<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material pursuant to (s)(s) 240.14a-11(c) or (s)(s) 240.14a-12
----------------------------------------------------------------
LYONDELL PETROCHEMICAL COMPANY
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------
LYONDELL PETROCHEMICAL COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate Box):
[X] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:1/
----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
- ---------
1/Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
1) Amount Previously Paid: _____________________________________
2) Form, Schedule or Registration Statement No.: _______________
3) Filing Party: _______________________________________________
4) Date Filed: _________________________________________________
<PAGE>
[Logo of Lyondell appears here]
LYONDELL PETROCHEMICAL COMPANY
1221 MCKINNEY STREET, SUITE 1600
HOUSTON, TEXAS 77010
March 23, 1994
Dear Stockholder:
You are cordially invited to join us at the 1994 Annual Meeting of
Stockholders on Thursday, May 5, 1994, beginning at 10:00 a.m. in the Ballroom
of the Four Seasons Hotel, 1300 Lamar, in Houston, Texas.
It is important that your shares be voted whether or not you plan to be
present at the meeting. Please complete, sign, date and return the enclosed
form of proxy promptly. If you attend the meeting and wish to vote your shares
personally, you may revoke your proxy. If you do plan to attend, we would
appreciate your checking the appropriate box on the enclosed proxy card.
This booklet includes the Notice of the Meeting and the Proxy Statement,
which contains information about the formal business to be acted upon by the
stockholders. The meeting will also feature a report on the operations of your
Company, followed by a question and discussion period. A post-meeting report
will be mailed to all stockholders.
Sincerely yours,
[Signature of Mike R. Bowlin appears here]
Chairman of the Board
[Signature of Bob G. Gower appears here]
President and Chief Executive Officer
<PAGE>
[Logo of Lyondell appears here]
LYONDELL PETROCHEMICAL COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1994
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Lyondell Petrochemical Company will be
held in the Ballroom of the Four Seasons Hotel, 1300 Lamar, in Houston, Texas,
at 10:00 a.m., Houston time, on Thursday, May 5, 1994, for the following
purposes, as more fully described in the attached Proxy Statement.
(1) To elect eleven directors to serve until the 1995 Annual Meeting of
Stockholders or until their earlier resignation or removal;
(2) To amend the Certificate of Incorporation to authorize the issuance of
Preferred Stock;
(3) To ratify the appointment of Coopers & Lybrand as independent auditors
for Lyondell for the year 1994; and
(4) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 18, 1994 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
PLEASE READ THE PROXY STATEMENT, THEN COMPLETE, SIGN AND DATE THE FORM OF
PROXY AND RETURN IT IN THE ENCLOSED SELF-ADDRESSED POSTPAID ENVELOPE.
EACH STOCKHOLDER OF RECORD WILL RECEIVE A SINGLE FORM OF PROXY PERTAINING TO
ALL CLASSES OF VOTING STOCK REGISTERED IN HIS OR HER NAME. EACH PARTICIPANT IN
ANY OF THE VARIOUS EMPLOYEE BENEFIT PLANS WILL ALSO RECEIVE A FORM OF PROXY
PERTAINING TO SHARES CREDITED TO HIS OR HER ACCOUNTS IN ALL PLANS.
BY ORDER OF THE BOARD OF DIRECTORS
[Signature of Jeffrey R. Pendergraft appears here]
Jeffrey R. Pendergraft Houston, Texas
Secretary March 23, 1994
<PAGE>
[Logo of Lyondell appears here]
LYONDELL PETROCHEMICAL COMPANY
1221 MCKINNEY STREET
SUITE 1600
HOUSTON, TEXAS 77010
----------------
PROXY STATEMENT
MARCH 23, 1994
----------------
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Lyondell
Petrochemical Company ("Lyondell" or the "Company"). The proxy may be revoked
by the stockholder at any time prior to the time it is voted by giving notice
of such revocation either personally or in writing to the Secretary of
Lyondell. When a proxy is returned properly dated and signed, the shares
represented thereby will be voted by the persons named as proxies in accordance
with each stockholder's directions. If a proxy is dated, signed and returned
without specifying choices, the shares will be voted as recommended by the
directors of the Company. As to other items of business which may come before
the meeting or any adjournment thereof, they will vote in accordance with their
best judgment. It is expected that proxy materials will be mailed to
stockholders beginning on or about April 4, 1994. Atlantic Richfield Company, a
Delaware corporation ("ARCO"), has advised the Company that it owned
approximately 49.9 percent of the outstanding Common Stock of the Company
("Common Stock") on March 1, 1994. See "Principal Stockholders."
VOTING PROCEDURES
Holders of record of Common Stock at the close of business on March 18, 1994
will be entitled to one vote per share. The Company had 80,000,000 shares of
Common Stock outstanding on such record date. Fractional shares will not be
voted. The presence, in person or by proxy, of stockholders entitled to cast at
least a majority of the votes that all stockholders are entitled to cast shall
constitute a quorum. Abstentions and broker non-votes are counted as present in
determining whether the quorum requirement is satisfied.
The directors will be elected by a plurality of the shares of Common Stock
present in person or represented by proxy at the meeting. Adoption of the
proposed amendment to the Certificate of Incorporation will require the
affirmative vote of a majority of the outstanding shares of Common Stock, and
the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting will be required to ratify the appointment
of the independent auditors.
Abstentions from voting on any matter will be included in the voting tally
and will have the same effect as a vote withheld on the election of directors,
against the proposed amendment to the Certificate of Incorporation, or against
the ratification of the appointment of the independent auditors, as the case
may be. Because broker non-votes with respect to a matter requiring the
affirmative vote of a majority of the outstanding shares of Common Stock will
have the same effect as a vote against such matter, broker non-votes will have
the same effect as a vote against the proposed amendment to the Certificate of
Incorporation. Because broker non-votes are not considered "shares present"
with respect to a matter requiring the affirmative vote of a majority of shares
present in person or by proxy at the meeting, broker non-votes will not effect
the outcome with respect to the election of directors or the ratification of
the appointment of the independent auditors.
<PAGE>
Certain of the Company's employee benefit plans, including the Capital
Accumulation Plan and the Savings Investment Plan, in which officers have
account balances, permit plan participants to direct the plan trustees how to
vote the Common Stock allocated to their accounts. The trustee for each such
plan will vote all shares of Common Stock for which no participant directions
are received in the same proportion as all those shares of Common Stock for
which directions are received.
PRINCIPAL STOCKHOLDERS
The Company's principal stockholder, ARCO, is one of the nation's leading
integrated oil companies and maintains its headquarters at 515 South Flower
Street, Los Angeles, California 90071. At March 1, 1994 ARCO owned 39,921,400
shares of Lyondell's Common Stock, which represent 49.9 percent of the
outstanding stock. ARCO has consistently maintained an ownership position of
just under 50 percent of Lyondell's Common Stock from the date of the Company's
public offering of stock; however, there is no assurance that ARCO will
maintain such ownership position in the future.
ARCO officers and directors do not constitute a majority of the Board of
Directors; however, ARCO officers and directors hold five of eleven
directorships. Beginning in 1989, the Company was not included as a
consolidated subsidiary in ARCO's financial statements; however, for certain
securities laws purposes, ARCO could be deemed to be a "control" person or an
"affiliate" of Lyondell.
ARCO has informed the Company that it intends to vote its shares in favor of
the eleven nominees to the Board of Directors, for the amendment to the
Certificate of Incorporation to authorize Preferred Stock and for the
appointment of Coopers & Lybrand as independent auditors for 1994.
The table below sets forth certain information as of December 31, 1993 (the
most recent date as of which the Company has information) regarding the
beneficial ownership of the Common Stock by persons other than ARCO known by
the Company to own beneficially more than five percent of its outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF SHARES
NAME SHARES OUTSTANDING
---- --------- -----------
<S> <C> <C>
Wellington Management Company(a)..................... 5,356,300 6.70%
75 State Street, Boston, Massachusetts 02109
</TABLE>
- --------
(a) Wellington Management Company ("WMC") (together with its wholly-owned
subsidiary, Wellington Trust Company, National Association) may be deemed a
beneficial owner of the 5,356,300 shares by virtue of the direct or
indirect investment and/or voting discretion they possess pursuant to the
provisions of investment advisory agreements with clients. WMC has shared
dispositive power over the 5,356,300 shares of Common Stock, including the
5,083,900 shares beneficially owned by Windsor Funds, Inc., an investment
advisory client of WMC.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock owned
beneficially as of March 1, 1994 by each director or nominee, each of the
executive officers named on the Summary Compensation Table and by all current
directors and officers as a group. As of March 1, 1994, the percentage of
shares of Common Stock beneficially owned by any director or nominee, named
executive officers or by all directors and officers as a group, did not exceed
one percent of the issued and outstanding Common Stock. Unless otherwise noted,
each individual has sole voting and investment power.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
OWNED BENEFICIALLY AS
OF MARCH 1, 1994(A)(B)
----------------------
<S> <C>
Mike R. Bowlin.......... 2,000
William T. Butler....... 3,001
Allan L. Comstock....... 0
Terry G. Dallas......... 0
Bob G. Gower............ 166,717
Stephen F. Hinchliffe,
Jr..................... 2,250(c)
Robert H. Ise........... 27,776
Dudley C. Mecum II...... 700
Jeffrey R. Pendergraft.. 25,521
William C. Rusnack...... 301
Dan F. Smith............ 27,590
Paul R. Staley.......... 400
William E. Wade, Jr..... 1,000
Russell S. Young........ 33,774(d)
All directors and
officers as a group (19
Persons)............... 375,521(e)
</TABLE>
- --------
(a) Includes shares held by the trustees under the Lyondell Capital
Accumulation Plan and the Lyondell Savings Investment Plan for the accounts
of participants as of December 31, 1993.
