Exhibit 10.28

LSB INDUSTRIES, INC.

RETENTION BONUS AGREEMENT

This LSB INDUSTRIES, INC., RETENTION BONUS AGREEMENT (the “Agreement”) is by and
between LSB Industries, Inc., a Delaware corporation, (the “Company”) and
[____________] (the “Employee”) effective as of the Effective Date.

WHEREAS, the Company recognizes the important goal of retaining the Employee as
an employee of the Company and its successors, and

WHEREAS, in furtherance of that goal, the Company wishes to provide an
additional financial incentive for the Employee to remain an employee of the
Company for the period of time specified herein.

NOW, THEREFORE, the Company and the Employee agree as follows:

1.Purpose.  The purpose of this Agreement is to provide a financial incentive
for the Employee to remain in the employ of the Employer.

2.Definitions.  The following terms when used herein shall have the meanings set
forth below, unless the context clearly indicates to the contrary.

(a)“Board” means the Board of Directors of the Employer.

(b)“Cause” means, (i) a violation of the Company’s substance abuse policy; (ii)
refusal or inability (other than by reason of death or disability) to perform
the duties assigned to the Employee or unacceptable performance of the same;
(iii) acts or omissions evidencing a violation of the Employee’s duties of
loyalty and good faith; candor; fair and honest dealing; integrity; or full
disclosure to the Company, as well as any acts or omissions which constitute
self-dealing; (iv) disobedience of orders, policies, regulations, or directives
issued to the Employee by the Company, including policies related to sexual
harassment, discrimination, computer use or the like; (v) conviction or
commission of a felony, a crime of moral turpitude, or a crime that could
reasonably be expected to impair the Employee’s ability to perform the
Employee’s job duties; (vi) revocation or suspension of any necessary license or
certification; (vii) willful generation of materially incorrect financial, or
engineering projections, compilations or reports; or (viii) a false statement by
the Employee to obtain his or her position, in each case as determined by the
Company in good faith and in its sole and absolute discretion.

(c)“Change in Control” means:

(i)A “change in the ownership of the Company” which shall occur on the date that
any one person, or more than one person acting as a group, acquires ownership of
stock in the Company that, together with stock held by such person or group,
constitutes more than 50% of the total fair market value or total voting power
of the stock of the Company; however, if any one person or more than one person
acting as a group is considered to own more than 50% of the total fair market
value or total voting power of the stock of the Company as of the Effective
Date, the acquisition of additional stock by the same person or persons will not
be considered a “change in the ownership of the Company” (or to cause a “change
in the effective control of the Company” within the meaning of paragraph (ii)
below) and an increase of the effective percentage of stock owned by any one
person, or persons acting as a group, as a result of a transaction in which the
Company acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this paragraph; provided, further, however,
that for purposes of this paragraph (i), any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any entity
controlled by the Company shall not constitute a Change in Control.  This
paragraph (i) applies only when there is a transfer of the stock of the Company
(or issuance of stock) and stock in the Company remains outstanding after the
transaction; or

 

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(ii)A “change in the effective control of the Company” which shall occur on the
date that either (A) any one person, or more than one person acting as a group,
acquires (or has acquired during the twelve month period ending on the date of
the most recent acquisition by such person or persons) ownership of stock of the
Company possessing 30% or more of the total voting power of the stock of the
Company, except for any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any entity controlled by the
Company; or (B) a majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Board prior to the date of the appointment
or election.  For purposes of a “change in the effective control of the
Company,” if any one person, or more than one person acting as a group, is
considered to effectively control the Company within the meaning of this
paragraph (ii), after the Effective Date, the acquisition of additional control
of the Company by the same person or persons is not considered a “change in the
effective control of the Company,” or to cause a “change in the ownership of the
Company” within the meaning of paragraph (i) above; or 

(iii)A “change in the ownership of a substantial portion of the Company’s
assets” which shall occur on the date that any one person, or more than one
person acting as a group, acquires (or has acquired during the twelve month
period ending on the date of the most recent acquisition by such person or
persons) assets of the Company that have a total gross fair market value equal
to or more than 40% of the total gross fair market value of all the assets of
the Company immediately prior to such acquisition or acquisitions.  For this
purpose, gross fair market value means the value of the assets of the Company,
or the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets.  Any transfer of assets to an entity
that is controlled by the stockholders of the Company immediately after the
transfer, as provided in guidance issued pursuant to Section 409A of the
Internal Revenue Code and the regulations issued thereunder (“Section 409A”),
shall not constitute a Change in Control.

