Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
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[ ] Preliminary Proxy Statement
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by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Millennium Chemicals Inc.
........................................................................
(Name of Registrant as Specified In Its Charter)
........................................................................
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on which the filing fee is calculated and state how it was
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.............................................................
[MILLENNIUM LOGO] [MILLENNIUM LETTERHEAD]
April 17, 2003
Dear Fellow Shareholder:
It is my pleasure to invite you to attend the 2003 Annual Meeting of
Shareholders of Millennium Chemicals Inc. This meeting will be held on Friday,
May 23, 2003 at The Parker Meridien in New York City, beginning at 10:00 a.m.
The notice of Annual Meeting and the Proxy Statement accompanying this letter
describe the formal business to be acted upon by the shareholders at the
meeting. The meeting will also feature a report on Millennium Chemicals'
performance and our prospects for the future.
Whether or not you plan to attend the meeting in person, please read the
proxy statement and vote your shares. If you are a registered shareholder (a
shareholder whose shares are registered in his or her own name), you may vote by
telephone or through the Internet. The instructions accompanying your proxy card
describe how to use these convenient services. If you hold your shares through a
broker, bank or other holder of record, you may vote as specified in the
instructions accompanying your proxy card. Of course, if you prefer, you may
vote by mail by completing your proxy card and returning it in the enclosed
postage-paid envelope. If you attend the meeting and wish to vote your shares in
person, you may revoke your proxy.
I look forward to seeing you at the Annual Meeting.
William M. Landuyt
WILLIAM M. LANDUYT
Chairman and
Chief Executive Officer
Web Address http://www.millenniumchem.com
[MILLENNIUM LOGO]
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2003
-------------------
Notice is hereby given that the 2003 Annual Meeting of Shareholders (the
'Annual Meeting') of Millennium Chemicals Inc., a Delaware corporation (the
'Company'), will be held at The Parker Meridien, 118 West 57th Street, New York,
NY 10019 on Friday, May 23, 2003, beginning at 10:00 a.m., Eastern Daylight
Time, for the following purposes:
1. To elect three Directors to serve until the Annual Meeting of
Shareholders in 2006 and until their successors are duly elected and
qualified;
2. To ratify the election of The Honorable Mary K. Bush and Mr. Daniel
S. Van Riper as Directors;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for 2003; and
4. To consider any other matter that may properly come before the Annual
Meeting.
Only holders of record of the Company's Common Stock, par value $0.01 per
share, at the close of business on April 8, 2003 will be entitled to notice of,
and to vote at, the Annual Meeting and any postponement or adjournment thereof.
By Order of the Board of Directors,
C. WILLIAM CARMEAN
Senior Vice President, General Counsel
and Secretary
April 17, 2003
-------------------------------------------------------------------------------
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY TELEPHONE OR THROUGH THE
INTERNET, OR COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. THANK YOU
FOR YOUR PROMPT ATTENTION TO THIS MATTER.
-------------------------------------------------------------------------------
[MILLENNIUM LOGO]
--------------------
PROXY STATEMENT
--------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Millennium Chemicals Inc., a Delaware corporation (the
'Company'), of proxies for use at the Annual Meeting of Shareholders of the
Company (the 'Annual Meeting'), to be held at The Parker Meridien, 118 West 57th
Street, New York, NY 10019 on Friday, May 23, 2003, at 10:00 a.m., Eastern
Daylight Time, and at any and all postponements or adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting.
This Proxy Statement, the Notice of Annual Meeting and the accompanying
proxy card are first being mailed to shareholders on or about April 21, 2003.
VOTING
Only shareholders of record at the close of business on April 8, 2003 (the
'Record Date') are entitled to notice of the Annual Meeting and to vote the
shares of common stock, par value $0.01 per share, of the Company (the 'Common
Stock') held by them on that date at the Annual Meeting or any postponement or
adjournment thereof. Each outstanding share entitles its holder to cast one vote
on each matter to be voted upon at the Annual Meeting. As of the Record Date,
63,458,736 shares of Common Stock were outstanding, not including 14,437,850
shares held by the Company and its subsidiaries and certain Company trusts,
which are not entitled to be voted.
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding on the Record Date and
entitled to be voted will constitute a quorum. The affirmative vote of a
plurality of the votes cast at the Annual Meeting, in person or by proxy, is
required for the election of Directors. The ratification of the election of The
Honorable Mary K. Bush and Mr. Daniel S. Van Riper as Directors, the
ratification of PricewaterhouseCoopers LLP as the Company's independent
accountants for the year 2003, and approval of any other proposal to be
considered at the Annual Meeting will require the affirmative vote of the
holders of a majority of the votes cast at the Annual Meeting, in person or by
proxy. Both abstentions and broker non-votes are counted only for purposes of
determining whether a quorum is present.
Registered shareholders (shareholders whose shares are registered in their
own names) may vote by telephone or through the Internet by following the
instructions included with their proxy cards. Shareholders who hold their shares
in 'street name' (i.e., through a broker, bank or other holder of record) may
vote by telephone or through the Internet if their proxy card includes
instructions regarding telephone or Internet voting. 'Street name' shareholders
who have questions regarding voting by telephone or through the Internet should
contact their broker, bank or other holder of record. Shareholders who vote by
telephone or through the Internet should not return their proxy cards.
A proxy may be revoked by a shareholder at any time before it is voted by
(1) giving notice of the revocation in writing to the Company's Secretary at 230
Half Mile Road, Red Bank, New Jersey 07701, Attn: C. William Carmean;
(2) submitting another valid proxy by mail, telephone or over the Internet that
is later dated and, if mailed, is properly signed; or, (3) voting in person at
the meeting.
Participants in the Millennium Chemicals Savings and Investment Plan;
Lyondell Chemical Company 401(k) Investment and Savings Plan; the Equistar
Chemicals, LP Savings and Investment Plan; and, the Equistar Chemicals, LP
Savings and Investment Plan for Represented Employees vote shares of Common
Stock allocated to them under such plans by instructing the relevant plan
trustee by mail, through the Internet or by telephone, as indicated on the proxy
card mailed to such participants. Such instructions must be received by such
trustees prior to 3:00 p.m. (Eastern Daylight Time) on May 21, 2003. If proper
instructions are not received by such time, the relevant plan trustee will vote
the shares in the same proportion that it votes shares for which it received
timely instructions.
1
MULTIPLE COPIES OF ANNUAL REPORT TO SHAREHOLDERS
If you received more than one copy of the Company's 2002 Annual Report to
Shareholders, you can reduce the number of Annual Reports you receive in the
future, and thus save the Company the cost of producing and mailing these
reports. We will discontinue the mailing of reports on the accounts you select
if you mark the designated box on the appropriate proxy card(s), or follow the
instructions provided when you vote over the Internet. Alternatively, you may
log on to the Internet, go to the web site: HTTP://WWW.AMSTOCK.COM and follow
the instructions.
At least one account at your address must continue to receive Annual
Reports, unless you elect to view future Annual Reports and Proxy Statements
over the Internet, as described under 'Electronic Access to Proxy Materials and
the Annual Report,' below. Mailing of dividends, proxy statements, proxy cards
and special notices will not be affected by your election to discontinue
duplicate mailings of the Annual Reports. To resume the mailing of Annual
Reports for an account, you may contact the Company's Investor Relations
Department at the address on page 22 of this Proxy Statement. If you own shares
through a bank, broker or other nominee and receive more than one Company Annual
Report, please contact that entity to eliminate duplicate mailings.
ELECTRONIC ACCESS TO PROXY MATERIALS AND THE ANNUAL REPORT
This Proxy Statement and the 2002 Annual Report to Shareholders are
available on the Company's Internet site at HTTP://WWW.MILLENNIUMCHEM.COM. Most
shareholders can elect to view future Proxy Statements and Annual Reports over
the Internet instead of receiving paper copies in the mail. If you choose to
receive future documents electronically, you will save the Company the cost of
producing and mailing these documents.
If you are a shareholder of record and wish to vote your shares over the
Internet, you can choose to receive documents electronically by logging onto the
Company's Internet site at HTTP://WWW.MILLENNIUMCHEM.COM and following the
instructions. Alternatively, you can choose to receive documents electronically
by logging on to the Internet, going to the website HTTP://WWW.AMSTOCK.COM and
following the instructions.
If you choose to view future Proxy Statements and Annual Reports over the
Internet, you will receive an e-mail next year with instructions containing the
Internet address of those materials and the Internet address to vote your shares
online. You will not receive a paper proxy card in the mail if you elect to
receive proxy materials and Annual Reports electronically. Your choice will
remain in effect until you advise us otherwise by contacting the Company's
Investor Relations Department at the address on page 22 of this Proxy Statement.
You do not have to elect Internet access each year. Mailing of dividends and
special notices will not be affected by your election to view Proxy Statements
and Annual Reports over the Internet.
If you hold your shares through a bank, broker or other nominee, please
refer to the information provided by that entity for instructions on how to
elect to view future Proxy Statements and Annual Reports over the Internet.
Most shareholders who hold their shares through a bank, broker or other
holder of record and who elect electronic access will receive an e-mail next
year containing the Internet address to use to access the Company's Proxy
Statement and Annual Report and to vote their shares.
2
OWNERSHIP OF COMMON STOCK
CERTAIN BENEFICIAL OWNERS
The following are the only persons known by the Company as of April 17, 2003
to own beneficially more than 5% of the outstanding Common Stock as of the
Record Date, not including shares held by the Company and its subsidiaries and
certain Company trusts, which are not entitled to be voted.
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
------------------- ------ --------
Barrow, Hanley, Mewhinney & Strauss, Inc. ................. 10,603,303(1) 16.7
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, TX 75204-2429
FMR Corp. ................................................. 9,012,282(2) 14.2
82 Devonshire Street
Boston, MA 02109
Capital Research and Management Company .................... 6,825,000(3) 10.8
333 South Hope Street
Los Angeles, CA 90071
AXA Financial, Inc. ....................................... 6,263,211(4) 9.9
1290 Avenue of the Americas
New York, NY 10104
Sterling Capital Management LLC ............................ 4,319,840(5) 6.8
4064 Colony Road, Suite 300
Charlotte, NC 28211
---------
(1) Based on a Schedule 13G filed with the Securities Exchange Commission (the
'SEC'), dated February 8, 2003, Barrow, Hanley, Mewhinney & Strauss, Inc.
