<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..... to .....
Commission File Number 1-5263
THE LUBRIZOL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-0367600
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
29400 Lakeland Boulevard
Wickliffe, Ohio 44092-2298
(Address of principal executive offices)
(Zip Code)
(440) 943-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Number of the registrant's common shares, without par value, outstanding, as of
April 30, 2000: 53,680,643.
<PAGE> 2
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1 Financial Statements
---------------------------
THE LUBRIZOL CORPORATION
========================
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------
March 31 December 31
(In Thousands of Dollars) 2000 1999
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
Cash and short-term investments ........................................ $ 126,571 $ 185,465
Receivables ............................................................ 322,100 301,256
Inventories:
Finished products .................................................... 126,889 118,135
Products in process .................................................. 51,632 56,855
Raw materials ........................................................ 74,458 66,102
Supplies and engine test parts ....................................... 17,344 17,057
----------- -----------
270,323 258,149
----------- -----------
Other current assets ................................................... 31,334 35,572
----------- -----------
Total current assets ............................... 750,328 780,442
Property and equipment - net ........................................... 660,078 670,512
Goodwill and intangible assets - net ................................... 172,257 149,779
Investments in nonconsolidated companies ............................... 36,673 30,441
Other assets ........................................................... 53,444 51,180
----------- -----------
TOTAL ......................................... $ 1,672,780 $ 1,682,354
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Short-term debt and current portion of long-term debt .................. $ 37,151 $ 37,584
Accounts payable ....................................................... 137,701 138,841
Accrued expenses and other current liabilities ......................... 126,117 134,875
----------- -----------
Total current liabilities .......................... 300,969 311,300
----------- -----------
Long-term debt ......................................................... 364,772 365,372
Postretirement health care obligation .................................. 101,755 108,717
Noncurrent liabilities ................................................. 49,803 45,054
Deferred income taxes .................................................. 61,053 61,787
----------- -----------
Total liabilities .................................. 878,352 892,230
----------- -----------
Contingencies and commitments
Shareholders' equity:
Preferred stock without par value - authorized and unissued:
Serial Preferred Stock - 2,000,000 shares
Serial Preferred Shares - 25,000,000 shares
Common Shares without par value:
Authorized 120,000,000 shares
Outstanding - 53,957,534 shares as of March 31, 2000 after deducting
32,238,360 treasury shares, 54,477,292 shares as of December 31,
1999 after deducting 31,718,602 treasury shares .................. 79,221 85,984
Retained earnings .................................................... 780,338 758,090
Accumulated other comprehensive income (loss) ........................ (65,131) (53,950)
----------- -----------
Total shareholders' equity ......................... 794,428 790,124
----------- -----------
TOTAL ......................................... $ 1,672,780 $ 1,682,354
=========== ===========
Amounts shown are unaudited
</TABLE>
-2-
<PAGE> 3
THE LUBRIZOL CORPORATION
========================
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
Three Months Ended
March 31
------------------------------
(In Thousands Except Per Share Data) 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Net sales ...................................... $ 435,034 $ 446,627
Royalties and other revenues ................... 1,127 918
--------- ---------
Total revenues ....................... 436,161 447,545
Cost of sales .................................. 307,708 303,174
Selling and administrative expenses ............ 43,499 45,003
Research, testing and development expenses ..... 34,649 36,898
--------- ---------
Total cost and expenses .............. 385,856 385,075
Gain from litigation settlement ................ - 14,476
Special charge ................................. - (3,136)
Other income (expense) - net ................... (1,741) (3,108)
Interest income ................................ 2,550 1,007
Interest expense ............................... (7,229) (7,140)
--------- ---------
Income before income taxes ..................... 43,885 64,569
Provision for income taxes ..................... 13,780 25,475
--------- ---------
Net income ..................................... $ 30,105 $ 39,094
========= =========
Net income per share ........................... $ 0.55 $ 0.72
========= =========
Net income per share, diluted .................. $ 0.55 $ 0.72
========= =========
Dividends per share ............................ $ 0.26 $ 0.26
========= =========
Average common shares outstanding .............. 54,300 54,549
</TABLE>
Amounts shown are unaudited.
-3-
<PAGE> 4
THE LUBRIZOL CORPORATION
========================
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Three Months Ended
March 31
---------------------------
(In Thousands of Dollars) 2000 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided from (used for):
Operating activities:
Net income ............................................... $ 30,105 $ 39,094
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization ........................ 24,099 24,253
Deferred income taxes ................................ 1,805 4,106
Special charge ....................................... 3,136
Change in current assets and liabilities:
Receivables ........................................ (23,621) (28,749)
Receivable from litigation settlement .............. (16,800)
Inventories ........................................ (13,839) 7,668
Accounts payable and accrued expenses .............. 6,987 31,785
Other current assets ............................... 3,272 15,333
Other items - net .................................... (4,775) 2,775
--------- ---------
Total operating activities ..................... 24,033 82,601
Investing activities:
Capital expenditures ................................... (17,774) (18,327)
Acquisitions and investments in nonconsolidated
companies ............................................ (35,741)
Other - net ............................................ 183 547
--------- ---------
Total investing activities ..................... (53,332) (17,780)
Financing activities:
Short-term borrowings (repayment) ...................... 19 (8,122)
Long-term repayments ................................... (14) (422)
Dividends paid ......................................... (14,152) (14,183)
Common shares purchased ................................ (15,850)
Stock options exercised ................................ 1,201 23
--------- ---------
Total financing activities ..................... (28,796) (22,704)
Effect of exchange rate changes on cash .................. (799) (3,495)
--------- ---------
Net increase (decrease) in cash and short term investments (58,894) 38,622
Cash and short-term investments at the beginning
of period .............................................. 185,465 53,639
--------- ---------
Cash and short-term investments at end of period ......... $ 126,571 $ 92,261
========= =========
</TABLE>
Amounts shown are unaudited.
-4-
<PAGE> 5
THE LUBRIZOL CORPORATION
------------------------
Notes to Consolidated Financial Statements
March 31, 2000
1. The accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of March 31, 2000 and December 31,
1999, and the results of operations and cash flows for the applicable
periods ended March 31, 2000 and 1999.
2. Net income per share is computed by dividing net income by average common
shares outstanding during the period. Net income per diluted share includes
the dilutive effect resulting from outstanding stock options and stock
awards.
Per share amounts are computed as follows:
Three Months Ended
March 31
---------------------
2000 1999
------- -------
Numerator:
Net income available to common
shareholders $30,105 $39,094
======= =======
Denominator:
Weighted average common shares
outstanding 54,300 54,549
Dilutive effect of stock options
and awards 178 59
------- -------
Denominator for net income
per share, diluted 54,478 54,608
======= =======
Net income per share $ .55 $ .72
======= =======
Net income per share, diluted $ .55 $ .72
======= =======
3. Total comprehensive income for the three-month periods ended March 31,
2000 and 1999 is comprised as follows:
Three Months Ended
March 31
---------------------
2000 1999
------- -------
Net income $30,105 $39,094
Other comprehensive income(loss) (11,181) (20,167)
------- -------
Total comprehensive income $18,924 $18,927
======= =======
Other comprehensive income (loss) in each of the periods above is comprised
solely of foreign currency translation adjustments, net of related tax
effects.
5
<PAGE> 6
THE LUBRIZOL CORPORATION
------------------------
Notes to Consolidated Financial Statements
------------------------------------------
March 31, 2000
4. In March 2000, the company purchased certain assets of Alox Corporation
(Alox) from RPM, Inc. Alox is a leading supplier of additives for corrosion
prevention in metalworking products, with 1999 revenues of approximately
$20 million. In March 2000, the company also acquired an additional 10%
interest in its India joint venture, bringing the company's ownership
interest up to 50%. The aggregate purchase price of both acquisitions was
approximately $36 million of which $26 million was assigned to goodwill and
intangible assets. The Alox purchase price is subject to working capital
adjustments, which are not expected to be significant. Amortization of
goodwill is on a straight-line basis over 15 years.
5. The second phase of the company's cost reduction program began in the third
quarter of 1999 and involves primarily the downsizing of the company's
Painesville, Ohio, manufacturing plant. This will result in the reduction
of approximately 5% of the company's workforce, or 200 positions, and the
shutdown of 23 of Painesville's 36 production systems. Through March 31,
2000, the company has shut down 12 of the 23 targeted systems and completed
approximately 47% of the workforce reduction. Cash expenditures of
approximately $.2 million were made in 2000 related to the cost reduction
program. Approximately $10.4 million remains as an accrued liability at
March 31, 2000.
6. The company aggregates its product lines into two principal operating
segments: chemicals for transportation and chemicals for industry. The
company evaluates performance and allocates resources based on segment
contribution income, defined as revenues less expenses directly
identifiable to the product lines aggregated within each segment. In
addition, the company allocates corporate research, testing, selling and
administrative expenses, and excess production capacity costs, in arriving
at segment operating profit before tax.
The following table presents a summary of the company's reportable segments
for the three months ended March 31, 2000 and 1999 on a basis of
segmentation consistent with the previous year end:
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999
------- -------
<S> <C> <C>
Revenue from external customers:
Chemicals for transportation $360,051 $374,172
Chemicals for industry 76,110 73,373
-------- --------
Total revenues $436,161 $447,545
======= ========
Segment contribution income:
Chemicals for transportation $75,554 $ 88,559
Chemicals for industry 12,118 12,797
------- --------
Total segment contribution income $87,672 $101,356
======= ========
Segment operating profit before tax:
Chemicals for transportation $40,974 $ 51,701
Chemicals for industry 7,590 7,661
------- --------
Total segment operating profit
before tax 48,564 59,362
Gain from litigation settlement - 14,476
Special charge - (3,136)
Interest expense - net (4,679) (6,133)
------- --------
Consolidated income before tax $43,885 $ 64,569
======= ========
</TABLE>
6
<PAGE> 7
Prior-year segment contribution income has been restated to reflect the
exclusion, for internal management reporting purposes, effective January 1,
2000, of excess production capacity from product costs. The change had no
effect on segment operating profit before tax.
