Borrower Representative, take any or all of the following
actions, without prejudice to the rights of the Administrative Agent or any
Lender to enforce its claims against any Borrower or any other Loan Party in any
manner permitted under applicable law:
 
(a)   declare the Commitments terminated, whereupon the Commitment of each
Lender shall forthwith terminate immediately without any other notice of any
kind;
 
(b)   declare the principal of and any accrued interest in respect of all Loans,
all Unpaid Drawings and all other Obligations (other than any Obligations under
any Designated Hedge Agreement) owing hereunder and thereunder to be, whereupon
the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower;
 
(c)   terminate any Letter of Credit that may be terminated in accordance with
its terms; or
 
(d)   exercise any other right or remedy available under any of the Loan
Documents or applicable law;
 
provided that, if an Event of Default specified in Section 8.01(h) shall occur,
the result that would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (a) and/or (b) above shall occur
automatically without the giving of any such notice.
 
Section 8.03    Application of Certain Payments and Proceeds. All payments and
other amounts received by the Administrative Agent or any Lender through the
exercise of remedies hereunder or under the other Loan Documents shall, unless
otherwise required by the terms of the other Loan Documents or by applicable
law, be applied as follows:
 
(i)   first, to the payment of that portion of the Obligations constituting
fees, indemnities and expenses and other amounts (including attorneys’ fees and
amounts due under Article III) payable to the Administrative Agent in its
capacity as such;
 
(ii)   second, to the payment of that portion of the Obligations constituting
fees, indemnities and expenses (including attorneys’ fees and amounts due under
Article III) payable to each Lender or each LC Issuer, ratably among them in
proportion to the aggregate of all such amounts;
 
(iii)   third, to the payment of that portion of the Obligations constituting
accrued and unpaid interest on the Loans and Unpaid Drawings with respect to
Letters of Credit, ratably among the Lenders in proportion to the aggregate of
all such amounts;
 
(iv)   fourth, pro rata to the payment of (A) that portion of the Obligations
constituting unpaid principal of the Loans and Unpaid Drawings, ratably among
the Lenders and each LC
 

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Issuer in proportion to the aggregate of all such amounts, and (B) the amounts
due to Designated Hedge Creditors under Designated Hedge Agreements subject to
confirmation by the Administrative Agent that any calculations of termination or
other payment obligations are being made in accordance with normal industry
practice;
 
(v)   fifth, to the Administrative Agent for the benefit of each LC Issuer to
cash collateralize the Stated Amount of outstanding Letters of Credit;
 
(vi)   sixth, to the payment of all other Obligations of the Loan Parties owing
under or in respect of the Loan Documents that are then due and payable to the
Administrative Agent, each LC Issuer, the Lenders and the Designated Hedge
Creditors, ratably based upon the respective aggregate amounts of all such
Obligations owing to them on such date; and
 
(vii)   finally, any remaining surplus after all of the Obligations have been
paid in full, to the Borrowers or to whomsoever shall be lawfully entitled
thereto.
 
 
ARTICLE IX.
 
THE ADMINISTRATIVE AGENT
 
Section 9.01     Appointment. Each Lender hereby irrevocably designates and
appoints KeyBank National Association to act as specified herein and in the
other Loan Documents, and each such Lender hereby irrevocably authorizes KeyBank
National Association as the Administrative Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent agrees to act as such upon the
express conditions contained in this Article. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
in the other Loan Documents, nor any fiduciary relationship with any Lender or
LC Issuer, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Administrative Agent. The provisions of this Article are solely for
the benefit of the Administrative Agent and the Lenders, and no Loan Party shall
have any rights as a third-party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Administrative
Agent shall act solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligation or relationship of agency or trust with
or for the Borrowers or any of their Subsidiaries.
 
Section 9.02    Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement or any other Loan Document by or through
agents, sub-agents or attorneys-in-fact, and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents,
sub-agents or attorneys-in-fact selected by it with reasonable care except to
the extent otherwise required by Section 9.03.
 
Section 9.03    Exculpatory Provisions. Neither the Administrative Agent nor any
of its Related Parties shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for its or such Related Parties’
own gross negligence or willful misconduct) or (b) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by the Borrowers or any of their Subsidiaries or any of their respective
officers contained in this Agreement, any other Loan Document or
 

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in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Loan Document or for any failure of the Borrowers or
any Subsidiary or any of their respective officers to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrowers or any Subsidiary. The Administrative Agent shall not
be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any Loan
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by the Administrative
Agent to the Lenders or by or on behalf of the Borrowers or any of their
Subsidiaries to the Administrative Agent or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
 
Section 9.04     Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, e-mail or other electronic transmission, facsimile
transmission, telex or teletype message, statement, order or other document or
conversation believed by it, in good faith, to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrowers or any of their Subsidiaries), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders or all of the
Lenders, as applicable, as to any matter that, pursuant to Section 11.12, can
only be effectuated with the consent of all Required Lenders, or all applicable
Lenders, as the case may be), and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders.
 
Section 9.05    Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default.” If the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided, however, that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
 
Section 9.06    Non-Reliance. Each Lender expressly acknowledges that neither
the Administrative Agent nor any of its Related Parties has made any
representations or warranties to it and that no act by the Administrative Agent
hereinafter taken, including, without limitation, any review of the affairs of
the Borrowers or any of their Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative
 

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Agent that it has, independently and without reliance upon the Administrative
Agent, or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrowers and their Subsidiaries and made
its own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent, or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrowers and their
Subsidiaries. The Administrative Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, assets, property, financial and other conditions,
prospects or creditworthiness of the Borrowers or any of their Subsidiaries that
may come into the possession of the Administrative Agent or any of its Related
Parties.
 
