Edgar Filing: MILLENNIUM CHEMICALS INC

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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Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

Millennium Chemicals Inc.
.................................................................
(Name of Registrant as Specified In Its Charter)

.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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230 Half Mile Road
P.O. Box 7015
Red Bank, NJ 07701-7015
Tel: (732) 933-5000 Fax: (732) 933-5240
Laporte Road
Stallingborough, Grimsby
North East Lincolnshire DN40 2PR
England
Tel: 0345 662663

April 12, 2001

Dear Fellow Shareholder:

It is my pleasure to invite you to attend the 2001 Annual Meeting of
Shareholders of Millennium Chemicals Inc. This meeting will be held on Friday,
May 18, 2001 at the Hilton New York 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

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 2001

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Notice is hereby given that the 2001 Annual Meeting of Shareholders (the
'Annual Meeting') of Millennium Chemicals Inc., a Delaware corporation (the
'Company'), will be held at the Hilton New York, 'A' Concourse, 1335 Avenue of
the Americas, New York, NY, 10019 on Friday, May 18, 2001, 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 2004 and until their successors are duly elected and
qualified;

2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for 2001;

3. To approve the adoption of the Company's 2001 Incentive Compensation
Plan; 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 March 23, 2001 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,

GEORGE H. HEMPSTEAD, III
Senior Vice President -- General Counsel
and Secretary

April 12, 2001

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.

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PROXY STATEMENT
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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 Hilton New York, 'A'
Concourse, 1335 Avenue of the Americas, New York, NY, 10019 on Friday, May 18,
2001, 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 12, 2001.

VOTING

Only shareholders of record at the close of business on March 23, 2001 (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,
63,450,643 shares of Common Stock were outstanding, not including 14,445,943
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 approval of any other proposal to be
considered at the Annual Meeting requires 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 though 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.

Participants in the Millennium Chemicals Savings and Investment Plan; the
Equistar Chemicals, LP Savings and Investment Plan; the Equistar Chemicals, LP
Retirement Savings and Investment Plan for Hourly Represented Employees; and,
the Lyondell Chemical Company 401(k) and Savings Plan may 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 16, 2001. 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.

MULTIPLE COPIES OF ANNUAL REPORT TO SHAREHOLDERS

If you received more than one copy of the Company's 2000 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.ECONSENT.COM/MCH, 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 log onto the Internet, go to the web site:
HTTP://WWW.ECONSENT.COM/MCH and follow the instructions. Alternatively, you may
contact the Company's Investor Relations Department at the address on page 31 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 2000 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 are a shareholder of record and wish to vote your shares over the
Internet, you can choose this option and save the Company the cost of producing
and mailing these documents by following the instructions. You can also choose
between paper documents and electronic access by logging on to the Internet,
going to the website HTTP://WWW.ECONSENT.COM/MCH 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 logging on to the Internet
site HTTP://WWW.ECONSENT.COM/MCH and changing your instructions. Alternatively,
you may contact the Company's Investor Relations Department at the address on
page 31 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.

OWNERSHIP OF COMMON STOCK

CERTAIN BENEFICIAL OWNERS

The following are the only persons known by the Company as of April 9, 2001
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. .................. 9,492,481(1) 14.8
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, TX 75204-2429
AXA Financial, Inc ......................................... 8,755,024(2) 13.6
1290 Avenue of the Americas
New York, NY 10104
Capital Research and Management Company .................... 8,636,500(3) 13.5
333 South Hope Street
Los Angeles, CA 90071
FMR Corp. .................................................. 7,930,877(4) 12.4
82 Devonshire Street
Boston, MA 02109

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(1) Based on a Schedule 13G filed with the Securities Exchange Commission (the
'SEC'), dated February 12, 2001, Barrow, Hanley, Mewhinney & Strauss, Inc.
('Barrow Hanley') has sole voting power over 1,159,055 shares, shared voting
power over 8,333,426 shares and sole dispositive power over 9,492,481
shares. Vanguard Windsor Funds-Windsor II Fund ('Vanguard') filed a
Schedule 13G with the SEC, dated February 14, 2001. 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 9,492,481 shares disclosed as beneficially owned by Barrow
Hanley in its Schedule 13G.

(2) Based on a Schedule 13G filed with the SEC, dated February 12, 2001, AXA
Financial, Inc. and its affiliates have sole voting power over 5,288,296
shares, shared voting power over 814,701 shares and sole dispositive power
over 8,755,024 shares.

(3) Based on a Schedule 13G filed with the SEC, dated February 9, 2001, Capital
Research and Management Company has sole dispositive power over 8,636,500
shares.

(4) Based on a Schedule 13G filed with the SEC, dated February 14, 2001, FMR
Corp. has sole voting power over 3,335,930 shares and sole dispositive power
over 7,930,877 shares.

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 23,
2001, 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..................................... 481,508(a) *
Robert E. Lee.......................................... 319,671(b) *
Lord Baker............................................. 5,326(c) *
Worley H. Clark, Jr. .................................. 4,897(c) *
Martin D. Ginsburg..................................... 4,755(c) *
Lord Glenarthur........................................ 4,755(c) *
David J. P. Meachin.................................... 4,455(c) *
Martin G. Taylor....................................... 13,326(c) *
Timothy E. Dowdle...................................... 51,063(d) *
Peter P. Hanik......................................... 159,199(e) *
George H. Hempstead, III............................... 197,027(f) *
Richard A. Lamond...................................... 73,446(g) *
John E. Lushefski...................................... 195,836(h) *
David L. Vercollone.................................... 43,082(i) *
All Directors and executive officers as a group
(14 persons)......................................... 1,558,346 2.5%

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* Represents less than 1%.

(a) Includes 184,306 shares of restricted Common Stock awarded under the
Company's Long Term Stock Incentive Plan (the '1996 Incentive Plan'), of
which 113,085 are subject to vesting pursuant to performance criteria and
the remainder are subject to time vesting; and, as of February 28, 2001:
(x) 11,115 shares of Common Stock held in the Company's 401(k) plan for
Mr. Landuyt's account; (y) 10,911 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) 158,791 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 300 shares of
Common Stock owned by Mr. Landuyt's wife, as to which Mr. Landuyt disclaims
beneficial ownership.

(b) Includes 129,014 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 79,159 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (x) 10,880 shares of Common Stock held in the
Company's 401(k) plan for Mr. Lee's account; (y) 6,196 shares of Common
Stock held for Mr. Lee's account in the Supplemental Savings Plan; and, (z)
73,845 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.

(c) Includes 1,350 shares issued on October 1, 2000; 978 shares issued on
October 1, 1999; 1,074 shares issued on October 1, 1998; 682 shares issued
on October 1, 1997; and, 671 shares issued on October 30, 1996 under the
1996 Incentive Plan, in each case in partial payment of annual Directors'
fees.

(d) Includes 13,721 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 8,961 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (x) 5,351 shares of Common Stock held in the
Company's 401(k) plan for Mr. Dowdle's account; (y) 1,073 shares of Common
Stock held for Mr. Dowdle's account in the Supplemental Savings Plan; and,
(z) 23,107 shares of Common Stock held in the Company's Salary and Bonus
Deferral Plan.
(footnotes continued on next page)

(footnotes continued from previous page)

(e) Includes 72,245 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 47,372 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (x) 10,176 shares of Common Stock held in the
Company's 401(k) plan for Mr. Hanik's account; (y) 1,878 shares of Common
Stock held for Mr. Hanik's account in the Supplemental Savings Plan; and,
(z) 28,524 shares of Common Stock held in the Company's Salary and Bonus
Deferral Plan.

(f) Includes 92,153 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 56,542 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (x) 11,768 shares of Common Stock held in the
Company's 401(k) plan for Mr. Hempstead's account; (y) 2,650 shares of
Common Stock held for Mr. Hempstead's account in the Supplemental Savings
Plan; and, (z) 12,695 shares of Common Stock held in the Company's Salary
and Bonus Deferral Plan.

(g) Includes 47,999 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 29,871 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (w) 9,177 shares of Common Stock held in the
Company's 401(k) plan for Mr. Lamond's account; (x) 1,827 shares of Common
Stock held for Mr. Lamond's account in the Supplemental Savings Plan; (y)
97 shares of Common Stock held in the Company's Salary and Bonus Deferral
Plan; and, (z) 210 shares of Common Stock held in the Company's Employee
Stock Purchase Plan. Also includes 14 shares of Common Stock owned by
Mr. Lamond's son, as to which Mr. Lamond disclaims beneficial ownership.

(h) Includes 92,153 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 56,542 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (x) 16,614 shares of Common Stock held in the
Company's 401(k) plan for Mr. Lushefski's account; (y) 4,795 shares of
Common Stock held for Mr. Lushefski's account in the Supplemental Savings
Plan; and, (z) 15,605 shares of Common Stock held in the Company's Salary
and Bonus Deferral Plan.

(i) Includes 13,724 shares of restricted Common Stock awarded under the 1996
Incentive Plan, of which 8,962 are subject to vesting pursuant to
performance criteria and the remainder are subject to time vesting; and, as
of February 28, 2001: (y) 11,088 shares of Common Stock held in the
Company's 401(k) plan for Mr. Vercollone's account; and (z) 1,680 shares of
Common Stock held for Mr. Vercollone's account in the Supplemental Savings
Plan.

CORPORATE GOVERNANCE

The Company has been publicly owned since its demerger (i.e., spin-off) from
Hanson PLC ('Hanson') 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.

Although incorporated in Delaware, the Company is, and will be, centrally
managed and controlled in the United Kingdom (the 'U.K.') until at least
October 1, 2001, the fifth anniversary of the Demerger. During this period, the
Company's Board of Directors is, and will be, the medium through which strategic
control and policy-making powers are exercised, and Board meetings almost
invariably will be held in the U.K. These corporate governance arrangements are
consistent with an agreement entered into by the Company and Hanson in
connection with the Demerger. This agreement provides that, for such five-year
period, the Company will not take, or fail to take, any action that would result
in a breach of, or constitute non-compliance with, certain representations and
undertakings made by Hanson to the U.K. Inland Revenue in order to obtain
clearance as to the tax-free treatment of the Demerger dividend for Hanson and
its shareholders (the Company's initial public shareholders) for U.K. tax
purposes. There are no restrictions on the location of the Company's shareholder
meetings, which (as in the case of this Annual Meeting) may be held in the
United States.

The Company's Policy on the Independence of Directors, which was adopted on
January 26, 2001, requires a majority of the members of the Board of Directors
to be independent, non-employee Directors. A copy of this Policy is attached
hereto as Exhibit A. The Charters of each of the Audit, Compensation and
Nominations Committees of the Board of Directors also require that all members
of

these committees be independent, non-employee Directors. The Board has
determined that all of the Board's non-employee Directors and all members of
these committees are independent Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors has established five standing committees:
an Audit Committee, a Compensation Committee, an Executive Committee, a
Nominations Committee and a Public Affairs Committee. The following is a
description of these committees:

Audit Committee. The Audit Committee's Charter requires that each member
of the Audit Committee be an independent, non-employee Director, free from
any relationship that would interfere with the exercise of his independent
judgement. In addition, the Board of Directors has determined that each
member of the Audit Committee is an independent Director as defined by the
New York Stock Exchange regulations regarding the independence of audit
committee members. The Committee currently consists of Lord Baker, David J.
P. Meachin and Martin G. Taylor (Chairman) and met three times in 2000.

The Audit Committee is responsible for reviewing matters relating to
financial reporting, internal controls and the audit process. The Report of
the Audit Committee is set forth on page 7 of this Proxy Statement and its
Charter is attached hereto as Exhibit B. The Audit Committee recommends to
the Company's Board of Directors the appointment of a firm of independent
accountants to audit the Company's financial statements. The Audit Committee
also reviews with representatives of the independent accountants the scope
of the audit of the Company's financial statements, results of audits, audit
costs, recommendations with respect to internal controls and financial
matters, and the independence of such independent accountants. It also
reviews non-audit services rendered by the Company's independent accountants
and periodically meets with and receives reports from the Company's
principal internal audit, financial and accounting officers.

Compensation Committee. All members of the Compensation Committee are
required by the Compensation Committee's Charter to be 'Non-Employee
Directors' within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (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 Committee currently consists of Worley H. Clark,
Jr. (Chairman), Lord Glenarthur and David J. P. Meachin, and met six times
in 2000.

The Compensation Committee sets the compensation of all the Company's
officers, establishes policies concerning stock ownership by officers and
approves the Company's executive compensation plans and programs, including
the Annual Performance Incentive Plan (the '1996 Annual Performance Plan'),
the 2000 Executive Long Term Incentive Plan, the 1996 Incentive Plan and the
Company's new Omnibus Incentive Compensation Plan (the '2001 Incentive
Plan'), and approves performance targets and awards under such plans. It
also reviews the competitiveness of the Company's management and director
compensation and benefit programs and reviews principal employee relations
policies and procedures.

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 currently consists of Lord Baker, Lord Glenarthur,
William M. Landuyt (Chairman) and Martin G. Taylor. The Executive Committee
did not meet in 2000.

Nominations Committee. The Charter of the Nominations Committee require
each member of the Nominations Committee to be an independent, non-employee
Director. The Committee currently consists of Lord Baker (Chairman), Martin
D. Ginsburg and Martin G. Taylor. The Committee met once in 2000.

The Nominations Committee has authority to nominate candidates to fill
vacancies on the Board and to nominate directors to serve as members,
including chairmen, of committees of the Board. The duties of the
Nominations Committee include determining the desirable balance of expertise
and composition of the Board, seeking out possible candidates to fill
positions on the Board, attracting qualified candidates to the Board,
reviewing the proposed slate of Directors to be elected by shareholders at
each Annual Meeting of Shareholders and recommending to the Board

the inclusion of the slate in the Company's Proxy Statement. The Nominations
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.

Public Affairs Committee. The Public Affairs Committee currently
consists of Worley H. Clark, Jr., Martin D. Ginsburg (Chairman) and Robert
E. Lee, and met twice during 2000. The Public Affairs Committee reviews the
Company's policies and practices concerning health, safety and environmental
matters and provides strategic direction with respect to such matters. The
Committee is responsible for ensuring that effective risk and crisis
management procedures are in place and that there are adequate procedures
and checks and balances to promote ethical business behavior. The Committee
also provides oversight within the Company regarding work force diversity,
charitable donations and other such responsibility issues.

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 auditors;
(ii) discussed with the independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61 'Communications with Audit
Committees;' and, (iii) discussed with the independent auditors their
independence as required by Independence Standards Board Standard No. 1
'Independent Discussions with Audit Committees.' Management has represented to
the Audit Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principals.

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, 2000, for
filing with the SEC. The Audit Committee also has recommended, subject to
shareholder approval, the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants. The Board of Directors has accepted this
recommendation, and recommends that the shareholders vote 'FOR' ratification of
the appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants.*

March 14, 2001 Respectfully submitted,
MARTIN G. TAYLOR, Chairman
LORD BAKER
DAVID J. P. MEACHIN

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*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 $40,000 per annum since October 1, 1998. In
addition, pursuant to the 1996 Incentive Plan, each non-employee Director
automatically was granted 1,074, 978 and 1,350 shares of Common Stock on
October 1, 1998, 1999 and 2000, respectively. The number of shares granted on
each of these grant dates was determined by dividing $20,000 by the closing
price on the business day immediately preceding each such grant date. The
Company's 1996 Incentive Plan currently provides that each non-employee Director
serving on October 1, 2001, 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 2000. All Directors attended at least 75% of
the total number of meetings 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 three Directors expire at the Annual Meeting. The terms of the other five
Directors continue after the Annual Meeting. The shareholders are being asked to
vote on the election of the three Directors whose terms expire at the Annual
Meeting, to serve until the Annual Meeting of Shareholders in 2004 and until
their successors are duly elected and qualified. 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 is 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 Committee, unless the Board of Directors reduces the number of
Directors.

THE NOMINEES HAVE BEEN RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS BY
THE NOMINATIONS COMMITTEE OF THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE 'FOR' ELECTION OF THE THREE NOMINEES IDENTIFIED BELOW.

NOMINEES FOR ELECTION AS DIRECTORS
TERM EXPIRING AT THE 2004 ANNUAL MEETING

Lord Glenarthur, 56, 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 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 was Chairman of St. Mary's Hospital NHS Trust from 1991 to 1998 and a
Special Trustee of St. Mary's Hospital from 1991 to 2000. He is Chairman of the
British Helicopter Advisory Board and the European Helicopter Association,
Deputy Chairman of the International Federation of Helicopter Associations and a
Council Member of The Air League in the

U.K. He is a Director of Whirlybird Services Limited, a Governor of Nuffield
Nursing Homes Trust (trading as Nuffield Hospitals) and a Commissioner of the
Royal Hospital Chelsea.