7. On March 28, 2000, the company entered into an interest rate swap agreement
that effectively converts the interest on $25 million of 5.875% notes due
2008 to a variable rate of three-month LIBOR less 143 basis points. On
April 5, 2000, the company entered into a similar agreement, for another
$25 million, at a rate of three-month LIBOR less 118 basis points.
8. The company had an effective tax rate of 31.4% for the three months ended
March 31, 2000 compared to 39.5% for the three months ended March 31, 1999.
The decrease in the effective tax rate is due in part to the U.S. tax
benefit from charitable contributions of technology to an educational
institution, and also to the favorable impact of statutory tax rate changes
for certain foreign subsidiaries.
7
<PAGE> 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Our revenues declined slightly in the first quarter of 2000 as compared to the
first quarter of 1999, due to a drop in volume and a lower average selling
price. A significant increase in raw material costs resulted in lower profit
margins for first quarter of 2000. Although we benefited from lower operating
expenses and a lower effective tax rate, partially offset by unfavorable
currency effects, the lower gross profit resulted in reduced net income in the
first quarter of 2000 as compared to the first quarter of 1999.
We group our product lines into two operating segments: chemicals for
transportation and chemicals for industry. Chemicals for transportation
comprised approximately 83% of our consolidated revenues and 87% of our segment
pretax operating profits for the full year 1999 (83% of revenues and 84% of
operating profits for the three months ended March 31, 2000). This discussion
and analysis of our financial condition and results of operations is primarily
focused upon the company as a whole, since we believe this provides the most
appropriate understanding of our business. See Note 6 to the financial
statements for further financial disclosures by operating segment.
Our consolidated revenues decreased $11.4 million or 2.5% for the first quarter
of 2000 compared with the same period in 1999. Chemicals for transportation
revenues decreased $14.1 million, or 4%, and chemicals for industry revenues
increased $2.7 million, or 4%, in the first quarter of 2000 compared to 1999.
Our average unit selling price in the first quarter of 2000 declined by 1%
compared with the first quarter of 1999, due to a 2% negative currency effect
(principally from the weaker Euro), offset by slightly favorable product mix.
Sequentially, first quarter 2000 average selling price was flat with the fourth
quarter of 1999. This was the result of a 2% contribution from the phasing in of
our December 1999 price increase, offset by negative mix and currency effects.
Our shipment volume declined 2% in the first quarter of 2000 compared with the
very strong first quarter of 1999, with lubricant additive shipments to North
American customers decreasing 5% and international shipment volume flat with
1999. Asia Pacific's volume declined 10% compared to an unusually strong first
quarter of 1999 and Europe and Latin America volume increased 6% and 1%,
respectively. We believe our first quarter 2000 volume was negatively impacted
by some advance buying by customers in late 1999 related to Year 2000 concerns
and also to purchases in advance of our announced December price increase.
8
<PAGE> 9
THE LUBRIZOL CORPORATION
------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Our cost of sales for the three months ended March 31, 2000 increased $4.5
million over the first quarter of 1999 because of 6% higher average raw material
costs due to the impact of higher crude oil costs on petrochemical prices,
partially offset by 5% lower manufacturing expenses and the impact of lower
volume. Our manufacturing cost per metric ton sold in the first quarter of 2000
was 3% lower than the same period of 1999 due to savings resulting from the
integration of the Adibis business and favorable currency effects. We expect our
raw material costs to continue to increase into the third quarter of 2000
because of price increases from suppliers and the delayed effect of supplier
increases on cost of sales at our international subsidiaries, which are on
first-in, first-out and weighted average costing methods. Our U.S. purchasing
index of top raw materials increased 10% from December 1999 to March 2000. In
response to higher raw material costs, we announced a second price increase
which is currently being phased in.
Gross profit (net sales less cost of sales) for the three months ended March 31,
2000 decreased $16.1 million, or 11%, compared with the same 1999 period because
of higher raw material costs and lower volume, partially offset by lower
manufacturing expenses. All of the decrease was attributable to the chemicals
for transportation operating segment. Our gross profit percentage (gross profit
divided by net sales) decreased to 29.3% in the first quarter of 2000 compared
to 32.1% in the first quarter of 1999 for the same reasons. Sequentially, the
percentage declined from 30.7% in the fourth quarter of 1999. We expect rising
raw material costs to continue to put pressure on margins in the near term,
until these costs stabilize and our price increases become fully effective.
Selling and administrative expenses decreased by $1.5 million, or 3%, for the
three months ended March 31, 2000 compared with the same period of 1999 due to
lower legal expenses and lower implementation costs for our enterprise-wide,
management information system.
Our research, testing and development expenses (technology expenses) decreased
$2.2 million, or 6%, for the first quarter of 2000 compared with 1999 because of
lower activity at third-party testing facilities resulting, in part, from an
industry delay in the effective date of the proposed new U.S. passenger car
motor oil technical standard, GF-3. We expect the delay will defer the
commencement of this testing until the fourth quarter of 2000, and expect full
year technology expense will be approximately at last year's level.
The change in other income (expense) favorably affected pre-tax income by $1.4
million for the three months ended March 31, 2000 compared to 1999 principally
due to a reduction in currency translation and transaction losses that had
occurred in the prior year.
Interest income increased $1.5 million for the three months ended March 31, 2000
compared to 1999 because of a higher level of cash investments resulting from
our strong operating cash flow in 1999.
9
<PAGE> 10
THE LUBRIZOL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
On March 31, 1999, Lubrizol and Exxon Corporation reached a settlement of all
pending intellectual property litigation between the two companies and their
affiliates, except for litigation pending in Canada. Under the settlement
agreement, Exxon paid us cash of $16.8 million in April 1999. After deducting
related expenses, this settlement increased pre-tax income by $14.5 million
($9.0 million after-tax or $.16 per share) for the three months ended March
31,1999.
In the first quarter of 1999, we recognized additional expense of $3.1 million
($2.9 million after-tax or $.05 per share), to reflect an additional amount for
separation benefits, principally in Japan, under our cost reduction program
originally announced and recognized in the fourth quarter of 1998.
As a result of the above factors, our net income before tax for the first
quarter of 2000 decreased 32% to $43.9 million, as compared to $64.6 million for
the first quarter of 1999. After excluding from the first quarter of 1999 the
gain from the Exxon litigation settlement and the special charge expense, our
net income before tax decreased $9.3 million, or 18%. Segment operating profit
before tax, which excludes interest expense, decreased $10.7 million, or 21%,
for chemicals for transportation and decreased $.1 million, or 1%, for chemicals
for industry.
We had an effective tax rate of 31.4% for the three months ended March 31, 2000
compared to 39.5% for the three months ended March 31, 1999 (38.0% before the
litigation settlement and the special charge). We also anticipate an effective
tax rate of 31.4% for the full year 2000, as compared with 36.5% for the full
year 1999, prior to the litigation settlement and special charge. This
anticipated decrease in the annual effective tax rate is due in part to the U.S.
tax benefit from charitable contributions of technology to an educational
institution, and also to the favorable impact of statutory tax rate changes for
certain of our foreign subsidiaries. The lower tax rate used for the first
quarter of 2000 had a favorable effect of $.05 per share compared to the rate of
38.0%, prior to litigation settlement and special charge, used for the first
quarter of 1999.
Changes in currency exchange rates during the first quarter of 2000 had an
unfavorable effect on net income per share of $.05 as compared to exchange rates
in effect during the first quarter of 1999. This was primarily the result of the
strengthening of the U.S. dollar against the Euro.
Primarily as a result of the above factors, our net income for the first quarter
of 2000 decreased 23% to $30.1 million ($.55 per share) as compared to $39.1
million ($.72 per share) for the first quarter of 1999. After excluding from the
first quarter of 1999 the gain from the Exxon litigation settlement and the
special charge expense, our net income for the first quarter of 2000 decreased
9% from the $33.0 million ($.61 per share) earned in the first quarter of 1999.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------------
Cash provided from operating activities was $24.0 million for the first three
months of 2000 as compared with $82.6 million for the first three months of
1999. The decrease was caused principally by a working capital buildup of $27.2
million in 2000 compared to reduction of $9.2 million in 1999, and a $9.0
million decrease in net income compared to last year's level. The working
capital change resulted from increased inventories in advance of planned
maintenance at some of our facilities; a lower net
10
<PAGE> 11
THE LUBRIZOL CORPORATION
------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
addition to current liabilities because we made variable compensation payments,
based on 1999 results, during the first quarter of 2000 with no comparable
payments last year; and the collection of a $16.1 million income tax refund in
the first quarter of 1999, with no comparable collection this year.
Our capital expenditures in the first three months of 2000 were $17.8 million as
compared with $18.3 million for same period in 1999. We estimate capital
spending for the full year 2000 will be $75 million to $80 million as compared
with $64.9 million in 1999.
During the first quarter of 2000, we spent approximately $36 million on two
acquisitions. We acquired certain production assets and working capital of Alox
Corporation (Alox), a leading supplier of additives for corrosion prevention in
metalworking products, with annual revenues of approximately $20 million. We
will integrate the Alox operation into our existing infrastructure and, after a
transition period, relocate the manufacturing activity to our Painesville, Ohio
plant. We also acquired an additional 10% interest in our India joint venture,
bringing our ownership interest up to 50%.
