<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
LYONDELL PETROCHEMICAL COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $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 0-11.
(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 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LYONDELL
PETROCHEMICAL
COMPANY
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS [LOGO OF LYONDELL APPEARS HERE]
TO BE HELD
ON MAY 3, 1996
AND PROXY STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY PROMPTLY
<PAGE>
[LOGO OF LYONDELL APPEARS HERE]
LYONDELL PETROCHEMICAL COMPANY
1221 MCKINNEY STREET, SUITE 1600
HOUSTON, TEXAS 77010
March 18, 1996
Dear Stockholder:
You are cordially invited to join us at the 1996 Annual Meeting of
Stockholders on Friday, May 3, 1996, 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 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 Company, followed
by a question and answer period. The official results of the voting at the
meeting will be sent to all stockholders as part of a subsequent stockholder
report.
Sincerely yours,
[SIGNATURE APPEARS HERE]
Chairman of the Board and Chief Executive Officer
[SIGNATURE APPEARS HERE]]
President and Chief Operating Officer
<PAGE>
[LOGO OF LYONDELL APPEARS HERE]
LYONDELL PETROCHEMICAL COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 1996
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 Friday, May 3, 1996, for the following
purposes, as more fully described in the attached Proxy Statement.
(1) To elect eight directors to serve until the 1997 Annual Meeting of
Stockholders or until their earlier resignation or removal;
(2) To consider and act upon a proposal to adopt the Restricted Stock Plan
for Non-Employee Directors;
(3) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for Lyondell for the year 1996; 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 15, 1996 will be
entitled to notice of and to vote at the meeting and 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 APPEARS HERE]
Jeffrey R. Pendergraft Houston, Texas
Secretary March 18, 1996
<PAGE>
[LOGO OF LYONDELL APPEARS HERE]
LYONDELL PETROCHEMICAL COMPANY
1221 MCKINNEY STREET
SUITE 1600
HOUSTON, TEXAS 77010
----------------
PROXY STATEMENT
MARCH 18, 1996
----------------
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 that may come before
the meeting or any adjournment thereof, the persons named in the accompanying
form of proxy will vote in accordance with their best judgment. It is expected
that proxy materials will be mailed to stockholders beginning on or about March
29, 1996. Atlantic Richfield Company, a Delaware corporation ("ARCO"), has
advised the Company that it owned approximately 49.9 percent of the outstanding
shares of Common Stock of the Company ("Common Stock") on March 15, 1996 and
that it intends to vote such shares in proportion to the votes of the non-ARCO
stockholders. See "PRINCIPAL STOCKHOLDERS."
VOTING PROCEDURES
Holders of record of Common Stock at the close of business on March 15, 1996
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 will
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
cast in person or represented by proxy at the meeting. Adoption of the proposal
to approve the Restricted Stock Plan for Non-Employee Directors and to ratify
the appointment of the independent auditors will require the affirmative vote
of a majority of the shares present in person or represented by proxy at the
meeting.
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 adoption of the Restricted Stock Plan for Non-Employee
Directors or against the ratification of the appointment of the independent
auditors, as the case may be. Because broker non-votes (instances where brokers
are prohibited from exercising discretionary authority for beneficial owners
who have not returned a proxy) 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 affect the outcome
with respect to the adoption of the Restricted Stock Plan for Non-Employee
Directors or the ratification of the appointment of the independent auditors.
<PAGE>
The Company's 401(k) and Savings Plan, in which executive officers have
account balances, permits plan participants to direct the plan trustees how to
vote the Common Stock allocated to their accounts. The trustee will vote all
shares of Common Stock for which no participant directions are received as
directed by the Plan's Benefits Administrative Committee which is comprised of
executive officers and senior managers of the Company.
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 15, 1996 ARCO owned 39,921,400
shares of Lyondell's Common Stock, which represent 49.9 percent of the
outstanding Common Stock.
In August 1994, ARCO completed an offering (the "ARCO Note Offering") of
three-year debt securities (the "ARCO Notes") exchangeable into Lyondell Common
Stock or cash. Upon maturity, three years from the date of issuance, the
principal amount of the ARCO Notes will be payable, at ARCO's option, in shares
of Lyondell Common Stock or cash. The number of shares or the amounts of such
cash will be determined using a formula based on the price of Lyondell Common
Stock at the maturity of the ARCO Notes. If ARCO elects to exchange the ARCO
Notes for the Lyondell Common Stock it holds, then its equity interest in
Lyondell will be substantially reduced or eliminated, depending on the price of
Lyondell's Common Stock at such time. ARCO has stated its current
intent to vote its shares of Lyondell Common Stock proportionately to the votes
of the non-ARCO stockholders, including with respect to the election of
directors; provided, however, that in the event a person other than ARCO is
deemed to own more than 10 percent of the Common Stock within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and there occurs a contested proxy solicitation within the meaning of
Rule 14a-11(a) of the Exchange Act, ARCO intends to vote its shares as it deems
proper.
The Company is 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.
The table below sets forth certain information as of December 31, 1995 (the
most recent date as of which the Company has information except as otherwise
noted below) regarding the beneficial ownership of the Common Stock by persons
other than ARCO known by the Company of more than five percent of its
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF SHARES
NAME AND ADDRESS SHARES OUTSTANDING
---------------- --------- -----------
<S> <C> <C>
FMR Corporation(a)..................................... 9,431,035 10.95%
82 Devonshire Street, Boston, Massachusetts 02109
Wellington Management Company(b)....................... 7,375,000 9.22%
75 State Street, Boston, Massachusetts 02109
Brinson Partners, Inc.(c).............................. 6,183,100 7.7%
209 South LaSalle, Chicago, Illinois 60604-1295
State Street Bank and Trust Company(d)................. 4,399,893 5.5%
225 Franklin Street, Boston, Massachusetts 02110
</TABLE>
2
<PAGE>
- --------
(a) FMR Corporation ("FMR") (together with its affiliated entities) may be
deemed a beneficial owner of the 9,431,035 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. The number
of shares owned by FMR and its affiliates as of December 31, 1995 included
5,534,821 shares resulting from the assumed conversion of the ARCO Notes
held by such affiliates as of such date (assuming a prescribed exchange
rate of 0.892857 shares of Common Stock per ARCO Note). FMR has the sole
dispositive power over 8,837,821 shares owned or deemed to be owned by the
Funds that its wholly-owned subsidiary, Fidelity Management & Research
Company ("Fidelity") acts as an advisor to. The power to vote or direct the
voting of such shares resides with the Funds' Boards of Directors and
Fidelity carries out the voting of the shares under written guidelines
established by the Funds' Boards of Directors. FMR has the sole dispositive
power over 593,214 shares owned or deemed to be owned by Fidelity
Management & Trust Company, its wholly-owned subsidiary serving as
investment manager of institutional accounts. FMR has sole voting power
with respect to 483,482 of those shares and no voting power with respect to
109,732 of those shares. The information with respect to FMR's beneficial
ownership is as of February 8, 1996.
(b) Wellington Management Company ("WMC") (together with its wholly-owned
subsidiary, Wellington Trust Management Company, N.A.) may be deemed a
beneficial owner of the 7,375,000 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, including the
Vanguard/Windsor Fund, Inc. ("Vanguard"). WMC has shared dispositive power
over the 7,375,000 shares. Vanguard has shared dispositive power and sole
voting power over the 7,375,000 shares.
(c) Brinson Partners, Inc. ("BPI") (together with its wholly-owned subsidiary,
Brinson Trust Company ("BTC")), and its parent holding companies, Brinson
Holdings, Inc. ("BHI"), SBC Holding (USA), Inc. ("SBCUSA") and Swiss Bank
Corporation ("SBC") may be deemed a beneficial owner of the 6,183,100
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. The number of shares owned by BPI and its
affiliates as of December 31, 1995 included 325,600 shares resulting from
the assumed conversion of the ARCO Notes held by such affiliates as of such
date (assuming a prescribed exchange rate of 0.892857 shares of Common
Stock per ARCO Note). BPI and BHI have shared voting and shared dispositive
power over 5,857,500 shares. BTC has shared voting and dispositive power
with respect to 1,420,500 shares; SBCUSA has shared voting and dispositive
power with respect to 5,893,100 shares; and SBC has shared voting and
dispositive power with respect to 6,183,100 shares.
(d) State Street Bank and Trust Company ("State Street"), Trustee for (i) the
Lyondell Petrochemical Company 401(k) and Savings Plan; (ii) the LYONDELL-
CITGO Refining Company Ltd. 401(k) and Savings Plans; (iii) various
collective investment funds for employee benefit plans and other index
accounts; and (iv) various trust accounts as Co-Trustee with the Barnes
Group may be deemed a beneficial owner of the 4,399,893 shares by virtue of
the direct or indirect investment and/or voting discretion it possesses
pursuant to the provisions of investment advisory agreements with clients.