('Barrow Hanley') has sole voting power over 1,141,348 shares, shared
voting power over 9,461,955 shares and sole dispositive power over
10,603,303 shares. Vanguard Windsor Funds-Windsor II Fund ('Vanguard')
filed a Schedule 13G with the SEC, dated February 13, 2003. Vanguard
disclosed in its Schedule 13G that it has sole voting and shared
dispositive power over 7,368,142 shares. Vanguard and Barrow Hanley have
confirmed in writing to the Company that the 7,368,142 shares disclosed
in Vanguard's Schedule 13G as beneficially owned by Vanguard are managed
by Barrow Hanley and are included in the 10,603,303 shares disclosed as
beneficially owned by Barrow Hanley in its Schedule 13G.
(2) Based on a Schedule 13G filed with the SEC, dated February 14, 2003, FMR
Corp. and its affiliates have sole voting power over 3,585,125 shares and
sole dispositive power over 9,012,282 shares.
(3) Based on a Schedule 13G filed with the SEC, dated February 10, 2003,
Capital Research and Management Company has no voting power, and sole
dispositive power over 6,825,000 shares.
(4) Based on a Schedule 13G filed with the SEC, dated February 12, 2003, AXA
Financial, Inc. and its affiliates have sole voting power over 3,532,580
shares, shared voting power over 713,856 shares, and sole dispositive
power over 6,263,211 shares.
(5) Based on a Schedule 13G filed with the SEC, dated February 4, 2003,
Sterling Capital Management LLC and its affiliates have shared voting and
shared dispositive power over 4,319,840 shares.
3
DIRECTORS AND EXECUTIVE OFFICERS
The following table, which is based upon information provided to the
Company, sets forth the beneficial ownership of Common Stock, as of March 17,
2003, by each of the Company's Directors and executive officers and all such
Directors and executive officers as a group.
NUMBER OF SHARES % OF
BENEFICIALLY SHARES
NAME OWNED OUTSTANDING
---- ----- -----------
William M. Landuyt..................................... 354,762(a) *
Robert E. Lee.......................................... 242,798(b) *
Lord Baker............................................. 9,257(c) *
Mary K. Bush........................................... 1,554(c) *
Worley H. Clark, Jr. .................................. 8,686(c) *
Irvin F. Diamond....................................... 1,554(c) *
Martin D. Ginsburg..................................... 8,686(c) *
Lord Glenarthur........................................ 8,686(c) *
David J. P. Meachin.................................... 4,386(c) *
Martin G. Taylor....................................... 17,257(c) *
Daniel S. Van Riper.................................... 4,554(c) *
C. William Carmean..................................... 23,258(d) *
Marie S. Dreher........................................ 31,085(e) *
Timothy E. Dowdle...................................... 49,093(f) *
Peter P. Hanik......................................... 96,650(g) *
John E. Lushefski...................................... 96,127(h) *
Myra J. Perkinson...................................... 1,755(i) *
David L. Vercollone.................................... 49,250(j) *
All Directors and executive officers as a group
(18 persons)......................................... 1,009,398 1.6%
---------
* Represents less than 1%.
(a) Includes: (w) 17,583 shares of earned but unvested performance-based stock
awarded under the Company's Long Term Stock Incentive Plan (the '1996
Incentive Plan'), which may vest in equal installments on December 31, 2003
and 2004; (x) 15,271 shares of Common Stock held in the Company's 401(k)
plan for Mr. Landuyt's account; (y) 19,758 shares of Common Stock held for
Mr. Landuyt's account in the Company's Supplemental Savings and Investment
Plan (the 'Supplemental Savings Plan'); and (z) 175,866 shares of Common
Stock held in the Company's Salary and Bonus Deferral Plan. Also includes
2,890 shares of Common Stock held in two trusts for Mr. Landuyt's children,
as to which Mr. Landuyt disclaims beneficial ownership, and 12,300 shares
of Common Stock owned by Mr. Landuyt's wife, as to which Mr. Landuyt
disclaims beneficial ownership. Does not include options granted under the
Company's Omnibus Incentive Compensation Plan (the 'Omnibus Incentive
Plan').
(b) Includes: (w) 12,309 shares of earned but unvested performance-based stock
awarded under the 1996 Incentive Plan, which may vest in equal
installments on December 31, 2003 and 2004; (x) 14,888 shares of Common
Stock held in the Company's 401(k) plan for Mr. Lee's account; (y) 10,819
shares of Common Stock held for Mr. Lee's account in the Supplemental
Savings Plan; and (z) 80,595 shares of Common Stock held in the Company's
Salary and Bonus Deferral Plan. Also includes 9 shares owned directly by
members of Mr. Lee's immediate family, as to which Mr. Lee disclaims
beneficial ownership. Does not include options granted under the Omnibus
Incentive Plan.
(c) Messrs. Diamond and Van Riper and Ms. Bush each received 1,554 shares of
Common Stock under the 1996 Incentive Plan in December 2002 upon their
election as new members of the Board. Each outside director, other than
the three Directors elected in December 2002, received 2,024 shares on
October 1, 2002; 1,907 shares on October 1, 2001; 1,350 shares on October
1, 2000; 978 shares on October 1, 1999; 1,074 shares on October 1, 1998;
682 shares on October 1, 1997;
(footnotes continued on next page)
4
(footnotes continued from previous page)
and, 671 shares on October 30, 1996 under the 1996 Incentive Plan, in each
case in partial payment of annual Directors' fees.
(d) Includes: (w) 704 shares of earned but unvested performance-based stock
awarded under the 1996 Incentive Plan, which may vest in equal installments
on December 31, 2003 and 2004; (x) 6,259 shares of Common Stock held in
the Company's 401(k) plan for Mr. Carmean's account; (y) 1,693 shares of
Common Stock held for Mr. Carmean's account in the Supplemental Savings
Plan; and (z) 4,022 shares of Common Stock held in the Company's Salary
and Bonus Deferral Plan. Does not include options granted under the 1996
Incentive Plan or the Omnibus Incentive Plan.
(e) Includes: (w) 1,759 shares of earned but unvested performance-based stock
awarded under the 1996 Incentive Plan, which may vest in equal installments
on December 31, 2003 and 2004; (x) 5,545 shares of Common Stock held in the
Company's 401(k) plan for Ms. Dreher's account; and (y) 2,399 shares of
Common Stock held for Ms. Dreher's account in the Supplemental Savings
Plan. Does not include options granted under the Omnibus Incentive Plan.
(f) Includes: (w) 916 shares of earned but unvested
performance-based stock awarded under the 1996 Incentive
Plan, which may vest in equal installments on December 31,
2003 and 2004; (x) 9,481 shares of Common Stock held in the
Company's 401(k) plan for Mr. Dowdle's account; (y) 2,791
shares of Common Stock held for Mr. Dowdle's account in the
Supplemental Savings Plan; and (z) 25,217 shares of Common
Stock held in the Company's Salary and Bonus Deferral Plan.
Does not include options granted under the 1996 Incentive
Plan or the Omnibus Incentive Plan.
(g) Includes: (w) 9,809 shares of earned but unvested
performance-based stock awarded under the 1996 Incentive
Plan, which may vest in equal installments on December 31,
2003 and 2004; (x) 12,674 shares of Common Stock held in the
Company's 401(k) plan for Mr. Hanik's account; (y) 4,458
shares of Common Stock held for Mr. Hanik's account in the
Supplemental Savings Plan; and (z) 33,110 shares of Common
Stock held in the Company's Salary and Bonus Deferral Plan.
Does not include options granted under the Omnibus Incentive
Plan.
(h) Includes: (w) 8,792 shares of earned but unvested
performance-based stock awarded under the 1996 Incentive
Plan, which may vest in equal installments on December 31,
2003 and 2004; (x) 19,503 shares of Common Stock held in the
Company's 401(k) plan for Mr. Lushefski's account;
(y) 9,120 shares of Common Stock held for Mr. Lushefski's
account in the Supplemental Savings Plan; and (z) 17,035
shares of Common Stock held in the Company's Salary and
Bonus Deferral Plan. Does not include options granted under
the Omnibus Incentive Plan.
(i) These shares are held in the Company's 401(k) plan for Mrs.
Perkinson's account.
(j) Includes: (w) 917 shares of earned but unvested
performance-based stock awarded under the 1996 Incentive
Plan, which may vest in equal installments on December 31,
2003 and 2004; (x) 15,800 shares of Common Stock held in
the Company's 401(k) plan for Mr. Vercollone's account; and
(y) 3,655 shares of Common Stock held for Mr. Vercollone's
account in the Supplemental Savings Plan. Does not include
options granted under the Omnibus Incentive Plan.
5
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the performance of the Company's Common Stock
with the performance of the S&P 500 Index and the Standard & Poor's Chemical
Composite Index (the 'S&P Chemical Index') over the period from December 31,
1997 through December 31, 2002, the end of the Company's most recent fiscal
year. The graph assumes that $100 was invested on December 31, 1997 in each of
the Company's Common Stock, the Standard & Poor's 500 Stock Index and the S&P
Chemical Index, and that all dividends were reinvested. The stock performance
shown in the graph is included in response to the SEC's requirements and is not
intended to forecast or be indicative of future performance.
[PERFORMANCE GRAPH]
---------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2002
---------------------------------------------------------------------------------------------------------------------------
Millennium Chemicals Inc. $100 $ 87 $ 88 $ 84 $ 61 $48
---------------------------------------------------------------------------------------------------------------------------
S&P'c'500 Index $100 $129 $156 $141 $125 $97
---------------------------------------------------------------------------------------------------------------------------
S&P'c'500 Chemicals Index $100 $ 94 $109 $100 $ 98 $99
---------------------------------------------------------------------------------------------------------------------------
CORPORATE GOVERNANCE
The Company has been publicly owned since its demerger (i.e., spin-off) from
Hanson PLC ('Hanson'), a company incorporated in the United Kingdom, on October
1, 1996 (the 'Demerger'). Hanson effected the Demerger by paying to its
shareholders a dividend consisting of all of the then-outstanding shares of
Common Stock.
