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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Lyondell Chemical Company
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(Name of Registrant as Specified In Its Charter)
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[LYONDELL LOGO]
One Houston Center
Kerry A. Galvin 1221 McKinney
Vice President, General Counsel & Secretary Suite 700
P.O. Box 3646
Houston, TX 77253-3646
Telephone: 713.309.2665
Fax: 713.309.2143
May 2, 2002
Mr. Eric D. Roiter
Senior Vice President and General Counsel
Fidelity Investments
82 Devonshire Street
Boston, MA 02109
Dear Mr. Roiter,
Lyondell Chemical Company is interested in and would like to address Fidelity's
concerns regarding the proposed Amended and Restated Lyondell Chemical Company
1999 Long-Term Incentive Plan (the "Plan"), as presented in Lyondell's Proxy
Statement dated April 4, 2002. We understand that Fidelity has two principal
areas of concern:
1. The restriction period for restricted stock awards should normally be at
lease three years. Restricted stock awards with a restriction period of
less than three years (but at least one year) may be acceptable if the
restricted stock award is performance based. Our practice has been to vest
restricted stock in three equal annual installments, beginning one year
after the date of grant. Management is willing to recommend to the
Compensation Committee of Lyondell's Board of Directors that it adopt an
amendment to the Plan to make its current practice explicit in the Plan.
2. The Board or Compensation Committee should not be authorized to materially
amend the Plan without shareholder approval. Management is willing to
recommend to the Compensation Committee of Lyondell's Board of Directors
that it adopt an amendment to the Plan to restate Section 14 in its
entirety, as follows:
Amendment or Termination. The Committee may amend, alter, or discontinue
the Plan, but no amendment, alteration or discontinuation shall be made
which would impair the rights of a Participant under any Award theretofore
granted without the Participant's consent, except such an amendment made to
cause the Plan to comply with applicable law, stock exchange rules or
accounting rules. In addition, no such amendment shall be made without the
approval of the Company's shareholders to the extent such approval is
required by law or agreement or if such amendment would:
(a) expand the classes of persons to whom Awards may be made under Section
3 of this Plan;
(b) increase the number of shares of Common Stock authorized for grant
under Section 5 of this Plan;
(c) increase the number of shares which may be granted under Awards to any
one Participant under Section 5 of this Plan;
(d) increase the number of shares available for Awards of Restricted
Stock;
(e) permit unrestricted shares of Common Stock to be granted other than in
lieu of cash payments under other incentive plans and programs of the
Company and its Subsidiaries;
(f) allow the creation of additional types of Awards;
(g) permit shortening the restriction periods with respect to Restricted
Stock Awards, the vesting periods with respect to Options or Phantom
Stock or removing or waiving Performance Goals except to the extent
permitted under Sections 9 and 11 of the Plan or as the Committee
otherwise deems appropriate in the case of the death, disability or
retirement of a Participant or with respect to a Change in Control of
Lyondell; or
(i) change any of the provisions of this paragraph of Section 14.
The Committee may amend the terms of any Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment
(a) shall cause a Performance-Based Award to cease to qualify for the
Section 162(m) exemption or (b) impair the rights of any Participant
without the Participant's consent except such an amendment made to cause
the Plan or Award to qualify for any exemption provided by Rule 16b-3.
Subject to the above provisions, the Committee shall have authority to
amend the Plan to take into account changes in law and tax and accounting
rules as well as other developments, and to grant Awards which qualify for
beneficial treatment under such rules without shareholder approval. No
Awards shall be granted more than ten years after the Effective Date.
Please note that Section 6 of the Plan already prohibits a reduction in the
exercise price of outstanding Options. As a result, no amendment is necessary to
prohibit the repricing of Options.
We appreciate the opportunity to resolve your concerns regarding the Plan.
Sincerely yours,
KERRY A. GALVIN
Kerry A. Galvin
Vice President, General Counsel and Secretary