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LSB INDUSTRIES, INC.
16 SOUTH PENNSYLVANIA AVENUE
POST OFFICE BOX 754
OKLAHOMA CITY, OK 73101
FAX: 405-235-5067
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 27, 1997
To the Stockholders of
LSB INDUSTRIES, INC.
The Annual Meeting of the Stockholders of LSB Industries, Inc. (the
"Company") will take place at the Company's financial center located at 4000
Northwest 39th Expressway, Oklahoma City, Oklahoma, on Friday, June 27, 1997, at
11:30 a.m. (CST), for the purpose of considering and acting upon the following
matters:
(1) The election of 5 nominees to the Board of Directors;
(2) The approval of the selection of independent auditors;
(3) Shareholder proposal to amend the Company's Bylaws to prohibit the
election to the Board of Directors of any person above the age of 70;
(4) Shareholder proposal relating to cumulative voting;
(5) Shareholder proposal relating to elimination of the staggered Board;
and,
(6) Any other business which properly may come before the meeting or any
adjournment of the meeting.
The Board of Directors has fixed the close of business on May 16, 1997, as
the record date for the determination of holders of the voting common stock and
voting preferred stock of the Company entitled to receive notice of, and to vote
at, the Annual Meeting.
The Board of Directors recommends a vote "FOR" matters (1) and (2) and
"AGAINST" the shareholder proposals (3), (4) and (5) for the reasons set forth
in the accompanying Proxy Statement.
To ensure the presence of a quorum at the Annual Meeting, 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.
The Company is distributing its 1996 Annual Report to Stockholders with the
enclosed proxy soliciting material.
By order of the Board of Directors
David M. Shear
Secretary
Oklahoma City, Oklahoma
May 27, 1997
LSB INDUSTRIES, INC.
16 SOUTH PENNSYLVANIA
POST OFFICE BOX 754
OKLAHOMA CITY, OK 73101
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 27, 1997
SOLICITATION OF PROXIES
SOLICITATION.
_____________
This Proxy Statement is solicited on behalf of the Board of Directors of LSB
Industries, Inc. (the "Company") and is hereby furnished to the stockholders of
the Company to solicit their proxies for use at the Annual Meeting of
Stockholders to take place on Friday, June 27, 1997 at 11:30 a.m. at the
Company's financial center located at 4000 Northwest 39th Expressway, Oklahoma
City, Oklahoma 73112 (the "Annual Meeting"). The Company may use the services of
its directors, officers, and employees to solicit proxies personally or by
telephone, without additional compensation therefore. The Company will bear all
of the costs of preparing, printing, assembling, and mailing this Proxy
Statement and the Proxy Card and all of the costs of the solicitation of the
proxies. The Company has also retained the services of McCormick & Pryor Ltd.
to aid in the solicitation of proxies for a fee of $4,000, plus reasonable out-
of-pocket expenses incurred by them.
REIMBURSEMENT OF EXPENSES.
__________________________
The Company will reimburse any bank, broker-dealer, or other custodian, nominee,
or fiduciary for its reasonable expenses incurred in completing the mailing of
proxy materials to the beneficial owners of the Company's voting Common Stock
and voting Preferred Stock.
REVOCATION OF PROXY.
____________________
Any stockholder giving his or her proxy may revoke it at any time before its
exercise by notifying the Secretary of the Company, by facsimile or in writing.
MAILING OF PROXY STATEMENT AND PROXY CARD.
__________________________________________
This Proxy Statement and the Proxy Card are being first sent to the stockholders
of the Company on or about May 27, 1997.
STOCKHOLDER PROPOSALS.
______________________
In order for the Company to include a stockholder proposal in the proxy
materials for the Company's 1998 Annual Meeting of Stockholders, a stockholder
must deliver the proposal in writing to the Secretary of the Company no later
than January 26, 1998.
SECURITIES AND PRINCIPAL HOLDERS
RECORD DATE AND VOTING SECURITIES.
__________________________________
Only the record holders of shares of the voting Common Stock and voting
Preferred Stock of the Company as of the close of business on May 16, 1997 (the
"Record Date"), will have the right to receive notice of, and to vote at, the
Annual Meeting. As of the close of business on the Record Date, the Company
had the following shares of voting Common Stock and voting Preferred Stock
issued and outstanding; (a) 12,882,656 shares of Common Stock (excluding
2,031,820 shares held in treasury); (b) 1,539 shares of Convertible
Noncumulative Preferred Stock; and (c) 20,000 shares of Series B 12% Cumulative
Convertible Preferred Stock. Each stockholder of record, as of the Record
Date, will have one vote for each share of voting Common Stock and voting
Preferred Stock of the Company (or one-half of one vote for each fractional
one-half share of the Convertible Noncumulative Preferred Stock) that the
stockholder owned as of the Record Date. All shares of voting Common Stock
and voting Preferred Stock will vote together as a single class on all matters
coming before the Annual Meeting, and a majority of all of the outstanding
shares of voting Common Stock and voting Preferred Stock of the Company,
represented as a single class, entitled to notice of, and to vote at, the
Annual Meeting, represented in person or by proxy, will constitute a quorum
for the meeting.
Pursuant to the General Corporation Law of the State of Delaware, only
votes cast "For" a matter constitute affirmative votes. Proxies relating to
the Election of Directors and Appointment of Auditors in which the
stockholder fails to make a specification as to whether he votes "For",
"Against", "Abstains" or "Withholds" as to a particular matter shall be
considered as a vote "For" that matter. Proxies relating to any of the
shareholder proposals in which the shareholder fails to make a specification
as to whether he votes "For", "Against", or "Abstains" as to a particular
shareholder proposal shall be considered a vote "Against" that proposal.
Votes will be tabulated by an inspector of election appointed by the
Company's Board of Directors. Votes in which the stockholder specifies that
he is "Withholding" or "Abstaining" from voting are counted for quorum
purposes. Abstentions and broker non-votes are not considered as votes "For"
a particular matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
________________________________________________
The following table shows the total number and percentage of the outstanding
shares of the Company's voting Common Stock and voting Preferred Stock
beneficially owned as of the close of business on the Record Date, with respect
to each person (including any "group" as used in Section 13(d)(3) of the
Securities Act of 1934, as amended) that the Company knows to have beneficial
ownership of more than five percent (5%) of the Company's voting Common Stock
and voting Preferred Stock. A person is deemed to be the beneficial owner
of voting shares of Common Stock of the Company which he or she could acquire
within sixty (60) days of the Record Date.
Because of the requirements of the Securities and Exchange Commission as
to the method of determining the amount of shares an individual or entity may
beneficially own, the amounts shown below for an individual or entity may
include shares also considered beneficially owned by others.
Amounts
Name and Address Title of Shares Percent
of of Beneficially of
Beneficial Owner Class Owned(1) Class
________________ _______ ____________ _______
Jack E. Golsen and Common 3,901,196 (3)(5)(6) 28.4%
members of his family(2) Voting Preferred 20,000 (4)(6) 92.7%
Riverside Capital(7)
Advisors, Inc. and
Glenn S. Koach Common 1,816,007 (7) 12.6%
Ryback Management
Corporation Common 1,424,674 (8) 10.0%
Dimensional Fund
Advisors, Inc. Common 748,800 (9) 5.8%
______________________________________
(1) The Company based the information, with respect to beneficial
ownership, on information furnished by the above-named individuals or entities
or contained in filings made with the Securities and Exchange Commission or the
Company's records.
(2) Includes Jack E. Golsen and the following members of his family:
wife, Sylvia H. Golsen; son, Barry H. Golsen (a Director, Vice Chairman of the
Board of Directors, and President of the Environmental Control Business of the
Company); son, Steven J. Golsen (Executive officer of several subsidiaries of
the Company); and daughter, Linda F. Rappaport. The address of Jack E. Golsen,
Sylvia H. Golsen, Barry H. Golsen, and Linda F. Rappaport is 16 South
Pennsylvania Avenue, Oklahoma City, Oklahoma 73107; and Steven J. Golsen's
address is 7300 SW 44th Street, Oklahoma City, Oklahoma 73179.
(3) Includes (a) the following shares over which Jack E. Golsen ("J.
Golsen") has the sole voting and dispositive power: (i) 89,028 shares that he
owns of record, (ii) 99,000 shares that he has the right to acquire within
sixty (60) days under a non-qualified stock option, (iii) 4,000 shares that he
has the right to acquire upon conversion of a promissory note,(iv) 133,333
shares that he has the right to acquire upon the conversion of 4,000 shares of
the Company's Series B 12% Cumulative Convertible Preferred Stock (the "Series
B Preferred") owned of record by him, (v) 10,000 shares owned of record by the
MG Trust, of which he is the sole trustee, and (vi) 40,000 shares that he has
the right to acquire within the next sixty (60) days under the Company's stock
option plans; (b) 1,081,984 shares owned of record by Sylvia H. Golsen, over
which she and her husband, J. Golsen share voting and dispositive power;
(c) 244,563 shares over which Barry H. Golsen ("B. Golsen") has the sole voting
and dispositive power, 533 shares owned of record by B. Golsen's wife, over
which he shares the voting and dispositive power, and 9,000 shares that he
has the right to acquire within the next sixty (60) days under the Company's
stock option plans; (d) 204,934 shares over which Steven J. Golsen
("S. Golsen") has the sole voting and dispositive power and 9,000 shares that
he has the right to acquire within the next sixty (60) days under the
Company's stock option plans; (e) 217,460 shares held in trust for the
grandchildren of J. Golsen and Sylvia H. Golsen of which B. Golsen,
S. Golsen and Linda F. Rappaport ("L. Rappaport") jointly or individually are
trustees; (f) 82,552 shares owned of record by L. Rappaport, over which L.
Rappaport has the sole voting and dispositive power; (g) 1,042,699 shares
owned of record by SBL Corporation ("SBL"), 39,177 shares that SBL has the
right to acquire upon conversion of 9,050 shares of the Company's non-voting
$3.25 Convertible Exchangeable Class C Preferred Stock, Series 2 (the "Series 2
Preferred"), and 400,000 shares that SBL has the right to acquire upon
conversion of 12,000 shares of Series B Preferred owned of record by SBL,
and (h) 60,600 shares owned of record by Golsen Petroleum Corporation
("GPC"), which is a wholly-owned subsidiary of SBL, and 133,333 shares that GPC
has the right to acquire upon conversion of 4,000 shares of Series B Preferred
owned of record by GPC. SBL is wholly-owned by Sylvia H. Golsen (40% owner),
B. Golsen (20% owner), S. Golsen (20% owner), and L. Rappaport (20% owner) and,
as a result, SBL, J. Golsen, Sylvia H. Golsen, B. Golsen, S. Golsen, and
L. Rappaport share the voting and dispositive power of the shares
beneficially owned by SBL. SBL's address is 16 South Pennsylvania Avenue,
Oklahoma City, Oklahoma 73107.