We maintained an active share repurchase program for a number of years, but
suspended repurchases at the end of 1998 because net debt as a percent of
capitalization had reached our target level of 35% and we wanted to preserve
cash and borrowing capacity to fund potential acquisitions. Because of our
strong cash flow in 1999 and the completion of only one small acquisition during
that year, our net debt to capitalization decreased to 25% at year-end. As a
result, we resumed share repurchases with approximately 140,000 shares
repurchased for $4.2 million in late 1999, and approximately 578,000 shares
repurchased for $15.8 million in the first quarter of 2000. We plan to spend
approximately $20 million on share repurchases during the second quarter of
2000. Our net debt to capitalization ratio at March 31, 2000 is 28.4%. Net debt
is the total of short- and long-term debt, reduced by cash and short-term
investments in excess of an assumed operating cash level of $40 million.
Capitalization is shareholders' equity plus net debt.
Primarily as a result of these activities and the payment of dividends, our
balance of cash and short-term investments decreased $58.9 million at March 31,
2000 compared with December 31, 1999.
We currently have $18,375,000 of outstanding tax-exempt marine terminal
refunding revenue bonds which mature on July 1, 2000. We are in the process of
replacing this debt with $18,375,000 of new tax-exempt marine terminal refunding
revenue bonds, which will enable us to maintain the lower relative funding costs
associated with this type of financing. The issuance of the new debt and the
retirement of the existing debt are expected to be completed during the second
quarter.
Our financial position remains strong with a ratio of current assets to current
liabilities of 2.5 to 1 at March 31, 2000, the same as at December 31, 1999. We
believe our existing credit facilities, internally generated funds and ability
to obtain additional financing will be sufficient to meet our future capital
needs.
COST REDUCTION PROGRAM
- ----------------------
We initiated a program in 1998 to reduce costs and improve our worldwide
operating structure. The first phase of this program was substantially completed
by the end of the third quarter of 1999. The second phase, which began in the
third quarter of 1999 and involves primarily the
11
<PAGE> 12
THE LUBRIZOL CORPORATION
------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
downsizing of our Painesville, Ohio manufacturing facility, will result in the
workforce reduction of approximately 5% of our workforce, or 200 positions, and
the shutdown of 23 of Painesville's 36 production systems. Through March 31,
2000, we have shut down 12 of the 23 targeted production systems and completed
approximately 47% of the anticipated workforce reduction. We estimate annualized
savings of $20 million by the latter part of 2000, of which approximately $1.5
million has been achieved through March 31, 2000. Cash expenditures related to
the cost reduction program of approximately $.2 million were made in the first
quarter of 2000. Approximately $10.4 million remains as an accrued liability at
March 31, 2000, nearly all of which represents cash yet to be expended in 2000.
Additionally, we will spend approximately $8 million of capital to transfer a
portion of the capacity to our Deer Park, Texas plant, of which $1.9 million has
been spent through March 31, 2000.
CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES
- ---------------------------------------------
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the federal
securities laws. As a general matter, forward-looking statements are those
focused upon future plans, objectives or performance as opposed to historical
items and include statements of anticipated events or trends and expectations
and beliefs relating to matters not historical in nature. Such forward-looking
statements are subject to uncertainties and factors relating to our operations
and business environment, all of which are difficult to predict and many of
which are beyond our control. Such uncertainties and factors could cause our
actual results to differ materially from those matters expressed in or implied
by such forward-looking statements. We identified certain, but not necessarily
all, of these uncertainties and factors in the Management's Discussion and
Analysis contained on pages 22 and 23 of our 1999 Annual Report to our
shareholders, and they are incorporated by reference herein.
12
<PAGE> 13
THE LUBRIZOL CORPORATION
------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
We operate manufacturing and blending facilities, laboratories and offices
around the world and utilize fixed and variable rate debt to finance our
global operations. As a result, we are subject to business risks inherent
in non-U.S. activities, including political and economic uncertainty,
import and export limitations, and market risk related to changes in
interest rates and foreign currency exchange rates. We believe the
political and economic risks related to our foreign operations are
mitigated due to the stability of the countries in which our largest
foreign operations are located.
In the normal course of business, we use derivative financial instruments
including interest rate swaps and foreign currency forward exchange
contracts to manage our market risks. Our objective in managing our
exposure to changes in interest rates is to limit the impact of such
changes on earnings and cash flow and to lower our overall borrowing
costs. Our objective in managing our exposure to changes in foreign
currency exchange rates is to reduce the economic effect on earnings and
cash flow associated with such changes. Our principal currency exposures
are in the major European currencies, the Japanese yen and certain Latin
American currencies. We do not hold derivatives for trading purposes.
A quantitative and qualitative discussion about our market risk is
contained on page 23 of our 1999 Annual Report to our shareholders. There
have been no material changes in the market risks faced by us since
December 31, 1999.
13
<PAGE> 14
THE LUBRIZOL CORPORATION
------------------------
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
(c) On January 31, 2000, we issued 951 common shares in a private
placement transaction exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of that Act.
We issued the shares to a former officer pursuant to a
deferred compensation program for executive officers.
On February 1, 2000, we issued 225 common shares in a private
placement transaction exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of that Act.
We issued the shares to a former director pursuant to a
deferred compensation plan for directors.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(10)(b)* The Lubrizol Corporation Amended Deferred
Compensation Plan for Directors.
(10)(h)* The Lubrizol Corporation 1991 Stock Incentive Plan,
as amended.
(10)(i)* The Lubrizol Corporation Deferred Stock Compensation
Plan for Outside Directors.
(10)(k)* The Lubrizol Corporation Deferred Compensation Plan
for Officers (Amended as of March 11, 2000).
(10)(l)* The Lubrizol Corporation Executive Council Deferred
Compensation Plan, as amended.
* Indicates management contract or compensatory plan or
arrangement.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 31, 2000.
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LUBRIZOL CORPORATION
/s/John R. Ahern
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John R. Ahern
Chief Accounting Officer and
Duly Authorized Signatory of
The Lubrizol Corporation
Date: May 11, 2000
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Exhibit (10)(b)
THE LUBRIZOL CORPORATION
Amended Deferred Compensation Plan For Directors
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(Amended as of March 11, 2000)
1. PURPOSE. The purpose of this Amended Deferred Compensation Plan For Directors
(the "Plan"), entered this 27th day of June, 1994, is to continue to permit any
member of the Board of Directors (the "Participant") of The Lubrizol Corporation
(the "Company"), to defer all or a portion of the compensation to be received as
a director until after the Participant ceases to be a director, all as provided
in the Plan.
2. ADMINISTRATION. The Plan shall be administered by the Organization and
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee's interpretation and construction of all provisions
of this Plan shall be binding and conclusive. In the event that a Participant is
a member of the Committee, such Participant shall not participate in any
decision of the Committee relating to that Participant's participation in this
Plan.
3. RIGHT TO DEFER COMPENSATION.
(a) Any director of the Company may, at any time, elect to defer under
this Plan all, or such portion as the director may designate, of (i) that
director's annual retainer fee and/or (ii) the attendance fees for attending
directors' meetings or committees thereof. The annual retainer fee, for this
purpose, shall be deemed to be earned equally and ratably as of the last day of
each calendar quarter during the calendar year. Attendance fees are deemed to be
earned when the director attends the meeting for which the attendance fee is
paid.
(b) The election described in paragraph (a) shall be made by written
notice delivered to the Vice President, Human Resources, of the Company
specifying (i) the length of time, not less than one year, during which the
election shall apply, (ii) the portion of the retainer fee and/or the attendance
fee to be deferred for such year or years, (iii) time of distribution, and (iv)
if applicable, the payment option as provided in Section 6 for distributions
upon ceasing to be a director.
(c) The election under this Section 3 shall take effect on the first
day of the calendar quarter following the month in which the election is made.
A director may designate that the election shall remain in effect until the
director, on a prospective basis, withdraws the election or changes the amount
to be deferred.
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(d) Any notice of withdrawal of the deferral election or change in the
amount to be deferred shall be effective on the first day of the calendar
quarter following the month in which such notice is given to the Company's Vice
President, Human Resources.
4. COMPENSATION DEFERRAL ACCOUNTS.
(a) On the date the compensation deferred under this Plan would have
become payable to the Participant in the absence of an election under this Plan
to defer payment thereof, the amount of such deferred compensation shall be
credited, pursuant to Participant's election, to a Stock Deferral Account and/or
any of the Cash Deferral Account investment portfolios designated as available
by the Committee from time to time. A Participant may transfer any portion or
all of the balance in any Deferral Account among the Stock Deferral Account and
the Cash Deferral Account investment portfolios as allowed under rules
established by the Committee; provided, however that any deferrals made
hereunder into a Stock Deferral Account prior to January 1, 2000, shall be
governed by the provisions of the Plan in effect prior to January 1, 2000. All
Deferral Accounts shall be established and maintained for each Participant in
the Company's accounting books and records and the Company shall be under no
obligation to purchase any investments designated by the Participant.
(b) Participant's Cash Deferral Accounts shall be credited with any
gains or losses equal to those generated as if the Participant's Cash Deferral
Account balances had been invested in the applicable investment portfolio(s)
selected by the Participant.
(c) The amount of deferred compensation credited to a Participant's
Stock Deferral Account pursuant to paragraph (a) shall be used to determined the
number of full and fractional units ("Units") representing Company Common Shares
("Shares") which the deferred amount would purchase at the closing price for the
Shares on the New York Stock Exchange ("NYSE") composite transactions reporting
system ("composite tape") on the date that the deferred amount is credited
pursuant to paragraph (a) and if Shares were not traded on that date on the
NYSE, then such computation shall be made as of the first preceding day on which
Shares were so traded. The Company shall credit the Participant's Stock Deferral
Account with the number of full and fractional Units so determined. However, at
no time prior to delivery of such Shares, shall the Company be obligated to
purchase or reserve Shares for such Stock Deferral Account and the Participant
shall not have any of the rights of a shareholder with respect to the Units
credited to such Participant's Stock Deferral Account.
