10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

o 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 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer: þ	Accelerated filer: o	Non-accelerated filer: o	Smaller reporting company: o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of the registrant’s common shares, without par value, outstanding as of April 30, 2009: 67,440,904.

THE LUBRIZOL CORPORATION
Quarterly Report on Form 10-Q
Three Months Ended March 31, 2009

Table of Contents

		Page Number
PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited):
	Consolidated Statements of Income	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Cash Flows	3
	Notes to Consolidated Financial Statements	4
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	35
PART II. OTHER INFORMATION
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6	Exhibits	37
	Signatures	38
EX-3.1
EX-3.2
EX-31.1
EX-31.2
EX-32.1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE LUBRIZOL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended
	March 31,
(In Millions of Dollars Except Per Share Data)	2009			2008
Revenues	$	1,012.4		$	1,227.3
Cost of sales		738.5			934.5
Gross profit		273.9			292.8
Selling and administrative expenses		93.8			108.6
Research, testing and development expenses		49.0			54.1
Amortization of intangible assets		6.3			7.0
Restructuring and impairment charges		11.4			4.8
Other income-net		(5.2	)		(4.9	)
Interest income		(2.7	)		(4.2	)
Interest expense		29.4			17.9
Income before income taxes		91.9			109.5
Provision for income taxes		26.7			33.5
Net income		65.2			76.0
Net income attributable to noncontrolling interests		1.0			2.4
Net income attributable to The Lubrizol Corporation	$	64.2		$	73.6
Net income per share attributable to The Lubrizol Corporation, basic	$	0.95		$	1.07
Net income per share attributable to The Lubrizol Corporation, diluted	$	0.95		$	1.06
Dividends paid per share	$	0.31		$	0.30

Amounts shown are unaudited.

The accompanying notes are an integral part of these consolidated financial statements.

1

THE LUBRIZOL CORPORATION

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(In Millions of Dollars Except Share Data)	2009			2008
ASSETS
Cash and cash equivalents	$	623.7		$	186.2
Investments		3.7			9.8
Receivables		600.8			608.5
Inventories		642.5			814.6
Other current assets		92.5			80.8
Total current assets		1,963.2			1,699.9
Property and equipment – at cost		2,860.0			2,878.0
Less accumulated depreciation		1,671.8			1,680.4
Property and equipment – net		1,188.2			1,197.6
Goodwill		773.2			782.1
Intangible assets – net		347.9			361.0
Investments in non-consolidated companies		9.0			7.3
Other assets		107.6			102.6
TOTAL	$	4,389.1		$	4,150.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt and current portion of long-term debt	$	212.8		$	391.2
Accounts payable		209.8			350.4
Accrued expenses and other current liabilities		273.1			279.7
Total current liabilities		695.7			1,021.3
Long-term debt		1,491.0			954.6
Pension obligations		335.8			340.1
Other postretirement benefit obligations		84.0			83.1
Noncurrent liabilities		124.9			129.1
Deferred income taxes		36.4			37.7
Total liabilities		2,767.8			2,565.9
Contingencies and commitments
Preferred stock without par value – unissued		–			–
Common shares without par value:
Authorized – 120,000,000 shares
Outstanding – 67,396,719 shares at March 31, 2009 after deducting 18,799,175 treasury shares; 67,257,963 shares at December 31, 2008 after deducting 18,937,931 treasury shares		765.4			764.7
Retained earnings		970.5			906.3
Accumulated other comprehensive loss		(175.6	)		(147.3	)
Total of The Lubrizol Corporation shareholders’ equity		1,560.3			1,523.7
Noncontrolling interests		61.0			60.9
Total shareholders’ equity		1,621.3			1,584.6
TOTAL	$	4,389.1		$	4,150.5

Amounts shown are unaudited.

The accompanying notes are an integral part of these consolidated financial statements.

