8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 3, 2005

____________________

ICO, INC.

(Exact name of registrant as specified in its charter)

Texas (State or other jurisdiction of incorporation) 0-10068 (Commission File Number) 76-0566682 (I.R.S. Employer Identification No.)

5333 Westheimer Road

Suite 600

Houston, Texas 77056

(Address of principal executive offices and zip code)

(713) 351-4100

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On September 2, 2005 (as disclosed in Item 5.02 of the Current Report on Form 8-K filed by ICO, Inc. (the “Company”) on September 9, 2005), A. John Knapp, Jr., a member of the Company’s Board of Directors, was appointed President and Chief Executive Officer of the Company, effective October 1, 2005.

In connection with Mr. Knapp’s appointment as President and Chief Executive Officer, on October 3, 2005, Mr. Knapp was granted options (“Options”) to purchase 120,000 shares of ICO, Inc. common stock (“Shares”), pursuant to the terms of the Company’s 1998 Employee Stock Option Plan, with vesting occurring over the period of October 3, 2005 through September 30, 2006 (“Fiscal Year 2006”) as follows: Options to purchase 10,000 Shares shall vest on October 31, 2005, and Options to purchase an additional 10,000 Shares shall vest on the last day of each of the eleven months immediately following October 2005; provided, however, that in the event that Mr. Knapp’s employment with the Company terminates for any reason prior to the last day of any month during Fiscal Year 2006, a pro-rated number of Shares will vest for the month in which his employment terminates (calculated based on the percentage of days he was an employee during the month of termination), and the remaining Options that would otherwise have vested during Fiscal Year 2006 shall not vest or be exercisable and shall terminate. All 120,000 of the Options, to the extent vested, shall expire on October 3, 2012. The exercise price for the 120,000 Options is the fair market value of the Shares (as defined in the plan) on the date of grant, which was $2.89 per Share.

On October 5, 2005 the Company entered into an Employment Agreement (the “Agreement”) with Mr. Knapp, to be effective as of October 1, 2005. Pursuant to the Agreement, Mr. Knapp is employed for an indefinite term commencing on October 1, 2005. In addition to the 120,000 Options that were granted on October 3, 2005, Mr. Knapp is entitled to receive a base salary of $96,000 per annum, payable bi-weekly, and is entitled to participate in the Company’s standard health and welfare plans, including medical and dental insurance, and the Company’s 401(k) plan, pursuant to the terms of those plans. Pursuant to the Agreement Mr. Knapp is an at-will employee, and if Mr. Knapp’s employment terminates for any reason, he shall be entitled to receive compensation and benefits through the termination date.

Item 9.01Financial Statements and Exhibits.

(c)Exhibits

ExhibitDescription

10.1 Stock Option Agreement between ICO, Inc. and A. John Knapp, Jr., dated October 3, 2005.

10.2 Employment Agreement between ICO, Inc. and A. John Knapp, Jr., executed on October 5, 2005, to be effective as of October 1, 2005.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ICO, INC.

Date:October 7, 2005

By:	/s/ Jon C. Biro
Name:	Jon C. Biro
Title:	Chief Financial Officer & Treasurer

EX-10.1

Exhibit 10.1

Summary Information

Employee: A. John Knapp, Jr.

Location: corporate

Date of Grant: October 3, 2005

ESOP: 1998

Exercise Price: $2.89/Share

Expiration: October 3, 2012, 12:00 a.m.

Total # Shares subject to grant: 120,000

Vesting:

10,000 Shares vest on October 31, 2005 (provided that Knapp is employed on that date)

10,000 Shares vest on November 30, 2005 (provided that Knapp is employed on that date)

10,000 Shares vest on December 31, 2005 (provided that Knapp is employed on that date)

10,000 Shares vest on January 31, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on February 28, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on March 31, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on April 30, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on May 31, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on June 30, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on July 31, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on August 31, 2006 (provided that Knapp is employed on that date)

10,000 Shares vest on September 30, 2006 (provided that Knapp is employed on that date)

In the event that Mr. Knapp’s employment terminates prior to the last day of a month during the above period, a pro-rated number of shares shall vest for that month.

STOCK OPTION AGREEMENT

This AGREEMENT is made and effective this 3^rd day of October, 2005 (the “Date of Grant”), between ICO, Inc., a Texas corporation (the “Company”), and (“Employee”), an employee of Company or one of its subsidiaries.

