Compensation Committee Report
The Compensation Committee has adopted and implemented core principles that form the framework for our executive compensation program. We
believe that this program appropriately aligns executive compensation opportunities and our long-term strategic plan and supports accountability for long-term results.
The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management and, based on
such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement, and we encourage you to read it.
William F. Murdy (Chair)
Jonathan S. Bobb
Richard W. Roedel
Compensation Discussion and Analysis
CEO and Leadership Team Transition
In 2015, the Company faced numerous challenges stemming from a multitude of influences, including pressure from activist investors to change the make-up of the Board,
make management changes and evaluate the separation of the Companys two primary businesses: climate control and chemical. In addition, cost overruns related to the expansion of the El Dorado facility continued, the stock price declined
precipitously, and the Company faced a potential liquidity crisis in the fourth quarter of 2015. In response to the potential liquidity crisis, the Company raised an additional $260 million from LSB Funding through the sale of additional senior
secured notes and the issuance of preferred stock and warrants, as previously disclosed. The agreements with LSB Funding also resulted in the creation of a second large ownership block being held by an interested party.
In response to the aforementioned activist pressure and continued operational and financial challenges, the following governance and other changes were implemented in
2015 and 2016:
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Seven new independent directors were added to the Board as a result of the Companys settlement with Starboard Value L.P. and certain affiliates;
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Three new directors were added to the Board as a result of the Companys agreements with LSB Funding;
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The Chief Executive Officer resigned and was replaced;
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The Chief Financial Officer retired and was replaced;
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The General Counsel resigned and was replaced; and
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The Chief Operating Officer resigned.
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Given the operational and financial condition of the Company and the wholesale
changes to the Board and
management team that was determined to be necessary for the Companys long-term viability and the significant share ownership by the Golsen Holders, the Company was faced with the difficult
task of building a new management team with the skills and experience required to guide the Company through the completion of the El Dorado expansion, the potential separation of the Companys businesses and the restructuring of the business
operations to increase cash flow and build stockholder value.
In September 2015, the Board asked Mr. Greenwell, at the time a non-employee director, to assume
the role of Interim Chief Executive Officer due in large part to his prior experience in the chemical industry, specifically his experience in the sale of Terra Industries and the re-financing of Tronox Limited. Mr. Greenwell was appointed as
President and Chief Executive Officer on December 22, 2015. At the same time the Company entered into a new employment agreement with Mr. Behrman with the goal of retaining him in the position of Chief Financial Officer to avoid further
turnover during the challenging times faced by the Company and to ensure access to his experience as an investment banker prior to joining the Company. Additionally, in January 2016, the Company engaged Mr. Foster as its new General Counsel,
due in large part to his experience with companies facing financial and operational difficulties, including his experience in the Tronox bankruptcy and the ensuing strategic transactions and re-financing.
The Compensation Committee, assisted by its independent compensation consultant, and with the consent of the Board, negotiated employment agreements with each of
Messrs. Greenwell, Behrman and Foster. The Compensation Committee has determined that these employment agreements include compensation, equity grants and change in control provisions commensurate with the challenges facing the Company and the
management team. In particular, the certainty provided in the agreements include time based equity grants and immediate vesting of equity grants upon a change in control of the Company. These provisions were included in the agreements for the
specific purpose of engaging
LSB Industries
Proxy Statement
23
Executive Compensation
and or retaining each of the executives because of their specific experience and skills under the circumstances. The
Compensation Committee will continue to review the circumstances and needs of the Company as it engages additional members of the executive team.
Overview of Compensation Program
This Compensation Discussion and Analysis describes our compensation
philosophy, objectives, policies and practices framed within the context of the chemical manufacturing industry and specifically our strategy and performance with respect to our named executive officers for 2016.
Our named executive officers during 2016 were:
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Jack E. Golsen
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Executive Chairman
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Daniel D. Greenwell
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President and Chief Executive Officer
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Mark T. Behrman
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Executive Vice President and Chief Financial Officer
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John H. Diesch
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Executive Vice President, Manufacturing
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Michael J. Foster
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Senior Vice President, General Counsel & Secretary
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Steven J. Golsen
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Former President and Chief Executive Officer of The Climate Control Group
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Our long-term success depends on our ability to efficiently operate our facilities, to continue to develop our product lines and
technologies, and to focus on developing our product markets. To achieve these goals, it is important that we attract, motivate, and
retain highly talented individuals who are committed to our values and goals.
The Compensation Committee has
the responsibility to establish, in consultation with management, our compensation philosophy for our senior executive officers and to implement and oversee a compensation program consistent with such philosophy. This group of senior executive
officers includes the named executive officers, as well as our other executive officers.
A primary objective of the Compensation Committee is to ensure that the
compensation paid to the senior executive officers provides incentives for superior performance, aligns their interests with our stockholders, and is fair, reasonable, and competitive.
The Compensation Committee is responsible for approval of all decisions for the compensation of our named executive officers.
The three elements of total direct compensation for our executives are: (i) base salary, (ii) short-term incentive and (iii) long-term incentive. Unlike
base salary, which is fixed annually, short-term and long-term incentive awards each represent variable compensation. These three elements are balanced such that each executive has an appropriate amount of compensation that is contingent on
performance across both near and long term horizons.
As illustrated in the graphics below, a substantial majority of each of the named executive officers,
excluding Messrs. J. Golsen and S. Golsen, target direct compensation for 2016 was delivered through variable compensation which is contingent on performance (80% for the Chief Executive Officer and 61% on average for the other named executive
officers).
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Chief Executive Officer
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Average Other Named Executive Officers
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24
LSB Industries
Proxy Statement
Executive Compensation
Compensation Philosophy and Objectives
We believe our executive compensation philosophy aligns the interests of our stockholders and senior executives and holds
our named executive officers accountable for short and long-term performance, manages risk taking within the parameters of our philosophy, and supports the guiding principles that drive our overall compensation philosophy. The elements of our
compensation program have specific
objectives and the overall program is designed to reward annual and sustained performance over the long-term. We follow the same program for all senior management, but vary pay mix by job
responsibility level and include additional pay for performance factors for our most senior employees. The table below describes the elements of our compensation program and how each supports our compensation philosophy:
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Compensation Element
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Performance Period
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Performance
Measures
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Purpose of
Compensation
Element
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Base Salary
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1 year
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Pay aligned with
scope of
responsibilities and
experience
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Provides
competitive fixed
pay
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Performance Annual Incentive Award
(Short-Term Incentive)
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1 year
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Financial
performance
metrics
Strategic goals
Individual employee
performance
Safety
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Promotes
achievement of
company
performance
metrics important to
stockholders
Evaluates
performance against
pre-established
strategic goals and
accomplishments
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Equity Grants
(Long-Term Incentive)
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3 years for
restricted stock
and restricted
stock unit
awards
6 years for stock
option awards
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Depending on form of
grant:
Time based (vesting
ratably over 3 years)
Financial
performance
metrics
Stock price
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Aligns named
executive officers
and long-term
stockholders
interests
Retains talent with
long-term wealth
accumulation
opportunities
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Limited Perquisites and Other Benefits
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Not applicable
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Not applicable
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Allows the
Company to remain
competitive among
its peers to attract
and retain key talent
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Setting Executive Compensation
The Compensation Committee sets annual cash and non-cash executive compensation to reward the named executive officers for achievement of, and to motivate the named
executive officers to achieve, long-term business objectives. The Compensation Committee also reviews the compensation information of our peer companies, as provided by our compensation consultants. As described in more detail below, in 2016, the
Compensation Committee engaged Steven Hall & Partners as compensation consultants to assist the Compensation Committee in conducting its review of the total compensation program. This information is
used to determine whether our compensation amounts are within the range of similarly sized companies, as further described below. We do not benchmark the amount of total compensation or any
material element of compensation.