State Street has sole voting power over 1,128,500 shares and shared voting
power over 3,254,793 shares, sole dispositive power over 1,142,800 shares
and shared dispositive power over 3,257,093 shares.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock owned
beneficially as of February 1, 1996 by each director or nominee, each of the
executive officers named in the Summary Compensation Table and by all current
directors and executive officers as a group. As of February 1, 1996, the
percentage of shares of Common Stock beneficially owned by any director or
nominee, named executive officers or by all directors and executive 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
FEBRUARY 1, 1996(A)(B)
----------------------
<S> <C>
William T. Butler....... 4,173
Curtis J. Crawford...... 1,422
Travis Engen............ 1,422
Bob G. Gower............ 288,552(c)
Stephen F. Hinchliffe,
Jr..................... 4,422(d)
Dudley C. Mecum II...... 2,122
Jeffrey R. Pendergraft.. 60,538
Dan F. Smith............ 60,148
Paul R. Staley.......... 1,672
Debra L. Starnes........ 38,031(e)
Russell S. Young........ 59,815(f)
All directors and
executive officers as a
group (16)............. 666,897(g)
</TABLE>
- --------
<TABLE>
<S> <C>
</TABLE>
(a) Includes shares held by the trustee under the Lyondell 401(k) and Savings
Plan for the accounts of participants as of December 31, 1995.
(b) The amounts shown include shares that may be acquired within 60 days
following February 1, 1996 through the exercise of stock options, as
follows: Mr. Gower, 199,387; Mr. Smith, 36,466; Mr. Pendergraft, 48,635;
Mr. Young, 40,404; Ms. Starnes, 28,924 and all directors and executive
officers as a group, including those just named, 463,120.
(c) Includes 5,000 ARCO Notes held by Mr. Gower. The ARCO Notes are convertible
at maturity into Lyondell Common Stock or, at ARCO's option, cash.
(d) 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.
(e) Does not include 5,392 shares owned by Ms. Starnes' spouse, as to which
shares she disclaims beneficial ownership.
(f) Does not include 1,100 shares owned by Mr. Young's spouse, as to which
shares he disclaims beneficial ownership.
(g) Does not include 7,492 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 Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten 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 stockholders 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, 1995 all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten-percent beneficial owners were
complied with.
4
<PAGE>
ELECTION OF DIRECTORS
Item 1 on Proxy Card
During 1995, the size of the Board was increased and two new directors were
added to the Board. Travis Engen was elected effective April 1, 1995 and Curtis
J. Crawford was elected effective July 22, 1995.
Pursuant to the Company's Certificate of Incorporation and its By-Laws, the
members of the Board of Directors serve for one-year terms, and until their
successors are elected and qualified. The Board of Directors has selected the
nominees listed below for election to the Board.
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 eight
nominees listed below. The directors will be elected by a plurality of the
shares of Common Stock cast in person or by proxy 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. PROPERLY DATED AND SIGNED PROXIES 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, 1996, 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.
William T. Butler, 63... Dr. Butler was elected a Director of the Company on
December 21, 1988, effective as of January 25,
1989. Dr. Butler became Chancellor of Baylor
College of Medicine on January 5, 1996. From 1979
until January 1996, he served as President and
Chief Executive Officer of Baylor College of
Medicine (education and research). He is also a
director of C. R. Bard, Inc. and Browning-Ferris
Industries Inc.
Dr. Butler is a member of the Compensation
Committee, the Executive Committee and the
Nominating Committee.
Curtis J. Crawford, 48.. Mr. Crawford was elected a Director of the Company
on July 21, 1995. He has held his current position
as President of Microelectronics, a business unit
of Lucent Technologies, Inc. (a successor to certain
AT&T businesses) since February 1, 1996. From 1993 to
February 1996 Mr. Crawford was President of AT&T
Microelectronics, a business unit of AT&T
Corporation. From 1991 to 1993, he held the position
of Vice President and Co-Chief Executive Officer of
AT&T Microelectronics. From 1988 to 1991, he held the
position of Vice President, Sales, Service and
Support for AT&T Computer Systems. From 1973 to 1988,
he served in various sales, marketing and executive
management positions at various divisions of
International Business Machines Corporation ("IBM"),
including Vice President, Marketing for the National
Distribution Division. He is a member of the Board of
Directors of the i-STAT Corporation, ITT Industries,
Inc., Semiconductor Industry Association and the
National Action Council on Minority Engineers.
Mr. Crawford is a member of the Audit Committee.
5
<PAGE>
Travis Engen, 51........ Mr. Engen was elected a Director of the Company
effective as of April 1, 1995. He has held his
current position as Chairman, President and Chief
Executive of ITT Industries, Inc. since December
20, 1995. From 1991 until December 19, 1995, he
served as Executive Vice President and a member of
the Management Policy Committee of ITT Corporation.
He held the position of Senior Vice President of
ITT Corporation and President and Chief Executive
Officer of ITT Defense, Inc. from 1987 to 1991. Mr.
Engen is also a director of Alcan Aluminium
Limited.
Mr. Engen is a member of the Compensation
Committee.
Bob G. Gower, 58........ Mr. Gower was elected Chairman of the Board of
Chairman of the Board Directors of the Company on August 31, 1994. Mr.
and Gower has served as Chief Executive Officer of the
Chief Executive Company since October 24, 1988 and has been a
Officer Director of the Company since June 27, 1988. He was
President of Lyondell and its predecessor, the
Lyondell Division, from the formation of the
Lyondell Division in April 1985 until August, 31,
1994. Prior to 1989, Mr. Gower served in various
positions with ARCO, including as Senior Vice
President of ARCO. He is also a director of
Keystone International and a member of the advisory
board of Texas Commerce Bank-Houston.
Mr. Gower is Chairman of the Executive Committee
and is a member of the Nominating Committee.
Stephen F. Hinchliffe, Mr. Hinchliffe was elected a Director of the Company
Jr., 62................. 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.
Mr. Hinchliffe is Chairman of the Compensation
Committee and a member of the Audit Committee.
Dudley C. Mecum II, 61.. 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 (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 Group, Dyncorp,
VICORP Restaurants, Inc., Fingerhut Companies,
Inc., Roper Industries, Inc. and Harrow Industries,
Inc.
Mr. Mecum is Chairman of the Audit Committee and a
member of the Compensation Committee.
6
<PAGE>
Dan F. Smith, 49........ Mr. Smith was elected President of the Company on
President and August 31, 1994 and has been Chief Operating
Chief Operating Officer since May 1993. Mr. Smith was elected a
Officer Director of the Company on October 24, 1988. 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. Mr.
Smith is also a director of ABS Group of Companies,
Inc., a subsidiary of American Bureau of Shipping.
Mr. Smith is a member of the Executive Committee.
Paul R. Staley, 66...... 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 National Vision Foundation since August
1994. He held the position of Chairman of the
Executive Committee of the Board of Directors of P.
Q. Corporation (an industry supplier of silicates)
from January 1991 until August 1994. He also held
the positions of President and Chief Executive
Officer of P.Q. Corporation from 1973 and 1981,
respectively, until January 1991.
Mr. Staley is Chairman of the Nominating Committee
and a member of the Audit Committee.
7
<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
-----------------------------------------------------------------------------
RESTRICTED SECURITIES LONG-TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($)(A) ($)(B) ($)(C) (#)(D) ($)(E) ($)(F)
- ------------------------ ---- ------- ------- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bob G. Gower............ 1995 698,078 648,922 39,177 670,557 -0- 596,554 91,746
Chairman of the Board & 1994 587,646 670,557 70,418 -0- 57,300 1,146,152 77,284
Chief Executive Officer 1993 555,099 460,000 74,498 -0- 56,500 964,452 60,357
Dan F. Smith............ 1995 473,905 370,813 7,945 383,175 -0- 115,382 56,519
President & Chief 1994 409,000 383,175 11,722 -0- 25,000 86,396(g) 55,549
Operating Officer 1993 247,651(h) 220,000 4,115 -0- -0- -0- 950,130(i)
Russell S. Young........ 1995 269,385 139,055 16,990 143,691 -0- 120,269 41,199
Senior Vice President, 1994 230,765 143,691 19,648 -0- 13,500 196,916 36,900
Chief Financial Officer 1993 206,338 97,500 17,347 -0- 14,500 180,698 29,130
& Treasurer
Jeffrey R. Pendergraft.. 1995 249,885 139,055 8,868 143,691 -0- 149,277 38,854
Senior Vice President, 1994 238,139 143,691 8,736 -0- 13,500 252,457 34,006
General Counsel & 1993 221,934 97,500 9,754 -0- 17,200 216,480 27,051
Secretary
Debra L. Starnes........ 1995 209,904 139,055 10,387 143,691 -0- 110,174 34,108
Senior Vice President, 1994 184,943 143,691 9,064 -0- 8,600 141,376 29,571
Polymers 1993 164,443 74,500 6,851 -0- 12,400 105,066 20,316
</TABLE>
- --------
(a) Bonuses paid with respect to 1995 and 1994 were paid pursuant to the terms
of the Value Share Plan, which was adopted in 1995 and is described on page
10 of this Proxy Statement. 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. These amounts are included in the bonus column for 1993 in addition to
the annual bonus paid pursuant to the Company's incentive plan that was in
effect at that time.
