Document:

Exhibit 4.5 - Form of ISO Agreement (10% Shareholder)

LSB INDUSTRIES, INC.

1998 STOCK OPTION AND INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

	 

	

            THIS AGREEMENT made this 8th day of July, 1999, between LSB INDUSTRIES,
INC., a Delaware corporation, hereinafter called the "Company", and ___________________,
hereinafter called "Optionee";

W I T N E S S E T H:

	            In consideration of the mutual covenants and conditions herein set forth and for good
and valuable consideration, the Company and the Optionee agree as follows:

            I.      Recitations.  The Company or its Subsidiary is presently employing the
Optionee as its employee and considers it desirable and in its best interest that Optionee be
given an inducement to acquire an initial or additional proprietary interest in the Company as
an added incentive to advance the interest of the Company in the form of this option to
purchase certain shares of the Company's common stock, par value $.10 per share ("Common
Stock"), which option hereunder is granted subject to and in accordance with the Company's
1998 Stock Option and Incentive Plan, as amended prior to this date (the "Plan").  The
capitalized terms herein shall have the same meaning as set forth in the Plan, unless otherwise
indicated.

	           II.     Employment.  This Agreement shall not impose upon the Company or its
Subsidiary any obligation to retain Optionee in its employ or to retain Optionee at his present
salary or position. If Optionee shall leave the employ of the Company or its Subsidiary for any
reason, the option granted herein shall immediately terminate, except as otherwise expressly
provided in Section IV hereof.

          III.   Grant of Option.  The Company hereby grants to Optionee as of the close of
business on this 8th day of July, 1999 (the "Date of Grant"), the right, privilege and option to
purchase an aggregate of ____________________ (__________) shares of its Common Stock
for a price of $1.375 per share (the "Exercise Price"), under and subject to the terms and
conditions of the Plan to which reference is hereby made and a copy of which is attached to
and made a part hereof, such Exercise Price being one hundred and ten percent (110%) of the
Fair Market Value of the Common Stock as determined pursuant to the Plan.  Such option is
hereinafter referred to as the "Option" and the shares of Common Stock purchasable upon the
exercise of the Option are hereinafter sometimes referred to as the "Option Shares."  The
Option is intended by the parties hereto to be an incentive stock option, as such term is defined
under Section 422 of the Internal Revenue Code of 1986, as amended.

 

 

 

 

 

	            IV.    Exercise of Stock Options.  

		                    A.     As an Employee.  If the Option has not been terminated pursuant to
Section VII 

           hereof, the Option granted herein may be exercised by Optionee as
hereinafter provided. 

           Unless waived by the Board of Directors or a committee thereof
that administers the Plan 

           (the Board of Directors or a committee thereof is referred to
herein as the "Committee"), 

           the Optionee, while in the employment of the Company or
its Subsidiary, may exercise the 

           option as follows:

          1.      at any time after one (1) year of continuous employment by the Optionee from
the 

                   Date of Grant, the Option may be exercised in whole or in part as to not
more than 

                   twenty percent (20%) of the total number of Option Shares; 

	           2.     at any time after two (2) years of continuous employment by the Optionee from
the 

                   Date of Grant, the Option may be exercised, in whole or in part, as to an
additional 

                   twenty percent (20%) of the total number of Option Shares; 

	           3.     at any time after three (3) years of continuous employment by the Optionee
from the 

                   Date of Grant, the Option may be exercised, in whole or in part, as to
an additional 

                   thirty percent (30%) of the total number of Option Shares; 

	           4.     at a time after four (4) years of continuous employment by the Optionee from
the 

                   Date of
Grant, the Option may be exercised, in whole or in part, as to all of
the Option 

                   Shares remaining subject to the Option.  

		                  The right to exercise the Option shall be cumulative.  Employment by a
Subsidiary of 

         the Company shall be considered employment by the Company.  The
Committee shall have the 

         sole right to accelerate the time when Optionee will become
entitled to exercise the Option 

         pursuant to the terms hereof and the Plan.    

		                  B.      As a Former Employee.  The Option granted herein may not be
exercised after 

         the Optionee is no longer an employee of the Company or any
Subsidiary; except that if the 

         Optionee ceases to be an employee on account of physical
or mental disability as defined 

          in Section 22(e)(3) of the Code ("Former Employee"),
he may exercise the option within 

          twelve (12) months after the date on which he ceased
to be an employee, for the number 

          of Option Shares for which he could have exercised
at the time he ceased to be an 

          employee.  In no event may the Option be exercised after
the expiration of ten (10) years 

          from the Date of Grant.