Mr. Clark, 68, 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 serves on the Board of Directors of Merrill
Lynch & Co., Inc.; Bethlehem Steel Corporation; Ultramar Diamond Shamrock
Corporation; and, Georgia Pacific Corporation. He is a Trustee of The Rush
Presbyterian-St. Luke's Medical Center and the Field Museum of Natural History.

Mr. Lee, 44, has served as Executive Vice President -- Growth and
Development of the Company since March 21, 2001. He was President and Chief
Executive Officer of Millennium Inorganic Chemicals Inc., a subsidiary of the
Company, from June 1997 until March 21, 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
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.

DIRECTORS CONTINUING IN OFFICE
TERM CONTINUES UNTIL THE 2002 ANNUAL MEETING

Mr. Landuyt, 45, 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 (which managed the United States
operations of Hanson before the Demerger) 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 also a Director of Bethlehem Steel Corporation.

Mr. Taylor, 65, has served as a Director of the Company since the Demerger.
He was an executive of Hanson from 1969 until his retirement in 1995, a Director
of Hanson between 1976 and 1995 and Vice Chairman of Hanson between 1988 and
1995. Mr. Taylor served as an executive of Dow Chemical Company (U.K.) from 1963
to 1969, a Director of UGI Plc from 1979 to 1982, a Director of The Securities
Association LTD from 1987 to 1990, a Director of National Westminster Bank Plc
from 1990 to 2000, and a Director of Vickers Plc from 1986 to 1999. He is Deputy
Chairman of Charter Plc.

TERM CONTINUES UNTIL THE 2003 ANNUAL MEETING

Lord Baker, 66, 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 Director of Hanson, Inter Hopper
Ltd. and Telezones.com Ltd. and is an adviser to The Blackstone Group and Cross
Border Enterprises, L.L.C.

Professor Ginsburg, 68, has served as a Director of the Company since
October 8, 1996. He has been Professor of Law at Georgetown University Law
Center since 1980. Professor Ginsburg is of counsel to the law firm of Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), which has provided legal services to the Company from time to
time.

Mr. Meachin, 60, 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 a Director of The Spartek Emerging
Opportunities of India Fund, Vice Chairman of the University of Cape Town Fund
in New York and a Director and past Chairman of the British American Educational
Foundation.

ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors, upon the recommendation of the Audit Committee, has
appointed the firm of PricewaterhouseCoopers LLP as independent accountants to
examine and audit the Company's financial statements for 2001.
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 Board. 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.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR'
RATIFICATION OF SUCH APPOINTMENT.

ITEM 3 -- APPROVE THE 2001 INCENTIVE PLAN

The Compensation Committee, recognizing that shareholders must approve
certain incentive compensation plans every five years to permit the
deductibility of certain performance-based incentive compensation under
Section 162(m) of the Code and, recognizing that insufficient shares are
available for grants under the 1996 Incentive Plan over the next five years,
advised the Board of Directors in January 2001 that it is in the Company's best
interests to approve the Company's Omnibus Incentive Compensation Plan (the
'2001 Incentive Plan'). The Company's success depends on its ability to attract,
retain and motivate employees of outstanding competence. The Compensation
Committee believes that incentive compensation that is strongly linked to
performance and total shareholder return will motivate these employees on behalf
of the Company's shareholders. Accordingly, on January 26, 2001, the Board of
Directors, acting on the recommendation of the Compensation Committee,
unanimously adopted the 2001 Incentive Plan and directed that it be submitted to
the Company's shareholders for approval at the 2001 Annual Meeting.

The following is a summary description of the 2001 Incentive Plan. The
complete text of the 2001 Incentive Plan is attached hereto as Exhibit C and
reference is made to that exhibit for the complete provisions of the plan. The
2001 Incentive Plan is designed to provide executives and other key employees
the opportunity to be awarded various types of incentive compensation, including
annual cash bonuses based on the performance of the Company and its business
units against EVA'r' performance targets, long-term incentive compensation based
on EVA'r' and total shareholder return, and equity awards such as stock options.
As such, the 2001 Incentive Plan is designed to replace the 1996 Annual
Performance Plan, which was approved by shareholders at the 1997 Annual Meeting
of Shareholders, and the 2000 Executive Long Term Incentive Plan, and to
supplement the limited number of equity-based grants, such as stock options,
that can be awarded under the 1996 Incentive Plan.

GENERAL

Administration of the Plan. The 2001 Incentive Plan will be administered by
the Compensation Committee, which must be comprised, unless otherwise determined
by the Board of Directors, solely of not less than two members who are
(i) 'Non-Employee Directors' with the meaning of Rule 16b-3(b)(3) (or any
successor rule) promulgated under the Exchange Act and (ii) 'outside directors'
within the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section
162(m) of the Code, provided that awards granted to non-employee Directors will
be administered by the Board. Subject to certain exceptions, the Compensation
Committee may delegate its responsibilities, powers and administrative duties.

Eligibility. Awards under the 2001 Incentive Plan may be granted to
employees of the Company and its subsidiaries and affiliates (provided such
subsidiary or affiliate has been designated by the

Compensation Committee as eligible to receive awards under the plan) and to
non-employee Directors of the Company.

Duration, Termination and Amendment of the Plan. Subject to the approval of
the Company's shareholders, the 2001 Incentive Plan became effective on
January 26, 2001 and, subject to the Board's right to amend or terminate the
2001 Incentive Plan at any time, the 2001 Incentive Plan will remain in effect
until all shares subject to it have been purchased or acquired. No award may be
granted under the 2001 Incentive Plan after January 25, 2011. The Board may
amend or terminate the 2001 Incentive Plan or any award granted under the plan
at any time. However, no such amendment or termination may be made without
approval of the shareholders if it will (a) disqualify any incentive stock
option as defined under Section 422 of the Code ('ISOs') granted under the plan;
(b) increase the aggregate number of shares that may be delivered under the
plan; (c) increase the maximum amounts that can be paid to an individual
participant under the plan; (d) change the types of business criteria on which
performance-based awards can be based under the plan; or, (e) modify the
requirements regarding eligibility for participation under the plan. In
addition, no such amendment or termination may materially adversely affect any
previously granted award without the written consent of the participant holding
the award.

Shares Subject to the Plan and Maximum Awards. Subject to the terms of the
2001 Incentive Plan, 3,200,000 shares of Common Stock are reserved for delivery
to participants under the 2001 Incentive Plan. No more than 1,000,000 shares may
be granted in the form of restricted stock and no more than 1,500,000 shares may
be granted to any participant under the 2001 Incentive Plan. In addition, there
are limitations on specific types of awards, as set forth below.

DESCRIPTION OF AWARDS UNDER THE 2001 INCENTIVE PLAN

The following types of awards may be granted under the 2001 Incentive Plan:

Stock Options and SARs. An option is the right to purchase one or more
shares of Common Stock at a specified price, as determined by the
Compensation Committee. The Compensation Committee may grant nonqualified
stock options ('NQSOs') and ISOs. Options will be exercisable at the times
and subject to the terms and conditions determined by the Compensation
Committee. No more than 1,000,000 shares subject to options may be granted
to any participant in any fiscal year. IN ADDITION, OUTSTANDING OPTIONS MAY
NOT BE MODIFIED TO REDUCE THE EXERCISE PRICE THEREOF NOR MAY A NEW OPTION AT
A LOWER PRICE BE SUBSTITUTED FOR A SURRENDERED OPTION (EXCEPT TO REFLECT A
CHANGE IN THE COMPANY'S CAPITAL STRUCTURE OR A DISTRIBUTION TO SHAREHOLDERS
OR A CHANGE-IN-CONTROL.) (See Section 6.2 of the 2001 Incentive Plan). The
Compensation Committee also may grant stock appreciation rights ('SARs'),
which are rights to receive payment either in cash or in Common Stock as the
Compensation Committee may determine equal in value to the excess of the
fair market value of a share of Common Stock on the date of exercise over
the reference price per share of Common Stock established in connection with
the grant of the SAR. No participant may receive awards of SARs in any year
in excess of 1,000,000 shares.

Restricted Stock. Restricted stock is an award of Common Stock subject
to restrictions and other terms and conditions as the Compensation Committee
determines. No more than 500,000 shares of restricted stock may be granted
to any participant in any fiscal year.

Performance Units/Shares and Cash-Based Awards. The Compensation
Committee also may grant other types of awards that are valued in whole or
in part by reference to, or are otherwise based on, the fair market value of
the Common Stock or other criteria approved by the Compensation Committee,
including the achievement of performance goals. These awards are subject to
such terms and conditions as the Compensation Committee determines. Payment
of earned performance units or shares and cash-based awards may be made in
any combination of cash or shares of Common Stock as determined by the
Compensation Committee that have an aggregate fair market value equal to the
value of the earned awards at the close of the applicable performance
period. The maximum aggregate grant of performance shares that may be
awarded to any participant in any fiscal year shall not exceed the value of
500,000 shares of Common

Stock. The maximum aggregate amount of performance units or cash-based
awards that may be awarded to any participant in any fiscal year shall not
exceed $12,000,000.

Stock Awards. The Compensation Committee may grant awards of up to
500,000 shares of Common Stock to any participant in any fiscal year.

All awards under the 2001 Incentive Plan to employees must be granted by the
Compensation Committee. All awards to non-employee Directors under this plan
must be granted by the Company's Board of Directors.

SPECIFIC TERMS OF AWARDS

Performance Measures. With respect to awards to participants designed to
qualify for the performance-based exception under Section 162(m) of the Code,
the performance measure or measures to be used for purposes of such grants will
be chosen from among the following: (i) EVA'r'; (ii) net earnings;
(iii) earnings per share; (iv) net sales growth; (v) net income (before or after
taxes); (vi) net operating profit; (vii) return measures (including, but not
limited to, return on assets, equity or sales); (viii) cash flow (including, but
not limited to, operating cash flow and free cash flow); (ix) cash flow return
on investments, which equals net cash flows divided by owner's equity;
(x) earnings before or after taxes, interest, depreciation and/or amortization;
(xi) internal rate of return or increase in net present value; (xii) dividend
payments to parent; (xiii) gross revenues; (xiv) gross margins; (xv) operating
margin; (xvi) share price (including, but not limited to, growth measures and
total shareholder return); (xvii) expense targets; (xviii) working capital
targets relating to inventory and/or accounts receivable; (xix) planning
accuracy (as measured by comparing planned results to actual results);
(xx) comparisons to various stock market indices; and, (xxi) comparisons to the
performance of other companies.

Employment or Service Termination. Each participant's award agreement will
set forth the extent to which the participant will retain any rights to awards
following termination of the participant's employment. Such provisions will be
determined in the sole discretion of the Compensation Committee, will be
included in the award agreement entered into with each participant, need not be
uniform among all awards, and may reflect distinctions based on the reasons for
termination.

Acceleration and Vesting of Awards Upon a Change-in-Control. Subject to the
terms of participants' award agreements, upon the occurrence of a
Change-in-Control: (i) all options and SARs become immediately exercisable and
remain exercisable throughout their entire term; (ii) any restriction periods
and restrictions imposed on restricted stock that are not performance-based will
lapse; and, (iii) the target payout opportunities attainable under outstanding
awards of 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.

A 'Change-in-Control' is defined under the 2001 Incentive Plan 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 (not including any period prior to the consummation of the
Demerger), 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); (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); or, (v) in the case of
executives who are employed by an operating subsidiary of the Company, (x) any
person (subject to certain exceptions) becoming the 'beneficial owner' (within
the meaning of Rule 13d-3 under the Exchange Act) of securities of the
subsidiary representing more than 50% of the combined voting power of its
outstanding securities, or (y) the sale of all or substantially all of the
assets of such subsidiary (subject to certain exceptions). The definition of
Change-in-Control under the 2001 Incentive Plan is identical to the definition
of Change-in-Control in the 1996 Incentive Plan, the 1996 Annual Performance
Plan, the 2000 Executive Long Term Incentive Plan and other executive benefit
plans of the Company. It is also identical to the definition of
Change-in-Control in the executive agreements of the Company's officers, to the
extent described under 'Executive Agreements and Other Relationships,' below.

Adjustment of Shares or Price. In the event of a change in the Common Stock
or the Company's capital structure through a stock split, merger, consolidation,
reorganization, liquidation or distribution of stock or property or other
similar change in capital structure or distribution to shareholders, the
Compensation Committee, in its sole discretion, will make an adjustment in the
number and class of shares that may be delivered under the 2001 Incentive Plan,
the award limits set forth in the 2001 Incentive Plan, and the terms of
outstanding awards, as the Compensation Committee determines to be appropriate
to prevent dilution or enlargement of rights.

The 2001 Incentive Plan provides that awards generally may be transferred by
will or the laws of descent and distribution. The Compensation Committee will
determine the treatment to be afforded to a participant in the event of
termination of employment for any reason, including death, disability or
retirement. In addition to the foregoing, other than with respect to ISOs, the
Compensation Committee may permit the transferability of an award by a
participant to certain members of the participant's immediate family or trusts
for the benefit of such persons or other entities owned by such persons.

The Compensation Committee may grant awards to participants who are subject
to the tax laws of nations other than the United States, which awards may have
terms and conditions as determined by the Compensation Committee as necessary to
comply with applicable foreign laws. The Compensation Committee may take any
action which it deems advisable to obtain approval of such awards by the
appropriate foreign governmental entity; provided however, that no such awards
may be granted and no action may be taken that would violate the Exchange Act,
the Code or any other applicable law.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

General. The following is a general summary as of the date of this Proxy
Statement of the United States federal income tax consequences associated with
participation in the 2001 Incentive Plan. The federal tax laws may change and
the federal, state and local tax consequences for any participant will depend
upon his or her individual circumstances. This information may not be applicable
to employees of foreign subsidiaries or to participants who are not residents of
the United States. All participants have been and are encouraged to seek the
advice of a qualified tax advisor regarding the tax consequences of
participation in the 2001 Incentive Plan. Any tax effects that accrue to foreign
employees as a result of participation in the 2001 Incentive Plan will be
subject to the tax laws of the countries in which such employees reside.

Under legislation adopted in 1997, the current United States federal maximum
tax rate on net long-term capital gain is 20%. For 2001, the maximum individual
ordinary income tax rate is 39.6%. Thus, the differences in effect for awards
resulting in tax at capital gain rates and awards resulting in tax at ordinary
income rates are significant. Developments should be monitored closely because
the Code may be amended or regulations may be adopted significantly changing the
tax effects of the awards described below.

Nonqualified Stock Options. A participant will not recognize any income upon
the grant of a nonqualified stock option ('NQSO') or stock appreciation right
('SAR'). Upon exercise of a NQSO, the amount by which the fair market value of
the shares acquired on the date of exercise exceeds the option exercise price
will be treated as ordinary income to the participant. Similarly, upon the
receipt of cash or shares pursuant to the exercise of an SAR, the participant
will recognize ordinary income in an amount equal to the sum of the cash and the
fair market value of the shares received. As a result of Section 16(b) of the
Exchange Act, under certain limited circumstances, the timing of income

recognition may be deferred for a certain period for any participant who is an
executive officer or director of the Company or a beneficial owner of more than
10% of any class of equity securities of the Company. Absent a Section 83(b)
election (as described below), recognition of income by the participant will be
deferred until the expiration of such period. Assuming the shares acquired upon
exercise of the option constitute capital assets in the participant's hands, any
gain or loss, measured by reference to the fair market value of the shares on
the date of exercise, recognized upon their ultimate disposition will be treated
as capital gain or loss to the participant, which will be long-term if the
shares have been held for more than one year after the exercise date.

Ordinary income realized upon the exercise of a NQSO or SAR is subject to
tax withholding. The Company has the right to deduct or withhold, or to cause a
participant to remit to the Company, all tax required to be withheld. In
addition, the participant may irrevocably elect, subject to the approval of the
Compensation Committee, to satisfy the withholding liability, in whole or in
part, by requesting the Company to purchase shares at their fair market value on
the date the tax liability is determined equal to the minimum statutory tax that
could be imposed on the transaction and withheld by the Company.

The Company generally will be allowed a federal income tax deduction in an
amount equal to the ordinary income included by the individual with respect to
his or her NQSO or SAR, provided that such amount constitutes an ordinary and
necessary business expense to the Company and is reasonable and the limitations
of Sections 280G and 162(m) of the Code do not apply.