Section 9.07     No Reliance on Administrative Agent’s Customer Identification
Program. Each Lender acknowledges and agrees that neither such Lender, nor any
of its Affiliates, participants or assignees, may rely on the Administrative
Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s
customer identification program, or other obligations required or imposed under
or pursuant to the USA Patriot Act or the regulations thereunder, including the
regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the
“CIP Regulations”), or any other Anti-Terrorism Law, including any programs
involving any of the following items relating to or in connection with the
Borrowers or any of their Subsidiaries, any of their respective Affiliates or
agents, the Loan Documents or the transactions hereunder: (a) any identity
verification procedures, (b) any record keeping, (c) any comparisons with
government lists, (d) any customer notices or (e) any other procedures required
under the CIP Regulations or such other laws.
 
Section 9.08    USA Patriot Act. Each Lender or assignee or participant of a
Lender that is not organized under the laws of the United States of America or a
state thereof (and is not excepted from the certification requirement contained
in Section 313 of the USA Patriot Act and the applicable regulations because it
is both (a) an affiliate of a depository institution or foreign bank that
maintains a physical presence in the United States or foreign country, and
(b) subject to supervision by a banking authority regulating such affiliated
depository institution or foreign bank) shall deliver to the Administrative
Agent the certification, or, if applicable, recertification, certifying that
such Lender is not a “shell” and certifying to other matters as required by
Section 313 of the USA Patriot Act and the applicable regulations: (i) within 10
days after the Closing Date, and (ii) at such other times as are required under
the USA Patriot Act.
 
Section 9.09    Indemnification. The Lenders agree to indemnify the
Administrative Agent and its Related Parties, ratably according to their pro
rata share of the Aggregate Credit Facility Exposure, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, reasonable expenses or disbursements of any kind whatsoever that
may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or asserted against the
Administrative Agent or such Related Parties in any way relating to or arising
out of this Agreement or any other Loan Document, or any documents contemplated
by or referred to herein or the transactions contemplated hereby or any action
taken or omitted to be taken by the Administrative Agent or such Related Parties
under or in connection with any of the foregoing, but only to the extent that
any of the foregoing is not paid by the Borrower; provided, however, that no
Lender shall be liable to the Administrative Agent or any of its Related Parties
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent resulting solely from the Administrative Agent’s or such Related
Parties’
 

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gross negligence or willful misconduct. If any indemnity furnished to the
Administrative Agent or any such Related Parties for any purpose shall, in the
opinion of the Administrative Agent, be insufficient or become impaired, the
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section shall survive the payment of all
Obligations.
 
Section 9.10     The Administrative Agent in Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrowers, their
respective Subsidiaries and their respective Affiliates as though not acting as
Administrative Agent hereunder. With respect to the Loans made by it and all
Obligations owing to it, the Administrative Agent shall have the same rights and
powers under this Agreement as any Lender and may exercise the same as though it
were not the Administrative Agent, and the terms “Lender” and “Lenders” shall
include the Administrative Agent in its individual capacity.
 
Section 9.11     Successor Administrative Agent. The Administrative Agent may
resign at any time upon not less than 30 days notice to the Lenders, each LC
Issuer and the Borrower. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, in consultation with the Borrower
Representative, to appoint a successor. If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the Lenders
and each LC Issuer, appoint a successor Administrative Agent; provided, however,
that if the Administrative Agent shall notify the Borrower Representative and
the Lenders that no such successor is willing to accept such appointment, then
such resignation shall nonetheless become effective in accordance with such
notice and (i) the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents (except that
in the case of any collateral security held by the Administrative Agent on
behalf of the Lenders or any LC Issuer under any of the Loan Documents, the
retiring Administrative Agent shall continue to hold such collateral security
until such time as a successor Administrative Agent is appointed) and (ii) all
payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender and
LC Issuer directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this paragraph. Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this paragraph). The fees payable by
the Borrowers to a successor Administrative Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrowers and
such successor. After the retiring Administrative Agent’s resignation hereunder
and under the other Loan Documents, the provisions of this Article and Section
11.02 shall continue in effect for the benefit of such retiring Administrative
Agent, its sub-agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while the retiring
Administrative Agent was acting as Administrative Agent.
 
Section 9.12     Other Agents. Any Lender identified herein as a Co-Agent,
Syndication Agent, Documentation Agent, Managing Agent, Manager, Lead Arranger,
Arranger or any other corresponding title, other than “Administrative Agent,”
shall have no right, power, obligation, liability, responsibility or duty under
this Agreement or any other Loan Document except those applicable to all Lenders
as such. Each Lender acknowledges that it has not relied, and will not rely, on
any Lender so identified in deciding to enter into this Agreement or in taking
or not taking any action hereunder.
 

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ARTICLE X.
 
GUARANTY
 
Section 10.01     Guaranty by the Borrowers. The Borrowers hereby
unconditionally guarantee, for the benefit of the Benefited Creditors, all of
the following (collectively, the “Borrower Guaranteed Obligations”): (a) all
reimbursement obligations and Unpaid Drawings with respect to Letters of Credit
issued for the benefit of any LC Obligor (other than such Borrower) under this
Agreement, and (b) all amounts, indemnities and reimbursement obligations,
direct or indirect, contingent or absolute, of every type or description, and at
any time existing owing by any Subsidiary under any Designated Hedge Agreement
or any other document or agreement executed and delivered in connection
therewith to any Designated Hedge Creditor, in all cases under subparts (a) or
(b) above, whether now existing, or hereafter incurred or arising, including any
such interest or other amounts incurred or arising during the pendency of any
bankruptcy, insolvency, reorganization, receivership or similar proceeding,
regardless of whether allowed or allowable in such proceeding or subject to an
automatic stay under Section 362(a) of the Bankruptcy Code). Upon failure by any
Loan Party to pay punctually any of the Borrower Guaranteed Obligations, the
Borrowers shall forthwith on demand by the Administrative Agent pay the amount
not so paid at the place and in the currency and otherwise in the manner
specified in this Agreement or any other applicable agreement or instrument.
 
