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                                                                   EXHIBIT 10.40



                             LAROCHE INDUSTRIES INC.

                      MANAGEMENT STOCK-BASED INCENTIVE PLAN



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                             LAROCHE INDUSTRIES INC.

                      MANAGEMENT STOCK-BASED INCENTIVE PLAN


                                TABLE OF CONTENTS

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ARTICLE I NAME, PURPOSE AND DEFINITIONS...................................................1

         Section 1.1 Purpose..............................................................1

         Section 1.2 Definitions..........................................................1

ARTICLE II ELIGIBILITY....................................................................3

ARTICLE III AWARDS........................................................................3

         Section 3.1 General..............................................................3

         Section 3.2 Phantom Shares.......................................................3

         Section 3.3 Other Awards.........................................................3

ARTICLE IV AWARD AGREEMENTS...............................................................4

         Section 4.1 General .............................................................4

         Section 4.2 Required Terms ......................................................4

ARTICLE V PAYMENT OF BENEFITS.............................................................5

         Section 5.1 Entitlement to Benefits .............................................5

         Section 5.2 Time of Payment .....................................................5

         Section 5.3 Form of Payment .....................................................5

ARTICLE VI ADMINISTRATION.................................................................5

         Section 6.1 General .............................................................5

         Section 6.2 Duties ..............................................................5

         Section 6.3 Powers ..............................................................5

         Section 6.4 Claim for Benefits...................................................6

ARTICLE VII ADJUSTMENTS UPON CHANGES IN CAPITALIZATION....................................6
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<TABLE>
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ARTICLE VIII  CHANGES OF CONTROL..........................................................6

         Section 8.1 General .............................................................6

         Section 8.2 Definition of Change of Control .....................................7

ARTICLE XI AMENDMENT AND TERMINATION......................................................7

         Section 9.1 Amendment of Plan ...................................................7

         Section 9.2 Termination of Plan .................................................8

         Section 9.3 Procedure for Amendment or Termination  .............................8

ARTICLE X MISCELLANEOUS...................................................................8

         Section 10.1 Rights of Employees ................................................8

         Section 10.2 Unfunded Status ....................................................8

         Section 10.3 Limits on Liability ................................................8

         Section 10.4 No Illegal Transactions ............................................9

         Section 10.5 Governing Law ......................................................9

         Section 10.6 Section References .................................................9
</TABLE>


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                             LAROCHE INDUSTRIES INC.

                      MANAGEMENT STOCK-BASED INCENTIVE PLAN

                                    ARTICLE I

                          NAME, PURPOSE AND DEFINITIONS

         LaRoche Industries Inc. (the "Company"), a Delaware corporation, hereby
establishes the LaRoche Industries Inc. Management Stock-Based Incentive Plan as
set forth herein and as may from time to time be amended (the "Plan"), effective
March 1, 1998.


         Section 1.1 Purpose. The purpose of the Plan is to benefit the Company
and stockholders by enabling key management employees of the Company to acquire
a financial interest in the Company. The Plan is intended to aid the Company in
attracting and retaining key management employees, to stimulate the efforts of
those individuals and strengthen their desire to remain in the employ of the
Company.

         Section 1.2 Definitions. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:

         (a) "Award" or "Awards" means an award granted pursuant to Article III.

         (b) "Award Agreement" means an agreement described in Article IV hereof
entered into between the Company and a Participant, setting forth the terms,
conditions and limitations applicable to the Award granted to the Participant.

         (c) "Beneficiary" means the Participant's spouse or, if the Participant
is not married at the date of the Participant's death, the Participant's estate.

         (d) "Board" means the Board of Directors of the Company as it may be
comprised from time to time.

         (e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute and applicable regulations.

         (f) "Committee" means the Compensation Committee of the Board.

         (g) "Company" means LaRoche Industries Inc., a Delaware corporation,
and any subsidiary or successor corporation.

         (h) "Fair Market Value" in reference to the Stock of the Company means
as of a given date, the fair market value determined by the Committee on the
basis of available prices for the Stock or in such manner as the Committee shall
agree. The Committee shall determine the fair market value of any security that
is not publicly traded, using such criteria as it shall determine, in its sole
discretion, to be appropriate for such valuation.

