EXHIBIT 10.3

STEPAN COMPANY

RESTRICTED STOCK AGREEMENT

2006 INCENTIVE COMPENSATION PLAN

THIS AGREEMENT (the “Agreement”), is made and entered into as of          day of
                , 20     (the “Date of Grant”) by and between Stepan Company, a
Delaware corporation (the “Company”) and (the “Participant”).

WITNESSETH THAT:

WHEREAS, the Company has adopted the Stepan Company 2006 Incentive Compensation
Plan (the “Plan”);

WHEREAS, in accordance with the provisions of the Plan, the Company desires to
provide the Participant with an incentive to increase the value of the Company;

WHEREAS, terms not otherwise defined in this Agreement shall have the meanings
ascribed to them in the Plan.

NOW, THEREFORE, in consideration of the foregoing and mutual agreements set
forth herein, and for other good and valuable consideration, the Company and
Participant agree as follows:

 

1. Award. Subject to the terms, conditions and restrictions set forth in this
Agreement and in the Plan, the Company hereby grants to the Participant as of
the Date of Grant              of shares of Stock of the Company (the
“Restricted Stock”). The shares of Restricted Stock awarded to the Participant
shall be subject to the performance conditions set forth in Section 2 (the
“Performance Conditions”) and the restrictions on transferability and forfeiture
set forth in Section 3 (the “Risk of Forfeiture Conditions”).

 

2. Performance Conditions.

 

  (a) The Restricted Stock shall be distributed to the Participant if and to the
extent that the Threshold, Target or Maximum performance level of the
performance goals is achieved, as determined by the Committee in its sole
discretion. The number of shares of Restricted Stock awarded hereby shall be
adjusted based upon the achievement of a specified level of the Company’s
Corporate Net Income (“CNI”) and Return on Invested Capital (“ROIC”) for the
Performance Period, as determined by the Committee. The “Performance Period” for
purposes of this Agreement is the period beginning on                      and
ending on                     .

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  (b) Except as otherwise provided in this Agreement, the number of shares of
Restricted Stock that the Participant shall be entitled to receive at the end of
the Restricted Period (unless forfeited pursuant to Section 3) shall equal the
number of shares of Restricted Stock awarded in accordance with Section 1
hereof, multiplied by the applicable percentage (“Applicable Percentage”), which
correspond to the Company’s achieved specified CNI and ROIC for the Performance
Period, and which is set by the Committee. For levels of actual performance
between the Threshold, Target and Maximum levels of performance achieved, as set
by the Committee, the Applicable Percentage will be calculated by prorating
between the values assigned to the specified performance levels, giving equal
weighting to each of the achieved CNI and ROIC.

 

  (c) Any shares of Restricted Stock awarded hereby that the Participant is not
entitled to receive at the end of the Restricted Period pursuant to this
Section 2 and as determined by the Committee, shall be deemed forfeited, and the
Company shall be authorized to cancel such shares at the end of the Restricted
Period.

 

3. Risk of Forfeiture Conditions. The Restricted Stock shall be subject to the
restrictions on transferability and risk of forfeiture set forth in paragraphs
(a) and (b) below (the “Risks of Forfeiture”) until such Risks of Forfeiture
lapse in accordance with the terms of this Agreement. Upon a lapse of the Risks
of Forfeiture, the Restricted Stock to which the Risks of Forfeiture applied
shall vest and become distributable to the Participant.

 

  (a) The Restricted Stock awarded to the Participant may not be encumbered,
sold, assigned, transferred, pledged, hypothecated or otherwise disposed of
other than by will or the laws of descent and distribution and shall be subject
to a risk of forfeiture during the Restricted Period, beginning on the Date of
Grant and ending on                     . No such sale, assignment, transfer,
exchange, pledge, hypothecation or encumbrance, whether made or created by
voluntary act of the Participant or of any agent of the Participant or by
operation of law, shall be recognized by, or be binding upon or shall in any
manner affect the rights of, the Company or any agent or any custodian holding
certificates for such Restricted Stock during the Restricted Period.