		                  C.     In Case of Death.  If the Optionee dies prior to the termination of this
Option, the 

          Option may be exercised within one (1) year after the death of the Optionee
by the personal

           representative of his estate, or

		 

		 

		2

		 

		 

		             by a person who acquired the right to
exercise the Option by bequest, inheritance, or by 

             reason of the death of the Optionee,
provided that:

	            1.      the Optionee died while an employee of the Company or a Subsidiary; or

	            2.      the Optionee ceased to be an employee of the Company or a Subsidiary on
account

                     of physical or mental disability and died within three (3) months after
the date on 

                     which he ceased to be such employee.

		                  The Option may be exercised only as to the number of shares for which the
Optionee 

             could have exercised at the time the Optionee died.  In no event may the
Option be 

             exercised after the expiration of five (5) years from the Date of Grant.

		                  D.      Continuous Employment.  The Committee shall decide, in its sole and
absolute 

          discretion, to what extent leaves of absence for government or military
service, illness, 

          temporary disability or other reasons, shall not interrupt continuous
employment, which 

          decision shall be binding for the purpose of this Agreement.

		                 
 E.     Acceleration upon Change in Control.  The Option shall become
immediately 

           exercisable in full, notwithstanding the four (4) year vesting schedule
provided in Section 

           IV.A, upon a change in control of the Company.  A "change in
control" shall be defined 

           as set forth in the Plan.

	          V.     Notice of Exercise and Payment of Exercise Price.  Subject to the terms of
this Agreement, the Option shall be exercised by giving written notice of such exercise to the
Company identifying the Option being exercised and specifying the number of Option Shares
then being purchased.  Such notice shall be accompanied by payment in full of the Exercise
Price, which shall be in cash or in whole shares of Common Stock which are already owned
by the Optionee, or partly in cash and partly in such Common Stock.  Cash payments shall be
made by wire transfer, certified check, bank check or personal check, in each case payable to
the order of the Company; provided, however, that the Company shall not be required to
deliver certificates for shares of Common Stock with respect to which the Option is exercised
until the Company has confirmed the receipt of good and valuable funds in payment of the
purchase price thereof.  Payments in the form of Common Stock (which shall be valued at the
Fair Market Value of a share of Common Stock on the date of exercise) shall be made by
delivery of stock certificates in negotiable form (in form and content satisfactory to the
Company) which are effective to transfer good and valid title thereto to the Company, free of
any liens or encumbrances.  

	          VI.     Issuance of Shares.  As soon as practicable after its receipt of such notice and
payment, the Company shall cause one or more certificates for the shares so purchased to be
delivered to the Optionee or his or her estate, as the case may be; provided, however, the
obligation of the Company to deliver such

	 

	3

	 

	certificates shall be subject to the Company's
compliance with any applicable federal and state securities laws as provided in Section 10
hereof.

          VII.    Termination of Option.  This Agreement and the Option granted herein, to the
extent not theretofore exercised, shall terminate and become null and void immediately upon
the earlier of the following to occur: 

		                  A.     Option No Longer Exercisable.  At such time as the Option is no longer
exercisable

          pursuant to the terms of Section IV hereof; 

		                  B.      Surrender of Options.  Upon the Optionee's surrender to the Company
for 

          cancellation of this Agreement and the Option granted herein; and, 

		                C.      Expiration of Term.  Upon the fifth (5th) anniversary of the Date of
Grant.

	          VIII.   Restrictions.  The Option will not be transferrable otherwise than by will or the
laws of descent and distribution, and the Option may be exercised, during the lifetime of the
Optionee, only by Optionee.  More particularly (but without limiting the generality of the
foregoing), the Option may not be assigned, transferred (except as provided above), pledged,
or hypothecated in any way, will not be assignable by operation of law and will not be subject
to execution, attachment, or similar process.  Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option contrary to the provisions hereof, and the
levy of any execution, attachment or similar process upon the Option, will be null and void
and without effect.

	           IX.    Adjustments.  Pursuant to the terms of the Plan, in the event of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, or
other change in the corporate structure or capitalization affecting the Corporation's common
stock, a fair and equitable adjustment will be made in the number, kind, option price, etc., of
shares subject to the Option to the extent that the proportionate interest of the holder of the
Option will be maintained as before the occurrence of such event.