If a participant exercises an NQSO by delivering shares, other than shares
previously acquired pursuant to the exercise of an ISO which is treated as a
'disqualifying disposition' (as described below), the participant will not
recognize gain or loss with respect to the exchange of such shares, even if
their then fair market value is different from the participant's tax basis. The
participant, however, will recognize ordinary income as described above with
respect to the exercise of the NQSO as if the exercise price had been paid in
cash.

Incentive Stock Options. A participant will not recognize any income upon
the grant or exercise of an incentive stock option as defined in Section 422 of
the Code ('ISO'). Similarly, a participant generally will not recognize any
income upon the exercise of an ISO, provided that the participant is employed by
the Company from the date of grant of the ISO until three months prior to the
exercise, except where employment terminates by reason of disability (where the
three month period is extended to one year) or death (where the requirement does
not apply). If a participant exercises an ISO after these requisite periods, the
option will be treated as a NQSO and will be subject to the rules set forth
above. Further, the amount by which the fair market value of the shares acquired
on the date of exercise exceeds the option exercise price will constitute an
item includible in alternative minimum taxable income, and thereby may subject
the participant to the alternative minimum tax. Such alternative minimum tax may
be payable even though the participant receives no cash upon the exercise of the
ISO with which to pay such tax.

Upon the disposition of shares acquired pursuant to the exercise of the ISO
after the later of (a) two years from the date of grant of the ISO or (b) one
year after the date of transfer (the 'ISO Holding Period'), the participant will
recognize long-term capital gain or loss, as the case may be, measured by the
difference between the shares' selling price and the option exercise price. If,
however, a participant does not hold the shares so acquired for the ISO Holding
Period -- thereby making a 'disqualifying disposition' -- the participant would
recognize ordinary income equal to the excess of the fair market value of the
shares at the time the ISO was exercised over the exercise price and the
balance, if any, would generally be treated as capital gain. If the
disqualifying disposition is a sale or exchange that would permit a loss to be
recognized under the Code (were a loss in fact to be realized), and the sales
proceeds were less than the fair market value of the shares on the date of
exercise, the participant's ordinary income therefrom would be limited to the
gain (if any) realized on the sale.

If a participant exercises an ISO by delivering shares previously acquired
pursuant to the exercise of another ISO, the participant is treated as making a
'disqualifying disposition' of such shares if they are delivered before the
expiration of their applicable ISO Holding Period. Upon the exercise of an ISO
using previously acquired shares as to which no disqualifying disposition
occurs, despite some uncertainty, it appears that the participant would not
recognize gain or loss with respect to such previously acquired shares.

The Company is not entitled to any tax deduction by reason of the grant or
by reason of the disposition of shares received upon the exercise of an ISO if
the ISO Holding Period is satisfied. The Company generally will be entitled to a
federal income tax deduction in the event of a disqualifying disposition in an
amount equal to the ordinary income included by the participant, provided such
amount constitutes an ordinary and necessary business expense to the Company and
is reasonable and the limitations of Section 280G and 162(m) of the Code do not
apply.

Other Awards. With respect to other awards under the 2001 Incentive Plan
that are settled either in cash or in shares that are either transferable or not
subject to a substantial risk of forfeiture (as defined in the Code and the
regulations thereunder), a participant generally will recognize ordinary income
equal to the amount of cash or the fair market value of the shares received.
With respect to awards settled in shares that are restricted as to
transferability or subject to a substantial risk of forfeiture, then, absent a
written election pursuant to Section 83(b) of the Code filed by the participant
with the Internal Revenue Service within 30 days after the date of transfer of
such shares pursuant to the award (a 'Section 83(b) election'), a participant
will recognize ordinary income at the earlier of the time at which (i) the
shares become transferable or (ii) the restrictions that impose a substantial
risk of forfeiture lapse, in an amount equal to the fair market value (on such
date) of such shares over the price paid for shares, if any. If a Section 83(b)
election is made, a participant will recognize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
transfer over the price paid for the shares, if any. The ordinary income
recognized with respect to the receipt of cash or shares pursuant to these
awards will be subject to tax withholding.

The Company generally will be allowed a federal income tax deduction in an
amount equal to the income included by the participant with respect to the
award, provided such amount constitutes an ordinary and necessary business
expense and is reasonable and the limitations of Section 280G and 162(m) of the
Code do not apply.

Dividends and Dividend Equivalents. To the extent awards under the 2001
Incentive Plan earn dividends or dividend equivalents, whether paid currently or
credited to an account established under the Plan, a participant generally will
recognize ordinary income with respect to such dividends or dividend
equivalents.

Change-in-Control. In general, if the total amount of payments to a
participant that are contingent upon a 'change of control' of the Company as
defined in Section 280G of the Code (generally including payments under the 2001
Incentive Plan that vest upon a 'Change-in-Control,' as defined under the 2001
Incentive Plan), equal or exceeds three times the individual's 'base amount'
(generally, such individual's average annual compensation for the five calendar
years preceding the 'change of control,' as defined in Section 280G of the
Code), then, subject to certain exceptions, the payments may be treated as
'parachute payments' under the Code, in which case a portion of such payments
would not be deductible by the Company and the participant would be subject to a
20% excise tax on such portion.

Certain Limitations on Deductibility or Executive Compensation. With certain
exceptions, Section 162(m) of the Code denies a deduction to publicly held
corporations for compensation paid to certain executive officers in excess of
$1 million per executive per taxable year (including any deduction with respect
to the exercise of an NQSO or SAR or the disqualifying disposition of stock
purchased pursuant to an ISO). One such exception applies to certain
performance-based compensation, provided that such compensation has been
approved by shareholders in a separate vote and certain other requirements are
met. If approved by its shareholders, the Company believes that stock options,
SARs and performance-based awards granted under the 2001 Incentive Plan should
qualify for the performance-based compensation exception to Section 162(m) of
the Code.

ERISA. The Company believes that the 2001 Incentive Plan is not subject to
any provisions of the Employee Retirement Income Security Act of 1974, nor is it
a qualified plan under Section 401(a) of the Code.

OTHER MATTERS

The Board of Directors has adopted the 2001 Incentive Plan, subject to
approval by the Company's shareholders at the 2001 Annual Meeting. Absent such
approval, the plan will not become effective and the Board of Directors will
consider alternatives for the Company at that time. On January 26, 2001, the
Company granted to a limited number of executive officers and key employees of
the Company three-year performance unit awards under the 2001 Incentive Plan
that have terms and conditions substantially identical to awards granted in 2000
under the 2000 Executive Long Term Incentive Plan, as described below under
'Long Term Incentive Compensation Awards.' All such awards were granted subject
to shareholder approval of the 2001 Incentive Plan at the 2001 Annual Meeting
and automatically will be cancelled if shareholders do not approve such
adoption. No other awards have been granted under the 2001 Incentive Plan. The
Compensation Committee has discretion to determine the employees who receive
awards under the 2001 Incentive Plan and the type, terms and conditions of
awards. Accordingly, it is not possible to determine the amount of the awards
that will be granted under the 2001 Incentive Plan, other than the awards
granted on January 26, 2001, as described above.

The following table sets forth information with respect to the awards
granted under the 2001 Incentive Plan on January 26, 2001 to the five executive
officers named in the Summary Compensation Table below; to all executive
officers as a group; and, to all employees, other than such executive officers,
as a group.

AWARDS GRANTED UNDER 2001 INCENTIVE PLAN

DOLLAR
NAME VALUE($)(1)
---- -----------

William M. Landuyt ..................................... 1,357,500
Chairman, President and Chief Executive Officer
Robert E. Lee .......................................... 431,250
Executive Vice President -- Growth and Development
George H. Hempstead, III ............................... 261,000
Senior Vice President -- General Counsel and Secretary
John E. Lushefski ...................................... 228,000
Senior Vice President and Chief Financial Officer
Peter P. Hanik ......................................... 192,500
Senior Vice President -- Technology
Executive Officer group (8 persons)..................... 2,949,470
Non-executive officer employee group.................... 1,119,063

---------

(1) All awards granted on January 26, 2001 under the 2001 Incentive Plan have a
three-year performance period commencing January 1, 2001 and ending
December 31, 2003. The amounts shown in the table represent the target award
for each person named and the aggregate target award for each group named.
Half of each such award is an EVA'r'-based award and the other half is a
TSR-based award. The maximum EVA'r'-based award for any participant is 200%
of the participant's target EVA'r'-based award. The maximum TSR-based award
for any participant is 200% of the participant's target TSR-based award. On
March 23, 2001, the closing price of the Common Stock on the New York Stock
Exchange was $16.22 per share.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE 'FOR' APPROVAL OF
THE 2001 INCENTIVE PLAN.

EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors is comprised entirely
of independent, non-employee Directors. This report sets forth the Compensation
Committee's policies governing compensation of the Company's officers, including
the Chief Executive Officer, and the relationship among compensation, the
Company's performance, individual performance and total shareholder return.

COMPENSATION PHILOSOPHY

The Compensation Committee is responsible for establishing and administering
compensation programs for the officers and employees of the Company and its
subsidiaries. In fulfilling this responsibility, the Compensation Committee's
policy is to provide strong, direct links among shareholder value, Company and
individual performance, and executive compensation, as well as to structure
sound compensation programs that attract and retain highly qualified people.
This is done in the context of a compensation program that includes:

Base Salary. Base salary is intended to provide an annual cash
compensation at a level consistent with each employee's position and
contribution, and competitive in the market with comparable companies.

Annual Incentive Bonus. The Company's 1996 Annual Performance Plan
provides executives and other key employees with the opportunity to receive
cash bonuses based on the performance of the Company and its business units
as measured by performance targets approved at the beginning of each year by
the Compensation Committee. The performance targets approved for 2000 were
based on Economic Value Added, or EVA'r', performance measures approved by
the Compensation Committee and developed by the Company's management in
conjunction with Stern Stewart & Co. These EVA'r' targets are based on the
excess of net operating profit after cash taxes over the estimated total
cost of capital employed. Bonuses earned by officers and senior Amanagers
are credited to a 'bonus bank,' with each employee receiving a designated
percentage of his or her bank account balance each year. For 2000, employees
received 40% of their bank account balances, after crediting the earned 2000
bonus awards, plus a prefunding amount necessary to implement the bonus bank
plan equal to 50% of their reference awards, discussed below. If an
employee's bonus bank account balance before crediting such 2000 award and
prefunding amount was negative, the employee received 40% of his or her 2000
earned award, and the remaining 60% was credited to the negative bonus bank
account.

Long-Term Incentive Compensation. To link each executive's compensation
to the long-term success of the Company and its subsidiaries, the Company
has adopted long-term incentive compensation programs. Executives received
on October 8, 1996 under the 1996 Incentive Plan performance-based stock
awards and time-vested restricted stock awards with respect to the three-,
four- and five-year performance periods ending December 31, 1999, 2000 and
2001, respectively. Certain executives promoted or hired after October 8,
1996 received stock awards under such plan upon such promotion or
employment. All outstanding performance-based restricted stock awards are
based on specific value-creation performance targets based either on a
cash-flow/return-on-investment formula or on EVA'r', as well as the
Company's Common Stock performance relative to the Standard & Poor's
Chemical Composite Index ('S&P Chemical Index'). In addition, because the
three-year stock award performance period ended December 31, 1999, certain
executives were granted at the beginning of 2000 awards under the Company's
2000 Executive Long Term Incentive Plan with respect to the three-year
performance period from January 1, 2000 to December 31, 2002. As discussed
in more detail under 'Long-Term Incentive Plans -- 2000 Executive Long Term
Incentive Plan,' below, these awards are based on specific EVA'r'
performance targets approved by the Compensation Committee at the time of
the grant, as well as the total shareholder return on the Common Stock
relative to the S&P Chemical Index.

2001 Incentive Plan. The 2001 Incentive Plan is designed to provide
executives and other key employees the opportunity to be awarded various
types of incentive compensation, including

annual cash bonuses based on the performance of the Company and its business
units and long-term incentive compensation based on performance criteria as
described on page 12 of this Proxy Statement and equity awards such as stock
options. As such, the 2001 Incentive Plan is designed to replace the Annual
Performance Plan and the 2000 Executive Long Term Incentive Plan and will
supplement the limited number of equity-based grants that can be awarded
under the 1996 Incentive Plan. The Company's Board is requesting the
shareholders to approve the 2001 Incentive Plan at this Annual Meeting.

Stock Ownership Guidelines. In order to align the interests of the
Company's management and shareholders, the Compensation Committee has
established guidelines for significant personal investment by executive
officers and key management in Common Stock, thus encouraging management to
take actions that maximize shareholder value.

The Compensation Committee seeks to ensure that the Chief Executive Officer
and other 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.

It is the Company's policy to position the base salaries of the Company's
executives at or near the median levels of compensation for similar positions in
comparable companies and total target compensation (base salary plus target
incentive compensation) at or near the seventy-fifth percentile. Accordingly,
the Company's incentive compensation will vary significantly depending on
results achieved against performance targets. The targeted levels of
compensation for the Company's executives are based in part on surveys of
comparable companies conducted by independent consultants. The companies
selected for comparison by the independent consultants include 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. The Compensation
Committee reviews the Company's compensation programs annually to ensure that
the Company's compensation programs continue to be competitive at the desired
levels within the market.

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. Bonuses
awarded under the 1996 Annual Performance Plan and performance-based stock
awards granted under the 1996 Incentive Plan are earned based on the achievement
of performance targets determined by the Compensation Committee. It is intended
that these awards will qualify for the 'performance-based compensation'
exception under Section 162(m) of the Code. The Board has adopted, and is
recommending that the shareholders approve, the 2001 Incentive Plan in order to
permit the future deductibility of annual bonuses, performance-based long-term
incentive compensation awards, stock options and SARs granted under that plan.

BASE SALARY

The Compensation Committee reviewed the base salaries of the Company's
executive officers and key managers in December 1999 and awarded base salary
increases for 2000, taking into account individual performance and
responsibilities and the Company's compensation policy.

1996 ANNUAL PERFORMANCE PLAN

Under the Company's 1996 Annual Performance Plan, the Compensation Committee
determines the executive officers and other employees who are eligible to
receive bonuses under the plan, approves the performance targets for such
bonuses and confirms actual performance against such targets.

The Compensation Committee approved the 1996 Annual Performance Plan
performance targets for calendar year 2000 for the Company and its business
units, based in each case on EVA'r'

performance measures (the 'EVA'r' performance targets'). The Compensation
Committee also approved the 2000 participants in the 1996 Annual Performance
Plan and approved the target bonus award (expressed as a percentage of each
participant's base salary (the 'reference award')) that could be credited to
each participant upon attainment of EVA'r' performance targets. The actual bonus
award credited to each participant's bonus bank for 2000 depended upon actual
performance in 2000 compared to the EVA'r' performance targets, and thus a
participant could have been credited a fraction of, or a multiple of, his or her
reference award. Because Messrs. Lee and Hanik are members of the Company's
Operations Committee and during 2000 were also the President and Chief Executive
Officer of Millennium Inorganic Chemicals Inc. (which operates the Company's
Titanium Dioxide and Related Products segment) and Millennium Petrochemicals
Inc. (which operates the Company's Acetyls segment), respectively, half of each
of their reference awards for 2000 was based on the performance of the entire
Company and half was based on the performance of the subsidiary.

As expected by the Company's Board of Directors and management, 2000 was a
challenging year for the Company. The 2000 EVA'r' performance targets for the
entire Company approved by the Compensation Committee at the beginning of 2000
were based on the expectation that business conditions in 2000 would be similar
to those experienced in 1999. EVA'r' performance for the entire Company in 2000
did not meet the Company's 2000 EVA'r' performance targets, primarily because
actual performance in 2000 at Millennium Specialty Chemicals Inc. (which
operates the Fragrance and Flavor Chemicals segment) and at Equistar fell short
of expected performance. The awards approved by the Compensation Committee for
the entire Company for 2000 reflected such performance, as only 71% of the
reference awards were earned. Performance at Millennium Inorganic Chemicals Inc.
and Millennium Petrochemicals Inc. substantially exceeded the EVA'r' performance
targets approved by the Compensation Committee at the beginning of 2000. As a
result, the portion of the bonuses received by Messrs. Lee and Hanik for their
subsidiaries' performance in 2000 constituted significantly larger percentages
of their reference awards than the portion received for the entire Company's
performance in 2000. In addition, because the portion of Mr. Lee's bonus bank
account attributable to the performance of Millennium Inorganic Chemicals Inc.
was negative before crediting the award he earned for that subsidiary's
performance in 2000 and the relevant prefunding, Mr. Lee received 40% of that
earned award, and the remaining 60% was credited to his negative bonus bank
account.