 

  (b) Except as otherwise provided in the Agreement, if the services of the
Participant to the Company shall be terminated during the Restricted Period for
any reason, the Participant shall immediately forfeit to the Company all
Restricted Stock, without any consideration paid to the Participant, and,
thereafter, the Participant shall have no further rights with respect to such
Restricted Shares.

 

4. Lapse of Risks of Forfeiture.

 

  (a) Except as otherwise provided in the Agreement, the Risks of Forfeiture
will lapse and the Participant’s rights will vest with respect to the Restricted
Stock (as adjusted in accordance with Section 2) and any Dividend Rights with
respect to such Restricted Stock, on the first day following the end of the
Restricted Period, provided the Participant shall have been continuously
employed by the Company from the Date of Grant through the date of such lapse.

 

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  (b) Notwithstanding any other provision of this Agreement, if the
Participant’s employment with the Company terminates at least twelve (12) months
after the Date of Grant but before the end of the Restricted Period by reason of
(i) death, (ii) becoming Disabled (within the meaning of Code Section 22(e)(3)),
or (iii) the Participant’s early or normal retirement (with the Company’s
approval) under the provisions of any qualified retirement plan maintained by
the Company, then the Risks of Forfeiture will lapse and the Participant’s right
to Restricted Stock (as adjusted pursuant to Section 2 and this Section) and any
Dividend Rights with respect to such Restricted Stock shall immediately vest.
The number of shares of Restricted Stock to which the Participant may become
entitled pursuant to this Section 4(b), shall equal the number of shares of
Restricted Stock granted hereunder, as adjusted pursuant to Section 2,
multiplied by a fraction, the numerator of which is the number of days in the
Restricted Period during which the Participant was employed by the Company and
the denominator of which is the total number of days in the Restricted Period,
rounded up or down to the whole number of shares.

 

5. Issuance of Stock Certificates. As soon as practicable after the expiration
or lapsing of the Restricted Period, the Company will issue to the Participant a
certificate (without legend) evidencing the number of shares that the
Participant is entitled to receive under Section 2, or, if applicable, Section 4
(less any shares withheld pursuant to Section 5.1 of the Plan) and with respect
to which the Risks of Forfeiture have lapsed.

 

6. Amendments. Any amendment to the Plan shall be deemed to be an amendment to
this Agreement to the extent that the amendment is applicable hereto; provided,
however, that no amendment shall adversely affect the rights of the Participant
under this Agreement without the Participant’s consent.

 

7. Severability. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereto shall continue
to be valid and fully enforceable.

 

8. Relation to Plan. This Agreement is subject to the terms and conditions of
the Plan. In the event of any inconsistent provisions between this Agreement and
the Plan, the Plan shall govern.

 

9. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of the Participant, and the successors and assigns
of the Company.

 

10. Governing Law. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Illinois, without giving
effect to the principles of conflict of laws.

 

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11. Section 83(b) Tax Election. The Participant understands that he or she may
elect to be taxed at the time the Restricted Stock is acquired rather than when
such stock ceases to be subject to forfeiture restrictions by filing an election
under Code Section 83(b) with the Internal Revenue Service within thirty
(30) days after the Date of Grant. The Participant understands that the failure
to make this filing within the thirty-day period will result in the recognition
of ordinary income by the Participant as the forfeiture restrictions on the
Restricted Stock lapses measured by the value of the Restricted Stock at that
time. The Participant agrees that he or she is relying on his or her own tax
advisors and is not relying on the Company with respect to any election that he
or she may make under Code Section 83(b).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the day first written above.

 

STEPAN COMPANY By:       

F. Quinn Stepan, Jr.

President & Chief Executive Officer

 

AGREED AND ACCEPTED: By:        Participant

 

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