(d) As of each dividend payment date declared with respect to the
Shares, the Company shall credit the Participant's Stock Deferral Account with
an additional number of whole and/or fractional Units equal to:
(i) the product of (x) the dividend per Share which is
payable with respect to such dividend payment date,
multiplied by (y)
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the number of whole and fractional Units credited to
the Participant's Stock Deferral Account as of such
payment date;
divided by
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(ii) the closing price of a Share on the dividend payment
date (or if Shares were not traded on that date, on
the next preceding day on which Shares were so
traded), as reported on the NYSE-composite tape.
5. PAYMENT OF DEFERRED COMPENSATION UPON CEASING TO BE A DIRECTOR.
(a) The total amount standing as a credit in a Participant's Cash
Deferral Accounts shall, upon Participant ceasing to be a director, be payable
to the Participant either in a lump sum or in periodic installments over such
period, not exceeding ten years, as the Participant shall have selected pursuant
to Section 3(b)(iv). Such periodic payments shall begin or the lump sum payment
shall be made, as the case may be, from the Participant's Cash Deferral
Accounts, at such time, not more than twelve (12) months after the Participant
ceases to be a director of the Company, as the Participant shall have selected
pursuant to Section 3 (b)(iv). Notwithstanding the foregoing, a Participant may
elect no later than thirty (30) days prior to the Participant ceasing to be a
director, nor earlier than ninety (90) days prior thereto, to change the form of
distribution of the Participant's Cash Deferral Accounts.
(b) The amount of each installment payable to a Participant shall be
determined by dividing the aggregate balance of such Participant's Cash Deferral
Accounts by the number of periodic installments (including the current
installment) remaining to be paid. Until a Participant's Cash Deferral Accounts
has been completely distributed, the balance thereof remaining, from time to
time, shall be credited with gains and losses on a monthly basis as provided in
Section 4(b).
(c) The total number of Units credited to the Participant's Stock
Deferral Accounts shall, upon Participant ceasing to be a director, be payable
to the Participant either in a lump sum or in periodic installments, over such
period, not exceeding ten years, as the Participant shall have selected pursuant
to Section 3(b)(iv). Such periodic payments shall begin or the lump sum payment
shall be made, as the case may be, at such time, not more than twelve (12)
months after the Participant ceased to be a director of the Company, as the
Participant shall have selected pursuant to Section 3(b)(iv). Notwithstanding
the foregoing, a Participant may elect no later than thirty (30) days prior to
the Participant ceasing to be a director, no earlier than ninety (90) days prior
thereto, to change the form of distribution of the Participant's Stock Deferral
Accounts.
(d) The amount of any installment payable from the Stock Deferral
Accounts to a Participant shall be determined by dividing the balance of the
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aggregate number of Units in the Participant's Stock Deferral Accounts by the
number of periodic installments (including the current installment) remaining to
be paid and the quotient shall be the number of Shares that are payable. If the
determination of the installment payable from the Participant's Stock Deferral
Accounts results in a fractional Share being payable, the installment payment
shall exclude any such fractional Share payment except that, in the final
installment payment, any such fractional Share shall be paid in cash in an
amount as determined by the Committee. Until the Participant's Stock Deferral
Accounts have been completely distributed, the balance in the Stock Deferral
Accounts shall continue to be credited with the dividend equivalents on such
balances as provided in Section 4(d).
(e) In the event a Participant dies prior to receiving payment of the
entire amount in that Participant's Cash Deferral Accounts and/or Stock Deferral
Accounts, as the case may be, the unpaid balance shall be paid to such
beneficiary as the Participant may have designated in writing to the Vice
President, Human Resources, of the Company as the beneficiary to receive any
such post-death distribution under the Plan or, in the absence of such written
designation, to the Participant's legal representative or to the beneficiary
designated in the Participant's last will as the one to receive such
distributions. Distributions subsequent to the death of a Participant may be
made either in a lump sum or in periodic installments in such amounts and over
such period, not exceeding ten years from the date of death, as the Committee
may direct and the amount of each installment shall be computed as provided in
Section 6(b), and (d) as the case may be.
(f) Payments from the Cash Deferral Accounts shall be made in cash and
payments from the Stock Deferral Accounts shall be made in Shares. The amount of
any distribution pursuant to Sections 5 through 8 hereunder shall reduce the
balance held in the Participant's corresponding Deferral Accounts as of the date
of such distribution. Installment payments shall be made pro-rata from a
Participant's Deferral Accounts.
6. IN-SERVICE DISTRIBUTIONS. Pursuant to Section 3, a Participant may elect to
receive an in-service distribution of all or any specified percentage of the
Participant's deferral for any calendar quarter commencing not earlier than the
first calendar year following the year that such compensation would have been
payable. In-service distributions shall be made in a lump sum payment. A
Participant may elect once for any calendar quarter of deferral for which the
Participant has elected an in-service distribution, to change the date of
distribution to another in-service year or upon ceasing to be director;
provided, however, that any such modification must be made in writing at least
twelve (12) months prior to the date originally elected for the in-service
distribution.
7. SPECIAL DISTRIBUTIONS. Notwithstanding any other provision of this Plan, a
Participant may elect to receive distribution of part or all of the total of
Participant's eligible Deferral Accounts in one or more distributions if (and
only if)
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the amount of the distribution is reduced by ten (10) percent. The ten (10)
percent reduction shall be forfeited. Distributions shall be made pro-rata among
Participant's eligible Deferral Accounts. Any distribution made pursuant to such
an election shall be made within sixty (60) days of the date such election is
submitted to Vice President - Human Resources.
8. HARDSHIP DISTRIBUTIONS. The Committee may accelerate the distribution of part
or all, in any or all, of Participant's Deferral Accounts for reasons of severe
financial hardship. For purposes of this Plan, severe financial hardship shall
be deemed to exist in the event the Committee determines that a Participant
needs a distribution to meet immediate and heavy financial needs resulting from
a sudden or unexpected illness or accident of the Participant or a member of
his/her family, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstance arising as a result of
events beyond the control of the Participant. A distribution based on financial
hardship shall not exceed the amount required to meet the immediate financial
need created by the hardship.
9. NON-ASSIGNABILITY. None of the rights or interests in any of the
Participant's Deferral Accounts shall, prior to actual payment or distribution
pursuant to this Plan, be assignable or transferable in whole or in part, either
voluntarily or by operation of law or otherwise, and such rights and interest
shall not be subject to payment of debts by execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner; provided that, upon the
occurrence of any such assignment or transfer or the attempted assignment or
transfer, all payments hereunder shall be payable in the sole and unrestricted
judgment and discretion of the Committee, as to time and amount, and shall be
distributable to the person who would have received the payment but for this
paragraph 9 only at such time or times and in such amounts as the Committee,
from time to time, shall determine.
10. INTEREST OF PARTICIPANT. The Company shall be under no obligation to
segregate or reserve any funds or other assets for purposes relating to the Plan
and, except as set forth in this Plan, no Participant shall have any rights
whatsoever in or with respect to any funds or other assets held by the Company
for purposes of the Plan or otherwise. Each Participant's accounts maintained
for purposes of the Plan merely constitute bookkeeping entries on records of the
Company, constitute the unsecured promise and obligation of the Company to make
payments as provided herein, and shall not constitute any allocation whatsoever
of any cash, shares or other assets of the Company or be deemed to create any
trust or special deposit with respect to any of the Company's assets.
Notwithstanding the foregoing provisions, nothing in this Plan shall preclude
the Company from setting aside Shares or funds in trust pursuant to one or more
trust agreements between a trustee and the Company. However, no Participant
shall have any secured interest or claim in any assets or property
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of the Company or any such trust and all Shares or funds contained in such trust
shall remain subject to the claims of the Company's general creditors.
11. SHARES CHANGES. In the event of any change in the number of outstanding
Shares by reason of any stock dividend, stock split up, recapitalization,
merger, consolidation, exchange of shares or other similar corporate change, the
number of units representing Shares to be credited in accordance with Section
4(c), the Shares to be distributed in accordance with this Plan shall be
appropriately adjusted to take into account any such event.
12. AMENDMENT. The Board of Directors of the Company may, from time to time,
amend or terminate this Plan, provided that no such amendment or termination of
the Plan shall adversely affect a Participant's Accounts as they existed
immediately before such amendment or termination or the manner of distribution
thereof, unless such Participant shall have consented thereto in writing.
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Exhibit (10)(h)
THE LUBRIZOL CORPORATION 1991 STOCK INCENTIVE PLAN
(As Amended March 27, 2000)
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 document evidencing any
Award granted hereunder, signed by the Company and delivered to the
Participant or Outside Director, as the case may be.
(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.
(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.
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THE LUBRIZOL CORPORATION Page 2
1991 STOCK INCENTIVE PLAN
(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.
(x) "Voting Stock" means the then-outstanding securities
entitled to vote generally in the election of directors of the Company.
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THE LUBRIZOL CORPORATION Page 3
1991 STOCK INCENTIVE PLAN
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; 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.
(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.
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THE LUBRIZOL CORPORATION Page 4
1991 STOCK INCENTIVE PLAN
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 fixed by the Committee in its sole discretion; provided that
the purchase price shall not be less than 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; 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 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.
(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 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 other than a reload Option granted
pursuant to this Section 6(e), and pays some or all of the Option Price
with Shares, the Committee in its discretion may grant to such
Participant or Outside Director a reload Option to purchase the number
of Shares equal to the number of Shares used as payment of the Option
Price, subject to the limitations described below. 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
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THE LUBRIZOL CORPORATION Page 5
1991 STOCK INCENTIVE PLAN
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 may 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).
