Document:

ex10-1.htm

    Exhibit
10.1

    AGENCY
AGREEMENT

     

    This
Agency Agreement (the "Agreement") is made
as of this 15th day of January, 2009 by and between Great American Group
WF, LLC, Hudson Capital Partners, LLC, SB Capital Group, LLC, and Tiger Capital
Group, LLC (collectively, the "Agent") and Circuit
City Stores, Inc., a Virginia corporation ("CCI"), Circuit City
Stores West Coast, Inc., a California corporation, and CCI's other direct and
indirect subsidiaries (collectively, "Merchant") that are
debtors in possession in chapter 11 bankruptcy cases jointly administered under
Case No. 08-35653 (KRH) (E.D. Va.) (collectively, the "Chapter 11 Cases") and
with a principal place of business at 9950 Mayland Drive, Richmond, Virginia
23233.

     

    RECITALS

     

    WHEREAS,
Merchant desires that Agent act as Merchant’s exclusive agent for the purpose of
conducting a sale (the "Sale") of all of the
Merchandise (as hereinafter defined) located in 567 retail store locations
("Stores") and distribution centers set forth on Exhibit 1 (each a
"Closing
Location," and  collectively the “Closing
Locations”).

     

    NOW
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Agent and Merchant hereby agree as
follows:

     

    Section
1. Defined
Terms.  The terms set forth below are defined in the Sections
referenced of this Agreement:

     

    
      
        
          	
                  Defined
    Term

                	
                  Section
      Reference

                
	
                  Additional
      Stores

                	
                  Section
      21

                
	
                  Agency
      Account

                	
                  Section
      7.2(a)

                
	
                  Agency
      Documents

                	
                  Section
      12.1(b)

                
	
                  Agent

                	
                  Preamble

                
	
                  Agent
      Claim

                	
                  Section
      13.5

                
	
                  Agent
      Letter of Credit

                	
                  Section
      3.3(b)

                
	
                  Agent’s
      Fee

                	
                  Section
      3.2

                
	
                  Agent
      Indemnified Parties

                	
                  Section
      14.1

                
	
                  Agreement

                	
                  Preamble

                
	
                  Approval
      Order

                	
                  Section
      2.1

                
	
                  Benefits
      Cap

                	
                  Section
      4.1(b)

                
	
                  Central
      Service Expenses

                	
                  Section
      4.1

                
	
                  Chapter
      11 Cases

                	
                  Preamble

                
	
                  Closing
      Locations

                	
                  Recitals

                
	
                  Cost
      File

                	
                  Section
      5.3(a)

                
	
                  Cost
      Value

                	
                  Section
      5.3(a)

                
	
                  Defective
      Merchandise

                	
                  Section
      5.1(b)

                
	
                  Designated
      Merchant Accounts

                	
                  Section
      7.2(b)

                
	
                  Discount

                	
                  Section
      5.3

                
	
                  Display
      Merchandise

                	
                  Section
      5.1

                
	
                  Estimated
      Guarantee Amount

                	
                  Section
      3.3(a)

                
	
                  Events
      of Default

                	
                  Section
      15

                
	
                  Excluded
      Defective Merchandise

                	
                  Section
      5.1

                
	
                  Excluded
      Goods

                	
                  Section
      5.1

                
	
                  Expenses

                	
                  Section
      4.1

                
	
                  FF&E

                	
                  Section
      5.1(b)

                
	
                  Final
      Reconciliation

                	
                  Section
      3.5(b)

                
	
                  Gross
      Rings

                	
                  Section
      3.4

                
	
                  Guaranteed
      Amount

                	
                  Section
      3.1(a)

                
	
                  Guaranty
      Percentage

                	
                  Section
      3.1(a)

                
	
                  Layaway
      Inventory

                	
                  Section
      9.3(c)

                
	
                  Lender
      Agent

                	
                  Bank
      of America, N.A., in its capacity
      as agent under Merchant's
      existing credit facility

                
	
                  Merchandise

                	
                  Section
      5.1(a)

                
	
                  Merchant

                	
                  Preamble

                
	
                  Merchant
      Consignment Goods

                	
                  Section
      5.2(a)

                
	
                  Occupancy
      Expenses

                	
                  Section
      4.1

                
	
                  Payment
      Date

                	
                  Section
      3.3(c)

                
	
                  Permitted
      Installation Services

                  Pricing
      Adjustment

                	
                  Section
      8.2

                  Section
      5.3(b)

                
	
                  Proceeds

                	
                  Section
      7.1

                
	
                  Retail
      Price

                	
                  Section
      5.3

                
	
                  Recovery
      Amount

                	
                  Section
      3.1(b)

                
	
                  Refund

                	
                  Section
      9.8

                
	
                  Remaining
      Merchandise

                	
                  Section
      3.2

                
	
                  Reserve
      Inventory

                	
                  Section
      9.2(c)

                
	
                  Reserve
      & Layaway Inventory

                	
                  Section
      9.2(c)

                
	
                  Retained
      Employee

                	
                  Section
      10.1

                
	
                  Retainer

                	
                  Section
      3.3(b)

                
	
                  Retention
      Bonus

                	
                  Section
      10.4

                
	
                  Sale

                	
                  Recitals

                
	
                  Sale
      Commencement Date

                	
                  Section
      6.1

                
	
                  Sale
      Guidelines

                	
                  Section
      9.1

                
	
                  Sale
      Term

                	
                  Section
      6.1

                
	
                  Sale
      Termination Date

                	
                  Section
      6.1

                
	
                  Sales
      Taxes

                	
                  Section
      9.4

                
	
                  Supplies

                	
                  Section
      9.5

                
	
                  Vacation
      Benefits

                	
                  Section
      4.1

                
	
                  WARN
      Act

                  Weekly
      Sale Reconciliation

                	
                  Section
      10.1

                  Section
      3.5(a)

                

        

      

    

     

    Section
2. Appointment of
Agent.

     

    2.1           Appointment of
Agent.  Merchant hereby irrevocably appoints Agent, and Agent
hereby agrees to serve as Merchant’s exclusive agent for the limited purpose of
conducting the Sale and, to the extent designated by Merchant, disposing of
Merchant’s owned FF&E, in accordance with the terms and conditions of this
Agreement.

     

     2.2           Bankruptcy Court
Approval.  Merchant’s and Agent’s obligations hereunder are
subject to approval of the Bankruptcy Court and shall be of no force and effect
in the event that it is not so approved.  As soon as practicable after
Merchant’s execution of this Agreement, Merchant shall apply to the Bankruptcy
Court for an order approving this Agreement in its entirety in form and
substance provided by Agent, which order shall be reasonably satisfactory to
Merchant (the “Approval Order”).  

     

    Section
3. Guaranteed Amount and Other
Payments.

     

    3.1 Payments to
Merchant.

     

    (a) As a
guaranty of Agent’s performance hereunder, Agent guarantees to Merchant that the
Proceeds of the Sale shall equal or exceed seventy and one half percent (70.5%)
(the “Guaranty
Percentage”) of the aggregate Cost Value of the Merchandise included in
the Sale (the “Guaranteed Amount”)
plus an amount sufficient to pay all Expenses.

     

    (b) To the
extent that Proceeds exceed the sum of (x) the Guaranteed Amount, (y) Expenses
of the Sale, and (z) one percent (1.0%) of the aggregate Cost Value of the
Merchandise (the “Agent’s Fee”) (the
sum of (x), (y) and (z), the “Initial Sharing Threshold”),
then Proceeds of the Sale above the Initial Sharing Threshold shall be shared
seventy percent (70%) to Merchant and thirty percent (30%) to Agent until Agent
has received an aggregate amount (including the Agent’s Fee and its 30% sharing)
equal to three percent (3%) of the aggregate Cost Value of the Merchandise (the
“Additional Sharing Threshold” and collectively with the “Initial Sharing
Threshold”, the “Sharing Thresholds”), and then all remaining Proceeds of the
Sale above the Additional Sharing Threshold shall be shared ninety percent (90%)
to Merchant and ten percent (10%) to Agent.  All amounts, if any, to
be received by the Merchant from Proceeds in excess of the Sharing Thresholds
shall be referred to as the “Recovery
Amount.”  The Agent shall pay to the Merchant the Guaranteed
Amount, the Recovery Amount, if any, in the manner and at the times specified in
Section 3.3 below.  The Guaranteed Amount and the Recovery Amount will
be calculated based upon the aggregate Cost Value of the Merchandise as
determined by the amount of Gross Rings, as adjusted for shrinkage per this
Agreement.

     

    3.2 Payments to
Agent.

     

    (a) The Agent
shall receive as its compensation for services rendered to the Merchant, the
Agent’s Fee, plus all remaining Proceeds of the Sale after payment of the
Guaranteed Amount, Expenses of the Sale, the Recovery Amount, if any, and all
other amounts payable to the Merchant from Proceeds hereunder.

     

    (b) Subject
to Merchant’s rights with respect to the Recovery Amount, all Merchandise
remaining, if any, at the Sale Termination Date (the “Remaining
Merchandise”) shall become the property of Agent, free and clear of all
liens, claims and encumbrances, provided, however, that Agent
shall use its best efforts to sell all of the Merchandise during the
Sale.  Any proceeds received from the sale of any Remaining
Merchandise shall be deemed Proceeds under this Agreement.

     

    3.3 Time of
Payments.

     

    (a) During
each week’s reconciliation as provided for in section 3.5 during the Sale Term,
all Proceeds of the Sale shall be deposited into the Designated Merchant
Accounts.  Proceeds shall be disbursed, on a weekly basis, as follows:
(i) first, to Merchant, to reimburse Merchant for Expenses paid by Merchant
during the previous week, (ii) second, to Agent, to reimburse Agent for Expenses
paid by Agent during the previous week, (iii) third, to Merchant, until the
Guaranteed Amount is paid in full, (iv) fourth, to Agent, until the Agent’s Fee
is paid in full, (v) fifth, to Merchant, in payment of the Recovery Amount, and
(vi) sixth, to Agent, the remainder.  All amounts shall be deposited
in Designated Merchant Accounts or such other accounts as designated by Lender
Agent.

     

    (b) No later
than two (2) business days after entry of the Approval Order (the “Payment Date”), and
to secure payment of the unpaid portion of the Guaranteed Amount and Expenses
from Agent to Merchant hereunder, Agent shall deliver to Merchant an irrevocable
standby letter of credit, naming Lender Agent as beneficiary, substantially in
the form of Exhibit
3.3(b) attached hereto, in the original face amount equal to the $100
million (the “Agent
Letter of Credit”).  Agent shall use its best efforts to cause
the Agent Letter of Credit to be delivered no later than the Payment
Date.  In the event that Agent shall fail to pay to Merchant, any
amount required to be paid hereunder, Lender Agent shall be entitled to draw on
the Agent Letter of Credit to fund such amount following five (5) days’ written
notice to Agent of the Merchant's intention to do so.  The Agent
Letter of Credit shall expire no less than sixty days after Sale Termination;
provided however; Merchant and
Agent agree that after payment of the unpaid portion of the Guaranteed Amount
pursuant to Section 3.3(a) the face amount of the Agent Letter of Credit shall
be reduced in an amount(s) to be agreed upon by Merchant and Agent, but in any
event not less than the sum of any and all amounts then due or to be due and
payable from Agent under this Agreement.  Unless the parties shall
have mutually agreed that they have completed the Final Reconciliation under
this Agreement, then, at least thirty (30) days prior to the initial or any
subsequent expiry date, Merchant shall receive an
amendment to the Agent Letter of Credit solely extending (or further extending,
as the case may be) the expiry date by at least sixty (60) days.  If
Merchant does not
receive such amendment to the Agent Letter of Credit no later than thirty (30)
days before the expiry date, then all amounts hereunder shall become immediately
due and payable and Lender Agent shall be permitted to draw under the Agent
Letter of Credit and Merchant shall hold the amount
drawn under the Agent Letter of Credit as security for amounts that may become
due and payable to Merchant hereunder.

     

    (c) Merchant
agrees that if at any time during the Sale Term Merchant holds any amounts due
to Agent as Proceeds hereunder, Agent may, in its discretion, after 5 business
days notice to Merchant and Lender Agent, offset such Proceeds being held by
Merchant against any amounts due and owing to Merchant pursuant to this Section
3.3 or otherwise under this Agreement.  In addition, Merchant and
Agent further agree that if at any time during the Sale Term, Agent holds any
amounts due to Merchant under this Agreement, Agent may, in its discretion,
after 5 business days notice to Merchant and Lender Agent, offset such amounts
being held by it against any amounts due and owing by, or required to be paid
by, Merchant hereunder.

     

    3.4 Gross
Rings.  During the Sale Term, Agent and Merchant shall keep a
strict count of register receipts and reports to determine the actual Cost Value
of the Merchandise sold by SKU.  All such records and reports shall be
made available to Agent and Merchant during regular business hours upon
reasonable notice.  Agent shall pay that portion of the Guaranteed
Amount calculated on the Gross Rings basis, to account for shrinkage, on the
basis of 102% of the aggregate Cost Value of Merchandise sold during the Sale
Term.

     

    3.5 Reconciliation

     

    (a) On each
Thursday during the Sale Term, commencing on the second Thursday after the Sale
Commencement Date, Agent and Merchant shall cooperate to jointly prepare a
reconciliation of the weekly Proceeds of the Sale, Expenses and any other Sale
related items that either party may reasonably request (the “Weekly Sale
Reconciliation”).

