<PAGE> 1
SCHEDULE 14A
(RULE 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. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE LUBRIZOL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
<PAGE> 2
[LUBRIZOL LOGO]
THE LUBRIZOL CORPORATION
29400 LAKELAND BOULEVARD
WICKLIFFE, OHIO 44092-2298
March 13, 1996
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
on Monday, April 22, 1996, at 10:00 a.m., at the Clarion Hotel & Conference
Center, 35000 Curtis Boulevard, Eastlake, Ohio.
The attached Notice and Proxy Statement describe the business of the
meeting. After the transaction of the formal business, officers will report on
current operations and plans. A question and answer period will follow.
At the 1995 meeting, approximately 86 percent of the Common Shares
outstanding were voted either in person or by proxy. Your continued support is
appreciated, and we hope that you will be able to join us at the April 22
meeting.
Cordially,
/s/ L.E. Coleman
Chairman of the Board
/s/ W.G. Bares
President and Chief Executive Officer
<PAGE> 3
THE LUBRIZOL CORPORATION
29400 LAKELAND BOULEVARD
WICKLIFFE, OHIO 44092
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the 1996 Annual Meeting of Shareholders of The
Lubrizol Corporation will be held at the Clarion Hotel & Conference Center,
35000 Curtis Boulevard, Eastlake, Ohio, on Monday, April 22, 1996, at 10:00
a.m., for the following purposes:
1. To elect four directors for three-year terms and two directors for
two-year terms;
2. To consider and act upon a proposal to amend The Lubrizol Corporation
1991 Stock Incentive Plan;
3. To confirm the appointment of Deloitte & Touche LLP as independent
auditors;
4. To transact such other business as properly may come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on March 1, 1996, are
entitled to notice of and to vote at the meeting. A shareholder who executes and
returns the accompanying proxy may revoke such proxy at any time before it is
voted at the meeting by following the procedures set forth in the attached Proxy
Statement.
K. H. HOPPING
Secretary
Wickliffe, Ohio
March 13, 1996
RETURN OF PROXIES REQUESTED
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE
SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY,
FOR WHICH A RETURN ENVELOPE IS PROVIDED.
<PAGE> 4
THE LUBRIZOL CORPORATION
29400 LAKELAND BOULEVARD
WICKLIFFE, OHIO 44092
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of the
Corporation and will be voted in accordance with the instructions given in the
proxy if it is returned duly executed and is not revoked. A shareholder may
revoke a proxy at any time before it is voted by giving notice to the
Corporation in writing or in open meeting. Attendance at the meeting will not in
and of itself revoke a proxy.
This Proxy Statement and the accompanying proxy were first mailed to
shareholders on or about March 13, 1996. The record date for determination of
shareholders entitled to vote at the meeting was the close of business on March
1, 1996. On that date, the outstanding voting securities of the Corporation were
62,790,094 Common Shares without par value ("Common Shares"). Each Common Share
is entitled to one vote.
So far as the Corporation is aware, no matters will be presented to the
meeting for action on the part of the shareholders other than those stated in
the notice. If any other matter is properly brought before the meeting, it is
the intention of the persons named in the accompanying proxy to vote the shares
to which the proxy relates in accordance with their best judgment. Abstentions
will be deemed to be present at the meeting for purposes of determining a quorum
and will be counted as voting (but not for or against) with regard to the issue
to which the abstention relates. Any "broker nonvote" also will be deemed to be
present for quorum purposes but will not be counted as voting with regard to the
issue to which it relates.
The Corporation has adopted a policy to the effect that all proxies,
ballots and voting tabulations identifying how a particular shareholder has
voted on any issue will be kept confidential and will not be disclosed to the
Corporation, unless such disclosure is mandated by law or is requested by that
particular shareholder, or except with respect to any contested election for the
Board of Directors. Accordingly, shareholders are requested to return proxies to
KeyCorp Shareholder Services, Inc., which serves as the independent tabulator
and inspector of elections and reports the voting results to the Corporation.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation will, upon request, reimburse brokerage houses, custodians, nominees
and others for their out-of-pocket and reasonable clerical expenses incurred in
connection with such solicitation. For the purpose of obtaining broad
representation at the meeting, Morrow & Co., Inc. has been retained by the
Corporation to assist in the solicitation of proxies at an anticipated cost of
approximately $7,000. In addition, officers and employees of the Corporation,
without being additionally compensated, may make additional requests by letter,
telephone or in person for the return of proxies.
1
<PAGE> 5
ELECTION OF DIRECTORS
The authorized number of directors of the Corporation is presently fixed at
thirteen, divided into three classes: two having four members and one having
five members. The directors in each class are elected for three-year terms so
that the term of office of one class of directors expires at each annual
meeting.
For election as directors at the Annual Meeting of Shareholders to be held
on April 22, 1996, the Organization and Compensation Committee has recommended,
and the Board of Directors has approved, the nomination of William G. Bares,
Peggy Gordon Elliott, Gordon D. Harnett, Victoria F. Haynes, David H. Hoag and
Thomas C. MacAvoy, all of whom are currently directors. Messrs. Bares and Hoag,
and Drs. Elliott and MacAvoy, are nominated to serve for three-year terms
expiring in 1999. Mr. Harnett and Dr. Haynes, who were appointed as directors
during 1995, are members of the class of directors with a term expiring in 1998
and are nominated to serve for two-year terms. It is anticipated that Richard A.
Miller, Karl E. Ware and Renold D. Thompson will retire as directors effective
at the 1996 Annual Meeting of Shareholders, in accordance with the Corporation's
retirement policy for directors, and that the number of directors will then be
fixed at ten.
If any of the nominees becomes unavailable for election, the accompanying
proxy will be voted for the election of such person, if any, as shall be
recommended by the Organization and Compensation Committee, or will be voted in
favor of holding a vacancy to be filled by the directors. The Corporation has no
reason to believe that any nominee will be unavailable. The nominees receiving
the greatest number of votes shall be elected to the director positions to be
filled.
The following information is provided regarding each nominee for election
as a director and each of the other directors who will continue in office after
the meeting:
NOMINEES FOR ELECTION
W. G. BARES, age 54, is President and Chief Executive
Officer of The Lubrizol Corporation. Mr. Bares joined
Lubrizol as a development engineer in 1963 and was appointed
Director of the Pilot Plant in 1972. He was elected Vice
President in 1978, Executive Vice President in 1980,
President in 1982 and Chief Operating Officer in 1987 and
became Chief Executive Officer on January 1, 1996. He was
elected a Director of the Corporation in 1981. A 1963
graduate of Purdue University with a B.S. degree in chemical
[PHOTO] engineering, he earned an M.B.A. from Case Western Reserve
University in 1969. He is a member of the American Institute
of Chemical Engineers and past chairman of its Cleveland
section, and is a Trustee for Case Western Reserve
University. In addition, he is a Director of Oglebay Norton
Company, KeyCorp, Bearings, Inc. and an Executive Board
Member of the Greater Western Reserve Council of the Boy
Scouts of America.
2
<PAGE> 6
PEGGY GORDON ELLIOTT, age 58, is President of The University
of Akron. Prior to joining Akron in 1992, Dr. Elliott was
Chancellor and Chief Executive Officer of Indiana University
Northwest. She became a Lubrizol Director in 1993. Dr.
Elliott was the first chair of the Coalition for Urban
Higher Education, a national organization formed in 1990 by
seven national higher education groups. Also on a national
level, Dr. Elliott is the current Treasurer of the American
Association of State Colleges and Universities, is a member
of the Board of Directors of the American Council on
Education, serves on the National Governmental Affairs
[PHOTO] Commission of the American Council on Education (ACE), is a
former ACE Fellow in Academic Administration, and is past
national president of the Association of Teacher Educators.
On the state level, Dr. Elliott chairs the Ohio Board of
Regents Committee on Secondary/Higher Education
Articulation, serves on the Boards of the Ohio Aerospace
Institute, Ohio Supercomputer Center, the Science and Ohio
Technology Leadership Council, Technology Leadership Council
of Cleveland Tomorrow and Northeastern Ohio Universities
College of Medicine. She received a degree in English from
Transylvania College in 1959, a masters in English and
secondary education from Northwestern University in 1964,
and a doctorate in secondary education from Indiana
University in 1975.
GORDON D. HARNETT, age 53, is Chairman, President and Chief
Executive Officer of Brush Wellman Inc., the world's largest
producer of beryllium and beryllium-containing engineered
products. Prior to joining Brush Wellman in 1991, Mr.
Harnett had been Senior Vice President of The BFGoodrich
Company. From 1977 to 1988, he had held a series of senior
executive positions with Tremco Inc., a wholly owned
subsidiary of BFGoodrich, including President and Chief
[PHOTO] Executive Officer from 1982 to 1988. From 1969 through 1976,
Mr. Harnett worked for McKinsey & Co., including a two-year
assignment in Tokyo. Mr. Harnett became a Lubrizol Director
in 1995. Mr. Harnett graduated from Miami University in 1964
with a B.S. in business administration. He received an
M.B.A. from Harvard University in 1969. Mr. Harnett is a
Director of National City Bank and Essef Corporation. In
addition, he is a Trustee of Hathaway Brown, Cleveland
Tomorrow, University Circle Inc. and the Achievement Center
for Children and is Chairman of Cleveland Development
Advisors, Inc.
3
<PAGE> 7
VICTORIA F. HAYNES, age 48, is Vice President-Research and
Development and Chief Technical Officer of The BFGoodrich
[PHOTO] Company, a specialty chemicals and aerospace company. Dr.
Haynes has been associated with BFGoodrich since 1992 where
she is responsible for corporate technology strategy
development and state of technology for the company. Prior
to joining BFGoodrich, Dr. Haynes held various technical
positions at Monsanto Company, including director of
technology for the Plastics Division from 1987-1992. Dr.
Haynes became a Lubrizol Director in 1995. Dr. Haynes
graduated from the University of California at Berkeley in
1969 with a B.S. in chemistry. She received an M.A. in
college teaching in 1971 and a Ph.D. in physical/organic
chemistry in 1975 from Boston University and followed with a
post doctoral associate assignment at Purdue University for
two years. Dr. Haynes is a member of the Cleveland
Association of Research Directors Board, the Edison Polymer
Innovation Corporation Board, the National Resource
Council's Board on Chemical Services and Technology, the
NIST Advisory Panel in Materials, the NSF Science Center
Advisory Board for Virginia Polytechnic Institute and the
NSF Science Center Advisory Board for Georgia Tech
University.
DAVID H. HOAG, age 56, is Chairman, President and Chief
Executive Officer of The LTV Corporation and Chief Executive
[PHOTO] Officer of LTV Steel Company. The LTV Corporation is a
metals company engaged in the production of flat rolled
carbon steel. Mr. Hoag was appointed to the position of
Chairman in June 1991 after having been elected President
and Chief Executive Officer in January of that year. Mr.
Hoag became Executive Vice President of The LTV Corporation
in July 1986 and was concurrently named a member of LTV's
Board of Directors. He became President and Chief Executive
Officer of LTV Steel Company in January 1985 and continues
to serve as Chief Executive Officer of LTV Steel Company. He
was previously President and Chief Executive Officer of
LTV's Jones & Laughlin Steel subsidiary before its
operations were combined with those of Republic Steel
Corporation in June 1984 to form LTV Steel. From June 1982
to April 1983, he was Executive Vice President of J&L. Mr.
Hoag became a Lubrizol Director in 1989. He is a native of
Pittsburgh and attended Allegheny College in Meadville,
Pennsylvania, receiving a degree in economics in 1960. He is
a Director of The Chubb Corporation, Chairman of Cleveland
Tomorrow, Chairman of the Board of Trustees of Allegheny
College and a Director of the American Iron & Steel
Institute.
4
<PAGE> 8
THOMAS C. MACAVOY, age 67, is Professor of Business
[PHOTO] Administration, Darden School, University of Virginia. He is
a retired Vice Chairman of Corning, Inc., a diversified
glass and glass products and diagnostic services company. He
has been a Lubrizol Director since 1983. He joined Corning
Glass Works in 1957 and was elected President in 1971. He
served as President until April 1983 and retired in 1987. He
is a Director of The Quaker Oats Company and The Chubb
Corporation. Dr. MacAvoy is Past President of the Boy Scouts
of America.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
EDWARD F. BELL, age 66, retired in January 1993 as President
[PHOTO] and Chief Executive Officer of Ameritech Ohio. He served in
the U.S. Army Signal Corps during the Korean War and started
his telecommunications career in 1953 as a lineman for
Illinois Bell. He subsequently served in several assignments
in the engineering department of this company before
transferring to American Telephone and Telegraph Company in
New York City in 1962. He returned to Illinois Bell in 1964
and once again served in several posts, the last being
Assistant Vice President-Corporate Planning. He joined Ohio
Bell in 1976 as Vice President-Engineering and Corporate
Planning and was elected President effective April 1, 1983.
