<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)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:______________________
(2) Aggregate number of securities to which transaction
applies:_________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):_____________
___________________________________________
(4) Proposed maximum aggregate value of transaction:_______________________
(5) Total fee paid:________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:________________________________________________
(2) Form, Schedule or Registration Statement No.:__________________________
(3) Filing Party:__________________________________________________________
(4) Date Filed:____________________________________________________________
================================================================================
<PAGE> 2
[LOGO]
THE LUBRIZOL CORPORATION
29400 LAKELAND BOULEVARD
WICKLIFFE, OHIO 44092-2298
March 19, 1997
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
on Monday, April 28, 1997, 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 1996 meeting, approximately 88 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 28
meeting.
Cordially,
/s/ W.G. Bares
Chairman of the Board,
President and Chief Executive
Officer
<PAGE> 3
THE LUBRIZOL CORPORATION
29400 LAKELAND BOULEVARD
WICKLIFFE, OHIO 44092
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the 1997 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 28, 1997, at 10:00
a.m., for the following purposes:
1. To elect four directors for three-year terms;
2. To confirm the appointment of Deloitte & Touche LLP as independent
auditors;
3. 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 7, 1997, 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 19, 1997
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 timely 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 19, 1997. The record date for determination of
shareholders entitled to vote at the meeting was the close of business on March
7, 1997. On that date, the outstanding voting securities of the Corporation were
58,490,294 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
American Stock Transfer & Trust Company, 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. Officers and employees of the Corporation,
without being additionally compensated, may make 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
eleven, divided into three classes: two having four members and one having three
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 28, 1997, the Organization and Compensation Committee has recommended,
and the Board of Directors has approved, the nomination of Edward F. Bell,
Lester E. Coleman, Forest J. Farmer, Sr. and Ronald A. Mitsch, all of whom are
currently directors, to serve for three-year terms expiring in 2000. Mr. Farmer
was appointed as a director in January 1997 as a member of the class whose term
expires in 1997. It is anticipated that Thomas C. MacAvoy will retire as a
director effective at the 1997 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:
<TABLE>
<S> <C>
NOMINEES FOR ELECTION
EDWARD F. BELL, age 67, retired in January 1993 as President and
Chief Executive Officer of Ameritech Ohio. He served in the U.S.
[EDWARD F. BELL Army Signal Corps during the Korean War and started his tele-
PHOTO] communications 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.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
L. E. COLEMAN, age 66, retired in April 1996 as Chairman of the
Board of The Lubrizol Corporation. He was elected a Director of
[L.E. COLEMAN the Corporation in 1974. Dr. Coleman joined Lubrizol in 1955 as
PHOTO] a research chemist. He 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 Geauga Park District
Foundation. He also currently serves on the Advisory Board of
the Daniel Webster Council and on the National Advisory Board of
the Boy Scouts of America.
FOREST J. FARMER, SR., age 56, is President and Chief Executive
Officer of Bing Manufacturing, Inc., which provides sequencing
[FOREST J. FARMER and value-added subassemblies to the automotive industry. He is
PHOTO] also Chairman, Chief Executive Officer and President of Technol-
ogy Teammates, a technology and engineering services company.
Mr. Farmer was associated with Chrysler Corporation from 1968 to
1994 where he held various management positions including
General Plants Manager for Car and Truck Assembly Operations.
From 1988 until 1994, he was President of Acustar, Inc., an
automotive components subsidiary of Chrysler Corporation. Mr.
Farmer became a Lubrizol Director in January 1997. Mr. Farmer
graduated from Purdue University in 1965 with a B.S. degree in
biology and physical education. He is a member of the Board of
Directors for the Automotive Hall of Fame, the Macomb Hospital
Corporation, Friends of Scouting and Public Broadcasting System
station WTVS-56 in Detroit, Michigan. Mr. Farmer is also
Chairman of the Detroit Area Vocational Industry Council.