The Company's Corporate Governance Guidelines set forth the Company's
philosophy and guidelines regarding corporate governance, including the roles
and responsibilities of the Company's Board of Directors, Board Committees and
management; Director qualification standards; performance evaluations of the
Board and management; the standards of business conduct of Directors, officers
and employees; and the procedures for reporting ethical and/or accounting
concerns to the Company's Board and management.
The Company's Policy on the Independence of Directors requires a majority of
the members of the Board of Directors to be independent, non-employee Directors.
Under this Policy, the Company has adopted the standards regarding independence
of Directors proposed by the New York Stock Exchange on August 16, 2002, as
amended on March 12, 2003 (the 'New York Stock Exchange's proposed independence
standards'). The Board has determined that all non-employee Directors are
independent Directors other than Professor Ginsburg. Professor Ginsburg, who
will be retiring from the Company's Board at the 2003 Annual Meeting, is of
counsel to the law firm of Fried, Frank, Harris, Shriver & Jacobson, which has
provided legal services to the Company from time to time.
The Company's Corporate Governance Guidelines, the Policy on the
Independence of Directors, the Charters of the standing Committees of the Board
of Directors, the Code of Conduct, and the procedures for the confidential and
anonymous communication of ethical or accounting concerns are available on the
Company's website, HTTP://WWW.MILLENNIUMCHEM.COM.
6
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has four standing committees: a Nominations
and Governance Committee, an Audit Committee, a Compensation Committee, and an
Executive Committee. The following is a description of these Committees:
Nominations and Governance Committee. The Charter of the Nominations and
Governance Committee requires each member of the Committee to be an
independent Director under the New York Stock Exchange's proposed
independence standards. The Board has determined that all members of the
Committee satisfy this requirement. The Committee currently consists of Lord
Baker (Chair); Mary K. Bush; Worley H. Clark, Jr.; and Martin G. Taylor. The
Committee met three times in 2002.
The Nominations and Governance Committee is responsible for advising the
Board and management regarding the Company's overriding governance
philosophy. The Committee develops and periodically reviews the general
guidelines, policies and procedures to implement such philosophy, including
the Company's Corporate Governance Guidelines, the Policy on the
Independence of Directors and the Code of Conduct. The Committee also
advises the Board regarding the performance of the Board, its standing
Committees and individual Directors, and assists the Board in enhancing the
performance of the Board and the Company.
The Nominations and Governance Committee is responsible for identifying
and making recommendations to the Board regarding nominees for Director and
for the members and Chairs of the standing Committees of the Board. The
Committee considers the desirable balance of expertise and composition of
the Board, seeks out possible candidates to fill positions on the Board,
reviews the proposed slate of Directors to be elected by shareholders at
each Annual Meeting of Shareholders, and recommends to the Board the
inclusion of the slate in the Company's Proxy Statement. The Committee will
consider nominees recommended by shareholders. Such recommendations should
be submitted to the Secretary of the Company at least 60 days prior to the
date of the applicable Annual Meeting and include certain information as
required by the Company's by-laws.
In addition, in January 2003, the Public Affairs Committee was merged
with the Nominations and Governance Committee, which became responsible for
assisting the Board in fulfilling its oversight responsibilities in the
areas of social responsibility and corporate citizenship. The Public Affairs
Committee met three times in 2002.
Audit Committee. The Audit Committee's Charter requires that each member
of the Audit Committee be an independent Director under the New York Stock
Exchange's proposed independence standards. Committee members also must
satisfy the independence, experience and financial expertise requirements
for members of audit committees of the New York Stock Exchange and Section
10A of the Securities Exchange Act of 1934, as amended (the 'Exchange Act').
The Board of Directors has determined that the members of the Committee
satisfy such requirements. The Board has also determined that Messrs.
Diamond, Taylor and Van Riper qualify as 'audit committee financial experts'
under Section 10A of the Exchange Act. The Committee currently consists of
Lord Baker; Irvin F. Diamond; David J. P. Meachin; Martin G. Taylor (Chair);
and Daniel S. Van Riper, and met seven times in 2002.
The Audit Committee assists the Board of Directors in its oversight of
the integrity of the Company's financial information and system of internal
controls, the Company's compliance with legal and regulatory requirements,
the independence and qualifications of the Company's independent
accountants, and the performance of the Company's internal audit function
and independent accountants. The Committee is responsible for oversight of
the work performed by the independent accountants. The Company's independent
accounting firm reports directly to the Committee. The Committee has sole
authority to appoint or replace the Company's independent accountants,
subject, if applicable, to shareholder ratification. The Committee approves
all audit engagement fees and terms, and preapproves all permitted non-audit
engagements with the Company's independent accountants. The Committee
reviews with representatives of the independent accountants the scope of the
audit of the Company's financial statements, results of
7
audits, audit costs, recommendations with respect to internal controls and
financial matters, and the independence of such independent accountants. It
periodically meets with the independent accountants, and separately with the
Company's internal auditor, in each case without the Company's officers
present. It also periodically meets with and receives reports from the
Company's principal internal audit, financial and accounting officers. The
Report of the Audit Committee is set forth below.
Compensation Committee. All members of the Compensation Committee are
required by the Compensation Committee's Charter to be independent Directors
under the New York Stock Exchange's proposed independence standards,
'non-employee directors' within the meaning of Rule 16b-3 under the Exchange
Act, and 'outside directors' within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the 'Code'). The Board of
Directors has determined that each member of the Committee satisfies all
such requirements. The Committee currently consists of Worley H. Clark, Jr.
(Chair); Lord Glenarthur; David J. P. Meachin; and Daniel S. Van Riper, and
met four times in 2002.
The Compensation Committee is responsible for discharging the Board's
responsibilities relating to the compensation of the Company's executives.
The Committee develops and reviews periodically the Company's compensation
policies and programs to ensure that they create a direct relationship
between compensation levels, corporate performance and shareholder return.
The Committee reviews and approves corporate goals and objectives relevant
to the compensation of each executive officer, reviews the performance of
the executive officers against such goals and objectives, and establishes
their compensation based on this evaluation. The Committee makes
recommendations to the Board with respect to the Company's compensation
philosophy and its incentive compensation policies and plans, and reviews
and approves for each officer the annual base salary, annual bonus targets
and awards, long-term incentives, and Stock Ownership Guidelines.
Executive Committee. The Executive Committee has the authority to act
for the full Board between regularly scheduled Board meetings with respect
to such matters as may be lawfully delegated by the Board under Delaware
law. The Committee's members currently are Worley H. Clark, Jr.; Martin D.
Ginsburg; David J.P. Meachin; and William M. Landuyt (Chairman). The
Executive Committee met once in 2002.
AUDIT COMMITTEE'S REPORT
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
financial information provided to shareholders and others, the system of
internal controls established by management, and the audit process.
The Board of Directors has adopted a written charter for the Audit
Committee. In accordance with this charter, the Audit Committee has met with
management, the Company's Director of Internal Audit and the Company's
independent auditors, and has: (i) reviewed and discussed the consolidated
financial statements with management and the independent accountants;
(ii) discussed with the independent accountants the matters required to be
discussed by Statement of Auditing Standards No. 61 'Communication with Audit
Committees;' and, (iii) received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), and has discussed with the independent accountant the
independent accountant's independence. Management has represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors has
approved, that the audited consolidated financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002, for
filing with the SEC. The Audit Committee also has appointed
PricewaterhouseCoopers LLP as the Company's independent accountants. The Audit
Committee and
8
the Board of Directors recommend that the shareholders vote 'FOR' ratification
of the appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants.*
March 19, 2003 Respectfully submitted,
MARTIN G. TAYLOR, Chair
LORD BAKER
IRVIN F. DIAMOND
DAVID J. P. MEACHIN
DANIEL S. VAN RIPER
---------
* In accordance with the rules of the SEC, the foregoing
information, which is required by paragraphs (a) and (b) of
Item 306 of Regulation S-K of the Exchange Act, shall not be
deemed to be 'soliciting material' or to be 'filed' with the
SEC or subject to Regulation 14A of the Exchange Act (except
as provided in Item 306), or to the liabilities of Section
18 of the Exchange Act, except to the extent that the
Company specifically requests that the information be
treated as soliciting material or specifically incorporates
it by reference into a document filed under the Securities
Act of 1933, as amended, or the Exchange Act.
DIRECTORS' REMUNERATION AND ATTENDANCE AT MEETINGS
Directors who are also full-time employees of the Company do not receive
additional compensation for their services as Directors. Non-employee Directors
have received a cash retainer of $10,000 per quarter since October 1, 1998. In
addition, commencing January 13, 2003, Directors attending special meetings of
the Board or any Committee thereof not held in conjunction with a regularly
scheduled meeting of the Board will receive $1,000 for each such meeting
attended.
Pursuant to the 1996 Incentive Plan, each non-employee Director
automatically was granted 2,024 shares of Common Stock on October 1, 2002, and
each Director elected to the Board for the first time in December 2002
automatically was granted 1,554 shares of Common Stock. The number of shares was
determined by dividing $20,000 by the closing price on the business day
immediately preceding the grant date, prorated in the case of the newly elected
directors to reflect their partial year of service. The Company's 1996 Incentive
Plan currently provides that each non-employee Director serving on October 1,
2003, and each October 1 thereafter, automatically will be granted on each such
date the number of shares of Common Stock determined by dividing one-half of the
annual cash retainer in effect on such date by the closing price of the Common
Stock on the business day immediately preceding such date. Non-employee
Directors are reimbursed for all reasonable expenses incurred in connection with
Board and Committee meetings. The Company also pays the premiums on directors'
and officers' liability and travel accident insurance policies.
The Board held five meetings in 2002. All Directors attended every meeting
held during 2002 of the Board and the Committees on which they served.
BUSINESS TO BE ACTED UPON BY THE SHAREHOLDERS
ITEM 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with the
terms of office of the respective classes ending in successive years. The terms
of Lord Baker and Messrs. Diamond and Meachin will expire at the Annual Meeting,
and they have been nominated by the Board of Directors for re-election by the
shareholders at the Annual Meeting, to serve until the Annual Meeting of
Shareholders in 2006 and until their successors are duly elected and qualified.