Section 10.02     Additional Undertaking. As a separate, additional and
continuing obligation, the Borrowers unconditionally and irrevocably undertake
and agree, for the benefit of the Benefited Creditors that, should any Borrower
Guaranteed Obligations not be recoverable from the Borrowers under Section 10.01
for any reason whatsoever (including, without limitation, by reason of any
provision of any Loan Document or any other agreement or instrument executed in
connection therewith being or becoming void, unenforceable, or otherwise invalid
under any applicable law) then, notwithstanding any notice or knowledge thereof
by any Lender, the Administrative Agent, any of their respective Affiliates, or
any other person, at any time, the Borrowers as sole, original and independent
obligor, upon demand by the Administrative Agent, will make payment to the
Administrative Agent, for the account of the Benefited Creditors, of all such
obligations not so recoverable by way of full indemnity, in such currency and
otherwise in such manner as is provided in the Loan Documents or any other
applicable agreement or instrument.
 
Section 10.03     Guaranty Unconditional. The obligations of the Borrowers under
this Article shall be unconditional and absolute and, without limiting the
generality of the foregoing shall not be released, discharged or otherwise
affected by the occurrence, one or more times, of any of the following:
 
(a)   any extension, renewal, settlement, compromise, waiver or release in
respect to the Borrower Guaranteed Obligations under any agreement or
instrument, by operation of law or otherwise;
 
(b)   any modification or amendment of or supplement to this Agreement, any
Note, any other Loan Document, or any agreement or instrument evidencing or
relating to any Company Guaranteed Obligation;
 
(c)   any release, non-perfection or invalidity of any direct or indirect
security for the Borrower Guaranteed Obligations under any agreement or
instrument evidencing or relating to any Borrower Guaranteed Obligations;
 
(d)   any change in the corporate existence, structure or ownership of any Loan
Party or other Subsidiary or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting any Loan Party or other Subsidiary or its assets or
any resulting release or discharge of any obligation of any Loan
 

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Party or other Subsidiary contained in any agreement or instrument evidencing or
relating to any of the Borrower Guaranteed Obligations;
 
(e)   the existence of any claim, set-off or other rights which the Borrowers
may have at any time against any other Loan Party, the Administrative Agent, any
Lender, any Affiliate of any Lender or any other Person, whether in connection
herewith or any unrelated transactions;
 
(f)   any invalidity or unenforceability relating to or against any other Loan
Party for any reason of any agreement or instrument evidencing or relating to
any of the Borrower Guaranteed Obligations, or any provision of applicable law
or regulation purporting to prohibit the payment by any Loan Party of any of the
Borrower Guaranteed Obligations; or
 
(g)   any other act or omission of any kind by any other Loan Party, the
Administrative Agent, any Lender or any other Person or any other circumstance
whatsoever which might, but for the provisions of this Article, constitute a
legal or equitable discharge of the Borrowers’ obligations under this Section
other than the irrevocable payment in full of all Borrower Guaranteed
Obligations.
 
Section 10.04    Borrowers Obligations to Remain in Effect; Restoration. The
Borrowers’ obligations under this Article shall remain in full force and effect
until the Commitments shall have terminated, and the principal of and interest
on the Notes and other Borrower Guaranteed Obligations, and all other amounts
payable by the Borrowers, any other Loan Party or other Subsidiary, under the
Loan Documents or any other agreement or instrument evidencing or relating to
any of the Borrower Guaranteed Obligations, shall have been paid in full. If at
any time any payment of any of the Borrower Guaranteed Obligations is rescinded
or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of such Loan Party, the Borrowers’ obligations under this Article
with respect to such payment shall be reinstated at such time as though such
payment had been due but not made at such time.
 
Section 10.05    Waiver of Acceptance, etc. The Borrowers irrevocably waive
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
person against any other Loan Party or any other Person, or against any
collateral or guaranty of any other Person.
 
Section 10.06    Subrogation. Until the indefeasible payment in full of all of
the Obligations and the termination of the Commitments hereunder, the Borrowers
shall have no rights, by operation of law or otherwise, upon making any payment
under this Section to be subrogated to the rights of the payee against any other
Loan Party with respect to such payment or otherwise to be reimbursed,
indemnified or exonerated by any such Loan Party in respect thereof.
 
Section 10.07    Effect of Stay. In the event that acceleration of the time for
payment of any amount payable by any Loan Party under any of the Borrower
Guaranteed Obligations is stayed upon insolvency, bankruptcy or reorganization
of such Loan Party, all such amounts otherwise subject to acceleration under the
terms of any applicable agreement or instrument evidencing or relating to any of
the Borrower Guaranteed Obligations shall nonetheless be payable by the
Borrowers under this Article forthwith on demand by the Administrative Agent.
 

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ARTICLE XI.
 