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 has met the Share ownership
guideline for such Participant, if any, set by the Company, and then
only to the extent that the Participant continues to meet such
ownership guideline immediately after such sale, 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.
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
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THE LUBRIZOL CORPORATION Page 6
1991 STOCK INCENTIVE PLAN
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.
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.
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. Such conditions may include issuance of Shares at the time of the
Award is granted or issuance of Shares at a time or times subsequent to the time
the Award is granted, which subsequent times may be specifically established by
the Committee and/or may be determined by reference to the satisfaction of one
or more performance measures specified by the Committee. The provisions of stock
awards need not be the same with respect to each Participant.
<PAGE> 7
THE LUBRIZOL CORPORATION Page 7
1991 STOCK INCENTIVE PLAN
SECTION 10. OUTSIDE DIRECTORS' OPTIONS.
On the close of business on the date of each Shareholders' Meeting,
each Outside Director shall automatically be granted an Option to purchase 2,500
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 after the
expiration of the Option period provided in Section 10(b).
(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) 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) 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 after the expiration
of the Option period provided in Section 10(b).
<PAGE> 8
THE LUBRIZOL CORPORATION Page 8
1991 STOCK INCENTIVE PLAN
(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 after the expiration of the Option period provided
in Section 10(b).
(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).
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;
<PAGE> 9
THE LUBRIZOL CORPORATION Page 9
1991 STOCK INCENTIVE PLAN
(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
(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:
<PAGE> 10
THE LUBRIZOL CORPORATION Page 10
1991 STOCK INCENTIVE PLAN
(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.
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.
<PAGE> 11
THE LUBRIZOL CORPORATION Page 11
1991 STOCK INCENTIVE PLAN
(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 Agreement, 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.
<PAGE> 1
Exhibit (10)(i)
THE LUBRIZOL CORPORATION
DEFERRED STOCK COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
Adopted: September 17, 1991
Amended: September 27, 1993
Amended: October 1, 1995
Amended: September 27, 1999
Amended: February 28, 2000
1. PURPOSE. The Lubrizol Corporation (the "Company") hereby establishes
its Deferred Stock Compensation Plan for Outside Directors (the "Plan")
in order to promote the interests of the Company and its shareholders
by having a portion of the total compensation payable to its outside
directors be deferred and paid in the form of common shares of the
Company, thereby increasing each Director's beneficial ownership of
Company common shares as well as each Director's proprietary interest
in the Company.
2. EFFECTIVE DATE. The effective date of the plan is October 1, 1991.
3. COMMON SHARE UNITS. In addition to the cash compensation otherwise
payable to each outside director of the Company, the Company shall
establish and maintain a Deferred Stock Account for and in the name of
each outside director. Subject to the provisions of Section 10, on the
first day of October in each calendar year, the Company shall credit
500 common share units ("Units") to the Deferred Stock Account of each
person who is an outside director of the Company on said date.
4. DIVIDEND EQUIVALENTS. As of each dividend payment date declared with
respect to the Company's common shares, the Company shall credit the
Deferred Stock Account of each director with an additional number of
Units equal to:
(a) the product of (i) the dividend per common share of the
Company which is payable with respect to such dividend payment
date, multiplied by (ii) the number of Units credited to the
director's Deferred Stock Account as of such dividend payment
date;
divided by
----------
(b) the closing price of a common share of the Company on the
dividend payment date (or if such stock was not traded on that
date, on the next preceding date on which such common shares
were traded), as reported by the New York Stock Exchange -
Composite Transactions Reporting System.
5. DISTRIBUTION OF COMMON SHARES
(a) Each director, or, in the event of death, his/her beneficiary,
shall be entitled to receive one common share of the Company
(a "Share" or "Shares") for each
-1-
<PAGE> 2
Unit credited to his/her Deferred Stock Account, payable at
such time or times as hereinafter provided. Once a Share has
been distributed with respect to a Unit, that Unit shall be
canceled.
(b) Unless otherwise elected by the director in accordance with
the provisions of Section 5(c), all Shares shall be
distributed to the director or beneficiary, as the case may
be, on the first day of the month following the date on which
the director ceases to be a director for any reason.
(c) At any time prior to the first time that the Company credits
Units to the director's Deferred Stock Account, the director
may irrevocably elect to have all Shares to which the director
will be entitled under this Plan distributed to him/her (or in
the event of his/her death, the director's designated
beneficiary) in ten or fewer annual installments commencing on
the first day of the month following the date on which such
director ceases to be a director of the Company for any
reason. The number of Shares to be distributed with each
installment shall be equal to the nearer whole number obtained
by dividing the number of Units then credited to the
director's Deferred Stock Account by the number of unpaid
installments.
(d) Units with respect to which no distribution of Shares has yet
occurred shall continue to be held in the director's Deferred
Stock Account and credited with dividend equivalents in
accordance with Section 4.
6. BENEFICIARY DESIGNATION
(a) Each director may, from time to time, by writing filed with
the Company, designate any legal or natural person or persons
(who may be designated contingently or successively) to whom
Shares attributable to the director's Units are to be
distributed if the director dies prior to having received all
of such Shares to which he/she is entitled under Section 5. A
beneficiary designation will be effective only if the signed
form is filed with the Company while the director is alive and
will cancel all beneficiary designation forms filed earlier.
(b) To the extent that a director fails to designate a beneficiary
or beneficiaries as provided in this Section 6, or if all
designated beneficiaries die before the director or before the
distribution of all Shares attributable to the director's
Units, all remaining Shares attributable to such Units shall
be distributed to the estate of the director as soon as
practicable after such death.
7. ACCELERATION OF SHARE DISTRIBUTIONS. The Company may accelerate the
distribution of Shares with respect to Units credited to the Deferred
Stock Account of any director for reasons of severe financial hardship.
For purposes of this Plan, severe financial hardship shall be deemed to
exist in the event the Company determines that a director needs a
distribution to meet immediate and heavy financial needs resulting from
a sudden or unexpected illness or accident of the director or a member
of his/her family, loss of the director's property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the director. A distribution
based on financial hardship shall not exceed the amount required to
meet the immediate financial need created by the hardship.
-2-
<PAGE> 3
8. TRANSFERABILITY. The interests of any director or beneficiary under the
Plan are not subject to the claims of the director's creditors and may
not otherwise be voluntarily or involuntarily assigned, alienated or
encumbered.
9. INTEREST OF DIRECTOR. The Company shall be under no obligation to
segregate or reserve any funds or other assets for purposes relating to
the Plan and, except as set forth in this Plan, no director shall have
any rights whatsoever in or with respect to any funds or other assets
held by the Company for purposes of the Plan or otherwise. Each
director's Deferred Stock Account maintained for purposes of the Plan
merely constitutes a bookkeeping entry on records of the Company,
constitutes the unsecured promise and obligation of the Company to make
payments as provided herein, and shall not constitute any allocation
whatsoever of any cash or other assets of the Company or be deemed to
create any trust or special deposit with respect to any of the
Company's assets. Notwithstanding the foregoing provisions, nothing in
this Plan shall preclude the Company from setting aside Shares or funds
in trust pursuant to one or more trust agreements between a trustee and
the Company. However, no director shall have any secured interest or
claim in any assets or property of the Company or any such trust and
all Shares or funds contained in such trust shall remain subject to the
claims of the Company's general creditors.
10. CHANGES IN SHARES. In the event of any change in the number of
outstanding Shares by reason of any stock dividend, stock split up,
recapitalization, merger, consolidation, exchange of shares or other
similar corporate change, the number of Units to be credited in
accordance with Section 3, the number of Units held in the director's
Deferred Stock Account and the Shares to be distributed in accordance
with this Plan shall be appropriately adjusted to take into account any
such event.
11. SUCCESSORS. This Plan shall be binding upon any assignee or successor
in interest to the Company whether by merger, consolidation or sale of
all or substantially all of the Company's assets.
12. AMENDMENT AND TERMINATION. The Board of Directors of the Company may,
from time to time, amend or terminate the Plan; provided, however, that
no such amendment or termination shall adversely affect the rights of
any director or beneficiary without his/her consent with respect to
Units credited prior to such amendment or termination.
-3-
<PAGE> 1
Exhibit (10)(k)
THE LUBRIZOL CORPORATION
Deferred Compensation Plan for Officers
---------------------------------------
(Amended as of March 11, 2000)
1. PURPOSE. The purpose of this Deferred Compensation Plan For Officers (the
"Plan") is to permit an officer (as identified by the Company for Section 16
purposes under the Securities Exchange Act of 1934) (sometimes hereinafter
referred to as "officer" or as the "Participant") of The Lubrizol Corporation
(the "Company"), who wishes, to defer a portion of such officer's compensation
as provided in the Plan.
2. ADMINISTRATION. The Plan shall be administered by the Organization and
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee's interpretation and construction of all provisions
of the Plan shall be binding and conclusive upon all Participants and their
heirs and/or successors.
3. RIGHT TO DEFER COMPENSATION.
(a) An officer of the Company may, at any time prior to January 1 of a
given calendar year, elect, for one or more future successive calendar years, to
defer under the Plan a pre-selected amount of such officer's cash compensation,
including bonus, which such officer may thereafter be entitled to receive for
services performed during such elected calendar year or years.
(b) The election under this Section 3 shall take effect on the first
day of the calendar year following the date on which the election is made and
such election shall be irrevocable for any elected calendar year after such
elected calendar year shall have commenced.
(c) The pre-selected amount that an officer may elect to defer shall be
one or more of the following:
(i) a fixed dollar amount or percentage of the officer's bi-weekly
base salary;
(ii) a fixed dollar amount or percentage of the officer's quarterly
pay;
(iii) a fixed dollar amount or percentage of the officer's
participation in the performance pay plan , if any.