     

    (b) Within
thirty (30) days after the Sale Termination Date, Agent and Merchant shall
jointly prepare a final reconciliation of the Sale, including, without
limitation, a summary of Proceeds, Expenses, and any other accounting required
hereunder (the “Final
Reconciliation”) and deliver the same to each other.  Within
five (5) days of completion of the Final Reconciliation, Agent shall pay to
Merchant, or Merchant shall pay to Agent, as the case may be, any and all
amounts due the other pursuant to the Final Reconciliation.  During
the Sale Term, and until all of Agent’s obligations under this Agreement have
been satisfied, Merchant and Agent shall have reasonable access to Merchant’s
and Agent’s records with respect to Proceeds and Expenses to review and audit
such records.

     

    (c) In the
event that there is a dispute with respect to the Final Reconciliation, such
dispute shall be promptly (and in no event later than the third business day
following the request by either Merchant or Agent) submitted to the Bankruptcy
Court for a determination.  Merchant and Agent hereby agree to submit
to the jurisdiction of the Bankruptcy Court for such determination.

     

    Section
4. Sale
Expenses.

     

    4.1 Expenses.  Agent
shall unconditionally be responsible for all Expenses incurred in conducting the
Sale.  As used herein, “Expenses” shall mean
Store-level operating expenses of the Sale which arise during the Sale Term
(except in the case of (c), (d) and (m) below, which may arise prior to the Sale
Commencement Date) at the Closing Locations limited to the
following:

     

    
      	
              (a)  

            	
              all
      payroll (including SPIFS) for Retained Employees for actual days/hours
      worked in the conduct of the Sale and third party payroll processing
      fees;

            

    

     

    
      	
              (b)  

            	
              amounts
      payable including FICA, unemployment taxes, worker’s compensation,
      healthcare insurance benefits, and paid time-off benefits that accrue
      during the Sale for Retained Employees  in an amount not to
      exceed 19.8% of base payroll for each Retained Employee (the “Benefits
      Cap”);

            

    

     

    
      	
              (c)  

            	
              on-site
      supervision of the Stores, including base fees and bonuses of Agent’s
      field personnel, actual costs of temporary employees retained by Agent
      through third-party agencies during the Sale Term, travel to and from the
      Stores and incidental out-of-pocket and commercially reasonable travel
      expenses relating thereto (including reasonable and documented corporate
      travel to monitor and manage the
Sale)

            

    

     

    
      	
              (d)  

            	
              advertising
      and signage expenses (at Merchant’s contract rates, if
      available);

            

    

     

    
      	
              (e)  

            	
              local,
      leased line, satellite broadband connections and long distance telephone
      (including network connection charges such as T-1 lines) expenses incurred
      in the conduct of the Sale and not reflected in
  4.1(l);

            

    

     

    
      	
              (f)  

            	
              credit
      card, Telecheck and bank card fees, chargebacks, discounts, bad debt
      expense, check guarantee fees and any other bank charges relating to store
      operations;

            

    

     

    
      	
              (g)  

            	
              costs
      of all security services, including, without limitation, security systems,
      courier and guard service, building alarm service, alarm services
      maintenance and armored car
expenses;

            

    

     

    
      	
              (h)  

            	
              store
      cash theft and other store cash shortfalls in the
    registers;

            

    

     

    
      	
              (i)  

            	
              a
      pro-rata portion of Merchant’s property, casualty, general liability
      and/or other insurance premiums attributable to the Merchandise, which are
      not reflected in 4.1(l), and the incremental cost of Agent’s insurance
      necessary to fulfill Agent’s obligations as set forth in Section 12
      herein;

            

    

     

    
      	
              (j)  

            	
              costs
      of transfers of Merchandise initiated by Agent between the Stores during
      the Sale Term, including freight and delivery
  costs;

            

    

     

    
      	
              (k)  

            	
              Retention
      Bonuses as described in Section 10.4
below;

            

    

     

    
      	
              (l)  

            	
              actual
      Occupancy Expenses for the Stores on a per location and per diem basis in
      an amount equal to the per Store per diem amount set forth on Exhibit
      4.1 hereto;

            

    

     

    
      	
              (m)  

            	
              Agent’s
      actual cost of capital, reasonable attorney’s fees, letter of credit fees,
      insurance costs and other transaction
costs;

            

    

     

    
      	
              (n)  

            	
              additional
      Supplies;

            

    

     

    
      	
              (o)  

            	
              the
      actual cost of delivering Merchandise to customers minus any reimbursement
      from customers, which reimbursement shall not constitute Proceeds
      hereunder;

            

    

     

    
      	
              (p)  

            	
              the
      actual cost of installing Merchandise for customers minus any
      reimbursement from customers, which reimbursement shall not constitute
      Proceeds hereunder;

            

    

     

    
      	
              (q)  

            	
              Central
      Services Expenses of $10,000 per week during the Sale
  Term;

            

    

     

    
      	
              (r)  

            	
              postage,
      courier and overnight mail charges to and from or among the Closing
      Locations and central office to the extent relating to the
      Sale;

            

    

     

    
      	
               
      

            	
              (t)
       

            	
              housekeeping,
      cleaning services and snow and trash removal;
  and

            

    

     

    There
will be no double payment of Expenses to the extent Expenses appear or are
contained in more than one Expense category.  Notwithstanding anything
herein to the contrary, to the extent that an Expense listed in Section 4.1 is
also included on Exhibit 4.1, then Exhibit 4.1 shall control and such Expense
shall not be double counted.

     

    As used
herein, the following terms have the following respective meanings:

     

    “Central Service
Expenses” means costs and expenses for Merchant’s central administrative
services necessary for the Sale, including, but not limited to, MIS services,
payroll processing, cash reconciliation, inventory processing and handling, and
data processing and reporting.

     

    “Excluded Benefits”
means, with respect to each Retained Employee, (i) the following benefits
arising or accruing prior to the Sale Commencement Date: (v) vacation days or
vacation pay, (w) sick days or sick leave or any other form of paid time off,
(x) maternity leave or other leaves of absence, termination or severance pay,
and (y) ERISA coverage and similar contributions and/or (ii) any benefits in
excess of the Benefits Cap, including any payments due under the Worker
Adjustment Retraining Notification Act (“WARN
Act”).

     

     “Occupancy Expenses”
means actual base rent, percentage rent, HVAC, utilities, CAM, storage costs,
real estate and use taxes, merchant’s association dues and expenses, personal
property leases (including, without limitation, point of sale equipment), cash
register maintenance, building maintenance, rental for furniture, fixtures and
other equipment, and building insurance relating to the Closing Locations
limited on a per diem, per Closing Location basis and limited to those amounts
and categories as described on Exhibit 4.1 attached
hereto.

     

    “Expenses”
shall not include: (i) Excluded Benefits; (ii) expenses associated with any of
Merchant’s distribution centers; (iii) any Occupancy Expenses in excess of the
amounts set forth on  Exhibit 4.1; (iv)
costs of transferring Merchandise from Merchant’s distribution centers to the
Stores, and (v) any other costs, expenses, or liabilities arising during the
Sale Term in connection with the Sale, other than the Expenses listed above, all
of which shall be paid by Merchant promptly when due during the Sale
Term.

     

    4.2 Payment of
Expenses.  All Expenses incurred during each week of the Sale
(i.e., Sunday
through Saturday) shall be paid by Agent to or on behalf of Merchant immediately
following the weekly Sale reconciliation by Merchant and Agent pursuant to
Sections 3.3 and 3.5, based upon invoices and other documentation reasonably
satisfactory to Agent.

     

    4.3 The Agent
shall be unconditionally responsible for the payment of all Expenses whether or
not there are sufficient Proceeds collected to pay such Expenses after the
payment of the Guaranteed Amount.

     

    Section
5. Merchandise.

     

    5.1 Merchandise Subject to this
Agreement.

     

    (a) For
purposes of this Agreement, “Merchandise” shall
mean: all finished goods inventory that is owned by Merchant and located at the
Closing Locations as of the Sale Commencement Date, including, Display
Merchandise, and Defective Merchandise, and all On Order
Merchandise.  For the avoidance of doubt, Merchandise shall include
all Panasonic consignment goods on display in a Closing Location.

     

    (b) Notwithstanding
the foregoing, “Merchandise” shall not include: (1) goods which belong to
sublessees, licensees or concessionaires of Merchant; (2) furnishings, trade
fixtures, equipment and improvements to real property that are located in the
Closing Locations (collectively, “FF&E”); (3)
Return to Vendor (RTV)/to be serviced or repaired merchandise; (4) merchandise
subject to Manufacturer’s recall; (5) Bose branded merchandise; (6) Reserve
& Layaway Inventory; (7) Department #111 Direct TV Receivers, Department
#118 Seating and Department 505 installation software; (8) gift cards and saving
cards; (9) Excluded Defective Merchandise; (10) other goods held by Merchant on
memo, on consignment (other than Panasonic consignment goods on display in a
Closing Location but including closed-box Panasonic consignment goods), or as
bailee; and (11) Product Return Center merchandise ((1) though (11),
collectively, “Excluded
Goods”).  As used in this Agreement the following terms have
the respective meanings set forth below:

     

    “Display Merchandise”
means those items of inventory used in the ordinary course of business as
displays or floor models, including inventory that has been removed from its
original packaging for the purpose of putting such item on display, but not
customarily sold or saleable by the Merchant.

     

    “Excluded Defective
Merchandise” means any item of merchandise that is dented, worn,
shopworn, scratched, broken, faded mismatched, damaged, defective, refurbished,
incomplete, out of box, mismatched, scratched, discolored, returned, missing
power cords or other included components, repaired or suffering from other
damages or merchandise affected by other similar defects rendering it otherwise
not reasonably suitable or reasonably saleable for its intended
purpose.

     

    “Defective
Merchandise” means any item of merchandise that is dented, worn,
scratched, broken, faded, mismatched, or merchandise affected by other similar
defects rendering it not first quality, but which is reasonably saleable by
Agent for its intended purpose during the Sale Term.  Defective
Merchandise does not include Display Merchandise.

     

    “On Order Merchandise”
means goods to be received at the Closing Locations in the ordinary course from
Merchant’s vendors on or after the Sale Commencement Date, not to exceed $75
million at Cost Value, which goods shall be delivered to the Stores by Merchant
at Merchant’s cost but at Agent’s direction no later February 6,
2009.

     

    “Distribution Center
Merchandise” means those items of inventory currently located at
Merchant’s Distribution Centers.  Such goods shall be delivered by
Merchant at Merchant’s cost but at Agent’s direction to the Stores no later than
fourteen days after Agent provides written notice to Merchant of Agent’s desired
allocation of such Distribution Center Merchandise (the “Distribution Center
Merchandise Receipt Deadline”).    

    

    5.2 Sale of Excluded
Goods.

     

    (a)           Merchant
shall retain all responsibility for Excluded Goods.  If the Merchant
elects, Agent shall accept all or a portion of Excluded Goods, as directed by
Merchant, for sale as “Merchant Consignment Goods” at prices established by the
Agent, except in the case of prices for Reserve & Layaway Inventory, which
shall be established by Merchant.  Agent shall retain 20% of the
receipts for all sales of Merchant Consignment Goods, and the Merchant shall
receive 80% of the receipts in respect of such sales; provided, however, that,
notwithstanding anything to the contrary herein, Merchant shall receive 80% of
the receipts for all sales of closed-box Panasonic consignment
goods.  Agent shall receive its share of the receipts of sales of
Merchant Consignment Goods on a weekly basis, immediately following the weekly
Sale reconciliation by Merchant and Agent pursuant to Section
3.5.  Except as expressly provided in this Section 5.2, the Agent
shall have no cost, expense or responsibility in connection with any goods not
included in Merchandise.

     

    (b)           Notwithstanding
anything to the contrary herein, Agent shall (i) process all Reserve Inventory
without compensation and (ii) process all Layaway Inventory with Merchant
retaining 90% of the proceeds from the sale of each item of Layaway Inventory
and Agent retaining 10% of such proceeds.  By no later than January
20, 2009, Merchant agrees to notify all Reserve & Layaway Inventory
customers that they must take delivery of all Reserve & Layaway Inventory by
no later than January 31, 2009.

     

    5.3 Valuation.

     

    (a)           For
purposes of this Agreement, except as modified below in Section 5.3(b), “Cost Value” shall
mean, with respect to each item of Merchandise, the standard cost (determined by
applicable merchant accounting unit for such item of Merchandise as reflected in
Merchant’s master cost files titled (x) “CC – CE Detail All Locations (Includes
OH Breakdown)” and (y) “CC-2A Entertainment Detail All Locations”) (together,
the "Cost
File”).  Cost is determined by the average cost method and
includes the cost of freight from the vendor to the Merchant’s distribution
centers, or in the case of direct shipments, the cost of freight from the vendor
to the Merchant’s stores.  In the case of import Merchandise, cost
includes duties, brokerage fees, drayage, and other associated costs that result
in a net landed cost.  Also included in the cost of inventory are
certain discounts and vendor allowances that are not a reimbursement of
specific, incremental and identifiable costs to promote vendors’
products.  With respect to some, and in certain instances all, items
of Merchandise, cost, as reflected in the Cost File, does not account for or
include certain volume discounts, advertising co-op allowances, or other
discounts, including, without limitation, cash discounts (each a "Discount"); provided. further, that the
Cost Value associated with any such item of Merchandise shall not be adjusted on
account of any Discount(s).  The Cost Value represents the stock
ledger cost, which includes a 5% load to protect inventory margin for internal
reporting and is reversed on the general ledger.