The Compensation Committee also considers the allocation between cash and non-cash compensation amounts as well as short-term and
long-term compensation, but does not have a specific formula or required allocation between such compensation types. In each case, such allocation is considered as part of the overall compensation determination.
LSB Industries
Proxy Statement
25
Executive Compensation
During 2016, the Compensation Committee compared the Chief Executive Officers total compensation to the total
compensation of our other named executive officers. However, the Compensation Committee has not established a target ratio between total compensation of the Chief Executive Officer and the median total compensation level for the next lower tier of
management. The Compensation Committee also considers internal pay equity among the named executive officers and in relation to the next lower tier of management and average compensation of all employees to maintain compensation levels that are
consistent with the individual contributions and responsibilities of those executive officers. The Compensation Committee does not consider amounts
payable under severance agreements when setting the annual compensation of the named executive officers.
Base Salary
The Compensation Committee annually reviews and adjusts salaries based on changes in the market, responsibilities and
performance against job expectations, strategic importance, and experience and tenure. The following table sets forth the base salaries for each of our named executive officers as of the end of 2016, the first full year for all of our named
executive officers except for Messrs. J. Golsen and S. Golsen. These base salaries are also effective for 2017 (other than for Mr. S. Golsen).
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Named Executive Officer
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2016 Base Salary
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Jack E. Golsen
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$
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800,000
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Daniel D. Greenwell
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$
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800,000
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Mark T. Behrman
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$
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500,000
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John H. Diesch
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$
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325,000
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Michael J. Foster
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$
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360,000
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Short-Term (Annual) Incentive Plan
Executive officers participate in the Companys Short Term Incentive Plan (the STI Plan). The STI
Plan is our annual performance pay plan developed and instituted in 2016. The STI Plan provides the opportunity for annual cash payments tied directly to the achievement of key financial and operational goals. The
Compensation Committee sets goals derived from our strategic plan that are designed to align the interests of management with the interests of our stockholders. The goals for 2016, and our
performance compared to those goals are shown below.
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Goal
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Weighting
of Goal
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Target
(1)
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Achievement
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Percentage Payout
Toward Target
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Operational Targets: El Dorado Expansion; Plant Reliability; Strategic Sales and Marketing improvements and
Strategic Plan Implementation
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35%
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Achievement of pre-established targets set by the Board
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57%
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20%
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Strategic Target: Sale of the Climate Control Group
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25%
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Sale of the Climate Control Group at or above value determined by the Board
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100%
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25%
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Corporate Target: Cost Reductions;
Debt Restructuring; and Internal
Restructuring
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20%
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Achievement of pre-established targets set by the Board
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75%
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15%
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Financial Performance
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20%
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Manage 2016 EBITDA to a pre-established target set by the Board
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0%
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0%
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Total
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100%
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60%
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(1)
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The Company is not disclosing details of specific 2016 financial and other targets applied to the various goals because of competitive sensitivity.
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26
LSB Industries
Proxy Statement
Executive Compensation
Payment to an executive officer under the STI Plan is calculated as follows:
Base Salary x Target Payout Percentage x Company Performance
Company performance is based on the achievement of the performance goals. Each performance goal is measured independently of other goals. Company performance for 2016
was 60% as shown in the table above.
Each payout target for Messrs. Greenwell, Behrman, Diesch and Foster is established in their respective employment agreements.
Messrs. J. Golsen and S. Golsen do not participate in the STI Plan. The target and actual annual incentive awards under the STI Plan for 2016 for each of our named executive officers, as determined by the Compensation Committee, are set forth in the
table below.
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Named Executive Officer
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2016 Base
Salary
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STI Plan
Target as
a
Percentage
of Base
Salary
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2016 Target
Award
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2016 Actual
Award
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Jack E. Golsen
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$
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800,000
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Daniel D. Greenwell
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$
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800,000
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62.5
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%
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$
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500,000
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$
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300,000
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Mark T. Behrman
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$
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500,000
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50
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%
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$
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250,000
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$
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150,000
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John H. Diesch
(1)
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$
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325,000
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$
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50,000
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Michael J. Foster
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$
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360,000
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50
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%
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$
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180,000
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$
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108,000
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Steven J. Golsen
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(1)
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Mr. Diesch joined the company in August 2016 and was not entitled to a bonus under the terms of his employment agreement. However, the Board awarded him a discretionary bonus based upon his contributions to the
Company in 2016.
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Long-Term (Equity) Incentive Plan
We award long-term performance pay to our named executive officers under the terms of the 2016 Long Term Incentive Plan
(the LTI Plan) that was approved by stockholders at the 2016 Annual Meeting of Stockholders. The Compensation Committee, with the input of its independent compensation consultant, designed the LTI Plan to align named executive officer
compensation with stockholders interests and to serve as a retention tool. The Compensation Committee believes the LTI Plan will allow us to continue to motivate our named executive officers through the grant of stock awards and will also
increase the Compensation Committees flexibility to grant different types of equity, equity-based, and cash awards in the future.
Our long-term incentive
plans currently consist of time-based restricted share grants and performance-based share grants as set forth in the respective named executive officers employment agreements. Both types of awards generally vest over a three-year period.
Time-
based awards vest one-third on each of the first three anniversaries of the date of grant. Performance-based awards vest at the end of the three-year performance measurement period. We believe
both award types link the value of payments to the long-term results of the Company.
100% of the currently outstanding performance-awards are tied to our ranking
relative total shareholder return (share price appreciation plus dividends reinvested) (TSR) versus the companies in the 2016 peer group over a three-year measurement period. The actual number of shares that will vest will be equal to
the aggregate number of shares granted multiplied by the applicable TSR payout percentage. TSR payout percentages will be determined using a non-linear interpolation between threshold and target and between target and maximum. The threshold TSR is
25%. If actual Company TSR over the applicable three-year period is at or below 25% as compared to the TSR of the peer group, there will be no earned award.
LSB Industries
Proxy Statement
27
Executive Compensation
The Company set the following payout percentages based on the three-year total relative shareholder return ranking.
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Tier
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TSR Ranking
|
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Maximum Tier
Payout
|
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Cumulative Tier
Payout
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5
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0 25
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%
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n/a
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4
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26 50
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%
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(1.4% per %)
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35%
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35
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%
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3
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51 75
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%
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(1.6% per %)
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40%
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75
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%
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2
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76 100
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%
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(2.0% per %)
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50%
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125
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%
|
1
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101 125
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%
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(3.0% per %)
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75%
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200
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%
|
Pursuant to the terms of their respective employment agreements, the 2016 long-term performance pay target for each of Messrs. Greenwell,
Behrman, Diesch and Foster are set out in the following table. Messrs. J. Golsen and S. Golsen do not participate in the LTI Plan.
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Named Executive Officer
|
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LTI Plan Target as
a Percentage of Base Salary
|
Jack E. Golsen
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Daniel D. Greenwell
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337.5
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%
|
Mark T. Behrman
(1)
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150
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%
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John H. Diesch
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50
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%
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Michael J. Foster
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100
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%
|
Steven J. Golsen
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(1)
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Pursuant to the terms of his employment agreement, Mr. Behrman did not receive an LTI Plan grant in 2016.
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Perquisites and Other Personal Benefits
We and the Compensation Committee believe that perquisites are necessary and appropriate parts of total compensation that
contribute to our ability to attract and retain superior executives. Accordingly, the Company provided our named executive officers a limited number of perquisites that are reasonable and consistent with our overall compensation program.
We currently provide an automobile for business use by Messrs. Diesch and Greenwell and an automobile
allowance to each of Messrs. Behrman and J. Golsen. Additionally, we pay country club dues for Mr. J. Golsen. He is expected to, and does, use the country club in large part for business
purposes.
The Compensation Committee periodically reviews the levels of perquisites provided to the named executive officers to determine whether such perquisites
are consistent with our compensation policies.
