As Filed with the Securities and Exchange Commission on August 19, 2002 Registration No. 333-_______
UNDER
THE SECURITIES ACT OF 1933
LSB
INDUSTRIES,
INC.
(Exact name of registrant as specified in its charter)
Delaware
73-1015226
(State of Incorporation) (I.R.S. Employer Identification No.)
Outside Directors Stock Purchase Plan
|
Heidi L. Brown, Esquire |
Copy to: |
|
Title of securities to be registered |
Amount to be registered |
Proposed maximum offering price per share(1)(2) |
Proposed maximum aggregate offering price (2) |
Amount of registration fee |
| Common Stock to be issued under the 1998 Stock Option and Incentive Plan | 987,800 | $1.25 - $3.00 | $1,425,823 | $131.18 |
| Common Stock to be issued under the Outside Directors Stock Purchase Plan | 400,000 | $1.25 - $3.23 | $1,054,400 | $97.00 |
(1) Estimated in accordance with Rule 457(c) and 457(h) solely for the purpose of calculating
the
registration fee on the basis of the price at which options granted under the Outside
Director Stock
Purchase Plan may be exercised and, with respect to shares of Common
Stock not subject to
outstanding options, on the basis of $3.23 per share, such amount
being the average of the high
and low price of the Common Stock as reported on the
NASDAQ Bulletin Board on August 16,
2002.
(2) The maximum offering price per share and the maximum aggregate offering price are based
upon
the following prices at which outstanding options granted under the Outside
Directors Stock
Purchase Plan and the 1998 Stock Option and Incentive Plan may be
exercised:
| Number of Shares of
Common Stock Subject to Outstanding Options |
Exercise Price Per Share of Common Stock |
Aggregate Offering Price | |
| 749,800 | $1.25 | $ 937,250 | |
| 253,500 | $1.375 | $ 348,563 | |
| 87,000 | $2.73 | $ 237,510 | |
| 17,500 | $3.00 | $ 52,500 | |
|
| |||
|
TOTALS |
1,107,800 |
$1,575,823 |
| Number of Shares of Common Stock Available for Future Options |
Exercise Price Per Share of Common Stock |
Aggregate Offering Price | |
| 280,000 | $3.23* | $ 904,400 |
* $3.23 is the average of the high and low price of the Common Stock as reported on the NASDAQ Bulletin Board on August 16, 2002.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
There are hereby incorporated by reference in this Registration Statement the following documents and information heretofore filed with the Securities and Exchange Commission:
1. The Company's Annual Report on Form 10-K for the year ended December 31,2001, filed on April 1, 2002 pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act");
2. The Company's Annual Report on Form 10-K/A for the year ended December 31,
2001, filed on April 23, 2002 pursuant to Section 13 of the Exchange Act;
3. The Company's Quarterly Report on Form 10-Q for the three months ended
March
31, 2002, filed on May 20, 2002 pursuant to Section 13 of the Exchange Act;
4. The Company's Quarterly Report on Form 10-Q for the three months and six
months ended June 30, 2002, filed on August 19, 2002 pursuant to Section 13 of
the Exchange Act;
5. The Company's current reports on Form 8-K (Date of Event: May 24, 2002) filed
on June 10, 2002; (Date of Event: March 11, 2002) filed on March 22, 2002; and
6. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A dated August 16, 1994, pursuant to Section
12 of the Exchange Act, including any amendment or report filed for the purpose
of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act on or after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference in this Registration Statement and to be part hereof from the date of filing of such documents.
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Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Counsel for the Company, Conner & Winters, P.C., One Leadership Square, Suite 1700, 211 North Robinson, Oklahoma City, Oklahoma 73102, has rendered an opinion as to the validity of the Common Stock being registered.
Item 6. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability (i) for any breach of their duty of loyalty to the company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) for unlawful payments or dividends or unlawful stock repurchases or redemptions as provided Section 174 of Delaware General Corporation Law or (iv) for transactions from which the director derived an improper personal benefit.
The Company carries officer and director liability insurance with respect to certain matters, including matters arising under the Securities Act of 1933, as amended (the "Securities Act").
Insofar as indemnification for liabilities arising under the Securities Act is permitted to directors and officers of the Corporation pursuant to the foregoing provisions, or otherwise, the Company has been informed that in the opinion of the Commission such indemnification is against public policy, as expressed in the Securities Act, and is therefore unenforceable.
Item 7. Exemption from Registration Claimed.
Not Applicable.
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Item 8. Exhibits.
Exhibit
Number Description
4.1 Outside Director Stock Purchase Plan, effective June 24, 1999
4.2 Form of Outside Director Stock Purchase Agreement
4.3 1998 Stock Option and Incentive Plan, effective August 13, 1998
4.4 Form of Incentive Stock Option Agreement
4.5 Form of Incentive Stock Option Agreement (10% Shareholder)
5.1 Opinion of Conner & Winters, P.C.
15.1 Letter of Acknowledgment regarding unaudited interim financial information
23.1 Consent of Ernst & Young LLP
23.2 Consent of Conner & Winters, P.C. (contained in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
II-4
Item 9. Undertakings.
A. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a
post-
effective
amendment to this registration statement to include any material
information with
respect to the plan of distribution not previously disclosed
in the registration
statement or any material change to such information in
the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933,
as amended (the "Securities Act"), each such post-effective
amendment shall be
deemed to be a new registration statement relating to
the securities offered therein,
and the offering of such securities at that
time shall be
deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold at the termination
of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto, duly authorized, in the City of Oklahoma City, Oklahoma on August 19, 2002.
LSB INDUSTRIES, INC.
By /s/ Jack E. Golsen
Jack E. Golsen, President and
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed on August 19, 2002, by the following persons in the capacities indicated:
/s/ Jack E. Golsen President, Chief Executive Officer,
Jack E. Golsen Chairman of the Board and Director
(Principal Executive Officer)
/s/
Tony M.
Shelby Senior Vice President of Finance
Tony M. Shelby and Director
(Principal Financial Officer)
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/s/
Jim D.
Jones Vice President, Controller and Treasurer
Jim D. Jones (Principal Accounting Officer)
/s/ Raymond B.
Ackerman Director
Raymond B. Ackerman
/s/ Charles A. Burtch Director
Charles A. Burtch
/s/ Robert C.
Brown Director
Robert C. Brown
/s/ Grant Donovan Director
Grant Donovan
Director
Dr. Allen Ford
/s/ Barry H. Golsen Director
Barry H. Golsen
/s/ David R.
Goss Director
David R. Goss
/s/ Bernard G. Ille Director
Bernard G. Ille
/s/ Donald W.
Munson Director
Donald W. Munson
/s/ Horace G.
Rhodes Director
Horace G. Rhodes
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1. Purpose. The purpose of this Outside Directors Stock Purchase Plan (the "Plan") is (a) to advance the interests of the Company and its stockholders while providing a means to attract, retain and compensate non-employee directors and (b) to enable non-employee directors to increase their proprietary interest in the Company, thereby providing such persons additional incentives to achieve the growth objectives of the Company.
2. Definitions. In addition to the terms defined in paragraph 1, the following terms have the meanings set forth below:
2.1 "Board" means the Board of Directors of the Company.2.2 "Company" means LSB Industries, Inc., a Delaware corporation.
2.3 "Fair Market Value" means, with respect to the Shares, the fair market value of
such
Shares determined by such methods or procedures as may be established from
time to
time by the Board. Unless otherwise determined by the Board, "Fair
Market Value" will
mean the closing price of a Share on the principal national
securities exchange on which
the Shares are listed on the day on which such value
is to be determined, as reported
in the composite quotations for securities traded
on such exchange provided by the
National Association of Securities Dealers or
successor national quotation service. If no
such quotations are available for the
day in question, "Fair Market Value" shall be
determined by reference to the
appropriate prices on the next preceding day for which
such prices are reported.
2.4 "Director Fee" means fees payable to a director in cash for the director's service
on the
Board and on committees of the Board during any calendar year.
2.5 "Eligible Director" means any member of the Board who is not an employee of the
Company or its subsidiaries.
2.6 "Option" means any option to purchase Shares which is awarded pursuant to the
Plan and
is not intended to be an "incentive stock option" within the meaning of
Section 422 of the
Internal Revenue Code of 1986 as amended.
Director, consisting of one or more documents, setting forth the terms and conditions of
an option granted under this Plan.
2.8 "Permanent Disability" or "Permanently Disabled" means the inability of the
Eligible
Director to perform the Eligible Director's usual duties as a Board
Member by reason
of
medically determined terminal, physical or mental
impairment expected to result in
death or to be of
continuous duration of 12
months or more.
2.9 "Plan Year" means each calendar year during which this Plan is in effect and, with
respect
to an Eligible Director's initial election or appointment to the Board, the
period
commencing at the time of such election or appointment and ending on the
succeeding December 31.
2.10 "Shares" means the common stock, par value $.001 per share, of the Company or,
if the
outstanding Shares are hereafter changed into or exchanged for different
stock or
securities of the Company or some other corporation, such other stock or
securities.
3. Participants. Each Eligible Director may participate in the Plan.
4. Shares Subject to Plan. 4.1 Limitations. Subject to any adjustment pursuant to the provisions of the Plan, the
maximum
number of Shares which may be issued and sold hereunder will not
exceed 400,000.
such Shares will again be available for distribution in connection with future grants or
issuances under this Plan. The number of shares available for distribution under this Plan
will be reduced by the number of shares issued under this Plan upon exercise of an Option
or upon issuance pursuant to the election by an Eligible Director in accordance with
paragraph 9 of this Agreement.
4.3 Character of Shares. The Company may satisfy its obligations to an Eligible
Director
exercising an Option or electing to receive Shares in payment of the
Director Fee by issuing
authorized and unissued Shares, by transferring treasury
shares, or in part by the issuance
of authorized and unissued Shares and the
balance by the transfer of treasury shares.
