LSB INDUSTRIES, INC.
1993 STOCK OPTION AND INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
________________________________
THIS AGREEMENT made this 22nd day of April, 1998, between
LSB INDUSTRIES, INC., a Delaware corporation, hereinafter called
the "Company", and __________________ hereinafter called
"Optionee";
W I T N E S S E T H:
In consideration of the mutual covenants and conditions
herein set forth and for good and valuable consideration, the
Company and the Optionee agree as follows:
WHEREAS, on __________________ Optionee was granted an
option to purchase ______________________ shares of the Company's
common stock for a price of $_________ per share, which option was
granted subject to and in accordance with the Company's Plan (as
defined below) (the "Terminated Option"); and
WHEREAS, the Company and the Optionee desire to terminate
the Terminated Option, effective immediately, and to replace the
Terminated Option with the Option granted under this Agreement; and
WHEREAS, the Company and the Optionee desire to have the
Option granted under this Agreement vest according to the vesting
schedule of the option covered by the Terminated Option, and, for
purposes apply the vesting schedule set forth in Section IV.A of
this Agreement, the period of time elapsed from the Date of Grant
(as defined below) will include the period of time elapsed under
the Terminated Option; and
WHEREAS, the Plan allows the Stock Option Committee to
accelerate the vesting schedule of an option granted under the
Plan; and
WHEREAS, pursuant to the actions and resolutions of the
Company's Stock Option Committee, the Company hereby grants to
Optionee an option as set forth below as a replacement for the
Terminated Option; and
WHEREAS, pursuant to the resolutions of the Stock Option
Committee, the Stock Option Committee desires that the vesting
schedule of the option granted herein shall be consistent with the
vesting schedule of the Terminated Option.
NOW, THEREFORE, the Company and Optionee do hereby agree
as follows:
I. Recitations. The Company is presently employing the
Optionee as its employee and considers it desirable and in its best
interest that Optionee be given an inducement to acquire an initial
or additional proprietary interest in the Company as an added
incentive to advance the interest of the Company in the form of
this option to purchase certain shares of the Company's common
stock, par value $.10 per share ("Common Stock"), which option
hereunder is granted subject to and in accordance with the
Company's 1993 Stock Option and Incentive Plan, as amended prior to
this date (the "Plan"). The capitalized terms herein shall have
the same meaning as set forth in the Plan, unless otherwise
indicated.
II. Employment. This Agreement shall not impose upon the
Company any obligation to retain Optionee in its employ or to
retain Optionee at his present salary or position. If Optionee
shall leave the employ of the Company for any reason, the option
granted herein shall immediately terminate, except as otherwise
expressly provided in Section IV hereof.
III. Grant of Option. The Company hereby grants to Optionee
as of the close of business on this 22nd day of April, 1998 (the
"Date of Grant", except that the use of the words "Date of Grant"
in Section IV hereof shall be ____________________, the right,
privilege and option to purchase an aggregate of
________________________ shares of its Common Stock for a price of
$4.1875 per share (the "Exercise Price"), under and subject to the
terms and conditions of the Plan to which reference is hereby made
and a copy of which is attached to and made a part hereof, such
Exercise Price being one hundred percent (100%) of the Fair Market
Value of the Common Stock as determined pursuant to the Plan. Such
option is hereinafter referred to as the "Option" and the shares of
Common Stock purchasable upon the exercise of the Option are
hereinafter sometimes referred to as the "Option Shares". The
Option is intended by the parties hereto to be an incentive stock
option, as such term is defined under Section 422 of the Internal
Revenue Code of 1986, as amended.