(4) Includes: (a) 4,000 shares of Series B Preferred owned of record by
J. Golsen, over which he has the sole voting and dispositive power; (b) 12,000
shares of Series B Preferred owned of record by SBL; and (c) 4,000 shares owned
of record by SBL's wholly-owned subsidiary, GPC, over which SBL, J. Golsen,
Sylvia H. Golsen, B. Golsen, S. Golsen, and L. Rappaport share the voting and
dispositive power.
(5) Does not include 122,297 shares of Common Stock that L. Rappaport's
husband owns of record and 9,000 shares which he has the right to acquire
within the next sixty (60) days under the Company's stock option plans, all
of which L. Rappaport disclaims beneficial ownership. Does not include
219,520 shares of Common Stock owned of record by the 1992 Trusts of
B. Golsen, S. Golsen, and L. Rappaport over which B. Golsen, S. Golsen and
L. Rappaport have no voting or dispositive power. Heidi Brown Shear is the
Trustee of each of these trusts.
(6) J. Golsen disclaims beneficial ownership of the shares that B.
Golsen, S. Golsen, and L. Rappaport each have the sole voting and investment
power over as noted in footnote (3) above. B. Golsen, S. Golsen, and
L. Rappaport disclaim beneficial ownership of the shares that J. Golsen has
the sole voting and investment power over as noted in footnotes (3) and (4)
and the shares owned of record by Sylvia H. Golsen. Sylvia H. Golsen
disclaims beneficial ownership of the shares that J. Golsen has the sole
voting and dispositive power over as noted in footnotes (3) and (4) above.
(7) Riverside Capital Advisors, Inc. ("Riverside") may be deemed to
beneficially own 1,742,832 of these shares (1,577,487 of which may only be
acquired upon conversion of 364,400 shares of the Company's non-voting Series 2
Preferred owned by Riverside) as a result of having full discretionary
investment authority over customers accounts to which it provides
investment services, and 73,175 of these shares are owned directly by Glenn
S. Koach ("Koach"), a Vice President of Riverside. In January, 1997,
Riverside, together with Koach, a Vice President of Riverside who has advised
the Company that he directly owns 73,175 shares of Common Stock of the Company,
Granite Capital, L.P. ("Granite") who has advised the Company that it owns
319,220 shares of Common Stock of the Company, and Carl and Olga Santangelo
("Santangelos") who have advised the Company they jointly own 9,133 shares of
Common Stock of the Company, filed a joint group Schedule 13D, stating that
such Schedule 13D was filed jointly due to an understanding among them to
submit to the Company, and vote for, the three (3) shareholder proposals set
forth in this Proxy Statement. The Schedule 13D further states that
Riverside and Koach share voting and dispositive power of 1,742,832 shares
(1,577,487 which can only be acquired upon Riverside's conversion of 364,400
shares of the Company's non-voting Series 2 Preferred owned by Riverside)
held in Riverside's name and that Koach had sole voting and dispositive
power of 73,175 shares. The Schedule 13D provides that Granite has sole
voting and dispositive power over the shares of Common Stock that it
beneficially owns; the Santangelos have sole voting and dispositive power of
the shares of Common Stock that they beneficially own and each of Riverside,
Koach, Granite and the Santangelos disclaim beneficial ownership of shares of
Common Stock that are, or may be, deemed to be beneficially owned by, or on
behalf of, any other person, to the extent beneficial ownership by such
reporting persons of such shares of Common Stock may result in such other
persons being deemed to be members of a group with such reporting persons.
As a result, the shares of Common Stock noted in this table as beneficially
owned by Riverside and Koach do not include shares of Common Stock beneficially
owned by Granite and the Santangelos. Further, the shares noted in the table
do not include 6,247 shares of Common Stock owned directly by other officers of
Riverside.
(8) Ryback Management Corporation ("Ryback") is the Investment Company
Advisor for Lindner Dividend Fund, a registered investment company, which owns
329,100 shares of Series 2 Preferred that is convertible into 1,424,674 shares
of Common Stock. Ryback has sole voting and dispositive power over these
shares.
(9) Dimensional Fund Advisors, Inc. ( Dimensional ), a registered
investment advisor, is deemed to have beneficial ownership of 748,800 shares of
the Company's Common Stock, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company, or
in series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional Fund Advisors Inc.
serves as investment manager. Dimensional disclaims beneficial ownership of
all such shares.
SECURITY OWNERSHIP OF MANAGEMENT.
_________________________________
The following table sets forth information obtained from the directors and
nominees to be elected as a director of the Company and the directors, nominees
and executive officers of the Company as a group as to their beneficial
ownership of the Company's voting Common Stock and voting Preferred Stock as of
the Record Date.
Because of the requirements of the Securities and Exchange Commission as
to the method of determining the amount of shares an individual or entity may
own beneficially, the amount shown below for an individual may include shares
also considered beneficially owned by others. Any shares of stock which a
person does not own, but which he or she has the right to acquire within sixty
(60) days of the Record Date, are deemed to be outstanding for the purpose of
computing the percentage of outstanding stock of the class owned by such person
but are not deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
Amounts of
Shares
Name of Title of Beneficially Percent of
Beneficial Owner Class Owned Class
________________ _______ ____________ __________
Raymond B. Ackerman Common 11,000(2) *
Robert C. Brown, M.D. Common 218,329(3) 1.7%
Gerald J. Gagner Common - -
Barry H. Golsen Common 2,147,365(4) 15.9%
Voting Preferred 16,000(4) 74.2%
Jack E. Golsen Common 3,133,154(5) 22.8%
Voting Preferred 20,000(5) 92.7%
David R. Goss Common 200,585(6) 1.5%
Bernard G. Ille Common 100,000(7) *
Donald W. Munson Common 432(8) *
Horace G. Rhodes Common 5,000(9) *
Jerome D. Shaffer, M.D. Common 139,363(10) 1.1%
Tony M. Shelby Common 204,880(11) 1.6%
Directors and Common 4,626,075(12) 33.3%
Executive Officers Voting Preferred 20,000 92.7%
as a group (13
persons)
________________________________
* Less than 1%.
(1) The Company based the information, with respect to beneficial
ownership, on information furnished by each director or officer, contained in
filings made with the Securities and Exchange Commission, or contained in the
Company s records.
(2) Mr. Ackerman has sole voting and dispositive power over these shares.
1,000 of these shares are held in a trust for which Mr. Ackerman is both the
settlor and the trustee and in which he has the vested interest in both the
corpus and income. The remaining 10,000 shares of Common Stock included herein
are shares that Mr. Ackerman may acquire pursuant to currently exercisable non-
qualified stock options granted to him by the Company.
(3) The amount shown includes 25,000 shares of Common Stock that Dr.
Brown may acquire pursuant to currently exercisable non-qualified stock options
granted to him by the Company. The shares, with respect to which Dr. Brown
shares the voting and dispositive power, consist of 122,516 shares owned by Dr.
Brown's wife, 50,727 shares owned by Robert C. Brown, M.D., Inc., a corporation
wholly-owned by Dr. Brown, and 20,086 shares held by the Robert C. Brown M.D.,
Inc. Employee Profit Sharing Plan, of which Dr. Brown serves as the trustee.
The amount shown does not include 57,190 shares directly owned by the children
of Dr. Brown, all of which Dr. Brown disclaims beneficial ownership.
(4) See footnotes (3), (4), and (6) of the table under "Security
Ownership of Certain Beneficial Owners" of this item for a description of the
amount and nature of the shares beneficially owned by B. Golsen, including
9,000 shares B. Golsen has the right to acquire within sixty (60) days.
(5) See footnotes (3), (4), and (6) of the table under "Security
Ownership of Certain Beneficial Owners" of this item for a description of the
amount and nature of the shares beneficially owned by J. Golsen, including the
shares J. Golsen has the right to acquire within sixty (60) days.
(6) The amount shown includes 12,000 shares that Mr. Goss has the right
to acquire within sixty (60) days pursuant to options granted under the
Company's stock option plans, over which Mr. Goss has the sole voting and
dispositive power. Mr. Goss disclaims beneficial ownership of 2,429 shares
owned by Mr. Goss' wife, individually, and/or as custodian for Mr. Goss'
children.
(7) The amount includes (i) 25,000 shares that Mr. Ille may purchase
pursuant to currently exercisable non-qualified stock options, over which Mr.
Ille has the sole voting and dispositive power, and (ii) 75,000 shares owned of
record by Mr. Ille's wife. Mr. Ille disclaims beneficial ownership of the
75,000 shares owned by Mr. Ille's wife.
(8) These are shares of Common Stock that Mr. Munson has the right to
acquire upon conversion of 100 shares of non-voting Series 2 Preferred that he
beneficially owns and which Mr. Munson has sole voting and dispositive power.
(9) Mr. Rhodes has sole voting and dispositive power over these shares.
(10) Dr. Shaffer has the sole voting and dispositive power over these
shares, which include 15,000 shares that Dr. Shaffer may purchase pursuant to
currently exercisable non-qualified stock options and 4,329 shares that Dr.
Shaffer has the right to acquire upon conversion of 1,000 shares of Series 2
Preferred owned by Dr. Shaffer.
(11) Mr. Shelby has the sole voting and dispositive power over these
shares, which include 12,000 shares that Mr. Shelby has the right to acquire
within sixty (60) days pursuant to options granted under the Company's ISOs and
15,152 shares that Mr. Shelby has the right to acquire upon conversion of 3,500
shares of Series 2 Preferred owned by Mr. Shelby.
(12) The amount shown includes 1,008,923 shares of Common Stock that
executive officers, directors, or entities controlled by executive officers and
directors of the Company have the right to acquire within sixty (60) days.
ELECTION OF DIRECTORS
GENERAL.
________
The Board of Directors has nominated for election to the Board of Directors
five (5) nominees. Three (3) of the nominees, Barry H. Golsen, David R. Goss,
and Jerome D. Shaffer, M.D., are presently serving as directors of the Company.