RONALD A. MITSCH, age 62, is Vice Chairman and Executive Vice
President-Industrial and Consumer Sector of 3M, a manufacturer
[RONALD A. MITSCH of products for industrial, commercial, health care and consumer
PHOTO] 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 re-
turned 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 chemis-
try. 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; NCR; Shigematsu Works Inc., Ltd., Tokyo, Japan; National
Association of Manufacturers; SEI Center for Advanced Studies in
Management, Philadelphia, Pennsylvania (associated with the
Wharton School of Business of The University of Pennsylvania).
In addition, he is a Trustee of Hamline University.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
W. G. BARES, age 55, is Chairman of the Board, President and
Chief Executive Officer of The Lubrizol Corporation. Mr. Bares
[W.G. BARES PHOTO] 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 and Chairman of the Board in
1996. A 1963 graduate of Purdue University with a B.S. degree in
chemical engineering, he earned an M.B.A. from Case Western
Reserve University in 1969. He is a member of the American
Petroleum Institute and the American Institute of Chemical
Engineers, having served as 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, Applied Industrial Technologies, the Chemical
Manufacturers Association and an Executive Board Member of the
Greater Western Reserve Council of the Boy Scouts of America.
Mr. Bares' term as a Lubrizol Director expires in 1999.
PEGGY GORDON ELLIOTT, age 59, is past President of The
University of Akron from which she is on leave as a Senior
[PEGGY GORDON Fellow at the National Center for Higher Education establishing
ELLIOTT PHOTO] an international technology data system for public universities.
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 has served as
Treasurer of the American Association of State Colleges and
Universities, a member of the Board of Directors of the American
Council on Education and the National Governmental Affairs
Commission. Dr. Elliott is a former American Council on
Education Fellow in Academic Administration and is past national
president of the Association of Teacher Educators. Dr. Elliott
chaired the Ohio Board of Regents Committee on Secondary/Higher
Education Articulation and served 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. Dr. Elliott is also a Director of the A.
Schulman Corp. 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. Dr.
Elliott's term as a Lubrizol Director expires in 1999.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
GORDON D. HARNETT, age 54, is Chairman, President and Chief
Executive Officer of Brush Wellman Inc., the world's largest
[GORDON D. HARNETT producer of beryllium and beryllium-containing engineered prod-
PHOTO] ucts. 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 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, Essef Corporation and
Playhouse Square Foundation. 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. Mr. Harnett's term as a Lubrizol
Director expires in 1998.
VICTORIA F. HAYNES, age 49, is Vice President-Research and
Development and Chief Technical Officer of The BFGoodrich
[VICTORIA F. Company, a specialty chemicals and aerospace company. Dr. Haynes
HAYNES PHOTO] 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 Sciences and Technology, the NRC
Chemical Industry Roundtable, the NIST Visiting Committee, the
NSF Science Center Advisory Board for Virginia Polytechnic
Institute, the NSF Science Center Advisory Board for Georgia
Tech University and the Engineering Advisory Board for Sandia
National Laboratory. Dr. Haynes' term as a Lubrizol Director
expires in 1998.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
DAVID H. HOAG, age 57, is Chairman, President and Chief Execu-
tive Officer of The LTV Corporation and Chief Executive Officer
[DAVID H. HOAG of LTV Steel Company. The LTV Corporation is a metals company
PHOTO] 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,
Karrington Health, Inc., the Federal Reserve Bank of Cleveland,
Chairman of Cleveland Tomorrow and Chairman of the Board of
Trustees of Allegheny College. Mr. Hoag's term as a Lubrizol
Director expires in 1999.
WILLIAM P. MADAR, age 57, is Vice Chairman and Chief Executive
Officer of Nordson Corporation. Nordson Corporation manufac-
[WILLIAM P. MADAR tures and worldwide markets industrial equipment, along with the
PHOTO] software and application technologies that enhance its use. A
1961 graduate of Purdue University with a B.S. degree in chemi-
cal 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 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.
</TABLE>
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors held ten meetings during 1996. The
Board has, among others, a standing Audit Committee and a standing Organization
and Compensation Committee. During 1996, 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 Edward F. Bell, Chairman, Peggy
Gordon Elliott, Gordon D. Harnett, Victoria F. Haynes and David H. Hoag, held
three meetings during 1996. 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
6
<PAGE> 10
the results of such reviews and conferences; and to submit to the Board any
recommendations the Committee may have.
