To Be Held June 1, 2017

LSB INDUSTRIES, INC.

16 South Pennsylvania Avenue

Oklahoma City, Oklahoma 73107

To the Stockholders of

LSB Industries, Inc.

Please note that you may attend the meeting in person or via conference call by dialing (201) 493-6739. Materials presented at the meeting will be posted at www.lsbindustries.com on the webcast section of the Investors tab.

Your vote is important. Please sign and promptly return the enclosed proxy card in the accompanying self-addressed envelope, which requires no postage if mailed in the United States. In addition, you can vote by telephone or Internet. Instructions are included on the proxy card.

						By order of the Board of Directors,
						Michael J. Foster
						Senior Vice President,
						Secretary and General Counsel

Oklahoma City, Oklahoma

May 2, 2017

The Board recommends a vote “FOR” each of the director nominees, a vote “FOR” each of Proposals 2 and 3 and a vote of “1 year” for Proposal 4.

Shares of our Series B Preferred, Series D Preferred and Series F Preferred are referred to as our “voting preferred stock.” All of our outstanding shares of common stock and voting preferred stock will vote together as a single class on all matters coming before the annual meeting.

By telephone. After reading the proxy materials, you may call the toll-free number (866) 286-3181, using a touch-tone telephone. You will be prompted to enter your Control Number, which you can find on your Notice of Telephone Voting Availability or your proxy card. This number will identify you and the Company. You can then follow the simple instructions that will be given to you to record your vote. Telephone voting will be available through 1:00 a.m. CDT on June 1, 2017.

Over the Internet. After reading the proxy materials, you may use a computer to access the website www.proxypush.com/LXU You will be prompted to enter your Control Number, which you can find on your Notice of Internet Availability or your proxy card. This number will identify you and the Company. You can then follow the simple instructions that will be given to you to record your vote. Internet voting will be available through 5:00 p.m. CDT on May 31, 2017.

By mail. After reading the proxy materials, you may vote your shares by marking, signing, dating and returning your proxy card to the Company’s proxy solicitor in the envelope provided. To best ensure timely receipt of your proxy, you are encouraged to mail your proxy card for arrival by May 31, 2017.

The Internet and telephone voting procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.

Whether you choose to vote in person, by telephone, over the Internet or by mail, you can specify whether your shares should be voted for all, some or none of the director nominees. You can also specify whether you want to vote for or against, or abstain from voting on:

In addition, you can also specify whether the frequency of the advisory vote on named executive officer compensation should be every year, every two years, every three years or you may abstain from this vote.

Beneficial Owner. If your stock is held in your brokerage account, also known as “street name,” you should instruct your broker how your shares should be voted. If you fail to give your broker

instructions, in some cases but not others the broker may submit a “broker non-vote.”

If you are a beneficial owner whose shares are held of record directly in your name by a broker, you will receive instructions from the broker describing how to vote your shares. If you do not instruct your broker how to vote your shares, it may vote your shares as it decides with respect to any matter for which it has discretionary authority under the rules of the New York Stock Exchange (“NYSE”).

There are also non-discretionary matters for which your broker does not have discretionary authority to vote unless it receives timely instructions from you. A “broker non-vote” results when a broker does not have discretion to vote on a particular matter, you have not given timely instructions on how the broker should vote your shares and the broker indicates it does not have authority to vote such shares on its proxy. Although broker non-votes will be counted as present at the annual meeting for purposes of determining a quorum, they will be treated as shares not entitled to vote on the proposal.

If your shares are held in street name and you do not give voting instructions, the broker will only be entitled to vote your shares in its discretion with respect to the ratification of the appointment of our independent registered public accounting firm. Without voting instructions from you, the record holder will not be permitted to vote your shares with respect to the election of directors, the advisory vote on executive compensation and the frequency of the advisory vote on named executive officer compensation. Your shares would therefore be considered broker non-votes with respect to these proposals and would have no effect on the proposal. Accordingly, it is important for you to instruct your broker how you wish to vote your shares.

Can I change my mind after I vote?

What if I sign and return my proxy card but I do not include voting instructions?

What does it mean if I receive more than one proxy card?

Will my shares be voted if I do not provide my proxy?

Who will count the votes?

General

Our Certificate of Incorporation and Bylaws provide for the division of the Board into three classes, each class consisting as nearly as possible of one-third of the whole. The term of office of one class of directors expires each year; with each class of directors elected for a term of three years and until the stockholders elect their qualified successors.

Agreements as to Certain Directors and Committees

Board Representation and Standstill Agreement

On December 4, 2015, the Company entered into the Board Representation and Standstill Agreement (the “Board Representation and Standstill Agreement”), by and among the Company, LSB Funding LLC (“LSB Funding”), Security Benefit Corporation (“Security Benefit”), Todd Boehly, Jack E. Golsen (“J. Golsen”), Steven J. Golsen (“S. Golsen”), Barry H. Golsen (“B. Golsen”), Linda Golsen Rappaport (“L. Rappaport”), Golsen Family LLC, an Oklahoma limited liability company (“Family LLC”), SBL LLC, an Oklahoma limited liability company (“SBL LLC”), and Golsen Petroleum Corp., an Oklahoma corporation (“GPC,” and together with Messrs. J. Golsen, S. Golsen and B. Golsen, Ms. L. Rappaport, Family LLC, SBL LLC, each a “Golsen Holder” and, collectively, the “Golsen Holders”).

LSB Funding Designees

Pursuant to the Board Representation and Standstill Agreement, the Company has agreed to permit LSB Funding, an affiliate of Security Benefit, to designate three nominees to the Board, at least one of which will meet the NYSE standards of independence. LSB Funding designated, and our Board appointed, (i) Jonathan S. Bobb, (ii) Joseph E. Reece, and (iii) Mark R. Genender to the Board on December 4, 2015. Mr. Reece is a nominee for election at this annual meeting.

So long as LSB Funding or its affiliates own the Series E cumulative redeemable Class C preferred stock (the “Series E Preferred”), LSB Funding will continue to be entitled to designate three directors. LSB Funding’s right to designate director nominees may be reduced upon the occurrence of certain events specified below:

Golsen Designees

Under the Board Representation and Standstill Agreement, the Golsen Holders, collectively, have the right to designate two directors; however, if the Golsen Holders, collectively, beneficially own less than 5% but at least 2.5% of the then outstanding common stock, the Golsen Holders will be entitled to designate up to one director. These designation rights will terminate immediately on the first date on which the Golsen Holders, beneficially own less than 2.5% of the then outstanding common stock.

Other Governance Matters

Our Bylaws provide that the Board may change the total number of directors on our Board from time to time provided that the minimum number of directors is 3 and the maximum is 14. The Board has set the number of directors at 11.

As discussed under “Corporate Governance—Nominating Committee,” our Nominating Committee reviews the composition of the Board to assess the Board’s performance, composition, and effectiveness. The Nominating Committee values certain characteristics in all Board members, including personal and professional integrity, reputation, outstanding professional achievement, and sound business judgment. The Nominating Committee evaluates each individual director in the context of the Board as a whole with the goal of recommending an effective group with a diversity of experience and skills that exercises sound business judgment in the interest of our business and our stockholders. Consistent with their responsibilities, members of the Nominating Committee have interviewed and evaluated each of the current nominees for director and has determined that each is highly qualified to serve as a member of our Board.