(b) The amounts shown include shares that may be acquired within 60 days
following March 1, 1994 through the exercise of stock options, as follows:
Mr. Gower, 112,137; Mr. Smith, 20,366; Mr. Pendergraft, 23,285; Mr. Young,
20,704; Mr. Ise, 25,879 and all directors and officers as a group,
including those just named, 272,984.
(c) Does not include 1,000 shares held by a trust of which Mr. Hinchliffe is a
trustee, as to which shares he disclaims beneficial ownership.
(d) Does not include 1,100 shares owned by Mr. Young's spouse, as to which
shares he disclaims beneficial ownership.
(e) Does not include 5,059 shares owned by spouses and a trust, as to which
shares beneficial ownership is disclaimed.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than eleven percent
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of Common
Stock of the Company. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that such reports
accurately reflect all reportable transactions and holdings, during the fiscal
year ended December 31, 1993 all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten-percent beneficial owners were
complied with.
3
<PAGE>
ELECTION OF DIRECTORS
Item 1 on Proxy Card
Pursuant to the Company's Certificate of Incorporation and its By-Laws, the
members of the Board of Directors serve for one-year terms. The Board of
Directors has selected the nominees listed below for election to a term of one
year.
Directors are to be elected at the annual meeting to hold office for the term
specified and until their successors are elected and qualified. Unless
authority to vote for directors is withheld in the proxy, the persons named in
the accompanying proxy intend to vote for the election of the eleven nominees
listed below. The directors will be elected by a plurality of the shares of
Common Stock of the Company voted at the meeting.
All nominees have indicated a willingness to serve as directors, but if any
of them should decline or be unable to act as a director, the persons named in
the proxy will vote for the election of another person or persons as the Board
of Directors recommends.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ELECTION OF EACH NOMINEE
LISTED BELOW. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
The following biographical information is furnished with respect to each of
the nominees for election at the annual meeting. The information includes age
as of March 1, 1994, present position, if any, with Lyondell, period served as
director, and other business experience during the past five years. The
positions referred to beneath a director's name refer to positions with
Lyondell unless stated otherwise.
Mike R. Bowlin, 51....... Mr. Bowlin was elected a Director of the Company on
July 23, 1993 and Chairman of the Board on August
13, 1993. He has been President and Chief
Operating Officer of ARCO since June 1, 1993 and a
director of ARCO since June, 1992. He was an
Executive Vice President of ARCO from June, 1992
to May, 1993. He was a Senior Vice President of
ARCO from August, 1985 to June, 1992 and President
of ARCO International Oil and Gas Company from
November, 1987 to June, 1992. He was Senior Vice
President of International Oil and Gas
Acquisitions from July, 1987 to November, 1987. He
was President of ARCO Coal Company from August,
1985 to July, 1987. He was a Vice President of
ARCO from October, 1984 to July, 1985. From April,
1981 to December, 1984, he was Vice President of
ARCO Oil and Gas Company. He has been an officer
of ARCO since October, 1984. He originally joined
ARCO in 1969.
William T. Butler, 61.... Dr. Butler was elected a Director of the Company on
December 21, 1988, effective as of January 25,
1989. He has held his current position as
President and Chief Executive Officer of Baylor
College of Medicine (education and research) since
1979. He is also a director of First City
Bancorporation of Texas, Inc., C. R. Bard, Inc.
and Browning-Ferris Industries Inc.
Allan L. Comstock, 50.... Mr. Comstock was elected a Director of the Company
on July 23, 1993. He has been a Vice President and
Controller of ARCO since June, 1993. He was a Vice
President of ARCO Chemical from October, 1989
through May, 1993. From November, 1985 to
September, 1989 he was General Auditor of ARCO. He
originally joined ARCO in 1969.
4
<PAGE>
Terry G. Dallas, 43...... Mr. Dallas was elected a Director of the Company on
July 23, 1993. He has been a Vice President of
ARCO since June, 1993 and Treasurer of ARCO since
January 24, 1994. He was Vice President, Corporate
Planning of ARCO from June, 1993 to January, 1994.
He served as Assistant Treasurer for ARCO
Corporate Finance from 1990 to 1993. He was Vice
President of Finance, Control and Planning for
ARCO British, Ltd. from 1988 to 1990 and Manager
of International Acquisitions for ARCO
International Oil and Gas Company from 1986 to
1988. He originally joined ARCO in 1979.
Bob G. Gower, 56......... Mr. Gower was elected Chief Executive Officer of
President and Chief the Company on October 24, 1988 and a Director and
Executive Officer President of the Company on June 27, 1988. He has
been President of Lyondell and its predecessor,
the Lyondell Division, since the formation of the
Lyondell Division in April, 1985. Mr. Gower was a
Senior Vice President of ARCO from June, 1984
until his resignation as an officer of ARCO on
January 18, 1989. Prior to 1984 he served in
various capacities with the then ARCO Chemical
Division. He originally joined ARCO in 1963.
Mr. Gower is also a director of Texas Commerce
Bank-Houston and Keystone International Inc.
Stephen F. Hinchliffe, Mr. Hinchliffe was elected a Director of the
Jr. 60.................. Company on March 1, 1991. Since 1988, he has held
his current position of Chairman of the Board and
Chief Executive Officer of BHH Management, Inc.,
the managing partner of Leisure Group, Inc.
Previously, he served as Chairman of the Board of
Leisure Group, Inc. (a manufacturer of consumer
products), which he founded in 1964.
Dudley C. Mecum II, 59... Mr. Mecum was elected a Director of the Company on
November 28, 1988, effective as of January 25,
1989. He has held his current position as a
partner with G. L. Ohrstrom & Company (merchant
banking) since August, 1989. Previously he was
Chairman of Mecum Associates, Inc. (management
consulting) from December, 1987 to August, 1989.
He served as Group Vice President and director of
Combustion Engineering Inc. from 1985 to December,
1987, and as a managing partner of the New York
region of Peat, Marwick, Mitchell & Co. from 1979
to 1985. He is also a director of The Travelers,
Inc., Dyncorp, VICORP Restaurants, Inc., Fingerhut
Companies, Inc. and Roper Industries, Inc.
William C. Rusnack, 49... Mr. Rusnack was elected a Director of the Company
on October 24, 1988. He has been a Senior Vice
President of ARCO since July 1990 and President of
ARCO Products Company since June, 1993. He was
President of ARCO Transportation Company from
July, 1990 to May, 1993. He was Vice President,
Corporate Planning, of ARCO from July, 1987 to
July, 1990. He was Senior Vice President,
Marketing and Employee Relations, of the ARCO Oil
and Gas Division from August, 1985 to July, 1987
and Vice President, Manufacturing, of the ARCO
Products Division from July, 1984 to August, 1985.
From June 1983 to July, 1984 he was Vice
President, Planning and Control, of the ARCO
Products Division. He originally joined ARCO in
1966. Mr. Rusnack is also a director of BWIP
Holding, Inc.
5
<PAGE>
Dan F. Smith, 47......... Mr. Smith was elected a Director of the Company on
Executive Vice October 24, 1988. He was elected Executive Vice
President and Chief President and Chief Operating Officer on May 6,
Operating Officer 1993. He served as Vice President Corporate
Planning of ARCO from October, 1991 until May,
1993. He previously served as Executive Vice
President and Chief Financial Officer of the
Company from October, 1988 to October, 1991 and as
Senior Vice President of Manufacturing of
Lyondell, and its predecessor, the Lyondell
Division, from June, 1986 to October, 1988. From
August, 1985 to June, 1986 Mr. Smith served as
Vice President of Manufacturing for the Lyondell
Division. He joined the Lyondell Division in
April, 1985 as Vice President, Control and
Administration. Prior to 1985, he served in
various financial, planning and manufacturing
positions with ARCO. He originally joined ARCO in
1968.
Paul R. Staley, 64....... Mr. Staley was elected a Director of the Company on
November 28, 1988, effective as of January 25,
1989. He has held his current position as Chairman
of the Executive Committee of the Board of
Directors of P. Q. Corporation (an industry
supplier of silicates) since January, 1991. He
held the positions of President and Chief
Executive Officer of P.Q. Corporation from 1973
and 1981, respectively, until January, 1991.
William E. Wade, Jr., Mr. Wade was elected a director of the Company on
51...................... August 13, 1993. He has been Executive Vice
President of ARCO since June 1, 1993 and a
director of ARCO since June, 1993. He was a Senior
Vice President of ARCO from May, 1987 to May, 1993
and President of ARCO Oil and Gas Company from
October, 1990 to May, 1993. He was President of
ARCO Alaska, Inc. from July, 1987 to July, 1990.