The Organization and Compensation Committee, currently composed of William
P. Madar, Chairman, Edward F. Bell, Peggy Gordon Elliott, Forest J. Farmer, Sr.
(from January 1997), Gordon D. Harnett, Victoria F. Haynes, David H. Hoag,
Thomas C. MacAvoy, and Ronald A. Mitsch, held seven meetings during 1996. The
functions of the Organization and Compensation Committee are to review, consider
and recommend the nomination of 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 each 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 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.
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, 1997, 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 3.5 percent of such Common
Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
-------------------------------------------------------------------------
NAME OF DIRECT EMPLOYEE EXERCISABLE DEFERRED SHARE
BENEFICIAL OWNER TOTAL OWNERSHIP(2) PLAN(3) OPTIONS(4) UNITS(5)
- ------------------------------- ---------- ------------ -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
R. A. Andreas.................. 87,846 14,411 2,370 71,065
W. G. Bares.................... 429,994 109,775 8,936 311,283
Edward F. Bell................. 12,333 1,700 8,500 2,133
Lester E. Coleman.............. 852,771(6) 232,694 619,166 911
Peggy Gordon Elliott........... 7,275 1,100 4,500 1,675
Forest J. Farmer, Sr........... 100 100
Gordon D. Harnett.............. 2,600 200 2,400
Victoria F. Haynes............. 1,718 500 1,221
G. R. Hill..................... 173,862 35,335 2,096 136,431
David H. Hoag.................. 14,033 3,400 8,500 2,133
J. E. Hodge.................... 39,150 2,426 3,011 33,713
S. F. Kirk..................... 55,626 4,935 4,894 45,797
Thomas C. MacAvoy.............. 11,433 800 8,500 2,133
William P. Madar............... 11,246 1,000 6,500 3,746
Ronald A. Mitsch............... 10,833 1,000 7,700 2,133
All Executive Officers and
Directors as a Group......... 2,047,619 451,468 49,666 1,528,003 18,482
<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, 2,426 of Mr. Hodge's
and 23,631 of the shares held by the group, as to which the persons
indicated have shared voting and investment power. Also includes 44,665
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, 1997.
(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, 1997, Dr. Coleman beneficially owns 1.5% of the
Corporation's Common Shares.
</TABLE>
8
<PAGE> 12
The following table sets forth, as of December 31, 1996, 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>
Sanford C. Bernstein & Co., Inc. 5,606,922(1) 9.4%
767 Fifth Avenue
New York, New York 10153
Wellington Management Company, LLP 3,885,400(2) 6.52%
75 State Street
Boston, Massachusetts 02109
INVESCO PLC 3,769,800(3) 6.3%
11 Devonshire Square
London EC2M 4YR
England
<FN>
- ---------------
(1) All information was obtained from a Schedule 13G filed January 30, 1997, by
Sandford C. Bernstein & Co., Inc., which is an investment adviser registered
under the Investment Advisers Act of 1940. Sandford C. Bernstein & Co., Inc.
reported sole voting power as to 3,046,920 shares and sole investment power
as to all 5,606,922 shares.
(2) All information was obtained from a Schedule 13G dated January 24, 1997,
filed by Wellington Management Company, LLP, which is an investment adviser
registered under the Investment Advisers Act of 1940. Wellington Management
Company, LLP reported shared voting power as to 404,400 shares and shared
investment power as to 3,885,400 shares.
(3) All information was obtained from a Schedule 13G dated February 10, 1997,
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
3,769,800 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 1996, 1995 and 1994.