The other two (2) nominees, Gerald J. Gagner and Donald W. Munson, are not
presently serving as directors of the Company. Messrs. Golsen, Goss and
Shaffer are to be elected for a term of three (3) years and until their
successors are duly elected, while Mr. Munson is to be elected in the class
whose term expires in 1999 and his successor is duly elected and Mr. Gagner is
to be elected in the class whose term expires in 1998 and his successor is duly
elected. If any of the nominees become unable or unwilling to accept the
election or to serve as a director (an event which the Board of Directors does
not anticipate), the person or persons named in the proxy as the proxies will
vote for the election of the person or persons recommended by the Board of
Directors. The proxies cannot be voted for a greater number of persons than
the number of nominees named above.
The Certificate of Incorporation and By-laws of the Company provide for
the division of the Board of Directors into three (3) 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 (3) years and until the shareholders elect their
qualified successors. Barry H. Golsen, David R. Goss, and Jerome D. Shaffer are
presently serving as directors of the Company in the class whose term is
expiring as of the Annual Meeting.
The Company's By-laws provide that the Board of Directors, by resolution
from time to time, may fix the number of directors that shall constitute the
whole Board of Directors. The By-laws presently provide that the number of
directors may consist of not less than three (3) nor more than eleven (11).
The Board of Directors currently has set the number of directors at eleven
(11).
The By-laws of the Company further provide that only persons nominated by
or at the direction of: (i) the Board of Directors of the Company, or (ii) any
stockholder of the Company entitled to vote for the election of the directors
that complies with certain notice procedures, shall be eligible for election as
a director of the Company. Any stockholder desiring to nominate any person as
a director of the Company must give written notice to the Secretary of the
Company at the Company's principal executive office not less than fifty (50)
days prior to the date of the meeting of stockholders to elect directors;
except, if less than sixty (60) days' notice or prior disclosure of the date of
such meeting is given to the stockholders, then written notice by the
stockholder must be received by the Secretary of the Company not later than the
close of business on the tenth (10th) day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was
made. In addition, if the stockholder proposes to nominate any person, the
stockholder's written notice to the Company must provide all information
relating to such person that the stockholder desires to nominate that is
required to be disclosed in solicitation of proxies pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended.
The following table sets forth the name, principal occupation, business
experience, age, year in which the individual first became a director, and year
in which the director's term will expire for each nominee for election as a
director at the Annual Meeting and all other directors whose term will continue
after the Annual Meeting.
FIRST
BECAME TERM PRINCIPAL OCCUPATION
NAME AND AGE A DIRECTOR EXPIRES AND OTHER INFORMATION
____________ __________ _______ _____________________
NOMINEES:
________
Gerald J. Gagner (1) 1998 Mr. Gagner, a resident of New Hope,
Age 61 Pennsylvania, served as President,
Chief Executive Officer and director
of USPCI, Inc., a New York Stock
Exchange Company involved in the
waste management industry, from
1984 until 1988, when USPCI was
acquired by Union Pacific
Corporation. From 1988 to the
present, Mr. Gagner has been engaged
as a private investor. Mr. Gagner
has served, and is presently
serving, as President and a
director of Dragerton Investments,
Inc., which developed and sold one
of the world's largest industrial
waste landfills, and is presently
general partner of New West
Investors, L.P., which has
investments principally in the
financial service industry. Mr.
Gagner is also a director of
Automation Robotics, A.G., a
German corporation. Mr. Gagner has
an engineering degree from the
University of Utah.
Barry H. Golsen 1981 2000 Mr. Golsen, L.L.B., has served as
Age 46 Vice Chairman of the Board of the
Company since August, 1994, and for
more than five (5) years has been
the President of the Company's
Environmental Control Business.
Mr. Golsen has both his
undergraduate and law degrees
from the University of Oklahoma.
David R. Goss 1971 2000 Mr. Goss, a certified public
Age 56 accountant, is a Senior Vice
President-Operations of the
Company and has served in
substantially the same capacity
for the past five (5) years. Mr.
Goss is a graduate of Rutgers
University.
Donald W. Munson (1) 1999 Mr. Munson is a resident of the
Age 64 United Kingdom. From January 1988,
until his retirement in August 1992,
Mr. Munson served as President and
Chief Operating Officer of Lennox
Industries. Prior to his election
as President and Chief Operating
Officer of Lennox Industries, Mr.
Munson served as Executive Vice
President of Lennox Industries'
Canadian operation and Managing
Director of Lennox Industries'
European operations. Prior to
joining Lennox Industries, Mr.
Munson served in various
capacities with the Howden Group,
a company located in the United
Kingdom, and The Trane Company,
including serving as the managing
director of various companies within
the Howden Group and Vice President-
Europe for The Trane Company. Mr.
Munson is currently a consultant and
international distributor for the
Ducane Company, a manufacturer of
certain types of residential air
conditioning, air furnaces and other
equipment, and is serving as a
member of the Board of Directors
of Beutot Clima, a French
manufacturer of air-conditioning-
heating equipment, which the
Company has an option to acquire.
Mr. Munson has degrees in
engineering and business
administration from the
University of Minnesota.
Jerome D. Shaffer, 1969 2000 Dr. Shaffer, a director of the
M.D., Company since its inception, is
Age 80 currently a private investor. He
practiced medicine for many years
until his retirement in 1987. Dr.
Shaffer is a graduate of Penn State
University and received his
medical degree from Jefferson
Medical College.
OTHER DIRECTORS:
_______________
Robert C. Brown, 1969 1998 Dr. Brown has practiced medicine for
M.D., many years and is Vice President and
Age 66 Treasurer of Plaza Medical Group,
P.C. Dr. Brown is a graduate of
Tufts University and received his
medical degree from Tufts University.
Jack E. Golsen, 1969 1998 Mr. Golsen, founder of the Company,
Age 68 is Chairman of the Board and
President of the Company and has
served in that capacity since the
inception of the Company in 1969.
During 1996, Mr. Golsen was inducted
into the Oklahoma Commerce and
Industry Hall of Honor as one of
Oklahoma's leading industrialists.
Mr. Golsen has a degree from the
University of New
Mexico in Biochemistry.
Horace G. Rhodes, 1996 1998 Mr. Rhodes is the managing partner
Age 69 of the law firm of Kerr, Irvine,
Rhodes & Ables and has served in
such capacity and has practiced law
for a period in excess of five (5)
Since 1972, Mr. Rhodes has served as
Executive Vice President and General
Counsel for the Association of
Oklahoma Life Insurance Companies
and since 1982 has served as
Executive Vice President and General
Counsel for the Oklahoma Life and
Health Insurance Guaranty Association.
Mr. Rhodes received his undergraduate
and law degrees from the University of
Oklahoma.
Raymond B. 1993 1999 From 1972 until his retirement in
Ackerman, 1992, Mr. Ackerman served as
Age 69 Chairman of the Board and President of
Ackerman, McQueen, Inc., the largest
public relations firm in Oklahoma. Mr.
Ackerman currently serves as Chairman
Emeritus of Ackerman, McQueen, Inc.
Mr. Ackerman retired as a Rear Admiral
from the United States Naval Reserves.
Mr. Ackerman is a graduate of Oklahoma
City University, and in 1996, he was
awarded an honorary doctorate from
Oklahoma City University.
Bernard G. Ille, 1971 1999 Mr. Ille served as President and
Age 70 Chief Executive Officer of First Life
Assurance Company from May, 1988,
until it was acquired by another
company in March 1994. In 1991,
First Life was placed in
conservatorship by the Oklahoma
Department of Insurance and
operated under conservatorship until
sold in March 1994. For more than
five (5) years prior to joining First
Life, Mr. Ille served as President of
United Founders Life Insurance Company.
Mr. Ille is a director of Landmark Land
Company, Inc., which was the parent
company of First Life. Mr. Ille is
currently a private investor. He is
a graduate of the University of
Oklahoma.
Tony M. Shelby 1971 1999 Mr. Shelby, a certified public
Age 55 accountant, is Senior Vice President
and Chief Financial Officer of the
Company, a position he has held for a
period in excess of five (5) years.
Prior to becoming Senior Vice President
and Chief Financial Officer of the
Company, Mr. Shelby served as Chief
Financial Officer of a subsidiary of
the Company and was with the accounting
firm of Arthur Young & Co., a
predecessor to Ernst & Young. Mr.
Shelby is a graduate of Oklahoma City
University.
________________
(1) Has not previously served as a director of the Company.
Approval of each nominee for election to the Board of Directors will
require the affirmative vote of a plurality of the votes cast by the holders of
the voting securities of the Company, voting together as one class.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE FIVE (5)
NOMINEES AS DIRECTORS OF THE COMPANY.
Family Relationships.
_____________________
ack E. Golsen is the father of Barry H. Golsen and the brother-in-law of Robert
C. Brown, M.D. Robert C. Brown, M.D. is the uncle of Barry H. Golsen.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS.
__________________________________________________
The Company has an Executive Salary Review Committee and an Audit Committee. The
Company does not have a nominating committee. The Board of Directors nominates
the nominees for election as directors of the Company.
The Company's Executive Salary Review Committee has the authority to set
the compensation of all officers of the Company. The present members of the
Executive Salary Review Committee are Robert C. Brown, M.D., Bernard G. Ille,
and Jerome D. Shaffer, M.D. During 1996, the Executive Salary Review Committee
had one (1) meeting.
The Audit Committee's functions include: (a) recommending a public
accounting firm for appointment by the Board of Directors for the purpose of
conducting the annual audit of the Company; (b) reviewing the recommendations of
the auditors regarding internal controls and procedures; (c) reviewing from time
to time the Company's general policies and procedures with respect to auditing,
accounting, and the application of financial resources; (d) reviewing all other
matters and making special inquiries and investigations referred to it by the
Board of Directors; and (e) making other recommendations to the Board of
Directors as the Committee may deem appropriate. The members of the Audit
Committee are Bernard G. Ille (Chairman), Jerome D. Shaffer, M.D., Robert C.
Brown, M.D., and Horace G. Rhodes. The Audit Committee held three (3) meetings
during 1996.
The Board of Directors of the Company held six (6) meetings in 1996.
During 1996, no incumbent director attended fewer than seventy-five percent
(75%) of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings held by all committees of the Board
of Directors on which he served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
________________________________________________________
Based solely on a review of copies of the Forms 3, 4 and 5 and amendments
thereto furnished to the Company with respect to 1996, or written
representations that no such reports were required to be filed with the
Securities and Exchange Commission, the Company believes that during 1996 all
directors and officers of the Company and beneficial owners of more than ten
percent (10%) of any class of equity securities of the Company registered
pursuant to Section 12 of the Exchange Act filed their required Forms 3, 4, or
5, as required by Section 16(a) of the Securities Exchange Act of 1934, as
amended, on a timely basis, except that Tony Shelby filed one late Form 4 to
report one transaction.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
_______________________________________________
A subsidiary of the Company, Hercules Energy Mfg. Corporation ("Hercules"),
leases land and a building in Oklahoma City, Oklahoma from Mac Venture, Ltd.