He became a Lubrizol Director in 1990. A native of Chicago,
Mr. Bell graduated in 1951 from the University of Illinois
with a B.S. degree in electrical engineering and received an
M.B.A. from Northwestern University in 1960. He is a Trustee
of the Cleveland State University Foundation, Catholic
Charities Foundation, the Cleveland Clinic, Health Trustee
Institute and United Way Services of Cleveland. Mr. Bell's
term as a Lubrizol Director expires in 1997.
L. E. COLEMAN, age 65, is Chairman of the Board of The
Lubrizol Corporation. He was elected a Director of the
[PHOTO] Corporation in 1974. Dr. Coleman joined Lubrizol in 1955 as
a research chemist. He has held various positions within the
Corporation and became President in 1976, Chief Executive
Officer in 1978 (until December 31, 1995) and was elected
Chairman of the Board in 1982. A 1952 graduate of the
University of Akron with a B.S. degree in chemistry, he
earned an M.S. degree in 1953 and a Ph.D. degree in 1955,
both in chemistry, from the University of Illinois. Dr.
Coleman is a Director of Norfolk Southern Corporation and
Harris Corporation. In addition, Dr. Coleman is on the
Advisory Council, College of Science, University of Notre
Dame and The University of Akron Sciences Advisory Council
for the Buchtel College of Arts and Sciences. He also
currently serves on the Executive Board of the Greater
Western Reserve Council as immediate past president and on
the National Executive Board of the Boy Scouts of America.
Dr. Coleman is also a member of the Geauga Park District
Foundation and The University of Akron Foundation. Dr.
Coleman's term as a Lubrizol Director expires in 1997.
5
<PAGE> 9
WILLIAM P. MADAR, age 56, has been President and Chief
Executive Officer of Nordson Corporation since 1986. Nordson
[PHOTO] Corporation manufactures and worldwide markets industrial
equipment, along with the software and application
technologies that enhance its use. A 1961 graduate of Purdue
University with a B.S. degree in chemical engineering, he
earned an M.B.A. from Stanford University in 1965. Mr. Madar
became a Lubrizol Director in 1992. He is a Director of
Nordson Corporation, National City Bank and Brush Wellman
Inc. Mr. Madar is Chairman of the Board of Trustees of the
Northeast Ohio Council on Higher Education, and he is a
Trustee of the Greater Cleveland Growth Association,
Cleveland Tomorrow, Cleveland Museum of Art, the Cleveland
Clinic Foundation, the Playhouse Square Foundation and
Hawken School. In addition, Mr. Madar is on the Advisory
Council of the Graduate School of Business of Stanford
University. Mr. Madar's term as a Lubrizol Director expires
in 1998.
RONALD A. MITSCH, age 61, is Vice Chairman and Executive
Vice President-Industrial and Consumer Sector of 3M, a
manufacturer of products for industrial, commercial, health
[PHOTO] care and consumer markets. He began his career with 3M in
1960 as a Senior Research Chemist. He served various
assignments in research and in 1979 was named Managing
Director, 3M Netherlands. He returned to the United States
in 1981 as Research and Development Vice President, Life
Sciences Sector. He was named Group Vice President, Traffic
and Personal Safety Products in 1985, Senior Vice President,
Research and Development in 1990, Executive Vice President
in 1991 and Vice Chairman in 1995. Dr. Mitsch graduated from
Hamline University in 1956 with a B.S. in chemistry. He
received an M.S. in organic chemistry in 1958 and a Ph.D in
organic chemistry in 1960 from the University of Nebraska.
Dr. Mitsch became a Lubrizol Director in 1991. He is a
Director of 3M, a Director of the 3M Foundation, a Director
of the SEI Center for Advanced Studies in Management at the
Wharton School of the University of Pennsylvania and a
Director of Shigematsu, Ltd., Tokyo, Japan. Dr. Mitsch's
term as a Lubrizol Director expires in 1997.
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors held eight meetings during 1995. The
Board has, among others, a standing Audit Committee and a standing Organization
and Compensation Committee. During 1995, each director attended at least 75% of
the meetings of the Board and those committees on which the director served.
The Audit Committee, currently composed of Renold D. Thompson, Chairman,
Edward F. Bell, Peggy Gordon Elliott and David H. Hoag, held three meetings
during 1995. The functions of the Audit Committee are to recommend the
nomination of independent auditors for appointment by the Board, subject to
confirmation by the shareholders; to review with the auditors the planned scope
and results of their examination; to hold such conferences and reviews with the
auditors as may be deemed desirable by either the Committee or the auditors; to
report to the Board the results of such reviews and conferences; and to submit
to the Board any recommendations the Committee may have.
6
<PAGE> 10
The Organization and Compensation Committee, currently composed of David H.
Hoag, Chairman, Edward F. Bell, Peggy Gordon Elliott, Gordon D. Harnett,
Victoria F. Haynes, Thomas C. MacAvoy, William P. Madar, Richard A. Miller,
Ronald A. Mitsch, Renold D. Thompson and Karl E. Ware, held seven meetings
during 1995. The functions of the Organization and Compensation Committee are to
review, consider and nominate candidates for election to the Board of Directors;
to review, consider and recommend candidates for election as officers of the
Corporation; to review and authorize rates of compensation for officers; to
designate those employees who will receive grants of stock options and other
stock awards under the Corporation's stock plans and the type and size of such
grants; to determine the size of the fund pools for the profit sharing plan,
year-end variable compensation plan and the variable award plan; and to
designate those employees who will receive awards under the Corporation's
variable award plan and who will be participants in the Corporation's executive
death benefit program. The Organization and Compensation Committee will consider
shareholder recommendations with respect to the composition of the Board.
Recommendations should be submitted in writing to the Secretary of the
Corporation no later than the first day of January preceding an annual meeting.
Directors (other than those who are employees of the Corporation) receive
an annual retainer fee of $14,000. In addition, directors (other than employees)
are paid an attendance fee of $700 for each meeting of the Board and each
committee meeting held on days on which the Board meets ($850 if held on other
days). The Corporation maintains a Deferred Compensation Plan for Directors
under which a director may elect to defer all or any portion of the annual
retainer fee and the attendance fees for any fiscal year. Any amounts so
deferred by a director may be credited to a cash account or a share unit account
in which each unit is equivalent to one Common Share. Amounts deferred into the
cash account earn interest at the Federal Reserve 90-Day Composite Rate in
effect from time to time and amounts deferred into the share unit account are
credited with additional share units reflecting quarterly dividends declared on
Common Shares. Amounts deferred are payable to the director either in cash or in
Common Shares (if deferred into share units) after cessation as a director of
the Corporation.
Pursuant to the Corporation's 1991 Stock Incentive Plan, on the date of
each Annual Meeting of Shareholders, each director who is not an employee of the
Corporation automatically receives an option to purchase 2,000 Common Shares of
the Corporation.
The Corporation also maintains a Deferred Stock Compensation Plan for
Outside Directors, under which each director who is not an employee of the
Corporation automatically receives, on October 1 of each year, 500 units, each
of which is equivalent to one Common Share. Additional share units are credited
to such directors on account of quarterly dividends declared on Common Shares.
Under the terms of the Plan, each share unit is converted into one Common Share
distributable shortly after the director ceases to be a director of the
Corporation. The director may elect to have the distribution made in up to ten
annual installments, and the distribution may be accelerated if a director
suffers financial hardship beyond the control of the director.
7
<PAGE> 11
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of January 31, 1996, information
concerning the number of Common Shares beneficially owned by each director and
each executive officer named in the compensation tables in this Proxy Statement
and by all executive officers and directors of the Corporation as a group.
Except as indicated below, no executive officer or director owns more than one
percent of the outstanding Common Shares of the Corporation. All executive
officers and directors as a group own approximately three percent of such Common
Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
-------------------------------------------------------------------------------
NAME OF DIRECT EMPLOYEE EXERCISABLE DEFERRED SHARE
BENEFICIAL OWNER OWNERSHIP(2) PLAN(3) OPTIONS(4) UNITS(5) TOTAL
- ------------------------------- ------------ -------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
R. A. Andreas.................. 13,017 2,258 60,271 75,546
W. G. Bares.................... 99,184 8,871 246,730 354,785
Edward F. Bell................. 1,700 6,500 1,577 9,777
L. E. Coleman.................. 210,038 23,484 451,659 685,181(6)
Peggy Gordon Elliott........... 100 2,500 1,134 3,734
Gordon D. Harnett.............. 200 915 1,115
Victoria F. Haynes............. 500 500
G. R. Hill..................... 35,335 1,996 107,646 144,977
David H. Hoag.................. 3,400 6,500 1,577 11,477
S. F. Kirk..................... 4,935 4,735 32,571 42,241
Thomas C. MacAvoy.............. 800 6,500 1,577 8,877
William P. Madar............... 1,000 4,500 2,151 7,651
Richard A. Miller.............. 2,041 6,500 1,577 10,118
Ronald A. Mitsch............... 1,000 5,700 1,577 8,277
Renold D. Thompson............. 2,000 6,500 1,577 10,077
Karl E. Ware................... 4,980 6,500 1,577 13,057
All Executive Officers and
Directors as a Group......... 430,830 83,216 1,321,082 15,239 1,850,367
<FN>
- ---------------
(1) Each person has sole voting and investment power with respect to all shares
shown except as indicated below.
(2) Includes shares owned by or jointly with family members, including 1,500 of
Mr. Bell's shares, 984 of Dr. Coleman's shares, 500 of Dr. Haynes' shares,
3,400 of Mr. Hoag's shares, 4,935 of Mr. Kirk's shares, 1,041 of Mr.
Miller's shares, 4,380 of Mr. Ware's shares, and 30,195 of the shares held
by the group, as to which the persons indicated have shared voting and
investment power. Also includes 25,004 shares owned by a private foundation
established by Dr. Coleman, as to which he has sole voting power but shared
investment power.
(3) Represents shares held in the Profit Sharing and Savings Plan, as to which
the persons indicated have sole voting power and limited investment power.
(4) Represents shares subject to stock options, granted under the Corporation's
option plans, that are exercisable currently or within 60 days of January
31, 1996.
(5) Represents the indirect beneficial interests held by outside directors under
the Deferred Stock Compensation Plan for Outside Directors and the Deferred
Compensation Plan for Directors.
(6) After taking into account stock options exercisable currently or within 60
days of January 31, 1996, Dr. Coleman beneficially owns 1.1% of the
Corporation's Common Shares.
</TABLE>
8
<PAGE> 12
The following table sets forth, as of December 31, 1995, information
concerning each person known by the Corporation to be the beneficial owner of
more than 5% of its Common Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------ ----------------- ----------
<S> <C> <C>
FMR Corp. 5,805,600(1) 9.18%
82 Devonshire Street
Boston, Massachusetts 02109
Cooke & Bieler, Inc. 4,143,350(2) 6.60%
1700 Market, Suite 3222
Philadelphia, PA 19103
INVESCO PLC 3,200,500(3) 5.06%
11 Devonshire Square
London EC2M 4YR
England
<FN>
- ---------------
(1) All information was obtained from a Schedule 13G filed February 14, 1996 by
FMR Corp. and certain of its affiliates, one of which is an investment
adviser registered under the Investment Advisers Act of 1940. Such reporting
persons reported sole voting power as to 179,500 shares and sole investment
power as to all 5,805,600 shares.
(2) All information was obtained from a Schedule 13G dated January 31, 1996
filed by Cooke & Bieler, Inc., which is an investment adviser registered
under the Investment Advisers Act of 1940. Cooke & Bieler, Inc. reported
sole voting power as to 3,449,850 shares and sole investment power as to
4,117,350 shares.
(3) All information was obtained from a Schedule 13G dated February 2, 1996
filed by INVESCO PLC and certain of its affiliates, one of which is an
investment adviser registered under the Investment Advisers Act of 1940.
Such reporting persons reported shared voting and investment power as to all
3,200,500 shares.