LONG-TERM INCENTIVE PLANS

1996 Incentive Plan. In January 2001, the Compensation Committee reviewed
the actual performance of the Company and its business units during the
performance period ending December 31, 2000 against the value creation
performance targets previously approved by the Compensation Committee for the
performance-based stock awards granted under the 1996 Incentive Plan. The
Compensation Committee determined that Messrs. Landuyt, Lee, Hempstead and
Lushefski had earned awards, based on the value creation targets approved for
the entire Company, at the 1.91% level. Mr. Lee was the President of the Company
in October 1996 when his restricted stock award was granted, and thus his award
is based on the performance of the entire Company. Mr. Hanik earned 31.86% of
his awards for the performance period ending December 31, 2000, as they were
based in part on the value creation targets for the entire Company and in part
on the targets for Millennium Petrochemicals Inc. Mr. Hanik was the President of
Millennium Petrochemicals Inc. from March 1998 to March 21, 2001.

The awards earned for the entire Company's performance in 2000 reflected the
fact that the performance of Millennium Inorganic Chemicals Inc. and the
operations that are now part of Equistar over the four-year performance period
ending December 31, 2000 fell significantly short of the performance targets
approved by the Compensation Committee in October 1996. The performance of
Millennium Petrochemicals Inc. came closer to the performance targets previously
approved for that business. In addition, the Compensation Committee determined
that the total shareholder return on the Common Stock during the four-year
performance period commencing January 1, 1997 was within the median one-third of
the companies in the S&P Chemical Index, and thus employees' awards were not
increased or decreased due to the relative performance of the Common Stock over
the four-year performance period. The total shareholder return on the Common
Stock during this four-year period

was 14.7%, significantly better than the return for the period commencing
October 2, 1996 shown in the graph on page 22.

2000 Executive Long Term Incentive Plan. The 2000 Executive Long Term
Incentive Plan incentivizes senior executives to focus on long-term value
creativity, rewarding their contributions to the Company's success over
three-year performance periods. One-half of the award (the 'EVA'r'-based award')
granted to each executive is based on EVA'r' performance compared to EVA'r'
performance targets approved by the Compensation Committee at the beginning of
each performance period. After the end of an award year, the Compensation
Committee determines actual EVA'r' performance against such targets, and credits
each participant with an EVA'r'-based award. This award is based on the
participant's target bonus award approved by the Compensation Committee at the
beginning of the performance period (expressed as a percentage of the
participant's base salary ('the ELTIP reference award')). This credited award is
then invested in Common Stock, which is placed in a trust, is subject to
forfeiture, and may vest at the end of the performance period. The remaining
half of each participant's award (the 'TSR-based award') is based on the
quarterly average total shareholder return on the Common Stock over the
performance period compared to the quarterly average total shareholder return on
the common stock of the companies in the S&P Chemical Index, in each case
including reinvested dividends. TSR-based awards are payable in cash after the
end of the performance period.

The EVA'r'-based awards granted in 2000 under the 2000 Executive Long Term
Incentive Plan were based on the same EVA'r' performance targets approved by the
Compensation Committee for the awards granted in 2000 under the 1996 Annual
Performance Plan. Thus, participants were credited at the beginning of 2001 with
EVA'r'-based awards under this plan at the same percentages of their ELTIP
reference awards as were approved by the Compensation Committee for awards
earned in 2000 under the 1996 Annual Performance Plan. Such credited
EVA'r'-based awards were invested in Common Stock, which may vest on
December 31, 2002.

STOCK OWNERSHIP

In order to promote an ownership perspective on the part of the Company's
executive officers and management employees and to link the return realized by
management on their personal assets to the return realized by the Company's
shareholders, the Board of Directors and the Compensation Committee approved
stock ownership guidelines (exclusive of the value of Common Stock that may be
earned under the 1996 Incentive Plan) for the 26 executive officers and senior
management employees of the Company and its subsidiaries who hold restricted
stock awards under the 1996 Incentive Plan. These executive officers and senior
managers are expected to achieve targeted ownership levels of Common Stock,
ranging from a value of 75% of annual base salary to 300% of annual base salary,
within five years after receiving a restricted stock award. This target would
require holdings of Common Stock (in addition to Common Stock that may be earned
under the 1996 Incentive Plan) aggregating more than $12.5 million, based on
2000 base salary levels. As of March 23, 2001, the 26 executive officers and
senior managers owned shares of Common Stock with a market value at such date of
more than $15 million (including shares purchased as a result of deferred
salaries and bonuses under the Salary and Bonus Deferral Plan and credited
awards in Common Stock under the 2000 Executive Long Term Incentive Plan but
excluding all Common Stock earned under the 1996 Incentive Plan). The
Compensation Committee believes that satisfactory progress has been made toward
meeting the targets.

CHIEF EXECUTIVE OFFICER'S COMPENSATION

In establishing Mr. Landuyt's base salary for 2000, the Compensation
Committee considered the salaries of chief executive officers of other chemical
companies and other companies of similar size and complexity. They also
considered Mr. Landuyt's performance and the Company's challenging business
environment. The Compensation Committee determined in December 1999 to award him
a salary increase for 2000 equal to 4% of his 1999 salary. Mr. Landuyt elected
in 1999 to defer 5% of his 2000 salary into Common Stock under the Salary and
Bonus Deferral Plan, and had deferred 10% of his 1999 salary into Common Stock
under this plan.

As discussed under '1996 Annual Performance Plan,' above, as a result of the
Company's performance in 2000, as measured by EVA'r' performance measures
approved by the Compensation Committee at the beginning of 2000, the
Compensation Committee approved crediting Mr. Landuyt's bonus bank account with
an award equal to 71% of his 2000 reference award. Accordingly, Mr. Landuyt was
entitled to a bonus with respect to 2000 under the 1996 Annual Performance Plan
of $838,417. Mr. Landuyt elected in 1999 to defer 25% of his 2000 bonus into
Common Stock under the Company's Salary and Bonus Deferral Plan, and had
deferred 50% of his 1999 bonus and 100% of his 1998 and 1997 bonuses into Common
Stock under this plan.

Mr. Landuyt received a performance-based stock award and a time-vested
restricted stock award under the 1996 Incentive Plan shortly after the Demerger.
As discussed under 'Long Term Incentive Plans -- 1996 Incentive Plan,' above,
1.91% of the performance-based stock award for the four-year period ending
December 31, 2000 was earned, and thus Mr. Landuyt received on February 15, 2001
1,069 shares of performance-based stock for such performance period,
representing 50% of the shares earned for such performance period. The remaining
50% of such earned shares vest pro rata on December 31, 2001, 2002, 2003, 2004
and 2005, subject to forfeiture. In addition, the Company distributed to
Mr. Landuyt 37,338 shares of time-vested restricted stock on October 8, 2000,
and 8,470 shares of performance-based stock on December 31, 2000 that had been
earned for the three-year performance period ended December 31, 1999.

As discussed under 'Long Term Incentive Plans -- 2000 Executive Long Term
Incentive Plan,' above, as a result of the Company's performance in 2000, as
measured by EVA'r' performance targets approved by the Compensation Committee at
the beginning of 2000, the Compensation Committee approved crediting
Mr. Landuyt with an EVA'r'-based award under the 2000 Executive Long Term
Incentive Plan of 26,423 shares of Common Stock. These shares have been placed
in a trust, are subject to forfeiture, and may vest on December 31, 2002.

Under the Stock Ownership Guidelines, Mr. Landuyt was given in October 1996
a target of owning Common Stock within five years with a value equal to 300% of
his base salary (exclusive of the value of Common Stock earned under the 1996
Incentive Plan). As of March 23, 2001, he had purchased (together with members
of his immediate family) 231,357 shares of Common Stock (including shares
purchased under the Salary and Bonus Deferral Plan and shares credited under the
2000 Executive Long Term Incentive Plan, but excluding all Common Stock earned
under the 1996 Incentive Plan) with a market value equal to 425% of his 2000
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 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

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 S&P Chemical Index over the
period from October 2, 1996, when regular-way trading in the Common Stock
commenced on the New York Stock Exchange, through December 31, 2000, the end of
the Company's most recent fiscal year. The graph assumes that $100 was invested
on October 2, 1996 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 CHART]

Millennium Chemicals Inc. S&P 500 Index S&P Chemical Index

100 100 100 Oct. 2, 1996
78 107 103 Dec. 31, 1996
107 143 127 Dec. 31, 1997
92 184 116 Dec. 31, 1998
94 223 151 Dec. 31, 1999
89 202 126 Dec. 31, 2000

---------

* As indicated above, October 2, 1996 was the date regular-way trading commenced
in the Common Stock after the Demerger.

SUMMARY COMPENSATION TABLE

The following table sets forth certain information with respect to the
compensation for 2000, 1999 and 1998 of the individuals who were the Company's
five most highly compensated executive officers in 2000, including Mr. Landuyt,
the Chief Executive Officer.

ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------------------- -------------------------------------------
RESTRICTED LTIP
NAME AND PRINCIPAL STOCK PAYOUTS ALL OTHER
POSITION(1) YEAR SALARY($)(1) BONUS($)(2) AWARDS($)(3) ($)(4) COMPENSATION($)(5)
----------- ---- ------------ ----------- ------------ ------ ------------------

William M. Landuyt............. 2000 884,000 838,417 0 0 87,305
Chairman, President and 1999 850,000 705,510 0 0 78,150
Chief Executive Officer 1998 810,000 435,240 0 0 25,801

Robert E. Lee.................. 2000 562,000 481,470 0 112,778 52,089
Executive Vice President -- 1999 540,000 172,406 0 107,547 71,527
Growth and Development 1998 515,000 666,067 0 102,596 11,670

George H. Hempstead, III....... 2000 416,000 273,106 0 40,452 45,683
Senior Vice President -- 1999 400,000 229,740 0 35,796 40,636
General Counsel 1998 380,000 141,360 0 35,917 20,913
and Secretary
John E. Lushefski.............. 2000 366,000 240,395 0 53,512 47,258
Senior Vice President 1999 352,000 202,413 0 51,030 38,457
and Chief Financial 1998 337,000 125,364 0 48,681 22,712
Officer
Peter P. Hanik................. 2000 250,000 323,826 0 0 29,337
Senior Vice President -- 1999 225,000 203,190 0 0 23,109
Technology 1998 200,000 134,400 5,231,250 32,584 12,024

---------

(1) Messrs. Landuyt and Hanik elected to defer 5% and 15%, respectively, of
their 2000 salaries into Common Stock under the Salary and Bonus Deferral
Plan. Messrs. Landuyt and Hanik each elected to defer 10% of their 1999
salaries into Common Stock under this plan, and Mr. Lee elected to defer 25%
of his 1998 salary into Common Stock under this plan.

(2) Messrs. Landuyt and Hanik elected to defer 25% and 50%, respectively, of
their 2000 bonuses into Common Stock under the Salary and Bonus Deferral
Plan. Messrs. Landuyt, Lushefski and Hanik elected to defer 50%, 10% and
50%, respectively, of their 1999 bonuses into Common Stock under this plan.
Messrs. Landuyt, Lee, Hempstead, Lushefski and Hanik elected to defer 100%,
50%, 40%, 25% and 50%, respectively, of their 1998 bonuses into Common Stock
under this plan.

(3) On October 8, 1996, Messrs. Landuyt, Lee, Hempstead and Lushefski were
granted performance-based stock awards and time-vested restricted stock
valued at that time at $10,000,000, $7,000,000, $5,000,000 and $5,000,000,
respectively. The number of shares of restricted stock awarded on
October 8, 1996 to these four executives under the 1996 Incentive Plan was
as follows: Mr. Landuyt -- 448,053, of which 336,040 were subject to the
attainment of performance goals and the remainder of which were subject to
time vesting; Mr. Lee -- 313,637, of which 235,228 were subject to the
attainment of performance goals and the remainder of which were subject to
time vesting; and, for each of Mr. Hempstead and Mr. Lushefski -- 224,026,
of which 168,020 were subject to the attainment of performance goals and the
remainder of which were subject to time vesting. On April 22, 1998,
Mr. Hanik was granted under the 1996 Incentive Plan, as a result of his
promotion to President and Chief Executive Officer of Millennium
Petrochemicals Inc., 150,000 shares of restricted stock valued at that time
at $5,231,250, based on the closing price of the Common Stock on such date
of $34.875. Of these shares, 112,500 were subject to the attainment of
performance goals and the remainder were subject to time vesting, in each
case over the two-, three- and four-year periods ending December 31, 1999,
2000 and 2001, respectively. In addition to the restricted stock granted to
Mr. Hanik in 1998 and disclosed above in the Compensation Table, Mr. Hanik
was granted on October 23, 1997 13,441 shares of restricted stock under the
1996 Incentive Plan, valued at that time at $318,384. Of these shares,
10,081 were subject to the
(footnotes continued on next page)

(footnotes continued from previous page)
attainment of performance goals and the remainder were subject to time
vesting. On October 8, 1999, Messrs. Landuyt and Lee received 37,337 and
26,136 shares, respectively; Messrs. Hempstead and Lushefski each received
18,668 shares; and, Mr. Hanik received 13,620 shares (plus accrued dividends
on all such shares), as a result of the vesting of the first installment of
time-vested restricted stock. On October 8, 2000, Messrs. Landuyt and Lee
received 37,338 and 26,136 shares, respectively; Messrs. Hempstead and
Lushefski each received 18,669 shares; and, Mr. Hanik received 13,620 shares
(plus accrued dividends on all such shares), as a result of the vesting of
the second installment of time-vested restricted stock. On February 15,
2000, Messrs. Landuyt, Lee, Hempstead, Lushefski and Hanik received 42,352,
29,646, 21,175, 21,175 and 14,603 shares, respectively, plus accrued
dividends on such shares, when 50% of the performance-based restricted stock
earned for the performance period ended December 31, 1999 vested and was
distributed. On December 31, 2000, these five executives received 8,470,
5,929, 4,235, 4,235 and 2,812 shares, respectively, plus accrued dividends
thereon, when an additional 10% of the earned performance-based restricted
stock for such period vested. The number and value (at the closing price of
the Common Stock on the New York Stock Exchange on December 31, 2000) of the
shares of unvested restricted stock held by these executives as of
December 31, 2000 was as follows: Mr. Landuyt -- 184,306 and $3,340,546;
Mr. Lee -- 129,014 and $2,338,379; for each of Mr. Hempstead and
Mr. Lushefski -- 92,153 and $1,670,273; and for Mr. Hanik -- 72,245 and
$1,309,441. In addition, dividends accrue on these restricted stock awards
from the date of grant and are paid, to the extent such restricted shares
are earned, as and when the underlying shares are distributed to the
executives upon the lapse of the restrictions relating thereto.

(4) Messrs. Lee, Hempstead and Lushefski were credited in January 1998 with
awards of $294,000, $153,000 and $139,500, respectively, under the Hanson
Industries 1996 Long Term Incentive Plan (the 'Hanson Industries 1996
LTIP'), to be paid out in cash in three equal installments on December 15,
1998, 1999 and 2000, plus interest thereon, subject to forfeiture under
certain circumstances if the executive is not employed by the Company or its
subsidiaries on the payment date. One-third of the credited Hanson
Industries 1996 LTIP awards became vested on each of December 15, 1998, 1999
and 2000. Amounts shown as 'LTIP Payouts' in 1998, 1999 and 2000 for Messrs.
Lee and Lushefski represent payments of the vested one-third portion of such
credited awards, plus interest thereon. Mr. Hempstead elected in 1998 to
defer all of his Hanson Industries 1996 LTIP award into Common Stock under
the Company's Salary and Bonus Deferral Plan. The amount shown as 'LTIP
Payouts' in 1998, 1999 and 2000 for Mr. Hempstead represent the value of
such Common Stock when it became vested on December 15, 1998, 1999 and 2000,
respectively, based on the closing price of the Common Stock on the New York
Stock Exchange on such dates. Amounts shown as 'LTIP Payouts' in 1998 for
Mr. Hanik represent the full payment in 1998 of Mr. Hanik's credited award
under the Hanson Industries 1996 LTIP; Mr. Hanik did not receive any further
payments under this plan. Mr. Landuyt did not participate in the Hanson
Industries 1996 LTIP.