The terms of Lord Glenarthur and Messrs. Clark and Lee will expire at the Annual
Meeting in 2004, and the terms of Ms. Bush and Messrs. Landuyt and Van Riper
will expire at the Annual Meeting in 2005, and in each case upon the election
and qualification of their successors. As previously announced, Professor
Ginsburg and Mr. Taylor will retire at the Annual Meeting. The Board currently
intends to reduce the size of the
9
Board from eleven to nine members when Professor Ginsburg and Mr. Taylor retire.
Set forth below is biographical information concerning each nominee for
re-election as a Director at this Annual Meeting, as well as each member of the
Board of Directors who is continuing in office. Each nominee has consented to
serve as a Director if elected.
All shares of Common Stock represented by valid proxies received pursuant to
this solicitation and not revoked before they are exercised will be voted in the
manner specified therein. If no indication is made as to how shares should be
voted, the shares represented by a properly completed proxy will be voted for
the election of the three Directors identified below. If any nominee should
refuse or be unable to serve (which is not anticipated), the persons designated
as proxies will cast votes for the remaining nominees and for such other person
as designated by the Board of Directors upon the recommendation of the
Nominations and Governance Committee, unless the Board of Directors reduces the
number of Directors.
THE THREE NOMINEES HAVE BEEN RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS
BY THE NOMINATIONS AND GOVERNANCE COMMITTEE OF THE BOARD OF DIRECTORS. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR' THE ELECTION OF THE
THREE NOMINEES IDENTIFIED BELOW.
NOMINEES FOR ELECTION AS DIRECTORS
TERM EXPIRING AT THE 2006 ANNUAL MEETING
Lord Baker, 68, has served as a Director of the Company since the Demerger.
Lord Baker has been a Member of the House of Lords in the U.K. since 1997. He
served as a member of Parliament in the U.K. between 1968 and 1997, as U.K.
Secretary of State for the Environment from 1985 to 1986, as U.K. Secretary of
State for Education and Science from 1986 to 1989, as Chairman of the U.K.
Conservative Party from 1989 to 1990 and as U.K. Secretary of State for the Home
Office from 1990 to 1992. He is Chairman of Northern Edge Ltd., Business Serve
Plc and Belmont Press (London) Ltd. He is a member of the Board of Directors of
Hanson, Stanley Leisure plc, Monstermob Ltd., and Collaboration Technology Ltd.,
and is an adviser to Cross Border Enterprises, L.L.C. He also is the President
of the Royal London Society for the Blind.
Mr. Diamond, 61, has served as a Director of the Company since December
2002. He is a Principal of REDW Business & Financial Resources, LLC, a certified
public accounting firm. He is a member of the Board of Directors of Cooper's
Inc.; Healthcare Horizons, Inc. Cimarron Health Plan; and Amerinst Insurance
Group Ltd.; and a member of the Advisory Board of Directors of First National
Bank of Santa Fe. Mr. Diamond is a past officer and Director of the American
Institute of Certified Public Accountants and past President of the New Mexico
Society of Public Accountants.
Mr. Meachin, 62, has served as a Director of the Company since the Demerger.
Mr. Meachin has been Chairman, Chief Executive and founder of Cross Border
Enterprises, L.L.C., a private international merchant banking firm, since its
formation in 1991. He was a Managing Director in the Investment Banking Division
of Merrill Lynch & Co., Inc. from 1981 to 1991. Mr. Meachin is Vice Chairman of
the University of Cape Town Fund in New York and a Director and past Chairman of
the British American Educational Foundation.
DIRECTORS CONTINUING IN OFFICE
TERM CONTINUES UNTIL THE 2004 ANNUAL MEETING
Lord Glenarthur, 58, has served as a Director of the Company since the
Demerger. He was an executive of Hanson between October 1989 and the Demerger,
and was Deputy Chairman of Hanson Pacific Limited between March 1994 and
February 1998. Lord Glenarthur has been a member of the House of Lords in the
U.K. since 1977. He served as the U.K. Parliamentary Under-Secretary of State at
the Department of Health and Social Security from 1983 to 1985 and at the U.K.
Home Office from 1985 to 1986, as Minister of State for Scotland from 1986 to
1987, and as U.K. Minister of State for Foreign and Commonwealth Affairs from
1987 to 1989. He is Chairman of the British Helicopter Advisory Board, the
European Helicopter Association and the International Federation of Helicopter
Associations and a Council Member of The Air League in the U.K. He is a Director
of Whirlybird
10
Services Limited, The Medical Defence Union and Audax Trading Ltd.; a Governor
of Nuffield Nursing Homes Trust (trading as Nuffield Hospitals); and a
Commissioner of the Royal Hospital Chelsea.
Mr. Clark, 70, has served as a Director of the Company since the Demerger.
He was President and Chief Executive Officer of Nalco Chemical Company from 1982
until his retirement in 1994 and Chairman of Nalco Chemical Company from 1984
until such retirement. Mr. Clark is a member of the Board of Directors of
Merrill Lynch & Co., Inc.; Bethlehem Steel Corporation; Valero Energy
Corporation; Georgia-Pacific Corporation; Merchants Exchange and Exchange Cubed.
He is a Trustee of The Rush Presbyterian-St. Luke's Medical Center and the Field
Museum of Natural History.
Mr. Lee, 46, has served as Executive Vice President -- Growth and
Development of the Company since March 2001. He was President and Chief
Executive Officer of Millennium Inorganic Chemicals Inc., a subsidiary of the
Company, from June 1997 until March 2001. He served as President and Chief
Operating Officer of the Company from the Demerger until June 1997. He has
served as a Director of the Company since the Demerger. Mr. Lee was a Director
and the Senior Vice President and Chief Operating Officer of Hanson Industries
(which managed the United States operations of Hanson before the Demerger) from
June 1995 until the Demerger, an Associate Director of Hanson from 1992 until
the Demerger, Vice President and Chief Financial Officer of Hanson Industries
from 1992 to June 1995, Vice President and Treasurer of Hanson Industries from
1990 to 1992, and Treasurer of Hanson Industries from 1987 to 1990. He joined
Hanson Industries in 1982.
TERM CONTINUES UNTIL THE 2005 ANNUAL MEETING
The Honorable Mary K. Bush, 55, has served as a Director of the Company
since December 2002. Since 1991, she has been President of Bush International, a
firm that advises emerging market governments on banking systems and capital
markets and on strategies to support free enterprise. Ms. Bush is a member of
the Board of Directors of Mortgage Guaranty Insurance Corporation; The Pioneer
Family of Mutual Funds; R. J. Reynolds Tobacco Company; Brady Corporation and
Sallie Mae. Advisory Boards include ManTech International Corporation and
Washington Mutual Investors Fund.
Mr. Landuyt, 47, has served as Chairman of the Board and Chief Executive
Officer of the Company since the Demerger. He has served as President of the
Company since June 1997. Mr. Landuyt was a Director and the President and Chief
Executive Officer of Hanson Industries from June 1995 until the Demerger, a
Director of Hanson from 1992 until September 29, 1996, Finance Director of
Hanson from 1992 to May 1995, and Vice President and Chief Financial Officer of
Hanson Industries from 1988 to 1992. He joined Hanson Industries in 1983. Mr.
Landuyt is a member and a Co-Chairman of the Partnership Governance Committee of
Equistar Chemicals, LP ('Equistar'), in which the Company holds a 29.5%
interest. He is a member of the Board of Directors of Bethlehem Steel
Corporation.
Mr. Van Riper, 62, has served as a Director of the Company since December
2002. He currently serves as Special Advisor to Sealed Air Corporation, a
manufacturer of packaging materials and systems. From July 1998 to January 2002,
he was Senior Vice President and Chief Financial Officer of Sealed Air
Corporation. Prior thereto, he was a Partner serving in leadership positions at
KPMG LLP, an accounting and tax firm. He is a member of the Board of Directors
of New Brunswick Scientific Co., Inc; Globecomm Systems Inc.; and DOV
Pharmaceutical, Inc. Mr. Van Riper is a member of the Dean's Board of Advisors
for Rutgers Business School.
ITEM 2 -- RATIFICATION OF APPOINTMENT OF DIRECTORS
In recognition of the planned retirement of Mr. Taylor and Professor
Ginsburg at this Annual Meeting and to ensure that shareholders continue to be
represented by experienced and knowledgeable Directors, the Board of Directors
expanded the Board from eight to eleven members in December 2002. The Board
elected Mr. Diamond to serve in the class of Directors expiring at this Annual
Meeting and Ms. Bush and Mr. Van Riper to serve in the class expiring at the
2005 Annual Meeting. Pursuant to Item 1 above, Mr. Diamond has been nominated,
by the Board, for election by the shareholders for a term expiring at the 2006
Annual Meeting. Pursuant to this Item 2, the Board of Directors is requesting
the shareholders to ratify the election of Ms. Bush and Mr. Van Riper as
11
Directors to serve until the 2005 Annual Meeting and until their successors are
duly elected and qualified. The Board is requesting the shareholders to ratify
such elections to ensure that the Company's shareholders support the Board's
decision to elect these new Directors. If the shareholders do not ratify such
elections, the Nominations and Governance Committee and the Board will consider
and determine an appropriate course of action. Ms. Bush and Mr. Van Riper plan
to be present at the Annual Meeting and to be available to meet shareholders and
respond to questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR' THE
RATIFICATION OF THE ELECTION OF MS. BUSH AND MR. VAN RIPER.
ITEM 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has appointed the firm of PricewaterhouseCoopers LLP as
independent accountants to examine and audit the Company's financial statements
for 2003. PricewaterhouseCoopers LLP has served as the Company's independent
accountants since the Demerger in 1996. If the shareholders do not ratify such
appointment, such appointment will be reconsidered by the Audit Committee.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to questions. See page 21 of this Proxy
Statement for information related to the services provided by
PricewaterhouseCoopers LLP during 2002.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THAT THE
SHAREHOLDERS VOTE 'FOR' RATIFICATION OF SUCH APPOINTMENT.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION OVERVIEW
The past two years have been among the most challenging years in the
chemical industry in decades. The Company's management anticipated these
difficulties and reorganized its wholly owned businesses in early 2001, cutting
costs and increasing its comparative profitability. The Company reduced S,D&A
expenses by 27% in 2001 and another 14% in 2002 -- saving $74 million in 2002 as
compared to the year 2000. Throughout this period, the Company reduced
manufacturing expenses while improving quality, reliability and safety. The
Company conserved cash by reducing capital expenditures in each of 2002 and 2001
compared to the prior year. In all significant areas in which the Company was
able to control costs and increase profitability, the Company's management and
employees took decisive steps.