</TABLE>
9
<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth the respective amounts of compensation of
the Chief Executive Officer and the next four highest-paid executive officers of
the Corporation for each of the years 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------------------- PAYOUTS
OTHER SECURITIES -----------
NAME AND ANNUAL RESTRICTED UNDERLYING LONG-TERM
PRINCIPAL POSITION COMPENSATION STOCK OPTIONS/ INCENTIVE
DURING 1995 YEAR SALARY BONUS (1) (2) AWARDS SARS(NO.)(3) PAYOUTS (4)
- --------------------------- -------- -------- --------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
L. E. Coleman
Chairman of the Board and
Chief Executive Officer... 1995 $693,532 $361,939 $ 23,434 0 100,726 N/A
1994 675,330 439,459 9,876 0 80,000 N/A
1993 652,713 253,310 11,589 0 146,570 N/A
W. G. Bares
President and Chief
Operating Officer......... 1995 489,719 244,100 8,487 0 56,229 N/A
1994 476,847 288,028 7,632 0 81,305 N/A
1993 461,052 166,207 5,758 0 49,046 N/A
G. R. Hill
Senior Vice President..... 1995 299,090 140,574 4,944 0 20,000 N/A
1994 291,730 165,570 6,311 0 45,139 N/A
1993 282,702 95,695 1,550 0 18,000 N/A
R. A. Andreas
Vice President and Chief
Financial Officer......... 1995 216,965 72,525 7,420 0 14,179 N/A
1994 205,636 95,865 3,793 0 13,387 N/A
1993 199,612 54,951 2,373 0 11,181 N/A
S. F. Kirk
Vice President............ 1995 191,664 93,680 4,031 0 12,412 N/A
1994 173,116 82,141 4,012 0 10,488 N/A
1993 158,309 44,841 2,708 0 4,000 N/A
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION
DURING 1995 (5)
- --------------------------- ------------
<S> <C><C>
L. E. Coleman
Chairman of the Board and
Chief Executive Officer... $ 34,129
38,663
72,156
W. G. Bares
President and Chief
Operating Officer......... 24,365
26,516
42,998
G. R. Hill
Senior Vice President..... 15,762
18,162
26,540
R. A. Andreas
Vice President and Chief
Financial Officer......... 11,589
12,501
25,157
S. F. Kirk
Vice President............ 10,530
10,738
7,000
<FN>
- ---------------
(1) Reflects payments under variable compensation and variable award plans.
(2) Reflects "gross-up" payments to cover taxes related to the use of corporate
aircraft and financial planning services. The aggregate amount of other
compensation paid or distributed to the named executives in the form of
personal benefits was minimal and did not exceed the amounts as to which
disclosure would be required.
(3) Reflects the number of Common Shares of the Corporation covered by stock
options granted during the year. No stock appreciation rights ("SARs"),
either in conjunction with or separate from stock options, were granted to
the named executives during the years shown.
(4) The Corporation maintains plans under which stock options, stock
appreciation rights and restricted stock may be awarded. However, the
Corporation does not maintain a "long-term incentive plan," as that term is
used in the applicable SEC rules, under which payments are measured by
performance of the Corporation over longer than a one-year period.
(5) Amounts shown for 1995 reflect contributions made by the Corporation on
behalf of the named executives under the Corporation's Profit Sharing and
Savings Plan, including accruals to the related supplemental defined
contribution plan. No amounts shown were received by any of the named
executives.
</TABLE>
10
<PAGE> 14
STOCK OPTION PLANS
The Corporation maintains a 1991 Stock Incentive Plan (the "1991 Plan")
that permits the granting of incentive and nonstatutory stock options, as well
as stock appreciation rights, restricted stock awards and awards of Common
Shares. All employees of the Corporation and its subsidiaries are eligible to be
selected to participate in the 1991 Plan. In addition, the 1991 Plan provides
for the automatic annual grant of stock options to directors who are not
employees of the Corporation or its subsidiaries. The 1991 Plan is proposed to
be amended (See "Approval of Amendments to the 1991 Stock Incentive Plan").
The Corporation also has options outstanding under a 1985 Employee Stock
Option Plan. No additional stock options may be granted under this Plan, except
that options may be granted to employees who pay some or all of the option price
of previously granted options by surrendering Common Shares already owned by
them up to the number of Common Shares so surrendered.
The following tables set forth information regarding stock option
transactions with respect to the named executive officers during 1995.
OPTION/SAR GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS/ POTENTIAL REALIZABLE VALUE AT
SECURITIES SARS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED PRICE APPRECIATION FOR OPTION
OPTIONS/ TO EXERCISE TERM (4)
SARS EMPLOYEES OR BASE EXPIRATION -----------------------------
NAME GRANTED (1) IN 1995 PRICE (3) DATE 0% 5%
- ---------------------- ----------- --------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
L. E. Coleman......... 100,000 18.93% $35.1875 3/27/05 $0 $ 2,212,923
726(2) 0.13% 34.1250 2/27/05 0 15,581
W. G. Bares........... 46,000 8.70% 35.1875 3/27/05 0 1,017,945
10,229(2) 1.93% 34.1250 2/27/05 0 219,525
G. R. Hill............ 20,000 3.78% 35.1875 3/27/05 0 442,585
R. A. Andreas......... 10,000 1.89% 35.1875 3/27/05 0 221,292
4,179(2) 0.79% 34.1250 2/27/05 0 89,686
S. F. Kirk............ 10,000 1.89% 35.1875 3/27/05 0 221,292
2,412(2) 0.45% 34.1250 2/27/05 0 51,764
All Optionees......... 528,210 100.00% 35.1214 (5) 0 11,666,923
All Shareholders...... (6) (6) (6) (6) 0 1,390,446,630(6)
Optionees' Gain as % 0.84%
of Shareholders'
Gain................
<CAPTION>
NAME 10%
- ---------------------- --------------
<S> <C>
L. E. Coleman......... $ 5,607,981
39,485
W. G. Bares........... 2,579,671
556,319
G. R. Hill............ 1,121,596
R. A. Andreas......... 560,798
227,281
S. F. Kirk............ 560,798
131,180
All Optionees......... 29,566,273
All Shareholders...... 3,523,664,757(6)
Optionees' Gain as % 0.84%
of Shareholders'
Gain................
</TABLE>
- ---------------
(1) Options become exercisable pursuant to a multi-year vesting schedule as
described under "Summary of 1991 Plan" below. As also described, "reload"
options may be granted under specified circumstances.
(2) Represents "reload" option granted in an amount equal to the number of
Common Shares surrendered in payment of the exercise price of another
option.
(3) Represents the average of the high and low sales prices as reported on the
New York Stock Exchange on the date of grant.
(4) The assumed rates of appreciation shown are prescribed in the applicable SEC
rules for use in this table. Such rates are not intended to represent either
past or future appreciation rates with respect to the Corporation's Common
Shares. If
11
<PAGE> 15
such assumed annual appreciation rates were applied to the fair market value
of the Corporation's Common Shares at December 29, 1995 ($27.38 per share),
the last trading day of the Corporation's fiscal year, then at the end of a
10-year option term (the customary term for options granted under the 1991
Plan), the market price of the Corporation's Common Shares would be $27.38
per share at a 0% appreciation rate, $44.60 per share at a 5% appreciation
rate, and $71.02 per share at a 10% appreciation rate.
(5) Expiration dates range from June 24, 1995 through April 24, 2005.
(6) The amounts shown represent the hypothetical return to all holders of the
Corporation's Common Shares assuming that all shareholders purchased their
shares at a purchase price of $35.12, the average exercise price for all
options granted during 1995, and that all shareholders hold the shares
continuously for a ten-year period. The number of outstanding Common Shares
on December 31, 1995 was 62,951,288.
AGGREGATED OPTION/SAR EXERCISES IN 1995
AND DECEMBER 31, 1995 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS/SARS
UNEXERCISED OPTIONS/SARS AT AT DECEMBER 31, 1995 (1)(2)
SHARES DECEMBER 31, 1995 (2)
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
L. E. Coleman..... 939 $ 7,200 361,796 177,370 $241,211 --
W. G. Bares....... 18,800 291,386 196,116 109,144 336,115 --
G. R. Hill........ 0 0 86,669 47,070 123,067 --
R. A. Andreas..... 6,600 82,293 48,182 23,669 76,271 --
S. F. Kirk........ 6,000 115,500 22,743 18,657 61,421 --
<FN>
- ---------------
(1) The "value realized" on options exercised was calculated by determining the
difference between the fair market value of the underlying Common Shares at
the exercise date and the exercise price of the option. The "value of
unexercised in-the-money options/SARs at December 31, 1995" was calculated
by determining the difference between the fair market value of the
underlying Common Shares at December 29, 1995 ($27.38 per share), the last
trading day of the Corporation's fiscal year, and the exercise price of the
option. An option is "in-the-money" when the fair market value of the
underlying Common Shares exceeds the exercise price of the option. All
unexercisable options held by the named individuals were not in-the-money at
December 31, 1995.
(2) Although the Corporation's option plans permit the granting of SARs, no SARs
were outstanding at December 31, 1995.
</TABLE>
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Organization and Compensation Committee of the Board of Directors (the
"Committee") is responsible for setting the policies and approving the practices
of the Corporation with respect to compensation of executive officers, including
those named in the compensation tables in this Proxy Statement. The Committee is
comprised of all of the eleven outside directors of the Corporation.
In carrying out its responsibilities in 1995, the Committee considered the
following:
12
<PAGE> 16
1. Advice from independent consultants concerning all aspects of the
Corporation's compensation policies, including how its policies and
practices compare to the known policies and practices of other companies;
2. The Corporation's financial performance;
3. The Corporation's commercial performance within the markets it
serves;
4. The Corporation's policies and practices for compensation of
employees generally;
5. The recommendations of the Corporation's management concerning
compensation of key employees including executive officers; and
6. The historical philosophy of the Corporation to reward according to
(i) individual merit including the individual's commitment to the
Corporation and (ii) the performance of the Corporation.
The compensation for all domestic employees of the Corporation, including
the executive officers named in the compensation tables in this Proxy Statement,
consists of (i) base salary, paid biweekly, (ii) quarterly pay and (iii) a
variable compensation component. Base salary of all employees is designed to be
within a range that approximates the 50th percentile salary for individuals
having similar responsibilities in the chemical and related industries. For
executive officers, four separate surveys selected by the Committee's
compensation consultant are utilized to determine base salary. Although these
surveys are significantly broader than the published industry line-of-business
indices used to compare total shareholder return as set forth below in this
Proxy Statement, six peer chemical companies are included in both the salary
surveys and the published industry indices. Quarterly pay is a fixed percentage
of base salary, adjusted yearly to reflect length of service with the
Corporation. The fixed percentage of base salary for quarterly pay is 9.1667
percent. This fixed percentage is multiplied by 1.02 after the first full year
of service, and this multiplier is increased by .02 for each additional year of
service. With quarterly pay, the Corporation's employees are generally paid
between the median and 75th percentile for individuals with similar
responsibilities in the compared companies. The variable compensation component
is paid at year-end from funds authorized by the Committee using a percentage,
as determined by the Committee, of the annual net income of the Corporation. The
Committee historically has set this percentage at a level that is stable over
time and set the percentage at 4.15 percent for 1995. Allocation of these funds
is based upon an employee's proportionate share of the aggregate base salary of
all domestic employees. The pay practices described above apply to all domestic
employees.
Executive officers and other key employees may receive additional cash
compensation under a variable award plan. These awards are paid from additional
funds authorized by the Committee again using a percentage of the annual net
income of the Corporation as determined by the Committee. This percentage has
historically been set at 2 percent of net income to maintain consistency over
time and was set at 2 percent for 1995. Allocation of these funds by the
Committee is based upon an executive's level of responsibility, recommendations
by management and a subjective judgment by the Committee of the executive's
contribution to the financial and commercial performance of the Corporation.
Generally, an executive's potential variable award is higher the greater the
responsibilities. The Committee does not use specific, objective measures of
corporate performance to allocate variable awards to executive officers. During
1995, the Committee reviewed and adopted additional subjective performance
measures to be used for variable compensation purposes during 1996 and beyond.
The Committee administers the Corporation's executive compensation policy such
that annual compensation (base salary, quarterly pay and
13
<PAGE> 17
variable awards) is comparable with other companies in the chemical and related
industries. Management estimates that the Corporation's annual executive
compensation for 1995 was between the 50th and 75th percentile when compared to
annual executive compensation paid by companies in the referenced surveys.