     

    (b)           For
purposes of this Agreement, Retail Price shall mean, with respect to each item
of Merchandise, as of the Sale Commencement Date, the lower of (i) the lowest
ticketed, shelf marked, or rebate price, and (ii) the lowest register or file
price, except for minimum discretionary prices allowed to sales
persons.  The marked down Retail Price of open box or display
Merchandise will not be applied as the lowest Retail Price for other items of
the identical SKU.  If Merchant and Agent agree that any item is
clearly mismarked, then such mismarked price will not be utilized when
determining Retail Price and the actual price will prevail.  If the
Retail Price of an item of Merchandise is less than the Cost Value of such item
of Merchandise as determined under section 5.3(a) and (b), the Cost Value of all
such items of Merchandise shall be such Retail Price.

     

    (c)           Other
than Excluded Defective Merchandise, in lieu of any other adjustments to the
Cost Value of Merchandise under this Agreement (e.g., adjustments for
Defective Merchandise, clearance merchandise, and/or sample merchandise), the
aggregate Cost Value of the Merchandise shall be adjusted (i.e., reduced) by means of a
single global downward adjustment equal to one percent (1%) of the sum of the
aggregate Cost Value of the Merchandise.

     

    (d)           Items
of On-Order Merchandise received at the Stores after February 6, 2009 and
Distribution Center Merchandise received at the Stores after the Distribution
Center Merchandise Receipt Deadline will be valued at the applicable Cost Value
(determined consistently with Section 5.3(a) and (b) above) for each such item
multiplied by the inverse of the prevailing discount on similar items of
Merchandise as of the date of receipt in the Stores.

    

    Section
6. Sale
Term.

     

    6.1 Term.  The
Sale shall commence at the Closing Locations on January 17, 2009 (the “Sale Commencement
Date”).  Agent shall complete the Sale at the Closing
Locations, and shall vacate all of the Closing Location premises on or before
March 31, 2009 (the “Sale Termination
Date”) unless the Sale and the Sale Termination Date are extended by
mutual agreement of Agent and Merchant following a commensurate extension of the
expiry date of the Agent Letter of Credit, provided that Agent may terminate the
Sale at any Closing Location upon ten (10) days’ written notice to
Merchant.  The period for the Sale Commencement Date to the Sale
Termination Date shall be referred to herein as the “Sale
Term.”

     

    6.2 Vacating the Closing
Locations.  On the Sale Termination Date, Agent shall leave the
Closing Locations in “broom clean” condition (ordinary wear and tear
excepted).  Agent shall vacate the Closing Locations on or before the
Sale Termination Date, as provided for herein, at which time Agent shall
surrender and deliver the Closing Location premises and Closing Location keys to
Merchant.  Agent’s obligations to pay all Expenses, including
Occupancy Expenses, for each Closing Location shall continue until the Sale
Termination Date for each such Closing Location.  All assets of
Merchant used by Agent in the conduct of the Sale (e.g. FF&E,
supplies, etc.) shall be returned by Agent to Merchant or left at the Closing
Locations premises at the end of the Sale Term to the extent the same have not
been used in the conduct of the Sale or have not been otherwise disposed of
through no fault of Agent; provided, however, Agent shall
remove all unsold Merchandise at the end of the Sale Term at each of the Closing
Locations. Agent shall be responsible for all Occupancy Expenses (irrespective
of any per diem cap on Occupancy Expenses) for a Closing Location for which
Merchant is or becomes obligated resulting from Agent’s failure to vacate such
Closing Location in a timely manner.

     

    Section
7. Sale
Proceeds.

     

    7.1 Proceeds.  For
purposes of this Agreement, “Proceeds” shall mean
the aggregate of:  (a) the total amount (in U.S. dollars) of all sales
of Merchandise made under this Agreement, exclusive of Sales Taxes, and (b) any
proceeds of Merchant’s insurance for loss or damage to Merchandise or loss of
cash arising from events occurring during the Sale Term.

     

    7.2 Deposit of
Proceeds.  During the Sale Term, all Proceeds of the Sale
(including credit card Proceeds), shall be deposited on a daily basis into
Merchant’s existing accounts designated for the designated Closing Locations,
but also are segregated and designated solely for the deposit of Proceeds of the
Sale (including credit card Proceeds), and the disbursement of amounts payable
by Agent hereunder (the “Designated Merchant
Accounts”).  The provisions of sections 7.1 and 7.2 shall be
subject to reasonable agreement with the Lender Agent as to the segregation and
operation of such accounts.

     

    7.3 Credit Card
Proceeds.  Agent shall have the right (but not the obligation)
to use Merchant’s credit card facilities (including Merchant’s credit card
terminals and processor(s), credit card processor coding, Merchant
identification number(s) and existing bank accounts) for credit card
Proceeds.  Merchant shall process credit card transactions on behalf
of Agent, applying customary practices and procedures.  Without
limiting the foregoing, Merchant shall cooperate with Agent to down-load data
from all credit card terminals each day during the Sale Term and to effect
settlement with Merchant’s credit card processor(s), and shall take such other
actions necessary to process credit card transactions on behalf of Agent under
Merchant’s Merchant identification number(s).  All credit card
Proceeds will constitute the property of Agent and shall be deposited into the
Designated Merchant Accounts.  Merchant shall not be responsible for
and Agent shall pay as an Expense hereunder, all credit card fees, charges, and
chargebacks related to the Sale, whether received during or after the Sale
Term.

     

    7.4 Petty Cash.  In
addition to the Guaranteed Amount, Agent shall purchase all cash in the Stores
on and, subject to Agent’s count and verification (which shall occur by no later
than the first Weekly Reconciliation, shall reimburse Merchant on a dollar for
dollar basis therefor.

     

    Section
8. Sale of Warranties and
Installation Services

     

    8.1 Subject
to Merchant's approval, Agent shall be provided the right to sell warranties
during the Sale at full retail price.  The sale of warranties shall
not be included in the calculation of Proceeds; however, profits from the sale
of warranties shall be shared.  Merchant shall retain or Agent shall
remit (if deposited in Agent account) sufficient payment to cover cost of
service and related commissions after which payment will be shared 90% to
Merchant and 10% to Agent.

     

    8.2 In all
Closing Locations, Agent shall have the right to sell (i) home theater
installation services, and (ii) car mobile entertainment installation services
during the Sale Term ((i)-(ii) collectively, the “Permitted Installation
Services”).  The sale of all Permitted Installation Services shall be
at full Retail Price.  The sale of Permitted Installation Services
shall not be included in the calculation of Proceeds, however, profits from the
sale of Permitted Installation Services shall be shared.  All
Permitted Installation Services sales shall be discontinued no later than ten
(10) days prior to the closing date for such Closing Location and all work
required to complete the Permitted Installation Services shall be completed no
later than five (5) days prior to the closing date for such Closing
Location.  Merchant shall retain or Agent shall wire to Merchant (if
deposited in Agent’s accounts) sufficient funds to cover the cost of the
Permitted Installation Services, after which all remaining funds generated from
the Permitted Installation Services shall be shared 90% to Merchant and 10% to
Agent.

     

    Section
9. Conduct of the
Sale.

     

    9.1 Rights of
Agent.  Agent shall be permitted and hereby is authorized to
conduct, advertise, post signs and otherwise promote the Sale consistent with
the Sale Guidelines. In addition to any other rights granted to Agent hereunder,
in conducting the Sale, Agent, in the exercise of its sole discretion, shall
have the right, limited only by the Sale Guidelines:

     

    (a) to
advertise, post signs, and otherwise promote, including the use of banners,
signwalkers, and a-frame signs, the Sale as a “going out of business”, "store
closing", "sale on everything", "everything must go", or similar themed sale,
all in accordance with the Sale Guidelines;

     

    (b) to
establish and implement advertising and promotion programs consistent with the
Sale themes set forth above;

     

    (c) to
establish Closing Location hours which are consistent with the terms of
applicable leases;

     

    (d) to use
without charge during the Sale Term all FF&E, advertising materials,
computer hardware and software, existing supplies located at the Closing
Locations, intangible assets (including Merchant’s name, logo and tax
identification numbers), Closing Location keys, case keys, security codes, and
safe and lock combinations required to gain access to and operate the Closing
Locations, and any other assets of Merchant located at the Closing Locations
(whether owned, leased, or licensed);

     

    (e) to use,
subject to Section 4.1(q), Merchant’s central office facilities, central
administrative services and personnel to process payroll, perform MIS and
provide other central office services necessary for the Sale; provided, however, that in the
event that Agent expressly requests Merchant to provide services other than
those normally provided to the Closing Locations and relating to the sale, Agent
shall be responsible for the actual incremental cost of such services as an
Expense of the Sale; and

     

    (f) to
transfer Merchandise between and among the Closing Locations, the costs of which
shall be paid by Agent as an Expense of the Sale.

     

    9.2 Terms of Sales to
Customers.

     

    (a) Final/As is
Sales.  All sales of Merchandise will be “final sales” and “as
is”, and all advertisements and sales receipts will reflect the
same.  Agent shall not warrant the Merchandise in any manner, but
will, to the extent legally permissible, pass on all manufacturers’ warranties
and, to the extent purchased, all warranties to customers.  All sales
will be made only for cash and nationally recognized bank credit
cards.

     

    (b) Gift
Certificates
and Rebates.  As directed by Merchant, Agent will accept
Merchant’s gift certificates, gift cards, and rebates issued by Merchant prior
to the Sale Commencement Date, provided that Agent shall be reimbursed by
Merchant in connection with the Weekly Sale Reconciliation contemplated under
Section 3.5 hereof on a dollar for dollar basis for any such gift certificates,
gift cards and rebates honored by Agent.  Notwithstanding anything
herein to the contrary, Agent shall not be permitted to sell any Merchant or
third party gift cards.

     

    (c) Future Delivery
Program.  Agent will honor (i) special order and other
inventory items for which the customer remitted payment in full to Merchant
prior to the Sale Commencement Date, but for which the customer has not taken
delivery or possession of such item ("Reserve Inventory")
and (ii) inventory items for which the customer has not remitted payment in full
to Merchant prior to the Sale Commencement Date and, as a result, has not taken
delivery or possession of such item ("Layaway Inventory",
and together with Reserve Inventory, "Reserve &
Layaway
Inventory").

     

    9.3 Sales
Taxes.  During the Sale Term, all sales, excise, gross receipts
and other taxes attributable to sales of Merchandise as indicated on Merchant’s
point of sale equipment (other than taxes on income) payable to any taxing
authority having jurisdiction (collectively, “Sales Taxes”) shall
be added to the sales price of Merchandise and collected by Agent, on Merchant’s
behalf, and deposited into Merchant’s existing accounts, trust accounts or other
accounts, as designated by Merchant; provided, further, that to the
extent the Merchandise is sold on a tax-exempt basis, e.g., sold on a wholesale
basis, Agent shall complete all applicable forms, including, without limitation,
resale certificates, and provide all completed forms to Merchant in connection
with the Final Reconciliation.  Provided that Agent has collected all
Sales Taxes during the Sale and remitted the proceeds thereof to Merchant,
Merchant shall promptly pay all Sales Taxes and file all applicable reports and
documents required by the applicable taxing authorities.  Merchant
will be given access to the computation of gross receipts for verification of
all such Sales Tax collections. If Agent fails to
perform its responsibilities in accordance with this Section 9.3, and provided
Merchant complies with its obligations in accordance with this Section 9.3,
Agent shall indemnify and hold harmless Merchant from and against any and all
costs including, but not limited to, reasonable attorneys’ fees, assessments,
fines or penalties which Merchant sustains or incurs as a result or consequence
of the failure by Agent to collect Sales Taxes and/or, to the extent Agent is
required hereunder to prepare reports and other documents, the failure by Agent
to promptly deliver any and all reports and other documents required to enable
Merchant to file any requisite returns with such taxing
authorities.

     

    9.4 Tax
Consequences.  Without limiting the generality of Section 9.3
hereof, it is hereby understood and agreed for all tax purposes that because
Agent is conducting the Sale solely as agent for the Merchant, all payments
contemplated by and among the parties to this Agreement (including the payment
by the Agent of the Guaranteed Amount) do not represent the sale of tangible
personal property and, accordingly, are not subject to the Sales
Taxes.

     

    9.5 Supplies.  Agent
shall have the right to use all existing supplies (e.g. boxes, bags, twine)
located at the Closing Locations at no charge to Agent.  In the event
that additional supplies are required in any of the Closing Locations during the
Sale, Merchant agrees to promptly provide the same to Agent.  Supplies
have not been since December 1, 2008 and shall not be prior to the Sale
Commencement Date, transferred by Merchant to or from the Closing Locations so
as to alter the mix or quantity of supplies at the Closing Locations from that
existing on such date, other than in the ordinary course of
business.