4.4 Board Determination. The adjustments described in this paragraph 4 and the
manner of
application thereof will be determined solely by the Board, and any such
adjustment may
provide for the elimination of fractional share interests. The
adjustments required under
this paragraph 4 will apply to any successor of
successors of the Company and will be
made regardless of the number or type of
successive events requiring adjustments
hereunder.
5. Grant of Options. The Board is authorized to grant Options which are governed by the terms and conditions specified in this paragraph 5 to any Eligible Director.
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5.1 Exercise and Term of Options. Each Option will become exercisable at such time
or
times, during such period, and for the number of Shares as determined by the
Board
and set forth in the Option Agreement; provided however, unless the Option
Agreement
otherwise provides, no Option will be exercisable within the period
ending six months
and one day after the date the Option is granted.
Notwithstanding the foregoing, each
Option will have a maximum term of ten
years measured from the date the Option is
granted.
5.2 Notice of Exercise and Payment. Subject to any installment, exercise and waiting
period
provisions that are applicable in a particular case, Options granted under
this Plan may be
exercised, in whole or in part, at any time during the term of the
Option, by giving written
notice of such exercise to the Company identifying the
Option being exercised and
specifying the number of shares then being purchased.
Such notice will be accompanied
by payment in full of the exercise price, which
shall be in cash or, unless otherwise
provided in the Option Agreement, in whole
Shares which are already owned by the
Eligible Director or, unless otherwise
provided in the Option Agreement, partly in cash
and partly in such Shares. Cash
payments will be made by wire transfer, certified
check or bank check or personal
check, in each case payable to the order of the
Company; provided, however, that
the Company will not be required to deliver
certificates for Shares with respect to
which an 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 Shares (which will be valued at the Fair Market
Value of a Share on the date of
exercise) will be made by delivery of stock
certificates in negotiable form which are effective to transfer good and valid title
thereto to the Company, free of any
liens or encumbrances, with signature guaranteed
by a bank or investment banking
firm.
5.3 Issuance of Shares. As soon as practicable after its receipt of notice and payment
pursuant
to paragraph 5.2, the Company will cause one or more certificates for the
Shares so
purchased to be delivered to the Eligible Director or the party exercising
the Option, as the
case may be.
5.4 Partial Exercise. An Option granted under this Plan may be exercised as to any
part of
the Shares for which it could be exercised. Such a partial exercise of an
Option will not
affect the right to exercise the Option from time to time in
accordance with this Plan as
to the remaining Shares subject to the Option.
5.5 Buyout and Settlement Provisions. The Board may at any time offer to buy out for
cash
or otherwise settle an Option previously granted, based upon such terms and
conditions
as the Board may establish and communicate to the Eligible Director at
the time that such
offer is made, including a settlement for exchange of a new
award under the Plan for the
surrender of the Option.
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5.6 Limited Transferability of Options. Each Option granted under this Plan may, in
connection with the Eligible Director's estate plan, be assigned in whole or in part
during the Eligible Director's lifetime to one or more members of the Eligible
Director's immediate family or to
a trust established exclusively for one or more
such family members. The assigned portion
may only be exercised by the person
or persons who acquire a proprietary interest in the Option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those
in effect for the Option immediately prior to such assignment and shall be
set forth
in such documents issued to the assignee as the Board may deem
appropriate. The
Eligible Director may also designate one or more persons
as the beneficiary or beneficiaries of the Eligible Director's outstanding Options
under this Plan, and
those Options will, in accordance with such designation,
automatically be
transferred to such
beneficiary or beneficiaries upon the Eligible
Director's death
while holding such Options. Such beneficiary or beneficiaries
will take the
transferred Options subject to all the terms and conditions of the
Option Agreement
including (without limitation) the limited time period during
which the Option may
be exercised following the Eligible Director's death.
5.7 Termination of Board Service. If the Eligible Director ceases Board service for
any reason
(other than death or Permanent Disability) while holding one or more
Options awarded
under this Plan, then each such Option will remain exercisable,
for any or all of the shares
for which the Option is exercisable at the time of such
cessation of Board service, until
the earlier of (a) the expiration of the term of the
Option as set forth in the Option
Agreement (b) the expiration of the three year
period measured from the date of such
cessation of Board service, and (c) the
expiration of ten years from the date such Option
was granted. However, each
option held by the Eligible Director under this Plan at the
time of the Eligible
Director's cessation of Board service will immediately terminate
and cease to
remain outstanding with respect to any and all Shares for which the Option
is not otherwise at that time exercisable.
5.8 Death or Permanent Disability.
5.8.1 Eligible Directors. If the Eligible Director's service as a Board member
ceases by
reason of death or Permanent Disability, then each Option held
by such Eligible
Director under this Plan will immediately become
exercisable for all Shares at
that time subject to that Option, and the Option
may be exercised for any or all
of those shares as fully-vested shares until
the earlier of (a) the expiration of the
term of the Option as set forth in the
Option Agreement (b) the expiration of the
three year period measured
from the date of such cessation of Board service,
and (c) the expiration of
ten years from the date the Option was granted.
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5.8.2 Former Eligible Directors. If the Eligible Director dies after cessation of
Board
service but while holding one or more Options under this Plan, then
each such
Option may be exercised, for any or all of the shares for which
the Option is
exercisable at the time of the Eligible Director's cessation of
Board service (less
any shares subsequently purchased by Eligible Director
prior to death), by the
personal representative of the Eligible Director's
estate or by the person or
persons to whom the option is transferred
pursuant to the Eligible Director's will
or in accordance with the laws of
descent and distribution or by the designated
beneficiary or beneficiaries of
such Option. Such right of exercise will lapse, and
the Option shall
terminate, upon the earlier of (a) the expiration of the term of the
Option
as set forth in the Option Agreement, (b) the three year period measured
from the date of the Eligible Director's cessation of Board service, or (c)
the
expiration of ten years from the date such Option was granted.
5.9 Cancellation and Regrant of Options. The Board is authorized to effect, at any
time and
from time to time, with the consent of the affected Option holders, the
cancellation of any
or all outstanding options under the Plan and to grant in
substitution new Options
covering the same or different number of Shares but with
an exercise price per share
based on the Fair Market Value per Share on the new
grant date.
6. Acceleration of Options.
6.1 Acceleration Upon Change of Control. Unless the Option Agreement provides
otherwise
or unless the Eligible Director waives the application of this paragraph
6.1 prior to a
Change of Control (as hereinafter defined), in the event of a Change
of Control, each
outstanding Option granted under the Plan will become
exercisable in full immediately
prior to the effective date of the Change of Control
notwithstanding the vesting provisions
contained in the Option Agreement and may
be exercised for any or all of those Shares
as fully-vested Shares.
6.2 Change of Control Defined. A "Change of Control" shall be deemed to have
occurred
upon any of the following events:
(a) The consummation of any of the following transactions: any merger,
reverse stock
split, recapitalization or other business combination of the
Company, with or into
another corporation, or an acquisition of securities
or assets by the Company,
pursuant to which the Company is not the
continuing or surviving corporation or
pursuant to which Shares would be
converted into cash, securities or other property,
other than a transaction
in which the majority of the holders of Shares immediately
prior to such
transaction will own at least 50 percent of the total voting power of
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the
then-outstanding securities of the surviving corporation immediately after
such
transaction; or
(b) A transaction in which any person (as such term is defined in Sections
13(d)(3) and
14(d)(2) of the Exchange Act), corporation or other entity
(other than the Company,
or any profit-sharing, employee ownership or
other employee benefit plan sponsored
by the Company or any Subsidiary,
or any trustee of, or fiduciary with respect to,
any
such plan when acting in
such capacity, or any group comprised solely of such
entities): (i) purchases
any Shares (or securities convertible into Shares) for cash,
securities or any
other consideration pursuant to a tender offer or exchange offer,
without
the prior consent of the Board, or (ii) becomes the "beneficial owner"
(as
such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly
(in one transaction or a series of transactions), of securities of the
Company
representing 50 percent or more of the total voting power of the
then-outstanding
securities of the Company ordinarily (and apart from the
rights accruing under special
circumstances) having the right to vote in the
election of directors (calculated as
provided in Rule 13d-3(d) in the case of
rights to acquire the Company's securities);
or
(c) If, during any period of two consecutive years, individuals who at the
beginning of
such period constituted the entire Board and any new director
whose election by the
Board, or nomination for election by the Company's
stockholders was approved by
a vote of at least two-thirds of the directors
then still in office who either were
directors at the beginning of the period
or whose election or nomination for election
by the stockholders was
previously so approved, cease for any reason to constitute
a majority
thereof.
vesting of all or any part of any Option, and/or waive any limitations or restrictions, if
any, for all or any part of an Option.
7. Adjustment Upon Change of Shares. Subject to any required action by the stockholders of the Company, the number of Shares for which Options may thereafter be granted, and the number of Shares then subject to Options previously granted, and the price per share payable upon exercise of such Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of Shares or the payment of a stock dividend (but only on the Shares) or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company. In addition, adjustments will be made pursuant to the following:
(a) If the Company is reorganized or consolidated or merged with another corporation,
in
which the Company is the non-surviving corporation, an Eligible Director
holding of an
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outstanding Option granted under this Plan shall be entitled (subject
to the provisions
of this paragraph 7) to receive Options covering shares of such
reorganized,
consolidated or merged corporation in the same proportion as granted
to the Eligible
Director prior to such reorganization, consolidation or merger at an
equivalent exercise
price, and subject to the same terms and conditions as this
Plan. For purposes of the
preceding sentence, the excess of the aggregate Fair
Market Value of Shares subject
to the Option immediately after the reorganization,
consolidation or merger over the
aggregate exercise price of such shares shall not
be more than the excess of the aggregate
Fair Market Value of all Shares subject
to the Option immediately before such
reorganization, consolidation or merger
over the aggregate exercise price of such Shares,
and the new stock option or
assumption of the old Option by any surviving corporation
shall not give the
Eligible Director additional benefits which the Eligible Director did not
have under
the old Option.