The following sets forth certain information regarding the director nominees and other directors whose term will continue after the annual meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE FOUR NOMINEES AS DIRECTORS OF THE COMPANY

The Audit Committee has appointed the firm of Ernst & Young LLP, Independent Registered Public Accounting Firm (“Ernst & Young”), as the Company’s auditors for 2017. Ernst & Young has served as our auditors for more than five years, including the fiscal year most recently completed. If the stockholders do not ratify the appointment of Ernst & Young, the Audit Committee will reconsider the appointment and may or may not

consider the appointment of another independent registered public accounting firm for the Company for 2017 or future years.

Consistent with past practices, it is expected that one or more representatives of Ernst & Young will attend the annual meeting and will be available to respond to appropriate questions or make a statement should they desire to do so.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017.

We are asking our stockholders to approve the following advisory resolution related to the compensation of the Company’s named executive officers commonly known as a “say-on-pay” proposal:

RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, and the compensation tables, and the related narrative discussion in this Proxy Statement.

Our stockholders’ opinions are important to us and we hold this advisory vote annually in order to get a better understanding of their views on the compensation of our named executive officers and its alignment with stockholder interests. The Board and the Compensation Committee, which is composed of independent directors, will review and take into account the outcome of this vote when considering future executive

compensation decisions. Stockholders are encouraged to read the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative executive compensation disclosure, in this Proxy Statement, which provide information about our compensation policies and the compensation of our named executive officers. Stockholders should note that, because the advisory vote on executive compensation occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, it may not be appropriate or feasible to change our executive compensation programs in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of stockholders.

The Board intends to hold this vote annually, and the next advisory vote to approve named executive officer compensation will occur in 2018.

THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE RESOLUTION TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION.

The Board is providing our stockholders with the opportunity to vote, on an advisory basis, on the frequency of future advisory votes on our executive compensation of the nature reflected in Proposal 3 above which are required to be held at least once every three years. This non-binding advisory vote is required to be conducted every six years under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We last asked our stockholders to indicate the frequency with which they believe a say-on-pay vote should occur at our 2011 Annual Meeting of Stockholders. At that time, our stockholders voted in favor of the annual submission of the Company’s executive compensation to our stockholders for approval on a non-binding basis. Our Board adopted this approach and the Company has had annual votes starting with the 2012 annual meeting. Stockholders may indicate whether they prefer that we hold a say-on-pay vote every year, every two years, every three years, or they may abstain from this vote.

After careful consideration, the Board, on the recommendation of the Compensation Committee, has determined that a say-on-pay vote every year is the best approach for the Company and our stockholders. While the Company’s executive compensation programs are designed to promote a long-term connection between pay and performance, the Board recognizes that executive compensation disclosures are made annually.

Holding an annual advisory vote on executive compensation allows stockholders to provide direct and immediate feedback on our compensation philosophy, policies and practices as disclosed in the proxy statement each year. However, stockholders should note that because the advisory vote on executive compensation occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change our executive compensation programs in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of stockholders.

As this is an advisory vote, the outcome of the vote is not binding on us, and our Compensation Committee and the Board may decide that it is in the best interests of our Company and our stockholders to hold a say-on-pay vote more or less frequently than the Board’s recommendation or the preference receiving the highest number of votes of our stockholders. However, our Compensation Committee and Board value the opinions expressed by our stockholders in their vote on this proposal, and expect to carefully review the voting results and take into account the outcome of this vote when considering the frequency of future advisory votes on our executive compensation.

THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE, ON AN ADVISORY BASIS, TO CONDUCT FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION EVERY YEAR.

Meetings of the Board

Our Board held 13 meetings in 2016. All directors, for the period of time they served on the Board in 2016, attended at least 75% of the combined total of the meetings held by the Board and the meetings held by all committees of the Board on which each director served.

Board Leadership Structure and Lead Director

At the end of 2014, our Board decided to separate the positions of Board Chairman and Chief Executive Officer given the composition of our Board and its committees, and the fact that a majority of our directors are independent directors who are qualified and experienced and all members of the Board’s key committees are independent directors. Jack Golsen was named to the role of Executive Chairman of the Board. The responsibilities of the Executive Chairman of the Board generally include:

The Board annually appoints a lead independent director (the “Lead Director”) from among the independent directors to coordinate the activities of the other independent directors and enhance the role of the independent directors in the overall corporate governance of the Company. On September 1, 2015, Mr. Murdy was named as Lead Director and continues to serve in this role.

The responsibilities of the Lead Director generally include:

Board, having the authority to add items to the agendas for any Board meeting, and reviewing and approving meeting schedules.

Committees of the Board of Directors and Committee Charters

The Board has three separately-designated active standing committees: a Nominating and Corporate Governance Committee, an Audit Committee, and a Compensation Committee. The Board has adopted written charters for each of these committees. The Board has determined that all members of these committees are independent directors and satisfy the SEC and NYSE requirements for independence. A current copy of the charters of the aforementioned Committees along with our corporate governance guidelines are available on our website at www.lsbindustries.com and are also available from the Company upon request to the Secretary.

The Board also has a separately designated Strategic Review Committee, which remains a standing committee to evaluate certain strategic proposals for the Company. A copy of the Strategic Review Committee Charter is available from the Company upon request to the Secretary.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee (“Nominating Committee”) consists entirely of independent directors who were appointed by the Board to serve until their successors are appointed and qualified. The Board has determined that each member of the Nominating Committee is independent in accordance with the listing standards of the NYSE. During 2016, the Nominating Committee held 8 meetings.

The Nominating Committee is primarily responsible for:

The Nominating Committee periodically assesses the skills and experience needed for the Board to properly direct the business and affairs of the Company. The Nominating Committee seeks Board candidates possessing the following qualities:

The Nominating Committee evaluates the skills, qualifications, experience and expertise of candidates to determine director nominees. For incumbent directors, the factors also include past performance on the Board and contributions to their respective committees.

The Nominating Committee is also responsible for:

The Nominating Committee considers the qualifications of director candidates recommended by stockholders and evaluates each of them using the same criteria the Nominating Committee uses for incumbent candidates. Director candidate recommendations by stockholders must be made in compliance with the procedures set

forth in our Bylaws by notice in writing delivered or mailed by first class U.S. mail, postage prepaid, to the Chairman of the Nominating Committee, in care of the Secretary of the Company, 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107. Please indicate “Nominating Committee” on the envelope.

Strategic Review Committee

The Strategic Review Committee was originally established for the purpose of assisting the Board in evaluating potential strategic separations of our Chemical Business and Climate Control Business and evaluating the possibility of placing some or all of our Chemical Business into a Master Limited Partnership structure. In accordance with the agreement entered into on April 26, 2015 with Starboard Value L.P., the responsibilities of the Strategic Review Committee were expanded to include an evaluation of our corporate governance and management structure, related party transactions and any other governance practices of the Company deemed appropriate by the Strategic Review Committee.

In 2016, the Board reconstituted the Strategic Review Committee for the purpose of reviewing all strategic alternatives for the Company.