("Mac Venture"), a limited partnership. GPC serves as the general partner of
Mac Venture. The limited partners of Mac Venture include GPC and the three
children of Jack E. Golsen. See "Security Ownership of Certain Beneficial Owners
and Security Ownership of Management", above, for a discussion of the stock
ownership of GPC. The land leased by Hercules from Mac Venture consists of a
total of 341,000 square feet, with 44,000 square feet in the building. Hercules
leases the property from Mac Venture for $7,500 per month under a triple net
lease which began as of January 1, 1982, and expires on December 31, 1998.
Northwest Internal Medicine Associates, ("Northwest") a division of Plaza
Medical Group., P.C., has an agreement with the Company to perform medical
examinations of the management and supervisory personnel of the Company and its
subsidiaries. Under such agreement, Northwest is paid $4,000 a month to perform
all such examinations. Dr. Robert C. Brown (a director of the Company) is Vice
President and Treasurer of Plaza Medical Group., P.C.
In 1983, LSB Chemical Corp. ("LSB Chemical"), a subsidiary of the Company,
acquired all of the outstanding stock of El Dorado Chemical Company ("EDC") from
its then four stockholders ("Ex-Stockholders"). A substantial portion of the
purchase price consisted of an earnout based primarily on the annual after-tax
earnings of EDC for a ten-year period. During 1989, two of the Ex-Stockholders
received LSB Chemical promissory notes for a portion of their earnout, in lieu
of cash, totaling approximately $896,000, payable $496,000 in January 1990, and
$400,000 in May 1994. LSB Chemical agreed to a buyout of the balance of the
earnout from the four Ex-Stockholders for an aggregate purchase amount of
$1,231,000. LSB Chemical purchased for cash the earnout from two of the Ex-
Stockholders and issued multi-year promissory notes totaling $676,000 to the
other two Ex-Stockholders. Jack E. Golsen guaranteed LSB Chemical's payment
obligation under the promissory notes. The unpaid balance of these notes at
March 31, 1997, was $400,000.
EXECUTIVE COMPENSATION
AND OTHER INFORMATION
EXECUTIVE COMPENSATION.
_______________________
The following table shows the aggregate cash compensation which the Company and
its subsidiaries paid or accrued to the Chief Executive Officer and each of the
other four (4) most highly-paid executive officers of the Company (which
includes the President of the Company's Environmental Control Business, who also
serves as Vice Chairman of the Board of Directors of the Company and who
performs key policy making functions for the Company). The table includes cash
distributed for services rendered during 1996, plus any cash distributed during
1996 for services rendered in a prior year, less any amount relating to those
services previously included in the cash compensation table for a prior year.
SUMMARY COMPENSATION TABLE
___________________________
Long-term
Compen-
sation
Annual Compensation Awards
____________________________ _______
Other All
Annual Securities Other
Compen- Underlying Compen-
Name and Salary Bonus sation Stock sation
Position Year ($) ($)(1) ($)(2) Options ($)(3)
_____________ ____ _____ ______ _______ __________ _______
Jack E. Golsen, 1996 469,125 - - 100,000 -
Chairman of the 1995 457,892 100,000 - - -
Board, President 1994 429,423 150,000 - 165,000(4) 100,000
and Chief
Executive Officer
Barry H. Golsen, 1996 209,125 - - 105,000 -
Vice Chairman of 1995 187,885 60,000 - - -
the Board of 1994 176,769 90,000 - - 100,000
Directors and
President of the
Environmental
Control Business
David R. Goss, 1996 173,300 - - 85,000 -
Senior Vice 1995 153,022 60,000 - - -
President - 1994 146,708 90,000 - - 100,000
Operations
Tony M. Shelby, 1996 173,425 - - 85,000 -
Senior Vice 1995 152,923 60,000 - - -
President/Chief 1994 146,708 90,000 - - 100,000
Financial Officer
David M. Shear, 1996 151,300 - - 64,000 -
Vice President/ 1995 137,923 40,000 - - -
General Counsel 1994 128,827 40,000 - - -
_______________________________
(1) Bonuses noted are for services rendered for the prior fiscal
year. No bonuses for 1996 performance are to be paid to the above named
executive officers.
(2) Does not include perquisites and other personal benefits,
securities or property for the named executive officer in any year if the
aggregate amount of such compensation for such year does not exceed the
lesser of either $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officer for such year.
(3) In 1994, the Company paid to Messrs. J. Golsen, B. Golsen,
Goss, and Shelby an additional bonus of $100,000 each for their services
as members of the Board of Directors of Equity Bank for Savings, F.A.,
during the six years that the Company owned that financial business, which
was sold by the Company in 1994.
(4) On June 1, 1989, the Company originally granted a nonqualified
stock option to J. Golsen to purchase 165,000 shares of the Company's
Common Stock at an exercise price of $2.625 per share (the "NQSO"), which
on the date of grant was the fair market value of the Company's Common
Stock. Prior to the NQSO's expiration date of June 1, 1994, the Company
granted an extension of the option period of the NQSO for an additional
five (5) year period, beginning on June 1, 1994, and terminating on June
1, 1999 (the "Extended NQSO"). The Extended NQSO vests and becomes
exercisable at twenty percent (20%) per year on June 1, 1995, 1996, and
1997, and the remaining forty percent (40%) becomes exercisable June 1,
1998. The exercise price of the Extended NQSO is $2.625 per share, the
same as the original NQSO. The Extended NQSO shall become immediately
exercisable in full upon the death of the optionee or a change in control
of the Company, and the Board of Directors of the Company may, at its
option, accelerate such vesting at any time.
OPTION GRANTS IN 1996.
______________________
The following table sets forth information relating to individual grants
of stock options made to each of the named executive officers in the above
Summary Compensation Table during the last fiscal year:
INDIVIDUAL GRANTS
NUMBER OF POTENTIAL REALIZABLE VALUE
SHARES OF AT ASSUMED ANNUAL RATES
COMMON STOCK % OF OF STOCK PRICE
UNDERLYING TOTAL OPTIONS APPRECIATION
OPTIONS GRANTED EXERCISE FOR OPTION TERM (2)
___________________
GRANTED EMPLOYEES PRICE EXPIRATION
NAME: (#)(1) IN 1996 ($/SH) DATE 5%($) 10%($)
_________________ _______ _________ ________ ________ _______ _______
Jack E. Golsen 100,000 13.9 $4.538 11/19/01 72,550 $210,325
Barry H. Golsen 100,000 13.9 4.538 11/19/01 72,550 210,325
5,000 .7 5.362 6/27/01 4,293 12,434
David R. Goss 80,000 11.1 4.125 11/19/06 207,900 524,700
5,000 .7 4.875 6/27/06 15,356 38,756
Tony M. Shelby 80,000 11.1 4.125 11/19/06 207,900 524,700
5,000 .7 4.875 6/27/06 15,356 38,756
David M. Shear 60,000 8.3 4.125 11/19/00 155,925 393,525
4,000 .6 4.875 6/27/06 12,285 31,005
(1) The Company has adopted a 1981 Incentive Stock Option Plan (the
"1981 Plan" ), a 1986 Incentive Stock Option Plan (the "1986 Plan"),
and a 1993 Incentive Stock Option Plan (the "1993 Plan"). The 1981
Plan, 1986 Plan, and the 1993 Plan are collectively designated as
the "Plans". The Plans provide that the Company may grant options
under the Plans to key salaried employees of the Company. The
option price for all options granted under the Plans cannot equal
less than 100% (or 110% for persons possessing more than 10% of the
voting stock of the Company) of the market value of the Company s
Common Stock on the date of the grant. The Company could grant
options under the 1981 Plan until November 30, 1991, until April 10,
1996 under the 1986 Plan, and until August 5, 2003 under the 1993
Plan. The holder of an option granted under the Plans may not
exercise the option after ten (10) years from the date of grant of
the option (or five (5) years for persons possessing more than 10%
of the voting stock of the Company). The options become exercisable
approximately 20% after one year from the date of grant, an
additional 20% after two years, an additional 30% after three years,
and the remaining 30% after four years.
(2) The potential realizable value of each grant of options assumes that
the market price of the Company s Common Stock appreciates in value
from the date of grant to the end of the option term at the
annualized rates shown above each column. The actual value that an
executive may realize, if any, will depend on the amount by which
the market price of the Company s Common Stock at the time of
exercise exceeds the exercise price of the option. As of April 17,
1997, the closing price of a share of the Company s Common Stock as
quoted on the New York Stock Exchange was $4.50. There is no
assurance that any executive will receive the amounts estimated in
this table.
AGGREGATED OPTION EXERCISES IN 1996 AND FISCAL YEAR END OPTION VALUES.
______________________________________________________________________
The following table sets forth information concerning each exercise of
stock options by each of the named executive officers during the last
fiscal year and the year-end value of unexercised options:
Number of Value
Securities of Unexercised
Underlying In-the-Money
Unexercised Options at
Options at FY End
FY End (#)(3) ($) (3) (4)
_____________ ____________
Shares
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
Name (#)(1) ($) (2) Unexercisable Unexercisable
_____________ _________ _______ _____________ _____________
Jack E. Golsen - - 106,000/ 166,230/
199,000 (5) 185,625
Barry H. Golsen - - 8,000/ 8,496/
105,000 -
David R. Goss - - 11,000/ 20,375/
85,000 30,000
Tony M. Shelby - - 11,000/ 20,375/
85,000 30,000
David M. Shear - - 23,000/ 36,875/
64,000 22,500
____________________________________
(1) Each number represents the number of shares received by the
named individual upon exercise.
(2) The values set forth in the column below are the difference
between the market value of the Company's Common Stock on the date the
particular option was exercised and the exercise price of such option.
(3) The options granted under the Company's Plans become
exercisable 20% after one year from date of grant, an additional 20% after
two years, an additional 30% after three years, and the remaining 30%
after four years.
(4) The values are based on the difference between the price of
the Company's Common Stock on the New York Stock Exchange at the close of
trading on December 31, 1996 of $4.50 per share and the exercise price of
such option. The actual value realized by a named executive on the
exercise of these options depends on the market value of the Company's
Common Stock on the date of exercise.