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 1996 YEAR SALARY BONUS (2) (3) AWARDS SARS(NO.)(4) PAYOUTS (5)
- --------------------------- -------- -------- --------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
W. G. Bares
Chairman of the Board,
President and Chief
Executive Officer......... 1996 539,730(1) 299,109 7,398 0 93,909 N/A
1995 489,719 244,100 8,487 0 56,229 N/A
1994 476,847 288,028 7,632 0 81,305 N/A
G. R. Hill
Senior Vice President..... 1996 306,707(1) 149,134 1,454 0 25,000 N/A
1995 299,090 140,574 4,944 0 20,000 N/A
1994 291,730 165,570 6,311 0 45,139 N/A
R. A. Andreas
Vice President and Chief
Financial Officer......... 1996 224,532(1) 73,301 3,772 0 12,006 N/A
1995 216,965 72,525 7,420 0 14,179 N/A
1994 205,636 95,865 3,793 0 13,387 N/A
S. F. Kirk
Vice President............ 1996 207,234(1) 95,381 4,797 0 15,000 N/A
1995 191,664 93,680 4,031 0 12,412 N/A
1994 173,116 82,141 4,012 0 10,488 N/A
J. E. Hodge
Vice President............ 1996 187,613(1) 83,479 2,175 0 10,000 N/A
1995 174,862 66,559 2,161 0 10,000 N/A
1994 152,328 74,584 0 0 7,500 N/A
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION
DURING 1996 (6)
- --------------------------- ------------
<S> <C><C>
W. G. Bares
Chairman of the Board,
President and Chief
Executive Officer......... 33,935
24,365
26,516
G. R. Hill
Senior Vice President..... 19,178
15,762
18,162
R. A. Andreas
Vice President and Chief
Financial Officer......... 13,936
11,589
12,501
S. F. Kirk
Vice President............ 12,953
10,530
10,738
J. E. Hodge
Vice President............ 11,408
9,869
9,365
<FN>
- ---------------
(1) For 1996, there were no general base salary increases given to any employee,
including executive officers. Salary for 1996 reflects the full year's
effect of pay increases which occurred during 1995.
(2) Reflects payments under variable compensation and variable award plans.
(3) 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.
(4) 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.
(5) The Corporation maintains plans under which stock options, stock
appreciation rights and restricted stock may be awarded. However, during
1996 the Corporation did 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.
(6) Amounts shown for 1996 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, and amounts expensed under the Corporation's Executive
Death Benefit Program, as set forth below. No amounts shown were received by
any of the named executives.
</TABLE>
<TABLE>
<CAPTION>
W. G. G. R. R. A. S. F. J. E.
BARES HILL ANDREAS KIRK HODGE
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Profit Sharing and Savings Plan........... $28,911 $17,750 $12,815 $12,953 $11,408
Executive Death Benefit Program........... 5,024 1,428 1,121 -- --
------- ------- ------- ------- -------
$33,935 $19,178 $13,936 $12,953 $11,408
</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. The 1991 Plan is administered by the
Organization and Compensation Committee of the Board of Directors, which selects
employees to be participants and determines the type and amount of awards to be
granted. 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 number of shares available for grant under the 1991 Plan during any
calendar year generally is 1% of the outstanding Common Shares as of the first
day of the year, plus any unused shares from previous years. The option price
for stock options granted under the 1991 Plan is the average of the high and the
low market price of Common Shares on the grant date and the term of each option
is fixed by the Committee. Options become exercisable to the extent of 50% of
the subject shares after one year from the grant date, 75% after two years from
the grant date and 100% after three years from the grant date. All outstanding
options become fully exercisable upon a "change of control" in the Corporation.
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 "reload" 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. Such "reload"
options are automatically granted under the 1991 Plan to persons who pay an
option exercise price by surrendering Common Shares. Common Shares acquired upon
the exercise of a "reload" option generally may not be transferred while the
holder is an employee or director of the Corporation.
The following tables set forth information regarding stock option
transactions with respect to the named executive officers during 1996.
OPTION/SAR GRANTS IN 1996
<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 1996 PRICE (3) DATE 0% 5%
- ---------------------- ----------- --------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
W. G. Bares........... 80,000 16.07% $30.0625 3/25/06 0 $ 1,512,492
13,909(2) 2.79% 30.0625 2/26/00 0 90,112
G. R. Hill............ 25,000 5.02% 30.0625 3/25/06 0 472,654
R. A. Andreas......... 10,000 2.00% 30.0625 3/25/06 0 189,061
295(2) 0.05% 28.8750 6/19/99 0 1,343
1,711(2) 0.34% 28.8750 2/26/00 0 10,647
S. F. Kirk............ 15,000 3.01% 30.0625 3/25/06 0 283,592
J. E. Hodge........... 10,000 2.00% 30.0625 3/25/06 0 189,061
All Optionees......... 497,566 100.00% 29.9644 (5) 0 9,376,382
All Shareholders...... (6) (6) (6) (6) 0 1,102,830,568(6)
Optionees' Gain as % 0.85%
of Shareholders'
Gain................