(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) The restricted stock is awarded as part of the award under the Company's
Value Share Plan. The dollar value included in the table reflects the
valuation at the time of the award. The restricted stock vests annually in
three equal installments and the first installment of the 1995 grant vested
as of December 15, 1995. The number and value (based on the December 31,
1995 closing price of the Company's Common Stock) of all unvested
restricted stock holdings by each of the named executive officers as of
December 31, 1995 is as follows: Mr. Gower: 17,655 shares ($403,858); Mr.
Smith: 10,089 shares ($230,786); Mr. Young: 3,783 shares ($86,536); Mr.
Pendergraft: 3,783 shares ($86,536); and Ms. Starnes: 3,783 shares
($86,536). The named executive officers will receive dividends on the
restricted stock reported in this column.
(d) No grants of stock options were made to executive officers in 1995.
(e) Amounts shown in the Long-Term Incentive Payouts column for 1995 represent
payment of the associated cash portion under the Value Share Plan that was
paid in December 1995 in connection with the vesting of such executive
officers' restricted stock as well as the payout of performance units
(including associated dividend share credits) previously awarded under the
Company's Executive Long-Term Incentive Plan (the "LTIP") (except with
respect to Mr. Smith, who was not an executive officer
8
<PAGE>
of the Company at the time the performance units were granted). Amounts
shown in the Long-Term Incentive Payouts column for 1994 and 1993 represent
payout of performance units (including associated dividend share credits)
previously awarded under the LTIP.
Dividend share credits are allocated to an optionee's account whenever
dividends are 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 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 with respect to options, until the participant
exercises such options or the options expire. Dividend share credits do not
represent earned compensation and have no definite value, if any, until the
date on which the options, 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. The number of dividend share credits accrued to the accounts
of the named executives during 1995, 1994 and 1993, respectively, is as
follows: Mr. Gower: 10,680, 10,273 and 13,819; Mr. Smith: 2,149, 1,867 and
2,405; Mr. Young: 2,182, 2,077 and 2,625; Mr. Pendergraft: 2,567, 2,483 and
3,414; and Ms. Starnes: 1,523, 1,470 and 1,674.
(f) Includes contributions to the Executive Supplementary Savings Plan,
incremental executive medical plan premiums, financial counseling
reimbursements and certain amounts in respect to the Executive Life
Insurance Plan, as follows:
<TABLE>
<CAPTION>
YEAR MR. GOWER MR. SMITH MR. YOUNG MR. PENDERGRAFT MS. STARNES
---- --------- --------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Executive Supplementary
Savings Plan........... 1995 $55,846 $37,913 $21,551 $19,991 $16,792
Incremental Medical Plan
Premiums............... 1995 $ 8,432 $ 8,432 $ 8,432 $ 8,432 $ 8,432
Financial Counseling
Reimbursement.......... 1995 $ 7,650 $ 4,687 $ 6,730 $ 6,975 $ 6,730
Executive Life Insurance
Plan................... 1995 $19,818 $ 5,487 $ 4,486 $ 3,456 $ 2,154
</TABLE>
(g) Represents an amount prorated for the number of months during the three-
year period that Mr. Smith was an executive officer of the Company.
(h) 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. Mr. Smith had previously served as an
executive officer of the Company from its formation to October 1991.
(i) In addition to the Company's standard executive benefits, such as those
described in footnote (f), this amount 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 along with
$15,681 which is the deemed value of the interest-free portion of a
bridging loan made to Mr. Smith during 1993 in connection with his
relocation to Houston.
9
<PAGE>
PAY AND PERFORMANCE PLANS AND LONG-TERM INCENTIVE PLANS
VALUE SHARE PLAN
In 1995 the Company adopted a new performance driven pay plan for executive
officers (the "Value Share Plan" ). The Value Share Plan is designed to provide
participants with an incentive to maximize long-term stockholder value and to
encourage significant ownership of Company stock. The Value Share Plan
establishes Performance Cycles and at the beginning of each Cycle, participants
are assigned an allocation percentage that will indicate the extent to which
each participant will share in the amounts generated by the Value Share Plan.
At the end of the Performance Cycle two award pools are created: (i) a Value
Award Pool and (ii) an Operating Award Pool.
The Value Award Pool equals the sum of 4.0% of Average EVA ("economic value
added") and 1.25% of MVA ("market value added"). EVA measures the Company's
cash flow performance in excess of a capital charge, which is calculated by
multiplying the capital invested in the Company times the Company's weighted
average cost of capital. MVA measures changes in the market value of the
Company's equity, plus the value of dividends as if they had been reinvested in
the Company's Common Stock.
An Operating Award Pool is created if certain minimum criteria are satisfied.
The size of the pool is based on the Compensation Committee's evaluation of
Lyondell's operating performance in the final year of any Cycle in the areas of
customer satisfaction, corporate responsibility (including safety and
environmental performance), employee productivity and financial performance.
The Operating Award Pool maximum is $1,000,000 for any Performance Cycle and
may be adjusted downward by the Compensation Committee based on its assessment
of the Company's performance in the final year of the Cycle.
Following the completion of a Performance Cycle, the sum of the Pools will be
awarded to Participants in accordance with their allocation percentages. Awards
are paid out in three parts as follows:
(a) One-third in cash, to be paid within 90 days following the end of a
Performance Cycle;
(b) One-third in restricted stock, issued within 90 days following the end of
a Performance Cycle; and
(c) One-third in cash, to be paid at the time that the related award of
restricted stock vests.
The restricted stock awards made in 1995, which represent the "long-term"
portion of the Value Share Plan, are reported in the Summary Compensation Table
as well as in the table below.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERIOD UNTIL
MATURATION
NAME NUMBER OF SHARES OR PAYOUT
---- ---------------- ------------
<S> <C> <C>
Mr. Gower...................................... 26,483 *
Mr. Smith ..................................... 15,133 *
Mr. Young...................................... 5,675 *
Mr. Pendergraft................................ 5,675 *
Ms. Starnes.................................... 5,675 *
</TABLE>
- --------
* The shares vest in annual one-third increments, beginning on December 15,
1995.
10
<PAGE>
EXECUTIVE LONG-TERM INCENTIVE PLAN
The LTIP provided 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. Additional information with respect to the payout of
performance units previously granted under the LTIP is contained in the Summary
Compensation Table. No performance units are currently outstanding. Commencing
in 1995, no additional grants of stock options or performance units have been
made to executive officers pursuant to the LTIP, although dividend share
credits will continue to accrue on outstanding stock options.
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, 1995. 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 the Common Stock.
AGGREGATED OPTION EXERCISES IN 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF SECURITIES OPTIONS AT FISCAL YEAR- FISCAL YEAR-
UNDERLYING OPTIONS END (#) END ($) (A) (B)
-------------------------------- ------------------------- -------------------------
NAME EXERCISED (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Gower............... -0- -0- 160,387 81,775 $223,070 -0-
Mr. Smith............... -0- -0- 30,216 18,750 50,456 -0-
Mr. Young............... -0- -0- 31,354 19,245 40,394 -0-
Mr. Pendergraft......... -0- -0- 38,035 21,650 49,874 -0-
Ms. Starnes............. -0- -0- 21,924 14,400 25,535 -0-
</TABLE>
- --------
(a) The last reported closing sales price, as reported on the NYSE, of Lyondell
Common Stock on December 31, 1995 was $22.875 per share.