(5) The amounts shown include a non-qualified stock option
covering 165,000 shares of Common Stock, which vest and are exercisable
20% on June 1, 1995, June 1, 1996, and June 1, 1997, and the remaining 40%
exercisable June 1, 1998.
OTHER PLANS.
____________
The Board of Directors has adopted an LSB Industries, Inc., Employee
Savings Plan (the "401(k) Plan") for the employees (including executive
officers) of the Company and its subsidiaries, excluding certain (but not
all) employees covered under union agreements. The 401(k) Plan is an
employee contribution plan, and the Company and its subsidiaries make no
contributions to the 401(k) Plan. The amount that an employee may
contribute to the 401(k) Plan equals a certain percentage of the
employee's compensation, with the percentage based on the employee's
income and certain other criteria as required under Section 401(k) of the
Internal Revenue Code. The Company or subsidiary deducts the amounts
contributed to the 401(k) Plan from the employee's compensation each pay
period, in accordance with the employee's instructions, and pays the
amount into the 401(k) Plan for the employee's benefit. The Summary
Compensation Table set forth above includes any amount contributed and
deferred during the 1994, 1995, and 1996 fiscal years pursuant to the
401(k) Plan by the named executive officers of the Company.
The Company has a death benefit plan for certain key employees.
Under the plan, the designated beneficiary of an employee covered by the
plan will receive a monthly benefit for a period of ten (10) years if the
employee dies while in the employment of the Company or a wholly-owned
subsidiary of the Company. The agreement with each employee provides, in
addition to being subject to other terms and conditions set forth in the
agreement, that the Company may terminate the agreement as to any employee
at anytime prior to the employee's death. The Company has purchased life
insurance on the life of each employee covered under the plan to provide,
in large part, a source of funds for the Company's obligations under the
Plan. The Company also will fund a portion of the benefits by investing
the proceeds of such insurance policy received by the Company upon the
employee's death. The Company is the owner and sole beneficiary of the
insurance policy, with the proceeds payable to the Company upon the death
of the employee. The following table sets forth the amounts of annual
benefits payable to the designated beneficiary or beneficiaries of the
executive officers named in the Summary Compensation Table set forth above
under the above-described death benefits plan.
Amount of
Name of Individual Annual Payment
__________________ ______________
Jack E. Golsen $175,000
Barry H. Golsen $ 30,000
David R. Goss $ 35,000
Tony M. Shelby $ 35,000
David M. Shear $ N/A
In addition to the above-described plans, during 1991 the Company
entered into a non-qualified arrangement with certain key employees of the
Company and its subsidiaries to provide compensation to such individuals
in the event that they are employed by the Company or a subsidiary of the
Company at age 65. Under the plan, the employee will be eligible to
receive for the life of such employee, a designated benefit as set forth
in the plan. In addition, if prior to attaining the age 65 the employee
dies while in the employment of the Company or a subsidiary of the
Company, the designated beneficiary of the employee will receive a monthly
benefit for a period of ten (10) years. The agreement with each employee
provides, in addition to being subject to other terms and conditions set
forth in the agreement, that the Company may terminate the agreement as to
any employee at any time prior to the employee's death. The Company has
purchased insurance on the life of each employee covered under the plan
where the Company is the owner and sole beneficiary of the insurance
policy, with the proceeds payable to the Company to provide a source of
funds for the Company's obligations under the plan. The Company may also
fund a portion of the benefits by investing the proceeds of such insurance
policies. Under the terms of the plan, if the employee becomes disabled
while in the employment of the Company or a wholly-owned subsidiary of the
Company, the employee may request the Company to cash-in any life
insurance on the life of such employee purchased to fund the Company's
obligations under the plan. Jack E. Golsen does not participate in the
plan. The following table sets forth the amounts of annual benefits
payable to the executive officers named in the Summary Compensation Table
set forth above under such retirement plan.
Amount of
Name of Individual Annual Payment
__________________ ______________
Barry H. Golsen $17,480
David R. Goss $17,403
Tony M. Shelby $15,605
David M. Shear $17,822
COMPENSATION OF DIRECTORS.
__________________________
In 1996, the Company compensated each non-management director of the
Company for his services in the amount of $4,500, with the exception of
Mr. Rhodes who received $3,516 as a pro-rated fee for service during 1996
subsequent to his election to the Board in March 1996. The non-management
directors of the Company also received $500 for every meeting of the Board
of Directors attended during 1996. Each member of the Audit Committee,
consisting of Messrs. Rhodes, Ille, Brown, and Shaffer, received an
additional $20,000 for his services in 1996, with the exception of Mr.
Rhodes who received $17,500. Each member of the Public Relations and
Marketing Committee, consisting of Messrs. Ackerman and Ille, received an
additional $20,000 for his services in 1996.
In September 1993, the Company adopted the 1993 Non-Employee
Director Stock Option Plan (the "Outside Director Plan"). The Outside
Director Plan authorizes the grant of non-qualified stock options to each
member of the Company's Board of Directors who is not an officer or
employee of the Company or its subsidiaries. The maximum shares for which
options may be issued under the Outside Director Plan will be 150,000
shares (subject to adjustment as provided in the Outside Director Plan).
The Company shall automatically grant to each outside director an option
to acquire 5,000 shares of the Company's Common Stock on April 30
following the end of each of the Company's fiscal years in which the
Company realizes net income of $9.2 million or more for such fiscal year.
The exercise price for an option granted under the Outside Director Plan
shall be the fair market value of the shares of Common Stock at the time
the option is granted. Each option granted under the Outside Director
Plan, to the extent not exercised, shall terminate upon the earlier of the
termination of the outside director as a member of the Company's Board of
Directors or the fifth anniversary of the date such option was granted.
On April 30, 1995, options to acquire 5,000 shares of Common Stock were
granted under this plan to each of Messrs. Ille, Brown, Shaffer, and
Ackerman, at a per share exercise price of $5.375. The Company did not
grant options under the Outside Director Plan in April, 1996, or April,
1997.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
________________________________________________________________
CONTROL ARRANGEMENTS.
______________________
(A) TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS. The
Company has entered into severance agreements with Jack E. Golsen, Barry
H. Golsen, Tony M. Shelby, David R. Goss, David M. Shear, and certain
other officers of the Company and subsidiaries of the Company.
Each severance agreement provides (among other things) that if,
within twenty-four (24) months after the occurrence of a change in
control (as defined) of the Company, the Company terminates the
officer's employment other than for cause (as defined), or the
officer terminates his employment for good reason (as defined), the
Company must pay the officer an amount equal to 2.9 times the
officer's base amount (as defined). The phrase "base amount" means
the average annual gross compensation paid by the Company to the
officer and includable in the officer's gross income during the
period consisting of the most recent five (5) year period
immediately preceding the change in control. If the officer has
been employed by the Company for less than 5 years, the base amount
is calculated with respect to the most recent number of taxable
years ending before the change in control that the officer worked
for the Company.
The severance agreements provide that a "change in control" means a
change in control of the Company of a nature that would require the
filing of a Form 8-K with the Securities and Exchange Commission
and, in any event, would mean when: (1) any individual, firm,
corporation, entity, or group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) becomes the beneficial
owner, directly or indirectly, of thirty percent (30%) or more of
the combined voting power of the Company's outstanding voting
securities having the right to vote for the election of directors,
except acquisitions by: (a) any person, firm, corporation, entity,
or group which, as of the date of the severance agreement, has that
ownership, or (b) Jack E. Golsen, his wife; his children and the
spouses of his children; his estate; executor or administrator of
any estate, guardian or custodian for Jack E. Golsen, his wife, his
children, or the spouses of his children, any corporation, trust,
partnership, or other entity of which Jack E. Golsen, his wife,
children, or the spouses of his children own at least eighty percent
(80%) of the outstanding beneficial voting or equity interests,
directly or indirectly, either by any one or more of the above
described persons, entities, or estates; and certain affiliates and
associates of any of the above-described persons, entities, or
estates; (2) individuals who, as of the date of the severance
agreement, constitute the Board of Directors of the Company (the
"Incumbent Board") and who cease for any reason to constitute a
majority of the Board of Directors except that any person becoming
a director subsequent to the date of the severance agreement, whose
election or nomination for election is approved by a majority of the
Incumbent Board (with certain limited exceptions), will constitute
a member of the Incumbent Board; or (3) the sale by the Company of
all or substantially all of its assets.
Except for the severance agreement with Jack E. Golsen, the
termination of an officer's employment with the Company "for cause"
means termination because of: (a) the mental or physical disability
from performing the officer's duties for a period of one hundred
twenty (120) consecutive days or one hundred eighty days (even
though not consecutive) within a three hundred sixty (360) day
period; (b) the conviction of a felony; (c) the embezzlement by the
officer of Company assets resulting in substantial personal
enrichment of the officer at the expense of the Company; or (d) the
willful failure (when not mentally or physically disabled) to follow
a direct written order from the Company's Board of Directors within
the reasonable scope of the officer's duties performed during the
sixty (60) day period prior to the change in control. The
definition of "Cause" contained in the severance agreement with Jack
E. Golsen means termination because of: (a) the conviction of Mr.
Golsen of a felony involving moral turpitude after all appeals have
been completed; or (b) if due to Mr. Golsen's serious, willful,
gross misconduct or willful, gross neglect of his duties has
resulted in material damages to the Company and its subsidiaries,
taken as a whole, provided that (i) no action or failure to act by
Mr. Golsen will constitute a reason for termination if he believed,
in good faith, that such action or failure to act was in the
Company's or its subsidiaries' best interest, and (ii) failure of
Mr. Golsen to perform his duties hereunder due to disability shall
not be considered willful, gross misconduct or willful, gross
negligence of his duties for any purpose.
The termination of an officer's employment with the Company for
"good reason" means termination because of (a) the assignment to the
officer of duties inconsistent with the officer's position,
authority, duties, or responsibilities during the sixty (60) day
period immediately preceding the change in control of the Company or
any other action which results in the diminishment of those duties,
position, authority, or responsibilities; (b) the relocation of the
officer; (c) any purported termination by the Company of the
officer's employment with the Company otherwise than as permitted by
the severance agreement; or (d) in the event of a change in control
of the Company, the failure of the successor or parent company to
agree, in form and substance satisfactory to the officer, to assume
(as to a successor) or guarantee (as to a parent) the severance
agreement as if no change in control had occurred.