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM (4)
-----------------------------
NAME 10%
- ---------------------- --------------
<S> <C>
W. G. Bares........... $ 3,832,951
194,058
G. R. Hill............ 1,197,797
R. A. Andreas......... 479,119
2,819
22,929
S. F. Kirk............ 718,678
J. E. Hodge........... 479,119
All Optionees......... 23,761,513
All Shareholders...... 2,794,779,654
Optionees' Gain as %
of Shareholders'
Gain................ 0.85%(6)
</TABLE>
11
<PAGE> 15
- ---------------
(1) Options become exercisable pursuant to a multi-year vesting schedule as
described above. 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 Common Shares. If such
assumed annual appreciation rates were applied to the fair market value of
the Common Shares at December 31, 1996 ($31.00 per share), 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 Common Shares would be $31.00 per share
at a 0% appreciation rate, $50.50 per share at a 5% appreciation rate, and
$80.41 per share at a 10% appreciation rate.
(5) Expiration dates range from June 23, 1996, through April 26, 2006.
(6) The amounts shown represent the hypothetical return to all holders of the
Common Shares assuming that all shareholders purchased their shares at a
purchase price of $29.96, the average exercise price for all options granted
during 1996, and that all shareholders hold the shares continuously for a
10-year period. The number of outstanding Common Shares on December 31,
1996, was 58,522,676.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND DECEMBER 31, 1996, OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES DECEMBER 31, 1996 (2) AT DECEMBER 31, 1996 (1)(2)
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----- ----------- ------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
W. G. Bares....... 25,000 $332,030 245,726 128,443 $279,277 $ 45,000
G. R. Hill........ 0 0 112,454 46,285 248,392 14,062
R. A. Andreas..... 3,400 40,656 60,020 20,437 109,206 5,625
S. F. Kirk........ 0 0 32,571 23,829 101,296 8,437
J. E. Hodge....... 0 0 24,338 16,875 69,530 5,625
<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, 1996" was calculated
by determining the difference between the fair market value of the
underlying Common Shares at December 31, 1996 ($31.00 per share), 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, 1996.
(2) Although the Corporation's option plans permit the granting of SARs, no SARs
were outstanding at December 31, 1996.
</TABLE>
12
<PAGE> 16
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
composed of all of the outside directors of the Corporation.
In carrying out its responsibilities in 1996, the Committee considered the
following:
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 executive 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 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 outside
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. For 1996, there were no general base
salary increases given to any employee, including executive officers. Quarterly
pay is a fixed percentage of base salary, based upon length of service and
adjusted yearly to reflect length of service with the Corporation. The fixed
percentage of base salary for quarterly pay is 9.1667%. 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 full 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. For executive officers, fixed pay, which consists of base salary and
quarterly pay, is designed to be generally at the median for individuals with
similar responsibilities in the compared companies. The variable compensation
component is paid at year-end from funds authorized by the Committee and is
based upon a percentage 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 4.2% for 1996. Allocation of these funds is based
upon an employee's proportionate share of the aggregate base salary of all
domestic employees. Beginning in 1997, key executive officers will no longer
receive this year-end variable component of compensation. The compensation
practices described above apply to all U.S. employees of the Corporation.
13
<PAGE> 17
Executive officers and other executives may receive additional cash
compensation under a separate variable award plan. These awards are paid each
year from additional funds authorized by the Committee, which determines a
percentage of the annual net income of the Corporation to establish the
participant pool. This percentage is determined based upon a weighting of
objective and subjective measures of performance. Seventy percent of the
weighting is applied to financial measures of performance with the remaining 30%
of the weighting being applied to growth, structure and franchise measures of
performance. In 1996, the financial measure was based upon performance against a
predetermined target for earnings per share and required a minimum achievement
for any awards to be paid under the plan. The percentage of annual net income of
the Corporation used for the variable award plan for 1996 was set by the
Committee at 1.62%. Allocation of these funds by the Committee was based upon an
executive's level of responsibility, recommendations by executive 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 among executive officers. The Committee administers
the Corporation's executive compensation policy such that annual executive
compensation (fixed and variable pay) is comparable with other companies in the
chemical and related industries. Management estimates that the Corporation's
annual executive compensation for 1996 was approximately at the 50th percentile
when compared to annual compensation paid by companies in the referenced
surveys.