28
LSB Industries
Proxy Statement
Executive Compensation
Consideration of Stockholder Say-On-Pay Advisory Vote
At our annual meeting of stockholders held in June 2016, our stockholders voted a majority (approximately 70%) of the total votes cast on
our say-on-pay proposal approved the compensation of our named executive officers for 2015 on a non-binding, advisory basis. While the Compensation Committee and the Board believes that this affirms our stockholders support of our approach to
executive compensation, we took note that the vote in support of the program was lower than in prior years. To better understand the concerns of stockholders relating to our compensation program, management and the Compensation Committee engaged
with shareholders representing approximately 70% of our outstanding stock. Additionally, our Chief Executive Officer and the Chairman of our Compensation Committee met with leaders from a proxy advisory services firm to discuss and understand the
concerns expressed by the firm about our compensation program. Management and the Compensation Committee reviewed the comments of stockholders and the proxy advisor and service firms and have expanded the discussion in this CD&A to better
explain the elements of our compensation program, including the reasons behind specific provisions in the employment agreements with certain of our named executive officers. See Executive CompensationEmployment Agreements
below for a more detailed discussion of the employment agreements with our named executive officers.
The
Compensation Committee will consider the feedback it receives from stockholders and proxy advisory services firms when making future compensation decisions for our named executive officers, including when negotiating any future employment
agreements.
Role of Executive Officers in Compensation Decisions
Our Chief Executive Officer annually reviews the performance of each of our named executive officers (other than his own) and provides recommendations to the Compensation
Committee with respect to salary, STI Plan and LTI Plan compensation, and other benefits. The Compensation Committee reviews these recommendations while considering the compensation philosophy and objectives and exercises its discretion in accepting
or modifying the recommended compensation. Historically, the Compensation Committee has generally adopted the compensation recommended by the Chief Executive Officer. In determining compensation for our Chief Executive Officer, the Compensation
Committee reviews his responsibilities and performance. Such review includes interviewing our Chief Executive Officer and consideration of the Compensation Committees observations of his performance during the applicable year. When
appropriate, named executive officers are invited by the Compensation Committee to provide insight regarding Company and individual performance and feedback regarding compensation structure. Named executive officers are not present at any meeting of
the Compensation Committee while their own compensation is being discussed or determined.
Role of Compensation Consultants in Compensation
Decisions
The Compensation Committee is committed to ensuring that our pay programs support our short- and long-term strategic objectives. In 2016, the
Compensation Committee engaged Steven Hall & Partners to assess all elements of our pay programs and propose potential
changes to the program and to provide market intelligence on compensation trends, views and recommendations with respect to our compensation programs, and analyses and recommendations with
respect to the amount or form of senior executive and director compensation. The Compensation Committee, in consultation with Steven Hall & Partners, continued its process of reviewing each element of compensation, separately and as part of
the broader program, to determine whether our current program adequately supports the strategic objectives of the Company and aligns our named executive officers and the long-term interests of our stockholders.
At the request of the Compensation Committee, Mr. Steven Hall attended meetings of the Compensation Committee and made presentations regarding his findings and
recommendations. Steven Hall & Partners did not provide any services to us in 2016 other than the executive and director compensation advisory services provided to the Compensation Committee. Steven Hall & Partners continues to
work with the Compensation Committee in 2017 to assess our compensation plans and programs.
Steven Hall & Partners reports directly to the Chair of the
Compensation Committee but partners with management, at the request of the Compensation Committee, to ensure the Compensation Committee receives the most comprehensive information for decision making.
The Compensation Committee analyzed the independence of Steven Hall & Partners pursuant to the SEC rules and NYSE listing standards and determined that the
engagement did not raise any conflict of interest that would prevent Steven Hall & Partners from
LSB Industries
Proxy Statement
29
Executive Compensation
independently representing the Compensation Committee. In reaching this conclusion, the Compensation Committee considered
the factors relevant to Steven Hall & Partners independence from management, including the factors set forth in the NYSE listing standards.
Peer Group Review
To ensure that our executive compensation program provides competitive compensation opportunities that are necessary
to attract and retain well-qualified executives, the Compensation Committee intends to review the level and mix of compensation for our Chief Executive Officer and other NEOs against the compensation provided by a group of peer companies (in
addition to survey data provided by Steven Hall
Partners). The Compensation Committee also intends to use these peer companies to consider the relative performance of our Company with respect to the TSR performance measures in our LTI Plan.
Following the sale of the Climate Control Group, the Compensation Committee made changes to the peer group to reflect the Companys singular focus in the
chemical industry and selected the following twenty peer companies based on:
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Industry/markets served;
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Likelihood that we would compete for senior level talent;
|
Post-Climate
Control Group Peer Group
|
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American Vanguard Corporation
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Balchem Corporation
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Calgon Carbon Corporation
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CF Industries Holdings, Inc.
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Compass Minerals International, Inc.
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|
CVR Partners, LP
|
Ferro Corporation
|
|
Flotek Industries, Inc.
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Green Plains Inc.
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Hawkins, Inc.
|
|
Innophos Holdings, Inc.
|
|
Innospec Inc.
|
Kraton Corporation
|
|
OCI Partners LP
|
|
OMNOVA Solutions Inc.
|
Platform Specialty Products Corporation
|
|
Quaker Chemical Corporation
|
|
Rayonier Inc.
|
The Andersons, Inc.
|
|
Tronox Limited
|
|
|
Employment Agreements
As discussed above, the Compensation Committee entered into each of the employment agreements described below based on the
terms it determined were necessary and appropriate under each circumstance to attract and retain our named executive officers, in each case, after consultation with its independent compensation consultant:
Jack E. Golsen
Effective January 1, 2015, Mr. J. Golsen was named our Executive Chairman of the Board and his employment agreement was amended to
stipulate his duties as Executive Chairman. Pursuant to the amended employment agreement, Mr. J. Golsen will:
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Serve for an initial term of three years, with automatic one-year extensions until terminated by either party in accordance with the terms of the employment agreement; and
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|
Receive an annual base salary of $800,000. He does not participate in the STI Plan or the LTI Plan.
|
In addition,
effective as of April 27, 2015, Mr. J. Golsens severance agreement (originally entered into on January 17, 1989 and amended on March 21, 1996 and December 17, 2008) was amended to eliminate tax gross-up provisions to
which Mr. J. Golsen would otherwise have been entitled should his employment be
terminated within 24 months of a change of control as defined in the severance agreement. For information regarding the provisions of Mr. J. Golsens agreements related to
change of control and severance payments, please see Potential Payments upon Termination or Change in Control below.
Daniel D. Greenwell
On
December 30, 2015, we entered into an employment agreement with Mr. Greenwell, effective December 31, 2015. The employment agreement provides that Mr. Greenwell will:
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Serve as President and Chief Executive Officer for an initial term of three years with automatic one-year extensions until terminated by either party in accordance with the employment agreement;
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|
|
|
Receive an annual base salary of at least $800,000;
|
|
|
|
Be eligible to receive a target annual cash performance bonus equal to between 62.5% and 125% of his base salary, depending on the Companys achievement of certain performance criteria, as determined by the
Compensation Committee; and
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|
|
|
Receive an annual equity award of restricted stock equal to not less than 337.5% of his base salary.
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30
LSB Industries
Proxy Statement
Executive Compensation
Following his termination of employment, Mr. Greenwell will be subject to non-compete and non-solicitation
restrictions for a period of 24 months. For information regarding the provisions of Mr. Greenwells employment agreement related to change of control and severance payments, please see Potential Payments Upon Termination or Change in
Control below.