     

    9.6 Returns of
Merchandise.  Agent is directed to accept all returns of
Merchandise sold prior to the Sale Commencement Date at all Closing Stores in
accordance with Merchant's return policies in effect on the Sale Commencement
Date for fourteen (14) days following the Sale Commencement Date.  Any
returned merchandise that is saleable as first-quality merchandise shall be
included in Merchandise and returned to the sales floor.  For purposes
of the calculation of the Guaranteed Amount the Merchandise shall be valued at
the Cost Value applicable to such item.  The aggregate Cost Value of
the Merchandise shall be increased by the Cost Value multiplied by the inverse
of the prevailing discount for that particular category at the time of the
return of any returned Merchandise included in Merchandise, and the Guaranteed
Amount shall be adjusted accordingly.  Any increases in payment on
account of the Guaranteed Amount as a result of returned Merchandise shall be
paid by Agent pursuant to Section 3.3 hereof.  Notwithstanding
anything to the contrary in applicable return policies, Agent shall not accept
returns of merchandise where the customer contemplates repurchasing the same
item so as to take advantage of the sale price being offered by
Agent.

     

    9.7 Refunds.  If
required by Merchant's return policies in effect on the Sale Commencement Date,
for fourteen (14) days following the Sale Commencement Date, Agent shall
reimburse customers for returned merchandise purchased prior to the Sale
Commencement Date and returned pursuant to Section 9.6 in the same tender as
such item was purchased (the "Refund").  Merchant
shall promptly reimburse Agent in cash for any Refunds Agent is required to
issue to customers in respect of any returned Merchandise as part of the Weekly
Sale Reconciliation.  Any returned merchandise not included in
Merchandise shall be disposed of by Agent in accordance with instructions
received from Merchant or, in the absence of such instructions, returned to
Merchant at the end of the Sale Term.  Merchant and Agent shall
jointly track returns of merchandise for purposes of determining any increase or
decrease to the Guaranteed Amount, or any amounts owed by Merchant to Agent as a
result of Agent accepting such returns or issuing Refunds.

     

    9.8 Force
Majeure.  If any casualty or act of God or act of terrorism
prevents or substantially inhibits the conduct of business in the ordinary
course at any Closing Location, then such Closing Location and the remaining
Merchandise located at such Closing Location shall be eliminated from the Sale
and considered to be deleted from this Agreement as of the date of such event,
and Agent and Merchant shall have no further rights or obligations hereunder
with respect thereto; provided, however, that (I) the
proceeds of any insurance attributable to such Merchandise or business
interruption shall constitute Proceeds hereunder, and (ii) the Guaranteed Amount
shall be reduced to account for any Merchandise eliminated from the Sale that is
not the subject of insurance proceeds.

     

    Section
10. Employee
Matters.

     

    10.1 Merchant’s
Employees.  Agent may use Merchant’s employees in the conduct
of the Sale to the extent Agent in its sole discretion deems expedient, and
Agent may select and schedule the number and type of Merchant’s employees
required for the Sale.  Agent shall identify any such employees to be
used in connection with the Sale (each such employee, a “Retained Employee”)
prior to the Sale Commencement Date.  Retained Employees shall at all
times remain employees of Merchant, and shall not be considered or deemed to be
employees of Agent.  Merchant and Agent agree that nothing contained
in this Agreement and none of Agent’s actions taken in respect of the Sale shall
be deemed to constitute an assumption by Agent of any of Merchant’s obligations
relating to any of Merchant’s employees including, without limitation, payroll,
benefits, Worker Adjustment Retraining Notification Act (“WARN Act”) claims and
other termination type claims and obligations, or any other amounts required to
be paid by statute or law; nor shall Agent become liable under any collective
bargaining or employment agreement or be deemed a joint or successor employer
with respect to such employees; provided, however, that nothing herein shall
affect Agent's obligations to pay the Expenses of the Sale  Merchant
shall not, without Agent’s prior written consent, raise the salary or wages or
increase the benefits for, or pay any bonuses or make any other extraordinary
payments to, any of its employees in anticipation of the Sale or prior to the
Sale Termination Date.  Merchant has not terminated and shall not
during the Sale Term terminate any employee benefits or benefit
programs.

     

    10.2 Termination of
Employees.  Agent may in its discretion stop using any Retained
Employee at any time during the Sale.  In the event that Agent
determines to stop using any Retained Employee, Agent will notify Merchant at
least seven (7) days prior thereto, except for termination “for cause” (such as
dishonesty, fraud or breach of employee duties), in which event no prior notice
to Merchant shall be required, provided Agent shall notify Merchant as soon as
practicable after such event.  From and after [_], 2009, and until the
Sale Termination Date, Merchant shall not transfer or dismiss employees of the
Closing Locations except “for cause” without Agent’s prior consent.

     

    10.3 Payroll
Matters.  During the Sale Term, Merchant shall process and pay
the base payroll and all related payroll taxes, worker’s compensation and
benefits for all Retained Employees, and any additional hires (including
temporary hires), in accordance with its usual and customary
procedures.  Agent’s own employees, independent contractors and
temporary employees retained by Agent through third party agencies will not be
deemed Retained Employees at any time during the
Sale.  Notwithstanding anything in this Agreement to the contrary, to
the extent the Proceeds are insufficient, Agent shall fund, in advance, all
payroll and related expenses for Retained Employees at least two (2) business
days prior to the date that such payments are due by the Merchant.

     

    10.4 Employee Retention
Bonuses.  Agent shall have the right to elect to pay, as an
Expense, retention bonuses (each a “Retention Bonus”)
(which bonuses shall be inclusive of payroll taxes but as to which no benefits
shall be payable), up to a maximum of 10% of base payroll, to certain
non-“insider” (as defined in title 11, United States Code) Retained Employees
who do not voluntarily leave employment and are not terminated “for
cause”.  Subject only to limitation of 10% of base payroll, the actual
amount to be paid to each such Retained Employee shall be in an amount to be
determined by Agent, and shall be payable within thirty (30) days after the Sale
Termination Date, and shall be processed through Merchant’s payroll
system.  Agent shall provide Merchant with a copy of Agent’s Retention
Bonus plan within two (2) business days after the Sale Commencement Date.
 

     

    Section
11. Conditions
Precedent.  The willingness of Agent and Merchant to enter into
the transactions contemplated under this Agreement are directly conditioned upon
the satisfaction of the following conditions at the time or during the time
periods indicated, unless specifically waived in writing by the applicable
party:

     

    (a) All
representations and warranties of Merchant and Agent hereunder shall be true and
correct in all material respects and no Event of Default (as defined herein)
shall have occurred at and as of the date hereof and as of the Sale Commencement
Date.

     

    (b) Merchant
shall have provided Agent reasonable access to all pricing and cost files, and
all other documents relative to the price, mix and quantities of inventory
located at the Closing Locations.

     

    (c) Merchant
shall have obtained the Approval Order on or before January 16, 2009, and the
Approval Order shall not have been stayed nor shall an application for a stay of
the Approval Order be pending.

     

    Section
12. Representations and
Warranties.

     

    12.1 Merchant’s Representations,
Warranties Covenant, and Agreements.  Merchant hereby
represents, warrants, covenants, and agrees in favor of Agent as
follows:

     

    (a) Merchant:
(i) is a entity duly organized, validly existing and in good standing under the
laws of the state of its organization stated above; (ii) has all requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as presently conducted; and (iii) is and during the Sale Term
will continue to be duly authorized to do business and in good standing in each
jurisdiction where the nature of its business or properties requires such
qualification, including the jurisdiction in which the Closing Locations are
located.

     

    (b) Subject
to Bankruptcy Court approval, Merchant has the right, power and authority to
execute and deliver this Agreement and each other document and agreement
contemplated hereby (collectively, together with this Agreement, the “Agency Documents”)
and to perform fully its obligations thereunder.  Merchant has taken
all necessary actions required to authorize the execution, delivery and
performance of the Agency Documents, and no further consent or approval is
required for Merchant to enter into and deliver the Agency Documents, to perform
its obligations thereunder, and to consummate the Sale.  Each of the
Agency Documents has been duly executed and delivered by Merchant and
constitutes the legal, valid and binding obligation of Merchant enforceable in
accordance with its terms.  No court order or decree of any federal,
state or local governmental authority or regulatory body is in effect that would
prevent or impair, or is required for Merchant’s consummation of, the
transactions contemplated by this Agreement, and no consent of any third party
which has not been obtained is required therefor.  No contract or
other agreement to which Merchant is a party or by which Merchant is otherwise
bound will prevent or impair the Agent conducting the Sale or any other
transactions contemplated by this Agreement, except to the extent the Agent
conducts the Sale contrary to the provisions of any governing Closing Location
lease.

     

    (c) Merchant
owns and will own at all times during the Sale Term, good and marketable title
to all of the Merchandise (other than consigned Merchandise).

     

    (d) Merchant
has and will maintain its pricing files and the Cost File in the ordinary course
of business, and prices charged to the public for goods (whether in-Closing
Location, by advertisement or otherwise) are the same in all material respects
as set forth in such pricing files for the periods indicated
therein.  All pricing files and records requested by Agent relative to
the Merchandise have been and will continue to be made available to
Agent.  All pricing files and records are and shall continue to be
true and accurate in all material respects as to the actual Cost Value of the
Merchandise.  Merchant’s price files reflect hard markdowns taken by
Merchant on items of Merchandise but do not reflect point-of-sale or other
temporary promotional activity.

     

    (e) Merchant
shall ticket or mark all items of inventory received at the Closing Locations
prior to and after the Sale Commencement Date in a manner consistent with
similar inventory located at the Closing Locations and in accordance with
Merchant’s historic practices and policies relative to pricing and marking
inventory.  Merchant has taken hard markdowns consistent with the
margins represented in the due diligence materials provided by Merchant to
Agent.

     

    (f) Merchant
covenants to continue to operate the Closing Locations in the ordinary course of
business until the Sale Commencement Date, in that (i) Merchant shall continue
selling inventory during such period at customary prices, (ii) Merchant shall
not promote or advertise any sales or in-store promotions (including POS
promotions) to the public except for Merchant’s historic and customary
promotions for all of its locations, (iii) Merchant shall not return inventory
to vendors and, shall not transfer Merchandise or Supplies between or among
Closing Locations, except for receipt of goods in the ordinary course of
business from Merchant’s vendor’s; provided, however, Merchant
does not represent that the replenishment of merchandise in the Closing
Locations through the Sale Commencement Date will be at the same levels as with
historical practices; (iv) Merchant shall not make any management personnel
moves or changes at the Closing Locations without Agent’s prior consent (which
consent will not be unreasonably withheld), (v) Merchant shall continue to
handle Return to Vendor, to be repaired and damaged merchandise in the ordinary
course, (vi) Merchant will continue to replenish inventory in the ordinary
course of Merchant’s business through the Sale Commencement Date, and (vi)
Merchant will not transfer from its designated locations in its distribution
centers any Defective Merchandise, RTV merchandise, or to be repaired or
serviced merchandise.  Except as previously disclosed to Agent or
provided for herein, Merchant has not and shall not purchase or transfer to or
from the Closing Locations any inventory outside the ordinary course in
anticipation of the Sale and shall not transfer to any of the Closing Locations
any inventory that was part of the prior liquidation sale held at approximately
155 stores.

     

    (g) No
action, arbitration, suit, notice, or legal, administrative or other proceeding
before any court or governmental body has been instituted by or against
Merchant, or has been settled or resolved, or to Merchant’s knowledge, is
threatened against or affects Merchant, relative to Merchant’s business or
properties and that questions the validity of this Agreement or that, if
adversely determined, would adversely affect the conduct of the
Sale.

     

    (h) To the
best of Merchant’s knowledge, all Merchandise is in compliance with all
applicable federal, state, or local product safety laws, rules and
standards.  Merchant shall provide Agent with its historic policies
and practices regarding product recalls prior to the Sale Commencement
Date.

     

    (i) No event
of default or event which with the giving of notice, the passage of time, or
both has occurred on the part of Merchant under any Closing Location lease,
reciprocal easement agreement or similar agreement relating to the occupancy of
the Closing Locations (other than as a result of the filing of Merchant’s
bankruptcy petition).  Throughout the Sale Term, Agent shall have the
right to the uninterrupted use and occupancy of, and peaceful and quiet
possession of the Closing Locations, the assets currently located at the Closing
Locations, and the services provided at the Closing
Locations.  Merchant shall throughout the Sale Term maintain in good
working order, condition and repair, at its sole expense (except to the extent
such amounts are included in Occupancy Expenses), all cash registers, heating
systems, air conditioning systems, elevators, escalators, Closing Location alarm
systems, and all other mechanical devices used in the ordinary course of
operation of the Closing Locations.

     

    (j) Merchant
has paid and will continue to pay throughout the Sale Term, (i) all self-insured
or Merchant funded employee benefit programs for employees, including health and
medical benefits and insurance and all proper claims made or to be made in
accordance with such programs, (ii) all casualty, liability, workers’
compensation and other insurance premiums, (iii) all utilities provided to the
Closing Locations, and (iv) all applicable taxes.

     

    (k) Merchant
has not and shall not throughout the Sale Term take any actions the result of
which is to increase the cost of operating the Sale, including, without
limitation, increasing salaries or other amounts payable to
employees.