2

THE LUBRIZOL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31,
(In Millions of Dollars)	2009			2008
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income	$	65.2		$	76.0
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		41.3			41.4
Deferred income taxes		(9.3	)		0.1
Deferred compensation		2.5			2.5
Restructuring and impairment charges		–			4.0
Loss (gain) from investments and sales of property and equipment		0.1			(0.1	)
Change in current assets and liabilities, net of acquisitions:
Receivables		1.3			(66.9	)
Inventories		156.3			(38.0	)
Accounts payable, accrued expenses and other current liabilities		(93.4	)		26.8
Other current assets		(2.3	)		(8.0	)
		61.9			(86.1	)
Other items-net		3.9			5.3
Total operating activities		165.6			43.1
INVESTING ACTIVITIES
Capital expenditures		(44.3	)		(51.5	)
Acquisitions		(2.6	)		0.9
Proceeds from investments		3.3			–
Net proceeds from sales of property and equipment		–			0.3
Other items-net		–			(0.1	)
Total investing activities		(43.6	)		(50.4	)
FINANCING ACTIVITIES
Changes in short-term debt-net		(0.2	)		0.2
Repayments of long-term debt		(285.7	)		–
Proceeds from the issuance of long-term debt		646.3			–
Payment of Treasury rate lock upon settlement		(16.7	)		–
Payment of debt issuance costs		(4.8	)		–
Dividends paid		(20.8	)		(20.5	)
Common shares purchased		–			(25.0	)
Proceeds from the exercise of stock options		0.8			2.1
Excess tax benefit from the exercise of stock options and awards		0.1			1.7
Total financing activities		319.0			(41.5	)
Effect of exchange rate changes on cash		(3.5	)		5.7
Net increase (decrease) in cash and cash equivalents		437.5			(43.1	)
Cash and cash equivalents at the beginning of period		186.2			502.3
Cash and cash equivalents at the end of period	$	623.7		$	459.2

Amounts shown are unaudited.

The accompanying notes are an integral part of these consolidated financial statements.

3

THE LUBRIZOL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2009 and 2008

(In Millions, Except Share and Per Share Data)

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for a complete set of financial statements.

2. Significant Accounting Policies

Net Income per Share Attributable to The Lubrizol Corporation

Net income per share attributable to The Lubrizol Corporation is computed by dividing net income attributable to The Lubrizol Corporation by the weighted-average common shares of The Lubrizol Corporation outstanding during the period, including contingently issuable shares. Net income per diluted share attributable to The Lubrizol Corporation includes the dilutive impact resulting from outstanding stock options and awards. Per share amounts are computed as follows:

	Three Months Ended
	March 31,
	2009		2008
Numerator:
Net income attributable to The Lubrizol Corporation	$	64.2	$	73.6
Denominator (in millions of shares):
Weighted-average common shares outstanding		67.7		68.6
Dilutive effect of stock options and awards		0.3		0.7
Denominator for net income per share, diluted		68.0		69.3
Net income per share attributable to The Lubrizol Corporation, basic	$	0.95	$	1.07
Net income per share attributable to The Lubrizol Corporation, diluted	$	0.95	$	1.06

Options to purchase 1.9 million shares were excluded from the diluted earnings per share calculations because they were antidilutive for the three months ended March 31, 2009. There were an insignificant number of options excluded from the diluted earnings per share calculations because they were antidilutive for the three months ended March 31, 2008.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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New Accounting Standards

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1 and APB 28-1 increases the frequency of fair value disclosures for financial instruments that are not currently reflected on a company’s balance sheet at fair value. FSP FAS 107-1 and APB 28-1 requires disclosure of the fair values of assets and liabilities not measured on the balance sheet at fair value on a quarterly basis, in addition to qualitative and quantitative information about fair value estimates for those financial instruments. This FSP is effective for interim and annual periods ending after June 15, 2009, with early application permitted. As FSP FAS 107-1 and APB 28-1 only requires enhanced disclosures, the company does not expect that the adoption of this standard will have a material effect on its financial statements.

In December 2008, the FASB issued FSP FAS 132R-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets.” FSP FAS 132R-1 amends SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132R-1 requires additional disclosure surrounding the benefit plan investment allocation decision-making process, the fair value of each major category of plan assets, the valuation techniques used to measure the fair value of plan assets and any significant concentrations of risk within plan assets. This FSP is effective for annual periods ending after December 15, 2009, with early application permitted. As FSP FAS 132R-1 only requires enhanced disclosures, the company does not expect that the adoption of this standard will have a material effect on its financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133.” This statement amends the disclosure requirements for derivative instruments and hedging activities in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The company adopted this standard on January 1, 2009. Refer to Note 7 for further discussion.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Financial Statements - an amendment of ARB No. 51.” This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement requires consolidated net income attributable to both the parent and the noncontrolling interest to be reported and disclosed in the consolidated financial statements. This statement also requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the noncontrolling owners of a subsidiary. The company adopted this standard on January 1, 2009 and retrospectively applied the presentation and disclosure requirements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” This statement replaces SFAS No. 141, “Business Combinations,” and requires an acquirer to recognize the assets acquired, the liabilities assumed and any noncontrolling interests in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. SFAS No. 141R requires that costs incurred to effect the acquisition be recognized separately from the acquisition as period costs. SFAS No. 141R also requires the recognition of restructuring costs that the acquirer expects to incur, but is not obligated to incur, separately from the business combination. Other key provisions of this statement include the requirement to recognize the acquisition-date fair values of research and development assets separately from goodwill and the requirement to recognize changes in the amount of deferred tax benefits that are recognizable due to the business combination in either income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. At March 31, 2009, the company had amounts recorded in its financial statements for unrecognized tax benefits and deferred tax valuation allowances related to past acquisitions that will affect the income tax provision in the period of reversal under SFAS No. 141R. With the exception of certain tax-related aspects described above, this statement applies prospectively to business combinations for which the acquisition date is on