Audit Committee

The Audit Committee assists the Board in (i) overseeing the accounting, reporting, and financial practices of the Company and its subsidiaries, including the integrity of the Company’s financial statements, the stewardship of administration and financial controls and the Company’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, the performance of the Company’s internal audit function and the Company’s independent auditor and the Company’s risk management system and processes and (ii) preparing the report required by the SEC to be included in the Company’s annual proxy. In carrying out these purposes, the Audit Committee, among other things, is responsible for:

During 2016, the Audit Committee held 10 meetings.

In 2016, the Board evaluated the members of the Audit Committee and believes that each member of the Audit Committee is financially literate and that each member has sufficient background and experience to fulfill the duties of the Audit Committee. The Board has

determined that Messrs. Roedel and Sanders, and Ms. Ogilvie satisfy the definition of “audit committee financial expert” under the NYSE listing standards and applicable SEC regulations.

Audit Committee Report

Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control. The Audit Committee oversees our financial reporting process and discusses our audited financial statements with management on behalf of the Board. In fulfilling its oversight responsibilities for 2016, the Audit Committee reviewed and discussed the following:

The audited financial statements in the Annual Report with management, including a discussion of the quality, not just the acceptability, of the accounting principles, practices and judgments;

The reasonableness of significant judgments; and the clarity of disclosures in the financial statements;

The integrity of the Company’s financial reporting processes and controls; and

The selection and evaluation of the independent registered public accounting firm, including the review of all relationships between the independent registered accounting firm and the Company.

The Audit Committee reviewed and discussed with Ernst & Young, the independent registered public accounting firm responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters that are required to be discussed with the Audit Committee under generally accepted auditing standards (including the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board, and any other applicable accounting and auditing standards). In addition, the Audit Committee has discussed with Ernst & Young the auditors’ independence from management and us, and has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the firm’s independence, and considered the compatibility of non-audit services with the auditors’ independence.

The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of our internal control, and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the SEC. The Audit Committee also appointed Ernst & Young as our independent registered public accounting firm for 2017.

The Audit Committee members listed below participated in the actions necessary to submit the 2016 Audit Committee Report.

Submitted by the Audit Committee of the Company’s Board of Directors.

Richard W. Roedel (Chair)

Marran H. Ogilvie

Richard S. Sanders

Notwithstanding anything to the contrary set forth in our filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate by reference previous or future filings, including this Proxy Statement, in whole or in part, the foregoing report of the Audit Committee and any statements regarding the independence of the Audit Committee members shall not be incorporated by reference into any such filings.

Fees Paid to Independent Registered Public Accounting Firm

Audit Fees

The aggregate fees billed by Ernst & Young for professional services rendered for the audit of our annual financial statements for the fiscal years ended December 31, 2016 and 2015, for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q for those fiscal years, and for review of SEC-related documents for those fiscal years were approximately $1,435,000 and $1,754,571, respectively.

Audit-Related Fees

Ernst & Young billed us $32,750 during 2016 and 2015, for audit-related services, which included services relating to our benefit plan audits.

Tax Fees

Ernst & Young billed us $649,694 and $577,068 during 2016 and 2015, respectively, for tax services, which included tax return review and preparation, tax consultations and planning.

All Other Fees

During 2016 and 2015, we engaged our accountants to provide other special project services of approximately $97,700 and $94,500, respectively.

Engagement of the Independent Registered Public Accounting Firm

The Audit Committee is responsible for approving all engagements with Ernst & Young to perform audit or non-audit services for us prior to us engaging Ernst & Young to provide those services. All of the services outlined under the headings “Audit Related Fees,” “Tax Fees,” and “All Other Fees,” above were approved by the Audit Committee. The Audit Committee of our Board has considered whether Ernst & Young’s provision of the services described above for the fiscal years ended December 31, 2016 and 2015 is compatible with maintaining its independence.

Audit Committee’s Pre-Approval Policies and Procedures

All audit and non-audit services that may be provided to us by our principal accountant, Ernst & Young, require pre-approval by the Audit Committee. The Audit Committee delegates such pre-approval of services to the Chairman of the Audit Committee. The Audit Committee or the Chairman of the Audit Committee evaluates the pre-approval request to determine the appropriateness of the proposed project and proposed fee. Further, Ernst & Young may not provide to us those services specifically prohibited by the SEC.

Oversight of Risk Management

The Board oversees management’s risk management activities, including those relating to credit risk, liquidity risk, and operational risk, through a combination of processes. The Board believes effective risk management will enable us to accomplish the following:

In addition to the Company’s formal compliance program, the Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. The Board also continually works, with the input of the Company’s executive officers, to assess and analyze the most likely areas of future risk for the Company.

The Audit Committee is responsible for overseeing the Company’s policies with respect to risk assessment and risk management relating to the Company’s major financial risk exposures and to review and discuss such material risks and the steps taken to monitor and control such exposures.

Code of Ethics

The Executive Chairman, the Chief Executive Officer, the Chief Financial Officer, the principal accounting officer, and the controller of the Company and the controllers of each of our subsidiaries, or persons performing similar functions, are subject to our Code of Ethics and our Statement of Policy Concerning Business Conduct. We and each of our subsidiary companies have adopted a Statement of Policy Concerning Business Conduct applicable to the employees, officers and directors of the Company and its subsidiaries.

Our Code of Ethics and Statement of Policy Concerning Business Conduct are available on our website at www.lsbindustries.com. We will post any amendments to these documents, as well as any waivers that are required to be disclosed pursuant to the rules of either the SEC or the NYSE, on our website (to the extent applicable to the Company’s executive officers, senior financial officers or directors).

Compensation Committee

Our Compensation Committee is comprised of non-employee, independent directors in accordance with the rules of the NYSE. During 2016, the Compensation Committee held 6 meetings.

The Compensation Committee’s responsibilities include, among other duties:

Recommendations regarding non-equity compensation of our non-executive officers and our named executive officers are made by our Chief Executive Officer, other than decisions related to his own compensation, and are presented for approval or modification by the Compensation Committee.

During 2016, the agenda for meetings of the Compensation Committee was determined by its Chairman with the assistance of our Chief Executive Officer. Compensation Committee meetings are regularly attended by the Chief Executive Officer. At each Compensation Committee meeting, the Compensation Committee also meets in executive session without the Chief Executive Officer. The Compensation Committee may delegate authority to the Chief Executive Officer in order to fulfill certain administrative duties regarding the compensation programs.

The Compensation Committee has authority under its charter to retain, approve fees for, and terminate advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. If a compensation consultant is engaged, the Compensation Committee reviews the total fees paid to such outside consultant by the Company to ensure that the consultant maintains its objectivity and independence when rendering advice to the Compensation Committee. During 2016, the Compensation Committee retained Steven Hall & Partners as independent compensation consultants to advise the Compensation Committee on matters related to executive and non-employee director compensation. For information regarding compensation consultants, please see “Executive Compensation-Compensation Discussion and Analysis-Role of Compensation Consultants in Compensation Decisions” in this Proxy Statement.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee has the authority to set the compensation of all of our officers. The Compensation Committee considered the recommendations of the Executive Chairman and the Chief Executive Officer when setting the compensation of our officers. During 2016, neither the Executive Chairman nor the Chief Executive Officer made any recommendation regarding his own compensation. None of the members of the Compensation Committee is, or ever has been, an officer or employee of the Company or any of its subsidiaries, or had any relationship requiring disclosure by the Company under Item 404 of Regulation S-K during 2016. No executive officer of the Company served on any board of directors or compensation committee of any other company for which any of our directors served as an executive officer at any time during 2016.