The Corporation encourages ownership and retention of Common Shares by all
employees. Executive officers and other executives may receive additional
compensation in the form of stock options. For 1996, the Committee set the
number of shares for annual grants midway between the 50th and 75th percentile
of long-term incentive awards within industrial companies generally. Grants were
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 executive management
and a subjective judgment by the Committee of the executive's contribution to
the financial and commercial performance of the Corporation. Existing awards
held by the individual are not considered when making new grants. Since stock
options are granted at the average of the high and the low of the 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 Mr. Bares, who became Chief Executive Officer of the
Corporation on January 1, 1996, the Committee's intent was to establish his base
salary within a range that was competitive with the salaries for chief executive
officers of companies in the chemical and related industries. In 1996, there
were no general base salary increases given to any employee, including Mr.
Bares. In contemplation of his new responsibilities, the Committee previously
had increased Mr. Bares' base salary by 8%, effective December 29, 1995. The
variable compensation component constituted 36% of Mr. Bares' annual
compensation in 1996. This component varies with the Corporation's net income as
described above.
In setting Mr. Bares' total compensation, the Committee considered various
aspects of corporate performance. Factors considered included profitability,
market
14
<PAGE> 18
position, productivity, product leadership, personnel development, employee
attitudes, public responsibility, quality practices and the balancing of
short-term and long-term goals. To determine Mr. Bares' variable award
compensation, the Committee used a predetermined weighting of both objective and
subjective measures of performance. Seventy percent of the weighting was applied
to financial measures of performance and 30% of the weighting was applied to
growth, structure and franchise performance measures. In addition, the Committee
used a combination of objective and subjective judgment with an emphasis on the
impact on the Corporation's sustainability and competitiveness within its
industry. In determining the number of stock options granted to Mr. Bares in
1996, the Committee considered the conclusions from this evaluation, as well as
his position within the Corporation and industry stock option grant comparisons.
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. All compensation paid in 1996 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).
1997 Compensation Practice Changes
During 1996, the Committee met extensively to consider and adopt changes to
the compensation practices for key executive officers to more closely align
their compensation with the Corporation's performance and shareholder interests.
These changes are effective beginning with 1997. All variable compensation for
key executive officers will be awarded under a performance pay plan (formerly,
the variable award plan). Performance pay, if any, will be based on objective
financial measures and objective and subjective measures of performance in the
areas of growth, structure and franchise and will tie to the Corporation's
annual plan. Objective financial measures will include earnings per share and
value added per share, which is a measure of economic value-added calculated on
a per share basis. Seventy percent of the weighting will be based upon financial
measures with the largest portion weighted to earnings per share. To reach 100%
payout, all performance goals for the year must be accomplished. The payout
percentage will vary up or down based upon goal accomplishment. Earnings per
share must reach a minimum threshold of a predetermined target or no performance
payments will be made even though other goals might be accomplished.
Beginning in 1997, share ownership guidelines have been established for key
executive officers. These guidelines require key executives to directly hold
Common Shares having a value of between 1.5 times and 4 times their annual fixed
pay, depending on the management position of the individual. Mr. Bares' target
is 4 times his annual fixed pay. He currently owns 6.5 times his annual fixed
pay in Common Shares.
Beginning in 1997, a new stock option and performance share program will be
implemented for key executive officers. Under this program, the number of Common
Shares covered by annual long-term stock option grants under the Corporation's
1991 Stock Incentive Plan will be reduced significantly. This reduction will be
offset by grants of performance share stock awards under the 1991 Stock
Incentive Plan. Common Shares equal to the number of performance shares granted
will be issued when the performance shares vest. Performance share grants will
vest only when the Corporation's Common Shares achieve a pre-selected target
market price or at the end of a pre-determined period of years. Performance
shares granted in 1997 will vest if the market price of the Corporation's Common
Shares reaches the target price of
15
<PAGE> 19
$45.00 per Common Share for ten consecutive trading days. Otherwise, the
performance share awards will not vest until six years after grant.