The Corporation encourages ownership and retention of Common Shares by all
employees. Executive officers and other key employees may receive additional
compensation in the form of stock options. The Committee sets the number of
shares for annual grants midway between the 50th and 75th percentile of
long-term incentive awards within industrial companies generally. Grants are set
above the 50th percentile to reflect the Corporation's industry leadership,
market share position and above average performance and to encourage executives
to focus on long-term shareholder value. The specific number of stock options
granted to an executive is determined by the Committee based upon the
individual's level of responsibility, recommendations by management and a
subjective judgment by the Committee of the executive's contribution to the
financial and commercial performance of the Corporation. Outstanding awards held
by the individual are not considered when making new grants. Since stock options
are granted at the average market price for Common Shares on the date of grant
and have value only if the market price of the underlying Common Shares
increases, and since the exercisability of options vests over a three-year
period after the grant date, the Committee believes stock options provide an
appropriate long-term incentive for those receiving grants.
With respect to Dr. Coleman, who was Chief Executive Officer of the
Corporation during 1995, the Committee's intent was to set his base salary for
1995 within a range that was competitive with the salaries for chief executive
officers of companies in the chemical and related industries. He received a 4.0
percent increase in his base salary effective August 1995. This increase in base
salary occurred eighteen months after his last increase in February 1994, which
is consistent with the Corporation's practice of reviewing base salary for
senior managers and executives at intervals which vary between 12 and 24 months.
The variable compensation component constituted 34% of Dr. Coleman's annual
compensation in 1995. This component varies with the Corporation's net income.
Dr. Coleman's variable compensation for 1995 was 18% below 1994, as a result of
the Corporation's lower net income for 1995.
In setting Dr. Coleman's total compensation, the Committee considered
various aspects of corporate performance. Factors considered included
profitability, market position, productivity, product leadership, personnel
development, employee attitudes, public responsibility, quality practices and
the balancing of short-term and long-term goals. The Committee does not assign
weights to these factors nor does it use a specific formula to calculate their
impact. Rather, the Committee uses a combination of objective and subjective
judgment with an emphasis on the impact on the Corporation's sustainability and
competitiveness within its industry. As indicated above, a significant portion
of Dr. Coleman's total compensation is impacted by the financial performance of
the Corporation as measured by annual net income. In determining the number of
stock options granted to Dr. Coleman in 1995, the Committee considered the
conclusions from this objective and subjective evaluation, as well as his
position within the Corporation and industry stock option grant comparisons.
14
<PAGE> 18
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility by public corporations of compensation paid to specified executive
officers. After taking into account deferrals under the Corporation's Deferred
Compensation Plan for Officers, all compensation paid in 1995 to the
Corporation's executive officers, including the compensation element of shares
received under the Corporation's stock option plans, qualified for deduction
under Section 162(m).
<TABLE>
<S> <C>
David H. Hoag, Chairman William P. Madar
Edward F. Bell Richard A. Miller
Peggy Gordon Elliott Ronald A. Mitsch
Gordon D. Harnett Renold D. Thompson
Victoria F. Haynes Karl E. Ware
Thomas C. MacAvoy
</TABLE>
PERFORMANCE COMPARISONS
The following chart compares the cumulative total shareholder return of the
Corporation for the five years ended December 31, 1995 to the cumulative total
shareholder return of (a) the Standard & Poor's Industrial Index, and (b) the
Dow Jones Chemical Index and the Standard & Poor's Specialty Chemical Index,
which are two pre-established groups of companies believed by the Corporation to
have a peer group relationship with the Corporation. In all cases shown, the
chart assumes the investment of $100 on December 31, 1990 and the immediate
reinvestment of all dividends.
<TABLE>
<CAPTION>
Measurement Period S&P INDUS- D.J. CHEMI- S&P SP.
(Fiscal Year Covered) LUBRIZOL TRIAL CAL CHEMICAL
<S> <C> <C> <C> <C>
1990 100.0 100.0 100.0 100.0
1991 123.2 130.7 134.0 141.1
1992 122.1 138.3 146.2 149.4
1993 157.1 150.8 161.8 170.4
1994 160.2 156.5 176.3 148.7
1995 135.0 210.7 230.8 195.5
</TABLE>
The Corporation supplies performance chemicals for lubricants and fuels
worldwide. No single peer index or peer company is totally comparable to the
Corporation's business. The peer company indices used to compare total
shareholder return include companies which supply specialty chemicals to diverse
markets. Some of the Corporation's direct competitors are chemical divisions
that represent small portions of integrated oil companies and are not included
in the peer comparisons since information is not available to the Corporation to
show those divisions separately from the parent.
15
<PAGE> 19
EMPLOYEE AND EXECUTIVE OFFICER BENEFIT PLANS
In addition to the stock option and variable compensation plans described
elsewhere in this Proxy Statement and the group health, hospitalization and life
insurance plans generally available to all employees, the Corporation also
maintains the following plans for the benefit of employees and executive
officers.
PENSION PLANS
The Corporation maintains a qualified Pension Plan in which generally all
domestic employees of the Corporation participate. The Corporation also
maintains a basic supplemental defined benefit plan which provides highly paid
employees with the portion of their retirement benefits not permitted to be paid
from the Pension Plan due to limitations imposed by the Internal Revenue Code.
In addition, the Corporation maintains a special officers' supplemental defined
benefit plan which currently covers two officers and is described in footnote
(4) below. The following table sets forth the estimated annual retirement
benefits payable at age 65 under the Pension Plan and the basic supplemental
defined benefit plan in the specified final average pay and years of service
classifications.
<TABLE>
<CAPTION>
CREDITED YEARS OF SERVICE
-------------------------------------------------------------------------
FINAL AVERAGE PAY 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
200$,000....... $ 27,700 $ 41,550 $ 55,400 $ 69,260 $ 83,110 $ 83,110
400,000....... 56,700 85,050 113,400 141,760 170,110 170,110
600,000....... 85,700 128,550 171,400 214,260 257,110 257,110
800,000....... 114,700 172,050 229,400 286,760 344,110 344,110
1,000,000..... 143,700 215,550 287,400 359,260 431,110 431,110
1,200,000..... 172,700 259,050 345,400 431,760 518,110 518,110
</TABLE>
- ---------------
(1) Benefits under the Pension Plan and the related basic supplemental plan
generally are based upon a "final average pay" formula or a "career average
pay" formula, whichever produces the higher benefit to a participant. The
above table uses the "final average pay" formula since it generally produces
the higher benefit at the compensation levels shown. The "final average pay"
formula contains a 30-year limitation upon credited years of service.
Benefits are computed on the basis of a 10-year certain and life annuity and
are not subject to any deduction for Social Security or other offset
amounts.
(2) Final average pay is an average of a participant's highest ten consecutive
years of compensation covered by the Pension Plan and the related basic
supplemental plan. Compensation covered by the Pension Plan and the basic
supplemental plan consists of base salary, quarterly pay, overtime pay,
shift premium differentials, vacation and holiday pay, paid variable
compensation, long-term disability benefits, elective before-tax savings
contributions, before-tax cafeteria plan contributions and (for purposes of
supplemental plans) compensation deferrals. Covered compensation for the
named executive officers is generally the same as that shown in the "annual
compensation" columns for such individuals in the summary compensation table
above.
(3) The estimated credited years of service for each of the named executive
officers (after application of the 30-year service limitation) is as
follows: Dr. Coleman, 30 years; Mr. Bares, 30 years; Mr. Kirk, 23 years; Mr.
Andreas, 15 years; and Dr. Hill, 13 years.
(4) Benefits under the special officers' supplemental plan are based upon a
"final average pay" formula under which final average pay is an average of a
participant's highest three consecutive years of covered compensation during
the last ten years. Compensation covered by this plan is the same as
described in footnote
16
<PAGE> 20
(2) above. The plan contains a 30-year limitation upon credited years of
service and benefits are computed on the basis of a 10-year certain and life
annuity. Benefits under the plan are subject to reduction for Social
Security and payments made under other specified benefit plans of the
Corporation. After making all deductions required under the plan, the
additional benefits payable under this plan at age 65 (assuming current
final average pay) to Dr. Coleman and Mr. Bares, who are the current
participants in this plan, are approximately $85,000 and $12,000,
respectively.
PROFIT SHARING AND SAVINGS PLAN
The Corporation maintains a qualified Profit Sharing and Savings Plan in
which generally all domestic employees of the Corporation participate. Each
year, the Board of Directors determines the portion, if any, of the
Corporation's profits that will be contributed to the profit sharing portion of
the Plan. Profit sharing contributions are allocated, pro rata, to participant
accounts on the basis of compensation levels.
Employees may elect to have their base salary reduced by up to 18% (16% for
certain highly compensated employees) and to have such amount contributed to the
savings portion of the Plan as a before-tax contribution. For employees with at
least one year of service, the Corporation contributes an amount equal to 50% of
an employee's before-tax contributions that are not in excess of 4% of the
employee's base salary. This matching contribution by the Corporation is
invested in Common Shares of the Corporation. Participating employees also may
make contributions on an after-tax basis, subject to certain overall limitations
upon an employee's total before-tax and after-tax contributions. Participants
direct the investment of their contributions among a Common Share fund, an
equity index fund, a balanced fund, a fixed income fund, an international equity
fund, a small cap fund and a global equity fund. Participants vest in profit
sharing and matching contributions made by the Corporation at a rate of 20% per
year of service. Distribution of a participant's vested account balance
generally occurs following retirement, death or other termination of employment.
DEFERRED COMPENSATION PLAN
The Corporation maintains a deferred compensation plan for executive
officers. The plan allows deferral of a pre-selected amount of total annual
compensation for one or more designated future successive calendar years. Any
amounts so deferred by an officer earn interest at the Federal Reserve 90-day
Composite Rate in effect from time to time and are payable to the officer upon
cessation of employment in a lump sum or periodic installments over a
pre-selected period not exceeding ten years.
EXECUTIVE DEATH BENEFIT PROGRAM
Certain executive officers are eligible to participate in an executive
death benefit program which provides a benefit payable to the executive
officer's designated beneficiary following the death of the executive officer
during employment or after retirement from the Corporation. For currently
employed participants, the death benefit is equal to 250% of the executive
officer's 1996 base salary plus quarterly pay, reducing to 150% at age 70 and
100% at age 75.
EXECUTIVE AGREEMENTS
The Corporation has entered into employment termination agreements (the
"Termination Agreements") with certain senior executives, including Messrs.
Coleman, Bares, Hill, Andreas and Kirk.
17
<PAGE> 21
Generally, each Termination Agreement provides that, in the event of a
change in control of the Corporation, the executive will be employed by the
Corporation at responsibility, salary and benefit levels substantially equal to
those immediately preceding the change in control, for a period of up to three
years (the "Employment Period"). If the executive's employment is terminated
during the Employment Period for reasons other than his death, permanent
disability, attainment of the normal retirement age or for cause, or if the
executive terminates his employment in certain circumstances, the principal
benefits provided to the executive are (a) a lump sum payment of an amount equal
to the present value of salary and additional forms of cash compensation which
the executive would have received during the remainder of the Employment Period
and (b) continued employee benefits coverage for the remainder of the Employment
Period. The Termination Agreements further provide that the executive is
entitled to receive an amount which will be sufficient (on an after-tax basis)
to pay any excise taxes that may be applicable to amounts deemed to be paid to
the executive by reason of the change in control.
Each executive has agreed, if he accepts any benefits under a Termination
Agreement, not to enter into any activity which would be competitive with the
business of the Corporation during a period of one year from the termination of
his employment after a change in control. Assuming a change in control were to
occur and all of the executive officers with whom the Corporation has entered
into Termination Agreements were terminated as of January 1, 1996, the aggregate
amount of the lump sum payments which the Corporation would be obligated to make
pursuant to the Termination Agreements (including amounts with respect to excise
taxes) would be approximately $19.4 million.
SEVERANCE COMPENSATION PLAN
The Corporation also has in effect a severance compensation plan that
provides for a severance payment to U.S. employees if within fifteen months
after a change in control of the Corporation their employment is terminated for
any reason other than death, permanent disability, voluntary retirement or for
cause. Executives who receive payments pursuant to Termination Agreements will
not receive duplicative severance payments under the severance compensation
plan.
If an employee with five or more years of service with the Corporation is
terminated other than as permitted under the severance compensation plan, the
benefit provided to such employee under such plan is a lump sum payment equal to
the total cash compensation received by the employee in the preceding
twelve-month period. Employees with less than five years but more than six
months of service would receive a lesser amount proportionate to their length of
service.