         (i) "Management" means any individual who is a salaried employee of the
Company.



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         (j) "Maturity Value" means the increase in Fair Market Value of a
Phantom Stock unit from the grant date specified in the Participant's Award
Agreement to the Payment Date, as determined by the Committee.

         (k) "Participant" means management personnel designated by the
Committee to be eligible and who have received an Award pursuant to this Plan.

         (l) "Payment Date" means the third anniversary of the effective date of
an Award Agreement.

         (m) "Phantom Stock" means a unit equivalent to a share of Stock as of
the date of the Award. The award of Phantom Stock units shall not entitle the
employee to any dividend, voting or other rights of a shareholder with respect
to such Phantom Stock units.

         (n) "Stock" means the common stock, par value $1.00 per share, of the
Company.

                                   ARTICLE II

                                   ELIGIBILITY

         Awards may be granted to any employee who is or class of employees who
are designated as Participants by the Committee. The Committee shall determine
which employees shall be Participants, the types of Awards to be made to
Participants, and the terms, conditions, and limitations applicable to the
Awards.

                                   ARTICLE III

                                     AWARDS

         Section 3.1 General. The Committee may, in its sole discretion, grant
Awards singly, in tandem, or in combination with other Awards under this Plan or
any other benefit plan of the Company. Subject to the other provisions of this
Plan, Awards also may be granted in combination or in tandem with, in
replacement of, or as alternatives to, grants or rights under this Plan and any
other benefit plan of the Company.

         Section 3.2 Phantom Shares. Phantom Stock units may be awarded under
this Plan from time to time based on such terms and conditions as the Committee
deems appropriate provided that such Awards shall not be inconsistent with the
terms and purposes of this Plan. The Committee shall determine the performance
measurements, if any, vesting and other conditions applicable to such Phantom
Stock units and may prescribe different provisions for different employees or
classes of employees.

         Section 3.3 Other Awards. The Committee may from time to time grant
other Stock and Stock-based Awards under the Plan, including without limitation,
Awards pursuant to which shares of Stock are or may in the future be acquired,
Awards denominated in Stock units and securities convertible into shares of
Stock. The Committee shall determine the terms and conditions of such other
Stock and Stock-based Awards provided that such Awards shall not be inconsistent
with the terms and purpose of this Plan.


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                                   ARTICLE IV

                                AWARD AGREEMENTS

         Section 4.1 General. Each Award under this Plan shall be evidenced by
an Award Agreement setting forth the number of units subject to the Award and
such other terms and conditions applicable to the Award as are determined by the
Committee.

         Section 4.2 Required Terms. In any event, Award Agreements shall
include, at a minimum, explicitly or by reference, the following terms:

         (a) Nonassignability. The Awards under the Plan and the benefit
attributable thereto shall not be assigned, pledged, or otherwise transferred
except by will or by the laws of descent.

         (b) Termination of Employment. In the event of the termination of a
Participant's employment with the Company for any reason prior to vesting, a
Participant shall forfeit all nonvested Phantom Stock units.

         (c) Rights of Stockholder. A Participant shall have no rights as a
stockholder with respect to any interests covered by an Award. Except as
provided in Article VII hereof, no adjustment shall be made for dividends or
other rights, unless the Award Agreement specifically requires such adjustment,
in which case grants of dividend equivalents or similar rights shall not be
considered to be a grant of any stockholder right.

         (d) Withholding. Withholding of applicable taxes required by law from
all amounts paid in satisfaction of an Award shall be satisfied by withholding
the applicable amount from any benefit due a Participant under the Plan and
paying the net amount of such benefit in cash to the Participant.

         (e) Other Terms. The Committee shall determine such other terms as are
necessary and appropriate to effect an Award to the Participant including but
not limited to the term of the Award, vesting provisions, deferrals, any
requirements for continued employment with the Company or a subsidiary, any
other restrictions or conditions (including performance requirements) on the
Award and the method by which restrictions or conditions lapse, the effect on
the Award of a Change of Control as defined in Article VIII, or the price,
amount, or value of Awards.