(5) The amounts shown in this column include the aggregate matching employer
contributions made in 2000 and 1999 under the Company's 401(k) savings plan,
Supplementary Savings Plan and Salary and Bonus Deferral Plan for each of
Messrs. Landuyt, Lee, Hempstead, Lushefski and Hanik of $71,528 and $57,838;
$38,996 and $60,222; $29,058 and $24,361; $25,579 and $21,481; and, $20,393
and $16,089, respectively. In 1998, the Company made matching contributions
under its 401(k) savings plan for each such officer of $5,000, and no
matching contribution under any other plan. All matching employer
contributions have been invested in Common Stock since the Demerger. 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

The Company had not granted any long-term incentive awards to Messrs.
Landuyt, Lee, Hempstead or Lushefski since October 8, 1996 or to Mr. Hanik since
April 22, 1998, when these executives received performance-based stock awards
and time-vested restricted stock awards under the 1996 Incentive Plan.
Reflecting the partial vesting of these awards for the performance period ending
December 31, 1999, the Board of Directors adopted, at the recommendation of the
Compensation Committee, the Company's 2000 Executive Long Term Incentive Plan
and granted these executives the following awards under such plan for the
performance period beginning January 1, 2000 and ending December 31, 2002. These
awards are subject to the achievement of performance-based targets and will be
forfeited if the executive's employment is terminated before the end of the
performance period, with certain exceptions, such as the retirement or death of
the participant.

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR

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, 2002 0 1,547,000 3,094,000
Robert E. Lee..................... December 31, 2002 0 843,000 1,686,000
George H. Hempstead, III.......... December 31, 2002 0 449,200 898,400
John E. Lushefski................. December 31, 2002 0 439,200 878,400
Peter P. Hanik.................... December 31, 2002 0 300,000 600,000

---------

(1) All awards granted in 2000 under the 2000 Executive Long Term Incentive Plan
have a three-year performance period commencing January 1, 2000 and ending
December 31, 2002.

(2) The maximum EVA'r'-based award for any participant is 200% of the
participant's target EVA'r'-based award. The maximum TSR-based award for any
participant is 200% of the participant's target TSR-based award.

As discussed under 'Long-Term Incentive Plans -- 2000 Executive Long Term
Incentive Plan,' above, one half of each award granted in 2000 to these
executives under the 2000 Executive Long Term Incentive Plan is an EVA'r'-based
award based on EVA'r' performance in 2000 compared to EVA'r' performance targets
approved by the Compensation Committee in January 2000. These targets were
identical to the targets approved by the Compensation Committee for awards
granted in 2000 under the 1996 Annual Performance Plan. In January 2001, the
Compensation Committee compared actual performance in 2000 against these
pre-approved targets. The Compensation Committee then credited each participant
with an EVA'r'-based award, based on the percentage of the award earned and the
participant's ELTIP reference award. This credited amount was then invested in
Common Stock based on the average closing price of the Common Stock during the
first ten trading days of 2000 (which was $20.7838). Accordingly, the
Compensation Committee determined on January 25, 2001 that Messrs. Landuyt, Lee,
Hempstead, Lushefski and Hanik be credited with 26,423, 27,073, 8,526, 7,501 and
9,779 shares of Common Stock, respectively. These shares are held in a trust,
accrue dividends, are subject to forfeiture, and may vest on December 31, 2002.

The remaining half of the award is a TSR-based award, which is an award
based on the total shareholder return on the Common Stock during the performance
period compared to the total shareholder return on the common stock of the
companies in the S&P Chemical Index, measured quarterly (including reinvested
dividends) and then ranked into quintiles. For example, the fifth quintile
consists of the top one-fifth of the companies in the S&P Chemical Index,
measured quarterly (including reinvested dividends), and then ranked by total
shareholder return. (Companies must be in the S&P Chemical Index at the
beginning and end of the performance period to be considered in this ranking.)
If the Company falls in the fifth quintile, participants receive 200% of their
targeted TSR-based award; in the fourth quintile, 150%; in the third quintile,
100%; in the second quintile, 50%; and, in the first quintile, no award. If the
relevant companies in the S&P Chemical Index are not divisible by

five, the Compensation Committee will determine the ranking in an equitable
manner. The TSR-based awards for the performance period 2000 to 2002 will not be
determined until after December 31, 2002.

RETIREMENT PLANS

Prior to January 1, 1999, each of the Company's operating subsidiaries and
the Company's corporate office sponsored its own pension benefit plan and
supplemental executive retirement plan. These plans were traditional final
average pay pension plans. Effective January 1, 1999, the Company converted
these final average pay pension plans to a single Pension Equity Plan.
Substantially all full-time United States nonunion employees of the Company and
its subsidiaries who have completed one year of service with the Company or
certain of the Company's subsidiaries are eligible to participate in the Pension
Equity Plan. Employees become vested in their Pension Equity Plan benefits after
five years of service. Certain executives and key managers with Pension Equity
Plan benefits that exceed the limitation set forth in Section 415 or 401(a)(17)
of the Code are eligible to participate in the Company's Supplemental Executive
Retirement Plan (the 'Supplemental Retirement Plan').

The following tables 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 respective plans
in which they participate assuming they retired in 2000 at the age of 65.

MILLENNIUM CHEMICALS INC. PENSION PLANS

The following table shows the estimated annual retirement benefits that
would be payable to Messrs. Landuyt, Lee, Hempstead, Lushefski and Hanik under
the Pension Equity Plan and the Supplemental Retirement Plan (collectively, the
'Pension Plans'). Messrs. Landuyt, Lee, Hempstead, Lushefski and Hanik have 18,
19, 19, 16 and 27 years of service, respectively, under the Pension Plans.

MILLENNIUM CHEMICALS INC. PENSION 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
------------------- ------- -------- -------- -------- -------- -------- --------

$ 200,000........... $ 4,696 $10,802 $ 19,725 $ 32,875 $ 46,025 $ 59,175 $ 72,325
$ 300,000........... $ 7,045 $16,203 $ 29,588 $ 49,313 $ 69,038 $ 88,763 $108,488
$ 400,000........... $ 9,393 $21,604 $ 39,450 $ 65,750 $ 92,050 $118,350 $144,651
$ 500,000........... $11,741 $27,005 $ 49,313 $ 82,188 $115,063 $147,938 $180,813
$ 600,000........... $14,089 $32,405 $ 59,175 $ 98,625 $138,075 $177,526 $216,976
$ 700,000........... $16,438 $37,806 $ 69,038 $115,063 $161,088 $207,113 $253,138
$ 800,000........... $18,786 $43,207 $ 78,900 $131,500 $184,101 $236,701 $289,301
$ 900,000........... $21,134 $48,608 $ 88,763 $147,938 $207,113 $266,288 $325,464
$1,000,000........... $23,482 $54,009 $ 98,625 $164,376 $230,126 $295,876 $361,626
$1,100,000........... $25,830 $59,410 $108,488 $180,813 $253,138 $325,464 $397,789
$1,200,000........... $28,179 $64,811 $118,350 $197,251 $276,151 $355,051 $433,952
$1,300,000........... $30,527 $70,212 $128,213 $213,688 $299,164 $384,639 $470,114
$1,400,000........... $32,875 $75,613 $138,075 $230,126 $322,176 $414,226 $506,277
$1,500,000........... $35,223 $81,014 $147,938 $246,563 $345,189 $443,814 $542,439
$1,600,000........... $37,572 $86,415 $157,801 $263,001 $368,201 $473,402 $578,602
$1,700,000........... $39,920 $91,816 $167,663 $279,438 $391,214 $502,989 $614,765
$1,800,000........... $42,268 $97,216 $177,526 $295,876 $414,226 $532,577 $650,927

---------

(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
(footnotes continued on next page)

(footnotes continued from previous page)
compensation plus deferrals under the Company's 401(k) and Section 125
plans, plus, under the Supplemental Retirement Plan only, deferrals of base
salary and annual incentive bonuses under the Supplemental Savings Plan and
the Salary and Bonus Deferral Plan; less all amounts received under the 1996
Incentive Plan, any other long-term incentive plan or deferred compensation
plan, moving expenses, severance pay, prizes, grievance settlements,
overseas cost of living allowances, mortgage assistance and executive
perquisites. Final 5-year Average Earnings is currently equal to $1,513,159,
$1,115,549, $679,663, $597,737 and $287,025 for Messrs. Landuyt, Lee,
Hempstead, Lushefski and Hanik, respectively.

(2) Benefits under the Pension Plans are computed as follows: Final Average
Earnings times the pension accrual for each year of service (maximum 35
years). The pension accruals are as follows:

YEARS OF PENSION
SERVICE ACCRUAL
------- -------

0 - 5 5.00%
6 - 10 6.50%
11 - 15 9.50%
16 or more 14.00%

The Pension Equity Plan formula calculates benefits payable as lump sums,
which are then converted to life annuity benefits, payable at age 65, using an
interest rate of 6.00% and the 1983 GATT mortality table for the above table.
The Supplemental Retirement Plan benefit is calculated under this formula
without regard to the limitations set forth in Sections 415 and 401(a)(17) of
the Code. The net Supplemental Retirement Plan benefit is the difference between
the benefits calculated under the Pension Equity Plan formula and the
Supplemental Retirement Plan formula. All capitalized terms used in this
paragraph and not otherwise defined have the meanings ascribed to them in the
relevant plan document.

GRANDFATHERED PENSION BENEFITS

When the Company converted its traditional final average pay pension plans
to the Pension Equity Plan on January 1, 1999, the Company determined that all
employees age 55 and older on that date would be entitled to receive a
grandfathered benefit of the greater of the benefit under the formulas of their
former pension plans and the formulas of the new Pension Plans. Mr. Hempstead
was over 55 on that date. Accordingly, Mr. Hempstead will receive a
grandfathered benefit of the greater of the aggregate benefit calculated under
the Pension Equity Plan and the Supplemental Retirement Plan, and the aggregate
benefit calculated under the old Millennium Chemicals Inc. Pension Plan (the
'Corporate Plan') and the old Corporate Supplemental Executive Retirement Plan
(the 'Corporate SERP' and, together with the Corporate Plan, the 'Grandfathered
Millennium Chemicals Pension Plans'). The following table shows Mr. Hempstead's
estimated annual retirement benefit under the Grandfathered Millennium Chemicals
Pension Plans.

GRANDFATHERED MILLENNIUM CHEMICALS PENSION 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
------------------- ------- -------- -------- -------- --------

$600,000.............................. $ 80,001 $160,002 $240,003 $270,000 $270,000
$700,000.............................. $ 93,335 $186,669 $280,004 $315,000 $315,000
$800,000.............................. $106,668 $213,336 $320,004 $360,000 $360,000
$900,000.............................. $120,002 $240,003 $360,005 $405,000 $405,000

---------

(1) Final 5-year Average Earnings under the Grandfathered Millennium Chemicals
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 under the Corporate Plan includes
(footnotes continued on next page)

(footnotes continued from previous page)
base salary only. Final Average Earnings under the Corporate SERP includes
base salary and bonus earned under the 1996 Annual Performance Plan and
prior annual bonus plans, and is currently equal to $679,663 for
Mr. Hempstead.

(2) Annual Benefits are computed on the basis of straight-life annuity amounts.
The pension benefit under the Corporate Plan is calculated as follows (a)
plus (b) multiplied by (c), where (a) is the Final Average Earnings times
1.95%; (b) is that portion of Final Average Earnings in excess of Social
Security Covered Compensation times .65%; and, (c) is years of Credited
Service to a maximum of 25 years (the 'Corporate Retirement Plan Formula').
Annual benefits under the Corporate SERP are calculated as follows: (a)
minus (b) multiplied by (c), where (a) is Final Average Earnings times
2.67%; (b) is the Social Security Benefit times 2%; and, (c) is years of
Credited Service to a maximum of 25; provided, however, that the benefit
payable under the Corporate SERP shall not exceed 45% of Final Average
Earnings. The Corporate SERP benefit is calculated without regard to the
limitations set forth in Sections 415 and 401(a)(17) of the Code (the
'Corporate SERP formula'). The net Corporate SERP benefit is the difference
between the benefits calculated under the Corporate Plan formula and the
Corporate SERP formula. The Social Security offset is not reflected in the
above table. All capitalized terms used in this paragraph and not otherwise
defined have the meanings ascribed to them in the relevant plan document.

In addition, the Company has determined that all employees age 50 and older
on January 1, 1999 with at least 15 years of service on such date would be
entitled to receive a grandfathered benefit of the greater of the benefit under
the formula of their former qualified pension plan and the formula of the
Pension Equity Plan. This determination will not affect the aggregate pension
benefit of any of the executive officers named in the Compensation Table.

EXECUTIVE AGREEMENTS AND OTHER RELATIONSHIPS

The following is a summary of the change-in-control agreements (the
'Agreements') that are in effect between each of the individuals named in the
Summary Compensation Table and ten other officers of the Company or a Company
subsidiary, on the one hand, and the Company or the Company subsidiary by which
each such officer is employed (the 'Employer'), on the other hand. Subject to
certain surviving rights, the Agreements will terminate on September 30, 2002,
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'). The definition of 'Change-in-Control' in the
Agreements is identical to the definition of 'Change-in-Control' in the 2001
Incentive Plan as described under 'Item 3 -- Approve the 2001 Incentive Plan,'
above, except that, for officers employed by the Company's operating
subsidiaries, a sale of the stock of, or the disposition of substantially all
the assets of, that subsidiary can also constitute a 'Change-in-Control.'

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 his or her
Employer without Cause or due to disability during the Change-in-Control
Protection Period; or, (iv) the executive's employment is terminated by his or
her Employer 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 Employer or by
Employer-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 by
the Employer; (x) three years of additional service and compensation credit for
pension purposes; (y) three years of the maximum Employer contribution under any
type of qualified or non-qualified defined contribution plan; and,
(z) provision for the executive's and his dependents' health coverage for three
years. In addition, if the payment to the executive under the Agreements,
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 Employer or its affiliates which has a material
adverse effect in the aggregate on the Employer and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Board of
Directors of the Employer provided that the executive does not believe in good
faith that such direction is illegal, unethical or immoral and promptly notifies
the appropriate board; (iii) conviction for a felony (subject to certain
exceptions); (iv) breach of any fiduciary duty owed to the Employer or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or, (v) material fraud with regard to the Employer or its
affiliates. '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 or the Employer; (iii) relocation of
the principal executive offices of the Employer 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 Employer 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 Employer 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 Employer to
assume the Agreement.

The Agreements do not apply to a termination of employment outside of the
Change-in-Control Protection Period. The Company's subsidiaries currently
maintain customary severance policies applicable to their respective employees.

In addition to the Agreements, certain other officers and management
employees of the Company and its subsidiaries have agreements with their
respective employers 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 Employer 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 or the Employer, as
applicable, 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. Amounts credited to participants under the 2000 Executive
Long Term Incentive Plan vest and become payable upon a Change-in Control, and
unearned awards vest and become payable at the participants' ELTIP reference
award level. Awards granted under the 2001 Incentive Plan vest and become
payable as described under 'Item 3 -- Approve the 2001 Incentive Plan,' above.
Finally, upon a Change-in-Control (as defined) of the Company or the Employer,
as applicable, all amounts deferred under the Company's Salary and Bonus
Deferral Plan and Supplemental Savings Plan will become payable.

The 1996 Incentive Plan requires that employees pay all applicable
withholding taxes before receiving any vested restricted stock. In order to
permit executives to pay such withholding taxes and to provide for other
expenses without selling shares, the Company's Board of Directors has authorized
the Company to repurchase vested restricted stock, or to make loans to employees
secured by their vested restricted stock. The loans have a term of one-year,
renewable at the option of the Company; currently accrue interest 7% per annum
(and had accrued interest at 6% per annum in 2000), payable quarterly; and, must
be secured by shares that have a market value on the date of the loan of at
least 125% of the loan amount. The Company has outstanding loans to its
executive officers in excess of $60,000 as follows: Mr. Landuyt, $719,705;
Mr. Lee, $734,234; Mr. Dowdle, $65,587; Mr. Hanik, $310,915; Mr. Hempstead,
$478,379; Mr. Lushefski, $479,377; and, Mr. Vercollone, $75,245. In February
2001, Mr. Landuyt repaid a portion of his loan, reducing the loan from $839,705
to $719,705.

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 have been
filed on a timely basis, except that Richard A. Lamond, an officer of the
Company, purchased 800 shares of Common Stock on March 9, 2000, and such
purchase was reported on August 9, 2000.

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 2000, 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, 2000:

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, 2000, including reviews of the Company's quarterly
consolidated financial statements filed on Form 10-Q and statutory audits of
foreign subsidiaries, were $1,531,600.

Financial Information Systems Design and Implementation Fees: None.

All Other Fees: $5,679,700.