To carry out the purposes of ICO, Inc.’s 1998 STOCK OPTION PLAN, (the “Plan”), by affording Employee 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 Employee hereby agree as follows:

1.Grant of Option. The Company hereby grants to Employee the right to purchase all or any part of an aggregate of 120,000 Shares (such right to purchase 120,000 Shares at the purchase price set forth in paragraph 2 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”).

2.Purchase Price. The purchase price of the Shares that may be purchased by Employee pursuant to the exercise of this Option shall be $2.89 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.

3.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
October 31, 2005	10,000 Shares*
November 30, 2005	10,000 Shares*
December 31, 2005	10,000 Shares*
January 31, 2006 February 28, 2006	10,000 Shares* 10,000 Shares*
March 31, 2006	10,000 Shares*
April 30, 2006	10,000 Shares*
May 31, 2006	10,000 Shares*
June 30, 2006	10,000 Shares*
July 31, 2006	10,000 Shares*
August 31, 2006	10,000 Shares*
September 30, 2006	10,000 Shares*

*Vesting is conditioned upon Employee continuing to be employed during the month prior to and including the referenced Vesting Date. In the event that Employee’s employment terminates prior to the Vesting Date, a pro-rated number (rounded-up for any fractional Share) of Shares shall vest during the month of termination. (For example only, if Employee’s employment terminates on December 10, 2005, only 3,226 Shares shall vest in connection with the month of December, 2005, representing 10/31 of 10,000 Shares.) Any Options to purchase Shares that have not vested as of the date of Employee’s termination of employment shall be terminated and shall not be exercisable by Employee. This Option shall not be exercisable in any event after October 2, 2012.

4.Withholding of Tax. To the extent that the exercise of this Option or the disposition of Shares acquired by exercise of this Option results in compensation income or wages to Employee for federal, state, or local tax purposes, if requested by Company, Employee shall deliver to the Company at the time of such exercise or disposition such amount of money or Shares as the Company may require to meet its obligations under applicable tax laws or regulations, and, if Employee fails to do so, the Company is authorized to withhold from any cash or Share remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income. Upon an exercise of this Option, the Company is further authorized in its discretion to satisfy any such withholding requirements out of any cash or Shares distributable to Employee upon such exercise.

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 Employee. 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 andDispute 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 duly authorized, and Employee has executed this Agreement, to be effective as of the Date of Grant set forth above.

 ICO, INC.

By:   /s/ Jon C. Biro                             

Jon C. Biro

Chief Financial Officer

  Employee

  /s/ A. John Knapp, Jr.                      

  A. John Knapp, Jr.

EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is entered into by and between ICO, Inc. (the “Company”) and A. John Knapp, Jr. (“Employee”), to be effective as of October 1, 2005 (the “Effective Date”).

WITNESSETH:

WHEREAS, Employee will become employed by Company on the Effective Date; and

WHEREAS, the Company desires to employ Employee from and after the Effective Date pursuant to the terms and conditions and for the consideration set forth in this Agreement, and Employee desires to be employed by Company pursuant to such terms and conditions and for such consideration.

NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, the Company and Employee agree as follows:

ARTICLE 1: EMPLOYMENT AND DUTIES:

1.1Employee’s employment and compensation received from Company are “at-will” and, therefore, can be terminated, with or without cause, at any time without prior notice, at Employee’s option or at the option of Company.  The “Employment Period,” as used herein, means the period commencing on the Effective Date, and ending on the last day of Employee’s employment with Company (the “Termination Date”).

1.2 Beginning as of the Effective Date, Employee shall be employed as President and Chief Executive Officer of the Company, and shall continue to be a member of the Board of Directors of the Company. Employee may also serve as an officer and/or director of the Company’s domestic and foreign affiliated subsidiaries, and in such other key contributor capacities as may be requested by the Employer. Employee agrees to serve in such positions, and to perform diligently and to the best of Employee’s abilities the duties and services pertaining to such positions as reasonably determined by Company, as well as such additional or different duties and services appropriate to such positions which the Employee from time to time may be directed to perform by the Company. Employee shall report to the Board.

1.3Employee shall at all times comply with and be subject to such policies and procedures as the Company may establish from time to time, including, without limitation, the Company’s Employee Handbook, Code of Business Ethics, Group Accounting and Finance Policy Manual, Group Legal Department Policy Manual, and Expense Reimbursement Policy Manual.