MISCELLANEOUS
 
Section 11.01     Payment of Expenses etc. The Borrowers agree to pay (or
reimburse the Administrative Agent, the Lenders or their Affiliates, as the case
may be) all of the following: (i) whether or not the transactions contemplated
hereby are consummated, for all reasonable out-of-pocket costs and expenses of
the Administrative Agent in connection with the negotiation, preparation,
syndication, administration and execution and delivery of the Loan Documents and
the documents and instruments referred to therein and the syndication of the
Commitments; (ii) all reasonable out-of-pocket costs and expenses of the
Administrative Agent and the Administrative Agent in connection with any
amendment, waiver or consent relating to any of the Loan Documents that are
requested by any Loan Party; (iii) all reasonable out-of-pocket costs and
expenses of the Administrative Agent, the Lenders and their Affiliates in
connection with the enforcement of any of the Loan Documents or the other
documents and instruments referred to therein, including, without
limitation,  the reasonable fees and disbursements of any individual counsel to
the Administrative Agent and any Lender (including, without limitation,
allocated costs of internal counsel); and (iv) any and all present and future
stamp and other similar taxes with respect to the foregoing matters and save the
Administrative Agent and each of the Lenders harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to any such indemnified Person) to pay such
taxes.
 
Section 11.02     Indemnification. The Borrowers agree to indemnify the
Administrative Agent, each Lender, and their respective Related Parties
(collectively, the “Indemnitees”) from and hold each of them harmless against
any and all losses, liabilities, claims, damages or expenses reasonably incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of (i) any investigation, litigation or other proceeding (whether or
not any Lender is a party thereto) related to the entering into and/or
performance of any Loan Document or the use of the proceeds of any Loans
hereunder or the consummation of any transactions contemplated in any Loan
Document, other than any such investigation, litigation or proceeding arising
out of transactions solely between any of the Lenders or the Administrative
Agent, transactions solely involving the assignment by a Lender of all or a
portion of its Loans and Commitments, or the granting of participations therein,
as provided in this Agreement, or arising solely out of any examination of a
Lender by any regulatory or other Governmental Authority having jurisdiction
over it, or (ii) the actual or alleged presence of Hazardous Materials in
violation of Environmental Laws in the air, surface water or groundwater or on
the surface or subsurface of any Real Property owned, leased or at any time
operated by the Borrowers or any of their Subsidiaries, the release, generation,
storage, transportation, handling or disposal of Hazardous Materials in
violation of Environmental Laws at any location, whether or not owned or
operated by the Borrowers or any of their Subsidiaries, if such Borrower or any
such Subsidiary could have or is alleged to have any responsibility in respect
thereof, the non-compliance of any such Real Property with foreign, federal,
state and local laws, regulations and ordinances (including applicable permits
thereunder) applicable thereto, or any Environmental Claim asserted against the
Borrowers or any of their Subsidiaries, in respect of any such Real Property,
including, in the case of each of (i) and (ii) above, without limitation, the
reasonable documented fees and disbursements of counsel incurred in connection
with any such investigation, litigation or other proceeding (but excluding any
such losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified or of any other Indemnitee who is such Person or an Affiliate of
such Person). To the extent that the undertaking to indemnify, pay or hold
harmless any Person set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrowers shall make
the maximum contribution to the payment and satisfaction of each of the
indemnified liabilities that is permissible under applicable law.
 

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Section 11.03     Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Lender and each LC Issuer is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any kind
to the Borrower Representative or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by such Lender or such LC Issuer (including, without limitation, by
branches, agencies and Affiliates of such Lender or LC Issuer wherever located)
to or for the credit or the account of the Borrowers against and on account of
the Obligations and liabilities of the Borrowers to such Lender or LC Issuer
under this Agreement or under any of the other Loan Documents, including,
without limitation, all claims of any nature or description arising out of or
connected with this Agreement or any other Loan Document, irrespective of
whether or not such Lender or LC Issuer shall have made any demand hereunder and
although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured. Each Lender and LC Issuer agrees to promptly notify the
Borrower Representative after any such set off and application, provided,
however, that the failure to give such notice shall not affect the validity of
such set off and application.
 
Section 11.04     Equalization.
 
(a)   Equalization. If at any time any Lender receives any amount hereunder
(whether by voluntary payment, by realization upon security, by the exercise of
the right of setoff or banker’s lien, by counterclaim or cross action, by the
enforcement of any right under the Loan Documents, or otherwise) that is
applicable to the payment of the principal of, or interest on, the Loans, LC
Participations or Fees (other than Fees that are intended to be paid solely to
the Administrative Agent or an LC Issuer and amounts payable to a Lender under
Article III), of a sum that with respect to the related sum or sums received by
other Lenders is in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation then owed and
due to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations to such Lenders
in such amount as shall result in a proportional participation by all of the
Lenders in such amount.
 
(b)  Recovery of Amounts. If any amount paid to any Lender pursuant to subparts
(i) or (ii) above is recovered in whole or in part from such Lender, such
original purchase shall be rescinded, and the purchase price restored ratably to
the extent of the recovery.
 
(c)  Consent of Borrower. The Borrowers consent to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrowers rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrowers
in the amount of such participation.
 
Section 11.05     Notices.
 
(a)   Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subpart
(c) below), all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopier as follows:
 
(i)   if to any Borrower or any other Loan Party, c/o the Borrower
Representative, at 1811 Bering Drive, Suite 200, Houston, Texas 77057,
Attention: Chief Financial Officer (Telecopier No. 713-335-2222; Telephone No.
713-351-4129;
 

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(ii)   if to the Administrative Agent, to it at the Notice Office; and
 
(iii)   if to a Lender, to it at its address (or telecopier number) set forth
next to its name on the signature pages hereto or, in the case of any Lender
that becomes a party to this Agreement by way of assignment under Section 11.04
of this Agreement, to it at the address set forth in the Assignment Agreement to
which it is a party.
 
(b)   Receipt of Notices. Notices and communications sent by hand or overnight
courier service, or mailed by certified or registered mail, shall be deemed to
have been given when received; notices sent by telecopier shall be deemed to
have been given when sent and receipt has been confirmed by telephone. Notices
delivered through electronic communications to the extent provided in subpart
(c) below shall be effective as provided in said subpart (c).
 
