-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UMMJm42Bf8dsVHAPwhB0dQKuxRrnm+t1Rpr8iEFwaLx0dxprHtvMu+9qJB8a/B/p RZfdedKf4aObxB+yDlSCZQ== 0000060714-94-000012.txt : 19940722 0000060714-94-000012.hdr.sgml : 19940722 ACCESSION NUMBER: 0000060714-94-000012 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940818 FILED AS OF DATE: 19940718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LSB INDUSTRIES INC CENTRAL INDEX KEY: 0000060714 STANDARD INDUSTRIAL CLASSIFICATION: 2810 IRS NUMBER: 731015226 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-07677 FILM NUMBER: 94539136 BUSINESS ADDRESS: STREET 1: 16 S PENNSYLVANIA CITY: OKLAHOMA CITY STATE: OK ZIP: 73107 BUSINESS PHONE: 4052354546 MAIL ADDRESS: STREET 1: P.O. BOX 754 CITY: OKLAHOMA STATE: OK ZIP: 73101 DEF 14A 1 LSB INDUSTRIES, INC. 16 SOUTH PENNSYLVANIA AVENUE POST OFFICE BOX 754 OKLAHOMA CITY, OK 73101 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 18, 1994 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 Thursday, August 18, 1994, at 11:00 a.m. (CST), for the purpose of considering and acting upon the following matters: (1) The election of 3 nominees to the Board of Directors; (2) The approval of the selection of independent auditors; (3) 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 July 13, 1994, 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. 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 previously distributed its 1993 Annual Report to Stockholders. By order of the Board of Directors David M. Shear Secretary Oklahoma City, Oklahoma July 18, 1994 LSB INDUSTRIES, INC. 16 SOUTH PENNSYLVANIA POST OFFICE BOX 754 OKLAHOMA CITY, OK 73101 PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 18, 1994 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 Thursday, August 18, 1994, at 11:00 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. 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 Kissel-Blake Inc. to aid in the solicitation of proxies for a fee of $3,000, 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 telegraph or in writing. MAILING OF PROXY STATEMENT AND PROXY CARD. This Proxy Statement and the Proxy Card is being first sent to Stockholders of the Company on or about July 18, 1994. STOCKHOLDER PROPOSALS. In order for the Company to include a stockholder proposal in the proxy materials for the Company's 1995 Annual Meeting of Stockholders, a stockholder must deliver the proposal in writing to the Secretary of the Company no later than March 20, 1995. 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 July 13, 1994 (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) 13,580,191 shares of Common Stock (excluding 1,035,085 shares held in treasury); (b) 1,619 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, except proxies 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. 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 AND MANAGEMENT. 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 June 30, 1994, 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 June 30, 1994, such as upon the exercise of options. 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 4,037,445 (3)(5)(6) 27.9% members of his family(2) Voting Preferred 20,000 (4)(6) 92.3% - - -------------------------------- (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 of the Company and president of several subsidiaries 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; Steven J. Golsen's address is 7300 S.W. 44th, Oklahoma City, Oklahoma 73179. (3) Includes (a) the following shares that Jack E. Golsen ("J. Golsen") has the sole voting and investment power: (i) 89,028 shares that he owns of record, (ii) 165,000 shares that he has the right to acquire 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, and (v) 10,000 shares that he has the right to acquire within the next sixty (60) days under the Company's stock option plans; (b) 1,293,984 shares owned of record by Sylvia H. Golsen, in which she and her husband, J. Golsen, share voting and investment power; (c) 264,526 shares that Barry H. Golsen ("B. Golsen") has the sole voting and investment power, 533 shares that he shares the voting and investment power with his wife that are owned of record by his wife, and 14,000 shares that he has the right to acquire within the next sixty (60) days under the Company's stock option plans; (d) 225,897 shares that Steven J. Golsen ("S. Golsen") has the sole voting and investment power and 14,000 shares that he has the right to acquire within the next sixty (60) days