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1.4Employee shall, during the Employment Period, devote at least 75% of Employee’s business time, energy, and best efforts to the business and affairs of the Company. Employee may not engage, directly or indirectly, in any other business, investment, or activity that interferes with Employee’s performance of Employee’s duties hereunder, is contrary to the interest of the Company or any of its affiliated subsidiaries and divisions (collectively, the “ICO Entities” or, individually, an “ICO Entity”). The ICO Entities as of the Effective Date are listed on Exhibit A attached hereto and incorporated herein. In the event that, during the Employment Period, any of the ICO Entities establish or purchase a 10% or more direct or indirect equity interest in any entity not listed on Exhibit A, such entity shall be deemed to be an ICO Entity for the purposes of this Agreement. The foregoing notwithstanding, the parties recognize and agree that Employee may engage in passive personal investments and other business activities which do not conflict with the business and affairs of the Company or the ICO Entities or interfere with Employee’s performance of his duties hereunder. Employee shall be eligible to serve on the board of directors or committees thereof of entities that are not ICO Entities during Employee’s employment by the Company, subject to the Board’s advance consideration and approval thereof. Employee shall be permitted to retain any compensation received for approved service on any unaffiliated corporation’s board of directors or committees thereof.

1.5Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of the Company and other ICO Entities and to do no act which would, directly or indirectly, injure any ICO Entity’s business, interests, or reputation. It is agreed that any direct or indirect interest in, connection with, or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect the Company, or any ICO Entity, involves a possible conflict of interest. In keeping with Employee’s fiduciary duties to the Company, Employee agrees that during the Employment Period Employee shall not knowingly become involved in a conflict of interest with the Company or the ICO Entities, or upon discovery thereof, allow such a conflict to continue. Moreover, during the Employment Period Employee shall not engage in any activity which might involve a possible conflict of interest without first obtaining approval in accordance with this Agreement and the Company’s policies and procedures.

ARTICLE 2: COMPENSATION AND BENEFITS:

2.1During the Employment Period, the Employee shall receive a base salary ("Base Salary") of Ninety-Six Thousand Dollars ($96,000) per annum, less all required deductions, including but not limited federal withholding, social security and other taxes, and payable bi-weekly on the Company’s regular payroll schedule. During the Employment Period, the Base Salary may be reviewed periodically by the Compensation Committee of the Board (the “Compensation Committee”). The Compensation Committee may make recommendations to the Board to revise the Employee’s Base Salary, which may only be revised upon approval by the Board. Any increase in the Base Salary shall not serve to limit or reduce any other obligation to the Employee under this Agreement.

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2.2In addition to the Base Salary and other benefits afforded to Employee under this Agreement, on the first business day of Employee’s employment, Employee shall be granted options (“Options”) to purchase 120,000 shares of the Common Stock of the Company (“Shares”). The Options shall be granted from the Company’s 1998 Employee Stock Option Plan, and pursuant to the terms of a Stock Option Agreement which shall include the terms described in this Section 2.2. The Options shall be granted at an exercise price equal to the fair market value of the Shares (as defined in the applicable stock option plan) on the date of grant. All of the referenced Options shall be Non Qualified Stock Options (NQSOs).

The Options shall vest as follows: Options to purchase 10,000 of the Shares shall vest upon the conclusion of each of the Employee’s first twelve months of employment as President and Chief Executive Officer. In the event that Employee’s employment as President and Chief Executive Officer terminates, for any reason, within twelve months after the Effective Date, vesting shall be pro-rated for the last month of service. All of the Options shall expire and shall not be exercisable on the seventh anniversary of the date of grant. The total number of Options to purchase Shares that have vested as of the first anniversary of the Effective Date shall be referred to herein as the “FY 2006 Vested Options.”

Example #1: Employee’s employment as President and Chief Executive Officer terminates five-and-a-half months after the Effective Date. In this scenario, Options to purchase 50,000 Shares shall have vested as of the end of the fifth month of employment, and with regard to the final half-month of employment, Options to purchase an additional 5,000 Shares shall vest. In this scenario an aggregate of Options to purchase 55,000 Shares shall have vested as of the Termination Date; therefore, the “FY 2006 Vested Options” is 55,000.