5

or after fiscal years beginning after December 15, 2008. The adoption of this standard on January 1, 2009 did not have a material effect on the company’s financial statements.

3. Acquisitions

On December 31, 2008, the company completed the acquisition of the thermoplastic polyurethane business from The Dow Chemical Company (Dow) for approximately $61.5 million in cash, including transaction costs. The acquisition included technology, trade names, customer lists and manufacturing know-how. As part of the transaction, the company also acquired a manufacturing facility in La Porte, Texas, which included equipment and inventory. The preliminary purchase price allocation for this acquisition included goodwill of $3.5 million and intangible assets of $17.6 million, which included $1.6 million of in-process research and development.

On October 10, 2008, the company completed the acquisition of the thermoplastic polyurethane business from SK Chemicals Co., Ltd. for approximately $5.0 million in cash, which will be paid in 2009 and 2010. The acquisition included equipment, technology, customer lists and manufacturing know-how. The purchase price allocation for this acquisition included goodwill of $0.3 million and intangible assets of $0.6 million.

The pro forma impacts of acquisitions in 2008 were immaterial to the company’s consolidated financial statements.

4. Inventories

The company’s inventories were comprised of the following:

	March 31,		December 31,
	2009		2008
Finished products	$	378.9	$	468.8
Products in process		106.9		137.8
Raw materials		121.3		172.8
Supplies and engine test parts		35.4		35.2
Total inventory	$	642.5	$	814.6

During the three months ended March 31, 2009, a reduction in inventory quantities resulted in a liquidation of LIFO inventory quantities carried at higher costs and increased cost of sales by $7.1 million.

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5. Goodwill and Intangible Assets

Goodwill is tested for impairment at the reporting unit level as of October 1 of each year or if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The company has determined that the Lubrizol Additives operating segment constitutes a reporting unit, and that the Noveon^® consumer specialties product line, Estane^® engineered polymers business (Estane), TempRite^® engineered polymers business (TempRite) and performance coatings product line within the Lubrizol Advanced Materials operating segment constitute separate reporting units. The carrying amount of goodwill by reportable segment at March 31, 2009 was as follows:

			Lubrizol
			Advanced			Lubrizol
			Materials			Additives			Total
Balance, December 31, 2008			$	599.0		$	183.1		$	782.1
Goodwill acquired and purchase adjustments				0.8			–			0.8
Translation adjustments				(9.0	)		(0.7	)		(9.7	)
Balance, March 31, 2009			$	590.8		$	182.4		$	773.2
The major components of the company’s identifiable intangible assets are customer lists, technology, trademarks, patents, land-use rights, favorable lease arrangements and non-compete agreements. Finite-lived intangible assets are amortized over their useful lives, which range between 3 and 50 years. The company’s indefinite-lived intangible assets include certain trademarks that are tested for impairment each year as of October 1 or more frequently if impairment indicators arise. Indefinite-lived trademarks are assessed for impairment separately from goodwill.
The following table shows the components of identifiable intangible assets:
	March 31, 2009					December 31, 2008
	Gross					Gross
	Carrying		Accumulated			Carrying			Accumulated
	Amount		Amortization			Amount			Amortization
Amortized intangible assets:
Customer lists	$	185.8	$	46.8		$	189.2		$	44.1
Technology		148.3		56.1			160.3			66.9
Trademarks		29.8		8.6			30.3			8.3
Patents		10.0		4.7			10.2			4.6
Land-use rights and favorable lease arrangements		11.4		2.0			14.6			1.9
Non-compete agreements		0.8		0.2			1.0			0.3
Total amortized intangible assets		386.1		118.4			405.6			126.1
Non-amortized trademarks		80.2		–			81.5			–
Total	$	466.3	$	118.4		$	487.1		$	126.1

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6. Debt

The company’s debt was comprised of the following:

	March 31,		December 31,
	2009		2008
Short-term debt and current portion of long-term debt:
Current portion of long-term debt	$	208.1	$	386.3
Other short-term debt		4.7		4.9
	$	212.8	$	391.2
Long-term debt:
4.625% notes, due 2009, net of original issue discount of $0.1 million at December 31, 2008, and fair value adjustments of $2.9 million and $4.3 million for unrealized gains on derivative instruments at March 31, 2009 and December 31, 2008, respectively	$	207.8	$	386.0
5.5% notes, due 2014, net of original issue discount of $1.8 million and $1.9 million at March 31, 2009 and December 31, 2008, respectively		448.2		448.1
8.875% notes, due 2019, net of original issue discount of $3.7 million at March 31, 2009		496.3		–
7.25% debentures, due 2025		100.0		100.0
6.5% debentures, due 2034, net of original issue discount of $4.7 million at March 31, 2009 and December 31, 2008		295.3		295.3
Debt supported by long-term banking arrangements:
Term loan, at LIBOR plus 2.75% (3.98% at March 31, 2009)		150.0		–
U.S. revolving credit borrowing, at prime (3.25% at December 31, 2008)		–		75.0
Euro revolving credit borrowing, at EURIBOR plus .325% (3.036% at December 31, 2008)		–		34.9
Other		1.5		1.6
		1,699.1		1,340.9
Less: current portion of long-term debt		208.1		386.3
Total long-term debt	$	1,491.0	$	954.6

In March 2009, the company repurchased $177.0 million of its 4.625% notes due October 1, 2009 at a purchase price of 100.5% per note, resulting in a loss on retirement of $1.3 million. The company also accelerated amortization of $0.6 million in debt issuance costs, Treasury rate lock agreements and original issue discounts associated with the repurchased notes. The loss on retirement and accelerated amortization costs resulting from the repurchase of the 4.625% notes were included in interest expense within the accompanying consolidated statements of income. The remaining balance outstanding on the 4.625% notes was $204.9 million at March 31, 2009.

In February 2009, the company entered into a $150.0 million term loan. The term loan is an unsecured, senior obligation of the company that matures on February 2, 2012 and bears interest based upon LIBOR plus a specified credit spread. Beginning in April 2010, the company is required to make quarterly principal payments. The total annual principal payments are $28.1 million in 2010, $54.4 million in 2011 and $67.5 million in 2012. The term loan is prepayable without penalty. The company used a portion of the proceeds from this loan to repay in full the $75.0 million of indebtedness outstanding under its U.S. revolving credit facility at December 31, 2008. The company intends to use the remaining proceeds for general corporate purposes.

In January 2009, the company issued senior unsecured notes having an aggregate principal amount of $500.0 million at a price of 99.256%. The notes mature on February 1, 2019 and bear interest at 8.875% per annum, payable semi-annually on February 1 and August 1 of each year. Including debt issuance costs, original issue discounts and losses on Treasury rate lock agreements, the 2019 notes have an effective annualized interest rate

8

of approximately 9.2%. The notes include a step-up in interest payable following certain ratings downgrades by credit rating agencies. Upon the occurrence of a change of control triggering event, as defined in the indenture, the company would be required to make an offer to repurchase the notes at 101% of their principal amount. The company used a portion of the net proceeds from these notes to repurchase $177.0 million of its 4.625% notes and intends to repay in full at maturity the $204.9 million remaining aggregate principal amount of these notes due October 1, 2009. The company intends to use the remaining net proceeds for general corporate purposes.

The company’s U.S. and euro bank credit agreements contain customary affirmative covenants including, among others, compliance with laws, payment of taxes, maintenance of insurance, conduct of business, keeping of books and records, maintenance of properties and ensuring the credit facilities receive the same rights and privileges as any future senior unsecured debt. The agreements also contain customary negative covenants including, among others, restrictions on: liens and encumbrances, sale of assets and affiliate transactions. Additionally, the company is required to comply with financial ratios of debt to consolidated earnings before interest, income taxes, depreciation and amortization, extraordinary, unusual or non-recurring non-cash gains or losses, including the sale of property and equipment and goodwill impairments, and non-cash gains or losses from less than wholly owned subsidiaries and investments (Consolidated EBITDA), as defined in the credit agreements, and Consolidated EBITDA to interest expense.

In March 2009, the company amended the required debt to Consolidated EBITDA ratio within its bank credit agreements. Effective with the amendments, to the extent that the company has cash or cash equivalents in an amount sufficient for the payment of the outstanding 4.625% notes, the company may exclude these notes from the calculation of debt for all periods prior to October 1, 2009. At March 31, 2009, the credit agreements required that the ratio of debt to Consolidated EBITDA be less than 3.5:1 and the ratio of Consolidated EBITDA to interest expense must be greater than 3.5:1. At March 31, 2009, the company maintained a ratio of debt to Consolidated EBITDA of 2.4:1 and a ratio of Consolidated EBITDA to interest expense of 7.2:1.