Although the Company's financial results and share price reflect current
economic conditions as well as the performance of the Company's minority equity
interest in Equistar, management's early actions regarding its wholly owned
businesses have enabled the Company to weather the global economic slowdown and
to maintain the Company's dividend without a substantial increase in debt. Due
to the decisions and performance of the Company's management and employees over
the past two years, the Company is now positioned to benefit from lower
controllable costs and improved prices for its major products. The Company
believes that its executive compensation programs -- driven by annual financial
targets for the Company's wholly owned businesses, long-term incentives based on
performance targets and shareholder return, as well as rigorous stock ownership
guidelines for management -- focused the Company's employees to achieve these
results and aligned the Company's management with the interests of its
shareholders.
COMPENSATION POLICIES AND PRACTICE
The Compensation Committee is comprised entirely of independent,
non-employee Directors. The Committee is responsible for administering all
executive officer compensation programs and plans, including reviewing and
approving annually base salaries, annual bonuses, and long-term incentive
compensation. The Compensation Committee's policy is to provide strong, direct
links among
12
executive compensation, Company performance and shareholder value in order to
attract and retain highly qualified people. The elements of the Company's
compensation program include:
Base Salary. Base salaries are intended to provide annual cash
compensation consistent with each employee's position and contribution at or
near the median level for similar positions in comparable companies. As a
result of the Company's challenging business environment during 2002, at the
request of the Company's executive officers, the Compensation Committee did
not grant any salary increase in 2002 to Mr. Landuyt or any other officer
who was an executive officer in 2001.
Annual Incentive Bonus. The Company provides executives and key
employees the opportunity to receive cash bonuses based on the annual
performance of the Company's wholly owned businesses, as measured by
performance targets approved by the Compensation Committee at the beginning
of each year. The 2002 performance targets were based on Economic Value
Added, or EVA'r', performance measures that compare net operating profit
after cash taxes over the estimated total cost of capital employed.
Long-Term Incentive Compensation. The Company's Executive Long Term
Incentive awards focus senior executives on creating value over three-year
performance periods. One-half of the award is based initially on the
performance targets for the Company's wholly owned businesses, as discussed
above, which then is converted to the extent earned into Common Stock units
that may vest at the end of the three-year period. This half of the award
granted in 2000 for the 2000 to 2002 performance period was based on
performance in 2000, a good year for the Company, and then was converted at
$20.78 per share into Common Stock units that vested at the end of 2002.
The other half of the Executive Long Term Incentive award is based on
total shareholder return on the Common Stock over the three-year period
relative to the S&P Chemical Index. The Company's relative total shareholder
return for the 2000 to 2002 performance period resulted in an award equal to
25% of the maximum potential award. The Company's executive officers were
not granted any options or other equity-based awards in 2000.
To further link executive compensation with the long-term interests of
shareholders, the Company granted stock options to its senior executives at
the beginning of 2002, as set forth in the table on page 17.
Stock Ownership Guidelines. The Compensation Committee has approved
rigorous stock ownership guidelines for the Company's executive officers and
certain senior managers, who are expected to achieve targeted ownership
levels of Common Stock, exclusive of the value of Common Stock earned under
the 1996 Incentive Plan, ranging from a value of 75% of annual base salary
for Vice Presidents to 300% of annual base salary for Mr. Landuyt, the
Chairman and Chief Executive Officer.
The Compensation Committee seeks to ensure that the Company's executives are
compensated in a manner that is consistent with the Company's compensation
philosophy, that is competitive with comparable companies when target levels of
performance are achieved, and that is equitable within the Company. Accordingly,
the Company's incentive compensation will vary significantly depending on
results achieved against performance targets. The Compensation Committee reviews
the Company's executive compensation programs annually. The targeted levels of
compensation for the Company's executives are based in part on surveys conducted
by independent consultants of comparable companies including commodity,
intermediate and specialty chemical companies that compete with the Company for
executive talent. Although many of the companies selected for comparison are
included in the S&P Chemical Index, the Company competes for executive talent
with a broader group of companies than those in such index.
Tax Deductibility. The Company has reviewed the deductibility of
compensation under Section 162(m) of the Code, and expects to continue to do so
in the future. All annual bonuses, all performance-based stock awards, and all
Executive Long Term Incentive awards granted under the Omnibus Incentive Plan
are granted under stockholder-approved compensation plans and are earned based
on the achievement of performance targets determined by the Compensation
Committee. It is intended that these awards and all stock options qualify for
the 'performance-based compensation'
13
exception under Section 162(m) of the Code; however, the Company's policy is to
maximize long-term shareholder value, and tax deductibility is only one factor
considered in setting compensation.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Base Salary. As a result of the global economic slowdown and the Company's
difficult business environment at the beginning of 2002, Mr. Landuyt recommended
that he receive no salary increase in 2002. The Compensation Committee accepted
Mr. Landuyt's recommendation.
Annual Bonus. The Compensation Committee approved the 2002 annual bonus
performance targets in January 2002. As discussed above, the Company's annual
bonus targets for 2002 were based on the performance of the Company's wholly
owned businesses, over which the Company's management exercises direct control,
and not the Company's minority equity interest in Equistar.
When the Compensation Committee considered and approved the 2002 annual
bonus targets in January 2002, the global chemical industry was in recession and
the Company's financial performance reflected those challenging conditions. The
Compensation Committee took these economic factors into consideration when
setting the annual bonus targets for 2002.
Despite an extremely difficult operating environment in which titanium
dioxide and acetyls prices decreased significantly in 2002 from 2001, the
operating income of the Company's wholly owned businesses excluding
restructuring charges increased by $18 million in 2002 compared to 2001, which
resulted in achievement of 2002 performance targets. Based on the Company's
actual performance in 2002 against the targets approved by the Committee, the
Company's management would have been entitled to receive an annual bonus for
2002 equal to 1.00 times the target bonus. Accordingly, based on actual
performance in 2002 against these targets, Mr. Landuyt and Mr. Lee were entitled
to receive annual bonuses of $1,176,500 and $575,000, respectively. However, in
light of the Company's disappointing stock market performance and to emphasize
commitment to the alignment of interests between the Company's senior management
and its shareholders, the annual bonuses for Mr. Landuyt and Mr. Lee were
reduced to zero, and the annual bonuses for Messrs. Lushefski, Vercollone and
Dowdle and the other members of the Company's Operations Committee were reduced
by 50%.
The Compensation Committee is reviewing the process that the Company uses to
set performance targets for 2003 and beyond and expects to make changes in the
methodology employed.
Long-Term Incentive Awards. As discussed under 'Long-Term Incentive
Compensation,' above, as a result of the Company's performance in 2000 compared
to the performance targets approved by the Compensation Committee for the year
2000, Mr. Landuyt received an award under the Executive Long Term Incentive Plan
for the performance period January 1, 2000 through December 31, 2002, which was
converted into Common Stock at a price of $20.78 (the average price of a share
of Common Stock during the first ten trading days of 2000), of 26,423 shares of
Common Stock. Under the terms of the plan, these shares, plus accrued dividends,
vested on December 31, 2002. In addition, also as discussed above, based on the
terms of such plan and the Company's relative total shareholder performance
during such three-year performance period, Mr. Landuyt received $386,750.
On January 24, 2002, Mr. Landuyt received stock options under the Omnibus
Incentive Plan for 254,000 shares of Common Stock at an exercise price of
$12.24, the closing price of the Common Stock on the New York Stock Exchange on
that date.
Stock Ownership Guidelines. Under the Company's Stock Ownership Guidelines,
Mr. Landuyt has a target of owning Common Stock with a value equal to 300% of
his base salary (exclusive of the value of Common Stock awarded under the 1996
Incentive Plan). As of April 15, 2003, he had purchased (together with members
of his immediate family) 316,950 shares of Common Stock (including shares
purchased under the Salary and Bonus Deferral Plan, but excluding all Common
Stock earned under the 1996 Incentive Plan), with a market value equal to 427%
of his 2002 base salary.
The Compensation Committee believes that these incentive compensation
programs and Stock Ownership Guidelines create the desired mutuality of interest
between the Chief Executive Officer and the Company's shareholders, as the
ultimate reward to the Chief Executive Officer from these
14
programs and his significant personal investment in Common Stock, as required by
the Guidelines, will be based upon the success of the Company.
Respectfully submitted,
WORLEY H. CLARK, JR., Chairman
LORD GLENARTHUR
DAVID J. P. MEACHIN
DANIEL S. VAN RIPER
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation for 2002, 2001, and 2000 of the individuals who were the Company's
five most highly compensated executive officers in 2002, including Mr. Landuyt,
the Chief Executive Officer.
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------------------- -------------------------------------------
SHARES LTIP
NAME AND PRINCIPAL UNDERLYING PAYOUTS ALL OTHER
POSITION YEAR SALARY($)(1) BONUS($)(1) OPTIONS(#) ($)(2)(3) COMPENSATION($)(4)
-------- ---- ------------ ----------- ---------- --------- ------------------
William M. Landuyt ............. 2002 905,000 0 254,000 681,110 60,250
Chairman, President and Chief 2001 905,000 113,318 176,000 0 94,561
Executive Officer 2000 884,000 838,417 0 0 87,305
Robert E. Lee .................. 2002 575,000 0 90,000 512,355 46,455
Executive Vice President -- 2001 575,000 190,657 61,000 0 67,080
Growth and Development 2000 562,000 481,470 0 112,778 52,089
John E. Lushefski .............. 2002 380,000 171,000 50,000 193,370 35,260
Senior Vice President and 2001 380,000 31,277 34,000 0 47,205
Chief Financial Officer 2000 366,000 240,395 0 53,512 47,258
David L. Vercollone ............ 2002 300,000 135,000 36,000 138,883 22,192
Senior Vice President -- 2001 296,650 121,569 25,000 0 25,875
Commercial, Operational 2000 276,000 189,833 0 8,063 16,771
Excellence Businesses
Timothy E. Dowdle .............. 2002 283,000 127,350 36,000 120,540 20,876
Senior Vice President -- 2001 276,525 104,125 25,000 0 24,061
Manufacturing 2000 239,200 164,761 0 0 17,774
---------
(1) Mr. Landuyt elected to defer 5% of his salary in 2000 and
25% of his bonus in both 2001 and 2000 into Common Stock
under the Salary and Bonus Deferral Plan. Mr. Dowdle elected
to defer 25% of his bonus in 2000 into Common Stock under
this plan.