	          X.      Compliance with Law and Approval of Regulatory Bodies.  No shares of
Common Stock will be issued or, in the case of treasury shares, transferred, upon exercise of
the Option, except in compliance with all applicable federal and state laws and regulations and
in compliance with rules of stock exchanges on which the Company's shares may be listed.
Any share certificate issued to evidence shares as to which the Option is exercised shall bear
such restrictive legends and statements as the Committee shall deem advisable to assure
compliance with federal and state laws and regulations.  No shares of Common Stock will be
issued or, in the case of treasury shares, transferred, upon exercise of the Option until the
Company has obtained such consent or approval from regulatory bodies, federal or state,
having jurisdiction over such matters as the Committee may deem advisable.

	 

4

	 

	          XI.    Investment Representations.
Optionee, or his personal representative, may be
required by the Committee to give a written representation that the shares subject to the Option
will be acquired, or are being acquired, as the case may be, for investment and not with a
view to a public distribution of them; provided, however, that the Committee in its sole
discretion, may release the Optionee, or his personal representative, from such investment
representations either prior to or subsequent to the exercise of the Option.

          XII.   Rights as a Shareholder.   Optionee shall have no rights as a shareholder with
respect to any shares covered by this Agreement or the Option until the date of issuance of a
stock certificate to him for such shares.  No adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is issued.

	          XIII.  Binding Effect.  This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties hereto.

	          XIV.   Incorporation by Reference; Interpretation.  The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by reference, and the
Option and this Agreement shall be interpreted in accordance with the Plan.  The Committee
shall construe and interpret the terms and provisions of the Plan and this Agreement and shall
at its discretion make general and special rules and regulations for administering the Plan,
which construction, interpretation, rules and regulations shall be binding and conclusive upon
all persons granted an option pursuant to the Plan and this Agreement.

	            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the Date of Grant.

ATTEST:                                                                     LSB INDUSTRIES, INC.				

____________________________________
            By:	_________________________________

____________________________Secretary                    Name:  Jack E. Golsen

                                                                                           Title:  President

		[S E A L]

							                                                                                        "Optionee"

                                                                                         __________________________________

                                                                                         _________________________Exhibit 4.4 - Form of ISO Agreement

LSB INDUSTRIES, INC.

1998 STOCK OPTION AND INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

	          THIS AGREEMENT made this 8th day of July, 1999, between LSB INDUSTRIES,
INC., a Delaware corporation, hereinafter called the "Company", and ___________________,
hereinafter called "Optionee";

W I T N E S S E T H:

	          In consideration of the mutual covenants and conditions herein set forth and for good
and valuable consideration, the Company and the Optionee agree as follows:

	          I.     Recitations.  The Company or its Subsidiary is presently employing the
Optionee as its employee and considers it desirable and in its best interest that Optionee be
given an inducement to acquire an initial or additional proprietary interest in the Company as
an added incentive to advance the interest of the Company in the form of this option to
purchase certain shares of the Company's common stock, par value $.10 per share ("Common
Stock"), which option hereunder is granted subject to and in accordance with the Company's
1998 Stock Option and Incentive Plan, as amended prior to this date (the "Plan").  The
capitalized terms herein shall have the same meaning as set forth in the Plan, unless otherwise
indicated.

	          II.    Employment.  This Agreement shall not impose upon the Company or its
Subsidiary any obligation to retain Optionee in its employ or to retain Optionee at his present
salary or position. If Optionee shall leave the employ of the Company or its Subsidiary for any
reason, the option granted herein shall immediately terminate, except as otherwise expressly
provided in Section IV hereof.

	          III.   Grant of Option.  The Company hereby grants to Optionee as of the close of
business on this 8th day of July, 1999 (the "Date of Grant"), the right, privilege and option to
purchase an aggregate of ______________ (______) shares of its Common Stock for a price of
$1.25 per share (the "Exercise Price"), under and subject to the terms and conditions of the
Plan to which reference is hereby made and a copy of which is attached to and made a part
hereof, such Exercise Price being one hundred percent (100%) of the Fair Market Value of the
Common Stock as determined pursuant to the Plan.  Such option is hereinafter referred to as
the "Option" and the shares of Common Stock purchasable upon the exercise of the Option are
hereinafter sometimes referred to as the "Option Shares."  The Option is intended by the
parties hereto to be an incentive stock option, as such term is defined under Section 422 of the
Internal Revenue Code of 1986, as amended.