                                    ARTICLE V

                               PAYMENT OF BENEFITS

         5.1 Entitlement to Benefits. The Award Agreement shall specify the
conditions that must be satisfied in order for a Participant to become vested in
Phantom Stock units. These conditions may include financial and other
performance requirements, continued employment and other measurements deemed
appropriate by the Committee.

         5.2 Time of Payment. A Participant shall be entitled to distribution of
the Maturity Value of vested Phantom Stock within 90 days following the Payment
Date.



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         5.3 Form of Payment. Payment of a Participant's vested Phantom Stock
units shall be made in a lump sum cash payment.

                                   ARTICLE VI

                                 ADMINISTRATION

         Section 6.1 General. The Plan and all Awards pursuant thereto shall be
administered by the Committee. A majority of the members of the Committee shall
constitute a quorum. The vote of a majority of a quorum shall constitute action
by the Committee.

         Section 6.2 Duties. The Committee shall have the duty to administer the
Plan, and to determine periodically the Participants in the Plan and the nature,
amount, pricing, timing, and other terms of Awards to be made to such
individuals.

         Section 6.3 Powers. The Committee shall have all powers necessary to
enable it to carry out its duties under the Plan properly, including without
limitation the power to interpret and administer the Plan. All questions of
interpretation with respect to the Plan, the number of units granted, and the
terms of any Award Agreements shall be determined by the Committee, and its
determination shall be final and conclusive upon all parties in interest. In the
event of any conflict between an Award Agreement and the Plan, the terms of the
Plan shall govern. In addition, the Committee may delegate to the officers or
employees of the Company the authority to execute and deliver such instruments
and documents, to do such acts and things, and to take all such other steps
deemed necessary, advisable or convenient for the effective administration of
the Plan in accordance with its terms and purpose. The Committee may, in its
discretion and consistent with the terms of the Plan, the requirements of other
applicable law, and the terms of an Award Agreement, amend, modify, or waive the
provisions of an Award Agreement or grant a new Award with respect to or in
replacement of an existing Award; provided, however, that no such amendment,
modification, or waiver shall, without the Participant's consent, alter or
impair any rights or obligations under an Award Agreement unless specifically
permitted by the Award Agreement.

         Section 6.4 Claim for Benefits. If any claim for benefits, which must
initially be submitted in writing to the Compensation Committee, is denied (in
whole or in part), the claimant must receive notice of such denial in writing,
written in a manner calculated to be understood by the claimant, setting forth
the reasons for such denial. A claimant may request that the Compensation
Committee review any such denial by submitting, in writing, a written request
within 30 days of such initial denial, setting forth the specific basis upon
which the Participant bases his or her claim for benefits. In the event a claim
for benefits is denied at the last stage of the Plan's administrative review
proceedings, and in the event the claimant continues to contest such denial, the
claim shall be settled by binding arbitration and the decision of the arbitrator
shall be final and binding on the parties.

                                   ARTICLE VII

                            ADJUSTMENTS UPON CHANGES
                                IN CAPITALIZATION

         In the event of a reorganization, recapitalization, Stock split, Stock
dividend, exchange of 


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Stock, combination of Stock, merger, consolidation or any other change in
corporate structure of the Company affecting the Stock, or in the event of a
sale by the Company of an or a significant part of its assets, or any
distribution to its stockholders other than a normal cash dividend, the
Committee shall make appropriate adjustment in the number, kind, price and value
of outstanding Awards as it determines appropriate so as to prevent dilution or
enlargement of rights, unless the Award provides otherwise.

                                  ARTICLE VIII

                                CHANGE OF CONTROL

         Section 8.1 General. In the event of a Change of Control of the
Company, in addition to any action required or authorized by the terms of an
Award Agreement, the Committee may, in its discretion, recommend that the Board
of Directors take any of the following actions as a result of, or in
anticipation of, any such event to assure fair and equitable treatment of the
Plan Participants:

         (a) accelerate time periods for purposes of vesting in, or realizing
gain from, any outstanding Award made pursuant to the Plan;

         (b) offer to purchase any outstanding Award made pursuant to this Plan
from the holder for its equivalent cash value, as determined by the Committee,
as of the date of the Change of Control; or

         (c) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and interests of
Plan Participants following such Change of Control.

Any such action approved by the Board of Directors shall be conclusive and
binding on the Company and Plan Participants.