under the Company's stock option plans; (e) 145,460 shares held in trust for the grandchildren of Jack E. and Sylvia H. Golsen of which B. Golsen, S. Golsen and Linda F. Rappaport jointly or individually, are trustees; (f) 82,552 shares owned of record by Linda F. Rappaport, which Mrs. Rappaport has the sole voting and investment power, and (g) 1,061,799 shares owned of record by Golsen Petroleum Corporation ("GPC) and 533,333 shares that GPC has the right to acquire upon conversion of 16,000 shares of Series B Preferred owned of record by GPC. GPC is wholly-owned by J. Golsen, Sylvia H. Golsen, B. Golsen, S. Golsen and Linda F. Rappaport, with each owning twenty percent (20%) of the outstanding stock of GPC, and as a result, GPC, J. Golsen, Sylvia H. Golsen, B. Golsen, S. Golsen, and Linda F. Rappaport share the voting and investment power of the shares beneficially owned by GPC. GPC'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, which he has the sole voting and investment power; and (b) 16,000 shares of Series B Preferred owned of record by GPC, in which GPC, J. Golsen, Sylvia H. Golsen, B. Golsen, S. Golsen and Linda F. Rappaport share the voting and investment power. (5) Does not include 144,260 shares of common stock that Linda F. Rappaport's husband owns of record and 14,000 shares which he has the right to acquire within the next sixty (60) days under the Company's stock option plans, all of which Linda F. Rappaport disclaims beneficial ownership. (6) J. Golsen disclaims beneficial ownership of the shares that B. Golsen, S. Golsen and Linda F. Rappaport each have the sole voting and investment power over as noted in footnote (3) above. B. Golsen, S. Golsen and Linda F. 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. SECURITY OWNERSHIP OF MANAGEMENT. The following table sets forth information obtained from the directors of the Company and the directors and executive officers of the Company as a group as to their beneficial ownership of the Company's common stock and voting preferred stock as of June 30, 1994. 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 June 30, 1994 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 5,680 (2) * Robert C. Brown, M.D. Common 258,329 (3) 1.9% Barry H. Golsen Common 2,019,651 (4) 14.9% Voting Preferred 16,000 (4) 74.0% Jack E. Golsen Common 3,290,477 (5) 23.9% Voting Preferred 20,000 (5) 92.5% David R. Goss Common 266,477 (6) 2.0% Bernard G. Ille Common 130,000 (7) 1.0% Jerome D. Shaffer,M.D. Common 140,374 (8) 1.0% Tony M. Shelby Common 262,882 (9) 1.9% C.L. Thurman Common 20,333 (10) * Directors and Common 5,039,799 (11) 36.8% Executive Officers Voting Preferred 20,000 (11) 92.5% 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 records. (2) Mr. Ackerman has sole voting and investment power of these shares, which shares are held in a trust in which Mr. Ackerman is both the settlor and the trustee and in which he has the vested interest in both the corpus and income. (3) The amount shown includes 45,000 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 investment power consist of 142,516 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 56,090 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 and Management" of this Item for a description of the amount and nature of the shares beneficially owned by B. Golsen, including 14,000 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 and Management" of this Item for a description of the amount and nature of the shares beneficially owned by J. Golsen, including the 10,000 shares J. Golsen has the right to acquire within sixty (60) days. (6) The amount shown includes 5,000 shares that Mr. Goss has the right to acquire within sixty (60) days pursuant to options granted under the Company's Incentive Stock Option Plans ("ISOs"), all of Mr. Goss has the sole voting and investment power. Mr. Goss shares voting and investment power over 2,429 shares owned by Mr. Goss's wife, individually and/or as custodian for Mr. Goss's children and has sole voting and investment power over the balance of the shares. (7) The amount includes 45,000 shares that Mr. Ille may purchase pursuant to currently exercisable non-qualified stock options in which Mr. Ille has the sole voting and investment power. The amount also includes 85,000 shares owned by Mr. Ille's wife, which Mr. Ille disclaims beneficial ownership. (8) Dr. Shaffer has the sole voting and investment power over these shares, which includes 45,000 shares that Dr. Shaffer may purchase pursuant to currently exercisable