(d) Notwithstanding paragraphs (a),(b) and (c), where an officer first
becomes eligible to participate in the Plan, the newly eligible officer may make
the election under this Section 3 to defer the specified compensation for
services to be performed subsequent to the election and for the remainder of the
calendar
1
<PAGE> 2
year in which the election under this Section 3 is made provided such
election is made within 30 days after the date the officer first becomes
eligible.
(e) Within such periods of time as the Committee shall designate, and
in addition to the provisions of paragraphs (a) through (d), an officer may
elect to defer that portion or all of the officer's cash and/or stock
compensation (i) described in paragraph (c), (ii) the performance share program,
and/or (iii) any other plan or program that provides for cash or stock
compensation, to the extent that such amounts would otherwise be nondeductible
by the Company pursuant to Section 162(m) of the Internal Revenue Code of 1986,
as amended. For purposes of the preceding sentence, the amount to be deferred
with respect to any compensation plans payable in Company shares shall be
determined by taking into consideration any fixed cash compensation (including
biweekly and quarterly pay) to be received subsequent to the date on which
shares are distributable under such program. Notwithstanding any other provision
of this Plan, deferrals under this paragraph (e) shall be distributable only
upon termination of employment in accordance with Section 6.
(f) All elections under this Plan shall be made by written notice
delivered to the Vice President, Human Resources, of the Company specifying (i)
the number of calendar years, one or more, during which the election shall
apply, (ii) the portion, if any, determined under paragraph (c), of each
category of the Participant's compensation to be deferred for such year or
years, as described above, (iii) the time of distribution, and (iv) if,
applicable, the payment option as provided in Section 6 for distributions upon
termination of employment.
(g) A Participant may designate that the deferral election under this
Section 3 shall remain in effect until the Participant, on a prospective basis,
withdraws the election or changes the amount to be deferred. Any notice of the
withdrawal of the deferral election or change of amount to be deferred shall be
effective on the first day of the calendar year following the date on which such
notice is given to the Company's Vice President, Human Resources; provided that,
such notice shall not change, alter or terminate the deferral of the officer's
participation in the performance pay plan for the year in which such notice of
withdrawal is given which, except for the deferral, would be payable in the
calendar year following the date on which such notice of withdrawal is given.
(h) Notwithstanding paragraph (f) and the first sentence of paragraph
(g), any compensation earned after the end of the first month in which a
Participant under this Plan no longer is an officer of the Company, as defined
in Section 1, but continues to be employed by the Company, shall not be
deferred, provided however, the balance in the Participant's Deferral Accounts
shall continue to be held and administered pursuant to the Plan.
2
<PAGE> 3
4. DEFERRAL OF CASH COMPENSATION.
(a) On the date the cash compensation deferred under the Plan would
have become payable to the Participant in the absence of an election under the
Plan to defer payment thereof, the amount of such deferred compensation shall be
credited to a Stock Deferral Account and/or any of the Cash Deferral Account
investment portfolios designated as available by the Committee from time to
time. All Deferral Accounts shall be established and maintained for each
Participant in the Company's accounting books and records and the Company shall
be under no obligation to purchase any investments designated by the
Participant. To the extent that, at the time amounts are credited to a
Participant's Deferral Accounts, any federal, state or local payroll withholding
tax applies (e.g., Medicare withholding tax), the Participant shall be
responsible for the payment of such amount to the Company and the Company shall
promptly remit such amount to the proper taxing authority.
(b) Participant's Cash Deferral Accounts shall be credited with any
gains or losses equal to those generated as if the Participant's Cash Deferral
Account balances had been invested in the applicable investment portfolio(s)
selected by the Participant
(c) A Participant's deferred cash compensation credited to a
Participant's Stock Deferral Account shall be used to determine the number of
full and fractional units ("Units") representing Company Common Shares
("Shares") which the deferred amount would purchase at the closing price for the
Shares on the New York Stock Exchange ("NYSE") composite transactions reporting
system on the date that the deferred amount is credited pursuant to paragraph
(a) and if Shares were not traded on that date on the NYSE, then such
computation shall be made as of the first preceding day on which Shares were so
traded. The Company shall credit the Participant's Stock Deferral Account with
the number of full and fractional Units so determined. A Participant's Stock
Deferral Account shall be administered in accordance with Section 5(b) through
(e).
(d) A Participant may elect pursuant to rules established by the
Committee to transfer a portion or all of the balance of any Deferral Account
established under this Section 4 to any other such Deferral Account.
(e) Notwithstanding the foregoing, a Participant may elect to have any
portion or all of the Participant's cash deferrals credited to any of the
Deferral Accounts listed in paragraph (a) and may transfer balances in
accordance with paragraph (d) provided that the Participant is considered, in
the judgement of the Chief Executive Officer of the Company, to be on plan to
meet the Participant's Company Share ownership guideline. Otherwise, a
Participant must elect that at least 50% of any cash deferral hereunder be
credited to a Stock Deferral Account and may not transfer any portion of the
balance of the Stock Deferral Account to another Deferral Account.
3
<PAGE> 4
5. DEFERRAL OF STOCK COMPENSATION.
(a) At the time that Shares are distributable to a Participant, who has
elected to defer the receipt thereof under Section 3(e), in lieu of Shares being
issued, there shall be credited to a separate Stock Deferral Account for the
Participant, full stock equivalent units ("Units') which shall be established
and maintained on the Company's records. One Unit shall be allocated to the
Stock Deferral Account for each such Share. The balance of a Stock Deferral
Account established under this Section 5(a) may not be transferred to any other
Deferral Account.
(b) As of each dividend payment date established by the Company for the
payment of cash dividends with respect to its Shares, the Company shall credit
each separate Stock Deferral Account of a Participant with an additional number
of whole and/or fractional Units equal to:
(i) the product of (x) the dividend per Share which is
payable with respect to such dividend payment date,
multiplied by (y) the number of whole and fractional
Units credited to the separate Stock Deferral Account
of a Participant as of such payment date;
divided by
----------
(ii) The closing price of a Share on the dividend payment
date (or if Shares were not traded on that date, on
the next preceding day on which Shares were so
traded), as reported on the NYSE-composite tape.
(c) At no time prior to actual delivery of Shares pursuant to the Plan,
shall the Company be obligated to purchase or reserve Shares for delivery of a
Participant and the Participant shall not be a shareholder nor have any of the
rights of a shareholder with respect to the Units credited to the Participant's
Stock Deferral Accounts.
(d) To the extent that, at the time Units are credited to a Stock
Deferral Account of a Participant, any federal, state or local payroll
withholding tax applies (e.g., Medicare withholding tax), the Participant shall
be responsible for the payment of such amount to the Company and the Company
shall promptly remit such amount to the proper taxing authority.
(e) In the event of any change in the number of outstanding Shares by
reason of any stock dividend, stock split up, recapitalization, merger,
consolidation, exchange of shares or other similar corporate change, the number
of Units in each separate Stock Deferral Account of a Participant shall be
appropriately adjusted to take into account any such event.
6. PAYMENT OF DEFERRED COMPENSATION UPON TERMINATION.
4
<PAGE> 5
(a) The total amount standing as a credit in a Participant's Cash
Deferral Accounts shall, upon termination of employment, be payable to the
Participant either in a lump sum or in periodic installments over such period,
not exceeding ten years, as the Participant shall have selected pursuant to
Section 3(f)(iv). Such periodic payments shall begin or the lump sum payment
shall be made, as the case may be, from the Participant's Cash Deferral
Accounts, at such time, not more than twelve (12) months after the Participant
ceases to be an employee of the Company, as the Participant shall have selected
pursuant to Section 3 (f)(iv). All amounts payable in accordance with this
Section 6(a) shall be subject to applicable federal, state and/or local payroll
withholding taxes then in effect. Notwithstanding the foregoing, a Participant
may elect no later than thirty (30) days prior to the Participant's termination
of employment, nor earlier than ninety (90) days prior thereto, to change the
form of distribution of the Participant's Cash Deferral Accounts.
(b) The amount of each installment payable to a Participant shall be
determined by dividing the aggregate balance of such Participant's Cash Deferral
Accounts by the number of periodic installments (including the current
installment) remaining to be paid. Until a Participant's Cash Deferral Accounts
has been completely distributed, the balance thereof remaining, from time to
time, shall be credited with gains and losses on a monthly basis as provided in
Section 4(b).
(c) The total number of Units credited to the Participant's Stock
Deferral Accounts shall upon termination of employment be payable to the
Participant either in a lump sum or in periodic installments, over such period,
not exceeding ten years, as the Participant shall have selected pursuant to
Section 3(f)(iv). Such periodic payments shall begin or the lump sum payment
shall be made, as the case may be, at such time, not more than twelve (12)
months after the Participant ceased to be an employee of the Company, as the
Participant shall have selected pursuant to Section 3(f)(iv). All amounts
payable in accordance with this Section 6(c) shall be subject to applicable
federal, state and/or local payroll withholding taxes then in effect.
Notwithstanding the foregoing, a Participant may elect no later than thirty (30)
days prior to the Participant's termination of employment, no earlier than
ninety (90) days prior thereto, to change the form of distribution of the
Participant's Stock Deferral Accounts.
(d) The amount of any installment payable from the Stock Deferral
Accounts to a Participant shall be determined by dividing the balance of the
aggregate number of Units in the Participant's Stock Deferral Accounts by the
number of periodic installments (including the current installment) remaining to
be paid and the quotient shall be the number of Shares that are payable. If the
determination of the installment payable from the Participant's Stock Deferral
Accounts results in a fractional Share being payable, the installment payment
shall exclude any such fractional Share payment except that, in the final
installment payment, any such fractional Share shall be paid in cash in an
amount as determined by the Committee. Until the Participant's Stock Deferral
5
<PAGE> 6
Accounts have been completely distributed, the balance in the Stock Deferral
Accounts shall continue to be credited with the dividend equivalents on such
balances as provided in Section 5(b).