     

    (l) The
Guaranteed Percentage has been fixed based upon the aggregate Cost Value of the
Merchandise (not including any On-Order Merchandise) not being less than $1.150
billion (the “Merchandise
Threshold”) and no more than $1.300 billion (the “Merchandise
Ceiling”).  To the extent that the aggregate Cost Value of the
Merchandise (not including any On-Order Merchandise) included in the Sale is
less than the Merchandise Threshold, or more than the Merchandise Ceiling, the
Guaranty Percentage shall be adjusted in accordance with Exhibit 12.1(1) annexed
hereto.

     

    (m) As of the
Sale Commencement Date, the aggregate Cost Value of the Merchandise divided by
the aggregate Retail Price of the Merchandise (the “Cost Factor”) shall
be no greater than 64.9%.  In the event the Cost Factor is greater
than ­­­64.9%, the Cost Value shall be adjusted as set forth on
Exhibit 12.1(m)
hereto.

     

    (n) Merchant
shall transfer the Distribution Center Merchandise at Merchant’s cost and
expense to the Stores as directed by Agent.

     

    12.2 Agent’s Representations and
Warranties.  Agent hereby represents, warrants and covenants in
favor of Merchant as follows:

     

    (a) Each
member of Agent: (i) is validly existing and in good standing under the laws of
the state of its organization; (ii) has all requisite power and authority to
consummate the transactions contemplated hereby; and (iii) is and during the
Sale Term will continue to be, duly authorized and qualified to do business and
in good standing in each jurisdiction where the nature of its business or
properties requires such qualification.

     

    (b) Agent has
the right, power and authority to execute and deliver each of the Agency
Documents to which it is a party and to perform fully its obligations
thereunder.  Agent has taken all necessary actions required to
authorize the execution, delivery, and performance of the Agency Documents, and
no further consent or approval is required on the part of Agent for Agent to
enter into and deliver the Agency Documents and to perform its obligations
thereunder.  Each of the Agency Documents has been duly executed and
delivered by Agent and constitutes the legal, valid and binding obligation of
Agent enforceable in accordance with its terms.  No court order or
decree of any federal, state or local governmental authority or regulatory body
is in effect that would prevent or impair or is required for Agent’s
consummation of the transactions contemplated by this Agreement, and no consent
of any third party which has not been obtained is required
therefor.  No contract or other agreement to which Agent is a party or
by which Agent is otherwise bound will prevent or impair the consummation of the
transactions contemplated by this Agreement.

     

    (c) No action, arbitration, suit, notice,
or legal administrative or other proceeding before any court or governmental
body has been instituted by or against Agent, or has been settled or resolved,
or to Agent’s knowledge, has been threatened against or affects Agent, which
questions the validity of this Agreement or any action taken or to be taken by
Agent in connection with this Agreement, or which if adversely determined, would
have a material adverse effect upon Agent’s ability to perform its obligations
under this Agreement.

     

    (d)            Agent
will facilitate for Merchant the delivery of customer owned merchandise while
the delivery hubs and distribution centers are still open at Merchant’s cost and
expense.

     

    Section
13. Insurance.

     

    13.1 Merchant’s Liability
Insurance.  Merchant shall continue at its cost and expense
(subject to payment of the Expenses by Agent) until the Sale Termination Date,
in such amounts as it currently has in effect, all of its liability insurance
policies including, but not limited to, products liability, comprehensive public
liability, auto liability and umbrella liability insurance, covering injuries to
persons and property in, or in connection with Merchant’s operation of the
Closing Locations, and shall cause Agent to be named an additional named insured
with respect to all such policies.  Prior to the Sale Commencement
Date, Merchant shall deliver to Agent certificates evidencing such insurance
setting forth the duration thereof and naming Agent as an additional named
insured, in form reasonably satisfactory to Agent.  All such policies
shall require at least thirty (30) days’ prior notice to Agent of cancellation,
non-renewal or material change.  In the event of a claim under any
such policies, Merchant shall be responsible for the payment of all deductibles,
retention’s or self-insured amounts thereunder, unless it is determined that
liability arose by reason of the wrongful acts or omissions or negligence of
Agent, or Agent’s employees, independent contractors or agents (other than
Merchant’s employees).

     

    13.2 Merchant’s Casualty
Insurance.  Merchant will provide throughout the Sale Term at
its expense (subject to payment of the Expenses by Agent) fire, flood, theft and
extended coverage casualty insurance consistent with Merchant's customary
practices prior to the Sale Commencement Date.  In the event of a loss
to the Merchandise on or after the Sale Commencement Date, the proceeds of such
insurance attributable to the Merchandise plus any self insurance amounts and
the amount of any deductible (which amounts shall be paid by Merchant), shall
constitute Proceeds hereunder and shall be paid to Agent.  Prior to
the Sale Commencement Date, Merchant shall deliver to Agent certificates
evidencing such insurance setting forth the duration thereof, in form and
substance reasonably satisfactory to Agent.  All such policies shall
require at least thirty (30) days prior notice to Agent of cancellation,
non-renewal or material change.  Merchant shall not make any change in
the amount of any deductibles or self-insurance amounts prior to the Sale
Termination Date without Agent’s prior written consent.

     

    13.3 Worker’s Compensation
Insurance.  Merchant shall at all times during the Sale Term,
at its cost (but subject to payment of the Expenses by Agent), maintain in full
force and effect worker’s compensation insurance (including employer liability
insurance) covering all Retained Employees in compliance with all statutory
requirements.  Prior to the Sale Commencement Date, Merchant shall
deliver to Agent a certificate of its insurance broker or carrier evidencing
such insurance.

     

    13.4 Agent’s
Insurance.  Agent shall maintain, at Agent's cost and expense
throughout the Sale Term, in such amounts as it currently has in effect,
comprehensive public liability and automobile liability insurance policies
covering injuries to persons and property in or in connection with Agent’s
agency at the Closing Locations, and shall cause Merchant to be named an
additional insured with respect to such policies. Prior to the Sale Commencement
Date, Agent shall deliver to Merchant certificates evidencing such insurance
policies, setting forth the duration thereof and naming Merchant as an
additional insured, in form and substance reasonable satisfactory to
Merchant.  In the event of a claim under such policies, Agent shall be
responsible for the payment of all deductibles, retentions or self-insured
amounts thereunder, to the extent said claim arises from or relates to the
alleged acts or omissions of Agent or Agent’s employees, agents or independent
contractors).

     

    13.5 Risk of
Loss.  Without limiting any other provision of this Agreement,
Merchant acknowledges that Agent is conducting the Sale on behalf of Merchant
solely in the capacity of an agent, and that in such capacity (i) Agent shall
not be deemed to be in possession or control of the Closing Locations or the
assets located therein or associated therewith, or of Merchant’s employees
located at the Closing Locations, and (ii) except as expressly provided in this
Agreement, Agent does not assume any of Merchant’s obligations or liabilities
with respect to any of the foregoing.  Merchant and Agent agree that
Merchant shall bear all responsibility for liability claims of customers,
employees and other persons arising from events occurring at the Closing
Locations during and after the Sale Term, except to the extent any such claim
arises directly from the acts or omissions of Agent, or its supervisors or
employees located at the Closing Locations (an “Agent Claim”).  In the
event of any such liability claim other than an Agent Claim, Merchant shall
administer such claim and shall present such claim to Merchant’s liability
insurance carrier in accordance with Merchant’s historic policies and
procedures, and shall provide a copy of the initial documentation relating to
such claim to Agent.  To the extent that Merchant and Agent agree that
a claim constitutes an Agent Claim, Agent shall administer such claim and shall
present such claim to its liability insurance carrier, and shall provide a copy
of the initial documentation relating to such claim to Merchant.  In
the event that Merchant and Agent cannot agree whether a claim constitutes an
Agent Claim, each party shall present the claim to its own liability insurance
carrier, and a copy of the initial claim documentation shall be delivered to the
other party.

     

    Section
14. Indemnification.

     

    14.1 Merchant
Indemnification.  Merchant shall indemnify and hold Agent and
its officers, directors, employees, agents and independent contractors
(collectively, “Agent
Indemnified Parties”) harmless from and against all claims, demands,
penalties, losses, liability or damage, including, without limitation,
reasonable attorneys’ fees and expenses, directly or indirectly asserted
against, resulting from, or related to:

     

    (a) Merchant’s
material breach of or failure to comply with any of its agreements, covenants,
representations or warranties contained in any Agency Document;

     

    (b) any
failure of Merchant to pay to its employees any wages, salaries or benefits due
to such employees during the Sale Term;

     

    (c) subject
to Agent’s compliance with its obligations under Section 9.4 hereof, any failure
by Merchant to pay any Sales Taxes to the proper taxing authorities or to
properly file with any taxing authorities any reports or documents required by
applicable law to be filed in respect thereof;

     

    (d) any
consumer warranty or products liability claims relating to
Merchandise;

     

    (e) any
liability or other claims asserted by customers, any of Merchant’s employees, or
any other person against any Agent Indemnified Party (including, without
limitation, claims by employees arising under collective bargaining agreements,
worker’s compensation or under the WARN Act), except for Agent Claims;
and

     

    (f) the
negligence or willful misconduct of Merchant or any of its officers, directors,
employees, agents or representatives.

     

    14.2 Agent
Indemnification.  Agent shall indemnify and hold Merchant and
its officers, directors, employees, agents and representatives harmless from and
against all claims, demands, penalties, losses, liability or damage, including,
without limitation, reasonable attorneys’ fees and expenses, directly or
indirectly asserted against, resulting from, or related to:

     

    (a) Agent’s
material breach of or failure to comply with any of its agreements, covenants,
representations or warranties contained in any Agency Document;

     

    (b) any
harassment or any other unlawful, tortious or otherwise actionable treatment of
any employees or agents of Merchant by Agent or any of its
representatives;

     

    (c) any
claims by any party engaged by Agent as an employee or independent contractor
arising out of such employment;

     

    (d) any Agent
Claims;

     

    (e) any
breach of or default under any and all applicable Closing Location leases
arising or resulting from or related Agent's conduct of the Sale which is not in
accordance with this Agreement or the Sale Guidelines at any and all Closing
Locations; and

     

    (f) the
negligence or willful misconduct of Agent or any of its officer, directors,
employees, agents or representatives.

     

    Section
15. Defaults.  The
following shall constitute “Events of Default”
hereunder:

     

    (a) Merchant’s
or Agent’s failure to perform any of their respective material obligations
hereunder, which failure shall continue uncured seven (7) days after receipt of
written notice thereof to the defaulting party; or

     

    (b) Any
representation or warranty made by Merchant or Agent proves untrue in any
material respect as of the date made and throughout the Sale Term;
or

     

    (c) The Sale
is terminated or materially interrupted or impaired at the Closing Locations for
any reason other than (i) an Event of Default by Agent, or (ii) any other
material breach or action by Agent not authorized hereunder.

     

    In the
event of an Event of Default, the non-defaulting party may, in its discretion,
elect to terminate this Agreement upon seven (7) business days’ written notice
to the other party.

     

    Section
16. Fixtures.  If
a request to sell all or a portion of the owned FF&E is made within three
weeks of the Sale Commencement Date, Agent shall use its best efforts to sell
Merchant’s owned FF&E.  Agent shall be entitled to twenty percent
(20%) of the net proceeds from the sale of the FF&E; provided however, Merchant may
elect to receive, in lieu of net proceeds and Agent’s commission, a lump sum
payment, on a per Store basis, in an amount to be determined between Merchant
and Agent.  Agent shall have the right to abandon any unsold FF&E
upon termination of the Sale.

     

    Section
17. Merchant’s Right to
Monitor.  Merchant shall have the right to monitor the Sale and
activities attendant thereto and to be present in the Stores during the hours
when the Stores are open for business, provided that Merchant’s presence does
not unreasonably disrupt the conduct of the Sale.  Merchant shall also
have a right of access to the Stores at any time in the event of an emergency
situation, and shall promptly notify Agent of such emergency.

     

    Section
18. Reporting. If
requested, Agent shall furnish Merchant with reports no more regularly than
weekly.  Such reports shall reflect the progress of the Sale,
including, without limitation, the Proceeds received to date, and such other
information regarding the Sale as Merchant reasonably requests.  Agent
shall maintain and provide to Merchant sales records to permit calculation of
and compliance with any percentage rent obligations under Closing Location
leases.

     

    Section
19. Miscellaneous.

     

    19.1 Notices.  All
notices and communications provided for pursuant to this Agreement shall be in
writing, and sent by hand, by facsimile, or a recognized overnight delivery
service, as follows:

     

    
      
      

       

       

      
        	 	
                If to
      Agent:    

              	Mark P.
      Naughton
	 	Great American
      Group, LLC
	 	Nine Parkway North,
      Suite 300
	 	Deerfield,
      IL 60015
	 	Phone:  (847)
      444-1400
	 	Fax:  (847)
      444-1401
	 	 

      

       

    

    
      	 	
              
                If
      to Merchant: 

              

            	
              Circuit
      City Stores, Inc.