(c)   Electronic Communications. Notices and other communications to the
Administrative Agent, an LC Issuer or any Lender hereunder and required to be
delivered pursuant to Sections 6.01(a), (b), (c), (d), (h) or (i) may be
delivered or furnished by electronic communication (including e-mail and
Internet or intranet web sites) pursuant to procedures approved by the
Administrative Agent. The Administrative Agent and the Borrowers may, in their
discretion, agree in a separate writing to accept notices and other
communications to them hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be
limited to particular notices or communications. Unless the Administrative Agent
otherwise prescribes, (i) notices and other communications sent to an e-mail
address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function,
as available, return e-mail or other written acknowledgement), provided that if
such notice or other communication is not sent during the normal business hours
of the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next Business Day for the recipient, and
(ii) notices or communications posted to an Internet or intranet web site shall
be deemed received upon the deemed receipt by the intended recipient at its
e-mail address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the web site address
therefor.
 
(d)   Change of Address, Etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
each of the other parties hereto in accordance with Section 11.05(a).
 
Section 11.06    Successors and Assigns.
 
(a)   Successors and Assigns Generally. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns; provided, however, that the Borrowers may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of all the Lenders, provided, further, that any assignment or
participation by a Lender of any of its rights and obligations hereunder shall
be effected in accordance with this Section 11.06.
 
(b)   Participations. Each Lender may at any time grant participations in any of
its rights hereunder or under any of the Notes to an Eligible Assignee, provided
that in the case of any such participation,
 
(i)   the participant shall not have any rights under this Agreement or any of
the other Loan Documents, including rights of consent, approval or waiver (the
participant’s rights against
 

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such Lender in respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the participant relating thereto),
 
(ii)   such Lender’s obligations under this Agreement (including, without
limitation, its Commitments hereunder) shall remain unchanged,
 
(iii)   such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations,
 
(iv)   such Lender shall remain the holder of the Obligations owing to it and of
any Note issued to it for all purposes of this Agreement, and
 
(v)   the Borrowers, the Administrative Agent, and the other Lenders shall
continue to deal solely and directly with the selling Lender in connection with
such Lender’s rights and obligations under this Agreement, and all amounts
payable by the Borrowers hereunder shall be determined as if such Lender had not
sold such participation, except that the participant shall be entitled to the
benefits of Article III to the extent that such Lender would be entitled to such
benefits if the participation had not been entered into or sold,
 
and, provided further, that no Lender shall transfer, grant or sell any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Loan Document except to
the extent such amendment or waiver would (x) extend the final scheduled
maturity of the date of any Scheduled Repayment of any of the Loans in which
such participant is participating, or reduce the rate or extend the time of
payment of interest or Fees thereon (except in connection with a waiver of the
applicability of any post-default increase in interest rates), or reduce the
principal amount thereof, or increase such participant’s participating interest
in any Commitment over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default shall not constitute a change
in the terms of any such Commitment), (y) release all or any substantial portion
of the Collateral, or release any guarantor from its guaranty of any of the
Obligations, except strictly in accordance with the terms of the Loan Documents,
or (z) consent to the assignment or transfer by the Borrowers of any of its
rights and obligations under this Agreement.
 
(c)   Assignments by Lenders.
 
(i)   Any Lender may assign all, or if less than all, a fixed portion, of its
Loans, LC Participations and/or Commitments and its rights and obligations
hereunder to one or more Eligible Assignees, each of which shall become a party
to this Agreement as a Lender by execution of an Assignment Agreement; provided,
however, that
 
(A)   except in the case of (x) an assignment of the entire remaining amount of
the assigning Lender’s Loans and/or Commitments or (y) an assignment to another
Lender, an Affiliate of such Lender or an Approved Fund with respect to such
Lender, the aggregate amount of the Commitment so assigned (which for this
purpose includes the Loans outstanding thereunder) shall not be less than
$2,500,000;
 
(B)   in the case of any assignment to an Eligible Assignee at the time of any
such assignment the Lender Register shall be deemed modified to reflect the
Commitments of such new Lender and of the existing Lenders;
 

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(C)   upon surrender of the old Notes, if any, upon request of the new Lender,
new Notes will be issued, at the Borrowers’ expense, to such new Lender and to
the assigning Lender, to the extent needed to reflect the revised Commitments;
and
 
(D)   unless waived by the Administrative Agent, the Administrative Agent shall
receive at the time of each such assignment, from the assigning or assignee
Lender, the payment of a non-refundable assignment fee of $3,500.
 
(ii)   To the extent of any assignment pursuant to this subpart (c), the
assigning Lender shall be relieved of its obligations hereunder with respect to
its assigned Commitments.
 
(iii)   At the time of each assignment pursuant to this subpart (c), to a Person
that is not already a Lender hereunder and that is not a United States Person
(as such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, the respective assignee Lender shall provide to the Borrower
Representative and the Administrative Agent the applicable Internal Revenue
Service Forms (and any necessary additional documentation) described in Section
3.03(b).
 
(iv)   With respect to any Lender, the transfer of any Commitment of such Lender
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitment shall not be effective until such transfer is recorded on the
Lender Register maintained by the Administrative Agent with respect to ownership
of such Commitment and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitment and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of any
Commitments and Loans shall be recorded by the Administrative Agent on the
Lender Register only upon the acceptance by the Administrative Agent of a
properly executed and delivered Assignment Agreement pursuant to this subpart
(c).
 
(v)   Nothing in this Section shall prevent or prohibit (A) any Lender that is a
bank, trust company or other financial institution from pledging its Notes or
Loans to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank, or (B) any Lender that is a trust, limited
liability company, partnership or other investment company from pledging its
Notes or Loans to a trustee or agent for the benefit of holders of certificates
or debt securities issued by it. No such pledge, or any assignment pursuant to
or in lieu of an enforcement of such a pledge, shall relieve the transferor
Lender from its obligations hereunder.
 