The bank credit agreements also contain customary events of default including, among others, failure to make payment when due, materially incorrect representations and warranties, breach of covenants, events of bankruptcy, the occurrence of one or more unstayed judgments in excess of $25.0 million that is not covered by an acceptable policy of insurance, a party obtaining a beneficial ownership in excess of 20% of the company’s voting stock, or the incurrence of $25.0 million of liabilities related to violations of employee benefit plan regulations or the withdrawal or termination of a multiemployer benefit plan. At March 31, 2009, the company was in compliance with all of its covenants and has not committed any acts of default.

7. Derivative Instruments and Hedging Activities

In the normal course of business, the company uses derivative financial instruments, including interest rate swap agreements, Treasury rate lock agreements, commodity purchase contracts and foreign currency forward contracts, to manage its risks. The company’s objective in managing its exposure to changes in interest rates is to limit the impact of such changes on its earnings and cash flow. The company manages its interest rate risk using a mix of fixed-rate and variable-rate debt. To achieve this mix in a cost-efficient manner, the company may enter into interest rate swap agreements in which the company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. The company also is exposed to interest rate risk on forecasted debt issuances. To manage this risk, the company may use Treasury rate lock agreements to lock in the rate used to determine the interest payments related to all or a portion of the forecasted debt issuance. The company’s objective in managing its exposure to changes in commodity prices is to reduce the volatility on earnings of utility expense through the use of commodity purchase contracts. The company’s objective in managing its exposure to changes in foreign currency exchange rates is to reduce the volatility on its earnings and cash flow through the use of foreign currency forward contracts. The company does not hold derivatives for trading purposes.

Derivative financial instruments are recognized on the balance sheet as either assets or liabilities and are measured at fair value. Derivatives that are not designated as hedges are recorded at fair value through adjustments to current earnings. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged asset or liability attributable to

9

the hedged risk are recognized in current earnings. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gains or losses on the derivatives, along with any gains and losses upon termination of the derivatives, are reported as a component within accumulated other comprehensive gain or loss and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” the company designated its interest rate swap agreements as fair value hedges of fixed-rate borrowings, commodity purchase contracts as cash flow hedges of forecasted purchases of natural gas and electricity and Treasury rate lock agreements as cash flow hedges of the forecasted semi-annual interest payments associated with forecasted debt issuances. Foreign currency forward contracts are not designated as hedging instruments. The company’s derivative instruments do not contain any credit-risk-related contingent features. The following table shows the location and fair value of derivative instruments reported in the consolidated balance sheets at March 31, 2009 and December 31, 2008:

Asset Derivatives
		March 31,		December 31,
	Balance Sheet Location	2009		2008
Derivatives designated as hedging instruments:
Interest rate swap agreements	Other current assets	$	2.9	$	4.3
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Other current assets	$	1.0	$	2.1
Liability Derivatives
		March 31,		December 31,
	Balance Sheet Location	2009		2008
Derivatives designated as hedging instruments:
Treasury rate lock agreements	Accrued expenses and other current liabilities	$	–	$	20.0
Commodity purchase contracts	Accrued expenses and other current liabilities		6.9		5.5
Commodity purchase contracts	Noncurrent liabilities		1.7		1.5
		$	8.6	$	27.0
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accrued expenses and other current liabilities	$	0.1	$	0.3

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Fair Value Hedges

In November 2004, the company entered into four interest rate swap agreements, each with a notional amount of $50.0 million, that effectively converted the interest on $200.0 million of outstanding 4.625% notes due 2009 to a variable rate of six-month LIBOR plus 40 basis points. In June 2004, the company entered into two interest rate swap agreements, each with a notional amount of $100.0 million, that effectively converted the interest on $200.0 million of then outstanding 5.875% notes due 2008 to a variable rate of six-month LIBOR plus 111 basis points. These swaps are designated as fair value hedges of underlying fixed-rate debt obligations and are recorded as an adjustment to short-term debt and current portion of long-term debt and other current assets. The effective portions of gains and losses on interest rate swap agreements designated as fair value hedges and the offsetting losses or gains on the hedged liabilities recognized in current earnings for the three months ended March 31, 2009 and 2008 were as follows:

		Three Months Ended
	Location of Gain (Loss)	March 31,
Derivative	Recognized in Earnings	2009			2008
Interest rate swap agreements	Interest expense	$	(1.4	)	$	8.5
		Three Months Ended
	Location of Gain (Loss)	March 31,
Hedged Item	Recognized in Earnings	2009			2008
Long-term debt	Interest expense	$	1.4		$	(8.5	)

Cash Flow Hedges

The company uses commodity purchase contracts to manage its exposure to changes in prices for natural gas. At March 31, 2009 and December 31, 2008, the notional amounts of open contracts totaled $19.0 million and $20.9 million, respectively. Contract maturities are less than 24 months.