For purposes of the definition of Change in Control, the provisions of Section
318(a) of the Code regarding the constructive ownership of stock will apply to
determine stock ownership; provided, that, stock underlying unvested options
(including options exercisable for stock that is not substantially vested) will
not be treated as owned by the individual who holds the option.  In addition,
for purposes of the definition of Change in Control alone, “Company” includes
(x) the Company, (y) the entity for whom a the Employee performs the services
for which the Restricted Stock are granted, and (z) an entity that is a
stockholder owning more than 50% of the total fair market value and total voting
power (a “Majority Stockholder”) of the Company or the entity identified in (y)
above, or any entity in a chain of entities in which each entity is a Majority
Stockholder of another entity in the chain, ending in the Company or the entity
identified in (y) above.

(d)“Disability” means as that the Employee (a) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than twelve (12) months, or (b) is, by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan
covering employees of the Employer.  Notwithstanding the forgoing, all
determinations of whether the Employee is Disabled shall be made in accordance
with Section 409A and guidance thereunder.

(e)“Effective Date” means [____________].

(f)“Employer” means the Company and any successor to the Company.

(g)“Involuntary Termination” means the Employee’s “separation from service”
(within the meaning of Treasury Regulation § 1.409A-1(h)) with the Employer by
the Employer for any reason other than Cause at any time after the Effective
Date and prior to the two-year anniversary of the Effective Date.

(h)“Retention Date” means the earliest to occur of (i) the date that is the
two-year anniversary of the Effective Date, (ii) the date of an Involuntary
Termination, or (iii) the date of the closing of a Transaction.

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(i)“Transaction” means (i) a sale of the facility at which the Employee works,
(ii) a sale of the business unit in which the Employee works (e.g., Climate
control Business, Chemicals business or Engineered Products Business), or (iii)
a Change in Control of the Company. 

3.Retention Bonus Pay.

(a)Provided that the Employee (i) is continuously employed by the Employer for
the period beginning on the Effective Date and ending on the Retention Date and
(ii) executes and does not revoke the release described in Section 6 in the time
permitted therein to do so, then the Employee shall be entitled to receive a
single lump sum cash payment of [____________] (the “Retention Bonus”), payable
to the Employee within 60 days following the Retention Date.  The provision of
the benefits set forth in this Section 3(a) are subject to Sections 3(b), 3(c)
and 3(d).  

(b)In the event the Employee (i) incurs a separation from service with the
Employer by reason of death or Disability prior to the Retention Date, and (ii)
executes, or if applicable, Employee’s estate or legal representative executes,
and does not revoke the release described in Section 6 in the time permitted
therein to do so, then the Employee or Employee’s estate, as applicable, shall
be entitled to receive a pro-rata portion of the Retention Bonus, with such
pro-rata portion calculated by multiplying the value of the Retention Bonus by a
fraction, the numerator of which is the number of days that have elapsed from
the Grant Date through the date of such separation from service and the
denominator of which shall be 730 (the “Pro-Rata Retention Bonus”).  The
Pro-Rata Retention Bonus shall be paid to the Employee or the Employee’s estate,
as applicable, within 60 days following the date of separation from service due
to death or Disability.  The provision of the benefits set forth in this Section
3(b) are subject to Sections 3(c) and 3(d).

(c)In the event the Employee incurs a separation from service with the Employer
for any reason other than death of Disability (as provided in Section 3(b))
prior to the Retention Date, no Retention Bonus shall be paid.

(d)The Employer shall withhold any and all taxes on the payment of the Retention
Bonus as may be required by applicable law.

4.Overpayment.  If, due to mistake or any other reason, the Employee receives
benefits under this Agreement in excess of what this Agreement provides, the
Employee shall repay the overpayment to the Employer in a lump sum within 30
days of notice of the amount of overpayment.  If the Employee fails to so repay
the overpayment, then without limiting any other remedies available to the
Employer, the Employer may deduct the amount of the overpayment from any other
benefits which become payable to the Employee by the Employer.