APPROVAL OF AMENDMENTS TO THE 1991 STOCK INCENTIVE PLAN
The 1991 Stock Incentive Plan was approved by the shareholders of the
Corporation at the 1991 Annual Meeting of Shareholders and was amended by
shareholders at the 1992 Annual Meeting of Shareholders. In January 1996, the
Board of Directors approved and determined to submit to the shareholders for
approval certain further amendments to the 1991 Plan (the "Amendments"), which
are set forth as Exhibit A to this Proxy Statement and described below.
18
<PAGE> 22
SUMMARY OF 1991 PLAN
The 1991 Plan is administered by the Organization and Compensation
Committee (the "Committee") of the Board of Directors, which selects employees
to be participants and determines the type and number of awards to be granted.
The number of shares available for award under the 1991 Plan during any calendar
year generally is 1% of the Corporation's outstanding Common Shares as of the
first day of the year (which percentage represented 629,512 shares at January 1,
1996), plus any unused shares from previous years (1,453,448 shares at January
1, 1996). The option price for stock options granted to employees under the 1991
Plan is the fair market value of Common Shares on the date of grant and the term
of each such option is fixed by the Committee, except that incentive stock
options are not exercisable after ten years from the grant date. Options become
exercisable to the extent of 50% of the subject shares after one year from the
date of grant, 75% after two years from the date of grant, and 100% after three
years from the date of grant. Each stock option is evidenced by an award
agreement conforming to the provisions of the 1991 Plan, in such form as from
time to time is approved by the Committee. Payment of the option price upon
exercise of an option may be made in cash, Common Shares, or a combination, as
set forth in the award agreement. The closing price on the New York Stock
Exchange of Common Shares on March 1, 1996 was $29.38.
Stock appreciation rights may be granted pursuant to the 1991 Plan either
separately or in conjunction with other awards. Upon exercise of a stock
appreciation right, the holder receives payment from the Corporation in an
amount equal to the excess of the then fair market value of the Common Shares
covered by the stock appreciation right over the option or grant price of the
stock appreciation right. The Committee may impose such conditions or
restrictions on the exercise of any stock appreciation right as it deems
appropriate.
Restricted stock awards may be granted pursuant to the 1991 Plan either
separately or in conjunction with other awards. Common Shares covered by
restricted stock awards may not be sold or otherwise transferred by the
recipient until termination of the restrictions applicable to the award.
However, during the restriction period, recipients have full voting rights and
are entitled to dividends relating to such Common Shares. If an employee ceases
to be employed before the end of the restriction period, all Common Shares
subject to restriction will be forfeited to the Corporation, except the
Committee is permitted to waive all or part of any remaining restrictions in the
event of retirement, permanent disability, death, or in cases of special
circumstances.
Awards of Common Shares may be granted under the 1991 Plan either
separately or in conjunction with other awards. The Committee has complete
discretion as to the employees to whom stock awards are granted, the number of
Common Shares awarded, and all terms and conditions of each award.
Under the terms of the 1991 Plan, each director who is not an employee of
the Corporation or its subsidiaries (an "Outside Director") automatically is
granted an option to purchase 2,000 Common Shares on the date of each Annual
Meeting of Shareholders. All such options are nonstatutory stock options with a
ten-year term, and the option price per share is the fair market value of Common
Shares on the date of grant. Payment of the option price upon exercise may be
made in cash, Common Shares, or a combination, as set forth in the award
agreement. Options become exercisable to the extent of 50% of the subject shares
after one year from the date of grant, 75% after two years from the date of
grant, and 100% after three years from the date of grant.
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<PAGE> 23
If the option price of any option granted to an employee or Outside
Director under the 1991 Plan is paid in whole or in part by surrendering Common
Shares already owned by the optionee, there is automatically granted, when the
Committee next otherwise grants options to employees generally, a "reload"
option for the number of Common Shares surrendered. If such automatic grants
would otherwise exceed the annual limitation under the 1991 Plan, then all such
grants are reduced proportionately in order to comply with the limitation.
Common Shares acquired upon the exercise of a reload option may not be sold or
otherwise transferred while the holder is an employee or director of the
Corporation, but may be used to pay the option price of other options granted
under the 1991 Plan.
All outstanding options become exercisable with respect to 100% of the
subject shares upon the occurrence of a "change in control" (as defined in the
1991 Plan), except that no option may be exercised prior to six months from the
date of grant. The Corporation may grant limited stock appreciation rights in
connection with options granted under the 1991 Plan, with such limited stock
appreciation rights being exercisable only after a change of control has
occurred.
For federal income tax purposes, under existing statutes, regulations and
authorities, an optionee does not realize taxable income at the time of the
grant of an incentive stock option, a nonstatutory stock option or a stock
appreciation right. Upon the exercise of a nonstatutory stock option, the
Corporation is entitled to a deduction and the optionee realizes ordinary income
in the amount by which the fair market value of the subject Common Shares on the
date of exercise exceeds the option price. Upon the exercise of a stock
appreciation right, the Corporation is entitled to a deduction and the optionee
realizes ordinary income in the amount of the cash or fair market value of the
Common Shares received. On the subsequent sale of Common Shares received upon
the exercise of a nonstatutory option or in payment of stock appreciation
rights, the difference between the fair market value of the Common Shares on the
date of receipt and the amount realized on the sale will be treated as capital
gain or loss, which will be short or long term depending on the period for which
the Common Shares are held prior to the sale. An optionee will have no taxable
income upon the exercise of an incentive stock option (except that the
alternative minimum tax may apply) and generally does not realize taxable income
until sale of the Common Shares received upon exercise of the option. If a sale
does not take place until at least two years after grant and one year after
exercise of the option, any gain or loss realized will be treated as long term
capital gain or loss. Under such circumstances, the Corporation will not be
entitled to a deduction in connection with the grant or the exercise of the
option. If a disposition occurs prior to two years after grant or one year after
exercise, then the difference between the option price and the fair market value
of the Common Shares on the date of exercise (or, in certain cases, the amount
realized on sale, if less than the market value on the date of exercise) is
taxable as ordinary income to the optionee and is deductible by the Corporation
for federal income tax purposes.
With respect to awards of Common Shares, a participant realizes ordinary
income equal to the fair market value of the Common Shares received and the
Corporation is entitled to a deduction in the same amount. With respect to
restricted stock awards, a participant generally realizes ordinary income equal
to the fair market value of the Common Shares received as of the first day that
such shares become transferable or are not subject to a substantial risk of
forfeiture, whichever occurs earlier. The Corporation is entitled to a deduction
at that time in the same amount.
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<PAGE> 24
PROPOSED AMENDMENTS
Annual Limit on Individual Participant Awards
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility by public corporations of compensation paid to specified executive
officers to $1 million annually to each executive. This deductibility limitation
applies to stock options, stock appreciation rights and other awards that may be
made under the 1991 Plan. The compensation element, as relates to options and
stock appreciation rights, is the appreciation in value of the underlying shares
between the grant date and the time of exercise, and as relates to share awards,
is the fair market value of the shares at the time of award or end of
restriction period. An exception from the deductibility limitation is provided
for certain stock options and stock appreciation rights if the option or right
is granted by a committee of "outside directors" and shareholders have approved
certain aspects of the award, including a limit upon the number of shares
covered by options or stock appreciation rights granted to any individual during
a specified period. Restricted stock awards and awards of shares generally are
not excepted from the $1 million deductibility limitation.
Although options and stock appreciation rights are granted by a committee
of "outside directors" and the 1991 Plan contains an overall limit upon the
number of Common Shares available for award in each calendar year, it does not
provide a limit upon the number of Common Shares that may be the subject of
options or stock appreciation rights granted to any one participant. The Board
of Directors believes it is in the Corporation's best interest to be able to
fully deduct compensation paid to executive officers, and desires that awards of
options and stock appreciation rights under the 1991 Plan qualify for the
applicable exception from the $1 million deductibility limit. Accordingly, in
order to preserve the deductibility rights of the Corporation in this regard,
the Amendments would place a 400,000 limit on the number of Common Shares that
could be the subject of such awards made to any one participant during a
calendar year.
Term of Reload Options
The 1991 Plan provides that the Committee may fix the exercise period for
options granted to employees, and provides a ten-year exercise period for
options granted to Outside Directors. Under the 1991 Plan, reload options have
terms and conditions identical to those applicable to other option grants. Since
options granted under the 1991 Plan become exercisable over a three-year period
following grant, reload options currently must have a term of at least three
years to be fully exercisable. The Board of Directors believes that reload
options should be immediately exercisable upon grant but should be exercisable
only for the unexpired term of the underlying option which gives rise to the
reload option. The Amendments would modify Sections 6(b) and (c), with respect
to options granted to employees, and Sections 10(b) and (c), with respect to
options granted to Outside Directors, to provide for the immediate vesting of
reload options and to specifically limit the option period for reload options to
the unexpired term of the underlying option giving rise to the reload option.
Post-Death Exercisability
The 1991 Plan provides for automatic full vesting of options held by
Outside Directors at the time of cessation as a director and permits an Outside
Director to exercise options for varying periods of time following his/her
cessation as a director (36 months following retirement, 12 months following
death and three months following cessation for reasons other than retirement or
death). The 1991 Plan does not address the situation in which an Outside
Director dies during an extended
21
<PAGE> 25
exercisability period following retirement or other cessation as a director. The
Board of Directors believes that the lack of such provisions limits the ability
of the estate of an Outside Director to fully exercise his/her options in the
event of death. In addition, the current form of award agreement approved by the
Committee and the practice with respect to employees is to provide for limited
continuing exercisability of options if an employee dies during an extended
exercisability period following cessation as an employee. Accordingly,
consistent with the practice for employees, the Amendments add Section 10(c)(iv)
to the 1991 Plan to provide for a one-year exercise period if an Outside
Director dies during the three-year extension period following retirement, and a
three-month exercise period if an Outside Director dies during the three-month
extension period following cessation as a director for reasons other than
retirement or death.
If the Amendments are approved by shareholders, the Committee intends to
modify the provisions of outstanding award agreements and the current form of
award agreement for Outside Directors under the 1991 Plan so that all options
would be exercisable on the basis permitted by the Amendments as described
above. To the extent shareholder approval is deemed to be required to modify
such award agreements, approval of the Amendments will also constitute approval
to modify such award agreements.
Conforming Housekeeping Matters
The Amendments update Section 10 of the 1991 Plan to reflect the current
number of Common Shares covered by stock options automatically granted annually
to Outside Directors. The current annual 2,000 share grant is the result of
applying the 1991 Plan's antidilution provisions to the 2-for-1 stock split
effective August 31, 1992.
The Amendments also conform the definition of "Award Agreement" contained
in the 1991 Plan to the Corporation's current practices when furnishing awards
to participants.
The affirmative vote of the holders of the majority of the Common Shares
represented at the meeting is necessary for approval of the Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
APPOINTMENT OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Deloitte & Touche LLP, independent auditors, to audit the financial
statements of the Corporation for the current year ending December 31, 1996. The
Board of Directors recommends that shareholders confirm this appointment.
During 1995, the Corporation engaged Deloitte & Touche LLP to render a
variety of services to the Corporation, including the audit of the Corporation's
financial statements. The Audit Committee has taken into consideration the fact
that the auditors provide services in addition to the audit of the Corporation's
financial statements and the possible effect of such services upon the auditor's
independence.
A representative of Deloitte & Touche LLP will be present at the Annual
Meeting of Shareholders, will have the opportunity to make a statement and will
be available to respond to questions.
22
<PAGE> 26
FILINGS UNDER SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who beneficially own more than
ten percent of a registered class of the Corporation's equity securities, to
file reports of ownership and changes in ownership of such securities with the
Securities and Exchange Commission. Officers, directors and
greater-than-ten-percent beneficial owners are required by applicable
regulations to furnish the Corporation with copies of all Section 16(a) reports
they file. The Corporation is not aware of any beneficial owner of more than ten
percent of its Common Shares.
Based solely upon a review of the copies of the reports furnished to the
Corporation during or with respect to 1995, and written representations from
certain reporting persons, the Corporation believes that no officer or director
failed to file on a timely basis during 1995 or during any prior year any report
required by Section 16(a) of the Securities Exchange Act of 1934.