He was a Vice President of ARCO from 1985 to May,
1987. From 1981 to 1985, he was Vice President of
ARCO Exploration Company. He has been an officer
of ARCO since 1985. He originally joined ARCO in
1968.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information as to the Chief Executive Officer
and the next four most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ------- -------
ANNUAL SPECIAL OTHER ANNUAL LTIP ALL OTHER
BONUS BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) ($)(A) ($)(B) (#)(C) ($)(C) ($)(D)(E)
- --------------------------- ---- ---------- ------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bob G. Gower............ 1993 555,099 220,000 240,000 74,499 56,500 964,452 59,262
President, 1992 527,215 -0- (a) 36,149 42,200 829,116 57,553
Chief Executive Officer 1991 511,781 340,000 -0- 37,000 957,719
Dan F. Smith (f)........ 1993 247,651 120,000 100,000 4,115 (f) (f) 934,449(g)
Executive Vice 1992 (f) -0- (a) (f) (f) 423,987 (f)
President, 1991 207,168 -0- -0- 14,400 298,117
Chief Operating Officer
Jeffrey R. Pendergraft.. 1993 221,934 60,000 37,500 9,754 17,200 216,480 26,030
Senior Vice President, 1992 213,277 -0- (a) 3,307 11,700 186,629 22,086
General Counsel & 1991 207,951 85,000 -0- 8,200 129,374
Secretary
Russell S. Young........ 1993 206,338 60,000 37,500 17,347 14,500 180,698 28,489
Senior Vice President, 1992 186,722 -0- (a) 6,988 8,200 155,341 19,513
Chief Financial Officer, 1991 175,829 65,000 -0- 6,400 134,537
Treasurer
Robert H. Ise (h)....... 1993 204,481 45,000 15,000 12,316 19,000 201,433 26,571
Vice President and 1992 193,519 -0- (a) 9,532 12,900 173,167 25,270
Vice President 1991 188,085 85,000 -0- 8,200 124,328
LYONDELL-CITGO
Refining Company Ltd.
</TABLE>
- --------
In accordance with the transition provisions applicable to the revised proxy
rules covering disclosure of executive compensation adopted under the
Securities Exchange Act of 1934 (the "Proxy Rules"), amounts of other annual
compensation and all other compensation are excluded for the Company's 1991
fiscal year.
(a) Special bonuses were paid in 1993 in recognition of the executive officers'
and other key employees' significant contributions during 1992 and 1993 to
the successful completion of the Company's refining venture with CITGO
Petroleum Corporation and Lagoven S.A.
(b) Includes imputed income in respect of the Long-Term Disability Plan, tax
gross-ups in respect of financial counseling reimbursements and in respect
of other miscellaneous items, and the amount of incremental interest
accrued under the Executive Deferral Plan that exceeds 120 percent of a
specified IRS rate. "Tax gross-ups" refers to the additional reimbursement
paid to a recipient to cover the federal income tax obligations associated
with the underlying benefit, including an additional amount, based on
maximum applicable income tax rates.
(c) Amounts shown in the LTIP Payouts column represent payment of performance
units (including associated dividend share credits) awarded under the
Company's Executive Long-Term Incentive Plan (the "LTIP"). The LTIP
provides for the granting of stock options and the right to receive
performance units under certain circumstances and a cash payment in respect
of dividend share credits as described in this footnote. Dividend share
credits are allocated to an optionee's account whenever dividends are
7
<PAGE>
declared on shares of common stock. The number of dividend share credits to
be allocated on each record date to an optionee's account is computed by
multiplying the dividend rate per share of Common Stock by the sum of (i)
the number of shares subject to outstanding options, (ii) the number of
performance units and (iii) the number of dividend share credits then
credited to the optionee's account and dividing the resulting figure by the
fair market value of a share of Common Stock ("FMV") on such dividend record
date. As future dividends are declared, the participant will receive
dividend share credits not only on the number of shares covered by
unexercised options and the number of performance units but also on the
number of dividend share credits in the participant's account. The dividend
crediting mechanism will continue to operate in this manner (i) with respect
to options, until the participant exercises such options or the options
expire, and (ii) with respect to performance units, until payment is made
(or not made, as the case may be) in respect of performance units. Dividend
share credits do not represent earned compensation and have no definite
value, if any, until the date on which the options or performance units, as
applicable, in respect of which such credits have been allocated, are
exercised or paid. See footnote (b) to the Aggregated Option Exercises and
Fiscal Year-End Option Values Table. Dividend share credits are canceled
upon an optionee's termination of employment under certain specified
circumstances. In addition to the dollar amounts shown in the LTIP Payouts
column, the number of dividend share credits accrued to the accounts of the
named executives during 1993 and 1992, respectively, is as follows: Mr.
Gower: 13,819 and 13,200; Mr. Smith: 2,405 and 4,399; Mr. Pendergraft: 3,414
and 2,885; Mr. Young: 2,625 and 2,311; and Mr. Ise: 3,384 and 2,900.
(d) Includes contributions to the Executive Supplementary Savings Plan,
incremental executive medical plan premiums, financial counseling
reimbursements and certain amounts in respect of the Executive Life
Insurance Plan, as follows:
<TABLE>
<CAPTION>
YEAR MR. GOWER MR. SMITH MR. PENDERGRAFT MR. YOUNG MR. ISE
---- --------- --------- --------------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Executive Supplementary
Savings Plan........... 1993 $44,408 $19,812 $17,754 $16,507 $16,358
1992 $42,177 $ -0- $17,062 $14,938 $15,481
Incremental Medical Plan
Premiums............... 1993 $ 4,301 $ 2,867 $ 4,301 $ 4,301 $ 4,301
1992 $ 4,104 $ -0- $ 4,104 $ 4,104 $ 4,104
Financial Counseling
Reimbursement.......... 1993 $ 7,735 $ -0- $ 3,975 $ 7,235 $ 4,645
1992 $ 8,885 $ -0- $ 920 $ 100 $ 4,646
Executive Life Insurance
Plan................... 1993 $ 2,818 $ 1,770 $ -0- $ 446 $ 1,267
1992 $ 2,387 $ -0- $ -0- $ 371 $ 1,039
</TABLE>
(e) In 1993 a revised methodology was adopted to calculate certain amounts in
respect of the Executive Life Insurance Plan; accordingly, 1992 amounts
have been restated to reflect this methodology. The effect of this
restatement is not material to the overall figure previously reported.
(f) Mr. Smith was elected Executive Vice President and Chief Operating Officer
on May 6, 1993. The salary figure for 1993 is the amount paid to Mr. Smith
for his service from that date. Prior to that he served as Vice President
Corporate Planning of ARCO from October, 1991. He previously served as
Executive Vice President and Chief Financial Officer of the Company from
October, 1988 to October, 1991. The salary figure for 1991 is the amount
paid to Mr. Smith for that portion of the year he was employed by the
Company.
(g) Includes relocation expenses in connection with his relocation to Houston
of $540,000 for the loss from the sale of a home. Mr. Smith also received
$370,000 as a tax gross-up in connection with that loss, which is included
in this column.
(h) Mr. Ise served as Vice President, Marketing and Sales, Polymers and
Petroleum Products through June 30, 1993. Effective as of July 1, 1993, Mr.
Ise began providing services as a loaned executive as a Vice President of
LYONDELL-CITGO Refining Company Ltd., a limited liability company in which
the Company currently owns an approximate 90% interest and CITGO Petroleum
Corporation owns an approximate 10% interest. LYONDELL-CITGO Refining
Company Ltd. reimburses the Company for the cost of salary and other
compensation paid to Mr. Ise. Mr. Ise continues to serve as a Vice
President of Lyondell.
8
<PAGE>
EXECUTIVE LONG-TERM INCENTIVE PLAN
The LTIP provides for the granting of stock options, the right to receive
performance units under certain circumstances and a cash payment in respect of
dividend share credits. The following table describes the grants to the named
executive officers of stock options and certain other information with respect
to the exercise of stock options. No performance units were granted in 1993.
Additional information with respect to payouts of performance units under the
LTIP is contained in the Summary Compensation Table.
OPTIONS
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the named executive officers during 1993. The values assigned to each reported
option are shown using the Black-Scholes option pricing model. In assessing
these values it should be kept in mind that no matter what theoretical value is
placed on a stock option on the date of grant, its ultimate value will be
dependent on the market value of the company's stock at a future date.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
---------------------------------------------------------------------
NUMBER OF % OF TOTAL OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE OR BASE EXPIRATION GRANT DATE PRESENT
NAME OPTIONS GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE VALUE ($)(B)
---- ------------------- ------------------ ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Mr. Gower............... 56,500 22 $26.00 March 5, 2003 $819,815
Mr. Smith(c)............ 0 -- -- -- --
Mr. Pendergraft......... 17,200 6.7 26.00 March 5, 2003 249,572
Mr. Young............... 14,500 5.6 26.00 March 5, 2003 210,395
Mr. Ise................. 19,000 7.4 26.00 March 5, 2003 275,690
</TABLE>
- --------
(a) The ten-year options were granted on March 5, 1993 pursuant to the LTIP at
an exercise price equal to the FMV on the date of grant. The options become
exercisable in four equal annual installments beginning March, 1994.
Options and the dividend share credits associated with such options are
canceled upon an optionee's termination of employment under certain
specified circumstances. Stock options also carry eligibility for dividend
share credits as described in footnote (c) to the Summary Compensation
Table.
(b) The values shown reflect a variation of the Black-Scholes pricing model.
The pricing model used by the Company includes the following assumptions:
options are exercised at the end of the 10-year term; no premium for risk
is assigned; the dividend yield is assumed to be the current yield on the
date of grant; and a long-term (200 days) historical volatility rate is
applied. The values relate solely to stock options (and not performance
units) and do not take into account risk factors such as nontransferability
and limits on exercisability. The values do take into account the fact that
dividend share credits are allocated to an optionee's account whenever
dividends are declared on shares of common stock.