	 

	 

	 

	          IV.    Exercise of Stock Options.  

                  A.     As an Employee.  If the Option has not been terminated pursuant to
Section VII 

          hereof, the Option granted herein may be exercised by Optionee as
hereinafter provided. 

          Unless waived by the Board of Directors or a committee thereof
that administers the Plan 

          (the Board of Directors or a committee thereof is referred to
herein as the "Committee"), 

          the Optionee, while in the employment of the Company or
its Subsidiary, may exercise the 

          option as follows:

	          1.     at any time after one (1) year of continuous employment by the Optionee from
the 

                  Date of Grant, the Option may be exercised in whole or in part as to not
more than 

                  twenty percent (20%) of the total number of Option Shares; 

	          2.     at any time after two (2) years of continuous employment by the Optionee from
the 

                  Date of Grant, the Option may be exercised, in whole or in part, as to an
additional 

                  twenty percent (20%) of the total number of Option Shares; 

	          3.     at any time after three (3) years of continuous employment by the Optionee
from the 

                  Date of Grant, the Option may be exercised, in whole or in part, as to
an additional 

                  thirty percent (30%) of the total number of Option Shares; 

          4.     at a time after four (4) years of continuous employment by the Optionee from
the Date 

                  of Grant, the Option may be exercised, in whole or in part, as to all of
the Option 

                  Shares remaining subject to the Option.  

		                  The right to exercise the Option shall be cumulative.  Employment by a
Subsidiary of 

          the Company shall be considered employment by the Company.  The
Committee shall have 

          the sole right to accelerate the time when Optionee will become
entitled to exercise the 

          Option pursuant to the terms hereof and the Plan.    

		                  B.     As a Former Employee.  The Option granted herein may not be
exercised after 

          the Optionee is no longer an employee of the Company or any
Subsidiary; except that if the 

          Optionee ceases to be an employee on account of physical
or mental disability as defined in 

          Section 22(e)(3) of the Code ("Former Employee"),
he may exercise the option within 

          twelve (12) months after the date on which he ceased
to be an employee, for the number 

          of Option Shares for which he could have exercised
at the time he ceased to be an employee. 

          In no event may the Option be exercised after
the expiration of ten (10) years from the Date 

          of Grant.

		                  C.     In Case of Death.  If the Optionee dies prior to the termination of this
Option, the 

          Option may be exercised within one (1) year after the death of the Optionee
by the personal

		 

		2

		 

		

          representative of his estate, or by a person who acquired the right to
exercise the Option by 

          bequest, inheritance, or by reason of the death of the Optionee,
provided that:

	          1.     the Optionee died while an employee of the Company or a Subsidiary; or

	          2.     the Optionee ceased to be an employee of the Company or a Subsidiary on
account of 

                  physical or mental disability and died within three (3) months after
the date on which 

                  he ceased to be such employee.

		                  The Option may be exercised only as to the number of shares for which the
Optionee 

          could have exercised at the time the Optionee died.  In no event may the
Option be exercised 

          after the expiration of ten (10) years from the Date of Grant.

		                  D.     Continuous Employment.  The Committee shall decide, in its sole and
absolute 

          discretion, to what extent leaves of absence for government or military
service, illness, 

          temporary disability or other reasons, shall not interrupt continuous
employment, which 

          decision shall be binding for the purpose of this Agreement.

                  E.     Acceleration upon Change in Control.  The Option shall become
immediately 

           exercisable in full, notwithstanding the four (4) year vesting schedule
provided in Section 

           IV.A, upon a change in control of the Company.  A "change in
control" shall be defined as 

           set forth in the Plan.

	          V.     Notice of Exercise and Payment of Exercise Price.  Subject to the terms of
this Agreement, the Option shall be exercised by giving written notice of such exercise to the
Company identifying the Option being exercised and specifying the number of Option Shares
then being purchased.  Such notice shall be accompanied by payment in full of the Exercise
Price, which shall be in cash or in whole shares of Common Stock which are already owned
by the Optionee, or partly in cash and partly in such Common Stock.  Cash payments shall be
made by wire transfer, certified check, bank check or personal check, in each case payable to
the order of the Company; provided, however, that the Company shall not be required to
deliver certificates for shares of Common Stock with respect to which the Option is exercised
until the Company has confirmed the receipt of good and valuable funds in payment of the
purchase price thereof.  Payments in the form of Common Stock (which shall be valued at the
Fair Market Value of a share of Common Stock on the date of exercise) shall be made by
delivery of stock certificates in negotiable form (in form and content satisfactory to the
Company) which are effective to transfer good and valid title thereto to the Company, free of
any liens or encumbrances.  