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 2001 ANNUAL MEETING

Under the rules of the SEC, any proposal of a shareholder submitted for
inclusion in the Company's proxy statement for the 2002 Annual Meeting must be
received by the Company by December 13, 2001 to be considered. Proposals should
be addressed to, Millennium Chemicals Inc., 230 Half Mile Road, P.O. Box 7015,
Red Bank, NJ 07701-7015, Attn: C. William Carmean.

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, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex 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 & Company Inc. to assist in
its solicitation of proxies from shareholders at a cost of $9,500, plus
reimbursement of expenses.

THE COMPANY'S 2000 ANNUAL REPORT TO SHAREHOLDERS, INCLUDING FINANCIAL
STATEMENTS, IS ENCLOSED HEREWITH. THE COMPANY WILL FURNISH THE COMPANY'S ANNUAL
REPORT ON FORM 10-K OR 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, P.O. BOX 7015, RED BANK, NJ 07701-7015, 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,
GEORGE H. HEMPSTEAD, III
Senior Vice President -- General
Counsel and Secretary

EVA'r' is a registered trademark of Stern Stewart & Co.

EXHIBIT A

MILLENNIUM CHEMICALS INC.
POLICY ON THE INDEPENDENCE OF DIRECTORS

It is the policy of Millennium Chemicals Inc. that a majority of the Board of
Directors be composed of Independent Directors. For purposes of this Policy, the
following directors shall not be considered independent:

1. A director who is employed by, or was employed during the prior three
years by, the Company or its affiliates.

2. A director who is employed as an executive of another corporation where
any of the Company's executives serves on that corporation's
compensation committee.

3. A director (a) who is a partner, controlling shareholder or executive
officer of an organization that has a business relationship with the
Company, or (b) who has a direct business relationship with the Company
(e.g., a consultant); unless the Board of Directors determines in its
business judgment that the relationship does not interfere with the
director's exercise of independent judgment.

4. An immediate family member of any of the above.

In applying this policy and in making a determination as to whether directors
have any relationship to the Company that may interfere with the exercise of
their independence from management and the Company, the Board of Directors shall
consider, among other things, the materiality of the relationship to the
Company, to the director, and, if applicable, to the organization with which the
director is affiliated. The Board of Directors shall make this determination at
least once annually, and annually shall request the directors to disclose to the
Board any connection with the Company and its management that could be material
in any determination of independence.

In addition to the foregoing requirements, each member of the Audit Committee
of the Board of Directors shall meet all requirements that the New York Stock
Exchange may impose from time to time for members of audit committees.

A-1

EXHIBIT B

MILLENNIUM CHEMICALS INC.
AUDIT COMMITTEE CHARTER

The primary function of the Audit Committee of the Board of Directors is to
assist the Board in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders and others, the
systems of internal controls which management has established, and the audit
process.

While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of the Company's management. Nor is the Committee to assure
compliance with laws and regulations and the Company's Code of Conduct.

In meeting its responsibilities, the Audit Committee is expected to:

1. Provide an open avenue of communication between the internal auditors, the
independent accountants, and the Board of Directors.

2. Review the Committee's charter annually and recommend proposed changes to
the Board of Directors.

3. Recommend to the Board of Directors the independent accountants to be
appointed, and monitor the compensation of the independent accountants,
and review and approve the dismissal of the independent accountants.

4. Review and concur in the appointment, replacement, reassignment or
dismissal of the Director of Internal Audit.

5. Confirm the independence of the Director of Internal Audit and other
internal audit department staff.

6. Review and discuss with the independent accountants, in order to satisfy
the Committee as to the independence of the independent accountants, any
disclosed relationships or services that may impact the objectivity and
independence of the independent accountants. Ensure the receipt annually
from the independent accountants of a formal written independence
statement.

7. Inquire of management, the Director of Internal Audit, and the independent
accountants about significant risks or exposures and assess the steps
management has taken to minimize such risk to the Company.

8. Review with the independent accountants and the Director of Internal
Audit, the audit scope and plan of the internal auditors and the
independent accountants.

9. Review with the Director of Internal Audit and the independent accountants
the coordination of audit efforts to facilitate completeness of coverage,
reduction of redundant efforts, and the effective use of audit resources.

10. Review with the independent accountants and the Director of Internal
Audit:

a. The adequacy of the Company's internal controls including computerized
information system controls and security.

b. Any related significant findings and recommendations of the
independent accountants and Director of Internal Audit together with
management's responses hereto.

11. Review with management and the independent accountants any changes in the
Company's accounting policies or methods. Review significant accounting
and reporting issues, including recent professional and regulatory
pronouncements.

12. Review with management and the independent accountants at the completion
of the annual examination:

a. The Company's annual financial statements and related footnotes.

b. The independent accountant's audit of the financial statements and
their report thereon.

c. Any significant changes required in the independent accountant's audit
plan.

d. Any significant difficulties or disputes with management encountered
during the course of the audit, and the resolution of those disputes,
if necessary or in the event of a change of the independent
accountants, review the reasons for such change as required to be
disclosed by Item 304 of Regulation S-K.

e. Other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards.

B-1

13. Discuss with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
review of the quarterly financial statements by the independent
accountants.

14. Review with management and the Director of Internal Audit:

a. Significant findings during the year and management's response
thereto.

b. Any difficulties encountered in the course of the internal audits,
including any restrictions on the scope of work or access to required
information.

c. Any changes required in the scope of the internal audit plan.

d. The internal audit department budget and staffing.

15. Review the filings with the SEC containing the Company's financial
statements.

16. Review with management and the independent accountants the audit scope
and plans for the annual employee benefit plan audits.

17. Report Committee actions to the Board of Directors, with such
recommendations as the Committee may deem appropriate.

18. Review with the independent accountants the results of any audit of
officers' expense accounts.

19. Review with the Director of Internal Audit and the independent
accountants any violations of the Company's Code of Conduct.

20. Review with the General Counsel of the Company, management and the
independent accountants, legal, environmental and regulatory matters that
may have a material impact on the financial statements, related Company
compliance policies and programs, and reports received from regulators.

21. Meet, at least annually, each of the Director of Internal Audit and the
independent accountants in separate executive sessions to discuss any
matters that the Committee or these groups believe should be discussed
privately with the Audit Committee.

22. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.

The membership of the Audit Committee shall consist of at least three
members, each of whom shall be independent and, as determined by the Board,
consistent with New York Stock Exchange guidelines, free from any relationship
that would interfere with the exercise of his or her independent judgement as a
member of the Committee of the Board of Directors, who shall serve at the
pleasure of the Board of Directors. Audit Committee members shall be designated
by the Board of Directors upon the recommendation of the Nominations Committee.

All members of the Committee shall be financially literate, defined as being
able to read and understand financial statements, including the Company's
balance sheet, income statement and cash flow statement or will become able to
do so within a reasonable period of time after his or her appointment. In
addition, at least one member of the Committee shall have accounting or related
financial management expertise, as determined by the Board.

The duties and responsibilities of a member of the Audit Committee are in
addition to those duties set out for a member of the Board of Directors.

The Committee shall have the authority to cause investigations to be made of
such matters within the scope of the Committee's purposes and responsibilities,
as the Committee may deem appropriate. Such investigations may be made by the
Company's employees or such other persons or firms as the Committee may direct.
The Committee will perform such other functions as may be assigned by law, the
Company's charter or Bylaws, or the Board of Directors.

One-third of the members, but not less than two, will constitute a quorum. A
majority of the members present at any meeting at which a quorum is present may
act on behalf of the Committee. The Committee shall meet at least three times
per year or more frequently as shall be determined by its Chairman, or upon the
request of any two of its members. The Chairman of the Committee will preside,
when present, at all meetings of the Committee. The Committee will keep a record
of its meetings and report on them to the Board. The Committee may meet by
telephone or video conference and may take action by written consent.

In advance of every regular meeting, the Committee Chairman, with the
assistance of the Committee Secretary, shall prepare and distribute to the
Committee members and others as deemed appropriate by the Chairman an agenda of
matters to be addressed at the meeting. The Committee may require officers and
employees of the Company to produce information and reports, annually or on
another regular basis, as the Committee may deem appropriate.

The Chairman of the Committee shall report to the Board at each meeting of
the Board on the Committee's activities, if any, since the last Board meeting.

The Committee may adopt such additional procedures, consistent with this
Charter, as the Committee deems necessary or appropriate.

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EXHIBIT C

MILLENNIUM CHEMICALS INC.
2001 OMNIBUS INCENTIVE COMPENSATION PLAN
Effective January 26, 2001
TABLE OF CONTENTS

Article 1. Establishment, Objectives, and Duration..................... C-2

Article 2. Definitions................................................. C-2

Article 3. Administration.............................................. C-4

Article 4. Shares Subject to the Plan and Maximum Awards............... C-5

Article 5. Eligibility and Participation............................... C-6

Article 6. Stock Options............................................... C-6

Article 7. Stock Appreciation Rights................................... C-7

Article 8. Restricted Stock............................................ C-8

Article 9. Performance Units, Performance Shares, and Cash-Based
Awards...................................................... C-9

Article 10. Performance Measures........................................ C-10

Article 11. Beneficiary Designation..................................... C-11

Article 12. Deferrals................................................... C-11

Article 13. Rights of Employees/Directors............................... C-11

Article 14. Change in Control........................................... C-11

Article 15. Amendment, Modification, and Termination.................... C-12

Article 16. Withholding................................................. C-12

Article 17. Indemnification............................................. C-12

Article 18. Successors.................................................. C-13

Article 19. General Provisions.......................................... C-13

C-1

ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION

1.1 ESTABLISHMENT OF THE PLAN. Millennium Chemicals Inc., a Delaware
corporation (hereinafter referred to as the 'Company'), hereby establishes an
incentive compensation plan to be known as the 'Millennium Chemicals Inc.
Omnibus Incentive Compensation Plan' (hereinafter referred to as the 'Plan'), as
set forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, Stock Awards and Cash-Based Awards.

Subject to approval by the Company's stockholders, the Plan shall become
effective as of January 26, 2001 (the 'Effective Date') and shall remain in
effect as provided in Section 1.3 hereof.

1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of the Company through annual and long-term incentives
that are consistent with the Company's goals and that link the personal
interests of Participants to those of the Company's stockholders; to provide
Participants with an incentive for excellence in individual performance; and to
promote teamwork among Participants.

The Plan is further intended to provide flexibility to the Company, its
Affiliates, and Subsidiaries, in their ability to motivate, attract, and retain
the services of Participants who make significant contributions to the Company's
success and to allow Participants to share in such success.

1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after the tenth (10th) anniversary
of the Effective Date.

ARTICLE 2. DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the word shall be
capitalized:

2.1 'AFFILIATE' shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations of the Exchange Act.

2.2 'AWARD' means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units, Stock Awards or
Cash-Based Awards.

2.3 'AWARD AGREEMENT' means either an agreement entered into by the Company
and each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan or a statement issued by the Company to a Participant
describing the terms and provisions of such Award.

2.4 'BOARD' or 'BOARD OF DIRECTORS' means the Board of Directors of the
Company.

2.5 'CASH-BASED AWARD' means an Award granted to a Participant as described
in Article 9 herein.

2.6 'CHANGE IN CONTROL' of the Company shall be deemed to have occurred as of
the first day that any one or more of the following conditions shall have been
satisfied:

(a) any 'person' as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company or
any company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
Common Stock of the Company), becoming the 'beneficial owner' (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing twenty-five percent (25%) or
more of the combined voting power of the Company's then outstanding
securities;

(b) during any period of two consecutive years (not including any period
prior to October 1, 1996), 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 (a), (c), or (d) of this Section 2.6 or a director whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) 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 or nomination for election by the
Company's stockholders 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;

(c) the merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
fifty percent (50%) of the combined voting power of

C-2

the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
person (other than those covered by the exceptions in (a) above)
acquires more than twenty-five percent (25%) of the combined voting
power of the Company's then outstanding securities shall not
constitute a Change in Control; or

(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or the closing of the sale or disposition by the
Company of all or substantially all of the Company's assets other than
the sale or disposition of all or substantially all of the assets of
the Company to one or more Subsidiaries (as defined below) of the
Company or to a person or persons who beneficially own, directly or
indirectly, at least fifty percent (50%) or more of the combined
voting power of the outstanding voting securities of the Company at
the time of the sale or disposition. 'Subsidiary' has the meaning set
forth in Section 424 of the Code, as amended or superseded, and the
term shall also include any partnership, limited liability company or
other business entity if the Company owns, directly or indirectly,
securities or other ownership interests representing at least fifty
percent (50%) of the ordinary voting power or equity or capital
interests of such entity. Notwithstanding any of the foregoing, the
formation of Equistar Chemicals, LP ('Equistar') and the contribution
of assets by Millennium Petrochemicals Inc. to Equistar on
December 1, 1997 shall not constitute a Change in Control, and the
sale or disposition of all or any part of the Company's interests in
Equistar shall not constitute a Change in Control.

2.7 'CODE' means the Internal Revenue Code of 1986, as amended from time to
time.

2.8 'COMMITTEE' means the committee appointed by the Board of Directors of
the Company from among its members (which may be the Compensation Committee) and
shall be comprised, unless otherwise determined by the Board of Directors,
solely of not less than two members who shall be (i) 'Non-Employee Directors'
within the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated under
the Exchange Act and (ii) 'outside directors' within the meaning of Treasury
Regulation Section 1.162-27(e)(3) under Section 162(m) of the Code.

2.9 'COMPANY' means Millennium Chemicals Inc., a Delaware corporation, and
any successor thereto as provided in Article 18 herein.

2.10 'DIRECTOR' means any individual who is a member of the Board of
Directors of the Company; provided, however, that any Director who is an
Employee shall not be considered to be a Director under the Plan.

2.11 'DISABILITY' shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Board.

2.12 'EFFECTIVE DATE' shall have the meaning ascribed to such term in Section
1.1 hereof.

2.13 'EMPLOYEE' means any employee of the Company or its Subsidiaries or
Affiliates provided such Subsidiary or Affiliate has been designated by the
Committee as eligible to receive Awards under the Plan.

2.14 'EXCHANGE ACT' means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

2.15 'FAIR MARKET VALUE' means, for purposes of this Plan and any Awards
hereunder, (i) the closing price of the Company's Shares on the date of
calculation (or on the last preceding trading date if Shares were not traded on
such date) if the Company's Shares are readily tradable on a national securities
exchange or other market system, (ii) if the Company's Shares are not readily
tradable, the amount determined in good faith by the Committee as the fair
market value of the Shares of the Company and (iii) in connection with a Change
in Control of the Company or an event specified in Section 4.2, the value of the
consideration paid to stockholders in connection with such Change in Control or
event or, if no consideration is paid in respect thereof, the amount determined
pursuant to clause (i) above.

2.16 'FREESTANDING SAR' means an SAR that is granted independently of any
Options, as described in Article 7 herein.

2.17 'INCENTIVE STOCK OPTION' or 'ISO' means an option to purchase Shares
granted under Article 6 herein and that is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422.

2.18 'INSIDER' shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.

2.19 'NONQUALIFIED STOCK OPTION' or 'NQSO' means an option to purchase Shares
granted under Article 6 herein and that is not intended to meet the requirements
of Code Section 422, or that otherwise does not meet such requirements.

2.20 'OPTION' means an Incentive Stock Option or a Nonqualified Stock Option,
as described in Article 6 herein.

2.21 'OPTION PRICE' means the price at which a Share may be purchased by a
Participant pursuant to an Option.

C-3

2.22 'PARTICIPANT' means an Employee or Director who has been selected to
receive an Award or who has outstanding an Award granted under the Plan.

2.23 'PERFORMANCE-BASED AWARD' means the Awards that qualify for the
Performance-Based Exception.

2.24 'PERFORMANCE-BASED EXCEPTION' means the performance-based exception from
the tax deductibility limitations of Code Section 162(m).

2.25 'PERFORMANCE SHARE' means an Award granted to a Participant, as
described in Article 9 herein.

2.26 'PERFORMANCE UNIT' means an Award granted to a Participant, as described
in Article 9 herein.

2.27 'PERIOD OF RESTRICTION' means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 8 herein.

2.28 'PERSON' shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
'group' as defined in Section 13(d) thereof.

2.29 'RESTRICTED STOCK' means an Award granted to a Participant pursuant to
Article 8 herein

2.30 'RETIREMENT' means, unless otherwise determined by the Committee or as
specifically provided in an Award Agreement, the Participant's termination of
employment after such Participant reaches age fifty (50) with the accrual of
fifteen (15) years of service (as defined in the qualified retirement plan
applicable to such Participant).

2.31 'SHARES' means the common stock, $.01 par value, of the Company.