(c) Mr. Smith was not an executive officer when options were granted in 1993.
See footnote (f) to the Summary Compensation Table.
9
<PAGE>
The following table shows the number of shares of Common Stock represented by
outstanding stock options held by each of the named executive officers as of
December 31, 1993. Also reported are the values for "in-the-money" options
which represent the positive spread between the exercise price of any such
existing stock options and the year end price of common stock.
AGGREGATED OPTION EXERCISES IN 1993
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS AT YEAR-END IN-THE-MONEY OPTIONS
UNDERLYING (#)(A) AT YEAR-END ($)(A)(B)
OPTIONS ------------------------- -------------------------
NAME EXERCISED (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Gower............... -0- -0- 78,212 106,650 $99,986 $18,500
Mr. Smith............... -0- -0- 16,766 7,200 15,354 7,200
Mr. Pendergraft......... -0- -0- 16,110 30,075 22,442 4,100
Mr. Young............... -0- -0- 12,879 24,400 18,467 3,200
Mr. Ise................. -0- -0- 15,854 32,775 21,119 4,100
</TABLE>
- --------
(a) The FMV of Lyondell Common Stock on December 31, 1993 was $21.25.
(b) Each option carries with it the right to dividend share credits, as
described in footnote (c) to the Summary Compensation Table. Set forth
below is a calculation of the value of accrued dividend share credits,
assuming exercise at December 31, 1993, of the in-the-money options. These
hypothetical values have been calculated for illustration purposes only.
<TABLE>
<CAPTION>
EXERCISABLE UNEXERCISABLE
------------ --------------
<S> <C> <C>
Mr. Gower....................... $413,802 $82,370
Mr. Smith....................... $ 65,217 $32,057
Mr. Pendergraft................. $ 92,859 $18,255
Mr. Young....................... $ 76,344 $14,248
Mr. Ise......................... $ 87,477 $18,255
</TABLE>
10
<PAGE>
ANNUAL PENSION BENEFITS
The following table shows estimated annual pension benefits payable to the
Company's employees, including executive officers of the Company, upon
retirement on January 1, 1994 at age 65 under the provisions of the Lyondell
Retirement Plan and the Executive Supplementary Retirement Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE FINAL EARNINGS
(BASE SALARY PLUS ANNUAL
INCENTIVE PLAN AWARDS)--
HIGHEST THREE CONSECUTIVE APPROXIMATE ANNUAL BENEFIT FOR YEARS OF
YEARS OUT OF LAST TEN YEARS MEMBERSHIP SERVICE INDICATED(A)(B)(C)
--------------------------- ---------------------------------------
15 20 25 30 35
YEARS YEARS YEARS YEARS YEARS
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
$1,100,000 253,025 337,367 421,709 506,050 590,392
1,000,000 229,925 306,567 383,209 459,850 536,492
900,000 206,825 275,767 344,709 413,650 482,592
800,000 183,725 244,967 306,209 367,450 428,692
700,000 160,625 214,167 267,709 321,250 374,792
600,000 137,525 183,367 229,209 275,050 320,892
500,000 114,425 152,567 190,709 228,850 266,992
400,000 91,325 121,767 152,209 182,650 213,092
300,000 68,225 90,967 113,709 136,450 159,192
200,000 45,125 60,167 75,209 90,250 105,292
</TABLE>
- --------
(a) The amounts shown in the above table are necessarily based upon certain
assumptions, including retirement of the employee on January 1, 1994 and
payment of the benefit under the basic form of allowance provided under the
Lyondell Retirement Plan (payment for the life of the employee only with a
guaranteed minimum payment period of 60 months). The amounts will change if
the payment is made under any other form of allowance permitted by the
Lyondell Retirement Plan, or if an employee's retirement occurs after
January 1, 1994, since the "annual covered compensation level" of such
employee (one of the factors used in computing the annual retirement
benefits) may change during the employee's subsequent years of membership
service. The benefits shown are not subject to deduction for Social
Security benefits or other offset amounts. The plans, however, provide a
higher level of benefits for the portion of compensation above the
compensation levels on which Social Security benefits are based.
(b) As of December 31, 1993, the credited years of service (rounded to the
nearest whole number) under the Lyondell Retirement Plan for the named
executive officers are: Mr. Gower, 30; Mr. Smith, 17; Mr. Pendergraft, 21;
Mr. Young, 13; and Mr. Ise, 34.
(c) All employees' (including executive officers') years of service with ARCO
prior to the creation of Lyondell have been credited under the Company's
retirement plans.
11
<PAGE>
The graph below compares the cumulative total return to stockholders of the
Company with the cumulative total return to stockholders of the S&P 500 Stock
Index and a group of 14 peer companies. Although SEC Rules require a five-year
comparison, Lyondell data is only available from January 19, 1989, the date on
which it began trading publicly.
COMPARISON OF 5 YEAR CUMULATIVE RETURNS
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
LYONDELL........................ $100.00 $ 75.68 $ 64.54 $108.04 $126.83 $115.96
S & P 500 ...................... $100.00 $131.69 $127.60 $166.47 $179.15 $197.21
PEER GROUP ONLY (a)............. $100.00 $ 96.98 $ 81.41 $ 94.83 $ 90.90 $106.14
</TABLE>
The Company believes that for the businesses which it operates a comparison
of cumulative total return from different time periods is appropriate to show
how these returns may vary. Accordingly, for this year the Company has
included a comparison of cumulative total return for the three years beginning
January, 1991.
COMPARISON OF 3 YEAR CUMULATIVE RETURNS
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
LYONDELL........................................ $100.00 $167.41 $196.52 $179.68
S & P 500....................................... $100.00 $130.46 $140.40 $154.55
PEER GROUP ONLY (a)............................. $100.00 $116.48 $111.67 $130.38
</TABLE>
12
<PAGE>
- --------
(a) The Peer Group is a composite index composed of independent refiners and
commodity chemical manufacturers. The Peer Group includes Ashland Oil,
Inc.; B.F. Goodrich; Crown Central Petroleum Corporation; Diamond Shamrock,
Inc.; FINA, Inc.; Georgia Gulf Corporation; Nova Corporation of Alberta;
Quantum Chemical Corporation*; Rexene Corporation; Sterling Chemicals,
Inc.; Sun Company, Inc.; Tosco Corporation; Union Carbide Corporation and
Valero Energy Corporation. The Peer Group is identical to the group
companies used for financial performance comparison purposes and includes
certain of the companies used for determinations of the competitiveness of
executive salaries.
(b) The returns of each member of the Peer Group are weighted according to the
respective issuer's market capitalization at the beginning of each year and
assume reinvestment of dividends. None of the 14 peer companies constituted
more than 15 percent of the market capitalization of the entire Peer Group
in 1993.
* The Peer Group is composed of 14 companies. One of those companies, Quantum
Chemical Corporation, was acquired by Hanson PLC in September, 1993 and is
no longer publicly traded. Therefore, for 1993, Quantum's data in the graph
is based on the last publicly reported price of its common stock.
PURSUANT TO SEC RULES, THIS SECTION OF THE PROXY STATEMENT IS NOT DEEMED
"FILED" WITH THE SEC.
13
<PAGE>
LYONDELL PETROCHEMICAL COMPANY
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Lyondell (the
"Compensation Committee") administers Lyondell's executive compensation. The
Compensation Committee conducts an annual review of executive compensation and
approves all compensation, grants or awards to executive officers of Lyondell.
The Company seeks to retain, motivate and reward executives by providing
short and long-term compensation that is tied to achievement of shareholder
value and Company performance objectives. This policy is implemented through
the compensation plan which at present is composed of base pay, an annual cash
incentive and long-term incentives in the form of stock options.
The Compensation Committee places strong emphasis on financial performance,
including total return to stockholders and achievement of annual goals by
Lyondell, as well as competitive compensation data. Lyondell's financial
performance as measured by various performance indicators is compared to the
peer group identified in the cumulative total stockholder return graphs
included in this proxy statement (which is a self-selected group of independent
refiners and petrochemical producers that competes in the Company's primary
business segments). Lyondell's financial performance and the extent to which
annual goals are achieved impact the actual level of cash and total
compensation to be awarded in any year.
Annually, the Compensation Committee reviews survey information compiled by
outside consultants as well as proxy data to determine competitive ranges of
pay for Lyondell's executives as compared to executives in other companies with
similar positions. The companies included in the survey and the proxy data are
representative of Lyondell's competitors for executive talent. Those companies
included in the proxy data review are identical to the peer group identified in
the stockholder return graphs.
While fluctuations occur year to year due to performance and changes in
survey data, Lyondell's compensation levels of base salary, base salary and
annual incentive and base, annual incentive and long-term incentive generally
are all lower than or at the median of the compensation levels of the companies
surveyed. From 1991 through 1993 total compensation (comprised of base salary,
annual incentive and long-term incentive awards) for the officers has been
relatively flat except for the officers who have received promotions during the
period.
Base Pay
Using survey and proxy data, the Compensation Committee determines
appropriate levels of pay for executive positions. Merit increase guidelines
are established consistent with this data. The amount of merit increase
provided an executive is primarily based on individual performance and
competitive data, but internal equity factors also may be considered.