	          VI.    Issuance of Shares.  As soon as practicable after its receipt of such notice and
payment, the Company shall cause one or more certificates for the shares so purchased to be
delivered to the Optionee or his or her estate, as the case may be; provided, however, the
obligation of the Company to deliver such

	3

	 

	certificates shall be subject to the Company's
compliance with any applicable federal and state securities laws as provided in Section 10
hereof.

	          VII.   Termination of Option.  This Agreement and the Option granted herein, to the
extent not theretofore exercised, shall terminate and become null and void immediately upon
the earlier of the following to occur: 

		                  A.     Option No Longer Exercisable.  At such time as the Option is no longer
exercisable

          pursuant to the terms of Section IV hereof; 

                  B.     Surrender of Options.  Upon the Optionee's surrender to the Company
for 

           cancellation of this Agreement and the Option granted herein; and, 

                 C.     Expiration of Term.  Upon the tenth (10th) anniversary of the Date of
Grant.

	          VIII.   Restrictions.  The Option will not be transferrable otherwise than by will or the
laws of descent and distribution, and the Option may be exercised, during the lifetime of the
Optionee, only by Optionee.  More particularly (but without limiting the generality of the
foregoing), the Option may not be assigned, transferred (except as provided above), pledged,
or hypothecated in any way, will not be assignable by operation of law and will not be subject
to execution, attachment, or similar process.  Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option contrary to the provisions hereof, and the
levy of any execution, attachment or similar process upon the Option, will be null and void
and without effect.

	          IX.    Adjustments.  Pursuant to the terms of the Plan, in the event of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, or
other change in the corporate structure or capitalization affecting the Corporation's common
stock, a fair and equitable adjustment will be made in the number, kind, option price, etc., of
shares subject to the Option to the extent that the proportionate interest of the holder of the
Option will be maintained as before the occurrence of such event.

	          X.     Compliance with Law and Approval of Regulatory Bodies.  No shares of
Common Stock will be issued or, in the case of treasury shares, transferred, upon exercise of
the Option, except in compliance with all applicable federal and state laws and regulations and
in compliance with rules of stock exchanges on which the Company's shares may be listed.
Any share certificate issued to evidence shares as to which the Option is exercised shall bear
such restrictive legends and statements as the Committee shall deem advisable to assure
compliance with federal and state laws and regulations.  No shares of Common Stock will be
issued or, in the case of treasury shares, transferred, upon exercise of the Option until the
Company has obtained such consent or approval from regulatory bodies, federal or state,
having jurisdiction over such matters as the Committee may deem advisable.

	 

	 

	4

	 

	          XI.    Investment Representations.
Optionee, or his personal representative, may be
required by the Committee to give a written representation that the shares subject to the Option
will be acquired, or are being acquired, as the case may be, for investment and not with a
view to a public distribution of them; provided, however, that the Committee in its sole
discretion, may release the Optionee, or his personal representative, from such investment
representations either prior to or subsequent to the exercise of the Option.

	          XII.   Rights as a Shareholder.   Optionee shall have no rights as a shareholder with
respect to any shares covered by this Agreement or the Option until the date of issuance of a
stock certificate to him for such shares.  No adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is issued.

	          XIII.  Binding Effect.  This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties hereto.

	          XIV.   Incorporation by Reference; Interpretation.  The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by reference, and the
Option and this Agreement shall be interpreted in accordance with the Plan.  The Committee
shall construe and interpret the terms and provisions of the Plan and this Agreement and shall
at its discretion make general and special rules and regulations for administering the Plan,
which construction, interpretation, rules and regulations shall be binding and conclusive upon
all persons granted an option pursuant to the Plan and this Agreement.

	           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the Date of Grant.

ATTEST:                                                               LSB INDUSTRIES, INC.				

____________________________________    By:	_________________________________

_____________________________Secretary         Name:  Jack E. Golsen

                                                                                  Title:  President

		[S E A L]

							                                                                              "Optionee"

                                                                               ____________________________________

                                                                               __________________________

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