<TABLE>
<S> <C>
William P. Madar, Chairman Victoria F. Haynes
Edward F. Bell David H. Hoag
Peggy Gordon Elliott Thomas C. MacAvoy
Gordon D. Harnett Ronald A. Mitsch
</TABLE>
PERFORMANCE COMPARISONS
The following chart compares the cumulative total shareholder return of the
Corporation for the five years ended December 31, 1996, 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, 1991, 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>
1991 100.0 100.0 100.0 100.0
1992 99.1 105.8 109.1 105.9
1993 127.5 115.3 120.8 120.8
1994 130.0 119.7 131.6 105.4
1995 109.6 161.2 172.3 138.6
1996 126.5 198.2 214.7 142.1
</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.
16
<PAGE> 20
EMPLOYEE AND EXECUTIVE OFFICER BENEFIT PLANS
In addition to the stock option and variable compensation plans described
above 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 one officer 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
<FN>
- ---------------
(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: Mr. Bares, 30 years; Messrs. Kirk and Hodge, 24 years; Mr. Andreas,
16 years; and Dr. Hill, 14 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
17
<PAGE> 21
(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 Mr. Bares, who is the current participant in this
plan, is approximately $88,000.
</TABLE>
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 PLANS
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.
The Corporation established a deferred compensation plan for key executive
officers that is effective initially for compensation earned in 1997. The plan
allows a key executive officer to defer a pre-selected amount of performance pay
under the Corporation's performance pay plan. With respect to amounts so
deferred by a key executive officer, share units are credited to a share unit
account based upon the current market price of Common Shares, with the resulting
units then being multiplied by 1.25. Additional share units are credited on
account of quarterly dividends declared on Common Shares. Amounts deferred
generally are payable to the key executive officer in Common Shares equivalent
to the number of share units in an account three years after the date share
units are first credited due to the deferral.
EXECUTIVE DEATH BENEFIT PROGRAMS
Certain executive officers are eligible to participate in an executive
death benefit program which provides a benefit payable to the executive
officer's designated
18
<PAGE> 22
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.
Bares, Hill, Andreas, Kirk and Hodge.
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 his 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, 1997, 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 $21.8 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.
19
<PAGE> 23
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, 1997. The
Board of Directors recommends that shareholders confirm this appointment.
During 1996, 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.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 1998 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 19, 1997. 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 1998 Annual Meeting of Shareholders, and must have held such Common
Shares for at least one year.
THE LUBRIZOL CORPORATION
K.H. HOPPING
Secretary
March 19, 1997
20
<PAGE> 24
<TABLE>
<S> <C> <C>
A [X] Plese mark your
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election [ ] [ ] DIRECTOR NOMINEES: 2. Appointment of Deloitte & Touche LLP [ ] [ ] [ ]
of Edward F. Bell as independent auditors
Directors Lester E. Coleman
Forest J. Farmer, Sr. The Board of Directors recommends a vote FOR the above proposals.
For, except vote withheld from Ronald A. Mitsch
the following nominees(s): If you have a change of address, please indicate
new address below and mark box to right.
Change [ ]
- ------------------------------ ------------------------------------------- of
------------------------------------------- Address
-------------------------------------------
Attend [ ]
Meeting
SIGNATURE(S) _______________________________ DATE ________________ SIGNATURE(S) _______________________________ DATE ______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. In case of a corporation, a duly authorized officer
should sign on its behalf.
</TABLE>
<PAGE> 25
PROXY THE LUBRIZOL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of The Lubrizol Corporation hereby appoints W. G.
Bares, R. A. Andreas and K. H. Hopping, and each of them, as agents, with full
power of substitution, to vote the shares of the undersigned at the 1997 Annual
Meeting of Shareholders of The Lubrizol Corporation to be held on April 28,
1997, 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 ITEM 2. THE AGENTS NAMED ABOVE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY CARD.
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