(b) Each option carries with it the right to dividend share credits, as
described in footnote (e) to the Summary Compensation Table. Set forth
below is a calculation of the value of accrued dividend share credits,
assuming exercise at December 31, 1995, 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..................................... $676,109 $-0-
Mr. Smith..................................... $140,262 $-0-
Mr. Young..................................... $123,061 $-0-
Mr. Pendergraft............................... $151,316 $-0-
Ms. Starnes................................... $ 76,840 $-0-
</TABLE>
11
<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 at age 65 based on credited service as of January 1, 1996 under the
provisions of the Lyondell Retirement Plan and the Supplementary Executive
Retirement Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE
FINAL
EARNINGS
(BASE
SALARY PLUS
ANNUAL
INCENTIVE
PLAN
AWARDS)
HIGHEST
THREE
CONSECUTIVE
YEARS OUT
OF LAST TEN
YEARS APPROXIMATE ANNUAL BENEFIT FOR YEARS OF MEMBERSHIP SERVICE INDICATED(A)(B)(C)
- ----------- -------------------------------------------------------------------------------
15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$1,400,000 322,271 429,695 537,119 644,542 751,966
1,300,000 299,171 398,895 498,619 598,342 698,066
1,200,000 276,071 368,095 460,119 552,142 644,166
1,100,000 252,971 337,295 421,619 505,942 590,266
1,000,000 229,871 306,495 383,119 459,742 536,366
900,000 206,771 275,695 344,619 413,542 482,466
800,000 183,671 244,895 306,119 367,342 428,566
700,000 160,571 214,095 267,619 321,142 374,666
600,000 137,471 183,295 229,119 274,942 320,766
500,000 114,371 152,495 190,619 228,742 266,866
400,000 91,271 121,695 152,119 182,542 213,966
300,000 68,171 90,895 113,619 136,342 159,066
200,000 45,071 60,095 75,119 90,142 105,166
</TABLE>
- --------
<TABLE>
<S> <C>
</TABLE>
(a) The amounts shown in the above table are necessarily based upon certain
assumptions, including retirement of the employee at age 65, based on
credited services as of January 1, 1996 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 actual retirement occurred after January 1, 1996,
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, 1995, the credited years of service (rounded to the
nearest whole number) under the Lyondell Retirement Plan for the named
executive officers are: Mr. Gower, 32; Mr. Smith, 19; Mr. Young, 15; Mr.
Pendergraft, 23; and Ms. Starnes, 20.
(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.
12
<PAGE>
EXECUTIVE SEVERANCE AGREEMENTS
In 1994, the Company entered into severance agreements with each of its
executive officers. The severance agreements provide for the receipt by the
executive officers of certain payments and benefits in the event of a "Change
of Control" of the Company. A Change of Control occurs when (i) the Incumbent
Directors (as defined in the severance agreements) cease to constitute at least
a majority of the Board, (ii) the stockholders of the Company approve any
merger, consolidation, recapitalization or sale of substantially all of the
assets of the Company under circumstances where such stockholders would own
less than 80 percent of the outstanding voting securities of the surviving
entity, or where the Incumbent Directors would not constitute a majority of the
Board of Directors immediately after such transaction, or such stockholders
approve any plan or proposal for the liquidation or dissolution of the Company
(iii) any person or group, other than ARCO, holds or acquires, directly or
indirectly, more than 20 percent of the Company's then outstanding voting
securities, or (iv) ARCO acquires (other than in an inadvertent transaction
that is effectively reversed) ownership, directly or indirectly, of more than
50 percent of the Company's then outstanding voting securities.
In the event of a Change of Control, the severance agreements provide for the
vesting of all of the executives' non-vested stock options (and dividend share
credits with respect thereto) granted to the executive under the Company's
Long-Term Incentive Plan. In the further event that there is a cessation of an
active market for the Company's Common Stock at or within three years after the
Change of Control, the Company is required to pay the executive a lump-sum
payment based on the Black Scholes value (as of the date immediately preceding
the cessation of an active market) and remaining term of the options for all of
the executive's unexercised stock options, notwithstanding the possibility that
the average exercise price of such options is in excess of the market value of
the underlying Common Stock. The Company's Restricted Stock Plan provides for
accelerated vesting of restricted stock in the event of a Change of Control.
The severance agreements provide for additional payments and benefits in the
event the executive's employment with the Company is actually or constructively
terminated at any time within three years following a Change in Control,
including lump-sum payments based on three times the executive's base salary
and pro rata Value Share Plan awards, certain tax gross-up payments, additional
pension benefits and benefits upon termination of the executive's deferral
plan. The Company expects that a material portion of any payments required to
be made under the severance agreements would be considered "parachute" payments
under applicable Internal Revenue Code provisions and would therefore not be
deductible for Federal Income Tax purposes by the Company. The original
agreements were extended through August 1996 and are renewable at the request
of the Company and upon specific approval of the Compensation Committee.
13
<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 15 peer companies.
The Peer Group is a composite index composed of independent refiners and
commodity chemical manufacturers. The Peer Group consists of Ashland Oil,
Inc.; Crown Central Petroleum Corporation; Diamond Shamrock, Inc.; Eastman
Chemical; FINA, Inc; The Geon Company; Georgia Gulf Corporation; Methanex
Corporation; Nova Corporation of Alberta; Rexene Corporation; Sterling
Chemicals, Inc.; Sun Company, Inc.; Tosco Corporation; Union Carbide
Corporation and Valero Energy Corporation. All the companies in the Peer Group
are included in the comparison group used for determinations of the
competitiveness of executive salaries.
COMPARISON OF 5-YEAR CUMULATIVE RETURNS
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
LYONDELL........................ $100.00 $167.41 $196.52 $179.68 $226.56 $207.55
S&P 500......................... $100.00 $130.47 $140.41 $154.56 $156.60 $215.46
PEER GROUP(a)................... $100.00 $116.83 $108.52 $124.08 $151.71 $160.37
</TABLE>
(a) Group total returns are weighted by average annual market capitalization
for Peer Group companies as of the beginning of each year and assume
reinvestment of dividends. None of the 15 peer companies constituted more
than 20 percent of the market capitalization of the entire Peer Group in
1995.
PURSUANT TO SEC RULES, THIS SECTION OF THE PROXY STATEMENT (INCLUDING THE
COMPENSATION COMMITTEE REPORT THAT FOLLOWS) IS NOT DEEMED "FILED" WITH THE
SEC AND IS NOT INCORPORATED BY REFERENCE WITH THE COMPANY'S REPORT ON
FORM 10-K.
14
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") has
the responsibility for establishing and administering the pay philosophy,
policies, and plans for the executive officers of the Company. The Committee
conducts an annual review of executive pay and approves all salary changes,
grants, and awards to executive officers of Lyondell. The Committee is
comprised of four non-employee directors: Mr. Stephen F. Hinchliffe, Jr.,
Chairman, Mr. Dudley C. Mecum II, Dr. William T. Butler and Mr. Travis Engen.
In 1994, the Compensation Committee conducted a comprehensive review of the
Company's executive pay programs. Based on this review, the Committee developed
a new performance-driven incentive plan which was implemented in 1995.
EXECUTIVE PAY PHILOSOPHY
The overriding principle behind the Company's pay philosophy is that pay must
support the Company's primary objective of creating shareholder value and that
superior pay will be provided for superior performance. Specific elements of
this philosophy are:
. Performance should be defined in terms of measures that directly link to
or strongly influence Lyondell's shareholder value and achievement of
strategic business and other performance objectives
. Executive base salaries should be comparable to salaries for similar
positions in a broad group of industrial and chemical companies that are
similar to Lyondell, with incentives varying substantially commensurate
with the Company's performance and designed to account for the cyclical
nature of the Company's businesses
. The pay programs should foster a team orientation and a high degree of
cooperation and coordination among top management
. Substantial ownership in the Company's stock among executives should be
highly encouraged so that management interests are closely aligned with
shareholders in terms of both risk and reward
Driven by this philosophy, the Company's executive pay program has been
designed to encourage a long-term performance orientation, with performance
measures that are strongly related to shareholder value creation. Further, the
program is designed to facilitate ownership of Company stock. As a result, the
Company's total pay package is designed to be highly sensitive to the Company's
performance, defined in terms of shareholder value creation.
Base Salary
Pursuant to the pay philosophy of emphasizing performance-oriented pay,
Lyondell's executive base salaries generally are positioned at the 50th
percentile of the market according to nationally recognized surveys for
industrial and chemical companies. Salaries for executives who are new to their
positions may be set at below market levels.
In 1995, the Compensation Committee assessed market pay by position by
relying on both published surveys and proxy data. Published surveys covered a
group of industrial and chemical companies. Proxy data covered specific
companies considered to be comparable to Lyondell because of the business in
which they operate (and are the same companies reflected in the Peer
Performance Graph). Using this data, salary adjustments were made in 1995 such
that salaries for most executives were set at the median of the market.
Salaries for those new in their positions, however, were set below the median
of the market.
15
<PAGE>
In the years in which external salary assessments are not conducted, the
Compensation Committee intends to increase executive salaries commensurate with
the increases reported by at least two nationally recognized surveys. Salary
increases for those new in their positions and currently below their market
medians may be higher than the market to bring their salaries up to the median
over time.
Incentives
Value Share Plan.
Lyondell executives are eligible to participate in the Value Share Plan which
was approved by the shareholders in 1995, replacing the Company's former
incentive plans. The Value Share Plan is designed to provide participants with
an incentive to maximize the long-term creation of shareholder value and
encourage significant ownership of Company stock.
Pursuant to the Value Share Plan, each year an award pool is created,
comprised of 4.0% of Lyondell's Economic Value Added (EVA), averaged over the
last five years, and 1.25% of Lyondell's 5-year Market Value Added (MVA). EVA
measures the Company's cash flow performance in excess of a capital charge,
which is calculated by multiplying the capital invested in the Company by the
Company's weighted average cost of capital. MVA measures changes in the market
value of the Company's equity, plus the value of dividends as if they had been
reinvested in the Company's stock. Based on this formula, an award pool of
$4,562,188 was created for 1995. This award pool represents 4.0% of 5-year
average EVA, which was $952,000 and 1.25% of 5-year MVA, which was $3,610,188.