Board Independence

The Board has determined that Messrs. Murdy, Roedel, White, Genender, Reece, Bobb, and Sanders and Ms. Ogilvie are “independent” in accordance with the current listing standards of the NYSE. Our independent directors are regularly scheduled to meet in executive session following each meeting of the Board.

The Board has affirmatively determined that each of the independent directors, except for Mr. Sanders, had no material relationship with the Company whether directly or as a partner, stockholder or officer of an organization that had a relationship with the Company during 2016. Directors responded to a questionnaire asking about their relationships (and those of their immediate family members) with us and other potential conflicts of interest. Mr. Sanders served as our Interim Executive Vice President, Chemical Manufacturing from

September 29, 2015 to August 1, 2016, at which time he no longer provided any services to the Company other than as a director. On December 14, 2016, the Board affirmatively determined that Mr. Sanders has no ongoing material relationship with the Company whether directly or as a partner, stockholder or officer of an organization that has a relationship with the Company.

The Board determined that the members of the Audit, Compensation, and Nominating Committees meet the independence tests of the NYSE and the SEC. In connection with the independence of each non-employee director, the Board also determined that each member of the Audit Committee and Compensation Committee meets the additional independence standards of the NYSE and SEC applicable to members of the respective committees.

Communication with the Board

Our Board believes that it is important for us to have a process whereby stockholders may send communications to the Board. Stockholders and interested parties who wish to communicate with the Board, the Lead Director, the independent directors as a group, or a particular director, may do so by sending a letter to the Lead Director at 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Stockholder-Board Communication” or “Stockholder-Director Communication.” All such letters must identify the author as a stockholder or an interested party and clearly state whether the intended recipients are all members of the Board, the Lead Director, the independent directors, non-management directors, or only certain specified individual directors. The Lead Director will make copies of all such letters and circulate them to the appropriate director or directors.

Policy as to Related Party Transactions

Pursuant to the Audit Committee Charter, our Audit Committee reviews any related party transactions involving any of our directors and executive officers. Although the Audit Committee has not adopted specific standards and procedures with respect to its review of related party transactions, the Audit Committee believes that it considers all relevant facts and circumstances in its review process. The following related party transactions were reviewed by the Audit Committee or the Board as a whole.

The following related party transactions were reviewed by the Audit Committee or the Board as a whole:

Our officers serve one-year terms, renewable on an annual basis by the Board, except in the case of Messrs. J. Golsen, Daniel D. Greenwell, Mark T. Behrman, Michael J. Foster and John H. Diesch with whom we have employment agreements more fully described under “Executive Compensation–Employment Agreements” below. Information regarding our executive officers is as follows:

Executive Officers and Succession Planning Transitions

In connection with our Board succession planning efforts, Mr. Greenwell was named Chief Executive Officer and President on December 22, 2015. Certain information regarding our agreements with Messrs. J. Golsen and Greenwell is provided below under “Executive Compensation—Employment Agreements.”

As part of such succession planning, the Board also appointed Mr. Mark T. Behrman to serve as Executive Vice President and Chief Financial Officer of the Company, effective as of the 2015 annual meeting, Mr. Michael J. Foster to serve as Senior Vice President, General Counsel and Secretary, effective January 5, 2016, and Mr. John H. Diesch to serve as Executive Vice President, Manufacturing, effective August 1, 2016.

Information Regarding our Executive Officers

Jack E. Golsen—Mr. J. Golsen, age 88, has served as the Executive Chairman of the Company’s Board since January 2015. Mr. J. Golsen’s biographical information is set forth above. See “Continuing Directors.”

Daniel D. Greenwell—Mr. Greenwell, age 54, has served as the President and Chief Executive Officer of the Company since December 2015. Mr. Greenwell’s biographical information is set forth above. See “Nominees for the Class of Directors Whose Term will Expire in 2020.”

Mark T. Behrman—Mr. Behrman, age 54, joined the Company as Senior Vice President of Corporate Development in March 2014, and began serving as our Executive Vice President and Chief Financial Officer as of the 2015 annual meeting. He has over 20 years of investment banking experience with a primary focus on the industrial and business services sectors, previously serving as a Managing Director at Sterne Agee & Leach, Inc., leading the firm’s industrials, transportation, and energy practices. During his career, Mr. Behrman has originated and executed numerous merger and acquisition transactions, equity and debt capital market

transactions and private capital raises for U.S. corporate clients in these sectors. Mr. Behrman was previously a Founder and Senior Managing Director of BlueStone Capital Partners, LP, where he was part of a team that created Trade.com Global Markets, Inc., and Founder and Director of the BlueStone/AFA Private Equity Fund. He began his investment banking career at PaineWebber, Inc. and at Drexel Burnham Lambert, Inc. Additionally, he has been a director of three public companies including Noble International, Ltd. where he served as a director for over eight years and as Chairman of its Audit Committee for three years. Currently, Mr. Behrman is a Director of Panhandle Oil and Gas Inc. (NYSE:PHX) and a member of its Audit and Nominating and Corporate Governance Committees. Mr. Behrman holds a Masters of Business Administration from Hofstra University and a Bachelor of Science in Accounting from Binghamton University.

John H. Diesch—Mr. Diesch, age 60, has served as the Executive Vice President, Manufacturing of the Company since August 2016. Mr. Diesch served as President and was a member of the board of directors of Rentech Nitrogen GP, LLC (“Rentech”) from 2011 until April 2016. From 2008 to 2013, he held the position of Senior Vice President of Operations at Rentech, where he was responsible for operations at Rentech’s facilities as well as its Product Demonstration Unit in Commerce City, Colorado. From 2006 to 2008, Mr. Diesch served as President of RNLLC (formerly REMC) and Vice President of Operations for Rentech. Before that, he was Managing Director of Royster-Clark Nitrogen, Inc. from 1999 to 2006, and previously served as Vice President and General Manager of nitrogen production and distribution for IMC AgriBusiness Inc., an agricultural fertilizer manufacturer. In 1991, Mr. Diesch joined Vigoro Industries Inc., a manufacturer and distributor of potash, nitrogen fertilizers and related products, as North Bend, Ohio Plant Manager after serving as Plant Manager, Production Manager and Process Engineer with Arcadian Corporation, a nitrogen manufacturer, Columbia Nitrogen Corp., a manufacturer of fertilizer products, and Monsanto Company, a multinational agricultural biotechnology corporation. Mr. Diesch was a member of the board of directors of the Fertilizer Institute, a former member of the board of directors of the Gasification Technologies Council and previously served as director of the Dubuque Area Chamber of Commerce, and was management Chairman of the Board for the Dubuque Area Labor Management Council. Mr. Diesch holds a Degree in Chemical Engineering and Environmental Studies from the University of Minnesota and Bemidji State University.

Michael J. Foster—Mr. Foster, age 50, joined the Company as Senior Vice President, General Counsel and Secretary in January 2016. He has more than 20 years of legal experience. Mr. Foster served as the Senior Vice President, General Counsel and Secretary for Tronox (NYSE:TROX), a global mining and manufacturing firm. While General Counsel for Tronox, Mr. Foster led the company in its successful Chapter 11 restructuring. He subsequently led Tronox in a merger with a South African joint venture partner and the resulting tax inversion and re-listing of Tronox Limited on the NYSE. Before his appointment as the Tronox

General Counsel, Mr. Foster served as its Managing Counsel where he led the operations of the Tronox legal team following its spin-off from Kerr-McGee Corporation. Prior to the Tronox spin-off, Mr. Foster served as a member of the Kerr-McGee legal team. His earlier experience includes nearly five years in the midstream energy industry and more than five years in the public and private practice of law. Mr. Foster holds a Bachelor of Science degree in agriculture science from the University of Illinois and a Juris Doctor degree from the University of Tulsa.