Annual Incentive
The Annual Incentive Plan provides the opportunity for annual cash incentives
to officers and select members of management. Under the Annual Incentive Plan a
target pool is established each year based on competitive data. Payout to the
officers may vary between zero and two hundred percent of the target pool. In
determining incentive amounts, the Compensation Committee reviews Lyondell's
annual performance as compared to peer companies as measured by total return to
stockholders, cash flow, earnings, return on capital employed and personal
performance. Productivity measures also are considered as well as achievement
of annual goals. The Compensation Committee does not assign specific weights to
any of the factors it considers when determining Lyondell's overall performance
for the year. In March, 1994, the Compensation Committee, based on a review of
Lyondell's 1993 performance, awarded annual cash incentives to the officers,
14
<PAGE>
including the chief executive officer, equalling approximately fifty percent of
the target pool. Additionally in July, 1993, special awards were made to
certain officers, including the chief executive officer, and other key
employees in recognition of their efforts in 1992 and 1993 for successfully
completing the LYONDELL-CITGO Refining Company Ltd. transaction with CITGO
Petroleum Corporation. The completion of this project represented the
achievement of a key strategic objective that is expected to provide
significant long-term positive financial impact for the Company.
Long-Term Incentives
A Subcommittee of the Compensation Committee administers the Executive Long
Term Incentive Plan (the "LTIP"), a program providing long-term incentives. The
Subcommittee is composed of Dr. William T. Butler and Messrs. Stephen F.
Hinchliffe, Jr., Chairman; Dudley C. Mecum II and Paul R. Staley.
The LTIP provides for the award of non-qualified stock options and
performance units. Performance units are designed as an incentive to reward
differential performance as measured by total return to stockholders as against
a group of related companies. The Subcommittee did not grant any performance
units in 1993.
In determining the Company's performance for purposes of LTIP, the
Subcommittee reviews the same performance factors that are used to determine
annual bonuses. In 1993, the officers, including the chief executive officer,
received increased grants of stock options in order maintain a competitive
overall total compensation package. As a result, a greater portion of the
officers total compensation package was at risk as to its ultimate value while
being aligned with stockholders' interests.
Chief Executive Officer's 1993 Compensation
The Compensation Committee determines the compensation of Mr. Gower,
Lyondell's Chief Executive Officer and President, in substantially the same
manner as the compensation for all other officers. Consistent with standard
compensation practices for chief executive officers and survey data, a greater
portion of Mr. Gower's total compensation is provided through awards under the
Annual Incentive Plan and the LTIP.
In 1993, Mr. Gower received a merit increase in base salary that was
consistent with the merit guidelines approved by the Compensation Committee.
The amount of merit increase is primarily based on individual performance and
competitive data.
In March 1993, Mr. Gower received a stock option grant of 56,500 under the
LTIP. The Compensation Committee believes such award is appropriate in that
Lyondell generally outperformed its peer companies during 1992 as measured by
the financial performance and productivity indicators described above, returned
17% to stockholders and achieved all major 1992 goals. As a result, it sought
to provide Mr. Gower with an acceptable competitive total compensation package
through an increased grant of stock options.
In July 1993, Mr. Gower received a special award in the amount of $240,000 in
recognition of his efforts in successfully completing the LYONDELL-CITGO
Refining Company Ltd. transaction with CITGO Petroleum Corporation. The
completion of this project represents the achievement of a primary strategic
objective. It is expected to benefit stockholders through stabilization of
profitability and cash flows from the refining business as well as upgrading
the refinery into a worldclass heavy crude oil processing facility.
In March 1994, Mr. Gower was granted an annual incentive award in the amount
of $220,000 under the Annual Incentive Plan. The Compensation Committee
believes such award is appropriate in that Lyondell improved 1993 profitability
through implementation of a cost reduction program that will reduce overhead
costs by approximately $30 to $50 million, completed a number of projects that
enhanced Lyondell's financial flexibility and achieved significant safety
milestones.
15
<PAGE>
Mr. Gower's total compensation package continues to include a large portion
which is at risk as to its ultimate value and the Compensation Committee
believes that this continues to align his rewards and incentives with
stockholders' interests.
Omnibus Budget Reconciliation Act of 1993
Section 162(m) of the Omnibus Budget Reconciliation Act of 1993 (the "1993
Act") limits the deductibility to the Company of cash compensation in excess of
$1 million paid to the Company's chief executive officer and the next four
highest paid officers during any fiscal year, beginning with 1994, unless such
compensation meets certain requirements. During 1994, the Compensation
Committee is undertaking a review of the executive compensation programs in
light of the requirements of the 1993 Act and to address certain other issues.
The Compensation Committee does not expect the provisions of the 1993 Act to
impact the Company in 1994 in any significant way, if at all.
Compensation Committee Members
The Compensation Committee strongly believes stockholders are well served by
Lyondell's executive management team and that the executive compensation
programs support the long-term success of the Company. This report is submitted
by the Compensation Committee of the Board of Directors of Lyondell.
PAUL R. STALEY, CHAIRMAN STEPHEN F. HINCHLIFFE, JR.
MIKE R. BOWLIN DUDLEY C. MECUM II
DR. WILLIAM T. BUTLER WILLIAM C. RUSNACK
PURSUANT TO SEC RULES, THIS SECTION OF THE PROXY STATEMENT IS NOT DEEMED
"FILED" WITH THE SEC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Messrs. Bowlin and Rusnack are executive officers, and Mr. Bowlin is also a
director, of ARCO. See "Transactions between the Company and ARCO" below.
TRANSACTIONS BETWEEN THE COMPANY AND ARCO
In connection with the transfer of assets and liabilities to Lyondell, the
Company and ARCO entered into a number of agreements for the purpose of
defining their ongoing relationships. In addition, in July 1987 the Lyondell
Division and ARCO Chemical Company ("ARCO Chemical"), then a wholly owned
subsidiary of ARCO, entered into a number of agreements in connection with the
organization of ARCO Chemical. None of these agreements was the result of
arm's-length negotiations between independent parties. It was the intention of
the Company, ARCO and ARCO Chemical that such agreements and the transactions
provided for therein, taken as a whole, accommodate the parties' interests in a
manner that was fair to the parties, while continuing certain mutually
beneficial joint arrangements. The Audit Committee of the Board of Directors of
the Company, none of the members of which are affiliated with the Company
(including LCR), ARCO or ARCO Chemical, has determined that such agreements,
taken as a whole, were fair to the Company and its stockholders. Because of the
complexity of the various relationships between the Company, ARCO and its
direct and indirect subsidiaries, including ARCO Chemical (together, "ARCO
Affiliates"), however, there can be no assurance that each of such agreements,
or the transactions provided for therein, has been effected on terms at least
as favorable to the Company as could have been obtained from unaffiliated third
parties.
16
<PAGE>
The terms and provisions of many of those initial agreements have been
modified subsequently or supplemented and additional or modified agreements,
arrangements and transactions have been and will continue to be entered into by
the Company and ARCO Affiliates. Any such future agreements, arrangements and
transactions will be determined through negotiation between the Company and
ARCO Affiliates and it is possible that conflicts of interest will be involved.
Future contractual relations among the Company and ARCO Affiliates will be
subject to certain provisions of the Company's Certificate of Incorporation.
See "Certificate of Incorporation Provisions Relating to Corporate Conflicts of
Interest." In addition, the Audit Committee of the Board of Directors has
adopted a set of guidelines for the review of all agreements entered into
between the Company and ARCO Affiliates. These guidelines include a provision
that, at least annually, the Audit Committee will review such agreements, or
the transactions provided for therein, to assure that such agreements are, in
its opinion, fair to the Company and its stockholders. See "BOARD OF
DIRECTORS--Audit Committee."
For the year ended December 31, 1993, Lyondell (including LCR) paid ARCO
Affiliates an aggregate of approximately $80 million. For the year ended
December 31, 1993, Lyondell recorded revenues of approximately $278 million
from sales to ARCO Affiliates, of which $263 million represented sales to ARCO
Chemical.
THE FOLLOWING IS A SUMMARY OF CERTAIN AGREEMENTS, ARRANGEMENTS AND
TRANSACTIONS AMONG THE COMPANY AND ARCO AFFILIATES EFFECTIVE DURING THE PAST
FISCAL YEAR, AS WELL AS CERTAIN AGREEMENTS, ARRANGEMENTS AND TRANSACTIONS THAT
ARE CURRENTLY PROPOSED.
TECHNOLOGY TRANSFERS AND LICENSES
Effective July 1, 1988, ARCO assigned to the Company numerous domestic and
foreign trademarks and certain U.S. and foreign patents and granted the Company
a nonexclusive license to use other trademarks which contain the word "ARCO,"
to use ARCO's spark symbol as a logo and to use ARCO's color striping scheme,
which license was royalty-free for a period of four years. The Company paid
ARCO approximately $80,000 under the terms of this license in 1993.