Except for the severance agreement with Jack E. Golsen, each
severance agreement runs until the earlier of: (a) three years
after the date of the severance agreement, or (b) the officer's
normal retirement date from the Company; however, beginning on the
first anniversary of the severance agreement and on each annual
anniversary thereafter, the term of the severance agreement
automatically extends for an additional one-year period, unless the
Company gives notice otherwise at least sixty (60) days prior to the
anniversary date. The severance agreement with Jack E. Golsen is
effective for a period of three (3) years from the date of the
severance agreement; except that, commencing on the date one (1)
year after the date of such severance agreement and on each annual
anniversary thereafter, the term of such severance agreement shall
be automatically extended so as to terminate three (3) years from
such renewal date, unless the Company gives notices otherwise at
least one (1) year prior to the renewal date.
Effective June 1, 1994, the Company extended until June 1, 1999, the
option period of a nonqualified stock option previously granted to
Jack E. Golsen for the purchase of 165,000 shares of the Company's
Common Stock at an exercise price of $2.625 per share (the "Extended
NQSO"). The Extended NQSO vests and becomes exercisable at twenty
percent (20%) per year on June 1, 1995, 1996, and 1997, and the
remaining forty percent (40%) becomes exercisable on June 1, 1998.
The terms of the Extended NQSO provide, in part, that the Extended
NQSO shall become immediately exercisable upon a change in control
of the Company. A "change in control" for purposes of the Extended
NQSO, shall be deemed to have occurred upon any of the following
events: (i) consummation of any of the following transactions: any
merger, recapitalization, or other business combination of the
Company pursuant to which the Company is the non-surviving
corporation, unless 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; (ii) a transaction in which any person, corporation, or
other entity (A) shall purchase any Common Stock pursuant to a
tender offer or exchange offer, without the prior consent of the
Board of Directors or (B) shall become the "beneficial owner" (as
such term is defined in Rule 13(d)(3) under the Securities Exchange
Act of 1934, as amended) of securities of the Company representing
fifty percent (50%) or more of the total voting power of the then
outstanding securities of the Company; or (iii) if, during any
period of two (2) consecutive years, individuals who, at the
beginning of such period, constituted the entire Board of Directors
and any new director whose election by the Board of Directors, 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 approved, cease for any reason to constitute a majority
thereof.
(B) EMPLOYMENT AGREEMENT. In March 1996, the Company entered into an
employment agreement with Jack E. Golsen. The employment agreement
requires the Company to employ Jack E. Golsen as an executive
officer of the Company for an initial term of three (3) years and
provides for two (2) automatic renewals of three (3) years each
unless terminated by either party by the giving of written notice at
least one (1) year prior to the end of the initial or first renewal
period, whichever is applicable. Under the terms of such employment
agreement, Mr. Golsen shall be paid (i) an annual base salary at his
1995 base rate, as adjusted from time to time by the Compensation
Committee, but such shall never be adjusted to an amount less than
Mr. Golsen's 1995 base salary, (ii) an annual bonus in an amount as
determined by the Compensation Committee, and (iii) receive from the
Company certain other fringe benefits. The employment agreement
provides that Mr. Golsen's employment may not be terminated, except
(i) upon conviction of a felony involving moral turpitude after all
appeals have been exhausted, (ii) Mr. Golsen's serious, willful,
gross misconduct or willful, gross negligence of duties resulting in
material damage to the Company and its subsidiaries, taken as a
whole, unless Mr. Golsen believed, in good faith, that such action
or failure to act was in the Company's or its subsidiaries' best
interest, and (iii) Mr. Golsen's death; provided, however, no such
termination under (i) or (ii) above may occur unless and until the
Company has delivered to Mr. Golsen a resolution duly adopted by an
affirmative vote of three-fourths of the entire membership of the
Board of Directors at a meeting called for such purpose after
reasonable notice given to Mr. Golsen finding, in good faith, that
Mr. Golsen violated (i) or (ii) above. If Mr. Golsen's employment
is terminated in breach of this Agreement, then he shall, in
addition to his other rights and remedies, receive and the Company
shall pay to Mr. Golsen (i) in a lump sum cash payment, on the date
of termination, a sum equal to the amount of Mr. Golsen's annual
base salary at the time of such termination and the amount of the
last bonus paid to Mr. Golsen prior to such termination times (a)
the number of years remaining under the employment agreement or (b)
four (4) if such termination occurs during the last twelve (12)
months of the initial period or the first renewal period, and (ii)
provide to Mr. Golsen all of the fringe benefits that the Company
was obligated to provide during his employment under the employment
agreement for the remainder of the term of the employment agreement,
or, if terminated at any time during the last twelve (12) months of
the initial period or first renewal period, then during the
remainder of the term and the next renewal period.
If there is a change in control (as defined in the severance
agreement between Mr. Golsen and the Company) and within twenty-four
(24) months after such change in control Mr. Golsen is terminated,
other than for Cause (as defined in the severance agreement), then
in such event, the severance agreement between Mr. Golsen and the
Company shall be controlling.
In the event Mr. Golsen becomes disabled and is not able to perform
his duties under the employment agreement as a result thereof for a
period of twelve (12) consecutive months within any two (2) year
period, the Company shall pay Mr. Golsen his full salary for the
remainder of the term of the employment agreement and thereafter
sixty percent (60%) of such salary until Mr. Golsen's death.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
____________________________________________________________
The Company's Executive Salary Review Committee has the authority to set
the compensation of all officers of the Company. This Committee generally
considers and approves the recommendations of the President. The members
of the Executive Salary Review Committee are the following non-management
directors: Robert C. Brown, M.D., Jerome D. Shaffer, M.D., and Bernard G.
Ille. During 1996, the Executive Salary Review Committee had one (1)
meeting.
See "Compensation of Directors" for information concerning
compensation paid and options granted to non-employee directors of the
Company during 1996 for services as a director to the Company.
REPORT OF EXECUTIVE SALARY REVIEW COMMITTEE.
____________________________________________
The following report by the Executive Salary Review Committee required by
the rules of the Securities and Exchange Commission to be included in this
Proxy Statement shall not be considered incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of
1934 (collectively, the "Acts"), except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed to be soliciting material or to be filed under such
Acts.
GENERAL.
The Executive Salary Review Committee ("Committee") is presently
comprised of three (3) directors of the Company, who are not current or
former employees of the Company. See "Compensation Committee Interlocks
and Insider Participation" . The Committee is responsible for reviewing
and approving the compensation paid to executive officers of the Company.
COMPENSATION POLICY FOR EXECUTIVE OFFICERS.
Although the Committee has not established specific quantitative
compensation policies for executive officers of the Company, including the
President-Chief Executive Officer, the Committee reviews each executive
officer's performance on behalf of the Company during the last preceding
year in establishing the executive officer's bonus for such year, if any,
and any increase or decreases to such executive officers' compensation for
the next year. The guiding principle of the Committee is based on the
following objectives: (i) to attract and retain qualified executives in a
highly competitive environment who will play significant roles in
achieving the Company's goals; (ii) to reward executives for strategic
management and the long-term enhancement of shareholder value; (iii) to
create a performance-oriented environment that rewards performance with
respect to financial and operational goals of the Company; and, (iv)
motivate executives to protect the interests of the Company in all
situations. The key elements of the Company's executive compensation
program have consisted of a base salary, bonus and stock options.
As to the compensation (salary and bonus) paid or payable to
executive officers, other than the President-Chief Executive Officer, the
President-Chief Executive Officer makes a recommendation to the Committee.
The Committee considers such recommendations. The President-Chief
Executive Officer's recommendation with respect to base salary and the
Committee's approval or disapproval of such recommendation is primarily
based on the objectives set forth above. With respect to bonus
compensation, such recommendation by the President - Chief Executive
Officer and approval is closely tied to the individual's performance and
the Company's financial performance.
Jack E. Golsen has been President and Chief Executive Officer of the
Company since its formation in 1969. In setting Mr. Golsen's salary and
bonus, the Committee takes into account shareholder value, which he helped
create, and the fact that Mr. Golsen initiated and continues to spearhead
the strategy of expanding and diversifying the Company through internal
growth, acquisitions, redeployment of assets and personnel and development
of international markets. Due to losses sustained by the Company in 1995
and 1996, increases in Mr. Golsen's annual salary for 1995 and 1996 were
nominal. In March 1996, the Company entered into an employment agreement
with Mr. Golsen, which employment agreement set Mr. Golsen's salary at his
1995 base rate, as adjusted from time to time by the Committee. See
"Executive Compensation and Other Information - Employment Contracts and
Termination of Employment and Change in Control Arrangements".
Bonuses, if any, are paid to executive officers in arrears for
performance during the previous fiscal year. Due to the Company's
performance in 1996, no bonuses were paid for 1996 performance to the
executive officers of the Company, including Jack E. Golsen. The
Committee considers the payment of bonuses to be consistent with the goals
set forth above.
In June, 1994, the Committee granted a one time fee to each of Barry
H. Golsen, Jack E. Golsen, David R. Goss, Jim D. Jones, and Tony M.
Shelby, executive officers of the Company, of $100,000 for their non-
compensated services as directors of Equity Bank for Savings, F.A.
("Equity Bank") from the time of Equity Bank's acquisition by the Company
in March, 1988, until Equity Bank was sold by the Company in May, 1994.
The Committee considered that their service as directors of Equity Bank
were important factors in the growth of Equity Bank from 1988, to May,
1994, and their contribution assisted the Company in selling Equity Bank
for approximately $92 million and a pre-tax profit of approximately $24.2
million.
The Company has had a practice of granting stock options to the
President-Chief Executive Officer and other executive officers of the
Company. This practice is founded on the belief that stock options offer
executive officers a valuable incentive to achieve increased profitability
of the Company in order to enhance shareholder value. There are no
specific factors used to determine the number of options granted or to the
timing of such grants; however, certain criteria are considered such as
length of service, level of responsibility, and the achievement of the
Company's earnings objective.
MEMBERS OF THE COMMITTEE:
_________________________
Bernard G. Ille, Chairman
Robert C. Brown, M.D.
Jerome D. Shaffer, M.D.
FIVE YEAR TOTAL SHAREHOLDER RETURN GRAPH.
_________________________________________
Due to the constraints of the EDGAR system, the performance graph (in a
line graph format) has been omitted. The following table has been
provided to take its place in the EDGAR filing. The following table
compares the yearly percentage change in the cumulative total shareholder
return assuming reinvestment of dividends, if any, of (i) the Company,
(ii) a composite index ("Peer Group ") comprised of a peer group of
entities from two distinct industries which represent the Company's two
primary lines of business (Chemical and Environmental Control), and (iii)
the New York Stock Exchange Market Value Index ("Broad Market"). The
table set forth below covers the period from year-end 1991 through year-
end 1996.