2.32 'STOCK APPRECIATION RIGHT' or 'SAR' means an Award, granted alone or in
connection with a related Option, designated as an SAR, pursuant to the terms of
Article 7 herein.

2.33 'STOCK AWARD' means an Award, granted pursuant to the terms of Section
9.7 herein.

2.34 'SUBSIDIARY' means any corporation, partnership, joint venture, or other
entity in which the Company has a majority voting interest.

2.35 'TANDEM SAR' means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).

ARTICLE 3. ADMINISTRATION

3.1 GENERAL. Subject to the terms and conditions of the Plan, the Plan shall
be administered by the Committee; provided, however, that the administration of
the Plan with respect to Awards granted to Directors shall be administered by
the Board. The members of the Committee shall be appointed from time to time by,
and shall serve at the discretion of, the Board of Directors. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make such determinations and interpretations and to take such action in
connection with the Plan and any Awards granted hereunder as it deems necessary
or advisable. All determinations and interpretations made by the Committee shall
be binding and conclusive on all participants and their legal representatives.
The Committee may delegate to one or more of its members, or to one or more
agents, such administrative duties as it may deem advisable, and the Committee,
or any person to whom it has delegated duties as aforesaid, may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. The Committee may employ such legal or
other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received
from any such counsel, consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company, or the Subsidiary or Affiliate whose employees have benefited from the
Plan, as determined by the Committee. No member of the Committee or the Board
and no employee of the Company or any of its Subsidiaries shall be liable for
any act or failure to act hereunder, except in circumstances involving his or
her bad faith or willful misconduct, or for any act or failure to act hereunder
by any other member or employee or by any agent to whom duties in connection
with the administration of this Plan have been delegated. The Company shall
indemnify members of the Committee and the Board and any agent of the Committee
or the Board who is an employee of the Company, a Subsidiary or an Affiliate
against any and all liabilities or expenses to which they may be subjected by
reason of any act or failure to act with respect to their duties on behalf of
the Plan, except in circumstances involving such person's bad faith or willful
misconduct.

3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and amend the terms and conditions of any outstanding
Award as provided in the Plan. Further, the Committee shall make all other
determinations that may be necessary or advisable for the administration of the
Plan.

C-4

Notwithstanding anything else in this Plan to the contrary, the Board shall make
all such decisions and determinations with respect to Directors, and references
in this Plan to the Committee shall be to the Board with respect to Directors
and Awards granted to Directors, unless the context clearly indicates otherwise.

3.3 DECISIONS BINDING. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders and resolutions of
the Committee shall be final, conclusive, and binding on all persons, including
the Company, its stockholders, Directors, Employees, Participants, and their
estates and beneficiaries.

ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided
in Section 4.2 herein, the number of Shares that may be subject to Awards,
including Options, under the Plan shall be 3,200,000 Shares, of which no more
than 1,000,000 Shares may be granted in the form of Restricted Shares, and the
maximum number of Shares with respect to which Awards may be granted or measured
to any individual Participant under the Plan during the term of the Plan shall
not exceed 1,500,000 Shares. Any Shares subject to an Option or Stock
Appreciation Right which for any reason are cancelled or terminated without
having been exercised, any Shares subject to Stock Awards, Performance Shares or
Performance Units which are forfeited, any Shares subject to Performance Awards
settled in cash or any Shares delivered to the Company as part or full payment
for the exercise of an Option or Stock Appreciation Right shall again be
available for Awards under the Plan. The preceding sentence shall apply only for
purposes of determining the aggregate number of Shares subject to Awards but
shall not apply for purposes of determining the maximum number of Shares with
respect to which Awards (including the maximum number of Shares subject to
Options and Stock Appreciation Rights) that may be granted to any individual
Participant under the Plan. The following rules shall apply to grants of such
Awards under the Plan:

(a) STOCK OPTIONS: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in
any one fiscal year to any one single Participant shall be 1,000,000
Shares.

(b) SARS: The maximum aggregate number of Shares that may be granted in
the form of Stock Appreciation Rights, pursuant to any Award granted
in any one fiscal year to any one single Participant shall be
1,000,000 Shares.

(c) RESTRICTED STOCK: The maximum aggregate grant with respect to Awards
of Restricted Stock granted in any one fiscal year to any one
Participant shall be 500,000 Shares.

(d) PERFORMANCE SHARES/PERFORMANCE UNITS AND CASH-BASED AWARDS: The
maximum aggregate grant with respect to Awards of Performance Shares
made in any one fiscal year to any one Participant shall be equal to
the value of 500,000 Shares; the maximum aggregate amount awarded or
credited with respect to Cash-Based Awards or Performance Units to any
one Participant in any one fiscal year may not exceed twelve million
dollars ($12,000,000).

(e) STOCK AWARDS: The maximum aggregate grant with respect to Awards of
Stock Awards granted in any one fiscal year to any one Participant
shall be 500,000 Shares.

4.2 ADJUSTMENTS IN AUTHORIZED SHARES. If there shall be any change in the
Shares of the Company or the capitalization of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse stock split, split up, spin-off, combination of shares, exchange of
shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to stockholders of the Company,
the Committee, in its sole discretion, in order to prevent dilution or
enlargement of Participants' rights under the Plan, shall adjust, in an
equitable manner, as applicable, the number and kind of Shares that may be
issued under the Plan, the number and kind of Shares subject to outstanding
Awards, the exercise price applicable to outstanding Awards, the Fair Market
Value of the Shares and other value determinations applicable to outstanding
Awards; provided, however, that any such arithmetic adjustment to a
Performance-Based Award shall not cause the amount of compensation payable
thereunder to be increased from what otherwise would have been due upon
attainment of the unadjusted award. Appropriate adjustments may also be made by
the Committee in the terms of any Awards under the Plan to reflect such changes
or distributions and to modify any other terms of outstanding Awards on an
equitable basis, including modifications of performance targets and changes in
the length of performance periods; provided, however, that any such arithmetic
adjustment to a Performance-Based Award shall not cause the amount of
compensation payable thereunder to be increased from what otherwise would have
been due upon attainment of the unadjusted award. In addition, other than with
respect to Options, Stock Appreciation Rights, and other awards intended to
constitute Performance-Based Awards, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles. Notwithstanding the foregoing,
(i) each such adjustment with respect to an Incentive Stock Option shall comply
with the rules of Section 424(a) of the Code, and (ii) in no event shall any
adjustment be made which would render any Incentive Stock Option granted
hereunder other than an incentive stock option for purposes of Section 422 of
the Code. The determination of the Committee as to the foregoing adjustments, if
any, shall be conclusive and binding on participants under the Plan.

C-5

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees and Directors.

5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees and
Directors, those to whom Awards shall be granted and shall determine the nature
and amount of each Award.

ARTICLE 6. STOCK OPTIONS

6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.

6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the Plan.
The Award Agreement also shall specify whether the Option is intended to be an
ISO within the meaning of Code Section 422, or an NQSO whose grant is intended
not to fall under the provisions of Code Section 422. An outstanding Option may
not be modified to reduce the exercise price thereof nor may a new Option at a
lower price be substituted for a surrendered Option (except in accordance with
Section 4.2 of the Plan or Article 14).

6.3 OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be as determined by the Committee; provided, however, subject to
Section 6.11 below, that the per-share exercise price shall not be less than
100% of the Fair Market Value of the Common Stock on the date the Stock Option
is granted.

6.4 DURATION OF OPTIONS. Each Option granted to a Participant shall expire at
such time as the Committee shall determine at the time of grant; provided,
however, subject to Section 6.11 below, no Option shall be exercisable later
than the tenth (10th) anniversary date of its grant.

6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.

6.6 PAYMENT. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.

The Option Price upon exercise of any Option shall be payable to the Company in
full either: (a) in cash or its equivalent; or (b) at the discretion of the
Committee, by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price (provided
that the Shares that are tendered must have been held by the Participant for at
least six (6) months prior to their tender to satisfy the Option Price); or (c)
by a combination of (a) and (b); or (d) any other method approved by the
Committee in its sole discretion at the time of grant and as set forth in the
Award Agreement.

The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.

Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, Share certificates
in an appropriate amount based upon the number of Shares purchased under the
Option(s).

Unless otherwise determined by the Committee, all payments under all of the
methods indicated above shall be paid in United States dollars.

6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.

6.8 TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Participant's Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Committee, shall be included in the Award
Agreement entered into with each Participant, need not be uniform among all
Options issued pursuant to this Article 6, and may reflect distinctions based on
the reasons for termination.

6.9 POST-EMPLOYMENT EXERCISES. The exercise of any Option after termination
of employment of an Employee with the Company, its Subsidiaries or Affiliates
shall be subject to such conditions as imposed by the Committee at the time of
the Award Agreement and satisfaction of the conditions precedent that the
Employee neither (i) competes with, or takes other employment with or renders
services to a competitor of, the Company, its Subsidiaries or Affiliates without
the written consent of the Company, nor (ii) conducts himself or herself in a

C-6

manner adversely affecting the Company; provided, however, that the Committee,
in its sole discretion, may waive any conditions imposed in the Award Agreement
or as set forth in (i) and (ii) above relating to the exercise of Options after
the date of termination of employment during the term of the option.

6.10 NONTRANSFERABILITY OF OPTIONS.

(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant.

(b) NONQUALIFIED STOCK OPTIONS. Except as provided below, no NQSO granted
under this Article 6 may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws
of descent and distribution and all NQSOs granted to a Participant
under this Article 6 shall be exercisable during his or her lifetime
only by such Participant. Notwithstanding the foregoing, at the
discretion of the Committee, an Award Agreement for the grant of NQSO
may permit the transferability of such an Award by a participant
solely to the participant's spouse, siblings, parents, children and
grandchildren or trusts for the benefit of such persons or
partnerships, corporations, limited liability companies or other
entities owned solely by such persons, including trusts for such
persons, subject to any restriction included in the Award Agreement.

6.11 REQUIREMENTS FOR INCENTIVE STOCK OPTIONS. Incentive Stock Options may be
granted only to participants who are employees of the Company or one of its
subsidiaries (within the meaning of Section 424(f) of the Code) at the date of
grant. The aggregate Fair Market Value (determined as of the time the Incentive
Stock Option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any calendar
year (under all option plans of the Company and of any parent corporation or
subsidiary corporation (as defined in Sections 424(e) and (f) of the Code,
respectively)) shall not exceed $100,000. For purposes of the preceding
sentence, Incentive Stock Options will be taken into account in the order in
which they are granted. The per-share exercise price of an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Shares on the
date of grant, and no Incentive Stock Option may be exercised later than ten
years after the date it is granted; provided, however, Incentive Stock Options
may not be granted to any participant who, at the time of grant, owns stock
possessing (after the application of the attribution rules of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company,
unless the exercise price is fixed at not less than 110% of the Fair Market
Value of the Shares on the date of grant and the exercise of such option is
prohibited by its terms after the expiration of five years from the date of
grant of such option. In addition, no Incentive Stock Option may be issued to a
participant in tandem with a Nonqualified Stock Option.

ARTICLE 7. STOCK APPRECIATION RIGHTS

7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs may
be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.

Subject to the terms and conditions of the Plan, the Committee shall have
complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs.

The grant price of a Freestanding SAR shall equal the Fair Market Value of a
Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.

7.2 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.

7.3 TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that no
SAR shall be exercisable later than the tenth (10th) anniversary date of its
grant.

7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.

7.5 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of
the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.

Notwithstanding any other provision of this Plan to the contrary, with respect
to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will
expire no later than the expiration of the underlying ISO; (b) the value of the
payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.

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7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:

(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price; by

(b) The number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, in some combination thereof, or in any
other manner approved by the Committee at its sole discretion. The Committee's
determination regarding the form of SAR payout shall be set forth in the Award
Agreement pertaining to the grant of the SAR.

7.7 TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the
SAR following termination of the Participant's employment or directorship with
the Company, its Affiliates, and/or its subsidiaries, as the case may be. Such
provisions shall be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with Participants, need not be
uniform among all SARs issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination.

7.8 POST-EMPLOYMENT EXERCISES. The exercise of any SAR after termination of
employment of an Employee with the Company, its Subsidiaries or Affiliates shall
be subject to such conditions as imposed by the Committee at the time of the
Award Agreement and satisfaction of the conditions precedent that the Employee
neither (i) competes with, or takes other employment with or renders services to
a competitor of, the Company, its Subsidiaries or Affiliates without the written
consent of the Company, nor (ii) conducts himself or herself in a manner
adversely affecting the Company; provided, however, that the Committee, in its
sole discretion, may waive any conditions imposed in the Award Agreement or as
set forth in (i) and (ii) above relating to the exercise of any SAR after the
date of termination of employment during the term of the option.

7.9 NONTRANSFERABILITY OF SARS. Except as provided below, no SAR granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution, and all SARs granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant. Notwithstanding
the foregoing, at the discretion of the Committee, an Award Agreement for the
grant of an SAR may permit the transferability of such an Award by a participant
solely to the participant's spouse, siblings, parents, children and
grandchildren or trusts for the benefit of such persons or partnerships,
corporations, limited liability companies or other entities owned solely by such
persons, including trusts for such persons, subject to any restriction included
in the Award Agreement.

ARTICLE 8. RESTRICTED STOCK

8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.

8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.

8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement and all rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant. Notwithstanding the foregoing, at the
discretion of the Committee, an Award Agreement for the grant of Restricted
Stock may permit the transferability of such an Award by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons or partnerships, corporations, limited
liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the Award
Agreement.

8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, and/or restrictions under applicable federal or
state securities laws.

To the extent deemed appropriate by the Committee, the Company may retain the
certificates representing Shares of Restricted Stock in the Company's possession
until such time as all conditions and/or restrictions applicable to such Shares
have been satisfied.

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Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.

8.5 VOTING RIGHTS. If the Committee so determines, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to
exercise full voting rights with respect to those Shares during the Period of
Restriction.

8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may, if the
Committee so determines, be credited with dividends paid with respect to the
underlying Shares while they are so held, in a manner determined by the
Committee in its sole discretion. The Committee may apply any restrictions to
the dividends that the Committee deems appropriate. Without limiting the
generality of the preceding sentence, if the grant or vesting of Restricted
Shares is designed to comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Shares, such that
the dividends and/or the Restricted Shares maintain eligibility for the
Performance-Based Exception.

8.7 TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Award Agreement shall set
forth the extent to which the Participant shall have the right to receive
unvested Restricted Shares following termination of the Participant's employment
or directorship with the Company. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Shares of
Restricted Stock issued pursuant to the Plan, and may reflect distinctions based
on the reasons for termination.

ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED AWARDS; STOCK
AWARDS

9.1 GRANT OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS. Subject to the
terms of the Plan, Performance Units, Performance Shares, and/or Cash-Based
Awards may be granted to Participants in such amounts and upon such terms, and
at any time and from time to time, as shall be determined by the Committee, and
Awards granted under this Article 9 may consist of any combination of
Performance Units, Performance Shares and/or Cash-Based Awards.

9.2 VALUE OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS. Each Performance
Unit shall have an initial value that is established by the Committee at the
time of grant. Each Performance Share shall have an initial value equal to or
greater than the Fair Market Value of a Share on the date of grant. Each
Cash-Based Award shall have a value as may be determined by the Committee. The
Committee shall set performance goals in its discretion which, depending on the
extent to which they are met, will determine the number and/or value of
Performance Units/Shares and Cash-Based Awards that will be paid out to the
Participant. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a 'Performance Period.'

9.3 EARNING OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS. Subject to the
terms of this Plan, after the applicable Performance Period has ended (including
any period of deferral as provided in Section 9.4 hereof), the holder of
Performance Units/Shares and Cash-Based Awards shall be entitled to receive
payout on the number and value of Performance Units/Shares and Cash-Based Awards
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been
achieved.

9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES AND
STOCK/CASH-BASED AWARDS. Payment of earned Performance Units/Shares and
Cash-Based Awards shall be as determined by the Committee and as evidenced in
the Award Agreement. Subject to the terms of the Plan, the Committee, in its
sole discretion, may pay earned Performance Units/Shares and Cash-Based Awards
in the form of cash or in Shares (or in a combination thereof) that have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares and Cash-Based Awards at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee. The determination of the Committee with respect to
the form of payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.

At the discretion of the Committee, Participants holding Performance
Units/Shares may be entitled to receive dividend units with respect to dividends
declared with respect to the Shares. Such dividends may be subject to the same
accrual, forfeiture, and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in Section 8.6 herein, as
determined by the Committee.

Notwithstanding the above, a Participant may elect to defer, or the Committee
may require or permit the deferral of, the receipt of Awards under Article 9
upon such terms as the Committee deems appropriate.