Mark T. Behrman
On January 14, 2016, we entered into an employment agreement with Mr. Behrman, effective
December 31, 2015. The employment agreement provides that Mr. Behrman will:
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|
|
Serve as our Executive Vice President of Finance and Chief Financial Officer for an initial term of three years with automatic one-year extensions until terminated by either party in accordance with the employment
agreement;
|
|
|
|
Receive an annual base salary of at least $500,000;
|
|
|
|
Be eligible to receive a target annual cash performance bonus equal to between 50% and 100% of his base salary, depending on the Companys achievement of performance criteria, as determined by the Compensation
Committee; and
|
|
|
|
Beginning in 2018, receive an annual equity award of restricted stock equal to not less than 150% of his base salary.
|
Following his termination of employment, Mr. Behrman will be subject to non-compete and non-solicitation restrictions for a period of 24 months. For information
regarding the provisions of Mr. Behrmans employment agreement related to change of control and severance payments, please see Potential Payments Upon Termination or Change in Control below.
John H. Diesch
On July 21 2016, we entered into an employment agreement with Mr. Diesch, effective August 1, 2016. The employment agreement
provides that Mr. Diesch will:
|
|
|
Serve as our Executive Vice President Manufacturing for an initial term of three years and five months with automatic one-year extensions until terminated by either party in accordance with the employment
agreement;
|
|
|
|
Receive an annual base salary of at least $325,000;
|
|
|
|
Be eligible to receive a target annual cash performance bonus equal to between 50% and
|
|
|
100% of his base salary, depending on the Companys achievement of performance criteria, as determined by the Compensation Committee; and
|
|
|
|
Receive an annual equity award equal to not less than 50% of his base salary, 50% of such grant to be time based restricted stock, vesting ratably over three years and 50% vesting upon the achievement of performance
metrics established by the Compensation Committee.
|
Following his termination of employment, Mr. Diesch will be subject to non-solicitation
restrictions for a period of 24 months. For information regarding the provisions of Mr. Dieschs employment agreement related to change of control and severance payments, please see Potential Payments Upon Termination or Change in
Control below.
Michael J. Foster
On January 6, 2016, we entered into an employment agreement with Mr. Foster, effective as of
January 5, 2016. The employment agreement provides that Mr. Foster will:
|
|
|
Serve as our Senior Vice President, General Counsel and Secretary for an initial term of three years with automatic one-year extensions until terminated by either party in accordance with the employment agreement;
|
|
|
|
Receive an annual base salary of at least $360,000;
|
|
|
|
Be eligible to receive a target annual cash performance bonus equal to between 50% and 100% of his base salary, depending on the Companys achievement of certain performance criteria, as determined by the
Compensation Committee;
|
|
|
|
Receive an annual equity award of restricted stock equal to not less than 100% of his base salary; and
|
|
|
|
Receive a sign-on grant of 50,139 shares of restricted stock.
|
Following his termination of employment, Mr. Foster
will be subject to non-compete and non-solicitation restrictions for a period of 24 months. For information regarding the provisions of Mr. Fosters employment agreement related to change of control and severance payments, please see
Potential Payments Upon Termination or Change in Control below.
LSB Industries
Proxy Statement
31
Executive Compensation
Management Stock Ownership Guidelines
Beginning in April 2017, the Compensation Committee approved stock ownership guidelines that ensure that the interests of
our named executive officers are aligned with the interests of our stockholders by requiring them to hold significant levels of Company stock. In keeping with our overall compensation philosophy, we believe
that the equity ownership levels that they are required to maintain are high enough to assure our stockholders of our named executive officers commitment to long-term value creation. The
terms of our Stock Ownership Guidelines are set out below:
|
|
|
|
|
Term
|
|
Component/Description
|
|
|
Participation
|
|
∎
Chief Executive
Officer
|
|
|
Denomination
|
|
∎
Multiple of base
salary/retainer
|
|
|
|
|
|
Position
|
|
Guidelines
|
|
|
|
Target Ownership Amount
|
|
Chief Executive Officer
|
|
5x base salary
|
|
|
|
|
|
Chief Financial Officer
|
|
3x base salary
|
|
|
|
|
|
Other named executive officers
|
|
3x base salary
|
|
|
Shares Counted
Towards
Ownership
|
|
∎
Shares owned outright or held in
trust
∎
Time-based vesting restricted stock or restricted stock units
∎
The target number of any
performance shares or units
|
|
|
Compliance Period
|
|
∎
The later of April 26, 2022 or
5 years from hire / promotion into covered role
|
|
|
Tracking
Achievement
|
|
∎
Measure compliance on December 31
each year using 90-trading day average stock price
∎
Notify participants and Compensation Committee of compliance / progress towards meeting guidelines
|
|
|
Controls
|
|
∎
Once the guideline is met,
participants are expected to maintain share ownership pursuant to the guideline thereafter
∎
Should a participant who
previously met the guideline subsequently fall below the guideline for any reason, they will be required to meet the guideline within 2 years
|
Tax and Accounting Implications
Section 162(m) of the Internal Revenue Code (the Code) provides that we may not deduct, for federal
income tax purposes, compensation in excess of $1 million paid to our Chief Executive Officer and each of the three other most highly-compensated officers (other than the Chief Executive Officer and Chief Financial Officer) whose compensation is
required to be disclosed to our stockholders under the federal securities laws in any taxable year. However, compensation in excess of $1 million may be deducted if it is performance-based compensation or qualifies for one of the other
exemptions from the deductibility limit. In making compensation decisions, the Compensation Committee considers the potential impact of Section 162(m) of the Code on the compensation paid to the named executive officers.
Where reasonably practicable, the Compensation Committee will seek to qualify the performance-based
incentive compensation paid or awarded to the named executive officers for the performance-based compensation exemption from the deductibility limit of Section 162(m) of the
Code. To maintain flexibility in compensating the named executive officers in a manner designed to promote varying corporate goals, however, the Compensation Committee has not adopted a policy that all compensation payable to the named executive
officers that is subject to Section 162(m) of the Code must be deductible for federal income tax purposes. From time to time, the Compensation Committee may, in its judgment, approve compensation for the named executive officers that does not
comply with an exemption from the deductibility limit when it believes that such compensation is in the best interests of the Company and its stockholders.
32
LSB Industries
Proxy Statement
Executive Compensation
We account for stock-based payments, including our incentive and nonqualified stock options and restricted stock awards, in
accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718). FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our
employees and members of our Board based on the grant date fair value of these awards. This calculation is performed for accounting
purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards. While we
consider the expense resulting from the application of FASB ASC Topic 718 when granting our stock-based compensation awards to ensure that it is reasonable, the amount of this expense is not the most important factor that the Compensation Committee
considers when making equity-award decisions.
Compensation Risk Assessment
Our compensation program, which applies to all employees including named executive officers, is designed to provide
competitive levels of reward that are responsive to company and individual performance but do not incentivize risk taking that is reasonably likely to have a material adverse effect on the Company. In reaching our conclusion that our compensation
policies do not create risks that are reasonably likely to have a material adverse effect on us, we examined the various elements of our compensation programs and policies and our risk mitigation controls. In particular, numerous factors were
considered, including:
|
|
|
We do not offer significant short-term incentives that would reasonably be considered as motivating
|
|
high-risk investments or other conduct that is not consistent with the long-term goals of the Company;
|
|
|
|
We provide a mix of short-term and long-term compensation, which is discussed in the CD&A, above;
|
|
|
|
The type of equity awards granted to employees and level of equity and equity award holdings; and
|
|
|
|
The historical emphasis on long-term growth and profitability, over short-term gains.
|
Senior executives representing our
legal and compliance, human resources, finance, and audit functions, as well as the Compensation Committees independent compensation consultant, are involved in this review process, which is conducted under the oversight of the Compensation
Committee.