(d)   No SEC Registration or Blue Sky Compliance. Notwithstanding any other
provisions of this Section, no transfer or assignment of the interests or
obligations of any Lender hereunder or any grant of participation therein shall
be permitted if such transfer, assignment or grant would require the Borrowers
to file a registration statement with the SEC or to qualify the Loans under the
“Blue Sky” laws of any State.
 
(e)   Representations of Lenders. Each Lender initially party to this Agreement
hereby represents, and each Person that becomes a Lender pursuant to an
assignment permitted by this Section will, upon its becoming party to this
Agreement, represents that it is a commercial lender, other financial
institution or other “accredited” investor (as defined in SEC Regulation D) that
makes or acquires loans in the ordinary course of its business and that it will
make or acquire Loans for its own account in the ordinary course of such
business; provided, however, that subject to the preceding Sections 11.06(b) and
(c), the disposition of any promissory notes or other evidences of or interests
in Indebtedness held by such Lender shall at all times be within its exclusive
control.
 

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Section 11.07    No Waiver; Remedies Cumulative. No failure or delay on the part
of the Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any other Loan Document and no course of dealing
between the Borrowers and the Administrative Agent or any Lender shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under any other Loan Document preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. No notice to or demand on the Borrowers in
any case shall entitle the Borrowers to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Lenders to any other or further action in any
circumstances without notice or demand. Without limiting the generality of the
foregoing, the making of a Loan or any LC Issuance shall not be construed as a
waiver of any Default or Event of Default, regardless of whether the
Administrative Agent, any Lender or any LC Issuer may have had notice or
knowledge of such Default or Event of Default at the time. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies that the Administrative Agent or any Lender would otherwise
have.
 
Section 11.08    Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial. ཉ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES. TO THE FULLEST EXTENT PERMITTED BY LAW, THE
BORROWERS HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY CLAIM TO ASSERT THAT
THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS GOVERNS THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS. Any legal action or proceeding with respect
to this Agreement or any other Loan Document may be brought in any court located
in Harris County, Texas or in any court of the United States for the Southern
District of Texas, Houston Division, and, by execution and delivery of this
Agreement, each Borrower hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrowers hereby further irrevocably consent to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Borrower Representative at its address for notices pursuant to
Section 11.05, such service to become effective 30 days after such mailing or at
such earlier time as may be provided under applicable law. Nothing herein shall
affect the right of the Administrative Agent or any Lender to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrowers in any other jurisdiction.
 
(b)   The Borrowers hereby irrevocably waive any objection that they may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Loan Document brought in the courts referred to in Section 11.08(a) above and
hereby further irrevocably waive and agree not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
 
(c)   EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING,
WITHOUT LIMITATION, ANY AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS RELATING TO
ANY OF THE FOREGOING), OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF
 

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LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH.
 
Section 11.09     Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same agreement. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower
Representative and the Administrative Agent.
 
Section 11.10     Integration. This Agreement, the other Loan Documents and any
separate letter agreements with respect to fees payable to the Administrative
Agent, for its own account and benefit and/or for the account, benefit of, and
distribution to, the Lenders, constitute the entire contract among the parties
relating to the subject matter hereof and thereof and supersede any and all
previous agreements and understandings, oral or written, relating to the subject
matter hereof or thereof.
 
Section 11.11     Headings Descriptive. The headings of the several Sections and
other portions of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
 
Section 11.12     Amendment or Waiver.
 
(a)   Neither this Agreement nor any other Loan Document, nor any terms hereof
or thereof, may be amended, changed, waived or otherwise modified unless such
amendment, change, waiver or other modification is in writing and signed by the
Borrowers, the Administrative Agent, and the Required Lenders or by the
Administrative Agent acting at the written direction of the Required Lenders;
provided, however, that
 
(i)   no change, waiver or other modification shall:
 
(A)   increase the amount of any Commitment of any Lender hereunder, without the
written consent of such Lender or increase the Total Credit Facility Amount
without the consent of all the Lenders;
 
(B)   extend or postpone the Revolving Facility Termination Date, the Term Loan
Maturity Date or the maturity date provided for herein that is applicable to any
Loan of any Lender, extend or postpone the expiration date of any Letter of
Credit as to which such Lender is an LC Participant beyond the latest expiration
date for a Letter of Credit provided for herein, or extend or postpone any
scheduled expiration or termination date provided for herein that is applicable
to a Commitment of any Lender, without the written consent of such Lender;
 
(C)   reduce the principal amount of any Loan made by any Lender, or reduce the
rate or extend the time of payment of, or excuse the payment of, interest
thereon (other than as a result of (x) waiving the applicability of any
post-default increase in interest rates or (y) any amendment or modification of
defined terms used in financial covenants), without the written consent of such
Lender;
 
(D)   reduce the amount of any Unpaid Drawing as to which any Lender is an LC
Participant, or reduce the rate or extend the time of payment of, or excuse the
 

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payment of, interest thereon (other than as a result of waiving the
applicability of any post-default increase in interest rates), without the
written consent of such Lender; or
 
(E)   reduce the rate or extend the time of payment of, or excuse the payment
of, any Fees to which any Lender is entitled hereunder, without the written
consent of such Lender; and
 
(ii)   no change, waiver or other modification or termination shall, without the
written consent of each Lender affected thereby,
 
(A)   release the Borrowers from any of their obligations hereunder;
 
(B)   release the Borrowers from their guaranty obligations under Article X or
release any Loan Party from the Subsidiary Guaranty, except, in the case of a
Subsidiary Guarantor, in accordance with a transaction permitted under this
Agreement;
 
(C)   release all or any substantial portion of the Collateral, except in
accordance with Section 2.19 or in connection with a transaction permitted under
this Agreement;
 
(D)   amend, modify or waive any provision of this Section 11.12, Section 8.03,
or any other provision of any of the Loan Documents pursuant to which the
consent or approval of all Lenders, or a number or specified percentage or other
required grouping of Lenders or Lenders having Commitments, is by the terms of
such provision explicitly required;
 
(E)   reduce the percentage specified in, or otherwise modify, the definition of
Required Lenders; or
 
(F)   consent to the assignment or transfer by the Borrowers of any of its
rights and obligations under this Agreement.
 