Compensation Committee Report

The Compensation Committee has adopted and implemented core principles that form the framework for our executive compensation program. We believe that this program appropriately aligns executive compensation opportunities and our long-term strategic plan and supports accountability for long-term results.

The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement, and we encourage you to read it.

William F. Murdy (Chair)

Jonathan S. Bobb

Richard W. Roedel

Compensation Discussion and Analysis

CEO and Leadership Team Transition

In 2015, the Company faced numerous challenges stemming from a multitude of influences, including pressure from activist investors to change the make-up of the Board, make management changes and evaluate the separation of the Company’s two primary businesses: climate control and chemical. In addition, cost overruns related to the expansion of the El Dorado facility continued, the stock price declined precipitously, and the Company faced a potential liquidity crisis in the fourth quarter of 2015. In response to the potential liquidity crisis, the Company raised an additional $260 million from LSB Funding through the sale of additional senior secured notes and the issuance of preferred stock and warrants, as previously disclosed. The agreements with LSB Funding also resulted in the creation of a second large ownership block being held by an interested party.

In response to the aforementioned activist pressure and continued operational and financial challenges, the following governance and other changes were implemented in 2015 and 2016:

Given the operational and financial condition of the Company and the wholesale changes to the Board and

management team that was determined to be necessary for the Company’s long-term viability and the significant share ownership by the Golsen Holders, the Company was faced with the difficult task of building a new management team with the skills and experience required to guide the Company through the completion of the El Dorado expansion, the potential separation of the Company’s businesses and the restructuring of the business operations to increase cash flow and build stockholder value.

In September 2015, the Board asked Mr. Greenwell, at the time a non-employee director, to assume the role of Interim Chief Executive Officer due in large part to his prior experience in the chemical industry, specifically his experience in the sale of Terra Industries and the re-financing of Tronox Limited. Mr. Greenwell was appointed as President and Chief Executive Officer on December 22, 2015. At the same time the Company entered into a new employment agreement with Mr. Behrman with the goal of retaining him in the position of Chief Financial Officer to avoid further turnover during the challenging times faced by the Company and to ensure access to his experience as an investment banker prior to joining the Company. Additionally, in January 2016, the Company engaged Mr. Foster as its new General Counsel, due in large part to his experience with companies facing financial and operational difficulties, including his experience in the Tronox bankruptcy and the ensuing strategic transactions and re-financing.

The Compensation Committee, assisted by its independent compensation consultant, and with the consent of the Board, negotiated employment agreements with each of Messrs. Greenwell, Behrman and Foster. The Compensation Committee has determined that these employment agreements include compensation, equity grants and change in control provisions commensurate with the challenges facing the Company and the management team. In particular, the certainty provided in the agreements include time based equity grants and immediate vesting of equity grants upon a change in control of the Company. These provisions were included in the agreements for the specific purpose of engaging

and or retaining each of the executives because of their specific experience and skills under the circumstances. The Compensation Committee will continue to review the circumstances and needs of the Company as it engages additional members of the executive team.

Overview of Compensation Program

This Compensation Discussion and Analysis describes our compensation philosophy, objectives, policies and practices framed within the context of the chemical manufacturing industry and specifically our strategy and performance with respect to our named executive officers for 2016.

Our named executive officers during 2016 were:

Our long-term success depends on our ability to efficiently operate our facilities, to continue to develop our product lines and technologies, and to focus on developing our product markets. To achieve these goals, it is important that we attract, motivate, and

retain highly talented individuals who are committed to our values and goals.

The Compensation Committee has the responsibility to establish, in consultation with management, our compensation philosophy for our senior executive officers and to implement and oversee a compensation program consistent with such philosophy. This group of senior executive officers includes the named executive officers, as well as our other executive officers.

A primary objective of the Compensation Committee is to ensure that the compensation paid to the senior executive officers provides incentives for superior performance, aligns their interests with our stockholders, and is fair, reasonable, and competitive.

The Compensation Committee is responsible for approval of all decisions for the compensation of our named executive officers.

The three elements of total direct compensation for our executives are: (i) base salary, (ii) short-term incentive and (iii) long-term incentive. Unlike base salary, which is fixed annually, short-term and long-term incentive awards each represent variable compensation. These three elements are balanced such that each executive has an appropriate amount of compensation that is contingent on performance across both near and long term horizons.

As illustrated in the graphics below, a substantial majority of each of the named executive officer’s, excluding Messrs. J. Golsen and S. Golsen, target direct compensation for 2016 was delivered through variable compensation which is contingent on performance (80% for the Chief Executive Officer and 61% on average for the other named executive officers).

We believe our executive compensation philosophy aligns the interests of our stockholders and senior executives and holds our named executive officers accountable for short and long-term performance, manages risk taking within the parameters of our philosophy, and supports the guiding principles that drive our overall compensation philosophy. The elements of our compensation program have specific

objectives and the overall program is designed to reward annual and sustained performance over the long-term. We follow the same program for all senior management, but vary pay mix by job responsibility level and include additional pay for performance factors for our most senior employees. The table below describes the elements of our compensation program and how each supports our compensation philosophy:

Setting Executive Compensation

The Compensation Committee sets annual cash and non-cash executive compensation to reward the named executive officers for achievement of, and to motivate the named executive officers to achieve, long-term business objectives. The Compensation Committee also reviews the compensation information of our peer companies, as provided by our compensation consultants. As described in more detail below, in 2016, the Compensation Committee engaged Steven Hall & Partners as compensation consultants to assist the Compensation Committee in conducting its review of the total compensation program. This information is

used to determine whether our compensation amounts are within the range of similarly sized companies, as further described below. We do not benchmark the amount of total compensation or any material element of compensation.

The Compensation Committee also considers the allocation between cash and non-cash compensation amounts as well as short-term and long-term compensation, but does not have a specific formula or required allocation between such compensation types. In each case, such allocation is considered as part of the overall compensation determination.

During 2016, the Compensation Committee compared the Chief Executive Officer’s total compensation to the total compensation of our other named executive officers. However, the Compensation Committee has not established a target ratio between total compensation of the Chief Executive Officer and the median total compensation level for the next lower tier of management. The Compensation Committee also considers internal pay equity among the named executive officers and in relation to the next lower tier of management and average compensation of all employees to maintain compensation levels that are consistent with the individual contributions and responsibilities of those executive officers. The Compensation Committee does not consider amounts

payable under severance agreements when setting the annual compensation of the named executive officers.

Base Salary

The Compensation Committee annually reviews and adjusts salaries based on changes in the market, responsibilities and performance against job expectations, strategic importance, and experience and tenure. The following table sets forth the base salaries for each of our named executive officers as of the end of 2016, the first full year for all of our named executive officers except for Messrs. J. Golsen and S. Golsen. These base salaries are also effective for 2017 (other than for Mr. S. Golsen).