(e) If the Participant elects to satisfy tax withholding under
paragraph (c) with Shares, then such withholding shall be from those Shares
otherwise issuable pursuant to paragraph (c) above, and shall be such number of
Shares that will provide for the federal, state and/or local income tax at the
rates then applicable for supplemental wages, unless otherwise requested by the
Participant, but in no event less than the statutory minimums for tax
withholding.
(f) For purposes under paragraph (e) of determining the number of
Shares that are to be withheld to provide for the tax withholding, Shares shall
be valued at the closing price on the New York Stock Exchange of a Share on the
date the Shares are distributable (or if the Shares were not traded on that
date, on the next preceding day on which the Shares were so traded). If the
determination of the tax withholding would require the withholding of a
fractional Share, the Participant shall remit cash to the Company in lieu of
such fractional Share.
(g) In the event a Participant dies prior to receiving payment of the
entire amount in that Participant's Cash Deferral Accounts and/or Stock Deferral
Accounts, as the case may be, the unpaid balance shall be paid to such
beneficiary as the Participant may have designated in writing to the Vice
President, Human Resources, of the Company as the beneficiary to receive any
such post-death distribution under the Plan or, in the absence of such written
designation, to the Participant's legal representative or to the beneficiary
designated in the Participant's last will as the one to receive such
distributions. Distributions subsequent to the death of a Participant may be
made either in a lump sum or in periodic installments in such amounts and over
such period, not exceeding ten years from the date of death, as the Committee
may direct and the amount of each installment shall be computed as provided in
Section 6(b), and (d) as the case may be.
(h) Payments from the Cash Deferral Accounts shall be made in cash and
payments from the Stock Deferral Accounts shall be made in Shares. The amount of
any distribution pursuant to Sections 6 through 9 shall reduce the balance held
in the Participant's corresponding Deferral Accounts as of the date of such
distribution. Installment payments shall be made pro-rata from a Participant's
Deferral Accounts.
7. IN-SERVICE DISTRIBUTIONS. Pursuant to Section 3 and other than for deferrals
pursuant to Section 3(e), a Participant may elect to receive an in-service
distribution of all or any specified percentage of the Participant's deferral
for any calendar year commencing not earlier than the first year following the
year that such compensation would have been payable. In-service distributions
shall be made in a lump sum payment. A Participant may elect once for any
calendar year of deferral for which the Participant has elected an in-service
distribution, to change the date of distribution to another in-service year or
upon termination;
6
<PAGE> 7
provided, however, that any such modification must be made in writing at least
twelve (12) months prior to the date originally elected for the in-service
distribution. Notwithstanding the foregoing, any distribution hereunder shall be
subject to further deferral pursuant to an election under Section 3(e).
8. SPECIAL DISTRIBUTIONS. Notwithstanding any other provision of this Plan, a
Participant may elect to receive distribution of part or all of the total of
Participant's eligible Deferral Accounts, other than from deferrals pursuant to
Section 3(e), in one or more distributions if (and only if) the amount of the
distribution is reduced by ten (10) percent. The ten (10) percent reduction
shall be forfeited. Distributions shall be made pro-rata among Participant's
eligible Deferral Accounts. Any distribution made pursuant to such an election
shall be made within sixty (60) days of the date such election is submitted to
Vice President - Human Resources. Notwithstanding the foregoing, any
distribution hereunder shall be limited to an amount that would not be subject
to further deferral pursuant to an election under Section 3(e).
9. HARDSHIP DISTRIBUTIONS. The Committee may accelerate the distribution of part
or all, in any or all, of a Participant's Deferral Accounts for reasons of
severe financial hardship. For purposes of the Plan, severe financial hardship
shall be deemed to exist in the event the Committee determines that a
Participant needs a distribution to meet immediate and heavy financial needs
resulting from a sudden or unexpected illness or accident of the Participant or
a member of the Participant's family, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstance arising
as a result of events beyond the control of the Participant. A distribution
based on financial hardship shall not exceed the amount required to meet the
immediate financial need created by the hardship.
10. NON-ASSIGNABILITY. None of the rights or interests in any of the
Participant's Deferral Accounts shall, at any time prior to actual payment or
distribution pursuant to the Plan, be assignable or transferable in whole or in
part, either voluntarily or by operation of law or otherwise, and such rights
and interest shall not be subject to payment of debts by execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner; provided
that, upon the occurrence of any such assignment or transfer or the attempted
assignment or transfer, all payments hereunder shall be payable in the sole and
unrestricted judgment and discretion of the Committee, as to time and amount
(including a lump sum amount), and shall be distributable to the person who
would have received the payment but for this Section 10 only at such time or
times and in such amounts as the Committee, from time to time, and in its sole
and unrestricted judgment and discretion, shall determine. Should an event
covered by this Section 10 occur prior to the death of a Participant, the
balance, if any, in the Participant's accounts shall, after such death, be
thereafter distributed as provided in Section 6 subject to the provisions of
this Section 10.
11. INTEREST OF PARTICIPANT. The Company shall be under no obligation to
segregate or reserve any funds or other assets for purposes relating to the Plan
and, except as set forth in this Plan, no Participant shall have any rights
7
<PAGE> 8
whatsoever in or with respect to any funds or other assets held by the Company
for purposes of the Plan or otherwise. Each Participant's accounts maintained
for purposes of the Plan merely constitute bookkeeping entries on records of the
Company, constitute the unsecured promise and obligation of the Company to make
payments as provided herein, and shall not constitute any allocation whatsoever
of any cash, shares or other assets of the Company or be deemed to create any
trust or special deposit with respect to any of the Company's assets.
Notwithstanding the foregoing provisions, nothing in this Plan shall preclude
the Company from setting aside Shares or funds in trust pursuant to one or more
trust agreements between a trustee and the Company. However, no Participant
shall have any secured interest or claim in any assets or property of the
Company or any such trust and all Shares or funds contained in such trust shall
remain subject to the claims of the Company's general creditors.
12. AMENDMENT. The Board of Directors of the Company, or the Organization and
Compensation Committee may, from time to time, amend or terminate the Plan,
provided that no such amendment or termination of the Plan shall adversely
affect a Participant's accounts as they existed immediately before such
amendment or termination or the manner of distribution thereof, unless such
Participant shall have consented thereto in writing. Notice of any amendment or
termination of the Plan shall be given promptly to all Participants.
13. PLAN IMPLEMENTATION. This Plan is adopted and effective on the 25th day of
July, 1994, as amended on June 17, 1995, as further amended September 25, 1995,
effective as of January 1, 1995, further amended on September 22, 1997 and
further amended on September 27, 1999, effective as of January 1, 2000;
provided, however that any deferrals made hereunder into a Stock Deferral
Account prior to January 1, 2000, shall be governed by the provisions of the
Plan in effect prior to January 1, 2000, further amended on February 28, 2000,
effective as of January 1, 2000 and March 11, 2000.
8
<PAGE> 1
Exhibit (10)(l)
THE LUBRIZOL CORPORATION
EXECUTIVE COUNCIL
DEFERRED COMPENSATION PLAN
As Amended
1. PURPOSE. The purpose of this Executive Council Deferred Compensation Plan
(the "Plan") is to permit a member of the Executive Council (sometimes
hereinafter referred to as the "Member" or as the "Participant") who is employed
by The Lubrizol Corporation (the "Company"), to defer a portion of such Member's
compensation as provided in this Plan.
2. ADMINISTRATION. The Plan shall be administered by the Organization and
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee's interpretation and construction of all provisions
of the Plan shall be binding and conclusive upon all Participants and their
heirs and/or successors.
3. RIGHT TO DEFER COMPENSATION.
(a) A Member may, at any time prior to January 1 of a given calendar
year, elect, for one or more future successive calendar years commencing with
the calendar year immediately following the election (each a "Participation
Year"), to defer under the Plan a pre-selected fixed dollar amount or percentage
of such Member's variable compensation, if any (the "deferred compensation"),
under The Lubrizol Corporation Performance Pay Plan ("Performance Pay Plan"),
which such Participant may thereafter be entitled to receive for services
performed during each elected Participation Year.
(b) The election under this Section 3 shall take effect on the first
day of the first elected Participation Year and such election shall be
irrevocable for any elected Participation Year once such Participation Year
shall have commenced.
(c) Notwithstanding paragraphs (a) and (b), when an individual Member
first becomes eligible to participate in the Plan, the newly eligible Member may
make the election under this Section 3 to defer the specified compensation for
services to be performed subsequent to the date specified in the election and
for the remainder of the calendar year in which the election under this Section
3 is made, provided that such election is made within 30 days after the date
that the Member is notified of the Member's eligibility.
(d) All elections under this Plan shall be made by written notice (on a
form provided by the Company) specifying (i) the number of calendar years, one
or more, during which the election shall apply, and (ii) the deferred
compensation, if any, determined under paragraph (a).
(e) A Participant may designate that the election under this Section 3
shall remain in effect until the Participant, on a prospective basis, withdraws
the election or changes the amount to be deferred. Any notice of the withdrawal
or change in the amount of the election shall be effective on the first day of
the calendar year next following the year on which such notice is given;
provided that, such notice shall not change, alter or terminate the deferral of
the Member's participation in the Performance
1
<PAGE> 2
Pay Plan for the year in which such notice of withdrawal or change is given
which, except for the deferral, would be payable in the calendar year next
following the year in which such notice of withdrawal or change is given.
Notwithstanding paragraph (b) and the first sentence of this paragraph (e), any
variable compensation earned after the end of the first month in which a
Participant under this Plan ceases to be a Member, as defined in Section 1, but
continues to be employed by the Company, shall not be deferred, provided
however, the balance in the Participant's Stock Deferral Accounts shall continue
to be held and administered pursuant to the Plan.