(2) Amounts shown as 'LTIP Payouts' in 2000 for Messrs. Lee,
Lushefski, and Vercollone represent payments in cash of the
third and final installment of awards credited in 1998 under
the Hanson Industries 1996 Long-Term Incentive Plan. Mr.
Landuyt was not entitled to receive benefits under this
plan.
(3) As described under 'Compensation Committee Report on
Executive Compensation -- Compensation Policies and
Practice -- Long-Term Incentive Compensation,' the LTIP
Payouts for 2002 consisted of a cash award, a share grant
(valued in the table above at the closing price of the
Common Stock on the New York Stock Exchange on December 31,
2002) and dividends accrued on such shares. In addition,
Messrs. Landuyt, Lee, Lushefski, Vercollone and Dowdle were
granted one-time performance-based stock awards and
time-vested restricted stock in 1996 and 1997 under the 1996
Incentive Plan. The table below shows the number of such
shares that vested in 2002, 2001 and 2000; the number and
value (at the closing price of the Common Stock on the New
(footnotes continued on next page)
15
(footnotes continued from previous page)
York Stock Exchange on December 31, 2002) of unvested
performance-based shares as of December 31, 2002; and the
number of performance-based shares that have been forfeited
to date.
LANDUYT LEE LUSHEFSKI VERCOLLONE DOWDLE
------- --- --------- ---------- ------
Vested in 2002................. 8,684 6,078 4,342 426 426
Vested in 2001................. 47,091 32,964 23,546 3,714 3,714
Vested in 2000................. 88,160 61,711 44,079 5,191 5,191
Unvested shares................ 17,583 12,309 8,792 917 917
Value of unvested shares....... $167,390 $117,182 $ 83,700 $ 8,730 $ 8,730
Forfeited to date.............. 249,195 174,437 124,598 22,606 22,606
Dividends accrue and are paid on vested stock awards from the date of grant
to the date shares are vested and distributed.
(4) The amounts shown in this column include the aggregate
matching contributions under the Company's 401(k) savings
plan, Supplementary Savings Plan, and Salary and Bonus
Deferral Plan for Mr. Landuyt of $45,074, $78,454, $71,528;
for Mr. Lee of $33,705, $53,858, $38,996; for Mr. Lushefski
of $17,757, $27,918, $25,579; for Mr. Vercollone of $18,221,
$22,117, $12,927; and for Mr. Dowdle of $16,671, $20,083,
$10,989, in each case in 2002, 2001 and 2000, respectively.
All such matching employer contributions have been invested
in Common Stock. The amounts shown in this column also
include the dollar value of insurance premiums paid by or on
behalf of the Company with respect to disability insurance
benefits, financial planning services and automobile usage
fees. Excluded are certain health, medical and other
non-cash benefits provided to the individuals named above
that are available generally to all salaried employees.
LONG-TERM INCENTIVE COMPENSATION AWARDS
Prior to 2001, the Company had not granted stock options to its executive
officers. It had granted only one-time performance-based and restricted stock
awards and, commencing in 2000, Executive Long Term Incentive awards. Based on
studies comparing the Company's long-term incentive compensation programs with
those of comparable companies, the Compensation Committee determined in January
2001 that, because the Company did not grant stock options to its senior
executives, the Company's long-term incentive compensation programs were not
consistent with the Company's compensation policies. Accordingly, the Executive
Long Term Incentive award opportunities were reduced substantially and stock
options were awarded for the first time to senior executives. These awards were
granted under the Omnibus Incentive Plan, which was approved by the Company's
shareholders at the 2001 Annual Meeting of Shareholders.
Executive Long Term Incentive Awards. The Compensation Committee granted
Messrs. Landuyt, Lee, Lushefski, Vercollone and Dowdle the following Executive
Long Term Incentive award opportunities for the three-year performance period
beginning January 1, 2002 and ending December 31, 2004. These awards are subject
to the achievement of performance-based targets and may be forfeited if the
executive's employment is terminated before the end of the performance period.
LONG-TERM INCENTIVE PLAN AWARDS IN 2002
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
OTHER PERIOD UNTIL PRICE-BASED PLANS
MATURATION OR ----------------------------------------
NAME PAYOUT(1) THRESHOLD($) TARGET($) MAXIMUM($)(2)
---- --------- ------------ --------- -------------
William M. Landuyt................ December 31, 2004 0 1,357,500 2,715,000
Robert E. Lee..................... December 31, 2004 0 431,250 862,500
John E. Lushefski................. December 31, 2004 0 228,000 456,000
David L. Vercollone............... December 31, 2004 0 180,000 360,000
Timothy E. Dowdle................. December 31, 2004 0 169,800 339,600
(footnotes on next page)
16
(footnotes from previous page)
(1) All awards granted in 2002 have a performance or vesting
period commencing January 1, 2002 and ending December 31,
2004. One-half of each of these awards is based on the
performance of the Company's wholly owned businesses in 2002
compared to performance targets approved by the Compensation
Committee in January 2002, and then converted into Common
Stock at a price of $12.906 (the average closing price of
the Common Stock during the first ten trading days of 2002).
The remaining half of the award is based on the total
shareholder return ('TSR') on the Common Stock during the
performance period compared to the TSR on the common stock
of the companies in the S&P Chemical Index (including
reinvested dividends).
(2) The maximum award for the portion of the award based on the
performance of the Company's wholly owned businesses for any
participant is 200% of the participant's target for such
portion, before conversion into Common Stock. The maximum
TSR-based award for any participant is 200% of the
participant's target TSR-based award.
Stock Option Awards. The Compensation Committee granted the following stock
option awards to Messrs. Landuyt, Lee, Lushefski, Vercollone and Dowdle on
January 24, 2002 under the Omnibus Incentive Plan.
OPTION GRANTS IN 2002(1)
PERCENT OF
TOTAL
OPTIONS
GRANTED
NUMBER TO ALL EXERCISE GRANT DATE
OF OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED IN 2002 PER SHARE ($) DATE VALUE ($) (2)
---- ------- ------- ------------- ---- -------------
William M. Landuyt................. 254,000 25.4 12.24 1/23/12 1,071,880
Robert E. Lee...................... 90,000 9.0 12.24 1/23/12 379,800
John E. Lushefski.................. 50,000 5.0 12.24 1/23/12 211,000
David L. Vercollone................ 36,000 3.6 12.24 1/23/12 151,920
Timothy E. Dowdle.................. 36,000 3.6 12.24 1/23/12 151,920
---------
(1) These stock option awards were granted on January 24, 2002
under the Omnibus Incentive Plan and have an exercise price
of $12.24, the closing price of the Common Stock on the New
York Stock Exchange on the date of grant. One third of each
award will become exercisable on each of the first, second
and third anniversaries of the date of grant.
(2) This table shows the hypothetical present value of these
options on the date of grant using the Black-Scholes model
in accordance with the rules of the SEC. The Company's use
of this model should not be construed as an endorsement of
its accuracy at valuing options. The ultimate value of the
options will depend on the performance of the Common Stock.
The actual value, if any, realized upon exercise of an
option will depend on the excess of the market value of the
Common Stock on the date the option is exercised over the
exercise price. The following assumptions were made for
purposes of calculating the original grant date present
value: an option term of ten years, volatility of 44.54%,
annual dividends of $0.54 per share, and a risk-free
interest rate of 5.04%.
No options were exercised during 2002 by any of the named executive
officers. The following table shows the number of shares of Common Stock
represented by outstanding options held by each of the named officers as of
December 31, 2002. The exercise prices of such options were $16.87 and $12.24,
greater than the closing price of the Common Stock on the New York Stock
Exchange on December 31, 2002.
17
UNEXERCISED OPTIONS AT DECEMBER 31, 2002
SHARES UNDERLYING
UNEXERCISED OPTIONS
HELD AT DECEMBER 31, 2002
---------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
William M. Landuyt......................................... 58,666 371,334
Robert E. Lee.............................................. 20,333 130,667
John E. Lushefski.......................................... 11,333 72,667
David L. Vercollone........................................ 8,333 52,667
Timothy E. Dowdle.......................................... 8,333 52,667
RETIREMENT PLANS
The following table set forth the annual benefits upon retirement at age 65,
without regard to statutory maximums, for various combinations of final average
earnings and lengths of service, which would be payable to the individuals named
in the Summary Compensation Table under the Company's qualified pension plan and
its supplemental retirement plans.