In connection with the transfer of assets and liabilities relating to the
Lyondell Division from ARCO to the Company, the Company and ARCO, effective
July 1, 1988, entered into (i) a License Agreement pursuant to which ARCO
licensed to the Company on a nonexclusive, royalty-free basis certain rights
(including Lyondell's right to sublicense to third parties, in some cases
without accounting to ARCO) to ARCO's technology and intellectual property
related to certain operations or assets of the Company, (ii) a technology
assignment agreement pursuant to which legal title to certain other technology
and intellectual property useful in the Company's business (including, without
limitation, technology relating to olefins, including product flexibility) was
transferred to the Company; provided, however, that except for technology
relating to the product flexibility unit, ARCO retained a nonexclusive license
to use the technology and property rights in ARCO's other operations, and (iii)
an immunity from suit agreement in respect of the Company's right to practice
all remaining technology in the possession of the Company prior to July 1,
1988. During 1990, the Company and ARCO entered into a series of amendments to
these agreements designed to clarify the parties' rights under the original
technology transfer. In addition, Lyondell and ARCO executed a patent
maintenance agreement pursuant to which ARCO agreed to maintain certain patents
licensed to Lyondell. Lyondell and ARCO also entered into a letter agreement
granting Lyondell the right to obtain additional licensing rights.
CROSS-INDEMNITY AGREEMENT
In connection with the transfer by ARCO of substantially all of the assets
and liabilities of its Lyondell Division to the Company, the Company and ARCO
executed a Cross-Indemnification Agreement (the "Cross-Indemnity Agreement").
In the Cross-Indemnity Agreement, the Company agreed generally to indemnify
ARCO against substantially all fixed and contingent liabilities relating to the
integrated
17
<PAGE>
petrochemical and petroleum processing business and certain assets of the
Lyondell Division. The liabilities assumed by the Company include the
following, to the extent not covered by ARCO's insurance: (a) all liabilities
and obligations of the Company and its combined subsidiaries, as of July 1,
1988; (b) all liabilities and obligations under contracts and commitments
relating to the business of the Lyondell Division and certain assets relating
thereto; (c) employment and collective bargaining agreements affecting the
Company's employees; (d) specified pending litigation and other proceedings;
(e) federal, state, foreign and local income taxes to the extent provided in
the Cross-Indemnity Agreement; (f) liabilities for other taxes associated with
the Lyondell Division's business and certain assets relating thereto; (g)
liabilities for any past, present or future violations of federal, state or
other laws (including environmental laws), rules, regulations or other
requirements of any governmental authority in connection with the business of
the Lyondell Division and certain assets relating thereto; (h) existing or
future liabilities for claims based on breach of contract, breach of warranty,
personal or other injury or other torts relating to such integrated
petrochemical and petroleum processing businesses and certain assets relating
thereto; and (i) any other liabilities relating to the assets transferred to
the Company or its subsidiaries. ARCO has indemnified the Company with respect
to other claims or liabilities and other matters of litigation not related to
the assets or business transferred by ARCO to the Company.
The Cross-Indemnity Agreement includes procedures for notice and payment of
indemnification claims and provides that a party entitled to indemnification
for a claim or suit brought by a third party may require the other party to
assume the defense of such claim. The Cross-Indemnity Agreement also includes a
defense cost-sharing agreement, whereby the Company will bear its allocated
defense costs for certain lawsuits.
DISPUTE RESOLUTION AGREEMENT
In April, 1993, the Company, ARCO and ARCO Chemical entered into a Dispute
Resolution Agreement that mandates a procedure for negotiation and binding
arbitration of significant commercial disputes among any two or more of the
parties.
SERVICES AGREEMENTS
The Company and ARCO entered into an agreement effective January 1, 1991 and
amended as of February, 1992 (the "Administrative Services Agreement") under
which ARCO agreed to continue to provide various transitional services to the
Company that ARCO had been providing pursuant to previous administrative
service agreements. The services which ARCO agreed to provide the Company in
the Administrative Services Agreement included employee benefits administration
services, payroll, telecommunications and certain computer-related services.
The Administrative Services Agreement terminates no later than December 31,
1997, although it may be terminated in its entirety earlier than such date upon
the terminating party providing the other party with at least one year's prior
notice, and a party may elect to terminate some of the services it is receiving
upon 30 days prior notice to the other party. The Administrative Services
Agreement provides for an annual renegotiation of fees. ARCO earned a fee of
approximately $2 million during 1993 for all of the services which it provided
under the Administrative Services Agreement.
Effective January 1, 1991, the Company and ARCO entered into an agreement
(the "Insurance Termination Agreement") which terminated the insurance coverage
previously provided by ARCO and established procedures for the resolution of
pending and future claims that are or will be covered under ARCO's policies in
effect prior to January 1, 1991.
OTHER AGREEMENTS BETWEEN THE COMPANY AND ARCO
Lyondell has purchased and LCR continues to purchase certain of its crude oil
requirements from ARCO Oil and Gas ("AOGC") under short-term arrangements at
prices based on market values at the time of delivery. LCR also purchases crude
oil from AOGC from time to time on the spot market at then-current spot market
prices. The Company and LCR also purchased natural gas and natural gas liquids
from AOGC during 1993 on the spot market at then-current spot market prices.
18
<PAGE>
The Company (including LCR) also sold products to ARCO Affiliates, including
crude oil resales and sales of heating oil and lube oil at market-based prices.
The Company has entered into several contracts with ARCO Pipe Line Company
(ARCO Pipe Line) pursuant to which the Company: (i) leases certain pipelines
and pipeline segments from ARCO Pipe Line at annual rental rates which include
recovery of operating costs, return on capital investment and inflation
escalators; (ii) has acquired the services of ARCO Pipe Line to operate various
groups of pipelines owned by the Company; and (iii) has entered into a
throughput and deficiency commitment for volumes at tariff rates for
transportation of crude oil and other products. Certain of these contracts that
relate to the refining business were assigned to LCR as of July 1, 1993. The
Company and LCR paid ARCO Pipe Line approximately $20 million during 1993 for
lease payments and services under these contracts. ARCO Pipe Line and LCR have
agreed to use jointly a control room owned by LCR and located at the Houston
Refinery. ARCO Pipe Line also owns various easements and licenses for its
pipelines and related equipment located on the property of the Company and LCR
and has performed services relating to the pipeline systems. The Company
(including LCR) also ships products over common carrier pipelines owned and
operated by ARCO Pipe Line pursuant to filed tariffs on the same basis as other
non-affiliated customers.
AGREEMENTS BETWEEN THE COMPANY AND ARCO CHEMICAL COMPANY
Lyondell provides to ARCO Chemical a large portion of the feedstocks
purchased by ARCO Chemical for its manufacturing facilities located at
Channelview, Texas. Pricing arrangements under these contracts are generally
representative of prevailing market prices. Lyondell also provides certain
nominal plant services at the aforementioned plants. ARCO Chemical in turn
provides certain feedstocks and supplies to Lyondell at market-based prices.
The Company processes MTBE (using one of the Company's two MTBE units) for
ARCO Chemical, and ARCO Chemical markets this product for its own account. The
term of this agreement extends through June 30, 1997. ARCO Chemical purchases
certain base feedstocks for this processing agreement from Lyondell at market
based prices. A processing fee is paid by ARCO Chemical to Lyondell to cover
variable and fixed operating costs, as well as capital costs. In addition, the
Company has agreed to sell to ARCO Chemical MTBE produced at the Company's
second MTBE unit that is in excess of the Company's requirements at market-
based prices.
CERTIFICATE OF INCORPORATION PROVISIONS RELATING TO CORPORATE CONFLICTS OF
INTEREST
In order to address certain potential conflicts of interest between the
Company and ARCO (for purposes of this section the term "ARCO" also includes
ARCO's successors and any corporation, partnership or other entity in which
ARCO owns fifty percent or more of the voting securities or other interest),
the Company's Certificate of Incorporation contains provisions regulating and
defining the conduct of certain affairs of the Company as they may involve ARCO
and its officers and directors, and the powers, rights, duties and liabilities
of the Company and its officers, directors and stockholders in connection
therewith. In general, these provisions recognize that from time to time the
Company and ARCO may engage in the same or similar activities or lines of
business and have an interest in the same areas of corporate opportunities. The
Certificate of Incorporation provides that ARCO has no duty to refrain from (1)
engaging in business activities or lines of business that are the same as or
similar to those of the Company, (2) doing business with any customer of the
Company or (3) employing any officer or employee of the Company. The
Certificate of Incorporation provides that ARCO is not under any duty to
present any corporate opportunity to the Company which may be a corporate
opportunity for both ARCO and the Company, and that ARCO will not be liable to
the Company or its stockholders for breach of any fiduciary duty as a
stockholder of the Company by reason of the fact that ARCO pursues or acquires
such corporate opportunity for itself, directs such corporate opportunity to
another person or does not present the corporate opportunity to the Company.
ARCO currently owns interests in certain chemical companies and refiners (other
than the Company) and has advised the Company that it may continue to acquire
additional interests in chemical companies and refiners.
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The Certificate of Incorporation provides that directors and officers of the
Company will not be liable to the Company or its stockholders for breach of any
fiduciary duty if they comply with the following provisions of the Certificate
of Incorporation. When a corporate opportunity is offered in writing to an
officer or an officer and a director of the Company who is also an officer or
an officer and a director of ARCO, solely in his or her designated capacity
with one of the two companies, such opportunity shall be first presented to
whichever company was so designated. No person is currently in this category.
Otherwise, (i) a corporate opportunity offered to any person who is an officer
or officer and director of the Company and who is also a director of ARCO,
shall be first presented to the Company, (ii) a corporate opportunity offered
to a person who is a director of the Company and who is also an officer or
officer and director of ARCO shall be first presented to ARCO, (iii) in all
other cases, a corporate opportunity offered to any person who is an officer
and/or a director of both the Company and ARCO shall be first presented to the
Company. Mr. Bowlin, Mr. Comstock, Mr. Dallas, Mr. Rusnack and Mr. Wade are in
category (ii) and no persons currently are in categories (i) and (iii).
