Exhibit 10.4

 
ICO, Inc. Fiscal Year 2006 Incentive Plan Matrix- Business Unit Group Presidents
 
 
 
Pay-out as a percentage of base salary *
Measurement
Weighting
0%
40%
80%
Operating Income
 
 
 
 
Business Unit ROIC
Business Unit Investment Turnover
 
 
 
 
ICO, Inc. consolidated ROE
 
 
 
 
Subjective/Qualitative Factors
 
 
 
 

Upon achievement of certain operating income targets, payouts ranging from 0% to
80% of Base Salary will be made.

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ICO, Inc.
FY 2006 Incentive Plan Matrix -Group Presidents
Explanation of Measurement Definitions and additional Explanatory Notes

Measurement definitions
* “Operating Income”: Earnings before interest and taxes, excluding
non-recurring charges. Note that Operating Income shall include expenses for
bonuses payable under this Plan. Non-recurring charges that are excluded from
the calculation of Operating Income shall consist of impairment, restructuring
and other charges included in ICO's audited financial statements. Additionally,
Operating Income shall exclude, on a pro-forma basis, the effect of discontinued
operations (including plants that are shut down or sold).

* “ROIC”: Annual Operating Income divided by the Invested Capital Base.
“Invested Capital Base” is defined as the total assets, minus all intercompany
loans that are included in total assets (consisting of intercompany accounts
receivables, loans, and payables), investment in affiliates, and goodwill, minus
current liabilities, excluding funded debt (i.e. interest bearing debt.). The
“Average Invested Capital Base” shall be calculated using the previous thirteen
points of month-end data.

* “Investment Turnover”: Trailing twelve months revenue divided by the Average
Invested Capital Base for the previous thirteen month-end periods.

* “ROE”: Net income from continuing operations, minus preferred dividends
(whether paid or accrued towards Convertible Preferred Stock liquidation
preference), divided by Stockholders' equity, less the liquidation preference of
Convertible Preferred Stock. For purposes of this calculation, Stockholders'
equity and liquidation preference balances shall be averaged using the previous
four (4) quarter-end balances, plus the prior year-end balance (e.g. for FY 2006
bonus calculation the FY 2005 previous year end-balance plus the four
quarter-end balances of fiscal year 2006).

Computational Note
For each measurement the bonus amount payable is calculated as the result
achieved for each measurement (i.e. the 0%, 40% or 80% pay-out) times the
weighting and multiplied by the relevant employee’s base salary. Results for
each measurement falling between the targeted amounts adjust the pay-out targets
by interpolating the percentage of: (i) the resulted achieved minus the lower
threshold divided by, (ii) the difference between the higher and lower target,
times (iii) the higher pay-out target percentage.

Additional Explanatory Notes
* Subject to Compensation Committee approval of all terms of grant, and subject
to options being available under an existing ICO, Inc. employee stock option
plan, for bonus amounts achieved in any measurement category based on exceeding
any applicable 40% target, at the Committee’s discretion the Committee may, if
requested by the Group President, award stock options in place of a portion of
incentive cash compensation, priced, with such options vesting immediately and
using the Company’s option pricing model in accordance with SFAS 123R.

* A Business Unit President will not be entitled to a bonus under this Plan, or
otherwise with respect to FY 2006, if, prior January 1, 2006, (a) he resigns
from employment with the Company, or (b) he is terminated from employment for
“Cause.” Termination for “Cause” shall mean termination for “Cause” as defined
in the employment agreement (if any) between the Company or its subsidiary and
the Business Unit President, and also shall mean termination of the Business
Unit President as a result of the Business Unit President’s violation of any
provision of the Company’s Code of Business Ethics.