            
	 	9950 Mayland
      Drive
	 	Richmond, Virginia
      23233
	 	Attn:  Reggie
      Hedgebeth
	 	
              Deborah
      Miller

            
	 	Phone:  (804)
      486-4000
	 	Fax:  (804)
      486-4877

    

    
 

    
      	
               
      

            	
              With
      copies to:

            	
              Skadden,
      Arps, Slate, Meagher & Flom LLP

            

    

    
      	
               
      

            	
              One
      Rodney Square

            

    

    
      	
               
      

            	
              P.O.
      Box 636

            

    

    
      	
               
      

            	
              Wilmington,
      DE 19899

            

    

    
      	
               
      

            	
              Attn.:  Gregg
      M. Galardi

            

    

    
      	
               
      

            	
              Ian
      S. Fredericks

            

    

    
      	
               
      

            	
              Phone:  (302)
      651-3000

            

    

    
      	
               
      

            	
              Fax:  (302)
      651-3001

            

    

     

    19.2 Governing
Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Virginia without regard to conflicts of
laws principles thereof.

     

    19.3 Entire
Agreement.  This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and cancels all prior agreements, including, but not limited to,
all proposals, letters of intent or representations, written or oral, with
respect thereto.

     

    19.4 Amendments.  This
Agreement may not be modified except in a written instrument executed by each of
the parties hereto along with the written consent of the Lender Agent, which
consent shall not be unreasonably withheld or delayed.

     

    19.5 No
Waiver.  No consent or waiver by any party, express or implied,
to or of any breach or default by the other in the performance of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligation of such party.  Failure on the part of
any party to complain of any act or failure to act by the other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights
hereunder.

     

    19.6 Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon Agent and Merchant, and their respective successors and
assigns.  The parties hereto acknowledge that Lender Agent is a third
party beneficiary of the Agreement.

     

    19.7 Execution in
Counterparts.  This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one agreement.  This Agreement may be
executed by facsimile, and such facsimile signature shall be treated as an
original signature hereunder.

     

    19.8 Section
Headings.  The headings of sections of this Agreement are
inserted for convenience only and shall not be considered for the purpose of
determining the meaning or legal effect of any provisions hereof.

     

    19.9 Survival.  All
representations, warranties, covenants and agreements made by the parties hereto
shall be continuing, shall be considered to have been relied upon by the parties
and shall survive the execution, delivery and performance of this
Agreement.

     

    19.10 Security
Interest.  Without limiting the Agent’s offset rights
hereunder, in consideration of Agent's obligations hereunder, the Approval Order
shall grant to Agent, effective as of the Payment Date, a valid and perfected
security interest in and lien upon the Merchandise and the Proceeds, owned
FF&E (if Merchant makes a request under section 16), proceeds from the sale
of owned FF&E, and proceeds from the sale of Merchant Consignment Goods to
secure all obligations of Merchant to Agent hereunder, junior only to (a) the
Lender Agent's lien until the Guaranteed Amount and the Expenses are paid in
full, and (b) any amount owed by Agent to Merchant for the Recovery Amount,
which security interest shall be perfected without the necessity of filing
financing statements to perfect the security interests.  Merchant
shall execute all such documents and take all such other actions as are
reasonably required to perfect and maintain such security interest as a valid
and perfected security interest.

     

    19.11 Bidding
Procedures/Bankruptcy Matters.  In consideration of Agent
conducting its due diligence and entering into this Agreement, which serves as a
base by which other offers may be measured and is subject to higher and better
offers by way of a bidding process, Merchant agrees to pay Agent from the
proceeds of the offer received from the successful bidder (to the extent that
Agent is not the successful bidder) a break-up fee in the amount of $7,500,000
(the “Break-Up
Fee”).  The Break-Up Fee shall be paid within five (5) business
days of (x) the commencement of the Sale by a successful bidder or (y) the
consummation of any other alternative transaction to the Sale contemplated
herein.

     

    19.12 Agent. All references
to "Agent" hereunder shall mean Great American Group WF, LLC, Hudson Capital
Partners, LLC, SB Capital Group, LLC, and Tiger Capital Group, LLC jointly and
severally.

     

    19.13 If
Merchant and Agent agree, Agent shall be permitted to utilize Merchant’s
internet operations according to mutually agreeable terms.

     

    IN
WITNESS WHEREOF, Agent and Merchant hereby execute this Agreement by their duly
authorized representatives as of the day and year first written
above.

     

     

    Great
American Group WF, LLC, Hudson Capital Partners, LLC, SB Capital Group, LLC, and
Tiger Capital

    Group,
LLC

    

    

    ___________________________________

                                                         By:     
_____________________________

                                                         Name: _____________________________

                                                         Its:      
_____________________________

    

    

    CIRCUIT
CITY STORES, INC.

    
 

    ___________________________________

    By:  _______________________________

    Its:  _______________________________

    

    

    CIRCUIT
CITY STORES WEST COAST, INC.

     

    ___________________________________

    By:  _______________________________

    Its:  _______________________________

     

     

     

    EXHIBITS

    
      

       

      [The
following exhibits to the Agency Agreement have been omitted:

       

      Exhibit 1
– 567 Store List

       

      Exhibit 2
– Circuit City Sale Guidelines

       

      Exhibit 3.1(c) – Merchandise
Threshold Schedule

       

      Exhibit 4.1 – Per Diem Occupancy
Schedule

       

      
        Exhibit 12.1(l) – Merchandise
Ceiling and Merchandise Threshold

      

       

      Exhibit 12.1(m) – Cost
Factor

       

      Exhibit 12.1(n) – Store
Entertainment Threshold

       

      The
Company will furnish supplementally any of the above exhibits to the Securities
and Exchange Commission upon request.]exhibit10-1.htm

    
      

    

    

    Exhibit
10.1

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    THIRD
AMENDED AND RESTATED

    ICO,
INC.

    2007
EQUITY INCENTIVE PLAN

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Third
Amended and Restated

    ICO,
Inc.

    2007
Equity Incentive Plan

    

    [Amending
and Restating the Second Amended and Restated ICO, Inc. 2007 Equity Incentive
Plan]

    

    ARTICLE
1

    Objectives

    

    This
Second Amended and Restated ICO, Inc. 2007 Equity Incentive Plan (formerly known
as the ICO, Inc. 1998 Stock Option Plan) is intended to advance the interests of
the Company, its shareholders, and its subsidiaries by encouraging and enabling
selected key employees of the Company, upon whose judgment, initiative and
effort the Company is largely dependent for the successful conduct of its
business, to acquire and/or increase and retain a proprietary interest in the
Company by ownership of its stock.

    

    

    ARTICLE
2

    Definitions

    

    
      	
              2.1

            	
              For
      purposes of the Plan the following terms shall have the definition that is
      attributed to them, unless another definition is clearly indicated by a
      particular usage and context.

            

    

    

    
      	
               
      

            	
              (a)

            	
              “Affiliates” means,
      except to the extent otherwise not permitted under Code Section 424(f),
      any one or more corporations which are members of a “parent-subsidiary
      controlled group” as such term is defined in Code Section 1563(a)(1),
      except that “at least 50 percent” shall be substituted for “at least 80
      percent” each place it appears in Code Section
  1563(a)(1).

            

    

    

    
      	
               
      

            	
              (b)

            	
              “Award” means any form
      of award authorized and granted under the Plan, whether singly or in
      combination, pursuant to such terms, conditions, restrictions and/or
      limitations (if any) as the Committee may establish.  Awards
      granted under the Plan may include:

            

    

    

    (i)           Options;
and

     

    (ii)           Restricted
Shares.

     

    
      	
               
      

            	
              (c)

            	
              “Award Agreement” means
      an agreement between a Participant and ICO, Inc. evidencing an
      Award.

            

    

    

    
      	
               
      

            	
              (d)

            	
              “Change of Control” has
      the meaning ascribed to it in Section
10.3.

            

    

    

    
      	
               
      

            	
              (e)

            	
              “Code” means the
      Internal Revenue Code of 1986, as
amended.

            

    

    

    
      	
               
      

            	
              (f)

            	
              “Committee” means the
      Compensation Committee, or such other committee comprised solely of
      “non-employee directors,” as defined in Rule 16b-3(b)(3), as designated by
      the Board of Directors, vested with authority for administration of the
      Plan by the Board.  The Committee shall be comprised solely of
      two (2) or more outside directors (within the meaning of the term “outside
      directors” as used in Code Section 162(m) and applicable interpretive
      authority thereunder, and within the meaning of “Nonemployee Director”
      as defined in Rule 16b-3, as currently in effect or as hereinafter
      modified or amended).

            

    

    

    
      	
               
      

            	
              (g)

            	
              The
      “Company” means
      ICO, Inc. and any Affiliate of ICO.

            

    

    

    
      	
               
      

            	
              (h)

            	
              “Date of Exercise” means
      the date on which the Company has received a written notice of exercise of
      an Option, in such form as is acceptable to the Company, and full payment
      of the purchase price.

            

    

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (i)

            	
              “Date of Grant” means
      the date when the grant of an Award is effective, which shall be
      designated by the Committee at the time it makes an Award, and shall be
      either the date when the Award is made or a date in the future specified
      by the Committee.

            

    

    

    
      	
               
      

            	
              (j)

            	
              “Effective Date” means
      January 25, 2007.

            

    

    

    
      	
               
      

            	
              (k)

            	
              “Eligible Employee”
      means any individual employed by the Company who performs services for the
      Company and is treated as an employee for federal income tax purposes
      either in the U.S. or in another country where such individual is
      employed  or is otherwise taxable.  Eligible Employees
      include individuals employed by the Company and on foreign assignment or
      working for the Company in a business unit that is located outside of such
      individual’s country of
citizenship.

            

    

    

    
      	
               
      

            	
              (l)

            	
              The
      “Fair Market
      Value” of a Share on a specified date means the last sale price
      reported on the NASDAQ Global MarketTM  (the “NASDAQ”) on the
      specified date, or if Shares are no longer traded on the NASDAQ, the last
      sales price reported on any other stock exchange or over-the-counter
      trading system on which Shares are trading on the specified
      date.  If no sale has been made on a specified date, then the
      Fair Market Value of the Shares on that date shall mean the last sales
      price on the last preceding day on which any sales of Shares were made on
      the NASDAQ or other applicable stock exchange or over-the-counter trading
      system.

            

    

    

    
      	
               
      

            	
              (m)

            	
              “Incentive Stock Option” shall
      have the same meaning as given to that term by Section 422 of the
      Code.

            

    

    

    
      	
               
      

            	
              (n)

            	
              “Nonqualified Stock
      Option” means any Option granted under the Plan that is not
      considered an Incentive Stock
Option.

            

    

    

    
      	
               
      

            	
              (o)

            	
              “Option” means the
      right to purchase a stated number of Shares at a specified
      price.  An Option may be granted to an Eligible Employee subject
      to the terms of this Plan, and such other conditions and restrictions as
      the Committee deems appropriate.  Each Option shall be
      designated by the Committee to be either an Incentive Stock Option or a
      Nonqualified Stock Option.

            

    

    

    
      	
               
      

            	
              (p)

            	
              “Option Expiration Date”
      is the last day of the term of an Option, i.e. the last date when an
      Option may be exercised.

            

    

    

    
      	
               
      

            	
              (q)

            	
              “Option Price” means
      the purchase price per Share subject to an Option and shall be fixed by
      the Committee, but shall not be less than 100% of the Fair Market Value of
      a Share on the Date of Grant.

            

    

    

    
      	
               
      

            	
              (r)

            	
              “Participant” means any
      Eligible Employee who is granted an Award under the
  Plan.

            

    

    

    
      	
               
      

            	
              (s)

            	
              “Performance Measures”
      has the meaning ascribed to it in Section
  3.3.

            

    

    

    
      	
               
      

            	
              (t)

            	
              “Performance Period”
      has the meaning ascribed to it in Section
3.3.

            

    

    

    
      	
               
      

            	
              (u)

            	
              “Permanent Disability”
      means any medically determinable physical or mental impairment rendering
      an individual unable to engage in any substantial gainful activity, which
      disability can be expected to result in death or which has lasted or can
      be expected to last for a continuous period of not less than 12
      months.

            

    

    

    
      	
               
      

            	
              (v)

            	
              “Plan” means this ICO,
      Inc. 2007 Equity Incentive Plan, which is a restatement of the previously
      adopted Fourth Amended and Restated ICO, Inc. 1998 Stock Option
      Plan.

            

    

    

    
      	
               
      

            	
              (w)

            	
              “Restricted Period” has
      the meaning ascribed to it in Section
7.1.

            

    

    

    
      	
               
      

            	
              (x)

            	
              An
      Award of “Restricted
      Shares” has the meaning ascribed to it in Section
    7.1.

            

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (y)

            	
              Rule 16b-3(b)(3) means
      Rule 16b-3 promulgated under the Securities Exchange Act of
      1934.

            

    

    

    
      	
               
      

            	
              (z)

            	
              “Share” means one share
      of the common stock, no par value, of ICO,
Inc.

            

    

    

    
      	
               
      

            	
              (aa)

            	
              “Termination of
      Employment” means the cessation of a Participant’s relationship as
      an employee of the Company for federal tax purposes in any jurisdiction
      where the individual is subject to federal income taxes as an employee of
      the Company.

            

    

    

    
      	
               
      

            	
              (bb)

            	
              “Vesting Period” means
      the continuous period of employment required for an Award of Options or
      Restricted Shares to become fully earned and
  exercisable.

            

    

    

    

    ARTICLE
3

    Administration

    

    
      	
              3.1

            	
              The
      Plan shall be administered by the Committee.  Actions shall be
      taken by a majority of the Committee
members.