FISCAL YEAR ENDING
__________________
1991 1992 1993 1994 1995 1996
____ ____ ____ ____ ____ ____
LSB IND., INC. 100.00 550.00 784.64 507.49 359.53 374.16
PEER GROUP 100.00 103.67 117.89 111.36 138.16 156.41
BROAD MARKET 100.00 104.70 118.88 116.57 151.15 182.08
Assumes $100 invested at year-end 1991 in the Company,
the Peer Group, and the NYSE MVI.
The Peer Group was developed for the Company by Media General
Financial Services and is comprised of certain companies that have
Standard Industrial Classification ("SIC") codes which the Company
believes correspond to the Company's primary lines of business. The
companies which comprise the Peer Group are listed on Exhibit "A" to this
Proxy Statement. The Peer Group is comprised of (a) chemical companies
having SIC codes 102 (sulfuric and nitrate) and 103 (specialty chemicals);
and (b) environmental control companies having SIC code 059 (plumbing,
heating, and air conditioning), and is provided for comparison to the
Company's two primary lines of business -- Chemical and Environmental
Control. The NYSE MVI line is provided as a result of the Company's
common stock being listed on the New York Stock Exchange. The Company has
been advised that the cumulative total return of each component company in
the Peer Group has been weighted according to the respective company's
stock market capitalization. In light of the Company's unique industry
diversification, the Company believes that the Peer Group is appropriate
for comparison to the Company.
The above Five-Year Total Shareholder Return Graph shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934 (collectively, the "Acts"),
except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed to be
soliciting material or to be filed under such Acts.
SELECTION OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND
RATIFICATION OF THE REAPPOINTMENT OF ERNST & YOUNG LLP.
The Board of Directors, based on the recommendation of the Audit
Committee, has reappointed the firm of Ernst & Young LLP, certified public
accountants, ("Ernst & Young") as the Company's auditors for 1997, subject
to the approval and ratification by the stockholders. Ernst & Young (or
its predecessor, Arthur Young & Company) has served as the Company's
auditors for a period in excess of five (5) years, including the fiscal
year most recently completed.
In line 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.
SHAREHOLDER PROPOSAL--Amend Bylaws of the
Company to Prohibit the Election to the
Board of Directors of Anyone Above the Age of 70.
The Company has been advised by Carl G. and Olga W. Santangelo (the
"Santangelos"), 3000 North Federal Highway, Fort Lauderdale, Florida
33306, and beneficial owners of 9,033 shares of voting securities of the
Company, that they intend to present for consideration and action at the
1997 Annual Meeting the resolution set forth below. See footnote (7)
under "Securities and Principal Holders--Security Ownership of Certain
Beneficial Owners."
RESOLVED, that the Bylaws of the Company be amended to
prohibit, commencing with directors to be elected at the 1998
annual meeting of stockholders, the election of any individual
above the age of seventy as a director of the Company
SHAREHOLDER SUPPORTING STATEMENT
Certain members of the Company's Board of Directors may, if
permitted, remain entrenched in their positions even though they may no
longer be capable of approaching their responsibilities with the vigor and
flexible outlook demanded of an effective Board member. In addition, the
extended entrenchment of Board members makes it more difficult to
introduce new members, with fresh ideas and innovations, to the Board.
The imposition of a maximum age limit on nominees for election as Company
directors will not only reduce the possibility that a director's age will
adversely affect his ability to serve the Company, but will also
facilitate periodic changes in the constitution of the Board that will
help to bring new ideas and approaches to bear on Company issues.
STATEMENT IN OPPOSITION TO THE SHAREHOLDER PROPOSAL
The Company believes that having a superior Board is a must at all
times, but is particularly essential during times of difficulty or
restructuring, when Board experience can provide the stability and know-
how to allow the Company to develop and carry out its complex strategic
plans. Prohibiting an eminently qualified person from serving as a
director for the sole reason that he or she is above the age of 70 is as
counterproductive as any other broad objective limitation on management
personnel. If this Bylaw amendment, as proposed above, is adopted, the
Company and the stockholders would be deprived of the experience and
competence as a member of the Board of anyone that is above the age of 70.
As the United States and various state governments have recognized in
passage of a variety of laws prohibiting age-related job discrimination,
the establishment of an arbitrary forced age for retirement is not
supported by science or by common experience. Competence and excellence
as a director simply cannot be determined solely as a result of a person
being above 70 years old and completely unrelated to the ability to
perform.
The process whereby the most qualified persons may be nominated as
director of the Company and such persons are elected or not elected to
such position, as determined by the stockholders, is the process at the
heart of democratic corporate governance. The Company believes that
freedom in nomination and election is the best way to assure that the
Company is managed by a first-rate Board.
It should be noted that the stockholders that submitted this
proposal are members of a group of five stockholders which has filed with
the Securities and Exchange Commission as a group by filing one (1) single
joint group Schedule 13D for all five stockholders. Other members of this
same joint group submitted the shareholder proposals relating to the
adoption of cumulative voting of the Board of Directors and elimination of
the Company's classified Board of Directors.
THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PURSUANT TO THE PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION, APPROVAL OF THE ABOVE SHAREHOLDER PROPOSAL WOULD REQUIRE
THE AFFIRMATIVE VOTE OF SIXTY-SIX AND TWO-THIRDS OF THE OUTSTANDING SHARES
OF VOTING STOCK OF THE COMPANY, VOTING AS A SINGLE CLASS. UNLESS
EXPRESSLY INSTRUCTED OTHERWISE IN THE PROXY, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY WILL VOTE THE SHARES REPRESENTED THEREBY AGAINST SUCH
SHAREHOLDER PROPOSAL. ABSTENTIONS AND NON-VOTES WILL HAVE THE EFFECT OF
VOTES AGAINST SUCH SHAREHOLDER PROPOSAL.
SHAREHOLDER PROPOSAL--Cumulative Voting
The Company has been advised by Granite Capital, L.P. ("Granite"),
126 East 56th Street, 25th Floor, New York, New York 10022, and beneficial
owner of 319,220 shares of voting securities of the Company, that they
intend to present for consideration and action at the 1997 Annual Meeting
the resolution set forth below. See footnote (7) under "Securities and
Principal Holders--Security Ownership of Certain Beneficial Owners."
RESOLVED, that the stockholders of the Company
recommend that as soon as practicable, the Board
of Directors take all steps within its legal
power and in accordance with applicable law as
are necessary to declassify the Board for
the purpose of director elections, such
declassification to be effected in a manner
that does not affect the unexpired
terms of directors previously elected.
SHAREHOLDER SUPPORTING STATEMENT
Company directors are currently divided into three classes
consisting of three directors each. A single class of directors is
elected to a three-year term at each annual meeting of stockholders. This
"staggered" Board structure is detrimental to the interests of the
Company's stockholders in two significant respects.
First, the three-year terms of the Company's directors dilute their
accountability to stockholders. Individual directors whose performance
may not be satisfactory to the Company's stockholders are nevertheless
assured of three-year terms. Even if a majority of the Company's
stockholders are dissatisfied with the performance of its Board, they may
be unable to effectuate a change in a controlling majority of its members
until after two annual Board elections. Directors should be properly
accountable to stockholders through elections on an annual basis.
Second, a staggered Board often discourages takeover proposals since
an outside suitor may be unable to obtain control of the Board until after
at least two annual Board elections. An increased potentiality for a
takeover would enhance the Board's accountability to stockholder interests
and, by deterring such takeovers, the Board may be denying the Company's
stockholders opportunities to maximize their investment in the Company.
The opportunity for the Company's stockholders to consider takeover
proposals that might be in their interests to accept should not be
diminished by unnecessary impediments to potential acquirers of the
Company.
STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL
Since the inception of the Company in 1969, the Company has had a
classified Board providing for three-year staggered terms rather than only
one-year terms. The Company firmly believes that a classified board has
been, and continues to be, in the best interests of the Company and its
stockholders. Continuity, long-term business strategy and policy, and
stability in the management of the Company's affairs are enhanced by
having directors who serve three-year, rather than one-year, terms. This
system generally assures that, at any given time, at least two-thirds of
the directors will have at least one year of prior experience and
familiarity with the business and affairs of the Company.
A classified board is a widely used safeguard to protect against
inadequate tender offers or unsolicited attempts to seize control of a
company. The Company's classified Board is intended to encourage a person
seeking to obtain control of the Company to negotiate with the Board.
Because the Company's classified Board generally prevents a hostile actor
from replacing the Board in less than twelve (12) months, the classified
system gives the Board time and ability to evaluate any proposal, to study
alternatives, to negotiate the best result for all stockholders, and to
ensure that stockholder value is maximized.
In the statement in support of its proposal, the proponent suggests
that staggered terms lessen the directors' accountability to the
stockholders. The Board disagrees. Any director may be removed by the
stockholders at any time for cause, and each year approximately one-third
of the directors stand for election. The Board believes that these factors
provide an effective balance between accountability and the need for
stability and experience on the Board.
It should be noted that the stockholder that submitted this proposal
is a member of a group of five stockholders which has filed with the
Securities and Exchange Commission as a group by filing one (1) single
joint group Schedule 13D for all five stockholders. Other members of this
same joint group submitted the stockholder proposals relating to the
adoption of cumulative voting of the Board of Directors and amendment to
the Bylaws requiring the Company not to nominate or renominate as a
director any person who is 70 years of age or older.
Approval of the proposal will require the affirmative vote of a
majority of the votes cast by holders of voting stock entitled to vote at
the Annual Meeting who are present in person or represented by proxy,
voting as a single class. Approval of this proposal would not, however,
require that the requested action be taken since the proposal is only a
recommendation to the Board of Directors. In order to declassify the
Board, it would be necessary to amend the Company's Certificate of
Incorporation. Under Delaware law an amendment to the Company's
Certificate of Incorporation to eliminate the Company's classified board
must first be recommend by the Board of Directors to the shareholders of
the Company entitled to vote, and thereafter under the Company's
Certificate of Incorporation such amendment would require the affirmative
vote of sixty-six and two-thirds of the outstanding shares of voting stock
of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE AGAINST
THIS PROPOSAL.
UNLESS EXPRESSLY INSTRUCTED OTHERWISE IN THE PROXY, THE PERSONS
NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE SHARES REPRESENTED THEREBY
AGAINST SUCH SHAREHOLDER PROPOSAL. ABSTENTIONS AND NON-VOTES HAVE THE
EFFECT OF VOTES AGAINST SUCH SHAREHOLDER PROPOSAL.