(b) To the extent that the foregoing adjustments relate to the Shares, such adjustments
shall
be made by the Board, whose determination in that respect shall be final,
binding and
conclusive.
(c) Except as expressly provided in this paragraph 7, the Eligible Director will have
no rights
by reason of any subdivision or consolidation of shares of stock of any
class or the
payment of any stock dividend or any other increase or decrease in the
number of
shares of stock of any class or by reason of any dissolution, liquidation,
merger,
consolidation, reorganization or spin-off of assets or stock of another
corporation,
and any issue by the Company of shares of stock of any class, or
securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by
reason thereof shall be made with respect to, the number or price
of Shares subject
to the Option.
(d) The grant of an Option pursuant to this Plan shall not affect in any way the right
or power
of the Company to make adjustments,
reclassifications, reorganizations
or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
8.1 Number of Award Shares. If the Eligible Director elects to receive a portion of
such
Eligible Director's Director Fee in Shares: (a) the Eligible Director will
receive the
number of Shares obtained by dividing the amount of the Director Fee
subject to
the Eligible Director's election by the Fair Market Value of a Share and
(b) the
Eligible Director will receive the balance of the Director Fee in cash or its
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equivalent. If the Eligible Director elects to receive 100% of the Director Fee in
Shares the Eligible Director will receive the number of Shares obtained by dividing
the applicable Director's Fee by the Fair Market Value of a share. Fair Market
Value as used in this paragraph 8, shall be determined on the business day
immediately preceding the date that the Director Fee is due.
8.2 Method of Electing. The election of the Eligible Director described in paragraph
8.1 must
be in writing and filed with the Company's Secretary prior to the first day
of each calendar
quarter during the Plan Year. If an Eligible Director fails to make
such election in a timely
manner, such Eligible Director will be deemed to have
elected not to receive any of the
Director Fee payable to such Eligible Director in
Shares.
9. Amendments and Termination.
9.1 Amendments to Plan; Termination. The Board may at any time, and from time to 9.2 Amendments to Individual Awards. The Board may amend the terms of any
Option
10. Investment Intent.
time, amend or modify any of the provisions of the Plan, and may at any time
suspend or terminate the Plan. Notwithstanding the foregoing sentence, any
amendment to the Plan will not be effective unless and until it has been duly
approved by the stockholders of
the outstanding Shares if the failure to obtain
such
approval would adversely affect the compliance of the Plan with the
requirements
of Rule 16b-3 under the Exchange Act, or with the requirements
of any other
applicable law, rule or regulation.
granted under the Plan; provided, however, that subject to paragraph 7
hereof, no
such amendment may be made by the Board which in any material
respect impairs the
rights of the Eligible Director without the Eligible Director's
consent.
11. Share Certificates. The Company will not be required to issue or deliver any certificate for Shares purchased hereunder or any portion thereof unless, in the opinion of the Company's counsel there has been compliance with all applicable legal requirements. In addition, the Company will impose such restrictions on Shares delivered to an Eligible Director under the Plan as it may deem advisable in order to comply with the Securities Act of 1933, as amended, the requirements of the New York Stock Exchange or any other stock exchange or automated quotation system upon which the shares are then listed or quoted, any state securities laws applicable to such, any transfer, any provisions of the Company's Certificate of Incorporation or Bylaws, or any other law, regulation, or binding contract to which the Company is a party.
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12. Stockholder Rights. An Eligible Director will have no stockholder rights (a) with respect to the Shares subject to an Option until such person has exercised the Option, paid the exercise price, and become a holder of record of the purchased Shares, or (b) with respect to Shares subject to such person's election pursuant to paragraph 8.1, until the Director Fee is due and payable and such person has become a holder of record of the purchased Shares.
13. Effective Date, Stockholder Approval, and Plan Termination. The Plan will become effective on its approval by the stockholders of the Company. Unless earlier terminated by the Board, the Plan will remain in effect until such time as no Shares remain available for delivery under the Plan, and the Company has not further rights or obligations under the Plan with respect to Options under the Plan.
14. Relationship to Other Compensation Plans. The adoption of the Plan will neither affect any other stock option, incentive or other compensation plans in effect for the Company or any of its subsidiaries, nor will the adoption of the Plan preclude the Company from establishing any other forms of incentive or other compensation plan for directors of the Company.
15. Plan Binding on Successors. The Plan will be binding upon the successors and assigns of the Company.
16. Headings. Headings of paragraphs hereof are inserted for convenience and reference, and do not constitute a part of the Plan.
17. Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.
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This Non-qualified Stock Option Agreement (the "Agreement") is made the 8th day of July, 1999, between LSB Industries, Inc., a Delaware corporation (the "Company"), and ____________________ (the "Participant"). In consideration of the mutual covenants and conditions set forth in this Agreement and for good and valuable consideration, the Company and the Participant agree as follows.
1. Recitations. The Participant is a member of the Board of Directors of the Company who is not an employee of the Company or any Subsidiary. The Company believes that the Participant should be provided an inducement to continue the Participant's association with the Company and to advance the interests of the Company. Accordingly, the Company desires to provide the Participant the opportunity to purchase certain shares of the Company's common stock, par value $.10 per share ("Common Stock"), pursuant to the Company's Outside Directors Stock Purchase Plan, as approved by the shareholders of the Company on June 24, 1999, and as may be amended (the "Plan"). A copy of the Plan has been delivered to the Participant. The option granted hereunder is granted pursuant and subject to the terms and provisions of the Plan, which is made a part of this Agreement. Unless otherwise indicated, capitalized terms in this Agreement have the same meaning as set forth in the Plan.
2. Grant of Option. Subject to the terms and conditions of this Agreement, the Company hereby grants to the Participant the right, privilege and option to purchase fifteen (15) shares of the Company's Common Stock (the "Option"). The purchase price for each share to be purchased under the Option is $1.25 (the "Exercise Price"). The Exercise Price represents 100% of the Fair Market Value (as defined in the Plan) of the Common Stock at the close of the business on the date of this Agreement and is subject to adjustment as provided in the Plan. The Option is not an "incentive stock option" as such term is defined under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
3. Exercise of Option. The Option may be exercised only pursuant to the following terms and conditions.
3.1 As a Director. While serving as a member of the Board of Directors of the Companyor any Subsidiary, the Participant may exercise the Option, in whole or in part, at any
time after the expiration of six months and one day from the date of this Agreement.
If the Participant's service as a member of the Board of Directors ceases by reason
of the death or Permanent Disability of the Participant, the Option will immediately
become exercisable for all shares subject to the Option, and the Option may be
exercised for all of shares subject to the Option as fully-vested shares. Upon the
Permanent Disability of the Participant, the Option may be exercised by the
Participant, the Participant's attorney-in-fact, or the Participant's duly appointed
guardian. Upon the death
of the Participant, the Option may be exercised by the
personal representative of
the Participant's estate, the person or persons to whom
the Option is transferred
pursuant to the Participant's will or in accordance with
the laws of descent and
distribution, or the Participant's designated beneficiaries
of such Option. The
Option may not be exercised after the termination of the
Option pursuant to
paragraph 5 of this Agreement.
3.2 As a Former Director. The Participant may exercise the Option if the
Participant
has ceased to be a member of the Board of Directors of the
Company or any
Subsidiary for any reason, other than death or Permanent
Disability, only as to the
number of shares for which the Participant could have
exercised at the time the
Participant ceased being a member of the Board of
Directors. If the Eligible
Director dies after ceasing to be a member of the
Board of Directors but prior to
the expiration of the Option, the personal
representative of the Participant's estate,
the person or persons to whom the
Option is transferred pursuant to the Participant's
will or in accordance with the
laws of descent and distribution, or the Participant's
designated beneficiaries of
such Option may exercise the Option as to all or any
part of the number of
shares for which the Participant could have exercised as of
the date of the
Participant's death. The Option may not be exercised after the
termination of
the Option pursuant to paragraph 5 of this Agreement.
discretion to (a) accelerate the time when the Participant will become entitled to
exercise all or any part of the Option and (b) waive any limitations or restrictions with
respect to all or any part of the Option. Unless the Participant waives the application
of this paragraph 3.3 prior to a Change of Control (as defined in the Plan), in the event
of a Change of Control, the Option will become exercisable in full immediately prior
to the effective date of the Change of Control notwithstanding the vesting provisions
contained in this Agreement and may be exercised for any or all of the shares subject
to the Option as fully-vested shares.
4. Method of Exercise and Payment of Exercise Price.
4.1 Exercise Notice. Subject to the terms and conditions of this Agreement, the
Option may
be exercised by written notice (an "Exercise Notice") delivered to
the Company at its
principal place of business setting forth the exact number of
shares under the Option
that the Participant is purchasing, which may not
exceed the number of shares that the
Participant is eligible to purchase under
this Agreement at the time of such purchase.
The Exercise Notice must be
accompanied by the payment to the Company of (a) the
full Exercise Price for
the number of shares Participant desires to purchase and (b) all
withholding
taxes pursuant to paragraph 4.3. The Participant agrees to comply with
such
other reasonable requirements as the Board of Directors of the Company may
establish.
4.2 Payment of Exercise Price. The Participant may pay the Exercise Price in (a)
cash or by
check, draft, money order, or wire transfer, in each case payable to
the order of the
Company,
(b) in whole shares of Common Stock which are
already owned by the
Participant, or (c) partly in cash and partly in such shares.
The Company will not be
required to deliver certificates for shares to be
acquired under the Option until the
Company has confirmed the receipt of good
and valuable funds in payment of the
Exercise Price. Payments in the form of
shares (x) will be valued at the Fair Market
Value (as defined in the Plan) on
the date of exercise, and (y) will be made by delivery
of stock certificates in
negotiable form which are effective to transfer good and valid
title thereto to the
Company, free of any liens or encumbrances, with signature
guaranteed by a
bank or investment banking firm.