Another section of the Certificate of Incorporation provides that no
contract, agreement, arrangement or transaction between the Company and ARCO or
between the Company and a director or officer of the Company or of ARCO would
be void or voidable for the reason that ARCO or any director or officer of the
Company or of ARCO are parties thereto or because any such director or officer
were present or participated in the meeting of the Board of Directors which
authorized the contract if the material facts about the contract, agreement,
arrangement or transaction were disclosed or known to the Board of Directors or
the stockholders and the Board of Directors in good faith authorizes the
contract by a vote of a majority of the disinterested directors or the majority
of stockholders approves such contract, agreement, arrangement or transaction.
The foregoing Certificate of Incorporation provisions describe the
obligations of officers and directors of the Company with respect to
presentation of corporate opportunities, but do not limit the ability of the
Company or of ARCO to consider and act upon such opportunities whether or not
such provisions have been followed.
CERTAIN OTHER TRANSACTIONS
During the 1993 fiscal year, Dan F. Smith, a director and the Company's
Executive Vice President and Chief Operating Officer, was indebted to the
Company in the amount of $349,000. This interest-free loan, which was repaid
within seven months and was not outstanding at the end of the year, was made in
connection with his relocation to Houston.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES
Directors who are employees of the Company or of ARCO are not paid any fees
or additional compensation for service as members of the Board of Directors or
any committee thereof. During 1993 directors who were not employees of the
Company or of ARCO received an annual retainer fee of $25,000 per year and
$1,000 for each Board or committee meeting attended, and were reimbursed for
travel and other related expenses incurred in attending such meetings. In
addition, outside directors who served as Chairman of either the Audit or
Compensation Committee received $18,000 per year and outside directors who
served as Chairman of either the Nominating Committee or the Executive Long-
Term Incentive Plan Subcommittee received $5,000 per year.
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
The Lyondell Petrochemical Company Retirement Plan for Outside Directors (the
"Directors' Retirement Plan") is a non-qualified retirement plan for directors
who are not employees of the Company or of ARCO. The annual retirement benefit
is equal to the director's annual retainer fee immediately preceding
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the director's retirement from the Board of Directors. A director vests in the
benefit upon serving three years as a member of the Board of Directors, or, in
the case of a retired Company or ARCO officer, three years following retirement
as an officer of the Company or ARCO. The benefit is payable for a period of
time equal to a director's service on the Board of Directors, or, in the case
of retired officers of the Company or ARCO, to the director's service on the
Board of Directors following retirement as an officer. However, if a director
has served for at least 15 years as a member of the Board of Directors,
excluding years of service when the director was also an officer of the Company
or ARCO, the benefit shall be paid for the greater of the period described in
the preceding sentence or until death. Benefits commence at age 65, or, if
later, at the time the director retires from the Board of Directors. A
surviving spouse is entitled to receive 50 percent of the benefits otherwise
payable to a director with payment up to a maximum of 15 years if the director
dies prior to retirement from the Board of Directors or if he dies after
retirement from the Board of Directors the benefits otherwise payable to the
director up to a maximum of 15 years. The benefits under the Directors'
Retirement Plan are secured through a grantor trust.
DEFERRAL PLAN FOR OUTSIDE DIRECTORS
The Lyondell Petrochemical Company Elective Deferral Plan for Outside
Directors (the "Directors' Deferral Plan") became effective October 1, 1990 and
provides directors who are not employees of the Company or ARCO with the
opportunity to defer all or a portion of their retainer and meeting fees. Under
the Directors' Deferral Plan, the minimum amount that may be elected to be
deferred is $8,000 and the maximum is 100 percent of the director's retainer
and meeting fees per year. Amounts may be deferred until retirement from their
regular employment or resignation from the Board, unless the director has
suffered a financial hardship or elected an early distribution at the time the
deferral commitment is made. Upon the director's death, retirement or
resignation, benefits are payable, in accordance with the director's prior
election, either in a lump sum or in substantially equal monthly payments over
five, ten or fifteen years. All other benefits are paid in a lump sum. The
benefits under the Directors' Deferral Plan are secured through a grantor
trust. A participant's account under the Deferral Plan will accrue interest at
a rate established by the Company annually prior to the Commencement of each
year. The guaranteed minimum rate of interest is not less than the Citibank
base rate. The interest rate for 1993 was 181% of the rolling average 10-year
Treasury Note Rate.
BOARD OF DIRECTORS
DIRECTORS' MEETINGS
An annual meeting of the Board of Directors is held each year in conjunction
with the annual meeting of stockholders (held on the first Thursday in May) for
the purposes of the organization, election or appointment of officers and the
transaction of other business. Regular meetings of the Board of Directors may
be held without notice at such times as the Board of Directors may determine.
The Board of Directors currently expects to hold regular meetings in Houston,
Texas. Special meetings may be called by the Chairman of the Board of
Directors, the President or a majority of the directors in office. The By-Laws
permit action to be taken without a meeting if all members of the Board of
Directors consent to such action in writing. During 1993 the Board of Directors
held seven meetings. All of the Company's directors except Mr. Wade attended 75
percent or more of the aggregate of all meetings of the Board and committees on
which they served during 1993.
EXECUTIVE COMMITTEE
The Executive Committee has and may exercise all the authority of the Board
of Directors in the management of the Company in the interim between meetings
of the Board of Directors. The Executive Committee reviews and approves all
director compensation plans and arrangements. The Executive Committee met once
during 1993. The Executive Committee presently consists of Messrs. Gower,
Rusnack and Bowlin, who serves as Chairman.
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COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews and approves
compensation and benefit plans, makes recommendations to the Board of Directors
as to management succession plans and administers the Company's Annual
Incentive Plan. No member of the Committee is an officer or employee of the
Company and no member is eligible to participate in any benefit plan of the
Company that is administered by the Committee. Effective January 25, 1989, the
Compensation Committee established a special subcommittee, the Executive Long-
Term Incentive Plan Administration Subcommittee, to administer the Long-Term
Incentive Plan. No member of the Subcommittee is eligible to participate in any
benefit plan of ARCO, ARCO Chemical, or the Company, other than the Company's
Retirement Plan for Outside Directors and the Deferral Plan for Outside
Directors. The Compensation Committee held five meetings during 1993. The
Compensation Committee consists of Messrs. Butler, Hinchliffe, Mecum, Rusnack,
Staley, who serves as Chairman, and Bowlin. The Subcommittee, which held four
meetings during 1993, presently consists of Messrs. Butler, Hinchliffe, who
serves as Chairman, Mecum and Staley.
NOMINATING COMMITTEE
The Nominating Committee of the Board of Directors considers and makes
recommendations to the Board of Directors as to the names of persons whom it
concludes should be considered for Board of Directors membership, and
recommends matters relating to committee assignments and the selection, tenure
and retirement of directors. A stockholder of the Company may nominate persons
for election to the Board of Directors. The Nominating Committee held three
meetings during 1993. The Nominating Committee presently consists of Messrs.
Gower, Butler, who serves as Chairman, and Bowlin.
FINANCE COMMITTEE
The Finance Committee of the Board of Directors reviews and makes
recommendations to the Board of Directors regarding loans, borrowings and
credit agreements, capital projects over $15 million, proposed acquisitions,
divestitures, mergers and joint ventures, issuances or purchases by the Company
of its Common Stock and budgets and long-range plans. The Finance Committee
held three meetings during 1993. The Finance Committee presently consists of
Messrs. Bowlin, Comstock, Gower, Dallas who serves as Chairman, Rusnack, Smith
and Wade.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors was established for the general
purpose of reviewing the integrity of the Company's accounting and financial
reporting, maintaining communications between the Board of Directors and
external and internal auditors, dealing with conflicts between ARCO and the
Company and initiating special investigations as deemed necessary. The Audit
Committee has adopted specific guidelines for review of agreements between the
Company and ARCO or its affiliates to assure that such agreements are fair to
the Company and its stockholders. The independent accountants and the internal
auditors have full and free access to the Audit Committee and meet with it,
with and without management being present, to discuss all appropriate matters.
No member of the Committee is an officer or employee of the Company, ARCO
Chemical or of ARCO. The Audit Committee held six meetings during 1993. The
Audit Committee presently consists of Messrs. Butler, Hinchliffe, Mecum, who
serves as Chairman, and Staley.
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PROPOSAL FOR ADOPTION OF AMENDMENTS TO THE CERTIFICATE OF INCORPORATION TO
AUTHORIZE THE ISSUANCE OF PREFERRED STOCK
Item 2 on Proxy Card
The Board of Directors has adopted a resolution declaring the advisability of
an amendment to the Certificate of Incorporation of the Company to authorize
the issuance of up to 80,000,000 shares of Preferred Stock, $.01 par value
("Preferred Stock"). The proposed amendment to the Certificate of Incorporation
is attached hereto as Appendix A and incorporated herein by reference. The
discussion hereunder is qualified in its entirety by reference to Appendix A.
Preferred stock is a widely used and attractive form of equity financing.
Lyondell's Certificate of Incorporation does not provide for the issuance of
this financing instrument at the Board of Directors discretion. The Board of
Directors believes the Company should have the flexibility to issue preferred
stock, along with its ability to issue debt and additional common equity.