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 1997 Annual
Meeting of Shareholders and who wishes to have the proposal included in the
Corporation's proxy statement and form of proxy for that meeting must deliver
the proposal to the Corporation not later than November 13, 1996. To be eligible
to have a proposal included in the Corporation's proxy statement and form of
proxy, a shareholder must be the record or beneficial owner of at least 1% or
$1,000 in market value of the Corporation's Common Shares entitled to be voted
at the 1997 Annual Meeting of Shareholders, and must have held such Common
Shares for at least one year.
THE LUBRIZOL CORPORATION
K.H. HOPPING
Secretary
March 13, 1996
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<PAGE> 27
EXHIBIT A
PROPOSED AMENDMENTS TO THE LUBRIZOL CORPORATION
1991 STOCK INCENTIVE PLAN
The Lubrizol Corporation Stock Incentive Plan (the "Plan") is amended in
the following manner:
1. Change in Section 2(b). Section 2(b) of the Plan is amended to read as
follows (deletions are lined through and additions are underlined):
(b) "Award Agreement" means a written DOCUMENT[agreement] evidencing any
Award granted hereunder, and signed by both the Company and DELIVERED TO the
Participant or by both the Company and an Outside Director, AS THE CASE MAY BE.
2. Change in Section 4(a). Section 4(a) of the Plan is amended to read as
follows (deletions are lined through and additions are underlined):
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in the Plan, the total number of
Shares available under the Plan in each calendar year shall be one percent (1%)
of the total outstanding Shares as of the first day of any year for which the
Plan is in effect; provided that such number shall be increased in any year by
the number of Shares available for grant hereunder in previous years but not
covered by Awards granted hereunder in such previous years; [and] provided
further, that a total of no more than two million (2,000,000) Shares shall be
available for the grant of Incentive Stock Options Under the Plan; AND PROVIDED
FURTHER, THAT NO MORE THAN FOUR HUNDRED THOUSAND (400,000) SHARES SHALL BE
AVAILABLE FOR GRANT TO ANY PARTICIPANT DURING A CALENDAR YEAR. Settlement of an
Award, whether by the issuance of Shares or the payment of cash, shall not be
deemed to be the grant of an Award hereunder. In addition, any Shares issued by
the Company through the assumption or substitution of outstanding grants from an
acquired company shall not reduce the Shares available for grants under the
Plan. Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued Shares or treasury shares. If any Shares subject to any
Award granted hereunder are forfeited or if such Award otherwise terminates
without the issuance of such Shares or payment of other consideration in lieu of
such Shares, the Shares subject to such Award, to the extent of any such
forfeiture or termination, shall again be available for grant under the Plan as
if such Shares had not been subject to an Award.
3. Change in Section 6(b)and (c). Section 6(b) and (c) are amended to read as
follows (additions are underlined):
(b) OPTION PERIOD. The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the Grant Date; AND PROVIDED
FURTHER, THAT NO RELOAD OPTION GRANTED TO A PARTICIPANT PURSUANT TO THE TERMS OF
SECTION 6(e) SHALL BE EXERCISABLE AFTER THE EXPIRATION OF THE TERM OF THE OPTION
THAT GAVE RISE TO THE GRANT OF SUCH RELOAD OPTION.
(c) EXERCISE OF OPTION. Options shall be exercisable to the extent of fifty
percent (50%) of the Shares subject thereto after one year from the Grant Date,
seventy-five percent (75%) of such Shares after two years from the Grant Date,
and one hundred percent (100%) of such Shares after three years from the Grant
Date, subject to any provisions respecting the exercisability of Options that
may be contained in an Award Agreement; PROVIDED THAT A RELOAD OPTION GRANTED TO
A
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<PAGE> 28
PARTICIPANT PURSUANT TO THE TERMS OF SECTION 6(e) SHALL BE EXERCISABLE TO THE
EXTENT OF ONE HUNDRED PERCENT (100%) OF SUCH SHARES FROM THE GRANT DATE.
4. Change in Section 10. Section 10 is amended to read as follows (deletions are
lined through and additions are underlined):
SECTION 10. OUTSIDE DIRECTORS' OPTIONS.
[On the close of business on the date of the 1991 Shareholders' Meeting,
each Outside Director shall automatically be granted an Option to purchase 1,000
Shares, and o]ON the close of business on the date of each subsequent
Shareholders' Meeting, each Outside Director shall automatically be granted an
Option to purchase 2,000[1,000] Shares. All such Options shall be Non-Statutory
Stock Options and shall be subject to the following terms and conditions and to
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as are contained in the applicable Award Agreement.
(a) OPTION PRICE. The purchase price per Share shall be one hundred percent
(100%) of the Fair Market Value of the Share on the Grant Date. Payment of the
Option Price may be made in cash, Shares, or a combination of cash and Shares,
as provided in the Award Agreement in effect from time to time.
(b) OPTION PERIOD. The term during which Options granted under this Section
10 shall be exercisable shall be ten (10) years from the Grant Date; PROVIDED
THAT NO RELOAD OPTION GRANTED TO AN OUTSIDE DIRECTOR PURSUANT TO THE TERMS OF
SECTION 6(e) SHALL BE EXERCISABLE AFTER THE EXPIRATION OF THE TERM OF THE OPTION
THAT GAVE RISE TO THE GRANT OF SUCH RELOAD OPTION.
(c) EXERCISE OF OPTIONS. Subject to the provisions of this Section 10(c),
Options shall be exercisable to the extent of fifty percent (50%) of the Shares
subject thereto after one year from the Grant Date, seventy-five percent (75%)
of such Shares after two years from the Grant Date, and one hundred percent
(100%) of such Shares after three years from the Grant Date; PROVIDED THAT A
RELOAD OPTION GRANTED TO AN OUTSIDE DIRECTOR PURSUANT TO THE TERMS OF SECTION
6(e) SHALL BE EXERCISABLE TO THE EXTENT OF ONE HUNDRED PERCENT (100%) OF SUCH
SHARES FROM THE GRANT DATE. Options may be exercised by an Outside Director
during the period that the Outside Director remains a member of the Board and
under the circumstances described below:
(I) If an Outside Director retires under a retirement plan or policy
of the Company, then Options held by such Outside Director may be exercised for
a period of thirty-six (36) months following retirement, to the extent of 100%
of the Shares covered by such Options (notwithstanding the extent to which the
Outside Director otherwise would have been entitled to exercise such Options at
the date of retirement), provided that in no event shall an Option BE
EXERCISABLE [more than] AFTER THE EXPIRATION OF THE OPTION PERIOD PROVIDED IN
SECTION 10(b)ten [(10) years after the Grant Date.]
(ii) In the event of the death of an Outside Director WHILE SERVING AS
A DIRECTOR, Options held by such Outside Director may be exercised for a period
of twelve (12) months following the date of death, (A[i]) to the extent of 100%
of the Shares covered by such Options (notwithstanding the extent to which the
Outside Director otherwise would have been entitled to exercise the Option at
the date of death), and (B[ii]) only by the executor or administrator of the
Outside Director's estate or by the person or persons to whom the Outside
Director's rights under the Options shall pass by the Outside Director's will
or the laws of descent and distribution, provided that in no event shall an
Option be exercisable [more than] AFTER THE
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<PAGE> 29
EXPIRATION OF THE OPTION PERIOD PROVIDED IN SECTION 10(b)[ten (10) years after
the Grant Date.]
(III) If an Outside Director shall cease to be a director for any
reason other than retirement under a retirement plan or policy of the Company or
death, Options held by such Outside Director may be exercised for a period of
three (3) months following such cessation, to the extent of 100% of the Shares
covered by such Options (notwithstanding the extent to which the Outside
Director otherwise would have been entitled to exercise such Options at the date
of such cessation), provided that in no event shall an Option be exercisable
[more than] AFTER THE EXPIRATION OF THE OPTION PERIOD PROVIDED IN SECTION
10(b)[ten (10) years after the Grant Date.]
(IV) IN THE EVENT AN OUTSIDE DIRECTOR, AFTER CEASING TO BE A DIRECTOR,
DIES DURING AND SUBJECT TO ONE OF THE PERIODS DESCRIBED IN SECTION 10(C)(I) OR
(III), WHILE POSSESSED OF UNEXERCISED OPTIONS, THE EXECUTOR OR ADMINISTRATOR OF
THE OUTSIDE DIRECTOR'S ESTATE, OR THE PERSON ENTITLED BY WILL OR THE APPLICABLE
LAWS OF DESCENT AND DISTRIBUTION, MAY EXERCISE SUCH OPTIONS HELD BY THE OUTSIDE
DIRECTOR AT THE TIME OF THE OUTSIDE DIRECTOR'S DEATH DURING THE PERIOD THAT IS
APPLICABLE, AS FOLLOWS:
(A) IF SECTION 10(C)(I) WAS IN EFFECT, FOR ONE YEAR AFTER THE
OUTSIDE DIRECTOR'S DEATH;
(B) IF SECTION 10(C)(III) WAS IN EFFECT, FOR THREE MONTHS AFTER
THE OUTSIDE DIRECTOR'S DEATH;
PROVIDED THAT, IN NO EVENT SHALL THE OPTION BE EXERCISABLE AFTER THE EXPIRATION
OF THE OPTION PERIOD PROVIDED IN SECTION 10(B).
A-3
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THE LUBRIZOL CORPORATION 1991 STOCK INCENTIVE PLAN
(As Amended June 22, 1992)
SECTION 1. PURPOSE.
The purposes of The Lubrizol Corporation 1991 Stock Incentive Plan are
to encourage selected employees of The Lubrizol Corporation and its
Subsidiaries and directors of the Company to acquire a proprietary and vested
interest in the growth and performance of the Company, to generate an increased
incentive to contribute to the Company's future success and prosperity, thus
enhancing the value of the Company for the benefit of shareholders, and to
enhance the ability of the Company and its Subsidiaries to attract and retain
individuals of exceptional talent upon whom, in large measure, the sustained
progress, growth and profitability of the Company depends.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, or Stock Award granted
pursuant to the provisions of the Plan.
(b) "Award Agreement" means a written agreement evidencing any
Award granted hereunder and signed by both the
Company and the Participant or by both the Company
and an Outside Director.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" means a committee of not less than three (3)
Outside Directors of the Board, each of whom shall be
a "disinterested person" within the meaning of Rule
16b-3(d)(3) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any
successor rule or statute.
(f) "Company" means The Lubrizol Corporation.
(g) "Employee" means any employee of the Company or of any
Subsidiary.
(h) "Fair Market Value" means the average of the high and low
price of a Share on the New York Stock Exchange on
the Grant Date (in the case of a Grant), or any other
relevant date.
<PAGE> 31
(i) "Grant Date" means the date on which the Board approves
the grant of an Option, Stock Appreciation Right,
Restricted Stock Award, or Stock Award, and, with
respect to an Option granted to an Outside Director
pursuant to Section 10, the date of the Shareholders'
Meeting on which such Option is granted.
(j) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422A of the Code
or any successor provision thereto.
(k) "Non-Statutory Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
(l) "Option" means an option to purchase Shares granted
hereunder.
(m) "Option Price" means the purchase price of each Share
under an Option.
(n) "Outside Director" means a member of the Board who is not
an employee of the Company or of any Subsidiary.
(o) "Participant" means an Employee who is selected by the
Committee to receive an Award under the Plan.
(p) "Plan" means The Lubrizol Corporation 1991 Stock Incentive
Plan.
(q) "Restricted Stock Award" means an award of restricted
Shares under Section 8 hereof.
(r) "Restriction Period" means the period of time specified
in an Award Agreement during which the following
conditions remain in effect: (i) certain restrictions on
the sale or other disposition of Shares awarded under the
Plan, (ii) subject to the terms of the applicable Award
Agreement, the continued employment of the Participant,
and (iii) such other conditions as may be set forth
in the applicable Award Agreement.
(s) "Shareholders' Meeting" means the annual meeting of
shareholders of the Company in each year.
(t) "Shares" means common shares without par value of the
Company.
(u) "Stock Appreciation Right" means the right to receive a
payment in cash or in Shares, or in any combination
thereof, from the Company equal to the excess of the Fair
Market Value of a stated number of Shares at the exercise
date over a fixed price for such Shares.
(v) "Stock Award" means the grant of unrestricted Shares under
the Plan.
(w) "Subsidiary" means a corporation which is at least 80%
owned, directly or indirectly, by the Company.
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<PAGE> 32
(x) "Voting Stock" means the then-outstanding securities
entitled to vote generally in the election of directors
of the Company.