In addition, a discretionary annual award pool of $1,000,000 was created for
1995, based on the Committee's subjective assessment of Lyondell's performance
over the course of the year. In determining the size of this pool, which may
not exceed $1,000,000, the Committee took into account accomplishments relating
to customer satisfaction, corporate responsibility, including safety and
environmental performance, employee productivity and 1995 financial
performance. The Company must also satisfy certain minimum criteria relating to
these areas.
The formula and discretionary award pools were allocated to a total of 10
executives, including the Chief Executive Officer, who in the opinion of the
Committee, have the opportunity to significantly impact the long-range success
and value of the Company in accordance with pre-established allocation
percentages. One-third of the calculated value of each individual's award was
paid out in cash and one-third was paid in restricted stock. One-third will be
paid out at the times that the restricted stock vests in an amount equal to the
value of the restricted stock at the time of vesting.
Stock Ownership Guidelines
In 1995, the Committee adopted stock ownership guidelines for participants in
the Value Share Plan. Within five years of 1995, current participants are
requested to own a specific number of shares of Lyondell common stock depending
upon their position level as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
REQUESTED TO BE
POSITION OWNED
-------- ----------------
<S> <C>
Chief Executive Officer.................................. 125,000
Chief Operating Officer.................................. 60,000
Senior Vice President.................................... 25,000
Vice President........................................... 15,000
</TABLE>
Shares which are beneficially owned, other than unexercised stock options and
unvested restricted stock, will count toward fulfillment of the ownership
guidelines.
16
<PAGE>
CHIEF EXECUTIVE OFFICER'S 1995 PAY
In 1995, the Compensation Committee determined the pay of Mr. Gower,
Lyondell's Chairman and Chief Executive Officer, in substantially the same
manner as the pay for all other officers. Consistent with standard pay
practices for chief executive officers, as indicated by survey data, a greater
portion of Mr. Gower's total pay is provided through incentive awards.
In 1995, Mr. Gower's salary was raised from $600,000 to $700,000. This salary
increase was consistent with the guidelines approved by the Compensation
Committee.
In March 1996, Mr. Gower received an incentive award for 1995 which was based
on Lyondell's Economic Value Added (EVA), averaged over 1995, Lyondell's 1995
Market Value Added (MVA), plus an assessment of the Company's performance based
an certain predetermined criteria. As a result, Mr. Gower's annual incentive
cash award was $648,922, a grant of restricted stock equal to 27,323 shares was
made and Mr. Gower will receive a deferred cash payment as the restricted stock
grant vests. The vesting of the restricted stock and the deferred cash payment
occur on the same terms as all other executive officers participating in the
Value Share Plan. The Committee believes that this award is appropriate given
the Company's achievements in creating value, as measured by EVA and MVA, as
well as its financial and strategic success.
Mr. Gower's pay package continues to include a large portion which is at risk
as to its ultimate value. The Compensation Committee believes that Mr. Gower's
pay mix, coupled with the design of his pay package, continues to align his
rewards and incentives with shareholder interests.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
Section 162(m) of the Omnibus Budget Reconciliation Act of 1993 (the "1993
Act") limits the deductibility of pay 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 pay meets certain
requirements.
In 1995, the shareholders approved the new Value Share Plan and the
Restricted Stock Plan which Plans replaced the Company's annual bonus plan and
the LTIP. The Company believes that the amounts awarded in 1996 pursuant to the
plan should be deductible. The Committee seeks to qualify for deductibility
where feasible, but retains the discretion to pay non-deductible amounts if
that would be in the best interests of the Company and shareholders under the
circumstances.
COMPENSATION COMMITTEE MEMBERS
The Compensation Committee strongly believes that shareholders are well
served by Lyondell's executive management team and that the executive pay
philosophy and programs that have been established support the long-term
success of the Company. This report is submitted by the Compensation Committee
of the Board of Directors of Lyondell.
Respectfully submitted,
Stephen F. Hinchliffe, Jr. (Chairman)
Dr. William T. Butler
Dudley C. Mecum II
Travis Engen
THE COMPENSATION COMMITTEE
17
<PAGE>
TRANSACTIONS BETWEEN THE COMPANY AND ARCO
Lyondell was a division of ARCO until July 1988 when ARCO transferred the
assets of its Lyondell division to a wholly-owned subsidiary, Lyondell
Petrochemical Company. In January 1989, ARCO completed an initial public
offering of Lyondell's Common Stock. 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 (and now an 83.3 percent 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
LYONDELL-CITGO Refining Company Ltd.,("LCR")), ARCO or ARCO Chemical, has
determined that such agreements, taken as a whole, were in its opinion 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.
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 for so long as ARCO remains a
significant stockholder. 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, 1995, Lyondell (including LCR) paid ARCO
Affiliates an aggregate of approximately $28 million. For the year ended
December 31, 1995, Lyondell recorded revenues of approximately $325 million
from sales to ARCO Affiliates, of which $321 million represented sales to ARCO
Chemical. Sales to ARCO Chemical accounted for approximately 12 percent of
total revenues from sales of petrochemical products (including intersegment
sales) and approximately six percent of total revenues.
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.
REGISTRATION RIGHTS AGREEMENT
Subject to the terms and conditions of a registration rights agreement
("Registration Rights Agreement") entered into with Lyondell in connection with
the ARCO Note Offering, ARCO agreed that it will not, without the prior
approval of Lyondell's Board of Directors, prior to the maturity of the ARCO
Notes, (i) initiate or solicit proposals by a single entity or a group of
affiliated entities to acquire all or substantially all of ARCO's Lyondell
Common Stock or otherwise to acquire Lyondell, (ii) take action by written
consent in lieu of a meeting of Lyondell's stockholders or cause to be called
any special meeting of Lyondell's stockholders, (iii) initiate or propose, or
solicit proxies in respect of, stockholder proposals with respect to the
Company, or (iv) solicit proxies or written consents in respect of replacing or
adding members of the Lyondell Board of Directors.
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Under the terms and conditions of the Registration Rights Agreement, ARCO
also agreed that it will not, without the prior approval of Lyondell's Board of
Directors or except upon exchange of the ARCO Notes as contemplated by the
prospectus for the ARCO Notes, prior to one year following the maturity date of
such ARCO Notes, dispose of (or enter into an agreement contemplating the
disposition of) all or any portion of its Lyondell Common Stock in a private
sale to a single entity or a group of affiliated entities, provided that this
agreement will not restrict ARCO from selling all or any portion of its
Lyondell Common Stock (i) in a public offering intended to result in widespread
distribution; (ii) in a Rule 144 transaction under the Securities Act of 1933
(the "Securities Act") in accordance with the volume limitations set forth
therein; (iii) in a Rule 144A transaction intended to result in widespread
distribution to institutional buyers; or (iv) pursuant to a tender offer or
exchange offer by Lyondell or a third party or a merger or other business
combination including Lyondell that is not solicited by ARCO and in which ARCO
is treated on substantially comparable terms with other holders of Lyondell
Common Stock. Notwithstanding the foregoing, ARCO is not precluded from (i)
participating in any self tender offer or exchange offer or open market
purchase program conducted by Lyondell, (ii) voting its shares of Lyondell
Common Stock as it deems proper, or (iii) disclosing (including in response to
private inquiries) either its intentions concerning matters to be brought
before Lyondell's stockholders or making such disclosures as ARCO determines
appropriate in compliance with its obligation under the federal securities
laws.
Pursuant to the Registration Rights Agreement, ARCO has the right to require
the Company to use its best efforts to file up to three registration statements
under the Securities Act covering ARCO shares of Lyondell Common Stock. ARCO
also has the right, if the Company files a registration statement for an equity
offering, to require the Company to register ARCO's shares of Common Stock for
sale under the Securities Act on such registration statement. If the exercise
by ARCO of such "piggyback registration rights" would result in the
registration of a number of shares of Common Stock, that in the judgment of the
managing underwriter for such proposed offering exceeds the number which can be
sold in the offering, the number of shares that ARCO initially intended to
register shall be reduced. ARCO has agreed to pay all costs and expenses
relating to the exercise of its "demand" registration rights. In the event of a
"demand" registration, ARCO and the Company will indemnify the underwriters of
the offering for certain liabilities, including liabilities under the
Securities Act in connection with any such registration, except that in the
event that ARCO owns less than 20 percent of the Lyondell Common Stock, the
Company will indemnify both ARCO and the underwriters.