Example #2: Employee continues to be employed as of December 31, 2006. In this scenario, Options to purchase 120,000 Shares shall have vested as of the anniversary of the Effective Date; therefore, the “FY 2006 Vested Options” is 120,000.

2.3During the Employment Period, the Employee shall be entitled to participate in incentive, savings, and retirement plans, and other standard benefit plans afforded to other employees of the Company, including, without limitation, all medical, dental, disability, group life, accidental death, D&O indemnity, and travel accident insurance plans and programs of the Company, to the extent Employee is otherwise eligible under the terms and conditions of the applicable plan or policy, and as such plans or policies may be from time to time be amended, modified or terminated by the Company without prior notice. Dependants of Employee may participate in such plans to the extent allowed for other dependants of employees of the Company as allowed by the applicable plan. This Agreement shall not be construed to limit in any respect the Company’s right to establish, amend, modify, or terminate any benefit plan or policy. Furthermore, the Company shall not by reason of this Article 2 be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any incentive compensation, employee benefit, or stock or stock option program or plan, so long as such actions are similarly applicable to covered employees generally.

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2.4During the Employment Period, the Company shall pay or reimburse Employee for all actual, reasonable, and customary expenses incurred by Employee in the course of his employment in accordance with the Company’s policies and procedures in effect at the time.

2.5During the Employment Period, the Employee shall be entitled to four weeks of vacation, fully paid, per calendar year.

2.6The Company may withhold from any compensation, benefits, or amounts payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

ARTICLE 3: TERMINATION OF EMPLOYMENT AND

EFFECTS OF SUCH TERMINATION

3.1As Employee’s employment is “at will,” either Party (Company or Employee) may terminate this Agreement, with or without cause, upon providing written notice to the other party pursuant to Section 5.1 below. On the Termination Date, all future compensation to which Employee would otherwise be entitled and all future benefits for which Employee is eligible shall cease and terminate as of the Termination Date. Employee shall not be entitled to receive payment, if any, for accrued and unused vacation days.

3.2Termination of the employment relationship does not terminate those obligations imposed by this Agreement which are continuing obligations, including Employee’s obligations under Article 4.

ARTICLE 4:

OWNERSHIP AND PROTECTION OF INTELLECTUAL PROPERTY

AND CONFIDENTIAL INFORMATION;

NON-COMPETITION AGREEMENT:

4.1All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during Employee’s employment by the Company (whether during business hours or otherwise and whether on the Company’s premises or otherwise) which relate to the business, products or services of the Company or any of the ICO Entities (including, without limitation, all such information relating to corporate opportunities, confidential financial information, research and development activities, sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or potential customers and their requirements, the identity of key contacts within the customers’ organizations or within the organizations of acquisition prospects, marketing and merchandising techniques, prospective names, and marks), and all writings or material of any type embodying any of such items, shall be the sole and exclusive property of ICO or the ICO Entities, as the case may be.

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4.2Employee acknowledges that the businesses of the Company and the ICO Entities are highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates (including but not limited to the products and/or services marketed, advertised, and/or sold to customers and prospective customers, and the prices charged or quoted to them for such products and/or services, and the business activities, needs, and requirements for products and/or services of such customers or prospective customers) all comprise confidential business information and trade secrets which are valuable, special, and unique assets which the Company or the ICO Entities use in their business to obtain a competitive advantage over their competitors. Employee further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to the Company and the ICO Entities in maintaining their competitive position. Employee hereby agrees that Employee will not, at any time during or after the Employment Period, make any unauthorized disclosure of any confidential business information or trade secrets of the Company or any other ICO Entity, or make any use thereof, except in the carrying out of his employment responsibilities hereunder. Confidential business information shall not include information in the public domain (but only if the same becomes part of the public domain through a means other than a disclosure prohibited hereunder). The above notwithstanding a disclosure shall not be unauthorized if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any judicial arbitration, dispute resolution or other legal proceeding in which Employee’s legal rights and obligations as an Employee or under this Agreement are at issue; provided, however, that Employee shall, to the extent practicable and lawful in any such events, give prior notice to the Company of his intent to disclose any such confidential business information in such context so as to allow the Company or the applicable ICO Entity an opportunity (which Employee will cooperate with and will not oppose) to obtain such protective orders or similar relief with respect thereto as may be deemed appropriate.