If this proposal is approved, the Board of Directors will be able to specify
the precise characteristics of the Preferred Stock to be issued, in light of
current market conditions and the nature of specific transactions, and will not
be required to solicit further authorization from stockholders for any specific
issue of Preferred Stock. The Company's purposes for any future issuance of
Preferred Stock could include, without limitation, issuance in public or
private sales for cash as a means of obtaining additional capital for use in
the Company's business and operations, or issuance as part or all of the
consideration required to be paid by the Company for acquisitions of other
businesses or properties. The Board of Directors has adopted a policy providing
that no future issuance of Preferred Stock will be effected without stockholder
approval unless the Board (whose decision shall be conclusive) determines in
good faith (i) that such issuance is primarily for the purpose of facilitating
a financing, an acquisition or another proper corporate objective or
transaction, and (ii) that any anti-takeover effects of such issuance are not
the Company's primary purpose for effecting such issuance. The Board of
Directors will not amend or revoke this policy without giving written notice to
the holders of all outstanding shares of the Company's stock, however, no such
amendment or revocation will be effective, without stockholder approval, to
permit a subsequent issuance of Preferred Stock for the primary purpose of
obstructing a takeover of the Company by any person who has, prior to such
written notice to stockholders, notified the Board of Directors of such
person's desire to pursue a takeover of the Company. As of the date hereof, the
Board of Directors has no present intention to issue any series of Preferred
Stock.
At present, the Certificate of Incorporation provides for the issuance of up
to 250,000,000 shares of Common Stock, par value $1.00 per share. Under the
proposal, the Board of Directors can authorize the issuance, at any time or
from time to time, of one or more series of Preferred Stock at its discretion.
In addition, the Board of Directors would determine all designations, powers,
preferences and the rights of such stock and any qualifications, limitations
and restrictions, including but not limited to: (i) the designation of series
and numbers of shares; (ii) the dividend rights, if any; (iii) the rights upon
liquidation or distribution of the assets of the Company, if any; (iv) the
conversion or exchange rights, if any; (v) the redemption provisions, if any;
and (vi) the voting rights, if any.
No holders of shares of capital stock of the Company have or will have any
preemptive rights to acquire any securities of the Company, including the
Preferred Stock.
Any conversion privilege may include the right to convert or exchange
Preferred Stock into Common Stock or into other assets or property of the
Company. If the Board of Directors provides that shares of any series may be
converted or exchanged, the terms of any such conversion or exchange privilege
will be determined by the Board based on its assessment of the value of the
Common Stock or other asset into which the Preferred Stock may be converted or
exchanged. If convertible or exchangeable into Common Stock or another asset,
the terms and conditions fixed and determined by the Board of Directors on
which such
23
<PAGE>
conversion or exchange may be made may include, without limitation thereof,
provision for the protection of the conversion or exchange right against
dilution in any manner whatsoever, and provision as to the effect upon the
conversion or exchange right of any merger or consolidation of the Company into
or with any other corporation.
The authorization of preferred stock could have the effect of discouraging a
tender offer or unsolicited attempt to acquire control of the Company in a
transaction that a stockholder might deem desirable, including takeover
attempts that might result in a premium over the market price of the Common
Stock. Preferred Stock issuances involving certain voting or conversion
privileges can be used to make the acquisition of a company more difficult or
more costly. The Company is not aware of any present effort by any person to
accumulate the company's Common Stock or to obtain control of the Company.
Adoption of the proposed amendment to the Certificate of Incorporation will
require the affirmative vote of a majority of the outstanding shares of Common
Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY OTHERWISE.
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Item 3 on Proxy Card
The Board of Directors has recommended the appointment of Coopers & Lybrand,
Certified Public Accountants, to audit the financial statements of Lyondell for
the year 1994. Coopers & Lybrand has acted in this capacity since July, 1988.
Coopers & Lybrand has acted as the independent auditor for ARCO for many years.
Since June, 1987 Coopers & Lybrand has also acted as the independent auditor
for ARCO Chemical, an 83.3 percent-owned (as of March 1, 1994) subsidiary of
ARCO that became publicly held in October 1987. In addition, from time to time,
the firm performs consulting work for ARCO Chemical, ARCO and the Company.
Representatives of Coopers & Lybrand will be present at the meeting and will
have the opportunity to make a statement if they desire to do so. These
representatives will also be available to respond to appropriate questions.
The proposal will be approved if it receives the affirmative vote of a
majority of the shares of Common Stock present in person or by proxy at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to be presented at
the meeting. If any other matters should properly come before the meeting, the
persons named in the enclosed proxy form will vote the proxies in accordance
with their best judgment.
PROXY SOLICITATION
The expense of soliciting proxies will be paid by the Company. The Company
has retained Georgeson & Company Inc. to solicit proxies at an estimated fee of
$8,500 plus expenses. Some of the officers and other employees of the Company
also may solicit proxies personally, by telephone and by mail, if deemed
appropriate.
24
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PROXIES
The designated proxies are Messrs. John R. Beard, Joseph M. Putz and Russell
S. Young. Under the General Corporate Law of Delaware, a stockholder has the
right to designate other individuals to act as proxies. A stockholder may
designate other individuals by crossing out the printed names on the proxy
card, provided that no more than three individuals are so designated.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1995 Annual Meeting
must be received by December 4, 1994. Such proposals should be addressed to the
Secretary.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY FILES AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND
EXCHANGE COMMISSION. STOCKHOLDERS MAY OBTAIN A COPY OF THIS REPORT (WITHOUT
EXHIBITS), WITHOUT CHARGE, BY WRITING TO THE COMPANY'S INVESTOR RELATIONS
DEPARTMENT AT 1221 MCKINNEY STREET, SUITE 1600 HOUSTON, TEXAS 77010.
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APPENDIX A
AMENDMENT OF CERTIFICATE OF INCORPORATION
AUTHORIZING ISSUANCE OF PREFERRED STOCK
It is proposed that ARTICLE IV of the Certificate of Incorporation be amended
and restated to read in its entirety as follows:
ARTICLE IV
CAPITAL STOCK
A. AUTHORIZED SHARES
The total number of shares of capital stock that the Company shall have
authority to issue is 330,000,000 shares.
B. COMMON STOCK
1. The Company shall have authority to issue up to 250,000,000 shares of
Common Stock, par value of $1.00 per share.
2. Each holder of shares of Common Stock shall have the right to one vote for
each share of Common Stock held of record on the books of the Company.
C. PREFERRED STOCK
1. The Company shall have authority to issue up to 80,000,000 shares of
Preferred Stock, par value of $.01 per share.
2. Preferred Stock may be issued from time to time in one or more series. The
Board of Directors is hereby expressly authorized from time to time to provide
for the issuance of Preferred Stock in one or more series, and to establish and
fix by resolution or resolutions providing for the issuance of each such series
the number of shares to be included in such series and the voting and other
powers, designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
of each such series, to the full extent now or hereafter permitted by law,
subject to any other provision of this Certificate of Incorporation. The number
of authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of stock of the Company entitled to vote thereon having a majority
of the votes entitled to be cast, without a separate vote of the holders of the
Preferred Stock, or any series thereof, unless a separate vote of any of such
holders is required pursuant to the resolution or resolutions establishing any
such series of Preferred Stock.
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[Logo of Lyondell appears here]
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD
ON MAY 5, 1994
AND PROXY STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY PROMPTLY
<PAGE>
Item 1. ELECTION OF DIRECTORS FOR all nominees
listed below [ ]
WITHHOLD AUTHORITY to EXCEPTIONS* (as indicated
vote for all nominees below [ ] to the contrary below) [ ]
Mike R. Bowlin, William T. Butler, Allan L. Comstock, Terry G. Dallas,
Bob G. Gower, Stephen F. Hinchliffe, Jr., Dudley C. Mecum II,
William C. Rusnack, Dan F. Smith, Paul R. Staley, William E. Wade, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee mark
the "Exceptions" box and write that nominee's name on space provided below.)
*Exceptions
-----------------------------------------------------------------
Item 2. Proposal to amend the Certificate of Incorporation to authorize
Preferred Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 3. Proposal to ratify the appointment of Coopers & Lybrand, independent
accountants, as the Company's auditors for the fiscal year ending
December 31, 1994.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] I/we will attend the meeting.
PROXY DEPARTMENT Address Change
NEW YORK, N.Y. 10203-0244 Mark Here [ ]
Please sign exactly as name appears.
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
Dated , 1994
-------------------------
------------------------------------
Signature
------------------------------------
Signature if held jointly
Please Sign, Date and Return the Proxy Votes MUST be indicated
Promptly Using the Enclosed Envelope. (x) in Black or Blue Ink. [ ]
[LOGO OF LYONDELL PETROCHEMICAL COMPANY APPEARS HERE]
One Houston Center
1221 McKinney, Suite 1600
Houston, Texas 77010
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby makes, constitutes and appoints John R. Beard, Joseph
W. Putz and Russell S. Young, and each of them, lawful attorneys and proxies of
the undersigned, with full power of substitution, for and in the name, place and
stead of the undersigned to attend the Annual Meeting of Stockholders of
Lyondell Petrochemical Company (herein the "Company") in the Ballroom of the
Four Seasons Hotel, 1300 Lamar, Houston, Texas, on Thursday, May 5, 1994 at
10:00 a.m., local time, and at any adjournment(s) thereof, with all powers the
undersigned would be entitled to vote if personally present.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Items 1, 2 and 3.
(Continued, and to be signed and dated, on reverse side.)