9.5 TERMINATION OF EMPLOYMENT/DIRECTORSHIP. In the event the employment or
directorship terminates for any reason, including by reason of death,
Disability, or Retirement, all Performance Units/Shares and Cash-Based Awards
shall be forfeited by the Participant to the Company unless determined otherwise
by the Committee, as set forth in the Participant's Award Agreement.

9.6 NONTRANSFERABILITY. Except as provided below, Performance Units/Shares
and Cash-Based Awards may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the

C-9

laws of descent and distribution and a Participant's rights under the Plan shall
be exercisable during the Participant's lifetime only by the Participant.
Notwithstanding the foregoing, at the discretion of the Committee, an Award
Agreement for the grant of Performance Units/Shares and Cash-Based Awards may
permit the transferability of any such Awards by a participant solely to the
participant's spouse, siblings, parents, children and grandchildren or trusts
for the benefit of such persons or partnerships, corporations, limited liability
companies or other entities owned solely by such persons, including trusts for
such persons, subject to any restriction included in the Award Agreement.

9.7 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of Shares issued or transferred to Participants with or without other
payments therefor. Stock Awards may be subject to such terms and conditions as
the Committee determines appropriate, including, without limitation,
restrictions on the sale or other disposition of such shares, the right of the
Company to reacquire such shares for no consideration upon termination of the
Participant's employment within specified periods, and may constitute
Performance-Based Awards, as described in Article 10 hereof. The Committee may
require the participant to deliver a duly signed stock power, endorsed in blank,
relating to the Shares covered by such an Award. The Committee may also require
that the stock certificates evidencing such shares be held in custody or bear
restrictive legends until the restrictions thereon shall have lapsed. The Stock
Award shall specify whether the Participant shall have, with respect to the
Shares subject to a Stock Award, all of the rights of a holder of Shares of the
Company, including the right to receive dividends and to vote the shares.
Notwithstanding the foregoing, at the discretion of the Committee, an Award
Agreement for the grant of a Stock Award may permit the transferability of such
an Award by a participant solely to the participant's spouse, siblings, parents,
children and grandchildren or trusts for the benefit of such persons or
partnerships, corporations, limited liability companies or other entities owned
solely by such persons, including trusts for such persons, subject to any
restriction included in the Award Agreement.

ARTICLE 10. PERFORMANCE-BASED AWARDS AND PERFORMANCE MEASURES

10.1 PERFORMANCE-BASED AWARDS. Certain Awards granted under the Plan may be
granted in a manner such that the Awards qualify as Performance-Based Awards. As
determined by the Committee in its sole discretion, either the granting or
vesting of such Performance-Based Awards shall be based on achievement of hurdle
rates and/or growth rates in one or more business criteria that apply to the
individual participant, one or more business units or the Company as a whole.
The business criteria shall be as set forth in Section 10.2 hereof. With respect
to Performance-Based Awards, (i) the Committee shall establish in writing
(x) the performance goals applicable to a given period, and such performance
goals shall state, in terms of an objective formula or standard, the method for
computing the amount of compensation payable to the participant if such
performance goals are obtained and (y) the individual employees or class of
employees to which such performance goals apply no later than 90 days after the
commencement of such period (but in no event after 25% of such period has
elapsed) and (ii) no Performance-Based Awards shall be payable to or vest with
respect to, as the case may be, any Participant for a given period until the
Committee certifies in writing that the objective performance goals (and any
other material terms) applicable to such period have been satisfied. With
respect to any Awards intended to qualify as Performance-Based Awards, after
establishment of a performance goal, the Committee shall not revise such
performance goal or increase the amount of compensation payable thereunder (as
determined in accordance with Section 162(m) of the Code) upon the attainment of
such performance goal. Notwithstanding the preceding sentence, the Committee may
reduce or eliminate Awards payable upon the attainment of such performance goal.

10.2 PERFORMANCE MEASURES. The performance measure(s) to be used for purposes
of Performance-Based Awards shall be chosen from among:

(a) EVA'r'

(b) Net earnings;

(d) Net sales growth;

(e) Net income (before or after taxes);

(f) Net operating profit;

(g) Return measures (including, but not limited to, return on assets,
equity, or sales);

(h) Cash flow (including, but not limited to, operating cash flow and
free cash flow);

(i) Cash flow return on investments, which equals net cash flows divided
by owner's equity;

(j) Earnings before or after taxes, interest, depreciation and/or
amortization;

(k) Internal rate of return or increase in net present value;

(l) Dividend payments to parent;

(m) Gross revenues;

(n) Gross margins;

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(o) Operating margin;

(p) Share price (including, but not limited to, growth measures and
total shareholder return);

(q) Expense targets;

(r) Working capital targets relating to inventory and/or accounts
receivable;

(s) Planning accuracy (as measured by comparing planned results to
actual results);

(t) comparisons to various stock market indices; and

(u) comparisons to the performance of other companies.

For purposes of this Plan, EVA'r' means the positive or negative value
determined by net operating profits after taxes over charge for capital, or any
other financial measure, as determined by the Committee in its sole discretion.
(EVA'r' is a registered trademark of Stern Stewart & Co.).

The Committee may provide in any such Award that any evaluation of performance
exclude any of the following events that occurs during a performance period:
(a) asset write-downs; (b) litigation or claim judgments or settlements;
(c) the effect of changes in tax law, accounting principles or other laws or
provisions affecting reported results; (d) accruals for reorganization and
restructuring programs; (e) extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operations appearing in the
Company's annual report to stockholders for the applicable year;
(f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To
the extent such exclusions affect Awards to executives covered by
Section 162(m), they will be prescribed in resolutions that meet the
requirements of Section 162(m) for deductibility.

In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards that shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).

ARTICLE 11. BENEFICIARY DESIGNATION

Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.

ARTICLE 12. DEFERRALS

The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or SAR, the lapse
or waiver of restrictions with respect to Restricted Stock, or the satisfaction
of any requirements or goals with respect to Performance Units/Shares and
Cash-Based Awards. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.

ARTICLE 13. RIGHTS OF EMPLOYEES/DIRECTORS

13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of the
Company.

13.2 PARTICIPATION. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.

13.3 RIGHTS AS A STOCKHOLDER. A Participant shall have none of the rights of
a shareholder with respect to shares of Common Stock covered by any Award until
the Participant becomes the record holder of such shares.

ARTICLE 14. CHANGE IN CONTROL

14.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges, or unless the Committee shall determine otherwise in the
Award Agreement:

(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their
entire term;

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(b) Any restriction periods and restrictions imposed on Restricted Shares
that are not performance-based shall lapse; and

(c) The target payout opportunities attainable under all outstanding
Awards of performance-based Restricted Stock, Performance Units,
Performance Shares, Stock Awards and Cash-Based Awards shall be deemed
to have been earned to the extent described below for the entire
Performance Period(s) as of the effective date of the Change in
Control. The vesting of all Awards denominated in Shares shall be
accelerated as of the effective date of the Change in Control, and
there shall be paid out to Participants, within thirty (30) days
following the effective date of the Change in Control, all Shares
pursuant to such Awards based upon an assumed achievement of all
targeted performance goals at the target (or at such greater level if
achieved). Awards denominated in cash shall also vest and be paid to
participants in cash, within thirty (30) days following the effective
date of the Change in Control, with the amount of the cash award to be
paid based on an assumed achievement of all targeted performance goals
at the target (or at such greater level if achieved).

14.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan (but subject to the
limitations of Section 15.2 hereof) or any Award Agreement provision, the
provisions of this Article 14 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards; provided, however, that the
Board may not take any such action within the six months immediately prior to
the date of a Change in Control which would affect adversely any Award
theretofore granted under the Plan without the prior written consent of the
Participant with respect to said Participant's outstanding Awards, and any such
purported action is null.

14.3 POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision of
the Plan to the contrary, in the event that the consummation of a Change in
Control is contingent on using pooling of interests accounting methodology, the
Board may take any action necessary to preserve the use of pooling of interests
accounting.

ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION

15.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of the
Plan and Article 14, the Board may at any time and from time to time, alter,
amend, suspend, or terminate the Plan in whole or in part; provided, however,
that no amendment of the Plan may be made without approval of the stockholders
of the Company if the amendment will: (i) disqualify any Incentive Stock Options
granted under the Plan; (ii) increase the aggregate number of Shares that may be
delivered under the Plan; (iii) increase any of the maximum amounts which can be
paid to an individual participant under the Plan as set forth in Article 4
hereof; (iv) change the types of business criteria on which Performance-Based
Awards are to be based under the Plan; or (v) modify the requirements as to
eligibility for participation in the Plan.

15.2 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the
Plan to the contrary (but subject to Section 14.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant holding such Award.

ARTICLE 16. WITHHOLDING

16.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.

16.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by requesting the Company to
purchase Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory tax that could be imposed on the
transaction and required to be withheld by the Company. All such elections shall
be irrevocable, made in writing, signed by the Participant, and shall be subject
to any restrictions or limitations that the Committee, in its sole discretion,
deems appropriate.

ARTICLE 17. INDEMNIFICATION

Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right

C-12

of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.

ARTICLE 18. SUCCESSORS

All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

ARTICLE 19. GENERAL PROVISIONS

19.1 LEGEND. The Committee may require each person receiving Shares pursuant
to an Award under this Plan to represent to and agree with the Company in
writing that the Participant is acquiring the Shares without a view to
distribution thereof. In addition, to any legend required by this Plan, the
certificates for such Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer of such Shares.

19.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

19.3 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

19.4 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. The Company shall receive the consideration
required by law for the issuance of Awards under the Plan.

19.5 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the 1934 Act, unless determined otherwise by the Board. To
the extent any provision of the Plan or action by the Board fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Board.

19.6 LISTING. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Option with the United States Securities
and Exchange Commission or to the effect compliance with the registration,
qualification, and listing requirements of any national securities laws, stock
exchange, or automated quotation system.

19.7 DELIVERY OF TITLE. The Company shall have no obligation to issue or
deliver evidence of title for shares of Shares under the Plan prior to:

(a) Obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and

(b) Completion of any registration or other qualification of the Shares
under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or
advisable.

19.8 INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

19.9 INVESTMENT REPRESENTATIONS. As a condition to the exercise of an Option,
the Company may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.

19.10 NO ADDITIONAL RIGHTS. Neither the Award nor any benefits arising under
this Plan shall constitute part of a Participant's employment contract with the
Company or any Subsidiary or Affiliate, and accordingly subject to Sections 14.2
and 15.2, this Plan and the benefits hereunder may be terminated at any time in
the sole and exclusive discretion of the Committee without giving rise to
liability on the part of the Company or any Affiliate for severance payments.

19.11 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any
provision of the Plan to the contrary, in order to comply with provisions of
laws in other countries in which the Company, its Affiliates, and its
Subsidiaries operate or have Employees, the Board, in their sole discretion,
shall have the power and authority to:

(a) Determine which Affiliates and Subsidiaries will be covered by the
Plan;

(b) Determine which Employees employed outside the United States are
eligible to participate in the Plan;

C-13

(c) Modify the terms and conditions of any Award granted to Employees who
are employed outside the United States to comply with applicable
foreign laws;

(d) Establish subplans, modify exercise procedures, and other terms and
procedures to the extent such actions may be necessary or advisable.
Any subplans and modifications to Plan terms and procedures
established under this Section 19.11 by the Board or the Committee
shall be attached to this Plan document as Appendices; and

(e) Take any action, before or after an Award is made, which it deems
advisable to obtain approval or comply with any necessary local
government regulatory exemptions or approvals.

Notwithstanding the above, the Committee may not take any actions hereunder, and
no Awards shall be granted, which would violate the Exchange Act, the Code, any
securities law or governing statute or any other applicable law.

19.12 UNCERTIFICATED SHARES. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a non-certificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange.

19.13 UNFUNDED PLAN. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.

19.14 NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
or Awards, or other property shall be issued or paid in lieu of fractional
Shares or whether such fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.

19.15 GOVERNING LAW. The Plan and each Award Agreement shall be governed by
the laws of the state of Delaware, excluding any conflicts or choice of law rule
or principle that might otherwise refer construction or interpretation of the
Plan to the substantive law of another jurisdiction. Unless otherwise provided
in the Award Agreement, recipients of an Award under the Plan are deemed to
submit to the exclusive jurisdiction and venue of the federal or state courts of
New York, county of New York, to resolve any and all issues that may arise out
of or relate to the Plan or any related Award Agreement.

C-14

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 the 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 the Proxy Statement and your proxy card for further information.

[X] Please mark your 0625
votes as in this
example.

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.

The Board of Directors recommends a vote FOR the election of directors
and FOR proposals 2 and 3.

FOR WITHHELD

1. Election [ ] [ ]
of Directors.
(see reverse)

FOR AGAINST ABSTAIN

2. Approval of [ ] [ ] [ ]
independent
accountants.

FOR AGAINST ABSTAIN
3. Approve the [ ] [ ] [ ]
2001 Incentive
Compensation Plan

For, except vote withheld from the following nominee(s):

---------------------------------------------------------------

Discontinue Annual Report Mailings for this Account [ ]

SIGNATURE(S)________________________________________________ DATE________, 2001
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.

Fold and Detach Here IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL

[LOGO]
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT
VOTE BY TELEPHONE OR INTERNET
QUICK, EASY, IMMEDIATE

Millennium Chemicals Inc. encourages you to take advantage of two cost-effective
and convenient ways to vote your shares. You may now vote your proxy 24 hours a
day, 7 days a week, using either a touch-tone telephone or electronically
through the Internet. Your telephone or Internet vote must be received by 12:00
midnight Eastern Daylight Time on May 17, 2001 (or 3:00 p.m. on May 16, 2001 for
shares held in certain employee benefit plans and voted by trustees).

Telephone and Internet proxy voting is permitted under the laws of the state in
which Millennium Chemicals Inc. is incorporated. Your telephone or Internet vote
authorizes the proxies named on the above proxy card to vote your shares in the
same manner as if you marked, signed and returned your proxy card.

VOTE BY INTERNET

LOG ON TO THE INTERNET AND GO TO the WEB SITE:
http://www.eproxyvote.com/mch

Click on the PROCEED icon-You will be asked to enter
the Voter Control Number that appears on this proxy
card. Then follow the instructions.

VOTE BY PHONE

ON A TOUCH-TONE TELEPHONE DIAL 1-877-PRX-VOTE (1-877-779-8683)
FROM THE U.S. AND CANADA OR DIAL 201-536-8073 FROM OTHER COUNTRIES.
You will be asked to enter the Voter Control Number that appears on
this proxy card. Then follow the instructions.

OR
VOTE BY MAIL

Mark, sign and date your proxy card and return it in the
postage-paid envelope.

If you are voting by telephone or through the
Internet, please do not mail your proxy card.

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.

PROXY
MILLENNIUM CHEMICALS 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 18, 2001

The undersigned hereby constitutes and appoints William M. Landuyt, John E.
Lushefski and George H. Hempstead, III, 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 Hilton New York, 1335 Avenue of the Americas, A Concourse, 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
Glenarthur, (02). Worley H. Clark, Jr., and (03). Robert E. Lee.

2. Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants.

3. To approve the adoption of the Companys 2001 Incentive Compensation Plan.

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 of
its affiliates, 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 undersigneds shares as directed, provided
voting instructions are properly received by 3:00 p.m. (Eastern Daylight Time)
on May 16, 2001.
---------------
SEE REVERSE
SIDE
---------------

Fold and Detach Here IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL

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 and you wish to consent to Internet delivery of
future Annual Reports and Proxy Statements, follow the instructions set forth
below.

Log onto the Internet and go to the web site:
http://www.econsent.com/mch (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).

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 the 10 digit hyphenated number located above your
name on 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 are not a registered shareholder and you wish to consent to
Internet delivery of future Annual Reports and Proxy Statements, please contact
your bank, broker or other holder of record and inquire about the availability
of such option for you.

If you consent, your account will be so noted and, when the Millennium
Chemicals 2001 Annual Report and Proxy Statement for the 2002 Annual Meeting of
Shareholders become available, you will be notified by e-mail as to how to
access them on the Internet.

If you do elect to receive your Millennium Chemicals materials over the
Internet, you can still request paper copies by reregistering on the Internet
site above, or by e-mail to ir@millenniumchem.com or by contacting Millennium
Chemicals Inc. at 230 Half Mile Road, Red Bank, New Jersey 07701-7015,
Attention: Investor Relations.

STATEMENT OF DIFFERENCES

The registered trademark symbol shall be expressed as......................'r'