Company receives full payment for any required state and federal withholding taxes.
Payment for withholding taxes will be made in cash or by check, draft, money order,
or wire transfer, unless the Board of Directors of the Company otherwise provides.
The foregoing sentence does not require payment of withholding taxes at the time of
exercise if payment of such taxes is deferred pursuant to any provision of the Code,
and actions satisfactory to the Company are taken to reasonably insure payment of
withholding taxes when due. The obligations of the Company under the Plan are
conditioned upon such payment or arrangements and the Participant agrees that the
Company may deduct any such taxes from any payment of any kind otherwise due
to the Participant from the Company to the extent permitted by law.
4.4 Delivery of Shares. Subject to the terms and conditions of this Agreement, the
Company will deliver the shares acquired upon the exercise of the Option within
a
reasonable period of time after the Company receives the Exercise Notice and
the
correct Exercise Price. Notwithstanding the foregoing, if any law or
regulation
requires the Company to take any action with respect to the shares
specified in such
written notice before the issuance of such shares, then the date
of delivery of such
shares shall be extended for the period necessary to take
such action.
(a) the expiration of three years from the date the Participant ceased to be a
member of the
Board of Directors of the Company or any Subsidiary;
(b) the tenth anniversary of the date of this Agreement; and
(c) the Participant's surrender to the Company for cancellation of this Agreement
and the
Option granted herein.
7. Rights as Stockholder. Participant shall have no right as a stockholder with respect to any shares covered by the Option until the exercise of the Option and the issuance of a stock certificate in accordance with this Agreement. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.
8. Stock Dividends, Reorganizations. If and to the extent the number of issued shares of Common Stock of the Company shall be increased or reduced resulting from a subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of such shares of Common Stock of the Company effected without receipt of consideration by the Company, the number of shares of Common Stock subject to the Option and the Exercise Price will be proportionately adjusted in accordance with the terms and conditions of the Plan. The grant of the Option will not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.
9. Compliance with Law and Approval of Regulatory Bodies. Notwithstanding anything in this Agreement to the contrary, no shares 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, rules and regulations (including, but not limited to the Federal and State securities laws, rules and regulations) and in compliance with rules of stock exchanges on which the Company's Common Stock may be listed. Notwithstanding anything in this Agreement to the contrary, no shares will be issued, or, in the case of treasury shares transferred, upon exercise of the Option until the Company has obtain such consent or approval from any
and all regulatory bodies, Federal or State, and such stock exchanges having jurisdiction over such matters as the Board of Directors of the Company may deem advisable.
10. Additional Provisions. 10.1 Amendments. The Board of Directors of the Company may at any time, and
from time
to time, amend or modify any of the provisions of the Plan, and may
at any time
suspend or terminate the Plan. This Agreement may be amended
from time to time by
the Board of Directors of the Company, but no amendment
which in any material
respect impairs the rights of the Participant under this
Agreement will be effective as
to the Participant unless all of the parties hereto
agree in writing.
terms and provisions of this Agreement, which construction and interpretation, shall be
binding and conclusive upon all parties hereto.
10.3 Investment Intent. The Participant represents and warrants that all shares
acquired
under this Agreement will be acquired for the Participant's own
account and for
the purpose of investment and not with a view to the sale or
distribution thereof,
except for sales pursuant to an effective registration
statement under the Securities
Act of 1933 (the "Act") or pursuant to an
exemption from registration under the
Act. The Participant
understands that the
shares of Common Stock covered
by this Agreement have not been as of the
date hereof, and may be at the time
that such are purchased, registered under
the Act (the Company being under no
obligation to effect such registration) and that such shares must be held indefinitely
unless a subsequent disposition
thereof is registered under the Act or is exempt
from registration. The
Participant further understands that the exemption from
registration afforded by
Rule 144 under the Act depends upon the satisfaction
of various conditions and
that, if applicable, Rule 144 affords the basis for sale
of such shares only in
limited amounts.
sell or otherwise dispose of the shares acquired under this Agreement in the absence
of (a) an effective registration statement under the Act, (b) an opinion acceptable in
form and substance to the Company from Participant's counsel satisfactory to the
Company, or an opinion of counsel to the Company, to the effect that no registration
is required for such disposition, or (c) a "no-action" letter from the staff of the
Securities & Exchange Commission ("SEC") to the effect that such a disposition takes
place without registration.
10.5 Legend. The certificates representing shares covered by this Agreement will upon
issuance thereof have stamped or imprinted thereon or affixed thereto a legend to
the following effect:
The registered holder hereof has acquired the shares represented
by this certificate for investment and not for resale in connection
with a distribution thereof. Accordingly, such shares have not
been
registered under the Securities Act of 1933 and may not be
sold,
transferred or otherwise disposed of except pursuant to a
currently
effective registration statement under said Act or
otherwise in a
transaction exempt from the provisions of Section
5 of said Act.
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain own stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one or the
other corporations in such chain.
10.7 Governing Law. This Agreement will be construed pursuant to the laws of the
State
of Delaware.
10.8 Binding Effect. This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties hereto.
IN WITNESS WHEREOF, the parties hereunto have caused this Agreement to be executed the day and year first above written.
LSB INDUSTRIES, INC.
By: _________________________________
Jack E. Golsen, President
(the "Company")
____________________________________
_______________________, Director
(the "Participant")
The Board of Directors of LSB Industries, Inc., a Delaware corporation (the
"Company"), has adopted this 1998 Stock Option and Incentive Plan (the "Plan"), effective the
13th day of August, 1998, as follows:
1. Purpose. This Plan permits selected officers and employees, prospective employees, consultants and independent contractors of the Company or any Subsidiary who bear a large measure of responsibility for the success of the Company to acquire and retain a proprietary interest in the Company and to participate in the future of the Company as shareholders. The purpose of this Plan is to advance the interests of the Company and its shareholders by enabling the Company and the subsidiaries to offer to its employee-directors, officers, employees, consultants and independent contractors, long-term performance-based stock and/or other equity interests in the Company, thereby enhancing its ability to attract, retain and reward such individuals, and by providing an incentive for employee-directors, officers, employees to render outstanding service to the Company and to the Company's shareholders.
2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth herein:
2.1 "Act" means the Securities Act of 1933, as amended from time to time, or
any successor
statute or statutes thereto.
2.2 "Agreement" means the agreement between the Company and the Holder
setting forth
the terms and conditions of an award under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Change of Control" means a change of control of the Company pursuant to
Section
8.2 hereof.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time to
time,
and any successor statute or statutes thereto.
2.6 "Committee" means the Stock Option Committee of the Board or any other
committee
of the Board which the Board may designate. In all events, the
Committee shall consist
only of non-employee directors of the Company.
2.7 "Common Stock" means the Common Stock of the Company, par value $.10 per share.
2.8 "Disability" means disability as determined under the procedures established
by the
Committee for purposes of the Plan.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to
time, or any successor statute or statutes thereto.
2.10 "Fair Market Value", unless otherwise required by any applicable provision
of the
Code or any regulations issued thereunder, means, as of any given
date:
2.10.1 the closing price of the Common Stock on the last preceding day
on
which the Common Stock was traded, as reported on a
national securities
exchange; and,
2.10.2 if the fair market value of the Common Stock cannot be
determined
pursuant to clause (i) hereof, such price as the
Committee shall determine.
2.11 "Formula Price Per Share" means the highest gross price (before brokerage
commissions, soliciting dealers' fees and similar charges) paid for any share
of Common
Stock at any time during the ninety (90) day period immediately
prior to the Change
of Control (whether by way of exchange, conversion,
distribution, liquidation or
otherwise) paid or to be paid for any share of
Common Stock in connection with a
Change of Control. If the consideration
paid or to be paid in any transaction that results
in a Change of Control
consists, in whole or in part, of consideration, other than cash,
the Board
shall take such action, as in its judgment it deems appropriate, to establish
the cash value of such consideration, but such valuation shall not be less than
the value,
if any, attributed to such consideration by any other party to such
transaction that
results in a Change of Control.
2.12 "Holder" means an eligible employee-director, officer, employee, consultant
or
independent contractor of the Company or a Subsidiary who has received
an award
under the Plan.
2.13 "Incentive Stock Option" or "ISO" means any Stock Option intended to be
and
designated as an "incentive stock option" within the meaning of Section
422 of the Code.
2.14 "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock
Option.
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2.15 "SAR Value" means the excess of the Fair Market Value of one share of
Common
Stock over the exercise price per share specified in a related Stock
Option in the
case of a Stock Appreciation Right granted in tandem with a
Stock Option and the
Stock Appreciation Right price per share in the case of
a Stock Appreciation Right
awarded on a free-standing basis multiplied by
the number of shares in respect of
which the Stock Appreciation Right shall
be exercised, on the date of exercise.
2.16 "Section 16(b) Holder" means such officer or director or ten percent (10%)
beneficial
owner of Common Stock subject to Section 16(b) of the Exchange
Act.
2.17 "Stock Appreciation Right" means the right, pursuant to an award granted
under
Section 7 hereof, to recover an amount equal to the SAR Value.
2.18 "Stock Option" means any Incentive Stock Option or Non-Qualified Stock
Option to
purchase shares of Common Stock which is awarded pursuant to
this Plan.
2.19 "Subsidiary" means any present or future subsidiary corporation of the
Company, as
such term is defined in Section 424(f) of the Code.