LSB Industries
Proxy Statement
33
Executive Compensation Tables
2016 Summary Compensation Table
The following table sets forth the total compensation earned by or paid to our Chief Executive Officer, our Chief Financial Officer and our three other most highly
compensated executive officers, collectively our named executive officers, for the years ended December 31, 2016, 2015 and 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position`
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
(1)
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan
Compensation
|
|
|
All other
Compensation
(2)
|
|
|
Total
|
|
Jack E. Golsen
Executive Chairman of the Board
|
|
|
2016
|
|
|
$
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,621
|
|
|
$
|
802,621
|
|
|
|
2015
|
|
|
$
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,135
|
|
|
$
|
802,135
|
|
|
|
2014
|
|
|
$
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,882
|
|
|
$
|
803,882
|
|
Daniel D. Greenwell
President and Chief Executive Officer
|
|
|
2016
|
|
|
$
|
800,000
|
|
|
|
|
|
|
$
|
2,700,000
|
|
|
|
|
|
|
$
|
300,000
|
|
|
$
|
132,904
|
|
|
$
|
3,932,904
|
|
|
|
2015
|
|
|
$
|
410,769
|
|
|
|
|
|
|
$
|
2,700,003
|
|
|
|
|
|
|
|
|
|
|
$
|
177,624
|
|
|
$
|
3,288,396
|
|
Mark T. Behrman
Executive Vice President and Chief Financial Officer
|
|
|
2016
|
|
|
$
|
500,000
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
150,000
|
|
|
$
|
6,600
|
|
|
$
|
656,600
|
|
|
|
2015
|
|
|
$
|
364,231
|
|
|
|
|
|
|
$
|
1,500,003
|
|
|
$
|
838,259
|
(4)
|
|
|
|
|
|
$
|
11,854
|
|
|
$
|
2,714,347
|
|
John H. Diesch
Executive Vice President Manufacturing
(5)
|
|
|
2016
|
|
|
$
|
137,500
|
|
|
$
|
50,000
|
|
|
$
|
81,247
|
|
|
|
|
|
|
|
|
|
|
$
|
24,242
|
|
|
$
|
292,989
|
|
Michael J. Foster
Executive Vice President and General Counsel
(6)
|
|
|
2016
|
|
|
$
|
358,615
|
|
|
|
|
|
|
$
|
719,996
|
|
|
|
|
|
|
$
|
108,000
|
|
|
|
|
|
|
$
|
1,186,611
|
|
Steven J. Golsen
President and Chief Executive Officer of The Climate Control Group
(7)
|
|
|
2016
|
|
|
$
|
174,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
551,509
|
|
|
$
|
726,413
|
|
|
|
2015
|
|
|
$
|
425,000
|
|
|
$
|
16,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,439
|
|
|
$
|
447,785
|
|
|
|
2014
|
|
|
$
|
425,000
|
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,732
|
|
|
$
|
577,732
|
|
(1)
|
The amounts shown in this column represent the aggregate grant date fair value of the restricted stock granted to our named executive officers pursuant to the terms of the respective executives employment
agreement computed in accordance with FASB ASC Topic 718, determined without regard to forfeitures. This amount does not reflect the actual value that may be recognized by the named executive officers.
|
|
For more information regarding the assumptions made in the valuation of the awards reported in this column, see also Note 14, Stockholders Equity, to our audited financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2016 filed with the SEC.
|
(2)
|
For 2016, All Other Compensation includes:
|
|
|
For Mr. Diesch: $16,679 for reimbursement of relocation and short-term commuting expenses and $7,563 as a tax gross-up for such expenses.
|
|
|
An automobile allowance for Mr. Behrman and a company car for Mr. Diesch.
|
|
|
Country club dues for Mr. J. Golsen.
|
|
|
For Mr. Greenwell: $65,189 for reimbursement of expenses related to his commuting from his home in Iowa to our corporate offices in Oklahoma, as well as living expenses while working in Oklahoma and $67,715 as a
tax gross-up for such expenses.
|
|
|
For Mr. J. Golsen, the amount for 2014 was recalculated to represent only the amounts earned by him during 2014. As originally reported for 2014, All Other Compensation also included premiums we paid
for insurance contracts to which we are the sole named beneficiary, which insurance contracts will be used to fund certain death and continuation benefit agreements we have with Mr. J. Golsen. The cost of such premiums has been removed from the
table above as the policies are simply used by the Company as a method by which to fund the benefits. Mr. J. Golsen, is not now and never has been a beneficiary of the insurance policies and has no authority to name the beneficiaries. For more
information regarding these agreements, see Potential Payments Upon Termination or Change in Control Death Benefit and Continuation Agreements below.
|
|
|
For Mr. S. Golsen, $425,000 in severance payments accrued as of his termination date, $123,958 for consulting services related to the sale of the Climate Control Group, and $2,551 as an automobile allowance.
|
34
LSB Industries
Proxy Statement
Executive Compensation Tables
(3)
|
Pursuant to the terms of his Employment Agreement, Mr. Behrman did not receive an LTI Plan grant in 2016.
|
(4)
|
Mr. Behrman voluntarily relinquished his option award on January 14, 2016.
|
(5)
|
The salary and Non-Equity Incentive Plan compensation amounts shown for Mr. Diesch represent the pro-rated salary and STI Plan payments made to Mr. Diesch for services provided from the effective date of his
employment agreement through December 31, 2016. The Bonus amount shows the discretionary award made by the Board for Mr. Dieschs contributions in 2016.
|
(6)
|
The salary and Non-Equity Incentive Plan compensation amount shown for Mr. Foster represents the pro-rated salary and STI Plan payments made to Mr. Foster for services provided from the effective date of his
employment agreement through December 31, 2016.
|
(7)
|
The salary compensation amount shown for Mr. S. Golsen represents the pro-rated salary paid to Mr. S. Golsen for services provided until May 31, 2016, his termination date. In accordance with SEC
regulations, only compensation information for any fiscal year in which an individual was an NEO is reported in the Summary Compensation Table. Given that Mr. S. Golsen is an NEO for 2016 and was an NEO for 2014, his compensation information is
also presented for 2015 in accordance with SEC regulations.
|
LSB Industries
Proxy Statement
35
Executive Compensation Tables
2016 Grants of Plan-Based Awards
The following table sets forth information concerning grants of plan-based awards to the named executive officers during the calendar year ended
December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
(1)
|
|
|
Date
Approved
by Board
|
|
|
Estimated Future Payouts
under Non-Equity
Incentive
Plan Awards
(2)
|
|
|
Estimated Future Payouts
under Equity Incentive Plan
Awards
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
(#)
(3)
|
|
|
All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
Exercise
or
Base
Price of
Option
Awards
($/SH)
|
|
|
|
|
|
|
Threshold
($)
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
|
|
|
Grant
Date Fair
Value of
Stock
and
Option
Awards
($)
(4)
|
|
Jack E. Golsen
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel D. Greenwell
|
|
|
12/31/2016
|
|
|
|
12/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320,665
|
|
|
|
|
|
|
$
|
2,700,000
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark T. Behrman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Diesch
|
|
|
8/2/2016
|
|
|
|
7/27/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,974
|
|
|
|
|
|
|
$
|
81,247
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Foster
|
|
|
1/5/2016
|
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,139
|
|
|
|
|
|
|
$
|
359,998
|
(8)
|
|
|
|
12/31/2016
|
|
|
|
12/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,755
|
|
|
|
|
|
|
$
|
359,998
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,000
|
|
|
|
360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Golsen
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Messrs. Foster and Diesch were each awarded an initial grant under the LTI Plan pursuant to their employment agreements on the commencement dates of their employment, January 5, 2016 and August 1, 2016,
respectively. Messrs. Greenwell and Foster received annual grants under the LTI Plan on December 31, 2016, in each case, following the Compensation Committee meeting approving such grants. Mr. Fosters grant of 42,755 shares of
restricted stock was made on December 31, 2016 instead of on the anniversary of his commencement of employment in order to align his grant date with that of Mr. Greenwells for accounting and efficiency purposes.