MILLENNIUM CHEMICALS INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN($)(2)
FINAL 5-YEAR ----------------------------------------------------------------------------------
AVERAGE EARNINGS($)(1) 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------------------- ------- -------- -------- -------- -------- -------- --------
$ 100,000........... 12,500 25,000 37,500 50,000 50,000 50,000 50,000
$ 200,000........... 25,000 50,000 75,000 100,000 100,000 100,000 100,000
$ 300,000........... 37,500 75,000 112,500 150,000 150,000 150,000 150,000
$ 400,000........... 50,000 100,000 150,000 200,000 200,000 200,000 200,000
$ 500,000........... 62,500 125,000 187,500 250,000 250,000 250,000 250,000
$ 600,000........... 75,000 150,000 225,000 300,000 300,000 300,000 300,000
$ 700,000........... 87,500 175,000 262,500 350,000 350,000 350,000 350,000
$ 800,000........... 100,000 200,000 300,000 400,000 400,000 400,000 400,000
$ 900,000........... 112,500 225,000 337,500 450,000 450,000 450,000 450,000
$1,000,000........... 125,000 250,000 375,000 500,000 500,000 500,000 500,000
$1,100,000........... 137,500 275,000 412,500 550,000 550,000 550,000 550,000
$1,200,000........... 150,000 300,000 450,000 600,000 600,000 600,000 600,000
$1,300,000........... 162,500 325,000 487,500 650,000 650,000 650,000 650,000
$1,400,000........... 175,000 350,000 525,000 700,000 700,000 700,000 700,000
$1,500,000........... 187,500 375,000 562,500 750,000 750,000 750,000 750,000
$1,600,000........... 200,000 400,000 600,000 800,000 800,000 800,000 800,000
$1,700,000........... 212,500 425,000 637,500 850,000 850,000 850,000 850,000
$1,800,000........... 225,000 450,000 675,000 900,000 900,000 900,000 900,000
$1,900,000........... 237,500 475,000 712,500 950,000 950,000 950,000 950,000
$2,000,000........... 250,000 500,000 750,000 1,000,000 1,000,000 1,000,000 1,000,000
---------
(1) Final 5-year Average Earnings under the pension plans is
defined as the average of the highest Final Average Earnings
of any five calendar years in the ten calendar years
preceding retirement. Final Average Earnings for any
calendar year under the pension plans is defined as: W-2
compensation plus deferrals under the Company's 401(k) and
Section 125 plans (plus, under the supplemental retirement
plans only, deferrals of base salary and annual incentive
bonuses under the Supplemental Savings Plan and the Salary
and Bonus Deferral Plan), less all long-term incentive
compensation and most other types of compensation that are
not base salary or annual incentive bonuses. Under the
supplemental retirement plans, Final Average Earnings is
calculated without regard to the limitations set forth in
Section 415 and 401(a)(17) of the Code. Final 5-year Average
Earnings is currently equal to $1,627,793, $1,211,072,
$632,719, $459,701 and $412,578 for Messrs. Landuyt, Lee,
Lushefski, Vercollone and Dowdle, respectively. Messrs.
Landuyt, Lee,
(footnotes continued on next page)
18
(footnotes continued from previous page)
Lushefski, Vercollone and Dowdle have 20, 21, 18, 17
and 22 years of service, respectively, under the
pension plans.
(2) Annual Benefits are computed on the basis of straight-life
annuity amounts. The pension benefit set forth above is
calculated as follows: Final Average Earnings times 2.5%
multiplied by years of Credited Service (not to exceed 20
years). The net benefit under the supplemental retirement
plans is the difference between the benefits calculated
under the formula described above and the qualified pension
plan formula. All capitalized terms used in this paragraph
and not otherwise defined have the meanings ascribed to them
in the relevant plan document.
EXECUTIVE AGREEMENTS AND OTHER RELATIONSHIPS
The following is a summary of the change-in-control agreements (the
'Agreements') that are in effect between the Company and each of the individuals
named in the Summary Compensation Table and five other officers of the Company.
Subject to certain surviving rights, the Agreements will terminate on September
30, 2004, provided that if a Change-in-Control (as defined) has taken place
prior to termination of the Agreements, the Agreements shall continue in full
force and effect during the two-year period after a Change-in-Control (the
'Post-Change-in-Control Period'). A 'Change-in-Control' is defined in the
Agreements as (i) any person (subject to certain exceptions) becoming the
'beneficial owner' (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's outstanding securities; (ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (i), (iii) or (iv)
of this definition or a director whose initial assumption of office occurs as a
result of either an actual or threatened election contest or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other
than the Board of Directors of the Company) whose election by the Board of
Directors of the Company or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board of Directors
of the Company; (iii) the merger or consolidation of the Company with any other
corporation (subject to certain exceptions); or (iv) approval by the Company's
shareholders of a plan of complete liquidation of the Company or the sale of all
or substantially all of the Company's assets (subject to certain exceptions).
The Agreements provide that if during the 180-day period prior to a
Change-in-Control (the 'Pre-Change-in-Control Period') or the
Post-Change-in-Control Period (collectively with the Pre-Change-in-Control
Period, the 'Change-in-Control Protection Period'), (i) the executive terminates
his or her employment for Good Reason (as defined below); (ii) a
Change-in-Control occurs and during the Post-Change-in-Control Period the
executive, subject to a required 180-day period of continued employment, in
certain circumstances, terminates his or her employment for any reason
(including death); (iii) the executive's employment is terminated by the Company
without Cause or due to disability during the Change-in-Control Protection
Period; or, (iv) the executive's employment is terminated the Company at or
after the age of 65 (in certain circumstances) during the Post-Change-
in-Control Period, the executive (or, if applicable, the executive's legal
representative) shall be entitled to receive: (w) in a lump sum within five days
after such termination (or, if within the Pre-Change-in-Control Period, within
five days after the Change-in-Control) (1) three times the highest annualized
base salary paid within 180 days prior to such termination (provided that if the
termination is based on disability, such payment shall be offset by the
projected disability benefits to be paid by the Company or by Company-provided
insurance), and (2) three times the highest annual bonus paid or payable to the
executive for any of the previous three completed fiscal years; (x) three years
of additional service and compensation credit for pension purposes; (y) three
years of the maximum Company contribution under the Company's defined
contribution plans; and, (z) provision for the executive's and his
19
dependents' health coverage for three years. In addition, if the payment to the
executive under his or her Agreement, together with certain other amounts paid
to the executive, exceeds certain threshold amounts and results from a change in
ownership as defined in Section 280G(b)(2) of the Code, the Agreements provide
that the executive will receive an additional amount to cover the federal excise
tax and any interest, penalties or additions to tax with respect thereto on a
'grossed-up' basis. In addition to providing rights upon a Change-in-Control,
the Agreements provide the executives with certain indemnification rights.
In the Agreements, 'Cause' is defined as the executive's (i) willful
misconduct with regard to the Company that has a material adverse effect in the
aggregate on the Company; (ii) refusal to follow the proper written direction of
the Board of Directors of the Company, unless the executive believes in good
faith that such direction is illegal, unethical or immoral and promptly notifies
the Board; (iii) conviction for a felony (subject to certain exceptions);
(iv) breach of any fiduciary duty owed to the Company that has a material
adverse effect on the Company; or, (v) material fraud with regard to the
Company. 'Good Reason' is defined (subject to certain exceptions) as (i) a
material diminution in the executive's position, duties or responsibilities from
the executive's highest position held during the Pre-Change-in-Control Period or
the assignment of duties or responsibilities inconsistent with such position;
(ii) removal from or the failure of the executive to be re-elected to any of his
positions as an officer with the Company; (iii) relocation of the Company's
principal executive or operational offices, as applicable, to a location more
than 25 miles from where they are located at the time of a Change-in-Control or
a relocation by the Company of the executive's principal office away from such
principal offices; (iv) if a Director during the Pre-Change-in-Control Period,
the executive's removal or failure to be re-elected to the Company's Board of
Directors; (v) a failure to continue the executive as a participant in, or to
continue, any bonus program in which the executive was entitled to participate
within the Pre-Change-in-Control Period; (vi) any material breach by a party
other than the executive of any provision of the Agreement; (vii) a reduction by
the Company of executive's rate of annual base salary within 180 days prior to a
Change-in-Control; or, (viii) failure by any successor to the Company to assume
the Agreement.
The Agreements apply only upon a Change in Control and DO NOT provide any
protection or benefits unless a Change-in-Control has occurred. The Company
currently maintains customary severance policies for its employees.
In addition to the Agreements, certain other officers and management
employees of the Company and its subsidiaries have agreements that provide
severance protection upon a Change-in-Control substantially similar to that
provided by the Agreements, except that (i) amounts payable and benefits
provided will be determined by a multiple of two rather than three; (ii) the
definitions of 'Cause' and 'Good Reason' in certain instances afford the Company
broader rights; and, (iii) the rights of the executive upon a Change-in-Control
will be less in certain instances.
In addition to the change-in-control provisions under the executive
agreements described above, the 1996 Incentive Plan and the agreements pursuant
to which restricted stock and options have been awarded under the 1996 Incentive
Plan provide that upon a Change-in-Control of the Company, unforfeited
restricted stock and options will vest immediately. In addition, the unforfeited
restricted stock held by any employee who is terminated by his Employer without
cause (as defined) or due to his disability or death or who terminates his
employment for good reason (as defined) within six months prior to a
Change-in-Control, will also vest upon the Change-in-Control. Under the Omnibus
Incentive Plan, subject to the terms of participants' award agreements, upon the
occurrence of a Change-in-Control (as defined), all options become immediately
exercisable and remain exercisable throughout their entire term, and the target
payout opportunities attainable under outstanding performance-based awards will
vest and be deemed to have been earned for the entire performance period (or
periods) based on an assumed achievement of targeted performance goals at the
target level (or at such greater level if achieved) and will be distributed or
paid within thirty days after the Change-in-Control. The Company's supplemental
executive retirement plans provide that all accrued benefits vest upon a Change
in Control, but are not payable until termination of employment. Finally, upon a
Change-in-Control (as defined) of the Company, all amounts deferred under the
Company's Salary and Bonus Deferral Plan and Supplemental Savings Plan will
become payable.
20
The Company requires that employees pay all applicable withholding taxes
before receiving any vested performance-based or restricted stock. In order to
permit executives to pay such withholding taxes without selling shares, the
Company had made, prior to 2002, loans to employees secured by their vested
restricted stock. These loans had terms of one year, were renewable at the
option of the Company, accrued interest at 5.0% per annum during 2002 and 4.25%
per annum during 2003, payable quarterly, and were secured by shares that had a
market value on the date of the loan of at least 125% of the loan amount. At the
beginning of 2002, the Company had outstanding loans to its executive officers
in excess of $60,000 as follows: Mr. Landuyt, $879,705; Mr. Lee, $852,861; Mr.
Dowdle, $65,587; Mr. Hanik, $310,915; Mr. Lushefski, $479,377; and Mr.
Vercollone, $85,606. Such amounts were the largest amounts outstanding between
the Company and such officers during the period January 1, 2002 to the date
hereof. All loans by the Company to executive officers have been repaid in full.
In accordance with the Sarbanes-Oxley Act of 2002, the Company will not extend
credit to its Directors and executive officers.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding the Common Stock that
may be issued upon the exercise of options, warrants and other rights granted to
employees or Directors under the Company's existing equity compensation plans,
as of December 31, 2002. See Note 12 to the Company's Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002 for a discussion of the material features of all such
plans.