3. Administration.
3.1 Board; Committee. The Board shall create a committee consisting of three
members of
the Board. The Board may also appoint one member of the
Board as an alternate
member of the Committee. Upon such appointment,
the Committee shall have all the
powers, privileges and duties set forth
herein. The Board may, from time to time,
appoint members of any such
Committee in substitution for, or in addition to, members
previously
appointed, may fill vacancies in the Committee and may discharge the
Committee. The Committee shall select one of its members as its Chairman
and shall
hold its meetings at such times and places as it shall deem
advisable. A majority of
its members shall constitute a quorum and all
determinations shall be made by a
majority of such quorum. Any
determination reduced to writing and signed by a
majority of the members of
the Committee, shall be fully effective and a valid
act of the Committee as if
it had been made by a majority vote at a meeting
duly called and held. The
membership of the Committee shall at all times be
constituted so as to not
adversely affect the compliance of the Plan with the
requirements of Rule
16b-3 under the Exchange Act, to the extent it is applicable,
or with the
requirements of any other applicable law, rule or regulation.
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3.2 Power and Authority. The Committee shall have full power and authority to
do all things
necessary or appropriate to administer this Plan according to its
terms and provisions
(excluding the power to appoint members of the
Committee and to terminate, modify,
or amend the Plan, except as otherwise
authorized by the Board), including, but not
limited to the full power and
authority (subject to the express provisions of this Plan):
3.2.1 to award Stock Options and Stock Appreciation Rights, pursuant
to the
terms of this Plan, to eligible individuals described under
Section 5 hereof;
3.2.2 to select the eligible individuals to whom Stock Options or Stock
Appreciation
Rights, or any combination thereof, if any, may
from time to time be awarded
hereunder;
3.2.3 to determine the Incentive Stock Options, Non-Qualified Stock
Options, Stock
Appreciation Rights, or any combination thereof,
if any, to be awarded
hereunder to one or more eligible
employees or persons;
3.2.4 to determine the number of shares to be covered by each award
granted
hereunder;
3.2.5 to determine the terms and conditions not inconsistent with the
terms of the Plan,
of any award hereunder (including, but not
limited to, share price, any restrictions
or limitations, and any
vesting, exchange, surrender, cancellation, acceleration,
termination, exercise or forfeiture provisions, as the Committee shall
determine);
3.2.6 to determine any specified performance goals or such other
factors or criteria
which need to be attained for the vesting of an
award granted hereunder;
3.2.7 to determine the terms and conditions under which awards
hereunder are to
operate on a tandem basis and/or in conjunction
with or apart from other equity
awarded under this Plan and cash
awards made by the Company or any
Subsidiary outside of this
Plan;
3.2.8 to determine the extent and circumstances under which Common
Stock and
other amounts payable with respect to an award
hereunder shall be deferred,
which may be either automatic or at
the election of the Holder; and
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3.2.9 to substitute (i) new Stock Options for previously granted Stock
Options, which
previously granted Stock Options have higher
option exercise prices and/or
contain other less favorable terms,
and (ii) new awards of any other type for
previously granted
awards of the same or other type, which previously granted
awards are upon less favorable terms.
3.3 Interpretation of Plan.
3.3.1 Subject to Sections 3.2 and 9 hereof, the Committee shall have
the authority at
its discretion to adopt, alter and repeal such
general and special administrative
rules, regulations, and
practices governing the Plan as it shall, from time to time,
deem
advisable, to construe and interpret the terms and provisions of
this Plan
and any award issued under this Plan (and to determine
the form and substance
of all Agreements relating thereto), and to
otherwise supervise the administration
of this Plan.
3.3.2 Anything in this Plan to the contrary notwithstanding, no term of
this Plan
relating to Incentive Stock Options shall be interpreted,
amended or
altered, nor shall any discretion or authority granted
under this Plan be so
exercised, so as to disqualify the Plan under
Section 422 of the Code, or,
without the consent of the Holder(s)
affected, to disqualify any Incentive
Stock Option under Section 422 of the Code.
3.3.3 Subject to Sections 3.2 and 9 hereof, all decisions made by the
Committee
pursuant to the provisions of this Plan shall be made
in the Committee's sole
discretion and shall be final and binding
upon all persons granted options
pursuant to the Plan.
4. Shares Subject to Plan.
4.1 Number of Shares. The aggregate number of shares of Common Stock
reserved and
available for distribution under this Plan shall be 850,000
shares. If any shares of
Common Stock that are subject to a Stock Option or
Stock Appreciation Right cease
to be subject to such Stock Option or Stock
Appreciation Right, or any such award
otherwise terminates without a
payment being made to the Holder in the form of
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Common Stock, such
shares shall again be available for distribution in connection with
future
grants and awards under this Plan. The number of shares available for
distribution
under this Plan shall be reduced by the number of shares of
Common Stock issued under
this Plan upon the exercise of a Stock Option.
4.2 Character of Shares. The Company may elect to satisfy its obligations to a
Holder
exercising a Stock Option entirely by issuing authorized and unissued
shares of Common
Stock to such Holder, entirely by transferring treasury
shares to such Holder, or in part
by the issue of authorized and unissued
shares and the balance by the transfer of treasury
shares.
5. Eligibility.
5.1 General. Awards under this Plan may be made to: (i) officers and other
employees of the
Company or any Subsidiary who are at the time of the
grant of an award under this Plan
regularly employed by the Company or
any Subsidiary, including any full time salaried
officer or employee who is a
member of the Board (except as provided in the last
sentence under Section
3.1); and, (ii) consultants or independent contractors whom the
Board
believes have contributed or will contribute to the success of the Company.
5.2 Multiple Awards. The Committee shall from time to time designate such
employees,
consultants or independent contractors to whom options are to be
granted, and the
number of shares to be subject to each option. The
Committee may at any time grant
one or more Stock Options or Stock
Appreciation Rights or a combination thereof
to an individual to whom a
Stock Option or Stock Appreciation Right has previously
been granted under
this or any other stock option plan of the Company, whether or
not such
previously granted Stock Option or Stock Appreciation Right has been fully
exercised.
5.3 Ineligibility for Awards. No person designated by the Board to serve on the
Committee,
effective at such future time so that he qualifies as a
"disinterested person" within the
meaning of Rule 16b-3(c) of the Exchange
Act, shall be eligible to receive any awards
under the Plan during the period
from the date such designation is made to the date
such designation becomes
effective. Notwithstanding Section 5.1 hereof, no member
of the
Committee, while serving as such, shall be eligible to receive an award under
the Plan.
6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the Plan may be of two
types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options.
Only full-time
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salaried officers or employees may be granted Incentive Stock
Options. Any individual
eligible to participate under this Plan may be
granted Non-Qualified Stock Options. Any
Stock Option granted under the
Plan shall contain such terms, not inconsistent with this
Plan, as the
Committee may from time to time approve. The Committee shall have the
authority to grant to any eligible individual Incentive Stock Options, Non-Qualified
Stock Options, or both types of Stock Options and, in each case,
may be granted
alone, in tandem with, or without, or in addition to Stock
Appreciation Rights. To the
extent that any Stock Option (or portion
thereof) does not qualify as an Incentive
Stock Option, it shall constitute a
separate Non-Qualified Stock Option. Unless
granted in substitution for
another outstanding award, Stock Options shall be granted
for no consideration other than services to the Company or a Subsidiary.
6.2 Exercise Price.
6.2.1 Less Than 10% Shareholder. The exercise price in any option
granted under
this Plan to an individual who, at the time the
Stock Option is granted, does
not own stock possessing more
than ten percent (10%) of the total combined
voting power of all
classes of stock of the Company or of any Subsidiary
(computed
in accordance with the provisions applicable to Section 422(b)(6)
of the Code) (a "less than 10% Shareholder") shall be not less
than the Fair
Market Value of the shares of Common Stock
subject to the Stock Option
at the time the Stock Option is
granted, determined by the Committee in
accordance with the
applicable regulations and rulings of the Commissioner
of the
Internal Revenue Service in effect at the time the Stock Option is
granted.
6.2.2 10% Shareholder. The exercise price in any option granted
under the Plan to
an individual who is not a less than ten percent
(10%) Shareholder (a "10%
Shareholder") shall be not less than
one hundred ten percent (110%) of the
Fair Market Value of the
shares of Common Stock subject to the Stock Option
at the time
the Stock Option is granted, determined in accordance with the
applicable regulations and rulings of the Commissioner of the
Internal Revenue
Service in effect at the time the Stock Option is
granted.
6.3 Option Term. The term of each Stock Option shall be fixed by the Board,
but no Stock
Option shall be exercisable more than ten (10) years (five (5)
years, in the case of an
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Incentive Stock Option granted to a 10%
Shareholder) after the date on which the Stock
Option is granted.
6.4 Exercise of Non-Qualified Stock Options. Non-Qualified Stock Options shall
be
exercisable at such time or times and subject to such terms and conditions
as shall be
determined by the Committee; provided, however, that no Non-Qualified Stock Option
granted under this Plan may be exercised until after
the expiration of six (6) months
from the date the Stock Option is granted. If
the Committee provides, in its discretion,
that any Stock Option is
exercisable only in installments, the Committee may waive
such installment
exercise provisions at any time at or after the time of grant in whole
or in
part, based upon such factors as the Committee shall determine; provided
that
the Committee cannot waive the requirement that the Stock Option may
not be
exercised until after the expiration of six (6) months from the date the
Stock Option is
granted.
6.5 Exercise of Incentive Stock Options.
6.5.1 By an Employee. No Incentive Stock Option granted under this
Plan shall be
exercisable after the expiration of ten (10) years
from the date such ISO is
granted, except that no ISO granted to
a person who is not a less than 10%
Shareholder shall be
exercisable after the expiration of five (5) years from the
date
such option is granted. Employment by a Subsidiary shall be
employment
by the Company. Unless such requirements are
waived by the Committee,
the employee, while still in the
employment of the Company, may exercise the
options as
follows:
6.5.1.1 at any time after one (1) year of continuous
employment from the
date such ISO is granted, as
to twenty percent (20%) of the
shares subject to
the option;
6.5.1.2 at any time after two (2) years of such continuous
employment
from the date such ISO is granted, as
to an additional twenty
percent (20%) of the shares
subject to the option;
6.5.1.3 at any time after three (3) years of such continuous
employment
from the date such ISO is granted, as
to an additional thirty
percent (30%) of the shares
subject to the option; and
-8-
6.5.1.4 at any time after four (4) years of such continuous
employment
from the date such ISO is granted, as
to all of the shares
remaining subject to the option.