Executive officers participate in the Company’s Short Term Incentive Plan (the “STI Plan”). The STI Plan is our annual performance pay plan developed and instituted in 2016. The STI Plan provides the opportunity for annual cash payments tied directly to the achievement of key financial and operational goals. The

Compensation Committee sets goals derived from our strategic plan that are designed to align the interests of management with the interests of our stockholders. The goals for 2016, and our performance compared to those goals are shown below.

Base Salary x Target Payout Percentage x Company Performance

We award long-term performance pay to our named executive officers under the terms of the 2016 Long Term Incentive Plan (the “LTI Plan”) that was approved by stockholders at the 2016 Annual Meeting of Stockholders. The Compensation Committee, with the input of its independent compensation consultant, designed the LTI Plan to align named executive officer compensation with stockholders’ interests and to serve as a retention tool. The Compensation Committee believes the LTI Plan will allow us to continue to motivate our named executive officers through the grant of stock awards and will also increase the Compensation Committee’s flexibility to grant different types of equity, equity-based, and cash awards in the future.

Our long-term incentive plans currently consist of time-based restricted share grants and performance-based share grants as set forth in the respective named executive officer’s employment agreements. Both types of awards generally vest over a three-year period. Time-

based awards vest one-third on each of the first three anniversaries of the date of grant. Performance-based awards vest at the end of the three-year performance measurement period. We believe both award types link the value of payments to the long-term results of the Company.

100% of the currently outstanding performance-awards are tied to our ranking relative total shareholder return (share price appreciation plus dividends reinvested) (“TSR”) versus the companies in the 2016 peer group over a three-year measurement period. The actual number of shares that will vest will be equal to the aggregate number of shares granted multiplied by the applicable TSR payout percentage. TSR payout percentages will be determined using a non-linear interpolation between threshold and target and between target and maximum. The threshold TSR is 25%. If actual Company TSR over the applicable three-year period is at or below 25% as compared to the TSR of the peer group, there will be no earned award.

We and the Compensation Committee believe that perquisites are necessary and appropriate parts of total compensation that contribute to our ability to attract and retain superior executives. Accordingly, the Company provided our named executive officers a limited number of perquisites that are reasonable and consistent with our overall compensation program.

We currently provide an automobile for business use by Messrs. Diesch and Greenwell and an automobile

allowance to each of Messrs. Behrman and J. Golsen. Additionally, we pay country club dues for Mr. J. Golsen. He is expected to, and does, use the country club in large part for business purposes.

The Compensation Committee periodically reviews the levels of perquisites provided to the named executive officers to determine whether such perquisites are consistent with our compensation policies.

Consideration of Stockholder Say-On-Pay Advisory Vote

At our annual meeting of stockholders held in June 2016, our stockholders voted a majority (approximately 70%) of the total votes cast on our say-on-pay proposal approved the compensation of our named executive officers for 2015 on a non-binding, advisory basis. While the Compensation Committee and the Board believes that this affirms our stockholders’ support of our approach to executive compensation, we took note that the vote in support of the program was lower than in prior years. To better understand the concerns of stockholders relating to our compensation program, management and the Compensation Committee engaged with shareholders representing approximately 70% of our outstanding stock. Additionally, our Chief Executive Officer and the Chairman of our Compensation Committee met with leaders from a proxy advisory services firm to discuss and understand the concerns expressed by the firm about our compensation program. Management and the Compensation Committee reviewed the comments of stockholders and the proxy advisor and service firms and have expanded the discussion in this CD&A to better explain the elements of our compensation program, including the reasons behind specific provisions in the employment agreements with certain of our named executive officers. See “–Executive Compensation—Employment Agreements” below for a more detailed discussion of the employment agreements with our named executive officers.

The Compensation Committee will consider the feedback it receives from stockholders and proxy advisory services firms when making future compensation decisions for our named executive officers, including when negotiating any future employment agreements.

Role of Executive Officers in Compensation Decisions

Our Chief Executive Officer annually reviews the performance of each of our named executive officers (other than his own) and provides recommendations to the Compensation Committee with respect to salary, STI Plan and LTI Plan compensation, and other benefits. The Compensation Committee reviews these recommendations while considering the compensation philosophy and objectives and exercises its discretion in accepting or modifying the recommended compensation. Historically, the Compensation Committee has generally adopted the compensation recommended by the Chief Executive Officer. In determining compensation for our Chief Executive Officer, the Compensation Committee reviews his responsibilities and performance. Such review includes interviewing our Chief Executive Officer and consideration of the Compensation Committee’s observations of his performance during the applicable year. When appropriate, named executive officers are invited by the Compensation Committee to provide insight regarding Company and individual performance and feedback regarding compensation structure. Named executive officers are not present at any meeting of the Compensation Committee while their own compensation is being discussed or determined.

Role of Compensation Consultants in Compensation Decisions

The Compensation Committee is committed to ensuring that our pay programs support our short- and long-term strategic objectives. In 2016, the Compensation Committee engaged Steven Hall & Partners to assess all elements of our pay programs and propose potential

changes to the program and to provide market intelligence on compensation trends, views and recommendations with respect to our compensation programs, and analyses and recommendations with respect to the amount or form of senior executive and director compensation. The Compensation Committee, in consultation with Steven Hall & Partners, continued its process of reviewing each element of compensation, separately and as part of the broader program, to determine whether our current program adequately supports the strategic objectives of the Company and aligns our named executive officers and the long-term interests of our stockholders.

At the request of the Compensation Committee, Mr. Steven Hall attended meetings of the Compensation Committee and made presentations regarding his findings and recommendations. Steven Hall & Partners did not provide any services to us in 2016 other than the executive and director compensation advisory services provided to the Compensation Committee. Steven Hall & Partners continues to work with the Compensation Committee in 2017 to assess our compensation plans and programs.

Steven Hall & Partners reports directly to the Chair of the Compensation Committee but partners with management, at the request of the Compensation Committee, to ensure the Compensation Committee receives the most comprehensive information for decision making.

The Compensation Committee analyzed the independence of Steven Hall & Partners pursuant to the SEC rules and NYSE listing standards and determined that the engagement did not raise any conflict of interest that would prevent Steven Hall & Partners from

independently representing the Compensation Committee. In reaching this conclusion, the Compensation Committee considered the factors relevant to Steven Hall & Partners’ independence from management, including the factors set forth in the NYSE listing standards.

Peer Group Review

To ensure that our executive compensation program provides competitive compensation opportunities that are necessary to attract and retain well-qualified executives, the Compensation Committee intends to review the level and mix of compensation for our Chief Executive Officer and other NEOs against the compensation provided by a group of peer companies (in addition to survey data provided by Steven Hall

Partners). The Compensation Committee also intends to use these peer companies to consider the relative performance of our Company with respect to the TSR performance measures in our LTI Plan.