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 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: (1) all liabilities
and obligations of the Company and its combined subsidiaries, as of July 1,
1988; (2) all liabilities and obligations under contracts and commitments
relating to the business of the Lyondell Division and certain assets relating
thereto; (3) employment and collective bargaining agreements affecting the
Company's employees; (4) specified pending litigation and other proceedings;
(5) federal, state, foreign and local income taxes to the extent provided in
the Cross-Indemnity Agreement; (6) liabilities for other taxes associated with
the Lyondell Division's business and certain assets relating thereto; (7)
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; (8) 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 (9) 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.
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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.
SERVICES AGREEMENTS
ARCO provides various employee benefits administration and payroll services
pursuant to the "Employee Services Agreement" and investment services with
regard to the management of certain of Lyondell's qualified employee benefit
plan funds pursuant to the "Investment Management Agreement". Each of these
agreements terminates on May 1, 1998, although it may be terminated in its
entirety by ARCO (provided that ARCO no longer owns at least five percent of
the outstanding Common Stock) by giving Lyondell at least two years prior
notice. In addition, Lyondell may elect to terminate some or all of the
services being provided upon thirty days prior notice. Upon termination of any
or all services, ARCO will provide Lyondell with support and assistance to
accomplish an orderly transition from ARCO's provision of the services to
Lyondell's acquisition of comparable services. The Employee Services Agreement
provides for substantially all services to be provided at a fee based on ARCO's
costs and for the other services to be provided at mutually-agreed fees. The
Investment Management Agreement provides for a renegotiation of fees from time
to time. Lyondell paid ARCO an aggregate of $2 million in 1995 for services
under these agreements.
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.
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 containing the word "ARCO," to
use ARCO's spark symbol as a logo and to use ARCO's color striping scheme. The
Company paid ARCO approximately $60,000 under the terms of this license in
1995.
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 use 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.
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AGREEMENTS BETWEEN THE COMPANY AND ARCO PIPE LINE COMPANY
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) obtains services from ARCO Pipe Line to operate various groups
of pipelines owned by the Company; and (iii) throughputs 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. ARCO Pipe Line also owns various easements and licenses for its
pipelines and related equipment located on the property of the Company or 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. The Company and LCR paid ARCO Pipe Line approximately
$26 million during 1995 for rental fees and services under these contracts.
In April 1994, the Company and ARCO Pipe Line agreed to a new lease that
extends the Company's lease of ARCO Pipe Line's pipeline system referenced in
clause (i) of the foregoing paragraph from January 1999 through December 31,
2023. Absent major regulatory changes, the terms and conditions of the new
lease will not be materially different from the current lease.
Beginning in January 1997, ARCO Pipe Line will provide terminalling and
delivery of crude oil to the LCR Refinery under the terms of crude oil
terminally agreement that extends through 2010.
AGREEMENTS BETWEEN THE COMPANY AND ARCO CHEMICAL
Lyondell provides to ARCO Chemical a large portion of the feedstocks
(including benzene, ethylene, propylene and methanol) 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 sells MTBE (produced at one of the Company's two MTBE units) to
ARCO Chemical at market-based prices. The term of this agreement extends
through December 31, 1996. Production from the Company's second MTBE unit is
dedicated to LCR; however, the Company has agreed to sell to ARCO Chemical MTBE
produced at the Company's second MTBE unit that is in excess of LCR's
requirements at market-based prices.
AGREEMENTS BETWEEN THE COMPANY AND ARCO PRODUCTS COMPANY
Lyondell has entered into a nine year supply agreement beginning April 1996
with ARCO Products Company ("ARCO Products") wherein Lyondell is committed to
sell and ARCO Products is committed to buy approximately 6,000 barrels of
alkylate per day at market-based prices.
OTHER AGREEMENTS BETWEEN THE COMPANY AND ARCO
LCR purchases certain of its crude oil requirements from ARCO Affiliates
under short-term arrangements at prices based on market values at the time of
delivery. LCR also purchases crude oil from ARCO Affiliates 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 ARCO Affiliates during 1995
on the spot market at then-current spot market prices.
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.
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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.
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 (i)
engaging in business activities or lines of business that are the same as or
similar to those of the Company, (ii) doing business with any customer of the
Company or (iii) 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 if it 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.
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.
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 for the purposes of the organization of
committees, 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 1995, the Board of Directors held eleven meetings.
All of the Company's incumbent directors attended 75 percent or more of the
aggregate of all meetings of the Board and committees on which they served
during 1995.
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 three
times during 1995. The Executive Committee currently consists of Messrs.
Butler, Smith and Gower, who serves as Chairman.
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COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors adopts, amends,
administers and terminates compensation and benefit plans, makes
recommendations to the Board of Directors as to management succession plans and
administers the Company's pay performance and long-term incentive plans for
executive officers. 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. The Compensation Committee held
six meetings during 1995. The Compensation Committee currently consists of
Messrs. Butler, Engen, Mecum and Hinchliffe, who serves as the Chairman.
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. The Nominating Committee also performs an annual
evaluation of the Board's performance. Stockholders of the Company who wish to
nominate persons for election to the Board of Directors must comply with the
provisions of the By-Laws that are described more fully at page 28 of this
Proxy Statement. The Nominating Committee held four meetings during 1995. The
Nominating Committee currently consists of Messrs. Gower, Butler, and Staley,
who serves as Chairman.
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. The Audit
Committee held six meetings during 1995. The Audit Committee currently consists
of Mssrs. Crawford, Hinchliffe, Staley and Mecum, who serves as Chairman.
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COMPENSATION OF DIRECTORS
DIRECTORS' FEES
Directors who are employees of the Company are not paid any fees or
additional compensation for service as members of the Board of Directors or any
committee thereof. During 1995, directors who were not employees of the Company
("Non-Employee Directors") received an annual retainer fee of $30,000 and
$1,250 for each Board or committee meeting attended, and were reimbursed for
travel and other related expenses incurred in attending such meetings. In
addition, the non-employee directors who served as Chairman of the Audit,
Compensation and Nominating Committees, respectively, received $15,000, $12,500
and $10,000 per year.
For 1996, Non-Employee Directors received an annual retainer fee of $40,000,
of which $10,000 was paid in shares of restricted stock, with a restricted
period of one year. See "Restricted Stock Grants". It is proposed that Non-
Employee Directors will receive 25% of the cash value of the annual retainer in
the form of restricted stock each year. See Item 2 of this Proxy Statement "--
Proposal to Adopt Restricted Stock Plan for Non-Employee Directors". In
addition, Non-Employee Directors will receive $1,250 for attendance at each
regular, special or adjourned meeting of the Board of Directors and for each
meeting of the Audit Committee, Compensation Committee and Nominating Committee
(including in all cases meetings held by conference telephone or similar
communications equipment). In addition, the Non-Employee Directors who serve as
Chairman of the Audit, Compensation and Nominating Committees, respectively,
will receive $7,500, $7,500 and $5,000 per year.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
The Lyondell Petrochemical Company Retirement Plan for Non-Employee Directors
(the "Directors' Retirement Plan") is a non-qualified retirement plan for
directors who are not employees of the Company. The annual retirement benefit
is equal to the director's annual retainer fee immediately preceding 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 officer, three years following retirement as an
officer of the Company. 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, 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, 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 NON-EMPLOYEE DIRECTORS
The Lyondell Petrochemical Company Elective Deferral Plan for Non-Employee
Directors (the "Directors' Deferral Plan") became effective October 1, 1990 and
provides directors who are not employees of the Company 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.
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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 1995 was 10.3 percent.
RESTRICTED STOCK GRANTS
Effective January 17, 1996, each of the Non-Employee Directors received a
one-time grant of shares ("Restricted Shares") of Common Stock, which are
subject to transfer restrictions and risk of forfeiture for a period (the
"restricted period") of one year from the date of grant. During the restricted
period, the director has the right to receive dividends on and the right to
vote the Restricted Shares. The Restricted Shares will be forfeited if the
director's service terminates (other than for death or disability) prior to the
end of the restricted period. The Restricted Shares were granted as part of the
annual retainer for 1996 and were valued at $10,000. The Company believes
paying a portion of the directors' compensation in stock further aligns the
directors' interests with the stockholder. It is intended that the directors
will continue to hold the Restricted Shares beyond the termination of the
restricted period. For further description of the Proposal to Adopt the
Restricted Stock Plan for Non-Employee Directors, see Item 2 of this Proxy
Statement.
PROPOSAL TO ADOPT RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
Item 2 on Proxy Card
The Executive Committee of the Board of Directors is proposing for
stockholder approval the Restricted Stock Plan for Non-Employee Directors (the
"Director Plan"). A summary of the principal features of the Director Plan
follows and is qualified in its entirety by reference to the specific
provisions contained in the official text set forth in Appendix A to this Proxy
Statement.
The purpose of the Director Plan is to provide Non-Employee Directors with a
proprietary interest in the Company's success and progress by granting them
shares of Common Stock as a portion of their annual retainer. The Company
believes that increased share ownership by Non-Employee Directors further
aligns stockholder and Director interests by encouraging a greater focus on
profitability of the Company and on its Common Stock.