non-qualified stock options. (9) Mr. Shelby has the sole voting and investment power over these shares, which includes 5,000 shares that he has the right to acquire within sixty (60) days pursuant to options granted under the Company's ISOs. (10) Mr. Thurman has the sole voting and investment power over these shares, which includes 5,000 shares that Mr. Thurman may purchase pursuant to currently exercisable non-qualified stock options. (11) The amount shown includes 429,380 shares of common stock that officers and directors, or entities controlled by 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 reelection to the Board of Directors three (3) directors, each to hold office for a term of three (3) years and until their successors are duly elected. Barry H. Golsen, David R. Goss and Jerome D. Shaffer, M.D., currently serve as directors of the Company. 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 persons or persons named in the proxy 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 Bylaws 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, M.D., are presently serving as directors of the Company in the class whose term is expiring as of the Annual Meeting. The Company's Bylaws 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 Bylaws presently provide that the number of Directors may consist of not less than three (3) nor more than nine (9). The Board of Directors currently has set the number of directors at nine (9). The Bylaws of the Company further provide that the 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, 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. NAME AND FIRST BECAME PRINCIPAL OCCUPATION A DIRECTOR TERM EXPIRES AGE - - -------------------- ------------ ------------ --- NOMINEES: Barry H. Golsen (1) 1981 1997 43 Vice Chairman of the Board of Directors of the Company and President of the Environmental Control Business of the Company David R. Goss (2) 1971 1997 53 Senior Vice President of Operations of the Company Jerome D. Shaffer, M.D.(3) 1969 1997 77 Investments OTHER DIRECTORS: Robert C. Brown, M.D.(4) 1969 1995 63 President of Northwest Internal Medicine Associates, Inc. Jack E. Golsen (5) 1969 1995 65 President, Chief Executive Officer and Chairman of the Board of Directors of the Company C.L. Thurman (6) 1969 1995 75 Investments Raymond B. Ackerman (7) 1993 1996 71 Chairman Emeritus of Ackerman McQueen, Inc. Bernard G. Ille (8) 1971 1996 67 Investments Tony M. Shelby (9) 1971 1996 52 Senior Vice President of Finance and Chief Financial Officer of the Company - - --------------------------- (1) Mr. B. Golsen was elected as Vice Chairman of the Board of Directors of the Company at an April 15, 1994 meeting of the Board of Directors. For more than five (5) years, Mr. Golsen has served as a director and the President of the Company's Environmental Control Business. (2) Mr. Goss, a certified public accountant, has served in substantially the same capacity for the past five (5) years. (3) Dr. Shaffer retired from the practice of medicine in 1987. Prior to that time, Dr. Shaffer practiced medicine in Oklahoma City, Oklahoma, for more than five (5) years. (4) Dr. Brown has practiced medicine in Oklahoma City, Oklahoma, for more than five (5) years. (5) Mr. Jack E. Golsen, founder of the Company, has served in the same capacity for the past five (5) years. (6) Prior to his retirement from the Company in 1987, Mr. Thurman served as President of the industrial supply operations of the Company's Industrial Products Business for more than five (5) years. (7) On November 11, 1993, Mr. Ackerman was elected as a director of the Company by the Board of Directors to fill a newly created directorship resulting from an increase in the authorized number of directors approved by all of the stockholders having the right to vote as a single class. From 1984 to 1992, Mr. Ackerman served as Chairman of the Board of Ackerman McQueen, Inc., which is a public relations and advertising firm, located in Oklahoma. Ackerman McQueen, Inc., is not a parent, subsidiary or affiliate of the Company. On August 7, 1992, Mr. Ackerman retired from Ackerman McQueen, Inc. (8) Mr. Ille served as President and Chief Executive Officer of First Life Assurance Company ("First Life") from May, 1988, through March 31, 1994, when he retired from First Life and from that position. In 1991, First Life was placed in conservatorship under the Oklahoma Department of Insurance and was sold on March 31, 1994. For more than five (5) years prior to that time, Mr. Ille also served