Any waiver or consent with respect to this Agreement given or made in accordance
with this Section shall be effective only in the specific instance and for the
specific purpose for which it was given or made.
 
(b)   No provision of Section 2.05 or any other provision in this Agreement
specifically relating to Letters of Credit may be amended without the consent of
any LC Issuer adversely affected thereby.
 
(c)   No provision of Article IX may be amended without the consent of the
Administrative Agent.
 
(d)   To the extent the Required Lenders (or all of the Lenders, as applicable,
as shall be required by this Section) waive the provisions of Section 7.02 with
respect to the sale, transfer or other disposition of any Collateral, or any
Collateral is sold, transferred or disposed of as permitted by Section 7.02, (i)
such Collateral shall be sold, transferred or disposed of free and clear of the
Liens created by the respective Security Documents; (ii) if such Collateral
includes all of the capital stock of a Subsidiary that is a party to the
Subsidiary Guaranty or whose stock is pledged pursuant to the Security
Agreement, such capital stock shall be released from the Security Agreement and
such Subsidiary shall be released from the Subsidiary Guaranty; and (iii) the
Administrative Agent shall be authorized to take actions deemed appropriate by
it in order to effectuate the foregoing.
 

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Section 11.13     Survival of Indemnities. All indemnities set forth herein
including, without limitation, in Article III (subject to the limitations set
forth Section 3.01(d)), Section 9.09 or Section 11.02 shall survive the
execution and delivery of this Agreement and the making and repayment of the
Obligations.
 
Section 11.14     Domicile of Loans. Each Lender may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Lender; provided, however, that the Borrower shall not be responsible for
costs arising under Section 3.01 resulting from any such transfer (other than a
transfer pursuant to Section 3.05) to the extent not otherwise applicable to
such Lender prior to such transfer.
 
Section 11.15     Confidentiality.
 
(a)   Each of the Administrative Agent, each LC Issuer and the Lenders agrees to
maintain the confidentiality of the Confidential Information, except that
Confidential Information may be disclosed (1) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the persons to whom such disclosure
is made will be informed of the confidential nature of such Confidential
Information and instructed to keep such Confidential Information confidential),
(2) to any direct or indirect contractual counterparty in any Hedge Agreement
(or to any such contractual counterparty’s professional advisor), so long as
such contractual counterparty (or such professional advisor) agrees to be bound
by the provisions of this Section, (3) to the extent requested by any regulatory
authority, (4) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (5) to any other party to this Agreement,
(6) to any other creditor of any Loan Party that is a direct or intended
beneficiary of any of the Loan Documents, (7) in connection with the exercise of
any remedies hereunder or under any of the other Loan Documents, or any suit,
action or proceeding relating to this Agreement or any of the other Loan
Documents or the enforcement of rights hereunder or thereunder, (8) subject to
an agreement containing provisions substantially the same as those of this
Section, to any assignee of or participant in any of its rights or obligations
under this Agreement, (9) with the consent of the Borrowers, or (10) to the
extent such Confidential Information (i) becomes publicly available other than
as a result of a breach of this Section, or (ii) becomes available to the
Administrative Agent, any LC Issuer or any Lender on a non-confidential basis
from a source other than a Loan Party and not otherwise in violation of this
Section.
 
(b)   As used in this Section, “Confidential Information” means all information
received from the Borrowers relating to the Borrowers or their business, other
than any such information that is available to the Administrative Agent, any LC
Issuer or any Lender on a non-confidential basis prior to disclosure by the
Borrowers; provided, however, that, in the case of information received from the
Borrowers after the Closing Date, such information is clearly identified at the
time of delivery as confidential.
 
(c)   Any Person required to maintain the confidentiality of Confidential
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Confidential Information as such
Person would accord to its own confidential information. The Borrowers hereby
agree that the failure of the Administrative Agent, any LC Issuer or any Lender
to comply with the provisions of this Section shall not relieve the Borrowers,
or any other Loan Party, of any of its obligations under this Agreement or any
of the other Loan Documents.
 
Section 11.16     Limitations on Liability of the LC Issuers. The Borrowers
assume all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letters of Credit. Neither
any LC Issuer nor any of its officers or directors shall be liable or
 

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responsible for: (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by an LC Issuer against
presentation of documents that do not comply with the terms of a Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the LC
Obligor shall have a claim against an LC Issuer, and an LC Issuer shall be
liable to such LC Obligor, to the extent of any direct, but not consequential,
damages suffered by such LC Obligor that such LC Obligor proves were caused by
(i) such LC Issuer’s willful misconduct or gross negligence in determining
whether documents presented under a Letter of Credit comply with the terms of
such Letter of Credit or (ii) such LC Issuer’s willful failure to make lawful
payment under any Letter of Credit after the presentation to it of documentation
strictly complying with the terms and conditions of such Letter of Credit. In
furtherance and not in limitation of the foregoing, an LC Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation.
 