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Committee. Members of the
Committee shall be appointed by and serve at the pleasure of the Board, and may
resign by written notice filed with the Chairman of the Board or the Secretary
of the Company. A vacancy on the Committee shall be filled by the appointment
of a successor member by the Board. Subject to the express provisions of this
Plan, the Committee shall have conclusive authority to select Employees to be
Participants for Awards and determine the type and number of Awards to be
granted, to construe and interpret the Plan, any Award granted hereunder, and
any Award Agreement entered into hereunder, and to establish, amend, and
rescind rules and regulations for the administration of this Plan and shall
have such additional authority as the Board may from time to time determine to
be necessary or desirable. Notwithstanding the foregoing, the Committee shall
not have discretion with respect to Options granted to Outside Directors
pursuant to Section 10 such as to prevent any Award granted under this Plan
from meeting the requirements for exemption from Section 16(b) of the Exchange
Act, as set forth in Rule 16b-3 thereunder or any successor rule or statute.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in the Plan, the total number of
Shares available under the Plan in each calendar year shall be one
percent (1%) of the total outstanding Shares as of the first
day of any year for which the Plan is in effect; provided that
such number shall be increased in any year by the number of Shares
available for grant hereunder in previous years but not covered by
Awards granted hereunder in such previous years; and provided
further, that a total of no more than two million (2,000,000)
Shares shall be available for the grant of Incentive Stock Options
Under the Plan. Settlement of an Award, whether by the issuance of
Shares or the payment of cash, shall not be deemed to be the grant
of an Award hereunder. In addition, any Shares issued by the
Company through the assumption or substitution of outstanding
grants from an acquired company shall not reduce the Shares
available for grants under the Plan. Any Shares issued hereunder
may consist, in whole or in part, of authorized and unissued
Shares or treasury shares. If any Shares subject to any Award
granted hereunder are forfeited or if such Award otherwise
terminates without the issuance of such Shares or payment of other
consideration in lieu of such Shares, the Shares subject to such
Award, to the extent of any such forfeiture or termination, shall
again be available for grant under the Plan as if such Shares had
not been subject to an Award.
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(b) The number of Shares which remain available for grant
pursuant to this Plan, together with Shares subject to
outstanding Awards, at the time of any change in the
Company's capitalization, including stock splits, stock
dividends, mergers, reorganizations, consolidations,
recapitalizations, or other changes in corporate
structure, shall be appropriately and proportionately
adjusted to reflect such change in capitalization.
SECTION 5. ELIGIBILITY.
Any Employee shall be eligible to be selected as a Participant.
SECTION 6. STOCK OPTIONS.
Non-Statutory Stock Options and Incentive Stock Options may be granted
hereunder to Participants either separately or in conjunction with other Awards
granted under the Plan. Any Option granted to a Participant under the Plan
shall be evidenced by an Award Agreement in such form as the Committee may from
time to time approve. Any such Option shall be subject to the following terms
and conditions and to such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall deem desirable.
(a) OPTION PRICE. The purchase price per Share under an
Option shall be one hundred percent (100%) of the Fair
Market Value of the Share on the Grant Date of the Option.
Payment of the Option Price may be made in cash, Shares,
or a combination of cash and Shares, as provided in the
Award Agreement relating thereto.
(b) OPTION PERIOD. The term of each Option shall be fixed by
the Committee in its sole discretion; provided that no
Incentive Stock Option shall be exercisable after
the expiration of ten years from the Grant Date.
(c) EXERCISE OF OPTION. Options shall be exercisable to the
extent of fifty percent (50%) of the Shares subject
thereto after one year from the Grant Date, seventy-five
percent (75%) of such Shares after two years from the
Grant Date, and one hundred percent (100%) of such Shares
after three years from the Grant Date, subject to any
provisions respecting the exercisability of Options
that may be contained in an Award Agreement.
(d) INCENTIVE STOCK OPTIONS. The aggregate Fair Market Value
of the Shares with respect to which Incentive Stock
Options held by any Participant which are exercisable for
the first time by such Participant during any calendar
year under the Plan (and under any other benefit plans of
the Company, of any parent corporation, or Subsidiary)
shall not exceed $100,000 or, if different, the maximum
limitation in effect at the Grant Date under Section
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422A of the Code, or any successor provision, and any
regulations promulgated thereunder. The terms of any
Incentive Stock Option granted hereunder shall comply in
all respects with the provisions of Section 422A of the
Code, or any successor provision, and any regulations
promulgated thereunder.
(e) RELOAD. In the event that a Participant or an Outside
Director exercises an Option and pays some or all of the
Option Price with Shares, such Participant or Outside
Director shall be granted a reload Option to purchase the
number of Shares equal to the number of Shares used as
payment of the Option Price, such reload Option to be
granted at the time and subject to the limitation
described below. The Grant Date for the reload Option
shall be the next date on which the Committee otherwise
grants Options under this Plan to employees generally,
whether or not during the same calendar year in which the
original Option is exercised. Options granted to
Participants pursuant to this Section 6(e) shall have
terms and conditions as described in this Section 6 and
Options granted to Outside Directors pursuant to this
Section 6(e) shall have terms and conditions as described
in Section 10. Options granted pursuant to this Section
6(e) shall be of the same character (i.e., Non-Statutory
Stock Options or Incentive Stock Options) as the Option
that is exercised to give rise to the grant of the reload
Option, provided that if an Incentive Stock Option cannot
be granted under this Section 6(e) in compliance with
Section 422A of the Code, then a Non-Statutory Stock
Option shall be granted in lieu thereof. Options shall be
granted pursuant to this Section 6(e) only to the extent
that the number of Shares covered by such Option grants
does not, when added to the number of Shares covered by
Awards previously granted during such calendar year,
exceed the limitation set forth in Section 4(a). If such
limitation would otherwise be exceeded by the operation of
this Section 6(e), each Participant or Outside Director
entitled to receive an Option under this Section 6(e)
shall have the number of Shares subject to such Option
reduced appropriately and proportionately (i.e., by the
same percentage) so that the limitation set forth in
Section 4(a) will not be exceeded.
Shares received upon the exercise of an Option granted
pursuant to this Section 6(e) may not be sold or otherwise
transferred (i) by a Participant until such Participant
ceases to be employed by the Company or a Subsidiary, or
(ii) by an Outside Director until such Outside Director
ceases to be an Outside Director, provided, however, that
a Participant or Outside Director may use such Shares as
payment of the Option Price of Options granted under this
Plan to the extent permitted by the applicable Award
Agreement, in which case a number of the Shares (equal to
the number of Shares used for such payment) purchased by
the exercise of such Options also shall be subject to the
same restrictions upon transferability. Certificates for
such Shares with a transferability restriction shall bear
a legend referencing such restriction.
- 5-
<PAGE> 35
SECTION 7. STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights may be granted hereunder to Participants
either separately or in conjunction with other Awards granted under the Plan
and may, but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect to
each Participant. Any Stock Appreciation Right related to a Non-Statutory
Stock Option may be granted at the same time such Option is granted or at any
time thereafter before exercise or expiration of such Option. Any Stock
Appreciation Right related to an Incentive Stock Option must be granted at the
same time such Option is granted. Any Stock Appreciation Right related to an
Option shall be exercisable only to the extent the related Option is
exercisable. In the case of any Stock Appreciation Right related to any
Option, the Stock Appreciation Right or applicable portion thereof shall
terminate and no longer be exercisable upon the termination or exercise of the
related Option. Similarly, upon exercise of a Stock Appreciation Right as to
some or all of the Shares covered by a related Option, the related Option shall
be canceled automatically to the extent of the Stock Appreciation Rights
exercised, and such Shares shall not thereafter be eligible for grant under
Section 4(a). The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall deem appropriate.
SECTION 8. RESTRICTED STOCK AWARDS.
(a) ISSUANCE. Restricted Stock Awards may be issued hereunder to
Participants, either separately or in conjunction with other
Awards granted under the Plan. Each Award under this Section 8
shall be evidenced by an Award Agreement between the Participant
and the Company which shall specify the vesting schedule, any
rights of acceleration and such other terms and conditions as the
Board shall determine, which need not be the same with
respect to each Participant.
(b) REGISTRATION. Shares issued under this Section 8 shall be
evidenced by issuance of a stock certificate or certificates
registered in the name of the Participant bearing the following
legend and any other legend required by, or deemed
appropriate under, any federal or state securities laws:
The sale or other transfer of the common shares
represented by this certificate is subject to certain
restrictions set forth in the Award Agreement
between_________(the registered owner) and The Lubrizol
Corporation dated___________ under The Lubrizol Corporation
1991 Stock Incentive Plan. A copy of the Plan and Award
Agreement may be obtained from the Secretary of The
Lubrizol Corporation.
- 6 -
<PAGE> 36
Unless otherwise provided in the Award Agreement between
the Participant and the Company, such certificates shall
be retained by the Company until the expiration of the
Restriction Period. Upon the expiration of the
Restriction Period, the Company shall (i) cause the
removal of the legend from the certificates for such
Shares as to which a Participant is entitled in accordance
with the Award Agreement between the Participant and the
Company and (ii) release such Shares to the custody
of the Participant.
(c) FORFEITURE. Except as otherwise determined by the
Committee at the Grant Date, upon termination of
employment of the Participant for any reason during the
Restriction Period, all Shares still subject to
restriction shall be forfeited by the Participant and
retained by the Company; provided that in the event of a
Participant's retirement, permanent disability, death, or
in cases of special circumstances, the Committee may, in
its sole discretion, when it finds that a waiver would be
in the best interests of the Company, waive in whole or in
part any or all remaining restrictions with respect to
such Participant's Shares. In such case, unrestricted
Shares shall be issued to the Participant at
such time as the Committee determines.
(d) RIGHTS AS SHAREHOLDERS. At all times during the Restriction
Period, Participants shall be entitled to full voting
rights with respect to all Shares awarded under this
Section 8 and shall be entitled to dividends with respect
to such Shares.
SECTION 9. STOCK AWARDS.
(a) Awards of Shares may be granted hereunder to Participants,
either separately or in conjunction with other Awards
granted under the Plan. Subject to the provisions of the
Plan, the Committee shall have sole and complete authority
to determine (i) the Employees to whom such Awards shall
be granted, (ii) the time or times at which such Awards
shall be granted, (iii) the number of Shares to be granted
pursuant to such Awards, and (iv) all other conditions of
the Awards. The provisions of stock awards need not be the
same with respect to each Participant.
SECTION 10. OUTSIDE DIRECTORS' OPTIONS.
On the close of business on the date of the 1991 Shareholders'
Meeting, each Outside Director shall automatically be granted an Option to
purchase 1,000 Shares, and on the close of business on the date of each
subsequent Shareholders' Meeting, each Outside Director shall automatically be
granted an Option to purchase 1,000 Shares. All such Options shall be
Non-Statutory Stock Options and shall be subject to the following terms and
conditions and to such additional terms and conditions, not inconsistent with
the provisions of the Plan, as are contained in the applicable Award Agreement.
- 7 -
<PAGE> 37
(a) OPTION PRICE. The purchase price per Share shall be one
hundred percent (100%) of the Fair Market Value of the
Share on the Grant Date. Payment of the Option Price may
be made in cash, Shares, or a combination of cash and
Shares, as provided in the Award Agreement in effect from
time to time.
(b) OPTION PERIOD. The term during which Options granted
under this Section 10 shall be exercisable shall be ten
(10) years from the Grant Date.
(c) EXERCISE OF OPTIONS. Subject to the provisions of this
Section 10(c), Options shall be exercisable to the extent
of fifty percent (50%) of the Shares subject thereto after
one year from the Grant Date, seventy-five percent (75%)
of such Shares after two years from the Grant Date, and
one hundred percent (100%) of such Shares after three
years from the Grant Date. Options may be exercised by an
Outside Director during the period that the Outside
Director remains a member of the Board and under the
circumstances described below.
If an Outside Director retires under a retirement plan or
policy of the Company, then Options held by such Outside
Director may be exercised for a period of thirty-six (36)
months following retirement, to the extent of 100% of the
Shares covered by such Options (notwithstanding the extent
to which the Outside Director otherwise would have been
entitled to exercise such Options at the date of
retirement), provided that in no event shall an Option be
exercisable more than ten (10) years after the Grant Date.
In the event of the death of an Outside Director, Options
held by such Outside Director may be exercised for a
period of twelve (12) months following the date of death,
(i) to the extent of 100% of the Shares covered by such
Options (notwithstanding the extent to which the Outside
Director otherwise would have been entitled to exercise
the Option at the date of death), and (ii) only by the
executor or administrator of the Outside Director's estate
or by the person or persons to whom the Outside Director's
rights under the Options shall pass by the Outside
Director's will or the laws of descent and distribution,
provided that in no event shall an Option be exercisable
more than ten (10) years after the Grant Date.