4.3All written materials, records, and other documents made by, or coming into the possession of, Employee during the Employment Period which contain or disclose confidential business information or trade secrets of the Company or the ICO Entities shall be and remain the property of the Company or the ICO Entities, as the case may be. Upon the later of the termination of Employee’s employment with the Company, for any reason, and the last day of Employee’s service on the Board, Employee promptly shall deliver the same and all copies thereof to the Company.

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4.4To enable Employee to perform the duties contemplated by this Agreement, the Company promises that it will disclose confidential information, including confidential business information and trade secrets of the nature described or referenced in Sections 4.1 - 4.3 above, during the Employment Period and before termination of the employment relationship established by this Agreement. In return for and ancillary to the promise made by the Company to make such disclosure, Employee hereby makes a reciprocal promise designed to enforce the Company’s interest in protecting its confidential information and its goodwill. Accordingly, Employee promises to comply with the obligations set forth in Sections 4.1 through 4.3 above, and furthermore, Employee agrees that, during Employee’s employment with the Company and/or any other ICO Entity, and for fifteen (15) months following the later of the Termination Date and the last day when Employee serves on the Board, Employee will not, directly or through any other person, firm, or corporation, in any country in which the Company or any ICO Entity does business:

(a)perform services as an employee, officer, director or independent contractor for any Competing Enterprise (as defined below);

(b)be an owner, shareholder (except for the ownership by Employee of less than Five Percent (5%) of the equity securities of any publicly-traded company), agent, or partner of, or serve in an executive position with, any Competing Enterprise;

(c)call on or otherwise communicate with any customer or prior customer of the Company and/or any ICO Entity, including any respective successors and assigns, for the purpose of soliciting business for a Competing Enterprise or for someone other than the Company and/or other ICO Entities; or

(d)do anything to interfere with the normal operation of the businesses of the Company or any other ICO Entity, including, without limitation, make any effort personally or through others to recruit, hire, or solicit any employee or independent contractor of the Company or another ICO Entity to leave the Company or such ICO Entity, or to interfere in any way with any ICO Entity’s relationships with its customers or suppliers.

For purposes of this Section, the term “Competing Enterprise” shall mean: any person or any business organization of whatever form, excluding the Company and/or any other ICO Entity, engaged directly or indirectly in any business or enterprise whose business activities specifically relate to or involve: (i) grinding, processing, blending, and/or compounding of polymer products for (a) the rotational molding industry, or (b) any other industry that ICO Polymers North America, Inc. or any other ICO Entity specifically services or sells to; or (ii) the production of concentrates or compounds or other processing services related to polymer products as conducted by Bayshore Industrial, Inc. or any other ICO Entities.

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ARTICLE 5: MISCELLANEOUS:

5.1For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when received by or tendered to Employee or the Company, as applicable, by pre-paid courier or by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company, to

ICO, Inc., To the attention of the Chairman of the Board of Directors

5333 Westheimer Road, Suite 600

Houston, Texas 77056

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

If to Employee, to his last known personal residence.

Notwithstanding the foregoing, any Notice of Termination pursuant to Article 3 may be delivered to the Employee in accordance with the above sentences in this Section 5.1, or by email to the Employee’s Company email address, and in the event of such delivery by email, the Delivery Date shall be conclusively determined to be the date when such email was received on the Company’s server regardless of the date when such email was opened by the Employee.

5.2This Agreement shall be governed by and construed and enforced, in all respects in accordance with the law of the State of Texas, without regard to principles of conflicts of law, unless preempted by federal law, in which case federal law shall govern; provided, however, that the dispute resolution process in Section 5.5 shall govern in all respects with regard to the resolution of disputes hereunder.