IV. Exercise of Stock Options.
A. As an Employee. For the purposes of this Section IV
only, the "Date of Grant" shall be considered granted on
_______________________ which is the Date of Grant of the
Terminated Option. If the Option has not been terminated
pursuant to Section VII hereof, the Option granted herein may
be exercised by Optionee as hereinafter provided. Unless
waived by the Board of Directors or a committee thereof that
administers the Plan (the Board of Directors or a committee
2
thereof is referred to herein as the "Committee"), the
Optionee, while in the employment of the Company, may exercise
the option as follows:
1. at any time after one (1) year of continuous employment
by the Optionee from the Date of Grant, the Option may be
exercised in whole or in part as to not more than twenty
percent (20%) of the total number of Option Shares;
2. at any time after two (2) years of continuous employment
by the Optionee from the Date of Grant, the Option may be
exercised, in whole or in part, as to an additional
twenty percent (20%) of the total number of Option
Shares;
3. at any time after three (3) years of continuous
employment by the Optionee from the Date of Grant, the
Option may be exercised, in whole or in part, as to an
additional thirty percent (30%) of the total number of
Option Shares;
4. at a time after four (4) years of continuous employment
by the Optionee from the Date of Grant, the Option may be
exercised, in whole or in part, as to all of the Option
Shares remaining subject to the Option.
The right to exercise the Option shall be cumulative.
Employment by a Subsidiary of the Company shall be considered
employment by the Company. The Committee shall have the sole
right to accelerate the time when Optionee will become
entitled to exercise the Option pursuant to the terms hereof
and the Plan.
B. As a Former Employee. The Option granted herein may
not be exercised after the Optionee is no longer an employee
of the Company or any Subsidiary; except that if the Optionee
ceases to be an employee on account of physical or mental
disability as defined in Section 22(e)(3) of the Code ("Former
Employee"), he may exercise the option within twelve (12)
months after the date on which he ceased to be an employee,
for the number of Option Shares for which he could have
exercised at the time he ceased to be an employee. In no
event may the Option be exercised after the expiration of ten
(10) years from the Date of Grant.
C. In Case of Death. If the Optionee dies prior to the
termination of this Option, the Option may be exercised within
one (1) year after the death of the Optionee by the personal
representative of his estate, or by a person who acquired the
right to exercise the Option by bequest, inheritance, or by
reason of the death of the Optionee, provided that:
3
1. the Optionee died while an employee of the Company or a
Subsidiary; or
2. the Optionee ceased to be an employee of the Company or
a Subsidiary on account of physical or mental disability
and died within three (3) months after the date on which
he ceased to be such employee.
The Option may be exercised only as to the number of
shares for which the Optionee could have exercised at the time
the Optionee died. In no event may the Option be exercised
after the expiration of ten (10) years from the Date of Grant.
D. Continuous Employment. The Committee shall decide,
in its sole and absolute discretion, to what extent leaves of
absence for government or military service, illness, temporary
disability or other reasons, shall not interrupt continuous
employment, which decision shall be binding for the purpose of
this Agreement.
E. Acceleration upon Change in Control. The Option
shall become immediately exercisable in full, notwithstanding
the vesting schedule provided in Section IV hereof, upon a
change in control of the Company. A "change in control" shall
be defined as set forth in the Plan.
V. Notice of Exercise and Payment of Exercise Price.
Subject to the terms of this Agreement, the Option shall be
exercised by giving written notice of such exercise to the Company
identifying the Option being exercised and specifying the number of
Option Shares then being purchased. Such notice shall be
accompanied by payment in full of the Exercise Price, which shall
be in cash or in whole shares of Common Stock which are already
owned by the Optionee, or partly in cash and partly in such Common
Stock. Cash payments shall be made by wire transfer, certified
check, bank check or personal check, in each case payable to the
order of the Company; provided, however, that the Company shall not
be required to deliver certificates for shares of Common Stock with
respect to which the Option is exercised until the Company has
confirmed the receipt of good and valuable funds in payment of the
purchase price thereof. Payments in the form of Common Stock
(which shall be valued at the Fair Market Value of a share of
Common Stock on the date of exercise) shall be made by delivery of
stock certificates in negotiable form (in form and content
satisfactory to the Company) which are effective to transfer good
and valid title thereto to the Company, free of any liens or
encumbrances.