If an Outside Director shall cease to be a director for
any reason other than retirement under a retirement plan
or policy of the Company or death, Options held by such
Outside Director may be exercised for a period of three
(3) months following such cessation, to the extent of 100%
of the Shares covered by such Options (notwithstanding the
extent to which the Outside Director otherwise would have
been entitled to exercise such Options at the date of
such cessation), provided that in no event
- 8 -
<PAGE> 38
shall an Option be exercisable more than ten (10) years
after the Grant Date.
SECTION 11. CHANGE IN CONTROL.
Notwithstanding the provisions of Sections 6(c) and 10(c), Options
shall become exercisable with respect to 100% of the Shares upon the occurrence
of any Change in Control (as hereafter defined) of the Company; except that no
Options shall be exercised prior to the end of six months from the Grant Date.
Notwithstanding the provisions of Section 8 and the applicable Award
Agreement, any restricted Shares shall be 100% vested and without any
restrictions upon the occurrence of any Change in Control of the Company.
For all purposes of the Plan, a "Change in Control" shall have
occurred if any of the following events shall occur:
(a) The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and
immediately after such merger, consolidation or
reorganization less than a majority of the combined voting
power of the then-outstanding securities of such
corporation or person immediately after such transaction
are held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such transaction;
(b) The Company sells all or substantially all of its assets
to any other corporation or other legal person, and less
than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such sale are held in the aggregate by
the holders of Voting Stock of the Company immediately
prior to such sale;
(c) There is a report filed on Schedule 13D or Schedule 14D-l
(or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that
any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13(d)(3) or any successor
rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the Voting Stock;
(d) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Company has
or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction; or
- 9 -
<PAGE> 39
(e) If during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
Directors of the Company cease for any reason to
constitute at least a majority thereof, provided, however,
that for purposes of this Section 11(e), each Director who
is first elected, or first nominated for election by the
Company's stockholders, by a vote of at least two thirds
of the Directors of the Company (or a committee thereof)
then still in office who were Directors of the Company at
the beginning of any such period will be deemed to have
been a Director of the Company at the beginning of
such period.
Notwithstanding the foregoing provisions of Section 11(c) or 11(d)
hereof, unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for purposes
of the Plan solely because (i) the Company, (ii) an entity in which the
Company directly or indirectly beneficially owns 50% or more of the voting
securities, or (iii) any employee stock ownership plan or any other employee
benefit plan sponsored by the Company, either files or becomes obligated to
file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-l, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 20% or otherwise, or
because the Company reports that a change in control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership.
SECTION 12. AMENDMENTS AND TERMINATION.
The Board may, at any time, amend, alter or terminate the Plan, but no
amendment, alteration, or termination shall be made that would impair the
rights of an Outside Director or Participant under an Award theretofore
granted, without the Outside Director's or Participant's consent, or that
without the approval of the shareholders would:
(a) except as is provided in Sections 4(b) and 13(c) of the
Plan, increase the total number of Shares which may be
issued under the Plan;
(b) change the class of employees eligible to participate in
the Plan; or
(c) materially increase the benefits accruing to Participants
under the Plan;
so long as such approval is required by law or regulation; provided that, as
long as required by law or regulation, the provisions of Section 10 hereof may
not be amended or altered more than once every six (6) months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
- 10 -
<PAGE> 40
The Committee may amend the terms of any Award heretofore
granted (except, with respect to Options granted pursuant to Section 10 hereof,
only to the extent not inconsistent with Rule 16b-3 under the Exchange Act or
any successor rule or statute), prospectively or retroactively, but no such
amendment shall impair the rights of any Participant or Outside Director
without his consent.
SECTION 13. GENERAL PROVISIONS.
(a) No Option, Stock Appreciation Right, or Restricted Stock Award
shall be assignable or transferable by a Participant or an Outside
Director otherwise than by will or the laws of descent and
distribution, and Options and Stock Appreciation Rights may be
exercised during the Participant's or Outside Director's lifetime
only by the Participant or the Outside Director or, if permissible
under applicable law, by the guardian or legal representative of
the Participant or Outside Director.
(b) The term of each Award shall be for such period of months or years
from its Grant Date as may be determined by the Committee or as
set forth in the Plan; provided that in no event shall the term of
any Incentive Stock Option or any Stock Appreciation Right related
to any Incentive Stock Option exceed a period of ten (10)
years from the Grant Date.
(c) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate
structure such that Shares are changed into or become exchangeable
for a larger or smaller number of Shares, thereafter the number of
Shares subject to outstanding Awards granted to Participants and
to any Shares subject to Awards to be granted to Participants
pursuant to this Plan shall be increased or decreased, as the case
may be, in direct proportion to the increase or decrease in the
number of Shares by reason of such change in corporate structure;
provided, however, that the number of Shares shall always be a
whole number, and the purchase price per Share of any outstanding
Options shall, in the case of an increase in the number of Shares,
be proportionately reduced, and, in the case of a decrease in the
number of Shares, shall be proportionately increased. The above
adjustment shall also apply to any Shares subject to Options
granted to Outside Directors pursuant to the provisions of
Section 10.
(d) No Employee shall have any claim to be granted any Award under the
Plan and there is no obligation for uniformity of treatment of
Employees or Participants under the Plan.
(e) The prospective recipient of any Award under the Plan shall not,
with respect to such Award, be deemed to have become a
Participant, or to have any rights with respect to such Award,
until and unless such recipient shall have executed an Award
Agree-
- 11 -
<PAGE> 41
ment, and otherwise complied with the then applicable terms and conditions.
(f) All certificates for Shares delivered under the Plan pursuant to
any Award shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares are then
listed, and any applicable federal or state securities law, and
the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(g) Except as otherwise required in any applicable Award Agreement or
by the terms of the Plan, Participants shall not be required,
under the Plan, to make any payment other than the rendering of
services.
(h) The Company shall be authorized to withhold from any payment under
the Plan, whether such payment is in Shares or cash, all
withholding taxes due in respect of such payment hereunder and to
take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes.
(i) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases.
(j) Nothing in the Plan shall interfere with or limit in any way the
right of the Company or any Subsidiary to terminate any
Participant's employment at any time, nor shall the Plan confer
upon any Participant any right to continued employment with the
Company or any Subsidiary.
SECTION 14. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall be effective as of April 22, 1991, and shall continue
in effect until terminated by the Board.
- 12 -
<PAGE> 42
THE LUBRIZOL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R The undersigned shareholder of The Lubrizol Corporation hereby
O appoints W. G. Bares, L. E. Coleman and K. H. Hopping, and each
X of them, as agents, with full power of substitution, to vote the
Y shares of the undersigned at the 1996 Annual Meeting of Shareholders
of The Lubrizol Corporation to be held on April 22, 1996, and at
any adjournments thereof, as indicated on the reverse side of this
proxy card.
Comments:
----------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
(Comments will be collected by the Inspector of Elections and
forwarded to Lubrizol management)
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON THE
REVERSE SIDE. IF NO SPECIFICATION IS MADE, AUTHORITY IS GRANTED TO
CAST THE VOTE OF THE UNDERSIGNED FOR ELECTION OF THE NOMINEES AND FOR
ITEMS 2 AND 3. THE AGENTS NAMED ABOVE CANNOT VOTE YOUR SHARES UNLESS
YOU SIGN AND RETURN THIS PROXY CARD.
-------------
SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 43
<TABLE>
<C> <S>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / DIRECTOR NOMINEES: 2. Amendment of / / / / / /
Directors William G. Bares 1991 Stock
Peggy Gordon Elliott Incentive Plan.
Gordon D. Harnett
Victoria F. Haynes FOR AGAINST ABSTAIN
David H. Hoag 3. Appointment of / / / / / /
Thomas C. MacAvoy Deloitte & Touche
as independent
For, except vote withheld from the following nominee(s): auditors.
___________________________________________________________ If you have a change of address, please
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE PROPOSALS. indicate new address below and mark box
to left.
----------------------------------------
Change
of / / ----------------------------------------
Address
----------------------------------------
Attend / /
Meeting ----------------------------------------
NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
SIGNATURE(S) ________________________________________ DATE ________________ administrator, trustee or guardian,
please give full title as such. In case
SIGNATURE(S) ________________________________________ DATE ________________ of a corporation, a duly authorized
officer should sign on its behalf.
- ------------------------------------------------------------------------------------------------------------------------------------
DETACH CARD
</TABLE>
<PAGE> 44
CONFIDENTIAL VOTING INSTRUCTIONS
TO: KEY TRUST COMPANY OF OHIO, N.A. AS TRUSTEE UNDER THE LUBRIZOL
CORPORATION EMPLOYEES' PROFIT SHARING AND SAVINGS PLAN (REAP)
You are instructed to vote the number of shares of The
Lubrizol Corporation credited to my account on March 1, 1996 in The
Lubrizol Corporation Employees' Profit Sharing and Savings Plan
(REAP) at the 1996 Annual Meeting of Shareholders of The Lubrizol
Corporation to be held on April 22, 1996, and at any adjournments
thereof, as indicated on this card.
I understand that under REAP allocated shares for which the
Trustee does not receive directions in the form of a signed voting
instruction card from a participant ("unvoted allocated shares"),
will be voted by the Trustee in the same manner as the Trustee
votes shares pursuant to the directions received from other
participants who vote their allocated shares. (Any participant
wishing to vote the unvoted allocated shares differently from the
participant's allocated shares may do so by requesting a separate
voting instruction card from Key Trust Company of Ohio, N.A. at PO
Box 94717, Cleveland, Ohio 44101, (216) 689-7653.)
-------------
SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 45
<TABLE>
<C> <S>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / DIRECTOR NOMINEES: 2. Amendment of 1991 / / / / / /
Directors William G. Bares Stock Incentive
Peggy Gordon Elliott Plan.
Gordon D. Harnett
Victoria F. Haynes FOR AGAINST ABSTAIN
David H. Hoag 3. Appointment of / / / / / /
Thomas C. MacAvoy Deloitte & Touche
as independent
For, except vote withheld from the following nominee(s): auditors.
___________________________________________________________ WHEN PROPERLY EXECUTED, THESE SHARES WILL BE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE PROPOSALS. VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED PARATICIPANT. IF NO DIRECTION
IS MADE, THESE SHARES SHALL BE VOTED BY PLAN
PARTICIPANTS IN THEIR CAPACITY AS "NAMED
FIDUCIARIES."
SIGNATURE(S) ________________________________________ DATE ________________
- ------------------------------------------------------------------------------------------------------------------------------------
DETACH CARD
</TABLE>
To the Participants in The Lubrizol Corporation Employees' Profit Sharing and
Savings Plan:
As a participant in The Lubrizol Corporation Employees' Profit Sharing and
Savings Plan, you have a beneficial interest in Lubrizol common shares that are
allocated to your account under the Plan and held by the Trustee, Key Trust
Company of Ohio, N.A. Under the Plan's Trust Agreement, the Trustee is
authorized to vote such shares pursuant to instructions received from the Plan
participants. As a participant you have the RIGHT to instruct the Trustee how to
vote such shares allocated to your account at the Annual Meeting of Shareholders
as well as a proportionate number of unvoted shares by completing the attached
form. The number above is the number of Lubrizol common shares available to you
if you were to currently receive a distribution from the Plan. If the form is
not received by the Trustee by April 17, the Trustee will vote unvoted shares in
accordance with the instructions received from other Plan participants who vote
their shares. Therefore, it is important that you complete and return your
instruction form to register your vote. You should complete, SIGN, date, and
mail the above form to KeyCorp Shareholder Services, Inc. in the enclosed
prepaid envelope for tabulation.
Please refer to the Notice and Proxy Statement for the Annual Meeting for
information about the matters to be voted upon, and to the current Annual Report
for information relevant to the Corporation's financial condition and progress.
If you have any questions, please communicate with B. C. Megery or G. C.
Obenauer of the Employee Benefits Administrative Committee, The Lubrizol
Corporation, Wickliffe, Ohio.
Very truly yours,
EMPLOYEE BENEFITS
ADMINISTRATIVE COMMITTEE
R. A. Andreas, Chairman
W. R. Jones
M. M. Maritz
B. C. Megery
M. W. Meister
G. C. Obenauer