In November 2008, the company entered into several Treasury rate lock agreements with an aggregate notional principal amount of $200.0 million, all maturing on March 31, 2009, whereby the company had locked in Treasury rates relating to a portion of the then anticipated debt issuance in the first quarter of 2009. These Treasury rate lock agreements were designated as cash flow hedges of the forecasted semi-annual interest payments associated with the anticipated debt issuance. In January 2009, the company incurred a pre-tax loss of $16.7 million on the termination of these agreements in conjunction with the issuance of the 8.875% notes. The unamortized balance of the Treasury rate lock agreements recorded in accumulated other comprehensive loss, net of tax, was $10.6 million at March 31, 2009.

In June 2004, the company entered into several Treasury rate lock agreements with an aggregate notional principal amount of $900.0 million, all maturing on September 30, 2004, whereby the company had locked in Treasury rates relating to a portion of the then anticipated debt issuance. These Treasury rate lock agreements were designated as cash flow hedges of the forecasted semi-annual interest payments associated with the anticipated debt issuance. In September 2004, the company incurred a pre-tax loss on the termination of these agreements in an aggregate amount of $73.9 million. The unamortized balance of the Treasury rate lock agreements recorded in accumulated other comprehensive loss, net of tax, was $33.6 million and $34.7 million at March 31, 2009 and December 31, 2008, respectively.

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The effective portions of gains and (losses) on derivative instruments designated as cash flow hedges recognized in other comprehensive income, net of tax, for the three months ended March 31, 2009 and 2008 were as follows:

		Three Months Ended
		March 31,
Derivative		2009			2008
Commodity purchase contracts		$	(2.4	)	$	2.6
Treasury rate lock agreements			2.1			–
		$	(0.3	)	$	2.6
The effective portions of pre-tax losses on derivative instruments designated as cash flow hedges reclassified from accumulated other comprehensive loss (AOCL) into earnings for the three months ended March 31, 2009 and 2008 were as follows:
	Location of Loss	Three Months Ended
	Reclassified from	March 31,
Derivative	AOCL into Earnings	2009			2008
Commodity purchase contracts	Cost of sales	$	(2.0	)	$	(0.3	)
Treasury rate lock agreements	Interest expense		(1.8	)		(1.7	)
		$	(3.8	)	$	(2.0	)
The company estimates that it will reclassify into earnings during the next twelve months losses of approximately $5.1 million ($3.3 million net of tax) and $6.9 million ($4.5 million net of tax) from the amounts recorded in accumulated other comprehensive loss for Treasury rate lock agreements and commodity purchase contracts, respectively.
Derivative Instruments Not Designated as Hedges
The company selectively uses foreign currency forward contracts, in addition to working capital management, pricing and sourcing, to minimize the potential effect of currency changes on its earnings. The company’s principal currency exposures are the euro, the pound sterling, the Japanese yen, the Canadian dollar and the Brazilian real. The company does not designate these foreign currency forward contracts as hedges, as the objective for entering into these contracts is to minimize the amount of transaction gains or losses that are included in current earnings arising from exchange rate changes. The maximum amount of foreign currency forward contracts outstanding at any one time was $29.3 million during the three months ended March 31, 2009. At March 31, 2009 and December 31, 2008, the notional amounts of open short-term forward contracts to buy or sell currencies were $9.5 million and $25.0 million, respectively. The company recognized the gains on foreign currency forward contracts for the three months ended March 31, 2009 and 2008 as follows:
		Three Months Ended
	Location of Gain	March 31,
Derivative	Recognized in Earnings	2009			2008
Foreign currency forward contracts	Other income-net	$	0.2		$	0.2

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8. Fair Value Measurements

SFAS No. 157, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosure about fair value measurements. This statement defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 classifies the inputs used to measure fair value into three tiers: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The company estimates the fair value of financial instruments using available market information and generally accepted valuation methodologies. The following table shows the company’s financial assets and liabilities accounted for at fair value on a recurring basis at March 31, 2009:

			Fair Value Measurements at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other			Significant
			Markets for		Observable			Unobservable
	March 31,		Identical Assets		Inputs			Inputs
	2009		(Level 1)		(Level 2)			(Level 3)
Assets:
Money market mutual funds	$	498.9	$	492.5	$	6.4		$	–
Interest rate swaps		2.9		–		2.9			–
Foreign currency forward contracts		1.0		–		1.0			–
	$	502.8	$	492.5	$	10.3		$	–
Liabilities:
Deferred compensation plans	$	20.2	$	20.2	$	–		$	–
Forward commodity contracts		8.6		–		8.6			–
Foreign currency forward contracts		0.1		–		0.1			–
	$	28.9	$	20.2	$	8.7		$	–
9. Comprehensive Income
Total comprehensive income was comprised of the following:
					Three Months Ended
					March 31,
					2009			2008
Net income					$	65.2		$	76.0
Foreign currency translation adjustment						(34.2	)		76.1
Pension and other postretirement benefit plans						2.8			0.6
(Loss) gain on natural gas hedges, net						(1.1	)		2.8
Changes in treasury rate locks, net						3.3			1.1
Total comprehensive income					$	36.0		$	156.6
Comprehensive income attributable to noncontrolling interests						0.1			2.4
Comprehensive income attributable to The Lubrizol Corporation					$	35.9		$	154.2

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10. Shareholders’ Equity

The following table summarizes the changes in shareholders’ equity since January 1, 2009:

			Shareholders’ Equity
								Accumulated
	Number of							Other
	Shares		Common			Retained		Comprehensive			Noncontrolling
	Outstanding		Shares			Earnings		Loss			Interests			Total
Balance, January 1, 2009		67.3	$	764.7		$	906.3	$	(147.3	)	$	60.9		$	1,584.6
Comprehensive income:
Net income							64.2					1.0			65.2
Other comprehensive loss									(28.3	)		(0.9	)		(29.2	)
Total comprehensive income															36.0
Deferred stock compensation				0.7											0.7
Shares issued upon exercise of stock options and awards		0.1		0.8											0.8
Tax benefit (shortfall) from stock compensation				(0.8	)										(0.8	)
Balance, March 31, 2009		67.4	$	765.4		$	970.5	$	(175.6	)	$	61.0		$	1,621.3

On April 27, 2009, the company’s board of directors declared a regular quarterly dividend of $0.31 per common share payable June 10, 2009 to shareholders of record at the close of business on May 8, 2009.

11. Segment Reporting

The company is organized into two operating and reportable segments: Lubrizol Additives and Lubrizol Advanced Materials. Lubrizol Additives consists of two product lines: (i) engine additives and (ii) driveline and industrial additives. Engine additives is comprised of additives for lubricating engine oils, such as for gasoline, diesel, marine and stationary gas engines, and additives for fuels, refinery and oil field chemicals. Driveline and industrial additives is comprised of additives for driveline oils, such as automatic transmission fluids, gear oils and tractor lubricants and industrial additives, such as additives for hydraulic, grease and metalworking fluids, as well as compressor lubricants. Both product lines sell viscosity modifiers, in addition to outsourcing services for supply chain and knowledge center management. Lubrizol Additives products primarily are manufactured in company-owned facilities and are sold largely to a common customer base.

The Lubrizol Advanced Materials segment consists of three product lines: (i) engineered polymers, (ii) performance coatings and (iii) Noveon consumer specialties. The engineered polymers product line is characterized by products such as TempRite engineered polymers and Estane thermoplastic polyurethane. Engineered polymers products are sold to a diverse customer base comprised of major manufacturers in the construction, automotive, telecommunications, electronics and recreation industries. The performance coatings product line includes high-performance polymers and additives for specialty paper, graphic arts, paints, textiles and coatings applications that are sold to customers worldwide. The Noveon consumer specialties product line is characterized by production of acrylic thickeners, film formers, fixatives, emollients, silicones, specialty surfactants, methyl glucoside, lanolin derivatives and cassia hydrocolloids. The company markets products in the Noveon consumer specialties product line to customers worldwide, which include major manufacturers of cosmetics, personal care and household products.

The company primarily evaluates performance and allocates resources based on segment operating income, defined as revenues less expenses identifiable to the product lines included within each segment, as well as projected future performance. Segment operating income reconciles to consolidated income before income taxes by deducting corporate expenses and corporate other income that are not attributed to the operating segments, restructuring and impairment charges and net interest expense.

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In the fourth quarter of 2008, the company reorganized its reporting structure for the following two businesses:

• The AMPS^® specialty monomer business, with 2008 annual revenues of $35.3 million, which previously was reported as part of the Noveon consumer specialties product line, and

• The ADEX^TM explosives emulsifier business, with 2008 annual revenues of $45.0 million, which previously was reported as part of the engineered polymers product line.

The results for these two businesses now are reported in the driveline and industrial additives product line within the Lubrizol Additives segment.