In 1995 the Executive Committee of the Board adopted stock ownership
guidelines for the non-employee directors. Within 5 years, the current members
of the Board who are not employees are expected to achieve share ownership
levels equivalent to the value of the annual retainer.
DESCRIPTION OF THE PLAN
ELIGIBILITY. All current or subsequently elected members of the Board who are
not (and have not been in the preceding ten years) executive officers or
employees of the Company or any of its subsidiaries would be eligible to
participate in the Director Plan.
ADMINISTRATION. The Director Plan will be administered by the Director
Benefits Committee (the "Director Committee"). No member of the Director
Committee is eligible to receive a discretionary award of Common Stock of the
Company under the Director Plan.
Subject to the express provisions of the Director Plan, the Director
Committee has the authority to determine all of the terms and conditions of
grants and awards. The Director Committee will also have authority to prescribe
rules and regulations for administering the Director Plan and to decide
questions of interpretation of any provision of the Director Plan.
AVAILABLE SHARES. Under the Director Plan, 100,000 shares of Common Stock are
available for grants and awards to directors, subject to adjustment in the
event of a stock split, stock dividend, recapitalization, reorganization,
merger or other similar event or change in capitalization. Consistent with the
Company's past practice with respect to Common Stock related to grants or
awards under the Company's compensation plans,
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the Company intends to purchase all shares subject to the Director Plan in the
open market and reissue them to the Participants, although the Company has the
right to use originally issued shares, treasury shares or a combination
thereof.
EFFECTIVE DATE, AMENDMENT AND TERMINATION. If approved by stockholders, the
Director Plan will become effective as of June 1, 1996. The Director Committee
may amend the Director Plan at any time except that no amendment may be made
without stockholder approval if stockholder approval would be required by any
applicable law, rule or regulation. The Company may terminate the Director Plan
at any time; provided that no termination may impair any participant's rights
with respect to outstanding grants of Restricted Stock under the Director Plan.
AWARDS. Under the Director Plan, 25 percent of each annual retainer would be
paid to Non-Employee Directors in the form of restricted stock ("Restricted
Stock''). Fixed awards may be made in the form of shares of Common Stock that
are issued to the director but that are forfeitable and subject to restrictions
on transfer. Vesting of Restricted Stock awards is not contingent on the
achievement of specific objectives, but is contingent on the participant's
continuing to serve the Company's Board of Directors for a period specified in
the award.
The restricted period will begin on the date of the grant and will continue
for a period of time (of at least one year) determined on the date of grant.
Participants also will have the right, unless and until such award is
forfeited, to receive dividends thereon from the date of grant and the right to
participate in any capital adjustment applicable to all holders of Common
Stock. Participants also will have the right to vote the shares.
The Director Plan provides for early vesting in the event of disability,
death, retirement or Change of Control (See page 13 for a description of events
causing a Change of Control). In the event of early vesting, shares of
Restricted Stock issued pursuant to an award will be released from the
restrictions.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of certain
of the U.S. federal income tax consequences generally arising with respect to
grants and awards under the Director Plan.
A participant will not recognize any income at the time of the grant of
shares of Restricted Stock unless the participant makes an election to be taxed
at the time the Restricted Stock is granted (a "Section 83(b) election"), and
the Company will not be entitled to a tax deduction at such time. A participant
will recognize compensation taxable as ordinary income at the time the
restrictions lapse on Restricted Stock, if a Section 83(b) election was not
made, in an amount equal to the fair market value of the shares at such time.
The amount of ordinary income recognized by a participant should be deductible
by the Company as compensation expense. In addition, a participant receiving
dividends with respect to Restricted Stock for which a Section 83(b) election
has not been made and prior to the time the restrictions lapse will recognize
compensation taxable as ordinary income (subject to income tax withholding),
rather than dividend income, in an amount equal to the dividends paid, and the
Company should be entitled to a corresponding deduction.
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 THIS PROPOSAL. PROPERLY
DATED AND SIGNED PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE.
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PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Item 3 on Proxy Card
The Board of Directors has recommended the appointment of Coopers & Lybrand
L.L.P., Certified Public Accountants, to audit the financial statements of
Lyondell for the year 1996. Coopers & Lybrand L.L.P. has acted in this capacity
since July 1988 and has acted as the independent auditor for ARCO for many
years. Since June 1987, Coopers & Lybrand L.L.P. has also acted as the
independent auditor for ARCO Chemical, an 83.3 percent-owned (as of March 1996)
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 L.L.P. 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 L.L.P. PROPERLY DATED AND SIGNED PROXIES 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 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
$8,000 plus expenses. Some of the executive officers and other employees of the
Company also may solicit proxies personally, by telephone and by mail, if
deemed appropriate.
PROXIES
The designated proxies are Messrs. Joseph M. Putz, Debra L. Starnes 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.
27
<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
AND DIRECTOR NOMINATIONS
Stockholder proposals intended to be presented at the 1997 Annual Meeting
must be received by November 30, 1996. Such proposals should be addressed to
the Secretary. The 1997 Annual Meeting will take place in May 1997.
Pursuant to the Bylaws of the Company, a stockholder wishing to nominate a
candidate for election to the Board is required to give written notice to the
Secretary of the Company of his or her intention to make such a nomination. The
notice of nomination must be received by the Company not less than 90 days in
advance of such meeting, or if the meeting was not publicly announced by a
mailing to the stockholders, in a press release reported by the Dow Jones New
Service, the Associated Press or a comparable national news service or a filing
with the Securities and Exchange Commission more than 90 days prior to the
meeting, must be delivered to the Board of Directors not later than the close
of business on the tenth day following the day on which the date of the meeting
was first so publicly announced. The notice of nomination is required to
contain certain information about both the nominee and the stockholder making
the nomination. A nomination that does not comply with the above procedure will
be disregarded.
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.
28
<PAGE>
APPENDIX A
RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
OF LYONDELL PETROCHEMICAL COMPANY
1. PURPOSE.
The Restricted Stock Plan for Non-Employee Directors of Lyondell
Petrochemical Company (the "Plan") is intended to provide non-employee
directors of Lyondell Petrochemical Company (the "Company") with an increased
propriety interest in the Company's success and progress by granting them
shares of the Company's Common Stock ("Common Stock") that are restricted in
accordance with the terms and conditions set forth below ("Restricted Shares").
The Plan is intended to increase the alignment of non-employee directors with
the Company's shareholders in terms of both risk and reward.
2. ADMINISTRATION.
The Plan is to be administered by the Director Benefit Committee (the
"Committee") of the Company or any successor committee with responsibility for
the administration of compensation and benefit plans for directors. The
Committee shall have all necessary authority and discretion to interpret any
provision of this Plan or to determine any question regarding grants of
Restricted Shares under this Plan. Any determination or interpretations of the
Committee shall be final, conclusive and binding on all persons.
3. ELIGIBILITY.
All current or subsequently elected members of the Company's Board of
Directors who at the time such service began were not, and for the preceding
ten years had not been, executive officers or employees of the Company or any
of its subsidiaries ("Eligible Directors") shall be eligible to participate in
the Plan.
4. GRANTS.
Each year 25 percent of the annual retainer paid to non-employee directors
shall be made in the form of grants of Restricted Shares to Eligible Directors.
The number of Restricted Shares granted shall be determined by dividing an
amount equal to 25 percent of an Eligible Director's annual retainer fee by the
closing price of a share of Common Stock on the effective date of the grant.
Grants of Restricted Shares to Participants shall be on the terms and
conditions and with the restrictions determined from time to time by the
Committee under Section 5 of this Plan.
5. TERMS AND CONDITIONS OF RESTRICTED SHARES.
(a) General. Each grant of Restricted Shares shall be subject to the
restrictions under subsection (c) for the Restricted Period of the grant.
(b) Restricted Period. The Restricted Period shall begin on the date of
the grant. The Restricted Period for a grant shall be at least one year,
and shall be set by the Committee and described in the individual granting
agreement to be executed by the Company and each non-employee director.
(c) Restrictions. One or more of these restrictions shall be a
restriction which constitutes a substantial risk of forfeiture. An Eligible
Director shall have all ownership rights and privileges of a shareholder as
to such Restricted Shares, including the right to receive dividends and the
right to vote such Restricted Shares, except that the following
restrictions shall apply: (i) an Eligible Director shall not be entitled to
delivery of the certificate until the expiration of the Restricted Period,
(ii) none of the Restricted Shares may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of during the Restricted
Period, and (iii) except as provided in subsection 5(d), all grants of the
Restricted Shares shall be forfeited and all rights of an Eligible Director
to such Restricted Shares shall terminate without further obligation on the
part of the Company if the Eligible Director fails to satisfy the terms of
the grant of Restricted Shares.