Following the sale of the Climate Control Group, the Compensation Committee made changes to the peer group to reflect the Company’s singular focus in the chemical industry and selected the following twenty peer companies based on:

As discussed above, the Compensation Committee entered into each of the employment agreements described below based on the terms it determined were necessary and appropriate under each circumstance to attract and retain our named executive officers, in each case, after consultation with its independent compensation consultant:

Jack E. Golsen—Effective January 1, 2015, Mr. J. Golsen was named our Executive Chairman of the Board and his employment agreement was amended to stipulate his duties as Executive Chairman. Pursuant to the amended employment agreement, Mr. J. Golsen will:

In addition, effective as of April 27, 2015, Mr. J. Golsen’s severance agreement (originally entered into on January 17, 1989 and amended on March 21, 1996 and December 17, 2008) was amended to eliminate tax gross-up provisions to which Mr. J. Golsen would otherwise have been entitled should his employment be

terminated within 24 months of a “change of control” as defined in the severance agreement. For information regarding the provisions of Mr. J. Golsen’s agreements related to change of control and severance payments, please see “Potential Payments upon Termination or Change in Control” below.

Daniel D. Greenwell—On December 30, 2015, we entered into an employment agreement with Mr. Greenwell, effective December 31, 2015. The employment agreement provides that Mr. Greenwell will:

Following his termination of employment, Mr. Greenwell will be subject to non-compete and non-solicitation restrictions for a period of 24 months. For information regarding the provisions of Mr. Greenwell’s employment agreement related to change of control and severance payments, please see “Potential Payments Upon Termination or Change in Control” below.

Mark T. Behrman—On January 14, 2016, we entered into an employment agreement with Mr. Behrman, effective December 31, 2015. The employment agreement provides that Mr. Behrman will:

Following his termination of employment, Mr. Behrman will be subject to non-compete and non-solicitation restrictions for a period of 24 months. For information regarding the provisions of Mr. Behrman’s employment agreement related to change of control and severance payments, please see “Potential Payments Upon Termination or Change in Control” below.

John H. Diesch—On July 21 2016, we entered into an employment agreement with Mr. Diesch, effective August 1, 2016. The employment agreement provides that Mr. Diesch will:

Following his termination of employment, Mr. Diesch will be subject to non-solicitation restrictions for a period of 24 months. For information regarding the provisions of Mr. Diesch’s employment agreement related to change of control and severance payments, please see “Potential Payments Upon Termination or Change in Control” below.

Michael J. Foster—On January 6, 2016, we entered into an employment agreement with Mr. Foster, effective as of January 5, 2016. The employment agreement provides that Mr. Foster will:

Following his termination of employment, Mr. Foster will be subject to non-compete and non-solicitation restrictions for a period of 24 months. For information regarding the provisions of Mr. Foster’s employment agreement related to change of control and severance payments, please see “Potential Payments Upon Termination or Change in Control” below.

Beginning in April 2017, the Compensation Committee approved stock ownership guidelines that ensure that the interests of our named executive officers are aligned with the interests of our stockholders by requiring them to hold significant levels of Company stock. In keeping with our overall compensation philosophy, we believe

that the equity ownership levels that they are required to maintain are high enough to assure our stockholders of our named executive officers’ commitment to long-term value creation. The terms of our Stock Ownership Guidelines are set out below:

Section 162(m) of the Internal Revenue Code (the “Code”) provides that we may not deduct, for federal income tax purposes, compensation in excess of $1 million paid to our Chief Executive Officer and each of the three other most highly-compensated officers (other than the Chief Executive Officer and Chief Financial Officer) whose compensation is required to be disclosed to our stockholders under the federal securities laws in any taxable year. However, compensation in excess of $1 million may be deducted if it is “performance-based compensation” or qualifies for one of the other exemptions from the deductibility limit. In making compensation decisions, the Compensation Committee considers the potential impact of Section 162(m) of the Code on the compensation paid to the named executive officers.

Where reasonably practicable, the Compensation Committee will seek to qualify the performance-based

incentive compensation paid or awarded to the named executive officers for the “performance-based compensation” exemption from the deductibility limit of Section 162(m) of the Code. To maintain flexibility in compensating the named executive officers in a manner designed to promote varying corporate goals, however, the Compensation Committee has not adopted a policy that all compensation payable to the named executive officers that is subject to Section 162(m) of the Code must be deductible for federal income tax purposes. From time to time, the Compensation Committee may, in its judgment, approve compensation for the named executive officers that does not comply with an exemption from the deductibility limit when it believes that such compensation is in the best interests of the Company and its stockholders.

We account for stock-based payments, including our incentive and nonqualified stock options and restricted stock awards, in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and members of our Board based on the grant date “fair value” of these awards. This calculation is performed for accounting

purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards. While we consider the expense resulting from the application of FASB ASC Topic 718 when granting our stock-based compensation awards to ensure that it is reasonable, the amount of this expense is not the most important factor that the Compensation Committee considers when making equity-award decisions.

Our compensation program, which applies to all employees including named executive officers, is designed to provide competitive levels of reward that are responsive to company and individual performance but do not incentivize risk taking that is reasonably likely to have a material adverse effect on the Company. In reaching our conclusion that our compensation policies do not create risks that are reasonably likely to have a material adverse effect on us, we examined the various elements of our compensation programs and policies and our risk mitigation controls. In particular, numerous factors were considered, including:

Senior executives representing our legal and compliance, human resources, finance, and audit functions, as well as the Compensation Committee’s independent compensation consultant, are involved in this review process, which is conducted under the oversight of the Compensation Committee.

Employment Agreements

During 2016, we were party to employment agreements with Messrs. Greenwell, Behrman, Diesch and Foster which provide, among other things, certain severance benefits in the event an executive officer’s employment terminates under specific circumstances. We also were party to an employment and severance agreement with Mr. J. Golsen.

Severance Payments and Benefits under the Employment Agreements (other than for Messrs. J. Golsen and S. Golsen)

The employment agreements with our named executive officers (other than for Mr. J. Golsen) provide for potential severance payments upon the termination of a named executive officer’s employment in certain situations, including in connection with a “change in control,” without “cause” by the Company or for “good reason” by the executive, due to nonrenewal by the Company and upon the death or permanent disability of the executive (as each term is defined in the named executive officers’ employment agreement).

Termination for Cause, without Good Reason, or due to Executive’s Nonrenewal. In the event of an executive’s termination by the Company for “cause” or by the executive without “good reason,” the Company has no severance obligation to the executive other than payment of accrued obligations, which are (i) earned but unpaid base salary through the date of termination, (ii) any employee benefits to which the executive has a vested entitlement as of the date of termination, (iii) accrued but unused vacation, and (iv) approved but unreimbursed eligible business expenses.

Death or Permanent Disability. Under the terms of the employment agreements, in the event of an executive’s death or termination on account of becoming permanently disabled, the agreements will terminate and the executive will be entitled to (i) the payment of accrued obligations, (ii) payment of a pro-rata portion of his annual bonus determined and paid in accordance with our regular bonus practices (other than for Mr. Diesch) and (iii) accelerated vesting of a pro-rata portion of all equity awards that are otherwise unvested as of the date of his termination of employment, which pro rata portion will be based on the time the executive was employed during the applicable vesting period.

Termination without Cause, for Good Reason or due to Company’s Nonrenewal. If the executive is terminated by the Company without “cause,” by the

executive for “good reason” or by the Company’s proper notice of nonrenewal of the employment agreement, the executive will be entitled to (i) payment of a pro rata portion of his annual bonus based on the actual achievement of the applicable performance criteria for the year in which the executive’s employment terminates and paid in accordance with our regular bonus practices (other than for Mr. Diesch); (ii) payment of a lump sum cash payment equal to the product of one times (or two times in the case of Mr. Greenwell) the sum of his then-current base salary and target bonus (or in the case of Mr. Diesch, 12 months of his base salary only) payable on the first payroll date following the executive’s execution and non-revocation of a general release of claims; (iii) continued participation in our medical, dental and hospitalization insurance coverage for himself and his qualified dependents on the same terms in effect immediately prior to the termination for a period of 18 months with the employer portion of the continued coverage paid by us (other than for Mr. Diesch); and (iv) accelerated vesting of all equity awards otherwise unvested as of the date of his termination of employment.