The Committee may decide in each case to what extent leaves of
absence for
government or military service, illness, temporary
disability, or other reasons,
shall not interrupt continuous
employment.
6.5.2 Termination of Employment. Except as otherwise expressly
provided in Sections
6.5.3 and 6.5.4 of this Plan or in the
Agreement, no Stock Option may be
exercised at any time unless
the Holder thereof is then an employee of the
Company or a
Subsidiary.
6.5.3 By a Former Employee. No person may exercise an ISO after he
is no longer an
employee of the Company or any Subsidiary;
except that if an employee 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 ISO
within
twelve (12) months after the date on which he ceased to be an
employee,
for the number of shares for which he could have
exercised at the time he ceased
to be an employee. No ISO
granted under this Plan shall in any event be exercised
by such
Former Employee after the expiration of ten (10) years from the
date
such ISO is granted, except that no ISO granted to a person
who is a 10%
Shareholder may be exercisable after the expiration
of five (5) years from the date
such ISO is granted.
6.5.4 In Case of Death. If any employee or Former Employee who
was granted an ISO
dies prior to the termination of such ISO,
such ISO may be exercised within twelve
(12) months after the
death of the employee or Former Employee by his estate, or
by a
person who acquired the right to exercise such ISO by bequest or
inheritance,
or by reason of the death of such employee or
Former Employee, provided that:
6.5.4.1 such employee died while an employee of the Company or a Subsidiary; or
6.5.4.2 such Former Employee had 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.
-9-
Such ISO may be exercised only as to the number of shares for
which he could have
exercised at the time the employee or
Former Employee died. No ISO granted under
this Plan shall in
any event be exercised in case of death of an employee or Former
Employee after the expiration of ten (10) years from the date
such ISO is granted,
except that no ISO granted to a 10% Shareholder shall be exercisable after the
expiration of five (5) years
from the date such ISO is granted.
6.5.5 The Committee may, in its discretion, waive the installment
exercise provisions at
any time at or after the time of grant, in
whole or in part, based on such factors as
the Committee shall
determine; provided that at all times no ISO may be exercised
until the expiration of six (6) months from the date that the Stock
Option was granted.
6.6 Termination of Options. A Stock Option granted under this Plan shall be
considered
terminated, in whole or in part, to the extent that it can no longer
be exercised for
shares originally subject to it, provided that a Stock Option
granted shall be
considered terminated at an earlier date upon surrender for
cancellation by the Holder
to whom such Stock Option was granted.
6.7 Notice of Exercise and Payment. Subject to any installment, exercise and
waiting period
provisions that are applicable in a particular case, Stock
Options granted under this Plan
may be exercised, in whole or in part, at any
time during the term of the Stock Option,
by giving written notice of such
exercise to the Company identifying the Stock Option
being exercised and
specifying the number of shares then being purchased. Such notice
shall be
accompanied by payment in full of the exercise price, which shall be in cash
or,
unless otherwise provided in the Agreement, in whole shares of Common
Stock which
are already owned by the Holder of the Stock Option or, unless
otherwise provided
in the Agreement, partly in cash and partly in such
Common Stock. Cash payments
shall be made by wire transfer, certified check or 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 a
Stock 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
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stock certificates in negotiable form which are effective to
transfer good and valid title
thereto to the Company, free of any liens or
encumbrances, with signature guaranteed
by a bank or investment banking
firm.
6.8 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 the Holder or his or her estate, as the case may
be. No Holder or estate shall have any
of the rights of a shareholder with
reference to shares of Common Stock subject to a
Stock Option until after the
Stock Option has been exercised in accordance with Section
6.7 and certificates representing the shares of Common Stock so purchased by the Holder
pursuant to the Stock Option have been delivered to the Holder or estate.
6.9 Partial Exercise. A Stock Option granted under this Plan may be exercised
as to any part
of the shares for which it could be exercised. Such a partial
exercise of a Stock Option
shall not affect the right to exercise the Stock
Option from time to time in accordance
with this Plan as to the remaining
shares of Common Stock subject to the Stock Option.
6.10 $100,000 Per Year Limitation. To the extent that the aggregate Fair Market
Value of
Common Stock with respect to which Incentive Stock Options are
exercisable for the
first time by a Holder during any calendar year (under all
of the Company's plans)
exceeds $100,000, such excess Stock Options shall
be treated as Non-Qualified
Stock Options for purposes of Section 422 of the
Code.
6.11 Buyout and Settlement Provisions. The Committee may at any time offer to
buy out for
cash or otherwise settle a Stock Option previously granted, based
upon such terms and
conditions as the Committee shall establish and
communicate to the Holder at the time
that such offer is made, including a
settlement for exchange of a different award under
the Plan for the surrender
of the Stock Option.
7. Stock Appreciation Rights.
7.1 Grant and Exercise. Stock Appreciation Rights may be granted in tandem
with ("Tandem
Stock Appreciation Right") or in conjunction with all or part
of any Stock Option granted
under this Plan or may be granted on a free-standing basis. In the case of a Non-Qualified
Stock Option, a Tandem
Stock Appreciation Right may be granted either at or after the
time of the
grant of such Non-Qualified Stock Option. In the case of an Incentive Stock
Option, a Tandem Stock Appreciation Right may be granted only at the time
of the grant
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of such Incentive Stock Option. Unless granted in substitution
for another outstanding
award, Stock Appreciation Rights shall be granted
for no consideration other than
services to the Company or a Subsidiary.
7.2 Termination. A Tandem Stock Appreciation Right shall terminate and shall
no longer be
exercisable upon the termination or exercise of the related Stock
Option, except that,
unless
otherwise determined by the Board, a Tandem
Stock Appreciation Right granted
with respect to less than the full number of
shares covered by a related Stock Option
shall not be
reduced until after the
number of shares remaining under the related Stock
Option equals the
number of shares covered by the Tandem Stock Appreciation Right.
7.3 Method of Exercise. A Tandem Stock Appreciation Right may be exercised
by a Holder,
in accordance with Section 7.4 hereof, by surrendering the
applicable portion of the
related
Stock Option. Upon such exercise and
surrender, the Holder shall be entitled
to receive such amount in the form of
payment determined in the manner prescribed
in Section 7.5 hereof. Stock
Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent Tandem Stock Appreciation
Rights have been
exercised.
7.4 Exercisability. Tandem Stock Appreciation Rights shall be exercisable only
at such time
or
times and to the extent that the Stock Options to which they
relate shall be
exercisable in
accordance with the provisions of Section 6
hereof and this Section 7,
and may be subject to such additional limitations
on exercisability as shall be
determined by the Committee and set forth in the
Agreement. Other Stock
Appreciation Rights shall be exercisable at such
time or times and subject to such
terms and conditions as shall be determined
by the Committee and set forth in the
Agreement. Notwithstanding anything
to the contrary contained herein (including the
provisions of Section 8.1
hereof), any Stock Appreciation Right granted to a
Section 16(b) Holder to
be settled wholly or partially in cash (i) shall not be
exercisable during the
first six (6) months of the term of such Stock Appreciation
Right, except that
this special limitation shall not apply in the event of death or disability
of
such Holder prior to the expiration of the six (6) month period, and (ii) shall
only be
exercisable during the period beginning on the third business day
following the date of
release for publication of the Company of quarterly or
annual summary statements of
sales and earnings and ending on the twelfth
(12) business day following such date.
7.5 Receipt of SAR Value. Upon the exercise of a Stock Appreciation Right, a
Holder shall be
entitled to receive up to, but not more than, an amount in
cash and/or shares of Common
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Stock equal to the SAR Value with the Committee having the right to determine the form
of payment.
7.6 Shares Affected Under Plan. Upon the exercise of a Tandem Stock
Appreciation Right, the
Stock Option or part thereof to which such Tandem
Stock Appreciation Right is related
shall be deemed to have been exercised
for the purpose of the limitation set forth in
Section 4.1 hereof on the
number of shares of Common Stock to be issued under the Plan,
but only to
the extent of the number of shares, if any, issued under the Tandem Stock
Appreciation Right at the time of exercise based upon the SAR Value.
7.7 Limited Stock Appreciation Rights. The Committee may grant "Limited
Stock
Appreciation
Rights", i.e., Stock Appreciation Rights that become
exercisable upon
the occurrence of one or more of the events which trigger a
Change of Control as
defined in Section 8.2 hereof, and shall be settled in an
amount equal to the Formula
Price Per Share, subject to such other terms
and conditions as the Committee
may specify; provided, however, if any
Limited Stock Appreciation Right is granted
to a Section 16(b) Holder such
Limited Stock Appreciation Right (i) shall only be
exercisable within sixty
(60) days after the event triggering the Change of Control;
and (ii) may not
be exercised during the first six (6) months after the date of grant
of such
Limited Stock Appreciation Right (except in the event of death or disability
of such Holder prior to the expiration of the six (6) month period); and (iii)
shall
only be exercisable in the event that the date of the Change of Control
was outside the
control of such Holder; and (iv) shall only be settled in cash
in an amount equal to the
Formula Price Per Share.
8. Acceleration.
8.1 Acceleration Upon Change of Control. Unless the award Agreement
provides otherwise or
unless the Holder waives the application of this Section
8.1 prior to a Change of Control
(as hereinafter defined), in the event of a
Change of Control, each outstanding Stock
Option, Stock Appreciation Right
and Limited Stock Appreciation Right granted under
the Plan shall immediately become exercisable in full notwithstanding the vesting or
exercise
provisions contained in the Agreement.
