STOCK OPTION AGREEMENT

Exhibit 10.2

 

Director: Gregory T. Barmore

Date of Grant: November 18, 2005

Stock Option Plan: 1993 Non-Employee Director Plan

Exercise Price: $2.40/Share (FMV on date of grant)

Expiration: November 18, 2012, 12:00 a.m.

Total # Shares subject to grant: 40,000

Conditions: Grant is subject to and conditioned upon shareholder approval of the First Amendment to the Third Amended and Restated 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc. within one year after the Date of Grant.

Vesting (provided that above Conditions are satisfied):

* 20,000 Shares vest on December 15, 2006 (provided that Barmore continues to serve as Chairman of the Board on September 30, 2006 and all of the conditions for vesting described in Exhibit A are satisfied. In the event that only a portion of the conditions described in Exhibit A are satisfied, a corresponding portion of the 20,000 Shares will vest in accordance with Exhibit A.)

* 20,000 Shares vest on December 15, 2007 (provided that Barmore continues to serve as Chairman of the Board on September 30, 2007 and all of the conditions for vesting described in Exhibit B are satisfied. In the event that only a portion of the conditions described in Exhibit B are satisfied, a corresponding portion of the 20,000 Shares will vest in accordance with Exhibit B.)

 

This AGREEMENT is made and effective this 18^th day of November, 2005 (the “Date of Grant”), between ICO, Inc., a Texas corporation (the “Company”), and Gregory T. Barmore (“Director”), Chairman of the Company’s Board of Directors.

 

1. Subject to Shareholder Approval of Plan Amendment. This Agreement is subject to and conditioned upon ICO, Inc. shareholder approval of the First Amendment to the Third Amended and Restated 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc. (the “Amendment”) within one year after the Date of Grant. The Amendment was approved by the Board of Directors on November 18, 2005, prior to the Board’s approval of this grant. In the event that the Company’s shareholders do not approve the Amendment as set forth in this paragraph, this Agreement shall be null and void, and shall have no effect.

2. Grant of Option. To carry out the purposes of ICO, Inc.’s 1993 Stock Option Plan for Non-Employee Directors, (the “Plan”), by affording Director the opportunity to purchase shares of the common stock of the Company (“Shares”), and in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company and Director hereby agree to the terms of grant set forth herein. The Company hereby grants to Director the right to purchase all or any part of an aggregate of 40,000 Shares (such right to purchase 40,000 Shares at the purchase price set forth in paragraph 3 below being referred to herein as this “Option”), on the terms and conditions set forth herein and in the Plan, as such Plan may be amended or supplemented from time to time, and which Plan is incorporated herein by reference as a part of this Agreement, and subject to the conditional vesting described below. This Option shall not be treated as an incentive stock option within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

 

3. Purchase Price. The purchase price of the Shares that may be purchased by Director pursuant to the exercise of this Option shall be $2.40 per Share, which has been determined to be not less than the fair market value of the Shares on the Date of Grant of this Option. For the purpose of this Agreement, the “fair market value” of the Shares shall be determined in accordance with the definition of “fair market value” contained in the Plan.

 

4. Exercise of Option / Vesting Schedule. This Option shall vest and may be exercised, in whole or part, according to the schedule described below.

 

This Option may be exercised in whole or part, by written notice to the Company at its principal executive office addressed to the attention of its General Counsel, at any time and from time to time after the Date of Grant hereof, provided that the Option or portion thereof has vested and may be purchased in accordance with the following schedule:

 

Vesting Date	Number of Shares That Vest and May Be Purchased
December 15, 2006	Up to 20,000 Shares, contingent upon achieving the objectives described in clause (a) below and Exhibit A
December 15, 2007	Up to 20,000 Shares, contingent upon achieving the objectives described in clause (b) below and Exhibit B

(a) Options to purchase 20,000 Shares vest based on the Company’s fiscal year (“FY”) 2006 performance/service: 5,000 of these Options vest on December 15, 2006, provided that Director continues to serve as the Company’s Chairman of the Board through September 30, 2006. All or a portion of the remaining 15,000 of these Options will vest on December 15, 2006 based on the Company’s performance against target in FY 2006 on the three measurements described in Exhibits A and C, and also conditioned upon Director’s continued service as Chairman of the Board through September 30, 2006.