SHAREHOLDER PROPOSAL -- ELIMINATION OF STAGGERED BOARD
The Company has been advised by Riverside Capital Advisors, Inc.
("Riverside") and Glenn S. Koach ("Koach"), Vice President of Riverside,
1650 Southeast 17th Street, Suite 204, Fort Lauderdale, Florida 33316-
1735, and the beneficial owners of 238,520 shares of voting securities of
the Company, that they intend to present for consideration and action at
the 1997 Annual Meeting the resolution set forth below. See "Securities
and Principal Holders--Security Ownership of Certain Beneficial Owners."
RESOLVED, that the stockholders of the Company
recommend that as soon as practicable, the Board
of Directors of the Company take all steps
within its legal power and in accordance with
applicable law as are necessary to institute
cumulative voting in the election of directors.
SHAREHOLDER SUPPORTING STATEMENT
Since the Company stockholders currently vote their shares for each
director nominee on a one-share, one-vote basis, the holders of a majority
of the votes cast in an election of directors have the ability to control
the election of all directors and the holders of less than a majority of
the votes cast may be denied any direct representation on the Board.
The establishment of cumulative voting in the election of directors
would entitle each stockholder to as many votes as equals the number of
shares of the Company's voting stock he or she owns, multiplied by the
number of directors to be elected. All such votes may be cast for a
single candidate, or may be allocated among two or more candidates, as the
stockholder sees fit. The effect of cumulative voting is that
stockholders may, if they allocate their votes properly, have sufficient
votes to elect one or more Board members, notwithstanding that such
stockholders own, in the aggregate, only a minority of the shares being
voted in the election.
In accordance with principles of corporate democracy, holders of a
sizable number of Company shares should be entitled to have their views
and interests represented on the Board whether or not they constitute a
voting majority. The stockholder voting system currently in place serves
to perpetuate the views of an entrenched majority of the Company's
stockholders and offers no direct voice on the Board for the views and
interests of the Company's minority stockholders, even if they hold a
significant portion of the Company's voting stock. Through the
institution of cumulative voting, the interests of the Company will be
better served by enabling a broader range of stockholder views and
interests to be represented in Board deliberations.
STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL
Directors should be elected on their ability and commitment to
represent the best interests of the Company and the stockholders as a
whole. This principle is best served under the Company's present
democratic method for election of directors, whereby each director is
elected by a majority of all of the stockholders of the Company who vote
and each director's loyalty is clearly to all stockholders. The Board
embraces this principle by seeking nominees on the basis of personal
achievements, business acumen, diversity, integrity, sound judgment,
energy, willingness to serve, and other criteria relevant to their ability
to be effective representatives of all of the stockholders of the Company,
not just a small group of stockholders.
The Company agrees that independent minded directors are important
to the effectiveness of your Board and that honest differences of opinion
among experienced, knowledgeable persons with the objective of promoting
the best interests of the stockholders can often lead to more thoroughly
discussed decisions. However, the adoption of cumulative voting would
allow a relatively small group of stockholders to elect one or more
directors to advocate the special interests or points of view of that
group, regardless of the wishes of the majority of stockholders and
regardless of the best interest of the Company. The election of directors
to the Board who have been elected by a particular group through
cumulative voting, may lead to adversarial Board meetings with each
director advocating the position of the group responsible for such
director's election, rather than a position which is in the best interest
of the Company and all of the stockholders. This could cause divisions in
the Board and could adversely affect the operations of the business and
affairs of the Company.
The Company notes that the stockholders who submitted this proposal
are members of a group of five stockholders which has filed with the
Securities and Exchange Commission as a group by filing one (1) single
joint group Schedule 13D for all five stockholders. Other members of this
same joint group submitted the shareholders proposal relating to
elimination of a classified Board of Directors and amendment to the Bylaws
requiring the Company not to nominate or renominate as a director any
person who is 70 years of age or older. If the Company amended its
Restated Certificate of Incorporation to provide for cumulative voting of
the Board of Directors of the Company and to eliminate the classified
Board of Directors, this single joint group of five stockholders would
singlehandedly be able to elect a person to the Board against the votes
and wishes of all other stockholders of the Company assuming Riverside
converted into Common Stock all shares of non-voting convertible preferred
stock held by it and assuming that there continues to be six or more
directors on the Board.
The Company recognizes that every stockholder of LSB is a minority
stockholder and, consequently, that the future of the minority
stockholders is the future of the Company. Therefore, the Company
strongly believes each director elected to the Board should feel a
responsibility to serve the best interests of all of its stockholders
rather than the special interests of a particular group . The Company
believes that the current system of voting, providing for the election of
directors by plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote, provides the
best assurance that the directors' decisions will be in the best interests
of all stockholders and will provide the most effective management for the
Company.
Approval of the proposal will require the affirmative vote of a
majority of the votes cast by holders of voting stock entitled to vote at
the Annual Meeting who are present in person or represented by proxy,
voting as a single class. Approval of this proposal would not, however,
require that the requested action be taken since the proposal is only a
recommendation to the Board of Directors. In order to institute
cumulative voting, it would be necessary to amend the Company's
Certificate of Incorporation. Under Delaware law, an amendment to the
Company's Certificate of Incorporation relating to cumulative voting must
first be recommended by the Board of Directors of the Company to the
shareholders of the Company entitled to vote and thereafter such amendment
must be approved by a majority of the outstanding stock of the Company
entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE AGAINST
THIS PROPOSAL.
UNLESS EXPRESSLY INSTRUCTED OTHERWISE IN THE PROXY, THE PERSONS
NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE SHARES REPRESENTED THEREBY
AGAINST SUCH SHAREHOLDER PROPOSAL. ABSTENTIONS AND NON-VOTES HAVE THE
EFFECT OF VOTES AGAINST SUCH SHAREHOLDER PROPOSAL.
OTHER MATTERS
The Board of Directors knows of no other matters which may come
before the Annual Meeting. If any other business properly comes before
the meeting, the persons named in the proxy will vote with respect to that
matter in accordance with their best judgment.
Pursuant to the By-laws of the Company, only such business shall be
conducted at the Annual Meeting as shall have been brought before the
meeting (i) by or at the direction of the Board of Directors of the
Company, or (ii) by any stockholder of the Company who is entitled to vote
at the Annual Meeting and who complies with the following notice
requirements. No business may be properly brought before the Annual
Meeting by a stockholder unless the stockholder gives written notice to
the Secretary of the Company of the business to be presented at the Annual
Meeting not less than fifty (50) days prior to the date of the Annual
Meeting (or in the event that less than sixty (60) days notice, or public
disclosure of the date of the Annual Meeting, is given or made to
stockholders, written notice by the stockholder must be received by the
Secretary of the Company not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the meeting
was mailed or public disclosure was made). The written notice must set
forth: (i) a brief description of the business desired to be presented
before the Annual Meeting and reasons for conducting such business at the
meeting; (ii) the name and address, as they appear on the Company's books,
of the stockholder proposing such business, (iii) the class and number of
shares of the Company's voting stock beneficially owned by such
stockholder, and (iv) any material interest of such stockholder in such
business.
LSB INDUSTRIES, INC.
BY ORDER OF
THE BOARD OF DIRECTORS
DATE: May 27, 1997
David M. Shear
Secretary
Exhibit A
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ACR GROUP INC MELAMINE CHEMICALS INC
ADM TRONICS UNLIMITED MESTEK INC
AGRIUM INC METALCLAD CORP
AIRGAS INC MINERALS TECHNOLOGIES
ALBEMARLE CORP MONTEDISON SPA ADR ORD
ALCIDE CORP MORTON INTERNAT INC.
AMCOL INTERNATIONAL CORP MYCOGEN CORP
AMERICAN STANDARD COS N-VIRO INTERNAT CORP
BALCHEM CORP NALCO CHEMICAL CO
BEARD CO NCH CORP
BETZ DEARBORN INC NORSK HYRDO AS ADR
BUSH BOAKE ALLEN INC NORTHERN TECHNOLOGY
CAMBREX CORP NUCLEAR METALS INC
CARBIDE/GRAPHITE GRP INC NUCO2 INC
CATALYTICA INC OM GROUP INC
CHEMED CORP P&F INDUSTRIES CL A
CLEAN DIESEL TECH INC PENWEST LTD
CONSEP INC PETROLITE CORP
CONTINENTAL MATERIALS CP POLYDEX PHARMACEUTICALS
CROMPTON & KNOWLES CORP PRAXAIR INC
CYANOTECH CORP QUAKER CHEMICAL CORP
CYTEC INDUSTRIES INC RICH COAST INC
DANAHER CORP RINGER CORP
DETREX CORPORATION RONSON CORP
DEXTER CORP SOCTSMAN INDUSTRIES INC
DUALSTAR TECHNOLOGIES CP SCOTT'S LIQUID GOLD INC
DURIRON INC SIGMA-ALDRICH CORP
DWYER GROUP INC SOCIEDAD QUIMICA CHILE
ECOGEN INC STAKE TECHNOL LTD
ECOSCIENCE CORP STANDEX INTERNAT CORP
EDITEK INC SYBRON CHEMICAL INC
ENERGY BIOSYSTEMS CORP SYNTHETECH INC
ENVIRON TECHNOLOGY CORP TEAM INC
FERRO CORP TECUMSEH PRODUCTS CL A
FLAMEMASTER CORP TERRA INDUSTRIES INC
FREEPORT MCMORAN INC TERRA NITROGEN CO LP
FREEPORT MCMORAN RSC PRT THIOKOL CORP
FULLER, H.B. CO TOWER TECH INC
GLOBAL CASINOS INC U.S. HOME & GARDEN INC
GREAT LAKES CHEMICAL CP U.S. LIME & MINERALS INC
H.E.R.C. PRODUCTS INC UNIROYAL TECH CORP
HAUSER INC (CO) UNITED STATES FILTER CP
HAWKINS CHEMICAL INC VALHI INC
HIGH PLAINS CORP WATSCO INC
HUNTINGDON LIFE SCIENCES WD-40 CO
ICC TECHNOLOGIES INC YORK INTERNAT CORP
IMC GLOBAL INC
INTER-CITY PRODUCTS CORP
INTERNAT FLAVORS & FRAG
IVAX CORP
KINARK CORP
KYZEN CORP CL A
LANCER CORP
LAWTER INTERNAT INC.
LEARONAL INC
LESCO INC
LSB INDUSTRIES INC
LUBRIZOL CORP
MACDERMID INC
MACE SECURITY INTERNAT
MALLINCKRODT INC