Section 11.17     General Limitation of Liability. No claim may be made by any
Loan Party, any Lender, the Administrative Agent, any LC Issuer or any other
Person against the Administrative Agent, any LC Issuer, or any other Lender or
the Affiliates, directors, officers, employees, attorneys or agents of any of
them for any damages other than actual compensatory damages in respect of any
claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or any of the other
Loan Documents, or any act, omission or event occurring in connection therewith;
and the Borrowers, each Lender, the Administrative Agent and each LC Issuer
hereby, to the fullest extent permitted under applicable law, waive, release and
agree not to sue or counterclaim upon any such claim for any special,
consequential or punitive damages, whether or not accrued and whether or not
known or suspected to exist in their favor.
 
Section 11.18     No Duty. All attorneys, accountants, appraisers, consultants
and other professional persons (including the firms or other entities on behalf
of which any such Person may act) retained by the Administrative Agent or any
Lender with respect to the transactions contemplated by the Loan Documents shall
have the right to act exclusively in the interest of the Administrative Agent or
such Lender, as the case may be, and shall have no duty of disclosure, duty of
loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Borrowers, to any of its Subsidiaries, or to any other Person,
with respect to any matters within the scope of such representation or related
to their activities in connection with such representation. The Borrowers agree,
on behalf of itself and its Subsidiaries, not to assert any claim or
counterclaim against any such persons with regard to such matters, all such
claims and counterclaims, now existing or hereafter arising, whether known or
unknown, foreseen or unforeseeable, being hereby waived, released and forever
discharged.
 
Section 11.19     Lenders and Agent Not Fiduciary to Borrowers, etc. The
relationship among the Borrowers and their Subsidiaries, on the one hand, and
the Administrative Agent, each LC Issuer and the Lenders, on the other hand, is
solely that of debtor and creditor, and the Administrative Agent, each LC Issuer
and the Lenders have no fiduciary or other special relationship with the
Borrowers and their Subsidiaries, and no term or provision of any Loan Document,
no course of dealing, no written or oral communication, or other action, shall
be construed so as to deem such relationship to be other than that of debtor and
creditor.
 
Section 11.20     Survival of Representations and Warranties. All
representations and warranties herein shall survive the making of Loans and all
LC Issuances hereunder, the execution and delivery of this Agreement, the Notes
and the other documents the forms of which are attached as Exhibits hereto, the
issue and delivery of the Notes, any disposition thereof by any holder thereof,
and any
 

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investigation made by the Administrative Agent or any Lender or any other holder
of any of the Notes or on its behalf. All statements contained in any
certificate or other document delivered to the Administrative Agent or any
Lender or any holder of any Notes by or on behalf of the Borrowers or any of
their Subsidiaries pursuant hereto or otherwise specifically for use in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrowers hereunder, made as of the
respective dates specified therein or, if no date is specified, as of the
respective dates furnished to the Administrative Agent or any Lender.
 
Section 11.21     Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
 
Section 11.22    Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action, event, condition or
circumstance is not permitted by any of such covenants, the fact that it would
be permitted by an exception to, or would otherwise be within the limitations or
restrictions of, another covenant, shall not avoid the occurrence of a Default
or an Event of Default if such action is taken or event, condition or
circumstance exists.
 
Section 11.23    Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts that are treated as interest on such
Loan under applicable law (collectively, the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Base Rate to the date of repayment, shall have been
received by such Lender.
 
Section 11.24     USA Patriot Act. Each Lender subject to the USA Patriot Act
hereby notifies the Borrowers that pursuant to the requirements of the USA
Patriot Act, it is required to obtain, verify and record information that
identifies the Borrowers, which information includes the name and address of the
Borrowers and other information that will allow such Lender to identify the
Borrowers in accordance with the USA Patriot Act.
 
[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this
Agreement to be duly executed and delivered as of the date first above written.
 

   
ICO, INC.
       
Address:
1811 Bering, Suite 200
By:
/s/ Jon C. Biro
 
Houston, Texas 77057
Name:
Jon C. Biro
   
Title:
Chief Financial Officer &
     
Treasurer

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BAYSHORE INDUSTRIAL, L.P.
           
By:
Bayshore Industrial GP, L.L.C.
Address:
1811 Bering, Suite 200
Its:
General Partner
 
Houston, Texas 77057
By:
/s/ Jon C. Biro
   
Name:
Jon C. Biro
   
Title:
Chief Financial Officer &
     
Treasurer

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ICO POLYMERS NORTH AMERICA, INC.
       
Address:
1811 Bering, Suite 200
By:
/s/ Jon C. Biro
 
Houston, Texas 77057
Name:
Jon C. Biro
   
Title:
Chief Financial Officer &
     
Treasurer

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KEYBANK NATIONAL ASSOCIATION,
   
as a Lender, LC Issuer, and Administrative
   
Agent
       
Address:
3050 Post Oak Boulevard
By:
/s/ Bill Bobbora
 
Suite 500
Name:
William R. Bobbora
 
Houston, Texas 77056
Title:
Vice President
       

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WELLS FARGO BANK, NATIONAL
   
ASSOCIATION, as a Lender
     
Address:
1000 Louisiana
     
Houston, Texas 77002
By:
/s/ Charles W. Randall
   
Name:
Charles W. Randall
   
Title:
Vice President
       

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Schedule 1
 

 
Lenders and Commitments
 
 
Lender
 
 
Revolving
Commitment
 
 
Revolving Facility Percentage as of the Closing Date
 
 
Term
Commitment
 
 
  KeyBank National Association
 
 
$15,000,000
 
 
50.00%
 
 
$7,500,000
 
 
  Wells Fargo Bank, National Association
 
 
$15,000,000
 
 
50.00%
 
 
$7,500,000
 
 
Total:
 
 
$30,000,000
 
 
100.00%
 
 
$15,000,000