8.2 Change of Control Defined. A "Change of control" shall be deemed to have
occurred
upon any of the following events:
8.2.1 The consummation of any of the following transactions: any
merger, reverse
stock split, recapitalization or other business
combination of the Company,
with or into another corporation,
or an acquisition of securities or assets
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by the Company,
pursuant
to which the Company is not the continuing or
surviving
corporation or pursuant to which shares of Common Stock
would
be converted into cash, securities or other property, other than a
transaction in which the majority of the holders of
Common
Stock
immediately prior to such transaction will own at least fifty
percent (50%)
of the total voting power of the then-outstanding
securities of the surviving
corporation immediately after such
transaction; or
8.2.2 A transaction in which any person (as such term is defined in
Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), corporation
or other entity (other than the
Company, or any profit-sharing,
employee ownership or other employee benefit
plan sponsored by
the Company or any Subsidiary, or any trustee of or fiduciary
with respect to any such plan when acting in such capacity, or
any group
comprised solely of such entities): (i) shall purchase
any Common Stock (or
securities convertible into Common
Stock) for cash, securities or any other
consideration pursuant to
a tender offer or exchange offer, without the prior
consent of the
Board, or (ii) shall become the "beneficial owner" (as such term
is
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly (in one
transaction or a series of transactions), of
securities of the Company representing
fifty percent (50%) or
more of the total voting power of the then-outstanding
securities
of the Company ordinarily (and apart from the rights accruing
under
special circumstances) having the right to vote in the
election of directors
(calculated as provided in Rule 13d-3(d) in
the case of rights to acquire the
Company's securities); or
8.2.3 If, during any period of two consecutive years, individuals who
at the beginning
of such period constituted the entire Board and
any new director whose election
by the Board, or nomination for
election by the Company's stockholders was
approved by a vote
of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose
election or
nomination for election by the stockholders was
previously so approved, cease
for any reason to constitute a
majority thereof.
8.3 General Waiver by Board. The Committee may, after grant of an award,
accelerate the
vesting of all or any part of any Stock Option, and/or waive
any limitations or
restrictions, if any, for all or any part of an award.
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8.4 Acceleration Upon Termination of Employment. In the case of a Holder
whose
employment or affiliation with the Company or a Subsidiary is
involuntarily terminated
for any reason (other than for cause), the Committee
may, at its option and in its sole
discretion, accelerate the vesting of all or
any part of any award and/or waive, in
whole or in part, any or all of the
remaining deferral limitations or restrictions imposed
hereunder or pursuant
to the Agreement.
9. Amendments and Termination.
9.1 Amendments to Plan; Termination. The Board may at any time, and from
time to time,
amend any of the provisions of the Plan, and may at any time
suspend or terminate the
Plan; provided, however, that no such amendment
shall be effective unless and until it
has been duly approved by the
stockholders of the outstanding shares of Common
Stock if (i)
such amendment materially increases the benefits accruing to participants
under this
Plan; (ii) such amendment materially increases the number of securities
which
may be issued under this Plan; (iii) such amendment materially modifies the
requirements as to eligibility for participation in this Plan; or, (iv)
the failure to obtain
such approval would adversely affect the compliance of
the Plan with the requirements
of Rule 16b-3 under the Exchange Act, or
with the requirements of any other
applicable law, rule or
regulation.
9.2 Amendments to Individual Awards. The Board may amend the terms of any
award
granted under the Plan; provided, however, that subject to Section 11
hereof, no such
amendment may be made by the Board which in any material
respect impairs the rights
of the Holder without the Holder's consent.
10. Term of Plan.
10.1 Effective Date. The Plan shall be effective as of August 13, 1998
("Effective Date"),
subject to the approval of the Plan by the stockholders of
the Company within one year
after the Effective Date. Any awards granted
under the Plan prior to such approval
shall be effective when made (unless
otherwise specified by the Committee at the time
of grant) but shall be
conditioned upon, and subject to, such approval of the Plan by the
Company's stockholders and approval of the Company's application to list
the shares of
the Company's Common Stock covered by the Plan on the New
York Stock Exchange
(and no awards shall vest or otherwise become free of
restrictions prior to such
approvals).
10.2 Termination Date. No award shall be granted pursuant to the Plan on or
after the tenth
(10th) anniversary of the Effective Date, but awards granted
prior to such tenth (10th)
-15-
anniversary may extend beyond that date. The
Plan shall terminate at such time as no
further awards may be granted and all
awards granted under the Plan are no longer
outstanding.
11. Adjustment Upon Change of Shares. Subject to any required action by the
stockholders of the
Company, the number of shares of Common Stock for which Stock
Options may thereafter be
granted, and the number of shares of Common Stock then
subject to Stock Options previously
granted, and the price per share payable upon
exercise of such Stock Option and the number of
shares and exercise price relating to
Stock Appreciation Rights, shall be proportionately
adjusted for any increase or
decrease in the number of issued shares of Common Stock of the
Company resulting
from a subdivision or consolidation of shares of Common Stock or the
payment of a stock dividend (but only on the Common Stock) or any other increase or
decrease in
the number of shares of Common Stock effected without receipt of consideration
by the
Company.
11.1 If the Company is reorganized or consolidated or merged with another
corporation, in
which the Company is the non-surviving corporation, a
Holder of an outstanding Stock
Option and/or Stock Appreciation Right
granted under this Plan shall be entitled
(subject to the provisions of this
Section 11) to receive options and/or stock appreciation
rights covering
shares of such reorganized, consolidated or merged corporation in the
same
proportion as granted to Holder prior to such reorganization, consolidation
or
merger at an equivalent exercise price, and subject to the same terms and
conditions
as this Plan. For purposes of the preceding sentence, the excess
of the aggregate Fair
Market Value of shares subject to the option immediately after the reorganization,
consolidation or merger over the aggregate
exercise price of such shares shall not be
more than the excess of the
aggregate Fair Market Value of all shares of Common
Stock subject to the
option or Stock Appreciation Right immediately before such
reorganization,
consolidation or merger over the aggregate exercise price of such
shares of
Common Stock, and the new stock option or stock appreciation right or
assumption of the old Stock Option or old Stock Appreciation Right by any
surviving corporation shall not give the Holder additional benefits which he
did not
have under the old Stock Option or Stock Appreciation Right.
11.2 To the extent that the foregoing adjustments relate to the shares of Common
Stock
of the Company, such adjustments shall be made by the Committee,
whose
determination in that respect shall be final, binding and conclusive,
provided that each
Incentive Stock Option granted pursuant to this Plan shall
not be adjusted in a manner
that causes the Incentive Stock Option to fail to
continue to qualify as an incentive
stock option within the meaning of Section
422 of the Code.
-16-
11.3 Except as expressly provided in this Section 11, the Holder shall have no
rights by
reason of any subdivision or consolidation of shares of stock of any
class or the
payment of any stock dividend or any other increase or decrease
in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger,
consolidation,
reorganization or spin-off of assets or
stock of another corporation,
and any issue by the
Company of shares of
stock of any class, or securities
convertible into shares of stock of any class,
shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to the
Stock Option or the number or price of Stock
Appreciation Rights granted
under this Plan.
11.4 The grant of a Stock Option or Stock Appreciation Right pursuant to this
Plan shall not
affect in any way the right or power of the Company to make
adjustments,
reclassifications,
reorganizations or changes of its capital or
business structure or to
merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of
its business or assets.
12. General Provisions.
12.1 Investment Representations. The Committee may require each person
acquiring shares of
Common Stock pursuant to an award under this Plan to
represent to and agree with the
Company in writing that the Holder is acquiring the shares for investment without a
view to distribution thereof.
12.2 Additional Incentive Arrangements. Nothing contained in this Plan shall
prevent the
Board from adopting such other or additional incentive
arrangements as it may deem
desirable,
including, but not limited to, the
granting of Stock Options and the
awarding of stock and cash otherwise than
under this Plan; and such arrangements
may be either generally
applicable or
applicable only in specific cases.
12.3 No Right of Employment. Nothing contained in this Plan or in any award
hereunder
shall be deemed to confer upon any employee of the Company or
any Subsidiary
any right to
continued employment with the Company or any
Subsidiary, nor
shall it interfere in any way with the right of the Company or
any Subsidiary to
terminate the employment of any of its employees at any
time.
12.4 Withholding Taxes. Not later than the date as of which an amount first
becomes
includible in the gross income of the Holder for federal income tax
purposes
with respect to any award under the Plan, the Holder shall pay to
the Company,
or make arrangements
satisfactory to the Company regarding
the payment of,
-17-
any federal, state and local taxes of any kind required by law
to be withheld or
paid with respect to such amount. If permitted by the
Board, tax withholding or
payment obligations may be settled with Common
Stock, including Common
Stock that is part of the award that gives rise to the withholding requirement.
The obligations of the Company under this
Plan shall be conditional upon such
payment or arrangements and the
Company shall, to the extent permitted by
law, have the right to deduct any
such taxes from any payment of any kind
otherwise due to the Holder from
the Company.
12.5 Governing Law. This Plan and all awards made and actions taken
thereunder shall be
governed by and construed in accordance with the laws
of the State of Delaware (without
regard to choice of law provisions).
12.6 Other Benefit Plans. Any award granted under this Plan shall not be deemed
compensation for purposes of computing benefits under any retirement plan
of the
Company or any
Subsidiary and shall not affect any benefits under any
other
benefit plan now or subsequently in effect under which the availability
or amount
of benefits is related to the level of
compensation (unless required
by specific
reference in any such other plan to awards under this Plan).
12.7 Employee Status. A leave of absence, unless otherwise determined by the
Board prior to
the commencement thereof, shall not be considered a
termination of employment. Any
awards granted under this Plan shall not be
affected by any change of employment, so
long as the Holder continues to be
an employee of the Company or any Subsidiary.