VI. Issuance of Shares. As soon as practicable after its
receipt of such notice and payment, the Company shall cause one or
more certificates for the shares so purchased to be delivered to
4
the Optionee or his or her estate, as the case may be; provided,
however, the obligation of the Company to deliver such certificates
shall be subject to the Company's compliance with any applicable
federal and state securities laws as provided in Section X hereof.
VII. Termination of Option. This Agreement and the Option
granted herein, to the extent not theretofore exercised, shall
terminate and become null and void immediately upon the earlier of
the following to occur:
A. Option No Longer Exercisable. At such time as the
Option is no longer exercisable pursuant to the terms of
Section IV hereof;
B. Surrender of Options. Upon the Optionee's surrender
to the Company for cancellation of this Agreement and the
Option granted herein; and,
C. Expiration of Term. Upon the tenth (10th)
anniversary of the Date of Grant.
VIII. Restrictions. The Option will not be transferrable
otherwise than by will or the laws of descent and distribution, and
the Option may be exercised, during the lifetime of the Optionee,
only by Optionee. More particularly (but without limiting the
generality of the foregoing), the Option may not be assigned,
transferred (except as provided above), pledged, or hypothecated in
any way, will not be assignable by operation of law and will not be
subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other
disposition of the Option contrary to the provisions hereof, and
the levy of any execution, attachment or similar process upon the
Option, will be null and void and without effect.
IX. Adjustments. Pursuant to the terms of the Plan, in the
event of a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, reverse stock split, or other change
in the corporate structure or capitalization affecting the
Corporation's common stock, a fair and equitable adjustment will be
made in the number, kind, option price, etc., of shares subject to
the Option to the extent that the proportionate interest of the
holder of the Option will be maintained as before the occurrence of
such event.
X. Compliance with Law and Approval of Regulatory Bodies.
No shares of Common Stock will be issued or, in the case of
treasury shares, transferred, upon exercise of the Option, except
in compliance with all applicable federal and state laws and
regulations and in compliance with rules of stock exchanges on
which the Company's shares may be listed. Any share certificate
issued to evidence shares as to which the Option is exercised shall
5
bear such restrictive legends and statements as the Committee shall
deem advisable to assure compliance with federal and state laws and
regulations. No shares of Common Stock will be issued or, in the
case of treasury shares, transferred, upon exercise of the Option
until the Company has obtained such consent or approval from
regulatory bodies, federal or state, having jurisdiction over such
matters as the Committee may deem advisable.
XI. Investment Representations. Optionee, or his personal
representative, may be required by the Committee to give a written
representation that the shares subject to the Option will be
acquired, or are being acquired, as the case may be, for investment
and not with a view to a public distribution of them; provided,
however, that the Committee in its sole discretion, may release the
Optionee, or his personal representative, from such investment
representations either prior to or subsequent to the exercise of
the Option.
XII. Rights as a Shareholder. Optionee shall have no rights
as a shareholder with respect to any shares covered by this
Agreement or the Option until the date of issuance of a stock
certificate to him for such shares. No adjustment shall be made
for dividends or other rights for which the record date is prior to
the date such stock certificate is issued.
XIII. Binding Effect. This Agreement shall be binding
upon the heirs, executors, administrators and successors of the
parties hereto.
XIV. Incorporation by Reference; Interpretation. The Option
is granted pursuant to the terms of the Plan, the terms of which
are incorporated herein by reference, and the Option and this
Agreement shall be interpreted in accordance with the Plan. The
Committee shall construe and interpret the terms and provisions of
the Plan and this Agreement and shall at its discretion make
general and special rules and regulations for administering the
Plan, which construction, interpretation, rules and regulations
shall be binding and conclusive upon all persons granted an option
pursuant to the Plan and this Agreement.
XV. Terminated Option. The Terminated Option is hereby
terminated and rendered null and void effective immediately.
6
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed effective as of the Date of Grant.
ATTEST: LSB INDUSTRIES, INC.
______________________________ By:___________________________
Secretary Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
[S E A L]
"Optionee"
______________________________
_________________
7