1
<PAGE>
During the Restricted Period, the Restricted Shares may be held on an
uncertificated basis or a stock certificate representing the number of
Restricted Shares granted may be registered in each Eligible Director name
but held in custody by the Plan for the Eligible Director account and not
released to the Eligible Director until the Restricted Period lapses.
(d) Termination of Directorship.
If an Eligible Director ceased to be a director of the Company by reason
of Disability, Death, Retirement or Change of Control, the Restricted
Shares granted to such Eligible Director shall immediately vest. If an
Eligible Director ceases to be a director of the Company for any other
reason, the Eligible Director shall immediately forfeit all Restricted
Shares, except to the extent that a majority of the Board other than the
Eligible Director approves the vesting of such Restricted Shares. Upon
vesting, except as provided in Section 6, all restrictions applicable to
such Restricted Shares shall lapse and a certificate for such shares shall
be delivered to the Eligible Director, or the Eligible Director's
beneficiary or estate, in accordance with Section 5(e).
For purposes of this section, the following definitions apply:
(i) "Disability" shall mean a permanent and total disability as
defined in Section 22(e)(3) of the Internal Revenue Code.
(ii) "Retirement" shall mean ceasing to be a director of the Company
(i) on or after age 72 or (ii) at any time prior to age 72 with the
consent of a majority of the members of the Board other than the
Eligible Director.
(iii) "Change of Control" shall mean a change of control as defined
in the Company's Supplemental Executive Benefit Plans Trust Agreement.
(e) Delivery of Restricted Shares. At the end of the Restricted Period a
stock of certificate for the number of Restricted Shares which have vested
shall be delivered free of all such restrictions to the Eligible Director
or the Eligible Director's beneficiary or estate, as the case may be.
6. REGULATORY COMPLIANCE.
An Eligible Director or an Eligible Director's beneficiary or estate shall
not receive or sell any Common Stock granted pursuant to this Plan until all
appropriate listing, registration and qualification requirements and consents
and approvals have been satisfied or obtained, free of any condition
unacceptable to the Board of Directors.
The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Shares, including restrictions under the
Restricted Period, whenever it determines that such action is appropriate as a
result of changes in applicable laws or other circumstances after the date of
the grant.
7. SHARES RESERVED UNDER THE PLAN
The shares of Common Stock covered by grants under this Plan as Restricted
Shares will not exceed 100,000 shares in the aggregate, subject to adjustment
as provided below, and in accordance with and subject to Rule 16b-3 of the
Securities and Exchange Act of 1934, ("Exchange Act") as amended. Restricted
Shares may be originally issued or treasury shares or a combination of both.
Any shares of Common Stock granted as Restricted Shares that are terminated,
forfeited or surrendered or which expire for any reason will not be available
again for issuance under this Plan if any Eligible Director received any of the
benefits of ownership of those shares prior to termination, forfeiture or
surrender.
2
<PAGE>
In the event of a recapitalization, stock split, stock dividend, combination
or exchange of shares, merger, consolidation, rights offering, separation,
reorganization or liquidation, or any other change in the Company's corporate
structure or shares, the Committee may make such equitable adjustments in the
number and class of shares authorized to be granted as Restricted Shares, as it
deems appropriate to prevent dilution or enlargement of rights. Shares issued
as a consequence of any such change shall be issued subject to the same
restrictions and provisions applicable to the original grant of Restricted
Shares.
8. TERMINATION OR AMENDMENT OF THE PLAN.
The Company may at any time terminate the Plan and may from time to time
alter or amend the Plan or any part hereof (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Section 6) without shareholder approval, unless otherwise
required by law or by the rules of the Securities and Exchange Commission or
New York Stock Exchange. No termination or amendment of the Plan may, without
the consent of an Eligible Director, impair the rights of such director with
respect to shares of Common Stock granted under the Plan.
9. MISCELLANEOUS.
(a) Nothing in the Plan shall be deemed to create any obligation on the
part of the Board to nominate any director for reelection by the Company's
shareholders.
(b) The Company shall have the right to require, prior to the issuance or
delivery of any Restricted Shares, payment by an Eligible Director of any
taxes required by law with respect to the issuance or delivery of such
shares, or the lapse of restrictions thereon.
10. GOVERNING LAW.
The Plan shall be construed according to the law of the State of Texas to the
extent federal law does not supersede and preempt state law.
11. EFFECTIVE DATE.
The Plan shall become effective as of June 1, 1996, or such later date as may
be fixed by the Committee.
3
<PAGE>
[LOGO OF LYONDELL APPEARS HERE]
[LOGO OF LYONDELL APPEARS HERE]
[LOGO OF LYONDELL APPEARS HERE]
<PAGE>
[LOGO OF LYONDELL PETROCHEMICAL
COMPANY APPEARS HERE]
LYONDELL PETROCHEMICAL COMPANY
1221 McKinney Street, Suite 1600
Houston, Texas 77010
March 18, 1996
Dear Stockholder:
You are cordially invited to join us at the 1996 Annual Meeting of
Stockholders on Friday, May 3, 1996, 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 Company, followed by
a question and answer period. The official results of the voting at the meeting
will be sent to all stockholders as part of a subsequent stockholder report.
Sincerely yours,
[SIGNATURE APPEARS HERE]
Chairman of the Board and Chief Executive Officer
[SIGNATURE APPEARS HERE]
President and Chief Operating Officer
PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
[ ]
1. ELECTION OF DIRECTORS
FOR all nominees
listed below [X]
WITHHOLD AUTHORITY to vote
for all nominees listed below [X]
*EXCEPTIONS [X]
Nominees: William T. Butler, Curtis J. Crawford, Travis Engen, Bob G. Gower,
Stephen P. Hinchliffe, Jr., Dudley C. Mecum II, Dan F. Smith, Paul R. Staley
(INSTRUCTIONS: To withholding authority to vote for any individual nominee
mark the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions_____________________________________________________________________
2. Proposal to approve Restricted Stock Plan for Non-Employee Directors.
FOR [X] AGAINST [X] ABSTAIN [X]
3. Proposal to ratify the appointment of Coopers & Lybrand, independent
accountants, as the Company's auditors for the fiscal year ending
December 31, 1996.
FOR [X] AGAINST [X] ABSTAIN [X]
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 meeting. [X] Address Change Mark Here [X]
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:_________________________________________________ 1996
____________________________________________________________
Signature
____________________________________________________________
Signature if held jointly
Votes MUST be indicated (X) in Black or Blue ink. [X]
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
<PAGE>
[LOGO OF LYONDELL 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 Joseph M. Putz,
Debra L. Starnes and Russell S. Young and each of them, lawful attorney 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 Friday, May
3, 1996 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.
LYONDELL PETROCHEMICAL COMPANY
P.O. BOX 11244
NEW YORK, N.Y. 10203-0244
(Continued, and to be signed and dated, on reverse side.)
<PAGE>
[LOGO OF LYONDELL PETROCHEMICAL
COMPANY APPEARS HERE]
LYONDELL PETROCHEMICAL COMPANY
1221 McKinney Street, Suite 1600
Houston, Texas 77010
March 18, 1996
Dear Stockholder:
You are cordially invited to join us at the 1996 Annual Meeting of
Stockholders on Friday, May 3, 1996, 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 Company, followed by
a question and answer period. The official results of the voting at the meeting
will be sent to all stockholders as part of a subsequent stockholder report.
Sincerely yours,
[SIGNATURE APPEARS HERE]
Chairman of the Board and Chief Executive Officer
[SIGNATURE APPEARS HERE]
President and Chief Operating Officer
PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
[ ]
1. ELECTION OF DIRECTORS
FOR all nominees
listed below [X]
WITHHOLD AUTHORITY to vote
for all nominees listed below [X]
*EXCEPTIONS [X]
Nominees: William T. Butler, Curtis J. Crawford, Travis Engen, Bob G. Gower,
Stephen P. Hinchliffe, Jr., Dudley C. Mecum II, Dan F. Smith, Paul R. Staley
(INSTRUCTIONS: To withholding authority to vote for any individual nominee
mark the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions_____________________________________________________________________
2. Proposal to approve Restricted Stock Plan for Non-Employee Directors.
FOR [X] AGAINST [X] ABSTAIN [X]
3. Proposal to ratify the appointment of Coopers & Lybrand, independent
accountants, as the Company's auditors for the fiscal year ending
December 31, 1996.
FOR [X] AGAINST [X] ABSTAIN [X]
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 meeting. [X] Address Change Mark Here [X]
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:_________________________________________________ 1996
____________________________________________________________
Signature
____________________________________________________________
Signature if held jointly
Votes MUST be indicated (X) in Black or Blue ink. [X]
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
<PAGE>
[LOGO OF LYONDELL 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 State Street Bank, as
Trustee, lawful attorney and proxy 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 Friday, May 3, 1996 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.
LYONDELL PETROCHEMICAL COMPANY
P.O. BOX 11238
NEW YORK, N.Y. 10203-0238
(Continued, and to be signed and dated, on reverse side.)