         Section 8.2 Definition of Change of Control. For the purposes of this
Section, a "Change of Control" shall mean the earliest date on which one of the
following events shall occur:

         (a) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation, or pursuant to which shares of the
Company's common stock are converted into cash, securities or other property,
other than a consolidation or merger of the Company in which the holders of the
Company's common stock immediately prior to the merger have substantially the
same proportionate ownership of common stock of the surviving corporation
immediately after the consolidation or merger, or

         (b) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all the assets of the
Company, or

         (c) the approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company, or


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         (d) any transaction or series of related transactions (whether as a
result of privately negotiated purchases or otherwise) in which any person or
persons not currently a shareholder shall become the beneficial owner(s) of
securities of the Company representing 51% or more of the combined voting power
of the Company's securities having a right to vote in the election of Board
members.

                                   ARTICLE IX

                            AMENDMENT AND TERMINATION

         Section 9.1 Amendment of Plan. The Company expressly reserves the
right, at any time and from time to time, to amend in whole or in part any of
the terms and provisions of the Plan and any or all Award Agreements under the
Plan for whatever reason(s) the Company may deem appropriate; provided, that no
such amendment shall reduce the accrued value of vested Phantom Stock units as
of the date of such amendment.

         Section 9.2 Termination of Plan. The Company expressly reserves the
right, at any time, to terminate the Plan and any or all Award Agreements under
the Plan for whatever reason(s) the Company may deem appropriate, including,
without limitation, termination as to any participating subsidiary, employee, or
class of employees; provided, that vested Phantom Stock units shall be
surrendered for their equivalent cash value as of the termination date.

         Section 9.3 Procedure for Amendment or Termination. Any amendment to
the Plan or termination of the Plan shall be made by the Company by resolution
of the Board and shall not require the approval or consent of any subsidiary,
Participant, or Beneficiary in order to be effective.

                                    ARTICLE X

                                  MISCELLANEOUS

         Section 10.1 Rights of Employees. Status as an eligible employee shall
not be construed as a commitment that any Award will be made under the Plan to
such eligible employee or to eligible employees generally. Nothing contained in
the Plan (or in any other documents related to this Plan or to any Award) shall
confer upon any employee personnel or Participant any right to continue in the
employ or other service of the Company or constitute any contract or limit in
any way the right of the Company to change such person's compensation or other
benefits or to terminate the employment of such person with or without cause.

         Section 10.2 Unfunded Status. The Plan shall be unfunded. Neither the
Company nor the Board of Directors shall be required to segregate any assets
that may at any time be represented by Awards made pursuant to the Plan. Neither
the Company, the Committee, nor the Board of Directors shall be deemed to be a
trustee of any amounts to be paid under the Plan.


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         Section 10.3 Limits on Liability. Any liability of the Company to any
Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement. Neither the Company nor
any member of the Board of Directors or the Committee, nor any other person
participating in any determination of any question under the Plan, or in the
interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken or not taken, in good faith under
the Plan and that do not constitute willful misconduct. To the extent permitted
by applicable law, the Company shall indemnify and hold harmless each member of
the Board of Directors and the Committee from and against any and all liability,
claims, demands, costs, an expenses (including the costs and expenses of
attorneys incurred in connection with the investigation or defense of claims) in
any manner connected with or arising out of any actions or inactions in
connection with the administration of the Plan except for such actions or
inactions which are not in good faith or which constitute willful misconduct.

         Section 10.4 No Illegal Transactions. The Plan and all Awards granted
pursuant to it are subject to all laws and regulations of any governmental
authority which may be applicable thereto. Any provision of the Plan or any
Award notwithstanding, Participants shall not be entitled to exercise Awards or
receive the benefits thereof and the Company shall not be obligated to pay any
benefits to a Participant if such exercise, delivery, receipt or payment of
benefits would constitute a violation by the Participant or the Company or any
provision of any such law or regulation.

         Section 10.5 Governing Law. The laws of the State of Georgia shall be
controlling in all matters relating to the Plan.

         Section 10.6 Section References. All references in this Plan to
sections or articles shall refer to sections and articles of this Plan unless
specifically noted otherwise.

                                    LaRoche Industries Inc.


                                    By:
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                                    Its:
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