(b) Options to purchase 20,000 Shares vest based on FY 2007 performance/service: 5,000 of these Options vest on December 15, 2007, provided that Director continues to serve as the Company’s Chairman of the Board through September 30, 2007. All or a portion of 15,000 of these Options will vest on December 15, 2007 based on the Company’s performance against target in FY 2007 on the three measurements described in Exhibits B and C, and also conditioned upon Director’s continued service Chairman of the Board through September 30, 2007.

In the event that all or a portion of the Option does not vest because the conditions set forth herein or in Exhibits A and/or B are not satisfied, the portion of the Option that does not vest will automatically terminate on the date when it would otherwise vest, and shall not be exercisable by Director.

 

 

No portion of this Option shall not be exercisable in any event after November 18, 2012 at 12:00 a.m.

5. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Director. In the event of conflict between any of the provisions in this Agreement and provisions in the Plan, the provisions of the Plan will govern.

 

6. Governing Law and Dispute Resolution. This Agreement and the Option granted hereunder, shall be governed by, and construed in accordance with the laws of the State of Texas, without regard to its principles of conflicts of law. Any and all controversies, claims and differences arising out of or relating to the Option granted under this Agreement which cannot be settled by good faith negotiation between the parties will be finally settled by binding arbitration brought within three (3) months of the termination of the Option, with the date of termination to be governed by the provisions of the Plan and this Agreement. The binding arbitration will be conducted in accordance with the then existing rules of the American Arbitration Association (“AAA”), by one arbitrator. In the event of any conflict between such rules and this paragraph, the provisions of this paragraph shall govern. Upon the written demand of either party, the parties shall appoint a single arbitrator acceptable to both parties. Arbitration proceedings shall be held in Houston, Texas. The decision of the arbitrator shall be final and binding upon the parties hereto, not subject to appeal, and shall deal with the questions of interest, cost of the arbitration, and all matters relevant thereto. Judgment upon the award or decision rendered by the arbitrator may be entered in any court having jurisdiction thereof, or application may be made to such court for a judicial recognition of the award or any order of enforcement thereof as the case may be.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto and duly authorized, and Director has executed this Agreement, to be effective as of the Date of Grant set forth above. 

 

ICO, INC.
By:	/s/ A. John Knapp, Jr.
	A. John Knapp, Jr.
	President and Chief Executive Officer

 

 

DIRECTOR

/s/ Gregory T. Barmore

Gregory T. Barmore

 

 

 

 

Measurement	Weighting	FY '06 Minimum	FY '06 Target	CEO pay-out at target
ICO, Inc. Consolidated Operating Income
ICO, Inc. Consolidated Investment Turnover
ICO, Inc. Consolidated ROE
Vesting Over Time
Total

See Exhibit C for explanation of measurement definitions, vesting calculation information, and additional provisions regarding vesting.

 

 

 

 

 

See Exhibit C for explanation of measurement definitions, vesting calculation information, and additional provisions regarding vesting.

 

·

“Operating Income”: Earnings before interest and taxes, excluding non-recurring charges. Note that Operating Income shall include expenses for bonuses payable to the CEO, Group Presidents and CFO pursuant to the incentive plans applicable to them. Non-recurring charges that are excluded from the calculation of Operating Income shall consist of impairment, restructuring and other charges included in ICO's audited financial statements. Additionally, Operating Income shall exclude, on a pro-forma basis, the effect of discontinued operations (including plants that are shut down).

·

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

·

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

·

Actual results between the "minimum" and "target" are interpolated assuming zero Options vest if the actual results equal the results described in the "minimum" column, and 100% of the Options in a given measurement row vest if the results equal or exceed the “target” column (therefore the midpoint between the "minimum" and the "target" results in any given measurement row result in 50% of the Options at target being vested).

·

Upon the circumstances described in Section 6.3 (pertaining to sale or merger of the Company) of the Company’s 1998 Employee Stock Option Plan (“1998 Plan”), unvested Options shall vest in accordance with Section 6.3 of the 1998 Plan, as if such unvested Options were Options granted under the 1998 Plan, with the following exception: the Options referenced in the row in both Exhibits A and B entitled "Vesting over time" above shall only vest in proportion to service as Chairman of the Board as of the date of the sale or merger (e.g. if a sale or merger was to close on January 1, 2007, only 3/12ths of the Director’s 5,000 Options referenced in the row entitled “Vesting over time” for FY 2007 would vest).