            

    

    

    
      	
              3.2

            	
              Except
      as specifically limited by the provisions of the Plan, the Committee in
      its discretion shall have the authority
to:

            

    

    

    
      	
               
      

            	
              (a)

            	
              determine
      which Eligible Employees shall be granted
  Awards;

            

    

    

    
      	
               
      

            	
              (b)

            	
              determine
      the number of Shares which may be subject to each
  Award;

            

    

    

    
      	
               
      

            	
              (c)

            	
              for
      any Award that is an Option, determine the Option Price and the Option
      Expiration Date;

            

    

    

    
      	
               
      

            	
              (d)

            	
              determine
      the term and Vesting Period, if any, applicable to each Award of Options
      and Restricted Shares;

            

    

    

    
      	
               
      

            	
              (e)

            	
              for
      any Award that is an Option, determine whether each such Option is an
      Incentive Stock Option or Nonqualified Stock
  Option;

            

    

    

    
      	
               
      

            	
              (f)

            	
              for
      each Award, designate the Date of Grant of the Award, which must be on or
      after the date when a majority of the Committee members have specifically
      approved the material terms of the Award, and which Date of Grant cannot
      be retroactive;

            

    

    

    
      	
               
      

            	
              (g)

            	
              interpret
      the provisions of the Plan and decide all questions of fact arising in its
      application; and

            

    

    

    
      	
               
      

            	
              (h)

            	
              prescribe
      such rules and procedures for Plan administration as from time to time it
      may deem advisable.

            

    

    

    
      	
              3.3

            	
              An
      Award may be granted contingent upon the achievement of performance or
      other objectives (“Performance Measures”) during a specified period (the
      “Performance Period”).  Except as specifically limited by the
      provisions of the Plan, the Committee in its discretion shall have the
      authority to determine the Performance Period and Performance Measures, if
      any, applicable to an Award, and the Performance Period and Performance
      Measures applicable to the Award shall be set forth in the Award
      Agreement.  If an Award is subject to Performance Measures, the
      number of Options that vest, or the number of Restricted Shares earned,
      will be contingent on the degree to which the Performance Measures
      established at the time of the initial Award are satisfied or achieved, in
      the sole discretion of the Committee.  The Committee shall have
      the sole discretion to revise the Performance Measures or Performance
      Period to reflect significant events or changes that occurred during the
      Performance Period.

            

    

    

    
      	
              3.4

            	
              Any
      action, decision, interpretation or determination by the Committee with
      respect to the application or administration of this Plan shall be final
      and binding upon all persons, and need not be uniform with respect to its
      determination of recipients, amount, timing, form, terms or provisions of
      Awards.

            

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    

    
      	
              3.5

            	
              No
      member of the Committee shall be liable for any action or determination
      taken or made in good faith with respect to the Plan or any Award granted
      hereunder, and to the extent permitted by law, all members shall be
      indemnified by the Company for any liability and expenses that may occur
      through any claim or cause of
action.

            

    

    

    

    ARTICLE
4

    Shares Subject to
Plan

    

    
      	
              4.1

            	
              Number of Authorized
      Shares.  The Shares that may be made subject to Awards
      granted under the Plan shall not exceed 2,310,000 Shares in the
      aggregate.  Except as provided in Section 4.2 and to the extent
      permitted under Rule 16b-3, upon lapse or termination of any Award for any
      reason without being completely exercised, the Shares that were subject to
      such Award may again be subject to other Awards.  The aggregate
      number of Shares which may be issued under the Plan shall be subject to
      adjustment in the same manner as provided in Article 10 hereof with
      respect to Shares subject to Awards then outstanding.  Exercise
      of an Award in any manner shall result in a decrease in the number of
      Shares which may thereafter be available, both for purposes of the Plan
      and for sale to any one individual, by the number of Shares as to which
      the Award is exercised.  Separate stock certificates may be, but
      are not required to be, issued by the Company for those Shares acquired
      pursuant to the exercise of an Incentive Stock Option, for those Shares
      acquired pursuant to the exercise of  a Nonqualified Stock
      Option, or upon satisfaction of applicable Vesting Period and/or
      Performance Measures under an Award of Restricted
  Shares.

            

    

    

    
      	
              4.2

            	
              Annual Grant
      Limitation.  The maximum number of Shares with respect to
      which Awards (in any combination of Options and Restricted Shares) may be
      granted to any Participant during each fiscal year of ICO, Inc. is 400,000
      (subject to adjustment in the same manner as provided in Article 10 hereof
      with respect to Shares subject to Awards then outstanding).  The
      limitation set forth in the preceding sentence shall be applied in a
      manner which will permit compensation generated under the Plan to
      constitute “performance-based” compensation for purposes of Code Section
      162(m), including, without limitation, counting against such maximum
      number of Shares, to the extent required under Code Section 162(m), any
      Shares subject to Options that are canceled or
  repriced.

            

    

    

    
      	
              4.3

            	
              Term of
      Plan.  Subject to the terms and conditions of the Plan,
      the Committee may, from time to time prior to January 25, 2017, grant
      Awards to Eligible Employees on such terms and conditions as the Committee
      may determine.  More than one Award may be granted to the same
      Eligible Employee.

            

    

    

    

    ARTICLE
5

    Award
Agreements

    

    
      	
              5.1

            	
              All
      Awards granted under the Plan shall be evidenced by a written Award
      Agreement in such form or forms as the Committee in its sole discretion
      may determine.

            

    

    

    
      	
              5.2

            	
              Each
      Participant, by acceptance of an Award under this Plan, shall be deemed to
      have consented to be bound, on the Participant’s own behalf and on behalf
      of the Participant’s heirs, assigns and legal representatives, by all
      terms and conditions of this Plan, as amended from time to
      time.

            

    

    

    

    ARTICLE
6

    Stock Option
Awards

    

    
      	
              6.1

            	
              Option Expiration
      Dates.  Subject to specific provisions relating to
      Incentive Stock Options set forth in Section 6.5 below, and subject to the
      provisions regarding Termination of Awards in Article 9 below, each Option
      shall be for a term of from one to ten years from the Date of
      Grant.  In the event that the Option Expiration Date is not
      specified in the Option Award Agreement, it shall be ten years from the
      Date of Grant.

            

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    

    
      	
              6.2

            	
              Revisions to Option
      Awards.  The Committee, subject to the Participant’s
      approval, on or after the Date of Grant, may establish different exercise
      schedules and impose other conditions upon exercise and vesting for any
      particular Option or groups of Options.  In addition, the
      Committee may, at any time subject to the Participant’s approval,
      reclassify an Incentive Stock Option as a Nonqualified Stock
      Option.

            

    

    

    
      	
              6.3

            	
              Exercise of
      Options.  Any person entitled to exercise an Option in
      whole or in part may do so by delivering a written notice of exercise to
      the Company, attention Corporate Secretary, at its principal
      office.  The written notice shall specify the number of Shares
      for which an Option is being exercised and the Date of Grant of the Option
      being exercised, and shall be accompanied by full payment of the Option
      Price for the Shares being
purchased.

            

    

    

    6.4           Payment of Option
Price.

    

    
      	
               
      

            	
              (a)

            	
              Payment
      of the Option Price may be made in cash, by the tender of Shares, or both,
      or in such other form as may be determined by the
      Committee.  Shares tendered for payment of the Option Price
      shall be valued at their Fair Market Value on the Date of
      Exercise.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Payment
      through tender of Shares may be made by instruction from the Participant
      to the Company to withhold from the Shares issuable upon exercise that
      number which have a Fair Market Value equal to the exercise price for the
      Option or portion thereof being
exercised.

            

    

    

    6.5           Designation as Incentive
Stock Options or Nonqualified Stock Options

    

    
      	
               
      

            	
              (a)

            	
              The
      Committee in its discretion may designate whether an Option is to be
      considered an Incentive Stock Option or a Nonqualified Stock
      Option.  The Committee may grant both an Incentive Stock Option
      and a Nonqualified Stock Option to the same
      individual.  However, where both an Incentive Stock Option and a
      Nonqualified Stock Option are awarded at one time, such Options shall be
      deemed to have been awarded in separate grants, shall be clearly
      identified, and in no event will the exercise of one such Option affect
      the right to exercise the other such
Option.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Any
      Option designated by the Committee as an Incentive Stock Option will be
      subject to the general provisions applicable to all Options granted under
      the Plan.  In addition, the Incentive Stock Option shall be
      subject to the following specific
provisions:

            

    

    

    
      	
               
      

            	
              (1)

            	
              At
      the time the Incentive Stock Option is granted, if the Eligible Employee
      owns, directly or indirectly, stock representing more than 10% of (i) the
      total combined voting power of all classes of stock of the Company, or
      (ii) a corporation that owns 50% or more of the total combined voting
      power of all classes of stock of the Company,
  then:

            

    

    

    
      	
               
      

            	
              (i)

            	
              the
      Option Price must equal at least 110% of the Fair Market value of the
      Shares on the Date of Grant, and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      term of the Option shall not be greater than five years from Date of
      Grant.

            

    

    

    
      	
               
      

            	
              (2)

            	
              The
      aggregate Fair Market Value of Shares (determined at the Date of Grant)
      with respect to which Incentive Stock Options are exercisable by a
      Participant for the first time during any calendar year under this Plan or
      any other plan maintained by the Company shall not exceed
      $100,000.

            

    

    

    
      	
               
      

            	
              (c)

            	
              If
      any Option is not granted, exercised, or held pursuant to the provisions
      noted immediately above, it will be considered a Nonqualified Stock Option
      to the extent that the Award is in conflict with these
      restrictions.

            

    

    

    

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    ARTICLE
7

    Restricted Share
Awards

    

    
      	
              7.1

            	
              “Restricted
      Shares” are Awards consisting of grants of Shares to Participants, the
      vesting of which are subject to a Vesting Period and/or Performance
      Measures established by the Committee.  The period when any
      Restricted Shares have not yet been earned because the Vesting Period
      and/or Performance Measures have not been satisfied is referred to herein
      as the “Restricted Period.”

            

    

     

    
      	
              7.2

            	
              The
      Committee shall designate the Participants to whom Restricted Shares are
      to be awarded and the number of Shares that are subject to the
      Award.

            

    

     

    
      	
              7.3

            	
              Grants
      of Restricted Shares awarded to Participants under the Plan shall be
      subject to the following terms and conditions and to such other terms and
      conditions, not inconsistent with the Plan, as shall be prescribed by the
      Committee in its sole discretion and as shall be contained in the Award
      Agreement:

            

    

     

    
      	
               
      

            	
              (a)

            	
              Restricted
      Shares awarded to Participants may not be sold, assigned, transferred,
      pledged or otherwise encumbered, except as provided otherwise herein, for
      a Restricted Period of ten (10) years or such shorter period as the
      Committee may determine at the time of the Award of such Restricted
      Shares.  Under no circumstances shall the Restricted Period be
      less than one (1) year (“Minimum Restricted Period”); provided, however,
      that the vesting of any Restricted Shares may be accelerated to occur
      prior to the end of the Minimum Restricted Period pursuant to the
      provisions of Section 9.2 or Section 10.3
below

            

    

     

    
      	
               
      

            	
              (b)

            	
              Except
      for the restrictions described in the preceding paragraph, and as
      otherwise provided in an Award Agreement, during the Restricted Period the
      Participant as holder of such Restricted Shares shall have all the rights
      of a stockholder, including but not limited
to:

            

    

     

    
      	
               
      

            	
              i.

            	
              the
      right to vote such Restricted Shares,
and

            

    

     

    
      	
               
      

            	
              ii.

            	
              the
      right to receive all dividends paid on such Restricted
    Shares.

            

    

     

    
      	
               
      

            	
              (c)

            	
              The
      Committee may, subject to the Participant’s approval, at any time after
      the date of an Award of Restricted Shares, adjust the length of any
      applicable Vesting Period or Performance Period to account for individual
      circumstances of a Participant or group of Participants, provided that the
      Restricted Period may not be less than the Minimum Restricted
      Period.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Each
      certificate issued in respect of Restricted Shares awarded under the Plan
      shall be registered in the name of the Participant and, at the discretion
      of the Committee, until the conclusion of the Restricted Period each such
      certificate may be deposited in a bank or alternative location designated
      by the Committee.  Each such certificate shall bear the
      following (or a similar) legend:

            

    

     

    “The
transferability of this certificate and the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture) contained in the
ICO, Inc. 2007 Equity Incentive Plan and an agreement entered into between the
registered stockholder and ICO, Inc.  A copy of such plan and
agreement is on file in the office of the Secretary of ICO, Inc., 1811 Bering
Drive, Suite 200, Houston, Texas 77057 [or current ICO, Inc.
address].”

     

    
      	
               
      

            	
              (e)

            	
              At
      the end of the Vesting Period applicable to a Restricted Share Award (that
      is not subject to Performance Measures), such Restricted Shares will be
      transferred free of all restrictions to a Participant (or the
      Participant’s successors).  At the end of the Performance Period
      applicable to a Restricted Share Award: the Committee shall determine the
      number of Restricted Shares that have been earned in accordance with the
      provisions of Section 3.3 above; provided that the Vesting Period, if any,
      has been satisfied, such Restricted Shares will be transferred free of all
      restrictions to the Participant (or the Participant’s successors); and
      any

            

    

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    such
Restricted Shares that are not earned because of failure to satisfy applicable
Performance Measures shall be forfeited.