5.Set Off.  Notwithstanding anything in this Agreement to the contrary, the
Retention Bonus payable under Section 3 of this Agreement shall be reduced by
any amounts due to the Employer by the Employee or any property of the Employer
retained by the Employee following termination of employment.

6.Release and Other Agreements.  Notwithstanding any other provision in this
Agreement to the contrary, as consideration for receiving benefits under this
Agreement, the Employee may be required to execute (and not revoke) a general
release as may be reasonably requested by the Employer, pursuant to the
procedures established by the Employer.  If the Employee fails to properly
execute such release (or revokes such release), the Employee shall not receive
any benefits under this Agreement.

7.Not a Contract of Employment.  This Agreement is not an employment contract
for any definite period of time.  This Agreement shall have no effect whatsoever
on the at-will employment relationship between the Employee and the
Employer.  Nothing herein shall be deemed to give the Employee the right to be
retained in the employ of the Employer or to restrict the right of the Employer
to discharge the Employee at any time and for any reason, with or without cause
or notice.  This Agreement is a bonus-retention plan and, as such, does not
constitute an arrangement subject to the Employee Retirement Income Security Act
of 1974, as amended.  This Agreement shall not give the Employee any security or
other interest in any assets of the Employer; rather the Employee’s right

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to the Retention Bonus provided under this Agreement shall be those of a general
unsecured creditor of the Employer. 

8.Term.  This Agreement will expire on the earlier to occur of (a) the payment
of all amounts due pursuant to this Agreement following the Retention Date, or
(b) the Employee’s separation from service other than due to an Involuntary
Termination.  

9.Severability.  In the event that any provision of this Agreement, or the
application thereof to any person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal or unenforceable provision shall be fully
severable; and this Agreement shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.  Furthermore,
in lieu of each such illegal, invalid, or unenforceable provision, there shall
be added automatically as part of this Agreement, a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.

10.Choice of Law.  This Agreement shall be interpreted and construed in
accordance with and shall be governed by the laws of the State of Oklahoma,
without reference to principles of conflict of laws, and, when applicable, the
laws of the United States.

11.Entire Agreement.  This Agreement constitutes the entire agreement between
the Company and the Employee relating to the Retention Bonus.  Any previous
agreement with respect to this matter is superseded by this Agreement.  No term,
provision or condition of this Agreement may be modified in any respect except
by a writing executed by both of the parties hereto.  No person has any
authority to make any representation or promise not set forth in this
Agreement.  This Agreement has not been executed in reliance upon any
representation or promise except those contained herein.

12.Acknowledgment of Terms.  The Employee acknowledges that he has carefully
read this Agreement; that he has had the opportunity for review of it by an
attorney of his choosing; that he fully understands its final and binding
effect; that the only promises or representations made to him to sign this
Agreement are those stated herein; and that he is signing this Agreement
voluntarily.

13.Assignment.  The Employee may not assign his rights or obligations under this
Agreement to any other.

14.Waiver Under Agreement.  The failure of the Employer or the Employee to
enforce or require timely compliance with any term or provision of this
Agreement shall not be deemed to be a waiver or relinquishment of rights or
obligations arising hereunder, nor shall such a failure preclude the enforcement
of any term or provision or avoid the liability for any breach of this
Agreement.

15.Successors.  This Agreement shall be binding upon the Company and its
successors and assigns.  Except in the case of a merger or reorganization
involving the Company with respect to which under applicable law the surviving
corporation of such transaction will be obligated under this Agreement in the
same manner and to the same extent as the Company would have been required if no
such merger had taken place, the Company will require any successor (whether
direct or indirect, by purchase or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.  

16.Attorneys’ Fees.  If any action is initiated to enforce this Agreement, each
party shall bear its own costs and attorneys’ fees.

17.Headings.  The headings of the Sections herein are included solely for
convenience.  If the headings and the text of this Agreement conflict, the text
shall control.

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18.Section 409A.  The Retention Bonus and the Pro-Rata Retention Bonus described
herein are intended to be exempt from Section 409A pursuant to the exception
thereunder for “short-term deferrals,” within the meaning of the Section 409A. 

 

 

 

 

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EXECUTED on this ______ day of [____________], to be effective as of the
Effective Date.

 

LSB INDUSTRIES, INC.

 

 

By:

 

 

[____________]

 

 

 

 

 

[____________]

 

Employee

 

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