as President of United Founders Life Insurance Company. Mr. Ille also serves as a director of Landmark Land Company Inc. ("Landmark") and served as a director of Landmark's wholly-owned savings and loan subsidiary. Such savings and loan subsidiary was placed in receivership in 1991 by the Federal Deposit Insurance Corporation while Mr. Ille served as a director. First Life was a subsidiary of Landmark until such was placed in conservatorship. (9) Mr. Shelby, a certified public accountant, has served in substantially the same capacity for more than five (5) years. Approval of each nominee for election to the Board of Directors will require the affirmative vote of a plurality of the votes cash 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 THREE (3) NOMINEES AS DIRECTORS OF THE COMPANY. FAMILY RELATIONSHIPS. Jack 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. Jack E. Golsen was a member of the Executive Salary Review Committee until January, 1993. During 1993, 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 inquires 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., and Robert C. Brown, M.D. The Audit Committee held two (2) meetings during 1993. The Board of Directors of the Company held seven (7) meetings in 1993. During 1993 no 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 (other than the Stock Option Committee) of the Board of Directors on which he served. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Based solely on a review of copies of the Forms 3,4 and 5 and amendments thereto furnished to the Company with respect to 1993, or written representations that no such reports were required to be filed with the Securities and Exchange Commission, the Company believes that during 1993 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 Exchange Act on a timely basis, except that during 1993 each of Sylvia H. Golsen and Raymond B. Ackerman filed late their respective Forms 3 relating to when Mrs. Golsen became the beneficial owner of more than 10% of the Company's common stock and when Mr. Ackerman was elected as a director of the Company; C.L. Thurman timely filed one Form 5 representing one late Form 4 relating to the exercise of three stock options; and, Michael D. Tepper timely filed on Form 5 representing one late Form 4 relating to three different transactions on the same day. 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 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. Also, at January 1, 1991, GPC owed Hercules approximately $62,000 for purchases of oilfield equipment in prior years. Beginning in 1991, the balance of $62,000 was payable at the rate of $1,000 per month, and at March 31, 1994, $51,000 was owing by GPC to Hercules. At January 1, 1992, there were outstanding loans and advances to Tony M. Shelby of $105,000. $5,000 of such loans and advances were non-interest bearing. $100,000 of such loans and advances was subject to interest at an annual rate of 7.0%. During 1993, Mr. Shelby sold to the Company 9,782 shares of the Company's common stock at market value at that time and used the proceeds in payment of such loan plus accrued interest. The market value of the shares transferred on the date transferred was $11.25 per share (aggregate $110,000). Prior to 1993 Equity Bank for Savings, F.A. ("Equity"), a wholly owned subsidiary of the Company until sold in May, 1994, made a loan to Douglas Barton which loan bears an annual rate of interest equal to the Citibank, N.A.'s prime rate plus 1.5%. As of June 30, 1993, Mr. Barton owed Equity the sum of $358,158 on this loan. This loan was secured by Mr. Barton's home in Carmel, California and 155,000 shares of Landmark Land Company common stock. This loan was paid in full in January 1994. The loan made by Equity to Mr. Barton was made in Equity's ordinary course of business and made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other persons. Mr. Barton is the son of Gerald G. Barton, who the Company believed owned more than five percent of the Company's common stock from January 1, 1992 until March 1993, when he ceased, to the Company's knowledge, being an owner of record of more than five percent of any class of the Company's voting securities. 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 per month to perform all such examinations. Dr. Robert C. Brown (a director of the Company) is a co-owner 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, 1995. 