|
(2)
|
The amounts in these columns reflect the threshold, target and maximum payout levels for the STI Plan. Further details regarding these awards, please see Executive Compensation-Compensation Discussion and
Analysis-Compensation Philosophy and Objectives-Short-Term (Annual) Incentive Plan.
|
(3)
|
The amounts shown in this column represent the time-based vesting restricted stock awards granted to Mr. Foster under our 2008 Stock Incentive Plan on January 5, 2016 and time-based vesting restricted stock
awards granted to Mr. Diesch on August 1, 2016, and to Messrs. Greenwell and Foster on December 31, 2016 under the LTI Plan.
|
(4)
|
The amounts shown in this column represent the grant-date fair value of stock-based awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718, determined without regard to
forfeitures, and does not reflect the actual value that has or may be recognized by the named executive officers. For more information regarding the assumptions made in the valuation of the awards reported in this column, see also Note 14,
Stockholders Equity, to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC.
|
(5)
|
Neither Mr. J. Golsen nor Mr. S. Golsen participate in the STI Plan or the LTI Plan.
|
(6)
|
For the grants of restricted stock, the grant date fair value was based on a per share price of $8.42, the closing price on December 30, 2016, the date prior to the grant.
|
(7)
|
For the grants of restricted stock, the grant date fair value was based on a per share price of $11.65, the closing price on August 1, 2016, the date prior to the grant.
|
(8)
|
For the grants of restricted stock, the grant date fair value was based on a per share price of $7.18, the closing price on January 4, 2016, the date prior to the grant.
|
36
LSB Industries
Proxy Statement
Executive Compensation Tables
2016 Outstanding Equity Awards at Fiscal Year End
The following table contains information about outstanding equity awards held by our named executive officers as of December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number of Shares
or Units of Stock That
Have Not Vested
(#)
(1)
|
|
|
Market Value of
Shares or Units of
Stock That Have
Not Vested
($)
(2)
|
|
Jack E. Golsen
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel D. Greenwell
|
|
|
12/31/2015
|
|
|
|
213,093
|
|
|
$
|
1,794,243
|
|
|
|
|
12/31/2016
|
|
|
|
320,665
|
|
|
|
2,699,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533,758
|
|
|
$
|
4,494,242
|
|
Mark T. Behrman
|
|
|
12/31/2015
|
|
|
|
139,276
|
|
|
$
|
1,172,704
|
|
John H. Diesch
|
|
|
08/02/2016
|
|
|
|
6,974
|
|
|
$
|
58,721
|
|
Michael J. Foster
|
|
|
01/05/2016
|
|
|
|
50,139
|
|
|
$
|
422,170
|
|
|
|
|
12/31/2016
|
|
|
|
42,755
|
|
|
|
359,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,894
|
|
|
$
|
782,167
|
|
Steven J. Golsen
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts shown in this column reflect the number of time-based vesting restricted stock granted under our 2008 Stock Incentive Plan and our 2016 Long Term Incentive Plan that are not vested as of December 31,
2016. These unvested shares will vest in substantially equal one-third increments on the anniversary of the grant dates.
|
(2)
|
The amounts reported in this column were calculated by multiplying the number of shares of restricted stock that had not vested as of December 31, 2016 by the closing price of our common stock on the NYSE on
December 30, 2016, which was $8.42.
|
2016 Restricted Stock Vesting
The following table contains information regarding the vesting of restricted stock held by our named executive officers during 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired on
Vesting (#)
(1)
|
|
Value Realized on
Vesting ($)
(2)
|
Jack E. Golsen
|
|
|
|
|
|
|
|
|
|
|
Daniel D. Greenwell
|
|
|
|
106,546
|
|
|
|
$
|
897,117
|
|
Mark T. Behrman
|
|
|
|
69,638
|
|
|
|
$
|
586,352
|
|
John H. Diesch
|
|
|
|
|
|
|
|
|
|
|
Michael J. Foster
|
|
|
|
|
|
|
|
|
|
|
Steven J. Golsen
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts reported in this column represent the number of shares of restricted stock that vested on December 31, 2016, without reduction for any shares withheld to satisfy applicable tax obligations.
|
(2)
|
The amounts reported in this column represent the value of the shares of restricted stock that vested during 2016, calculated by multiplying the number of shares of time-based vesting restricted stock that vested on
December 31, 2016 by $8.42, the closing price of our common stock on December 30, 2016 on the NYSE.
|
LSB Industries
Proxy Statement
37
Executive Compensation Tables
Equity Compensation Plan Information
The following table
shows, as of December 31, 2016, information with respect to our equity compensation plans under which shares of common stock are authorized for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities to
be issued upon exercise of
outstanding
options,
restricted stock units,
warrants, and rights
(1)
(a)
|
|
|
Weighted-average
exercise price
of
outstanding options,
warrants, and rights
(b)
|
|
|
Number of securities
remaining available for
future issuance under
equity
compensation
plans (excluding
securities reflected in
column (a))
(c)
|
|
Equity compensation plans approved by shareholders
(2)
|
|
|
246,884
|
|
|
$
|
28.48
|
|
|
|
2,632,332
|
|
Equity compensation plans not approved by shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
246,884
|
|
|
$
|
28.48
|
|
|
|
2,632,332
|
|
(1)
|
As of December 31, 2016, there were options outstanding to purchase a total of 219,230 shares of common stock under our 2008 Stock Incentive Plan, which represent 0.8% of the number of common stock outstanding.
There were no options, warrants or rights outstanding under our 2016 Long Term Incentive Plan on December 31, 2016. A total of 1,038,290 unvested shares of time-based vesting restricted stock were excluded from this column (a) as those shares
are considered issued at the time of grant.
|
(2)
|
Plans previously approved by the stockholders include our 2008 Stock Incentive Plan, our Outside Directors Stock Purchase Plan and our 2016 Long Term Incentive Plan. Following approval of the 2016 Long Term Incentive
Plan at our annual meeting of stockholders held in June 2016, no further awards can be granted under either our 2008 Stock Incentive Plan or our Outside Directors Stock Purchase Plan. The amount in column (c) represents the number of shares
available for issuance under our 2016 Long Term Incentive Plan.
|
38
LSB Industries
Proxy Statement
Executive Compensation Tables
Potential Payments Upon Termination or Change in Control
Employment Agreements
During 2016, we were party to employment agreements with Messrs. Greenwell, Behrman, Diesch and Foster which provide, among other things, certain severance benefits in
the event an executive officers employment terminates under specific circumstances. We also were party to an employment and severance agreement with Mr. J. Golsen.
Severance Payments and Benefits under the Employment Agreements (other than for Messrs. J. Golsen and S. Golsen)
The employment agreements with our named executive officers (other than for Mr. J. Golsen) provide for potential severance payments upon the termination of a named
executive officers employment in certain situations, including in connection with a change in control, without cause by the Company or for good reason by the executive, due to nonrenewal by the Company and
upon the death or permanent disability of the executive (as each term is defined in the named executive officers employment agreement).
Termination for Cause, without Good Reason, or due to Executives Nonrenewal.
In the event of an executives termination by the
Company for cause or by the executive without good reason, the Company has no severance obligation to the executive other than payment of accrued obligations, which are (i) earned but unpaid base salary through the date
of termination, (ii) any employee benefits to which the executive has a vested entitlement as of the date of termination, (iii) accrued but unused vacation, and (iv) approved but unreimbursed eligible business expenses.
Death or Permanent Disability.