(f) All notices by a Participant under the Plan shall be in writing and
shall be given to the Company's Vice President, Human Resources.
4. STOCK DEFERRAL ACCOUNTS.
(a) At the close of business of the day on which the Performance Pay
Plan deferred compensation would have been payable to the Participant in the
absence of the election under the Plan to defer payment thereof, there shall be
credited to a separate Stock Deferral Account for each Participant full and
fractional stock equivalent units ("Units") which shall be established as
hereinafter provided and shall be maintained for each Participant on the
Company's records.
(b) The number of full and fractional Units that shall be credited to a
separate Stock Deferral Account for a Participant shall be equal to an amount
determined by:
(i) Dividing the Participant's deferred compensation for
the applicable Participation Year by the average of
the closing price for Lubrizol Common Shares
("Shares") on the New York Stock Exchange ("NYSE")
composite transactions reporting system ("composite
tape") for each of the ten (10) consecutive trading
days commencing on the fourth business day following
the release of earnings for such Participation Year;
and
(ii) multiplying the quotient determined in subparagraph
(i) by 1.25.
(c) To the extent that, at the time Units are credited to a Stock
Deferral Account of a Participant, any federal, state or local payroll
withholding tax applies (e.g., Medicare withholding tax), the Participant shall
be responsible for the payment of such amount to the Company and the Company
shall promptly remit such amount to the proper taxing authority.
(d) The amount of deferred compensation used in the formula set forth
in paragraph (b) shall not constitute a sum due and owing to Participant. Such
amount shall be used solely as part of the formula to determine the number of
full and fractional Units.
(e) As of each dividend payment date established by the Company for the
payment of cash dividends with respect to its Shares, the Company shall credit
each separate Stock Deferral Account of a Participant with an additional number
of whole and/or fractional Units equal to:
2
<PAGE> 3
(i) the product of (x) the dividend per Share which is
payable with respect to such dividend payment date,
multiplied by (y) the number of whole and fractional
Units credited to the separate Stock Deferral Account
of the Participant as of such payment date;
divided by
----------
(ii) the closing price of a Share on the dividend payment
date (or if Shares were not traded on that date, on
the next preceding day on which Shares were so
traded), as reported on the NYSE- composite tape.
(f) At no time prior to actual delivery of Shares pursuant to the Plan
shall the Company be obligated to purchase or reserve Shares for delivery to any
Participant and a Participant shall not be a shareholder or have any of the
rights of a shareholder with respect to the Units credited to each separate
Stock Deferral Account of a Participant.
5. PAYMENT OF DEFERRED COMPENSATION.
(a) All Units credited to a separate Stock Deferral Account of
Participant, including dividend equivalents thereon, shall be payable to the
Participant at the end of three years from the first date Units were credited to
such separate Stock Deferral Account of the Participant under Section 4(a);
provided, however, that a Participant may elect once for any calendar year of
deferral, to change the date of distribution to another in-service year or upon
retirement; provided further, that any such modification must be made in writing
at least twelve (12) months prior to the original date of distribution; provided
further, that if a Participant's employment is terminated for any reason other
than retirement or death, the Units credited to each separate Stock Deferral
Account of a Participant as of the Participant's termination of employment date,
including all dividend equivalents thereon, shall be payable to the Participant
within 30 days of such termination of employment.
(b) All distributions or payments of Units to a Participant shall be
made in Shares equal to the number of whole Units credited to the separate Stock
Deferral Account(s) of the Participant which become payable in accordance with
Section 5(a). Any fractional number of Units shall be paid in cash in lieu of
Shares.
(c) To the extent that, at the time Shares are distributed to a
Participant, any federal, state or local payroll withholding tax applies, the
Participant shall be responsible for the payment of such amount to the Company
and the Company shall promptly remit such amount to the proper taxing authority.
Such payment may be made in cash, in Shares, or in any combination of cash and
Shares, at the election of the Participant. All elections must be made in
writing and be submitted to the Vice President - Human Resources. If the
Participant elects to satisfy tax withholding with Shares, then such withholding
shall be from those Shares otherwise issuable pursuant to paragraph (b) above,
and shall be such number of Shares that will provide for the federal, state
and/or local income tax at the rates then applicable for supplemental wages,
unless otherwise requested by the Participant, but in no event less than the
statutory minimums for tax withholding. If no election is made prior to the
first distribution of Shares, the Company
3
<PAGE> 4
shall withhold a sufficient number of Shares to pay the withholding taxes at the
highest marginal tax rate in effect for such Participant. In no event shall the
withholding be less than the statutory minimum for tax withholding.
(d) In the event a Participant dies prior to receiving payment of the
entire amount in each separate Stock Deferral Account of the Participant, the
unpaid balance shall be paid to such beneficiary as the Participant may have
designated in writing to the Vice President, Human Resources, of the Company as
the beneficiary to receive any such post-death distribution under the Plan or,
in the absence of such written designation, to the Participant's legal
representative or to the beneficiary designated in the Participant's last will
as the one to receive such distributions. Distributions subsequent to the death
of a Participant may be made either in accordance with Section 5(a) and (b) or
earlier, as determined by the Committee.
(e) To the extent the Committee deems necessary, the Shares distributed
to a Participant pursuant to Section 5(a) and (b) or 6(a) or to a successor
pursuant to Section 5(d) may contain such restrictions on the right of immediate
transfer as the Committee may reasonably determine.
6. ACCELERATION OF PAYMENTS.
(a) The Committee may accelerate the distribution of part or all of one
or more of a Participant's separate Stock Deferral Accounts for reasons of
severe financial hardship. For purposes of the Plan, severe financial hardship
shall be deemed to exist in the event the Committee determines that a
Participant needs a distribution to meet immediate and heavy financial needs
resulting from a sudden or unexpected illness or accident of the Participant or
a member of the Participant's family, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstance arising
as a result of events beyond the control of the Participant. A distribution
based on financial hardship shall not exceed the amount required to meet the
immediate financial need created by the hardship.
7. NON-ASSIGNABILITY. None of the rights or interests in any of the
Participant's separate Stock Deferral Accounts shall, at any time prior to
actual payment or distribution pursuant to the Plan, be assignable or
transferable in whole or in part, either voluntarily or by operation of law or
otherwise, and such rights and interest shall not be subject to payment of debts
by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other
manner; provided that, upon the occurrence of any such assignment or transfer or
the attempted assignment or transfer, all payments under Section 5 shall be
payable in the sole and unrestricted judgment and discretion of the Committee,
as to time and amount, and shall be distributable to the person who would have
received the payment but for this Section 7 only at such time or times and in
such amounts as the Committee, from time to time, and in its sole and
unrestricted judgment and discretion, shall determine. Should an event covered
by this Section 7 occur prior to the death of a Participant, the balance, if
any, in each of the Participant's Stock Deferral Accounts shall, after such
death, be thereafter distributed as provided in Section 5(d) subject to the
provisions of this Section 7.
8. INTEREST OF PARTICIPANT. The Company shall be under no obligation to
segregate or reserve any funds or other assets for purposes relating to the Plan
and, except as set
4
<PAGE> 5
forth in this Plan, no Participant shall have any rights whatsoever in or with
respect to any funds or other assets held by the Company for purposes of the
Plan or otherwise. Each Participant's separate Stock Deferral Accounts
maintained for purposes of the Plan merely constitutes a bookkeeping entry on
records of the Company, constitutes the unsecured promise and obligation of the
Company to make payments as provided herein, and shall not constitute any
allocation whatsoever of any cash or other assets of the Company or be deemed to
create any trust or special deposit with respect to any of the Company's assets.
Notwithstanding the foregoing provisions, nothing in this Plan shall preclude
the Company from setting aside Shares or funds in trust pursuant to one or more
trust agreements between a trustee and the Company. However, no Participant
shall have any secured interest or claim in any assets or property of the
Company or any such trust and all Shares or funds contained in such trust shall
remain subject to the claims of the Company's general creditors.
9. MISCELLANEOUS. In the event of any change in the number of outstanding Shares
by reason of any stock dividend, stock split up, recapitalization, merger,
consolidation, exchange of shares or other similar corporate change, the number
of Units credited to each separate Stock Deferral Account of a Participant shall
be appropriately adjusted to take into account any such event.
10. AMENDMENT. The Board of Directors of the Company, or the Organization and
Compensation Committee, may, from time to time, amend or terminate the Plan,
provided that no such amendment or termination of the Plan shall adversely
affect any Stock Deferral Account of a Participant as it existed immediately
before such amendment or termination or the manner of distribution thereof,
unless such Participant shall have consented thereto in writing. Notice of any
amendment or termination of the Plan shall be given promptly to all
Participants.
11. PLAN IMPLEMENTATION. This Plan is adopted and effective as of the 1st day of
January, 1997, and amended effective November 23, 1998, and amended effective
September 27, 1999, amended effective February 29, 2000 and March 11, 2000.
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000060751
<NAME> THE LUBRIZOL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 126,571
<SECURITIES> 0
<RECEIVABLES> 299,191
<ALLOWANCES> 4,140
<INVENTORY> 270,323
<CURRENT-ASSETS> 750,328
<PP&E> 1,595,465
<DEPRECIATION> 935,387
<TOTAL-ASSETS> 1,672,780
<CURRENT-LIABILITIES> 300,969
<BONDS> 364,772
0
0
<COMMON> 79,221
<OTHER-SE> 715,207
<TOTAL-LIABILITY-AND-EQUITY> 1,672,780
<SALES> 435,034
<TOTAL-REVENUES> 436,161
<CGS> 307,708
<TOTAL-COSTS> 307,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (10)
<INTEREST-EXPENSE> 7,229
<INCOME-PRETAX> 43,885
<INCOME-TAX> 13,780
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,105
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.55
</TABLE>