     

    
      	
              7.4

            	
              Substitution of
      Cash.  If provided for in the applicable Award Agreement,
      the Committee may, in its discretion, substitute cash equal to the Fair
      Market Value (determined as of the date of distribution) of Restricted
      Shares otherwise required to be distributed to a
    Participant.

            

    

     

     

    ARTICLE
8

    Transferability of
Awards

    

    During
the lifetime of a Participant to whom an Award of Options or Restricted Shares
has been granted, such Options or Restricted Shares are not transferable
voluntarily or by operation of law, and may be exercised only by the designated
Participant.  Upon the death of a Participant to whom an Award of
Options or Restricted Shares has been granted, the Options or Restricted Shares
may be transferred to the beneficiaries or heirs of the deceased Participant by
will or by the laws of descent and distribution.  In addition, to the
extent permitted in an Award Agreement, the Committee may, in its discretion,
allow for the transferability of any Nonqualified Stock Options or Restricted
Shares granted pursuant to this Plan.

    

    

    ARTICLE
9

    Termination of
Awards

    

    
      	
              9.1

            	
              Termination During
      Period of Continuous Employment.  During a Participant’s
      period of continuous employment with the Company, an Award of Options or
      Restricted Shares will be terminated only if it (a) has been fully
      exercised or earned, (b) has not vested due to failure to satisfy any
      Performance Measures or other terms of grant, or (c) has expired or been
      forfeited by its terms.

            

    

    

    9.2           Termination of
Employment.

    

    
      	
               
      

            	
              (a)

            	
              Options.

            

    

    

    
      	
               
      

            	
              (1)

            	
              Unless
      an Option Award Agreement provides otherwise, upon Termination of
      Employment for any reason, the then exercisable portion of any Option will
      terminate upon the earlier of (i) the first business day following
      expiration of the three month period after the date of Termination of
      Employment, or (ii) the Option Expiration Date set forth in the Award
      Agreement pursuant to which the Option was granted.  The portion
      of any Option Award not exercisable will terminate on the date of
      Termination of Employment.  For purposes of the Plan, a leave of
      absence approved by the Company shall not be deemed to be Termination of
      Employment.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Notwithstanding
      the preceding paragraph, if a Participant holding an Option dies or
      becomes subject to Permanent Disability while employed or within three
      months after Termination of Employment, such Option may be exercised, to
      the extent exercisable on the date of the occurrence of the event which
      triggers the operation of this paragraph, at any time by the estate or
      guardian of such person or by those persons to whom the Option may have
      been transferred by will or by the laws of descent and distribution until
      the earlier of (i) the date which is one year after the date of such death
      or occurrence of Permanent Disability, or (ii) the Option Expiration Date
      set forth in the Award Agreement.

            

    

    

    
      	
               
      

            	
              (3)

            	
              The
      Committee may at any time prior to three months after the date of
      Termination of Employment provide that particular Options not be affected
      by such termination and continue in force whether or not exercisable at
      the date of such Termination of Employment until the Option Expiration
      Date set forth in the Award Agreement or any date prior
      thereto.

            

    

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (4)

            	
              Except
      as provided in Article 10 hereof, in no event will the continuation of the
      term of an Option beyond the date of Termination of Employment allow the
      Participant, or the Participant’s beneficiaries or heirs, to accrue
      additional rights under the Plan, or to purchase more Shares through the
      exercise of an Option that  could have been purchased on the day
      that employment was terminated.  In addition, notwithstanding
      anything contained herein, no Option may be exercised in any event after
      the expiration of ten years from the Date of Grant of such
      Option.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Restricted
      Shares.  Except as otherwise determined by the Committee
      in its sole discretion, a Participant whose employment with the Company
      terminates prior to the end of the Vesting Period applicable to a
      Restricted Share Award for any reason shall forfeit all Restricted Shares
      remaining subject to such outstanding Restricted Share
    Award.

            

    

    

    
      	
               
      

            	
              (c)

            	
              Termination Due to
      Death or Permanent Disability – Awards Subject to Performance
      Measures. In the event that the employment with the Company of a
      Participant with Options or Restricted Shares conditioned on Performance
      Measures terminates because of death or because the Participant becomes
      subject to Permanent Disability, and the Performance Period has not ended
      at the time of such termination due to death or Permanent Disability, the
      Committee shall have sole discretion to determine whether all or any
      portion of the Award that is subject to Performance Measures will be
      deemed earned.

            

    

    

    

    ARTICLE
10

    Adjustments to Awards due to
Changed Circumstances

    

    
      	
              10.1

            	
              In
      the event of changes in the outstanding common stock of the Company as a
      result of stock dividends, split-ups, recapitalizations, combinations of
      Shares, exchanges of Shares or related transactions, the number and class
      of Shares and price per Share for each outstanding award of Options or
      Restricted Shares shall be correspondingly adjusted by the
      Committee.

            

    

    

    
      	
              10.2

            	
              The
      Committee shall make appropriate adjustments in the Option Price of any
      outstanding award of Options to reflect any spin-off of assets,
      extraordinary dividends or other distributions to
      shareholders.

            

    

    

    
      	
              10.3

            	
              In
      event that the Company shall, pursuant to action by its Board of
      Directors, at any time propose to merge into, consolidate with, or sell or
      transfer substantially all of its assets, or otherwise enter in to a
      transaction pursuant to which ICO, Inc. is not the surviving corporation
      (other than a corporate restructuring among Company Affiliates), or in
      which the outstanding Shares of ICO, Inc. are converted to cash, other
      securities or other property (any such circumstances referred
      to  herein as a “Change of Control”) and provision is not made
      pursuant to the terms of the transaction(s) relating to such Change of
      Control (the “Transaction”) for the assumption by the surviving, resulting
      or acquiring corporation of any outstanding category of Awards under the
      Plan, or for the substitution of new Awards therefor, with regard for
      Awards for which no provision is made the following shall
      apply:

            

    

    

    
      	
               
      

            	
              (a)

            	
              Options.  The
      Committee shall cause written notice of the proposed Transaction to be
      given to each Option holder not more than twenty (20) days prior to the
      anticipated effective date of the proposed Transaction, and the
      Participant’s Option, unless otherwise provided for under the terms of the
      Option Award Agreement, shall become fully (100%) vested and, prior to a
      date specified in such notice, which shall not be more than ten days prior
      to the anticipated effective date of the proposed Transaction, each
      Participant shall have the right to exercise his or her Option to purchase
      any or all Shares then subject to such Option (unless otherwise provided
      under the terms of the Option Award Agreement), including those, if any,
      which by reason of other provisions of the Plan have not then become
      available for purchase.  Each Participant, by so notifying the
      Company in writing, may, in exercising his or her Option, condition such
      exercise upon, and provide that such exercise shall become effective at
      the time of, but immediately prior to, the consummation of the
      Transaction, in which event such Participant need not make payment for the
      Shares to be purchased upon exercise of such Option until five days after
      written notice by the Company to such Participant that
  the

            

    

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    Transaction
has been consummated.  If the transaction is consummated, each Option,
to the extent not previously exercised prior to the date specified in the
foregoing notice, shall terminate on the effective date of the
Transaction.  If the Transaction is abandoned, (i) any Shares not
purchased upon exercise of such Option shall continue to be available for
purchase in accordance with the other provisions of the Plan and (ii) to the
extent that any Option not exercised prior to such abandonment shall have vested
solely by operation of this paragraph, such vesting shall be deemed annulled,
and the original vesting schedule set forth shall be reinstituted, as of the
date of such abandonment.

    

    
      	
               
      

            	
              (b)

            	
              Restricted
      Shares.  The Committee shall cause written notice of the
      proposed Transaction to be given to each Participant holding Restricted
      Shares not more than twenty (20) days prior to the anticipated effective
      date of the proposed Transaction, and unless provided for under the terms
      of the Restricted Share Award Agreement, all restrictions imposed on
      Restricted Shares shall lapse and such Restricted Shares shall become
      fully (100%) vested as of a date specified in the notice, which shall not
      be more than ten (10) days prior to the anticipated effective date of the
      proposed Transaction.

            

    

    

    

    ARTICLE
11

    Amendment or Discontinuance
of Plan

    

    
      	
              11.1

            	
              The
      Board of Directors may at any time amend, suspend, or discontinue the
      Plan; provided, however, that except as otherwise permitted by Rule 16b-3,
      Code Section 162(m) or Code Section 422, no amendments by the Board of
      Directors shall, without further approval of the shareholders of ICO,
      Inc.:

            

    

    

    
      	
               
      

            	
              (a)

            	
              change
      the class of Eligible Employees;

            

    

    

    
      	
               
      

            	
              (b)

            	
              except
      as provided in Articles 4 and 9 hereof, increase the number of Shares
      which may be subject to Award granted under the Plan;
  or

            

    

    

    
      	
               
      

            	
              (c)

            	
              cause
      the Plan or any Award granted under the Plan to fail to (i) qualify for
      exemption from Section 16(b) of the Act, (ii) be excluded from the $1
      million deduction limitation imposed by Code Section 162(m), or (iii)
      qualify as an “Incentive Stock Option” as defined by Code Section
      422.

            

    

    

    
      	
              11.2

            	
              No
      amendment or discontinuance of the Plan shall alter or impair any Option
      granted under the Plan without the consent of the holder
      thereof.

            

    

    

    

    ARTICLE
12

    Effective
Date

    

    The Plan became effective on January
12, 1998, having been adopted by the Board of Directors on that date and
approved by the shareholders of the Company within twelve (12) months
thereafter.  The Plan was amended and restated by the Board of
Directors on December 18, 2001, and approved by the shareholders of the Company
on March 15, 2002.  The Plan was amended and restated by the Board of
Directors on January 27, 2004, and approved by the shareholders of the Company
on March 5, 2004.  The Plan was amended by the Board of Directors on
September 8, 2005 and was amended and restated by the Board of Directors on
November 16, 2005 (without the necessity of shareholder approval for such
amendments).  The Plan was amended and restated by the Board of
Directors on January 26, 2006, and approved by the shareholders of the Company
on March 14, 2006.  The Plan was amended and restated by the Board of
Directors on January 25, 2007, and approved by the shareholders of the Company
on March 5, 2007.  The Plan was amended and restated by the Board of
Directors on August 7, 2007 (without the necessity of shareholder approval for
such amendments).  The Plan was amended and restated by the Board of
Directors on December 5, 2007 (without the necessity of shareholder approval for
such amendments).  The Plan was amended and restated by the Board of
Directors on December 8, 2008, and approved by the shareholders of the Company
on [March 9, 2009].

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    ARTICLE
13

    Miscellaneous

    

    
      	
              13.1

            	
              Nothing
      contained in this Plan or in any action taken by the Board of Directors or
      shareholders of the Company shall constitute the granting of an Award, and
      an Award shall not be deemed granted unless: a written Award Agreement has
      been delivered to the respective employee; the employee has executed the
      Award Agreement respecting the Award in conformance with the provisions of
      the Plan and the terms of grant; and the Award Agreement has been executed
      on behalf of the Company.

            

    

    

    
      	
              13.2

            	
              Nothing
      contained in this Plan or in any Award granted pursuant to it shall confer
      upon any employee any right to continue in the employ of the Company or to
      interfere in any way with the right of the Company to terminate employment
      at any time.  So long as a holder of an Award shall continue to
      be an employee of the Company, the Award shall not be affected by any
      change of the Participant’s duties or
position.

            

    

    

    
      	
              13.3

            	
              Certificates
      for Shares purchased through exercise of Options or received due to an
      award of Restricted Shares will be issued in regular course after exercise
      of the Option and payment therefor as called for by the terms of the
      Option, or the vesting and/or performance terms of the award of Restricted
      Shares.  No persons holding an Option granted under this Plan
      shall have any rights or privileges of a shareholder of the Company with
      respect to any Shares issuable upon exercise of such Option until
      certificates representing such Shares shall have been issued and
      delivered.  No Shares shall be issued and delivered upon
      exercise of an Option unless and until the Company, in the opinion of its
      counsel, has complied with all applicable registration requirements of the
      Securities Act of 1933 and any applicable state securities laws, and with
      any applicable listing requirements of any national securities exchange on
      which ICO, Inc.’s securities may then be listed as well as any other
      requirements of law.

            

    

    

    
      	
              13.4

            	
              This
      Plan shall continue in effect until the expiration of all Awards granted
      under the Plan unless terminated earlier in accordance with Article 11;
      provided, however, that it shall otherwise terminate ten years after the
      Effective Date.

            

    

    

    
      	
              13.5

            	
              Notwithstanding
      any provision in this Plan or in any Award Agreement, no Restricted Share
      Award granted after the Effective Date of this amendment and restatement
      of the Plan shall be exercisable prior to the date the ICO, Inc. 2007
      Equity Incentive Plan (amending and restating the Fourth Amended and
      Restated ICO, Inc. 1998 Stock Option Plan) is approved by the shareholders
      of the Company (“Date of Shareholder Approval”).  In the event
      that any Options are granted after the Effective Date, such Options may
      only be exercisable prior to the Date of Shareholder Approval if, as of
      the Date of Grant of such Options, the total number of Options subject to
      awards under the Plan does not exceed the limit of Shares available for
      grant under the Plan as set forth in the Fourth Amended and Restated ICO,
      Inc. 1998 Stock Option Plan.

            

    

    

    
 

     

     

    -10-

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