12.8 Non-Transferability. Other than the transfer of a Stock Option or Stock
Appreciation
Right by will or by the laws of descent and distribution, no
award under this Plan
may be alienated, sold, assigned, hypothecated,
pledged, exchanged, transferred,
encumbered or
charged, and any attempt to
alienate, sell, assign, hypothecate,
pledge, exchange, transfer,
encumber or
charge the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of
the person entitled to such benefit. Unless otherwise provided
in this Plan or
the Agreement, any Stock Option or Stock Appreciation Right
granted under
this Plan is only exercisable during the lifetime of the Holder by the
Holder
or by his guardian or legal representative.
12.9 Applicable Laws. The obligations of the Company with respect to all awards
under this
Plan shall be subject to (i) all applicable laws, rules and
regulations, including, without
limitation, the requirements of all federal
securities laws, rules and regulations and state
securities and blue sky laws,
rules and regulations, and such approvals by any
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governmental
agencies as
may be required, including, without limitation, the
effectiveness of a
registration statement under the Act, and (ii) the rules and
regulations of any
national securities exchange on which the Common Stock
may be listed or
the NASDAQ National Market System if the Common Stock
is designated
for quotation thereon.
12.10 Conflicts. If any of the terms or provisions of the Plan conflict with the
requirements of
Rule 16b-3 under the Exchange Act, or with the
requirements of any other applicable
law, rule or regulation, and/or with
respect to Incentive Stock Options, Section 422
of the Code, then such terms
or provisions shall be deemed inoperative to the extent
they so conflict with
the requirements of said Rule 16b-3, and/or with respect to
Incentive Stock
Options, Section 422 of the Code. With respect to Incentive Stock
Options,
if this Plan does not contain any provision required to be included herein
under Section 422 of the Code, such provision shall be deemed to be
incorporated
herein with the same force and effect as if such provision had
been set out at length
herein.
12.11 Written Agreements. Each award granted under this Plan shall be confirmed
by, and
shall be subject to the terms of the Agreement approved by the
Committee and
executed by the Company and the Holder. The Committee
may terminate any
award made under this Plan if the Agreement relating
thereto is not executed and
returned to the Company within sixty (60) days
after the Agreement has been
delivered to the Holder for his or her execution.
12.12 Indemnification of Committee. In addition to such other rights of
indemnification as
they may have as directors or as members of the
Committee, the members of the
Committee shall be indemnified by the
Company against the reasonable expenses,
including attorneys' fees actually
and necessarily incurred in connection with the
defense of any action, suit or
proceeding, or in connection with any appeal therein,
to which they or any of
them may be a party by reason of any action taken or failure
to act under or
in connection with the Plan or any award granted thereunder, and
against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them
in satisfaction of a judgment in any such action, suit or proceeding,
except in
relation to matters as to which it shall be adjudged in such action,
suit or proceeding
that such Committee member is liable for negligence or
misconduct in the
performance of his duties; provided that within sixty (60)
days after institution of
-19-
any such action, suit or proceeding a Committee
member shall in writing offer the
Company the opportunity, at its own
expense, to handle and defend the same.
12.13 Consideration for Common Stock. The Committee may not grant any
awards under
this Plan pursuant to which the Company will be required to
issue any shares of
Common Stock unless the Company will receive
consideration for the shares of
Common Stock sufficient under the laws of
the State of Delaware so that such
shares of Common Stock will be, when
issued, validly issued and fully paid and
nonassessable when issued.
12.14 Common Stock Certificates. All certificates for shares of Common Stock
delivered
under this Plan shall be subject to such stop-transfer orders and
other restrictions as
the Committee may deem advisable under the rules,
regulations, and other
requirements of the Securities and Exchange
Commission, any stock exchange
upon which the Common Stock is then
listed, any applicable federal or state
securities law and any applicable
corporate law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. Notwithstanding anything to the contrary contained
herein, whenever
certificates representing shares of Common Stock subject to an
award are
required to be delivered pursuant to the terms of this Plan, the
Company
may, in lieu of such delivery requirement, comply with the provisions
of
Section 158 of the Delaware General Corporation Law.
12.15 Unfunded Status of Plan. This Plan is intended to constitute an "unfunded"
plan for
incentive and deferred compensation. With respect to any payments
not yet made to
a Holder by the Company, nothing contained herein shall
give any such Holder any
rights that are greater than those of a general
creditor of the Company.
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1998 STOCK OPTION AND INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT made this 8th day of July, 1999, between LSB INDUSTRIES,
INC., a Delaware corporation, hereinafter called the "Company", and ___________________,
hereinafter called "Optionee";
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:
I. Recitations. The Company or its Subsidiary 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 1998 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 or its Subsidiary 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 or its Subsidiary 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 8th day of July, 1999 (the "Date of Grant"), the right, privilege and option to purchase an aggregate of ____________________ (__________) shares of its Common Stock for a price of $1.375 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 and ten percent (110%) 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. 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 thereof is referred to
herein as the "Committee"),
the Optionee, while in the employment of the Company or
its Subsidiary, 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
2
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:
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 five (5) 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 four (4) year vesting schedule
provided in Section
IV.A, 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 the Optionee or his or her estate, as the case may be; provided, however, the obligation of the Company to deliver such
3
certificates shall be subject to the Company's compliance with any applicable federal and state securities laws as provided in Section 10 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 fifth (5th) 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 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.
4
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.
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: Jack E. Golsen
Title: President
[S E A L]
"Optionee"
__________________________________
_________________________
1998 STOCK OPTION AND INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT made this 8th day of July, 1999, between LSB INDUSTRIES, INC., a Delaware corporation, hereinafter called the "Company", and ___________________, hereinafter called "Optionee";
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:
I. Recitations. The Company or its Subsidiary 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 1998 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 or its Subsidiary 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 or its Subsidiary 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 8th day of July, 1999 (the "Date of Grant"), the right, privilege and option to purchase an aggregate of ______________ (______) shares of its Common Stock for a price of $1.25 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. 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 thereof is referred to
herein as the "Committee"),
the Optionee, while in the employment of the Company or
its Subsidiary, 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
2
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:
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 four (4) year vesting schedule
provided in Section
IV.A, 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 the Optionee or his or her estate, as the case may be; provided, however, the obligation of the Company to deliver such
3
certificates shall be subject to the Company's compliance with any applicable federal and state securities laws as provided in Section 10 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 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.
4
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.
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: Jack E. Golsen
Title: President
[S E A L]
"Optionee"
____________________________________
__________________________
A PROFESSIONAL CORPORATION
211 NORTH ROBINSON
OKLAHOMA CITY, OKLAHOMA 73102-7101
(405) 272-5711
FAX (405) 232-2695
August 19, 2002
LSB Industries, Inc.
16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73101
Re: LSB Industries, Inc.; Form S-8 Registration Statement; 1998 Stock Option
and Incentive Plan and Outside Directors Stock Purchase Plan;
Our File No. 7033.11
Ladies and Gentlemen:
We are delivering this opinion to you in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of the Registration Statement on Form S-8 (the "Registration Statement") of LSB Industries, Inc., a Delaware corporation (the "Company"), for the registration of 1,387,800 shares of the Company's Common Stock, $0.10 par value (the "Common Stock"), to be issued by the Company pursuant to the Company's 1998 Stock Option and Incentive Plan (987,800 shares; the "Employee Plan") and the Outside Directors Stock Purchase Plan (400,000 shares; the "Outside Director Plan") (together, the "Plans") from time to time to employees of the Company and its subsidiaries.
In connection with this opinion, the undersigned has examined and relied upon such corporate records, certificates, other documents and questions of law, as we have considered necessary or appropriate for the purposes of this opinion, including, but not limited to, the following:
(a) Company's Certificate of Incorporation, as amended;
(b) Company's Bylaws, as amended;
(c) Plans;
(d) Resolutions of the Board of Directors of the Company, dated August 13,
1998,
and August 13, 2002;
(e) Certificate of Good Standing of the Company issued by the Secretary of
State
of Delaware, dated August 9, 2002;
(f) Registration Statement; and
(g) Summary Information regarding the Plans.
In our examination, we have assumed the genuineness of all signatures, the legal capacity of all persons, the authenticity of all documents submitted as originals, the conformity with the original documents of all documents submitted as certified or photostatic copies, and the authenticity of the originals of such copies. We have further assumed that each recipient of shares of the Company's Common Stock under the Employee Plan is a Holder and each potential recipient of shares of the Company's Common Stock under the Outside Director Plan is an Eligible Director, as defined in the respective Plans, and that any shares of the Company's Common Stock to be issued under the Plans will have been issued pursuant to the terms of the Plans and will have been registered in accordance with the Act, absent the application of an exemption from registration, prior to the issuance of such shares.
In reliance upon and based on such examination and review, we are of the opinion that, when the Registration Statement becomes effective pursuant to the rules and regulations of the Commission, the 1,387,800 shares of Common Stock which may be issued pursuant to the Plans will constitute, when purchased and issued pursuant to the terms of such Plans, duly authorized, validly issued, fully paid and nonassessable shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to Conner & Winters, a Professional Corporation, wherever it appears in such Registration Statement. However, in rendering this opinion, we do not admit that we are acting within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Act.
Very truly yours,
CONNER & WINTERS, P.C.
/s/
Conner & Winters, P.C.
IHS/MHB/jtk
Letter of Acknowledgment Re: Unaudited Financial Information
The Board of Directors
LSB Industries, Inc.
We are aware of the incorporation by reference in the Registration Statement (Form S-8) of LSB Industries, Inc. for the registration of an aggregate of 1,387,800 shares of its common stock under the 1998 Stock Option and Incentive Plan and the Outside Directors Stock Purchase Plan of our reports dated May 10, 2002 and August 12, 2002 relating to the unaudited condensed consolidated interim financial statements of LSB Industries, Inc. that are included in its Forms 10-Q for the quarters ended March 31, 2002 and June 30, 2002.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
August 16, 2002
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the 1998 Stock Option and Incentive Plan and Outside Directors Stock Purchase Plan of LSB Industries, Inc. of our report dated March 27, 2002, with respect to the consolidated financial statements and schedule of LSB Industries, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2001, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
August 16, 2002