(B)
(A) WEIGHTED- (C)
NUMBER OF AVERAGE NUMBER OF SECURITIES
SECURITIES EXERCISE REMAINING AVAILABLE
TO BE ISSUED UPON PRICE OF FOR ISSUANCE UNDER
EXERCISE OF OUTSTANDING EQUITY COMPENSATION
OUTSTANDING OPTIONS, PLANS (EXCLUDING
OPTIONS, WARRANTS WARRANTS AND SECURITIES REFLECTED IN
PLAN CATEGORY AND RIGHTS (#) RIGHTS ($)(3) COLUMN (A)) (#)
------------- -------------- ------------- ---------------
Equity compensation plans approved
by security holders(1)........... 2,550,558 15.73 2,986,872
Equity compensation plans not
approved by security
holders(2)....................... 631,725 -- --
--------- ---------
Total.......................... 3,182,283 15.73 2,986,872
--------- ---------
--------- ---------
---------
(1) The Company's shareholders approved the 1996 Incentive Plan
in 1997 and the Omnibus Incentive Plan in 2001. All stock
options have been granted under the 1996 Plan or the Omnibus
Incentive Plan. All performance-based stock awards and
time-vested restricted stock awards were granted under the
1996 Incentive Plan. All Long Term Incentive and Executive
Long Term Incentive awards in 2001 and thereafter were
granted under the Omnibus Incentive Plan.
(2) Long Term Incentive and Executive Long Term Incentive awards
prior to 2001 and deferrals under the Salary and Bonus
Deferral Plan were not made pursuant to plans approved by
shareholders.
(3) This column includes the weighted average exercise price of
all outstanding stock options but excludes performance-based
stock awards, time-vested restricted stock awards, Long Term
Incentive and Executive Long Term Incentive awards, and
deferrals under the Salary and Bonus Deferral Plan.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16 of the
Exchange Act ('Section 16') requires that reports of beneficial ownership of
Common Stock and changes in such ownership be filed with the SEC by the
Company's Directors and executive officers. The Company is required to conduct a
review and to identify in its proxy statement each Director or executive officer
who failed to file any required report under Section 16 on a timely basis. Based
upon that review, the Company has determined that all required reports were
filed on a timely basis in 2002.
21
As of the date of this Proxy Statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items specifically identified in the Notice of Annual Meeting. Proxies in the
enclosed form will be voted in respect of any other business that is properly
brought before the Annual Meeting in accordance with the judgment of the person
or persons voting the proxies.
Services of PricewaterhouseCoopers LLP. During 2002, PricewaterhouseCoopers
LLP provided various audit and non-audit related services to the Company. The
following summarizes the aggregate fees billed to the Company for services
rendered for the year ended December 31, 2002:
Audit Fees: Aggregate fees billed for professional services rendered for
the audit of the Company's consolidated financial statements for the year
ended December 31, 2002, including reviews of the Company's quarterly
consolidated financial statements filed on Form 10-Q and statutory audits of
foreign subsidiaries, were $1,608,127.
Financial Information Systems Design and Implementation Fees: None.
All Other Fees: $2,130,030.
The Audit Committee of the Board has determined that the provision of
non-audit services generating 'All Other Fees' was compatible with maintaining
the independence of PricewaterhouseCoopers LLP.
SHAREHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
Under the rules of the SEC, any proposal of a shareholder submitted for
inclusion in the Company's proxy statement for the 2004 Annual Meeting must be
received by the Company by December 22, 2003 to be considered. Proposals should
be addressed to: Millennium Chemicals Inc., 230 Half Mile Road, Red Bank, NJ
07701, Attn: C. William Carmean, Senior Vice President, General Counsel and
Secretary.
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, without any
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, or facsimile. The Company
will, upon request, reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners of Common
Stock. The Company has retained Georgeson Shareholder to assist in its
solicitation of proxies from shareholders for a fee not to exceed $9,500, plus
reimbursement of out-of-pocket expenses.
THE COMPANY'S 2002 ANNUAL REPORT TO SHAREHOLDERS, INCLUDING FINANCIAL
STATEMENTS, IS ENCLOSED HEREWITH. THE ANNUAL REPORT TO SHAREHOLDERS INCLUDES THE
COMPANY'S ANNUAL REPORT ON FORM 10-K. THE COMPANY WILL FURNISH ANY EXHIBIT TO
SUCH ANNUAL REPORT ON FORM 10-K UPON REQUEST BY A SHAREHOLDER DIRECTED TO:
INVESTOR RELATIONS, MILLENNIUM CHEMICALS INC., 230 HALF MILE ROAD, RED BANK, NJ
07701, OR BY E-MAIL TO: IR@MILLENNIUMCHEM.COM, FOR A FEE LIMITED TO THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING ANY EXHIBITS.
By Order of the Board of Directors,
C. WILLIAM CARMEAN
Senior Vice President, General Counsel
and Secretary
EVA'r' is a registered trademark of Stern Stewart & Co.
22
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HOW TO VOTE
Your vote is important. Most shareholders have a choice of voting
over the Internet, by telephone, or by using a traditional proxy card.
Please refer to your proxy card or the information forwarded by your
bank, broker or other holder of record to see which options are available
to you.
ELECTRONIC ACCESS TO PROXY STATEMENTS
Most shareholders can view future Proxy Statements and Annual Reports
over the Internet rather than receiving paper copies in the mail. Please
refer to page 2 of this Proxy Statement and your proxy card for further
information.
REDUCE MULTIPLE MAILINGS
If you are a shareholder of record and have more than one account in
your name or delivered to the same address as other shareholders of
record, you can authorize the Company to discontinue mailings of multiple
Annual Reports. If you are a shareholder of record voting over the
Internet, follow the instructions provided after you vote. If you own
shares through a bank, broker or other nominee, please contact that
entity to eliminate duplicate mailings. See page 2 of this Proxy
Statement and your proxy card for further information.
-------------------------------------------------------------------------------
APPENDIX 1
HOW TO RECEIVE FUTURE ANNUAL REPORTS AND PROXY STATEMENTS ON-LINE
You may receive future Millennium Chemicals Inc. Annual Reports and Proxy
Statements on-line over the Internet by submitting your consent to Millennium
Chemicals. This will save Millennium Chemicals postage and printing expenses and
provide information to you faster.
Most shareholders can elect to view future Annual Reports and Proxy Statements
over the Internet instead of receiving paper copies in the mail. If you are a
registered shareholder or are holding shares through the Millennium Chemicals
Savings and Investment Plan or certain other benefit plans, and you wish to
receive future Annual Reports and Proxy Statements over the Internet and vote
over the Internet, follow the instructions set forth below.
o Log onto the Internet and go to the web site:
http://www.amstock.com (If you are voting your shares this year
using the Internet, you can link to this web site directly from
the web site where you vote your shares).
o You will be asked to consent to Internet delivery of annual
meeting materials and provide your e-mail address and account
number. Your account number is shown on the reverse side of this
proxy card. You will not need to provide an account number if you
only hold shares through the Millennium Chemicals Savings and
Investment Plan or certain other benefit plans.
If you consent, your account will be so noted and, when the Millennium Chemicals
2003 Annual Report and Proxy Statement for the 2004 Annual Meeting of
Shareholders become available, you will be notified by e-mail as to how to
access them on the Internet, and how to vote over the Internet. Your choice will
remain in effect until you advise us otherwise by contacting Millennium
Chemicals Inc. at 230 Half Mile Road, Red Bank, New Jersey 07701, Attention:
Investor Relations.
MILLENNIUM CHEMICAL INC.
PROXY/AUTHORIZATION CARD
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting of Shareholders
10:00 a.m., May 23, 2003
The undersigned hereby constitutes and appoints William M. Landuyt,
John E. Lushefski and C. William Carmean, and each of them, true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of MILLENNIUM CHEMICALS INC.
to be held at The Parker Meridien, 118 West 57th Street, New York, NY 10019, and
at any adjournments thereof, and, in their discretion, on all such other matters
as may properly come before said meeting.
1. Election of three directors. Nominees for directors are: (01). Lord
Baker, (02). David J.P. Meachin and (03). Irvin F. Diamond.
2. Ratification of the election of The Honorable Mary K. Bush and Mr.
Daniel S. Van Riper as directors.
3. Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxies cannot vote your
shares unless you vote by telephone or through the Internet, as described on the
reverse side, or sign and return this card.
As described in the Proxy Statement, if the undersigned is a participant in
certain employee savings and stock ownership plans of the Company or certain
other entities, this Proxy/Authorization Card also provides voting instructions
for shares held for the account of the undersigned in such plans. The Trustee
for the relevant plan will vote the undersigned's shares as directed, provided
voting instructions are properly received by 3:00 p.m. (Eastern Daylight Time)
on May 21, 2003.
SEE REVERSE SIDE
14475
ANNUAL MEETING OF SHAREHOLDERS OF
[LOGO MILLENNIUM CHEMICALS]
May 23, 2003
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the envelope ---------------------------
provided as soon as possible. COMPANY NUMBER
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-OR- ACCOUNT NUMBER
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TELEPHONE - Call toll-free 1-800-PROXIES from any touch-tone CONTROL NUMBER
telephone and follow the instructions. Have your control number ---------------------------
and proxy card available when you call.
-OR-
INTERNET - Access "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access
the web page.
Please detach and mail in the envelope provided IF you are not voting via telephone or the Internet.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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1. Election of Directors.
NOMINEES
[ ] FOR ALL NOMINEES o Lord Baker
o David J.P. Meachin
[ ] WITHHOLD AUTHORITY o Irvin F. Diamond
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
2. Ratification of the election of The Honorable FOR AGAINST ABSTAIN
Mary K. Bush and Mr. Daniel S. Van Riper [ ] [ ] [ ]
as directors.
3 Ratification of the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as independent
accountants.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the election of directors
and FOR proposals 2 and 3.
You can also elect to receive future Annual Reports and Proxy Statements over
the Internet instead of receiving paper copies in the mail. See the reverse side
of this proxy card for additional details.
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here:
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note [ ]
that changes to the registered name(s) on the account may not be
submitted via this method.
Discontinue Annual Report Mailings for this Account. [ ]
Please check here if you plan to attend the meeting. [ ]
Signature of Shareholder ___________________________ Date:____________________
Signature of Shareholder ___________________________ Date:____________________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
STATEMENT OF DIFFERENCES
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The copyright symbol shall be expressed as.............................. 'c'
The registered trademark symbol shall be expressed as................... 'r'