Under the terms of the employment agreements, in the event of an executives death or termination on account of becoming
permanently disabled, the agreements will terminate and the executive will be entitled to (i) the payment of accrued obligations, (ii) payment of a pro-rata portion of his annual bonus determined and paid in accordance with our regular
bonus practices (other than for Mr. Diesch) and (iii) accelerated vesting of a pro-rata portion of all equity awards that are otherwise unvested as of the date of his termination of employment, which pro rata portion will be based on the
time the executive was employed during the applicable vesting period.
Termination without Cause, for Good Reason or due to Companys Nonrenewal.
If the executive is terminated by the Company without cause, by the
executive for good reason or by the Companys proper notice of nonrenewal of the employment agreement, the executive will be entitled to (i) payment of a pro rata portion of
his annual bonus based on the actual achievement of the applicable performance criteria for the year in which the executives employment terminates and paid in accordance with our regular bonus practices (other than for Mr. Diesch);
(ii) payment of a lump sum cash payment equal to the product of one times (or two times in the case of Mr. Greenwell) the sum of his then-current base salary and target bonus (or in the case of Mr. Diesch, 12 months of his base salary
only) payable on the first payroll date following the executives execution and non-revocation of a general release of claims; (iii) continued participation in our medical, dental and hospitalization insurance coverage for himself and his
qualified dependents on the same terms in effect immediately prior to the termination for a period of 18 months with the employer portion of the continued coverage paid by us (other than for Mr. Diesch); and (iv) accelerated vesting of all
equity awards otherwise unvested as of the date of his termination of employment.
Change in Control
.
If a named executive officer (other than
Mr. J. Golsen) is employed by us at the time of a change in control and his employment is terminated without cause or by the executive for good reason within twenty-four months of the change in control (or for
Mr. Diesch, during the period beginning six months before and ending twelve months following the change in control), the executive will be entitled to (i) payment of a pro rata portion of his annual bonus based on the actual achievement of
the applicable performance criteria for the year in which the executives employment terminates and paid in accordance with our regular bonus practices (other than for Mr. Diesch); (ii) payment of a lump sum cash payment equal to the
product of two times (or three times in the case of Mr. Greenwell and one times in the case of Mr. Diesch) the sum of his then-current base salary and target bonus payable on the first payroll date following the executives execution
and non-revocation of a general release of claims; (iii) continued participation in our medical, dental and hospitalization insurance coverage for himself and his qualified dependents on the same terms in effect immediately prior to the
termination for a period of 18 months with the employer portion of the continued coverage paid by us (other than for Mr. Diesch); and (iv) accelerated vesting of all equity awards otherwise unvested as of the date of his termination of
employment.
LSB Industries
Proxy Statement
39
Executive Compensation Tables
Employment and Severance Agreements with Mr. J. Golsen
Employment Agreement
We are party to an employment agreement with Mr. J.
Golsen (originally entered into on March 21, 1996 and as subsequently amended on April 29, 2003, May 12, 2005 and December 17, 2008) to employ Mr. J. Golsen as Executive Chairman of the Board and Chairman of the
Executive Committee (the Golsen Agreement). The current term of the Golsen Agreement expires on January 1, 2018, but will be automatically renewed for two additional one-year periods unless terminated by us or Mr. J.
Golsen by written notice at least six months prior to the expiration of the then-current term.
The Golsen Agreement provides that upon a termination of his
employment without cause or for disability, Mr. J. Golsen (or his estate, if the termination is due to Mr. J. Golsens death) will be entitled to (a) a lump sum cash payment payable within 30 days following the date
of termination equal to the product of the number of full years remaining in the then-current term of the Golsen Agreement times the sum of (x) Mr. J. Golsens current annual salary and (y) the bonus paid to Mr. J. Golsen
for services provided in the most recently completed fiscal year; (b) continued participation in our medical, dental and vision plans for a period equal to the greater of 18 months or the remainder of the current term of the Golsen Agreement,
the cost of such coverage to be reimbursed at the end of each month; and (c) the unrestricted use of a company vehicle and cell phone, as applicable.
The
Golsen Agreement also provides that in the event Mr. J. Golsen becomes disabled and, as a result of the disability, is not able to perform his duties under the Golsen Agreement for a period of 12 consecutive months within any two-year period,
he is entitled to his full salary for the remainder of the then-current term of the Golsen Agreement and thereafter, 60% of such salary until his death.
Severance Agreement
We entered into a severance agreement with Mr. J.
Golsen on January 17, 1989 (as amended on March 21, 1996, December 17, 2008 and April 27, 2015), that controls the benefits that would be payable to Mr. J. Golsen should his employment be terminated within 24 months
following a change of control (the Golsen Severance Agreement). The Golsen Severance Agreement provides that if Mr. J. Golsen is terminated without cause or if he terminates his employment for good
reason within 24 months following a change of control, he will be entitled to a lump sum amount, payable on the date of termination, equal to the product of 2.9 times the average of his annual gross compensation paid by the Company
and includable in
his gross income during the most recently completed five taxable years prior to the date of the change of control.
The Golsen Severance Agreement provides that change of control generally means a transaction that would require the filing of a Current Report on Form 8-K
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Additionally, a change of control will be deemed to occur if:
Any one
person, or more than one person acting as a group, acquires ownership of our stock that, together with stock held by such person or group prior to the subsequent acquisition, constitutes more than 50% of the total fair market value or total voting
power of our stock;
The individuals who constitute the Board as of April 1, 2015 (the Incumbent Board) cease for any reason to
constitute at least a majority of the Board; provided, however, that any person becoming a director subsequent to April 1, 2015 whose election, or nomination for election by our shareholders, was approved by a vote of at least a majority of the
directors comprising the Incumbent Board (other than the election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest) shall be deemed to be a member of the Incumbent
Board; or
Any one person, or more than one person acting as a group, acquires (or has acquired during the twelve month period ending on the date of
the most recent acquisition by such person or persons) ownership of our stock possessing 30% or more of the total voting power of our stock, except acquisitions by:
Any person or group which, as of December 17, 2008, has such ownership, or
Mr. J. Golsen; his spouse; his children and the spouses of his children; his estate; executor or administrator of any estate, guardian or custodian
for Mr. J. Golsen, his spouse, his children, or the spouses of his children; any corporation, trust, partnership, or other entity of which Mr. J. Golsen, his spouse, his children, or the spouses of his children (or any combination
thereof) own at least 80% of the outstanding beneficial voting or equity interests, directly or indirectly; and certain affiliates and associates of any of the above-described persons, entities, or estates.
Notwithstanding the above, a change of control will not be deemed to occur unless such event also constitutes either a change in ownership or change in
effective control as those terms are defined in Treas. Reg. Section 1.409A-3.
40
LSB Industries
Proxy Statement
Executive Compensation Tables
Death Benefit Agreements
We are
party to death benefit agreements with Mr. J. Golsen, that provide cash benefits to Mr. J. Golsens beneficiaries in case of his death while employed by us or one of our subsidiaries (the 2005 Agreement). Pursuant to the
terms of the 2005 Agreement, we are obligated to maintain insurance with a minimum of $2.5 million death benefit. Upon Mr. Golsens death, his beneficiaries are entitled to a $2.5 million lump sum cash benefit payable within 30 days following
our receipt of the proceeds of the life insurance policies we maintain to fund the benefit. We maintain an insurance policy on Mr. J. Golsens life (to which we are the beneficiary) to cover our obligations under the 2005 Agreement.
Mr. S. Golsens Termination
Upon his termination of employment on May 31, 2016, Mr. S. Golsen became entitled to a separation payment totaling $425,000, which is paid in substantially
equal monthly installments during the 18-months following his termination, and a lump sum payment equal to $16,711.02 for COBRA expenses to be paid by the Company on or before June 15, 2017. For information regarding Mr. S. Golsens
consulting arrangement with the Company, please see Corporate Governance Policy as to Related Party Transactions above.