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, which is $400,000 at June 30, 1994. At the request of a lender to the Company and several of its subsidiaries, during the first half of 1992, Jack E. Golsen guaranteed the repayment of a term loan in the original principal amount of $2,000,000 made by such lender to several subsidiaries of the Company. This loan was repaid by the Company in May, 1993. In December 1993, the Company's Board of Directors authorized the Company to loan funds to certain executive officers of the Company and certain subsidiaries who incurred unanticipated alternative minimum tax liability as a result of the exercise of the Company's incentive stock options during 1993. Pursuant to such authorization, the Company has made loans to the following executive officers of the Company in the following amounts for the purpose of assisting in the payment of alternative minimum tax liability arising from the exercise of the Company's incentive stock options: Jack E. Golsen - $290,000; Barry H. Golsen - $270,000; David R. Goss - $461,000; Tony M. Shelby - $400,000; David M. Shear - $56,500; Jim D. Jones - $185,000; and Michael Tepper - $66,427. Each loan is payable on demand at an annual interest rate equal to New York Prime plus 1% and is secured by shares of the Company's common stock acquired by the respective executive officers upon the exercises of such options. The Company also made loans for the same purposes and on the same terms as described above to Steven J. Golsen, President of one of the company's subsidiaries, in the amount of $270,000 and Claude L. Rappaport, President of one of the Company's subsidiaries, in the amount of $270,000. Steven J. Golsen and Claude L. Rappaport are also the son and son-in-law, respectively, of Jack E. Golsen, the President and Chairman of the Board of the Company. In June, 1994, (i) David R. Goss paid $61,000 against the principal and interest due under his note, resulting in the unpaid principal balance due under Mr. Goss' note being reduced to $407,632 as of June 30, 1994; (ii) Tony M. Shelby paid $65,000 against the principal and interest due under his note, resulting in the principal balance due under Mr. Shelby's note being reduced to $339,969 as of June 30, 1994; and, (iii) Jim D. Jones paid $66,874 against the principal and interest due under his note, resulting in the unpaid principal balance due under Mr. Jones' note being reduced to $120,000 as of June 30, 1994. As of June 30, 1994, no payments have been made against any of the other notes. EXECUTIVE COMPENSATION AND OTHER INFORMATION EXECUTIVE COMPENSATION. The following table shows the aggregate cash compensation which the Company and its subsidiaries paid or accrued to the Chief Executive Officer and each of the other four (4) most highly-paid executive officers of the Company (which includes the individual who serves as Vice Chairman of the Board of Directors and President of the Company's Environmental Control Business and who performs key policy making functions for the Company). The table includes cash distributed for services rendered during 1993, plus any cash distributed during 1993 for services rendered in a prior year, less any amount relating to those services previously included in the cash compensation table for a prior year. The table also includes bonuses earned by the named executive officers during 1993, but not paid until June 1994. SUMMARY COMPENSATION TABLE -------------------------- LONG-TERM COMPEN- SATION ANNUAL COMPENSATION AWARDS ------------------- ------ OTHER ALL ANNUAL SECURITIES OTHER COMPEN- UNDERLYING COMPEN- NAME AND SALARY BONUS SATION STOCK SATION POSITION YEAR ($) ($) ($)(2) OPTIONS ($) - - -------------- ----- ------- ------- ------ ------- ---------- Jack E. Golsen 1993 379,615 150,000 - - 100,000(4) Chairman of the 1992 359,395 160,000(1) - 50,000 - Board and Chief 1991 353,779 - - - - Executive Officer Barry H. Golsen 1993 165,000 90,000 - - 100,000(4) Vice Chairman of 1992 168,671 100,000(1) - 10,000 - the Board and 1991 165,000 25,000 - - - President of the Environmental Control Business David R. Goss 1993 142,000 90,000 - - 100,000(4) Senior Vice 1992 145,099 100,000(1) - 10,000 - President - 1991 142,000 25,000 - - 17,000(3) Operations Tony M. Shelby 1993 142,000 90,000 - - 100,000(4) Senior Vice 1992 144,975 100,000(1) - 10,000 President/Chief 1991 142,000 25,000 - - 20,000(3) Financial Officer David M. Shear 1993 111,846 40,000 - - - Vice President/ 1992 98,032 50,000(1) - 25,000 - General Council 1991 86,688 15,000 - - - - - -------------------------- (1) Includes the following amounts paid in 1992 