Change in Control. If a named executive officer (other than Mr. J. Golsen) is employed by us at the time of a change in control and his employment is terminated without “cause” or by the executive for “good reason” within twenty-four months of the change in control (or for Mr. Diesch, during the period beginning six months before and ending twelve months following the change in control), the executive will be entitled to (i) payment of a pro rata portion of his annual bonus based on the actual achievement of the applicable performance criteria for the year in which the executive’s employment terminates and paid in accordance with our regular bonus practices (other than for Mr. Diesch); (ii) payment of a lump sum cash payment equal to the product of two times (or three times in the case of Mr. Greenwell and one times in the case of Mr. Diesch) the sum of his then-current base salary and target bonus payable on the first payroll date following the executive’s execution and non-revocation of a general release of claims; (iii) continued participation in our medical, dental and hospitalization insurance coverage for himself and his qualified dependents on the same terms in effect immediately prior to the termination for a period of 18 months with the employer portion of the continued coverage paid by us (other than for Mr. Diesch); and (iv) accelerated vesting of all equity awards otherwise unvested as of the date of his termination of employment.

Employment and Severance Agreements with Mr. J. Golsen

Employment Agreement

We are party to an employment agreement with Mr. J. Golsen (originally entered into on March 21, 1996 and as subsequently amended on April 29, 2003, May 12, 2005 and December 17, 2008) to employ Mr. J. Golsen as Executive Chairman of the Board and Chairman of the Executive Committee (the “Golsen Agreement”). The current term of the Golsen Agreement expires on January 1, 2018, but will be automatically renewed for two additional one-year periods unless terminated by us or Mr. J. Golsen by written notice at least six months prior to the expiration of the then-current term.

The Golsen Agreement provides that upon a termination of his employment without “cause” or for disability, Mr. J. Golsen (or his estate, if the termination is due to Mr. J. Golsen’s death) will be entitled to (a) a lump sum cash payment payable within 30 days following the date of termination equal to the product of the number of full years remaining in the then-current term of the Golsen Agreement times the sum of (x) Mr. J. Golsen’s current annual salary and (y) the bonus paid to Mr. J. Golsen for services provided in the most recently completed fiscal year; (b) continued participation in our medical, dental and vision plans for a period equal to the greater of 18 months or the remainder of the current term of the Golsen Agreement, the cost of such coverage to be reimbursed at the end of each month; and (c) the unrestricted use of a company vehicle and cell phone, as applicable.

The Golsen Agreement also provides that in the event Mr. J. Golsen becomes disabled and, as a result of the disability, is not able to perform his duties under the Golsen Agreement for a period of 12 consecutive months within any two-year period, he is entitled to his full salary for the remainder of the then-current term of the Golsen Agreement and thereafter, 60% of such salary until his death.

Severance Agreement

We entered into a severance agreement with Mr. J. Golsen on January 17, 1989 (as amended on March 21, 1996, December 17, 2008 and April 27, 2015), that controls the benefits that would be payable to Mr. J. Golsen should his employment be terminated within 24 months following a change of control (the “Golsen Severance Agreement”). The Golsen Severance Agreement provides that if Mr. J. Golsen is terminated without “cause” or if he terminates his employment for “good reason” within 24 months following a “change of control,” he will be entitled to a lump sum amount, payable on the date of termination, equal to the product of 2.9 times the average of his annual gross compensation paid by the Company and includable in

his gross income during the most recently completed five taxable years prior to the date of the change of control.

The Golsen Severance Agreement provides that “change of control” generally means a transaction that would require the filing of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Additionally, a change of control will be deemed to occur if:

Any one person, or more than one person acting as a group, acquires ownership of our stock that, together with stock held by such person or group prior to the subsequent acquisition, constitutes more than 50% of the total fair market value or total voting power of our stock;

The individuals who constitute the Board as of April 1, 2015 (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any person becoming a director subsequent to April 1, 2015 whose election, or nomination for election by our shareholders, was approved by a vote of at least a majority of the directors comprising the Incumbent Board (other than the election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest) shall be deemed to be a member of the Incumbent Board; or

Any one person, or more than one person acting as a group, acquires (or has acquired during the twelve month period ending on the date of the most recent acquisition by such person or persons) ownership of our stock possessing 30% or more of the total voting power of our stock, except acquisitions by:

Any person or group which, as of December 17, 2008, has such ownership, or

Mr. J. Golsen; his spouse; his children and the spouses of his children; his estate; executor or administrator of any estate, guardian or custodian for Mr. J. Golsen, his spouse, his children, or the spouses of his children; any corporation, trust, partnership, or other entity of which Mr. J. Golsen, his spouse, his children, or the spouses of his children (or any combination thereof) own at least 80% of the outstanding beneficial voting or equity interests, directly or indirectly; and certain affiliates and associates of any of the above-described persons, entities, or estates.

Notwithstanding the above, a change of control will not be deemed to occur unless such event also constitutes either a “change in ownership” or “change in effective control” as those terms are defined in Treas. Reg. Section 1.409A-3.

Death Benefit Agreements

We are party to death benefit agreements with Mr. J. Golsen, that provide cash benefits to Mr. J. Golsen’s beneficiaries in case of his death while employed by us or one of our subsidiaries (the “2005 Agreement”). Pursuant to the terms of the 2005 Agreement, we are obligated to maintain insurance with a minimum of $2.5 million death benefit. Upon Mr. Golsen’s death, his beneficiaries are entitled to a $2.5 million lump sum cash benefit payable within 30 days following our receipt of the proceeds of the life insurance policies we maintain to fund the benefit. We maintain an insurance policy on Mr. J. Golsen’s life (to which we are the beneficiary) to cover our obligations under the 2005 Agreement.

Mr. S. Golsen’s Termination

Upon his termination of employment on May 31, 2016, Mr. S. Golsen became entitled to a separation payment totaling $425,000, which is paid in substantially equal monthly installments during the 18-months following his termination, and a lump sum payment equal to $16,711.02 for COBRA expenses to be paid by the Company on or before June 15, 2017. For information regarding Mr. S. Golsen’s consulting arrangement with the Company, please see “Corporate Governance Policy as to Related Party Transactions” above.

Table of Severance Benefits

The following table summarizes the dollar amounts of potential payments to each named executive officer upon a qualifying termination of employment or change in control pursuant to the terms of their employment and severance agreements, as applicable, assuming that the events described in the table occurred on December 31, 2016, when the closing price of the Company’s common stock was $8.42. The values below are our best estimates of the severance payments and

benefits the executives would receive upon a termination of employment or a change in control as of December 31, 2016 and we believe the amounts are calculated using reasonable assumptions. All amounts are before taxes, which would reduce amounts ultimately received by our named executive officers. The table is only intended to summarize various terms of the employment agreement and is qualified in its entirety by reference to the full text of the actual agreements, copies of which are on file with the SEC.