Document:

Exhibit 10-3

    Exhibit
      10.3

    

    ICO,
      Inc. Fiscal Year 2006 Incentive Plan Matrix- Chairman and
      CEO

     

    

      
        	
                Measurement

              	
                Weighting

              	
                FY
                  '06 Minimum

              	
                FY
                  '06 Target

              	
                FY
                  '07 Minimum

              	
                FY
                  '07 Target

              	
                Chairman
                  pay-out at target

              	
                CEO
                  pay-out at target

              
	
                ICO,
                  Inc. consolidated Operating Income

              	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              	
                Vesting
                  of 

                5,000
                  options

              	
                Vesting
                  of 30,000 options

              
	
                ICO,
                  Inc. consolidated Investment turnover

              	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              	
                Vesting
                  of 

                5,000
                  options

              	
                Vesting
                  of 30,000 options

              
	
                ICO,
                  Inc. consolidated ROE

              	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              	
                Vesting
                  of 

                5,000
                  options

              	
                Vesting
                  of 30,000 options

              
	
                Vesting
                  over two years

              	
                 

              	 	
                 

              	 	
                 

              	
                Vesting
                  of 

                5,000
                  options

              	
                Vesting
                  of 30,000 options

              
	
                Total

              	
                100%

              	 	 	 	 	
                Vesting
                  of 

                20,000
                  

                previously
                  granted options

              	
                Vesting
                  of 120,000 previously granted
                  options

              

      

    

     

    
       

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ICO,
      Inc.

    FY
      2006 Incentive Plan Matrix - Chairman and CEO

    Explanation
      of Measurement Definitions and Summary of Terms of Proposed Option
      Grants

    

    

    Measurement
      definitions

    

    
      	·  	
              “Operating
                Income”:
                Earnings before interest and taxes, excluding non-recurring charges.
                Note
                that Operating Income shall include expenses for bonuses payable
                to the
                CEO, Group Presidents and CFO pursuant to the Incentive Plan Matrices
                applicable to them. 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).

            

    

    

    
      	·  	
              “Investment
                turnover”: Trailing
                twelve months revenue divided by the “Average Invested Capital Base” for
                the previous thirteen month-end periods. “Average Invested Capital Base”
                is defined as the average total assets minus current liabilities,
                excluding funded debt (i.e. interest bearing debt.), calculated using
                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).

            

    

    

    

    Summary
      of Option Grants

    

    Summary
      of November 18, 2005 grants to Chairman: Total grant of options (“Options”) to
      purchases 60,000 shares of ICO, Inc. common stock (“Shares”) for a term of seven
      years from the date of grant (regardless of when Mr. Barmore ceases to serve
      as
      Chairman) with the following vesting schedules: (1) 20,000 Options,
      approximately 1/12th
      of which
      vesting each month-end during FY 2006 (1,666 Options per month for the first
      11
      months and 1,674 on the last month of the fiscal year); (2) up to 20,000 Options
      vest on December 15, 2006 contingent upon achieving the FY 2006 objectives;
      and
      (3) up to 20,000 Options vest on December 15, 2007 contingent upon achieving
      the
      FY 2007 objectives. Actual results between the "minimum" and "target" are
      interpolated assuming zero Options vest if the actual results equal the results
      described in the "minimum" column, and 100% of the Options in a given
      measurement row vest if the results equal or exceed the “target” column
      (therefore the midpoint between the "minimum" and the "target" results in any
      given measurement row result in 50% of the Options at target being vested).
      Contingent options that do not vest (as a result of FY 2006 or FY 2007
      performance not meeting target) will be terminated. Vesting of contingent
      options relating to fiscal year 2006 and 2007 performance may only occur if
      the
      Chairman holds his current position as of the last day of the applicable fiscal
      year. The Chairman’s options will be granted from the Company’s 1993
      Non-Employee Director Stock Option Plan (the “Director Plan”), which much be
      amended to provide for discretionary grants. All option grants will be subject
      to shareholder approval of the referenced amendment to the Director Plan at
      the
      Company’s 2006 Annual Meeting of Shareholders. 

    

    Summary
      of October & November 2005 grants to CEO: Total grant of 360,000 Options for
      a term of seven years from the date of grant (regardless of when Mr. Knapp
      ceases to be President & CEO) with the following vesting schedules: (1)
      120,000 Options, with 10,000 vesting each month-end during FY 2006 (these
      Options were previously granted on October 3, 2005); (2) up to 120,000 Options
      (granted on November 18, 2005) will vest on December 15, 2006 contingent upon
      achieving the FY 2006 objectives described in the Matrix; and (3) up to 120,000
      Options (granted on November 18, 2005) will vest on December 15, 2007 contingent
      upon achieving the FY 2007 objectives described in the Matrix. Actual results
      between the "minimum" and "target" are interpolated assuming zero Options vest
      if the actual results equal the results described in the "minimum" column,
      and
      100% of the Options in a given measurement row vest if the results equal or
      exceed the “target” column (therefore the midpoint between the "minimum" and the
      "target" results in any given measurement row result in 50% of the Options
      at
      target being vested). Contingent options that do not vest (as a result of FY
      2006 or FY 2007 performance not meeting target) will be terminated. Vesting
      of
      contingent options relating to fiscal year 2006 and 2007 performance may only
      occur if the CEO holds his current position as of the last day of the applicable
      fiscal year. The CEO’s options shall be granted from the Company’s Second
      Amended and Restated 1998 Stock Option Plan, as amended (the “1998 Plan”), and
      shall all be Non-Qualified Stock Options.

    

    Additionally,
      with regard to the grants to the Chairman and CEO described above, upon a sale
      or merger of the Company, unvested Options shall vest prior to such sale or
      merger, with the following exception: the Options referenced in the row entitled
      "Vesting over two years" above shall only vest in proportion to service as
      Chairman or CEO (as applicable) as of the date of the sale or merger (e.g.
      if a
      sale or merger was to close on January 1, 2007, only 3/12ths of the Chairman’s
      5,000 options referenced in the row entitled “Vesting over two years” for FY
      2007, or the CEO’s corresponding 30,000 options referenced in the same row,
      would vest).Exhibit 10-4

    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.

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    

      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.

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