as bonuses for 1991: Jack E. Golsen - $60,000; Barry H. Golsen - $40,000; David R. Goss - $40,000; Tony M. Shelby - $40,000; and David M. Shear - $30,000. (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 1991, the Company paid to Messrs. Goss and Shelby an additional bonus of $17,000 and $20,000, respectively, which they returned to the Company in payment of a debt each owed to the Company. (4) This amount represents a one-time fee paid in June, 1994, to officers of the Company who served as directors of Equity Bank for Savings, F.A. ("Equity Bank"), for services rendered as a member of the Board of Directors of Equity Bank, during the period that Equity Bank was a wholly owned subsidiary of the Company from its acquisition in 1988 through the date that the Company sold all of the outstanding stock of Equity Bank in May, 1994. The Company does not believe it is practical to attempt to allocate portions of such payment by year, and, as a result, has allocated the full amount of such payment to 1993. OPTION GRANTS IN 1993. No stock options were granted by the Company to any named executive officer in 1993. Aggregated Option Exercises in 1993 and Fiscal Year End Option Values. - - --------------------------------------------------------------------- The following table sets forth information concerning each exercise of stock options by each of the named executive officers during the last fiscal year and the year-end value of unexercised options: NUMBER OF VALUE SECURITIES OF UNEXERCISED UNDERLYING IN-THE-MONEY UNEXERCISED OPTIONS AT OPTIONS AT FY END FY END (#)(3) ($) (3) (4) ------------- ------------- SHARES ACQUIRED VALUE ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE NAME (#)(1) ($) (2) UNEXERCISABLE UNEXERCISABLE - - -------------- ----------- ----------- ------------- ------------- Jack E. Golsen 35,800 $ 290,201 175,000/ (5) $1,238,750/ 30,000 189,360 Barry H. Golsen 39,170 339,372 14,000/ 111,475/ 6,000 37,872 David R. Goss 184,500 1,654,687 5,000/ 38,375/ 6,000 39,750 Tony M. Shelby 196,650 1,777,706 5,000/ 38,375/ 6,000 39,750 David M. Shear 8,000 75,250 8,000/ 58,250/ 15,000 99,375 ___________________________________ (1) Each number represents the number of shares received by the named individual upon exercise. (2) The values set forth in this column represent 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 price of the Company's common stock on the American Stock Exchange at the close of trading on December 31, 1993 of $9.75 per share. 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 amount shown includes 165,000 non-qualified stock options which are currently exercisable. 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 1993 fiscal year pursuant to the 401(k) Plan by the named executive officers of the Company. In 1981, the Company adopted 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 a 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 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 1993, the Company compensated each non- management director of the Company (with the exception of Raymond B. Ackerman, since he was not elected a director until November, 1993) for his services in the amount of $4,500. The non-management directors of the Company also received $500 for every meeting of the Board of Directors attended during 1993. Each member of the Audit Committee, consisting of Messrs. Ille, Brown and Shaffer, also received an additional $20,000 for their services in 1993. In addition, the Company paid C.L. Thurman $20,000 as compensation for his services as Chairperson of the Special Projects Committee of the Board of Directors for 1993. 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, 1994, the Company automatically granted to each non-management director of the Company (Messrs Ackerman, Thurman, and Ille and Drs. Brown and Shaffer) an option to purchase 5,000 shares of the Company's common stock pursuant to the Outside Directors Plan at $9.00 per share. TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS. In 1989 and 1991, the Company entered into severance agreements with Jack E. Golsen, Barry H. Golsen, Tony M. Shelby, David R. Goss, David M. Shear and certain other executive 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. 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 of control. 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. 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 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. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Company's Executive Salary Review Committee (the "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 for all officers of the Company except the President. The Committee sets the compensation of the President and Chief Executive Officer of the Company, taking into account the factors noted below under the "Report of Executive Salary Review Committee. 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 1993, the Executive Salary Review Committee had one meeting. See "Compensation of Directors" for information concerning compensation paid and options granted to non-employee directors of the Company during 1993 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. Jack E. Golsen served as a member of the Committee until January, 1993. See "Compensation Committee Interlocks and Insider Participation in Compensation Decisions". The Committee is responsible for reviewing and approving the compensation paid to executive officers of the Company, including the President-Chief Executive Officer. Compensation Policy for Executive Officers. Although the Committee has not established specific 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 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; and , (iii) to create a performance-oriented environment that rewards performance with respect to financial and operational goals of the Company. 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 recommendation and generally approves the recommendation. 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 three objectives set forth above. With respect to bonus compensation, such recommendation by the President and 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 1990 and 1991, increases in Mr. Golsen's annual salary for 1991 and 1992 were nominal. Mr. Golsen received bonuses for 1991 of $60,000, 1992 of $100,000 and 1993 of $150,000 as a result of the substantial improvement by the Company in each of 1991, 1992, and 1993 over the previous year due, in part, to the efforts of Mr. Golsen, which bonuses the Committee considers to be consistent with the goals set forth above. Further, 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. The Company has had a practice of granting options to the President- Chief Executive Officer and other executive officers. 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 table compares the yearly percentage change in the cumulative total shareholder return of (i) the Company, (ii) the American Stock Exchange Market Value Index ("AMEX MVI") and (iii) a Composite Index ("Composite Index") comprised of a peer group of entities from three distinct industries which represent the Company's three primary lines of business: Chemical, Environmental Control and Financial. The Graph set forth below covers the period from year end 1988 through year end 1993. FISCAL YEAR ENDING 1988 1989 1990 1991 1992 1993 LSB IND., INC. 100 127.27 90.91 90.91 500.00 713.30 PEER GROUP 100 118.01 108.30 150.08 162.85 186.40 BROAD MARKET 100 127.52 108.14 133.19 135.02 160.41 Assumes $100 invested at year-end 1988 in the Company, the AMEX MVI and the Composite Index. The Composite Index was developed for the Company by Media General Financial Services and is comprised of certain companies having a Standard Industrial Classification ("SIC") code which the Company believes corresponds to the Company's three primary lines of business: (a) chemical companies having SIC codes 102 (sulfuric and nitrate) and 103 (specialty chemicals) (the companies with these SIC codes have been combined as the peer group for the Company's Chemical Business); (b) environmental control companies having SIC code 059 (plumbing, heating, and air conditioning) as the peer group for the Company's Environmental Control Business; and (c) financial institutions having an SIC code 540 (savings and loan) as the peer group for the Company's Financial Services Business. The companies which comprise the Composite Index are listed on Exhibit "A" to this Proxy Statement. Each of the three lines of business is weighted equally in the composite Index. The Company has been advised that the cumulative total return of each component company 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 Composite Index represents an appropriate peer group comparison to the Company. The above Five-Year 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, based on the recommendation of the Audit Committee, has reappointed the firm of Ernst & Young, certified public accountants, as the Company's auditors for 1994, 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. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND RATIFICATION OF THE REAPPOINTMENT OF ERNST & YOUNG 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 Bylaws 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 DAVID M. SHEAR SECRETARY DATE: JULY 18, 1994 EXHIBIT "A" AHMANSON, H.F. & CO FIDELITY FEDERAL BANCORP AIRGAS INC FIRST CITIZENS FIN CP ALCIDE CP FIRST FED OF ALABAMA AMERIANA BANCORP FIRST FED S&L E HARTFORD AMERIBANC INVESTORS GR FIRST FIN CP AMERICAN BANK CT FIRST FIN HOLDING AMERICAN COLLOID CO FIRST FRANKLIN CP ANCHOR BANCORP INC FIRST HARRISBURG BANCORP ARISTOTLE CP FIRST HOME SAVINGS BANK ARMOR ALL PRODUCTS CP FIRST INDIANA CP ATLANFED BANCORP INC FIRST INTER-BANKCORP INC BALCHEM CP FIRST LIBERTY FINANCIAL BANCFLORIDA FINANCIAL CP FIRST MISSISSIPPI CP BANCORP OF NEW JERSEY FIRST NORTHRN SVGS BK BANKATLANTIC FED SVG BK FIRST REPUBLIC BANCORP BANKERS FIRST CP FIRST SAVINGS BANK N.M. BANKUNITED FINANCIAL A FIRST STATE FIN SVCS BAY VIEW CAPITAL CP FIRST WESTERN FINANCIAL BETZ LABORATORIES INC FIRSTAR CP BUFFELSFONTEIN GOLD MIN FIRSTFED FINANCIAL CP CALIFORNIA FED BK FSB A FIRSTFED FINANCIAL SVCS CALIFORNIA FIN HLDG CO FLAG FINANCIAL CP CAMBREX CP FLAMEMASTER CP CENTER BANKS INC FLORIDA FIRST FED SVG BK CENTRAL HOLDINGS CO FMS FINANCIAL CP CENTRAL JERSEY FIN CP FORTUNE BANCORP CENTRAL PENNSYLVANIA FIN FRAMINGHAM SAVINGS BANK CHARTER FEDERAL SAV BANK FRANKLIN BANK STHFLD MI CHARTER FSB BANCORP INC FREEPORT MCMORAN INC CHARTER ONE FINANCIAL FREEPORT MCMORAN RSC PRT CHEMED CP FULLER, H.B. CO CHESTER VALLEY BANCORP GLACIER BANCORP INC CITADEL HOLDING CP GOLDEN WEST FINANCIAL COAST SAVINGS FINANCIAL GREAT AMER MGMT & INV COLUMBIA FIRST BANK FSB GREAT LAKES BANCORP MI COMMERCIAL FEDERAL CP GREAT LAKES CHEMICAL CP CONSERVATIVE SAVINGS CP GREAT WESTERN FINANCIAL CONTINENTAL MATERIALS CP GREATER NEW YORK SAV BNK CONTINENTAL SAV OF AM HARLEYSVILLE SAVINGS BK CRESTMONT FINANCIAL CP HAVERFIELD CP CROMPTON & KNOWLES HAWKINS CHEMICAL INC CSF HOLDINGS INC HAWTHORNE FINANCIAL CP D&N FINANCIAL CP HIGH PLAINS CP DEERBANK CP HOME FED BANCORP SEY IN DETREX CP HOME FED FINANCIAL DEXTER CP HOME PORT BANCORP INC. DIME SAVINGS BANK N Y HUNTINGDON INT HLDG ADR. DOWNEY SAV & LN ASSN ICC TECHNOLOGIES INC DURIRON INC IMC FERTILIZER GROUP INC. DWYER GROUP INC. INDIANA FEDERAL CP EAGLE BANCORP INC INSITUFORM MID-AMER INC EAGLE BANCSHARES INC INTERNAT FLAVORS & FRAG EAGLE FINANCIAL CP INTERNAT HOLDING CAP EASTERN BANCORP INC IROQUOIS BANCORP INC ECOGEN INC ITHACA BANCORP INC F&C BANCSHARES INC IVAX CP F.F.O. FINANCIAL GROUP JONES PLUMBING SYSTEMS FARM & HOME FIN CP KINARK CP FEDERAL SAVGS BANK NB CT KING CITY FED SVGS BANK FERRO CP LAKELAND FIRST FIN GR FIDELITY BANCORP INC LANCER CP LAUREL CAPITAL GROUP INC STANDARD FEDERAL BANK MI LAWTER INTERNATIONAL INC STANDEX INTERNAT CP LEARONAL INC SUMMIT BANCORP INC WA LESCO INC SUNCOAST S&L ASSOC FSA LOCTITE CP SYNTHETECH INC LOYOLA CAPITAL CP TCF FINANCIAL CP LSB IND INC TEAM INC LUBRIZOL CP TECUMSEH PRODUCTS CO B MACDERMID INC TERRA IND MARYLAND FEDERAL BANCORP TIDEMARK BANCORP INC MASCO CP UNIONFED FINANCIAL CP MELAMINE CHEMICALS INC UNITED FED SAV ROCKY MT MESTEK INC UNITED FINANCIAL CP SC METALCLAD CP UNITED STATES FILTER CP METRO BANCSHARES INC UNIVAR CP METROBANK N.A. UNSL FINANCIAL CP METROPOLITAN FINANCIAL VALHI INC MONTEDISON S P A ADR ORD VALLEY FED SVG BANK AL MYCOGEN CP VIRGINA BEACH FED FIN NALCO CHEMICAL CO VSB BANKCORP INC NBB BANCORP INC W D-40 CO NCH CP WARREN BANCORP INC NEW HAMP THRIFT BANCSHRS WASHINGTON FED S&L SEATL NEW YORK BANCORP INC WASHINGTON MUTL SAV BK NEWNAN SAVINGS BANK GA WATSCO INC CL A NEWORLD BANCORP INC WATSCO INC CL B NFS FINANCIAL CP WEBSTER FINANCIAL CP NORSK HYDRO AS ADR WESCO FINANCIAL CP NORTH AMER SAV BK FSB WESTCORP INC CA NORTHEAST FEDERAL CP WESTERN FEDERAL BANK PR NOVELLUS SYSTEMS INC YORK FINANCIAL CP NU-WEST IND NUCLEAR METALS INC NYCOR INC ORIENTAL FED SVGS BK PR P&F IND CL A PALFED INC PARKVALE FINANCIAL CP PENWEST LTD PEOPLES BANK BRIDGEPT CT PETROLITE CP PIONEER FINANCIAL CP POLYDEX PHARMACEUTICALS PONCE FED BK FSB P R PROVIDENT BANKSHARES CP PULSE BANCORP INC QUAKER CHEMICAL CP RAILROAD FINANCIAL CP REPUBLIC SECURITY FIN CP RICH COAST RSCS LTD ROOSEVELT FINANCIAL GR ROTO-ROOTER INC. RS FINANCIAL CP SAINT PAUL BANCORP INC SCOTT'S LIQUID GOLD INC SEABOARD BANCORP INC SECURITY BANCORP SECURITY FIRST CP SFFED CP SHELTON BANCORP INC SIGMA - ALDRICH CP SOUTHINGTON SAVINGS BANK SOVEREIGN BANCORP INC STAKE TECHNOLOGY LTD -----END PRIVACY-ENHANCED MESSAGE-----