LSB Industries
Proxy Statement
41
Executive Compensation Tables
Table of Severance Benefits
The following table summarizes the dollar amounts of potential payments to each named executive officer upon a qualifying termination of employment or change in control
pursuant to the terms of their employment and severance agreements, as applicable, assuming that the events described in the table occurred on December 31, 2016, when the closing price of the Companys common stock was $8.42. The values
below are our best estimates of the severance payments and
benefits the executives would receive upon a termination of employment or a change in control as of December 31, 2016 and we believe the amounts are calculated using reasonable assumptions.
All amounts are before taxes, which would reduce amounts ultimately received by our named executive officers. The table is only intended to summarize various terms of the employment agreement and is qualified in its entirety by reference to the full
text of the actual agreements, copies of which are on file with the SEC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Termination
For Cause
|
|
|
Termination
Without
Cause or
For Good
Reason
|
|
|
Termination
During
Change in
Control
Period
|
|
|
Change in
Control
Without
Termination
(1)
|
|
|
Death
|
|
|
Disability
|
|
Jack E. Golsen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
N/A
|
|
|
$
|
800,000
|
(2)
|
|
$
|
2,320,000
|
(3)
|
|
|
|
|
|
$
|
5,049,960
|
(4)
|
|
$
|
800,000
|
(5)
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Coverage
(6)
|
|
|
N/A
|
|
|
$
|
8,013
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(7)
|
|
|
N/A
|
|
|
$
|
808,013
|
|
|
$
|
2,320,000
|
|
|
|
|
|
|
$
|
5,049,960
|
|
|
$
|
807,923
|
|
Daniel D. Greenwell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STI Plan Payments
(8)
|
|
|
N/A
|
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Cash Severance
|
|
|
N/A
|
|
|
$
|
2,600,000
|
(9)
|
|
$
|
3,900,000
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
(11)
|
|
|
N/A
|
|
|
$
|
4,494,242
|
|
|
$
|
4,494,242
|
|
|
$
|
4,494,242
|
|
|
|
|
|
|
|
|
|
Health Coverage
(6)
|
|
|
N/A
|
|
|
$
|
27,179
|
|
|
$
|
27,179
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
N/A
|
|
|
$
|
7,421,421
|
|
|
$
|
8,721,421
|
|
|
$
|
4,494,242
|
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Mark T. Behrman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STI Plan Payments
(8)
|
|
|
N/A
|
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
|
|
|
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Cash Severance
|
|
|
N/A
|
|
|
$
|
750,000
|
(9)
|
|
$
|
1,504,000
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
(11)
|
|
|
N/A
|
|
|
$
|
1,172,704
|
|
|
$
|
1,172,704
|
|
|
$
|
1,172,704
|
|
|
|
|
|
|
|
|
|
Health Coverage
(6)
|
|
|
N/A
|
|
|
$
|
27,179
|
|
|
$
|
27,179
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
N/A
|
|
|
$
|
2,099,883
|
|
|
$
|
2,849,883
|
|
|
$
|
1,172,704
|
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
John H. Diesch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STI Plan Payments
(8)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
N/A
|
|
|
$
|
325,000
|
(9)
|
|
$
|
487,500
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
(11)
|
|
|
N/A
|
|
|
|
|
|
|
$
|
58,721
|
|
|
|
|
|
|
$
|
8,217
|
(12)
|
|
$
|
8,217
|
(12)
|
Health Coverage
(8)
|
|
|
N/A
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
N/A
|
|
|
$
|
325,000
|
|
|
$
|
546,221
|
|
|
$
|
|
|
|
$
|
8,217
|
|
|
$
|
8,217
|
|
42
LSB Industries
Proxy Statement
Executive Compensation Tables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Termination
For Cause
|
|
|
Termination
Without
Cause or
For Good
Reason
|
|
|
Termination
During
Change in
Control
Period
|
|
|
Change in
Control
Without
Termination
(1)
|
|
|
Death
|
|
|
Disability
|
|
Michael J. Foster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STI Plan Payments
(8)
|
|
|
N/A
|
|
|
$
|
108,000
|
|
|
$
|
108,000
|
|
|
|
|
|
|
$
|
108,000
|
|
|
$
|
108,000
|
|
Cash Severance
|
|
|
N/A
|
|
|
$
|
540,000
|
(9)
|
|
$
|
1,080,000
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated
|
|
|
N/A
|
|
|
$
|
782,167
|
|
|
$
|
782,167
|
|
|
$
|
782,167
|
|
|
$
|
138,753
|
(12)
|
|
$
|
138,753
|
(12)
|
Health Coverage
(6)
|
|
|
N/A
|
|
|
$
|
27,179
|
|
|
$
|
27,179
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
N/A
|
|
|
$
|
1,457,346
|
|
|
$
|
1,997,346
|
|
|
$
|
782,167
|
|
|
$
|
246,753
|
|
|
$
|
246,753
|
|
(1)
|
The amounts shown in this column represent the value attributable to accelerated vesting of equity awards upon a change in control under the terms of our equity incentive plans and employment agreements, which would be
realized by the executives regardless of whether they suffered a termination of employment in connection with such change in control.
|
(2)
|
This amount represents the amount of Mr. J. Golsens full 2016 salary for one year (i.e., the remainder of the current term of the Golsen Agreement).
|
(3)
|
This amount represents the product of 2.9 times the average of Mr. J. Golsens annual gross compensation paid by the Company and includable in his gross income during the most recently completed five taxable
years prior to the date of the change of control.
|
(4)
|
This amount represents the sum of $2.5 million payable pursuant to the 2005 Agreement, $800,000 payable pursuant to the Golsen Agreement and $1,749,960 payable pursuant to the 1981 Agreement.
|
(5)
|
This amount represents the amount of Mr. J. Golsens full 2016 salary for one year (i.e., the remainder of the current term of the Golsen Agreement). In addition, upon the expiration of the current term,
Mr. J. Golsen would be entitled to receive a monthly payment of $40,000 (60% of his monthly 2016 salary) for life.
|
(6)
|
The amounts included for health coverage are the estimated cost to us for providing continuing health care under our existing medical, dental and vision benefits to each eligible executive for the applicable time period
specified in the named executive officers employment or severance agreement, as applicable.
|
(7)
|
The total amounts for Mr. J. Golsen do not include amounts payable for other lifetime benefits to which he is entitled pursuant to his employment agreement including: unrestricted use of a company car
(approximately $21,000 per year) and use of a cell phone (approximately $1,800 per year).
|
(8)
|
This amount represents the actual STI Plan payments made to the named executive officer for 2016.
|
(9)
|
This amount represents one times (two times for Mr. Greenwell) the sum of base salary and target bonus for Messrs. Greenwell, Behrman and Foster and one times base salary for Mr. Diesch.
|
(10)
|
This amount represents two times (three times for Mr. Greenwell and one times for Mr. Diesch) the sum of base salary and target bonus for Messrs. Greenwell, Behrman, Diesch and Foster.
|
(11)
|
The amounts shown for Equity Awards Unvested and Accelerated represents the shares of restricted stock awards that had not vested as of December 31, 2016, valued at $8.42 per share, the closing price of our stock
on the NYSE on December 30, 2016.
|
(12)
|
Represents the value of pro-rata vesting of outstanding equity awards upon the death or disability of the executive valued at $8.42 per share, the closing price of our stock on the NYSE on December 30, 2016.
|
LSB Industries
Proxy Statement
43
Executive Compensation Tables
Director Stock Ownership Guidelines
On April 26, 2017, the Board unanimously adopted the LSB Industries, Inc. Stock Ownership Guidelines. The Stock
Ownership Guidelines require each non-employee director to own shares of our common stock having an aggregate value of at least $250,000 (2 times the
non-
employee director retainer) by the later of (i) five years following the effective date of the guidelines (April 26, 2022) or (ii) the fifth anniversary of a directors election to
the Board.