5.3No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

5.4It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law. In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

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5.5It is the mutual intention of the parties to have any dispute concerning this Agreement resolved out of court. Accordingly, the parties agree that any claim or controversy of whatever nature arising from or relating in any way to this Agreement or the employment of the Employee by the Company, and any continuing obligations under this Agreement, including disputes arising under the common law or federal or state statutes, laws or regulations and disputes with respect to the arbitrability of any claim or controversy, shall be resolved exclusively by final and binding arbitration before a single experienced employment arbitrator selected by the parties and conducted in accordance with the agreement of the parties or as determined by the arbitrator. If the parties are unable to agree to an arbitrator, an arbitrator will be selected in accordance with the Employment Dispute Resolution (“EDR”) Rules of the American Arbitration Association (“AAA”). The arbitration will be conducted in Houston, Texas, pursuant to the EDR Rules of the AAA, and the arbitrator shall have full authority to award or grant all remedies provided by law. The judgment upon the award may be enforced by any court having jurisdiction thereof. Each party shall pay the fees of their respective attorneys, the expenses of their witnesses, and any other expenses incurred by such party in connection with the arbitration; provided, however, that the Company shall pay for the fees of the arbitrator or the administrative and filing fees charged by the AAA. However, either party, on its own behalf and on behalf of any other ICO Entities, shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any breach or the continuation of any breach of the provisions of herein.

5.6This Agreement shall be binding upon and inure to the benefit of the Company, to the extent herein provided, the Company and any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of the Company by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Employee’s rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred, whether by operation of law or otherwise, without the prior written consent of the Company.

5.7This Agreement replaces and extinguishes any previous agreements and discussions pertaining to the subject matter covered herein. This Agreement constitutes the entire agreement of the parties with regard to the terms of Employee’s employment, termination of employment and severance benefits, and contains all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such matters.

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Each party to this Agreement acknowledges that no representation, inducement, promise, or agreement, oral or written, has been made by either party with respect to the foregoing matters which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Employee by the Company that is not contained in this Agreement shall be valid or binding, except as set forth in any applicable Employee benefit plan. It is understood that, by signing below, Employee acknowledges that this Agreement supercedes any agreements or understandings regarding the subject matter covered herein made prior to the Employee signing this document. Any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby, provided that any such modification must be authorized or approved by the Board of Directors or its delegate, as appropriate.

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IN WITNESS WHEREOF, the Company and Employee have duly executed this Agreement in multiple originals to be effective on the Effective Date.

 ICO, INC.

/s/ Grefory T. Barmore                       

Gregory T. Barmore

Chairman of the Board of Directors

Date:         10/07/05                               

  Employee

  /s/ A. John Knapp, Jr.                      

  A. John Knapp, Jr.

  Date:          10/06/05                           

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EXHIBIT A

The ICO Entities (as defined in Section 1.4) are listed below, with country of incorporation and state (if U.S.) indicated.

Bayshore Industrial GP, L.L.C - USA, DE

Bayshore Industrial LP, L.L.C. - USA, DE

Bayshore Industrial, L.P. - USA, TX

Bayshore RE Holdings, Inc. - USA, DE

China RE Holdings, Inc. - USA, DE

Courtenay Polymers Pty Ltd. - Australia

Fabri-Moulds Ltd. - UK

ICO Europe BV - The Netherlands

ICO Global Services, Inc. - USA, DE

ICO Holdings Australia Pty Ltd. - Australia

ICO Holdings New Zealand Ltd. - New Zealand

ICO Holland BV - The Netherlands

ICO Minerals, Inc. - USA, DE

ICO P&O, Inc. - USA, DE

ICO Petrochemical Cayman Islands - Cayman Islands

ICO Polymers Cayman Islands - Cayman Islands

ICO Polymers do Brasil Ltda. - Brazil

ICO Polymers France SAS - France

ICO Polymers Hellas Ltd. - Greece

ICO Polymers Italy S.r.l. - Italy

ICO Polymers North America, Inc. - USA, NJ

ICO Polymers UK Ltd. - UK

ICO Polymers, Inc. - USA, DE

ICO Scandinavia AB - Sweden

ICO Technology, Inc. - USA, DE

ICO UK Ltd. - UK

ICO Worldwide, LP - USA, TX

ICO Worldwide (UK), Ltd. - UK

J.R. Courtenay (N.Z.) Ltd. - New Zealand

J.R. Courtenay Sdn Bhd - Malaysia

Rotec Chemicals, Ltd. - UK

Lomic SCI - France

Soreco SAS - France

Swavasey Colours Ltd. - UK

Tecron Industries Ltd. - UK

The Innovation Company, S.A. de C.V. - Mexico

Wedco Petrochemical, Inc. - USA, DE

Wedco Technology U.K. Ltd. - UK

Wedco Technology, Inc. - USA, NJ

Worldwide GP, LLC - USA, DE

Worldwide LP, LLC - USA, DE

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