Additionally, upon the adoption of SFAS 160, the company revised its measurement of segment operating income to include income attributable to noncontrolling interests. Previously, segment operating income excluded the portion of income attributable to noncontrolling interests. The results for the prior period presented have been retrospectively adjusted to conform to the current year presentation.

The following table presents a summary of the results of the company’s reportable segments:

	Three Months Ended
	March 31,
	2009			2008
Revenues from external customers:
Lubrizol Additives	$	727.8		$	844.7
Lubrizol Advanced Materials		284.6			382.6
Total revenues	$	1,012.4		$	1,227.3
Segment operating income:
Lubrizol Additives	$	118.7		$	116.8
Lubrizol Advanced Materials		25.5			29.2
Segment operating income		144.2			146.0
Corporate expenses		(16.0	)		(21.2	)
Corporate other income-net		1.8			3.2
Restructuring and impairment charges		(11.4	)		(4.8	)
Interest expense-net		(26.7	)		(13.7	)
Income before income taxes	$	91.9		$	109.5

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The company’s total assets by segment were as follows:

	March 31,		December 31,
	2009		2008
Segment total assets:
Lubrizol Additives	$	1,703.5	$	1,853.8
Lubrizol Advanced Materials		1,801.4		1,843.2
Total segment assets		3,504.9		3,697.0
Corporate assets		884.2		453.5
Total consolidated assets	$	4,389.1	$	4,150.5

12. Pension and Postretirement Benefits

The company has noncontributory defined benefit pension plans covering most employees. Pension benefits under these plans are based on years of service and compensation. The company’s funding policy in the United States is to contribute amounts to satisfy the funding standards of the Internal Revenue Code of 1986, as amended, and the Employee Retirement Income Security Act of 1974, as amended, and elsewhere is to fund amounts in accordance with local regulations. Several of the company’s smaller defined benefit plans are not funded.

The company also provides non-pension postretirement benefits, primarily health care benefits, for some employees. Participants contribute a portion of the cost of these benefits. The company’s non-pension postretirement benefit plans are not funded.

The components of net periodic pension cost consisted of the following:

	Three Months Ended									Three Months Ended
	March 31, 2009									March 31, 2008
				Non-									Non-
	U.S. Plans			U.S. Plans			Total			U.S. Plans			U.S. Plans			Total
Service cost – benefits earned during period	$	5.6		$	2.0		$	7.6		$	4.4		$	3.1		$	7.5
Interest cost on projected benefit obligation		7.0			3.6			10.6			6.5			4.5			11.0
Expected return on plan assets		(6.0	)		(3.1	)		(9.1	)		(6.0	)		(3.8	)		(9.8	)
Amortization of prior service costs		0.6			0.1			0.7			0.5			0.2			0.7
Recognized net actuarial loss		1.2			0.3			1.5			0.2			0.5			0.7
Net periodic pension cost	$	8.4		$	2.9		$	11.3		$	5.6		$	4.5		$	10.1

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The components of net periodic non-pension postretirement benefit cost consisted of the following:

	Three Months Ended
	March 31,
	2009			2008
Service cost – benefits earned during period	$	0.3		$	0.5
Interest cost on projected benefit obligation		1.4			1.5
Amortization of prior service credits		(1.7	)		(1.7	)
Amortization of initial net obligation		0.1			0.1
Recognized net actuarial loss		0.1			0.2
Settlement / curtailment gain		–			(1.1	)
Net periodic non-pension postretirement benefit cost (credit)	$	0.2		$	(0.5	)

13. Stock-Based Compensation

All references to the number of shares and share units in this Note are based on actual share and unit numbers and are not shown in millions.

The company utilizes the 2005 Stock Incentive Plan (2005 Plan) to provide equity awards to its key employees and directors. Key employees and directors also may receive equity compensation under the company’s deferred compensation plans. The 2005 Plan, approved by the company’s shareholders on April 25, 2005, provides for the granting of stock appreciation rights, restricted and unrestricted shares, share units and options to buy common shares up to an amount equal to 4,000,000 common shares, of which no more than 2,000,000 can be settled as full-value awards. After the 2,000,000 limit has been reached, full-value awards are counted in a 3-to-1 ratio against the 4,000,000 limit. Options become exercisable 50% one year after date of grant, 75% after two years, 100% after three years and expire 10 years after grant. In addition, the 2005 Plan provides each nonemployee director of the company an automatic annual grant of restricted share units worth approximately $0.1 million based on the fair market value of the company’s common shares on the date of each annual meeting of shareholders. A pro-rata number of restricted share units is granted to directors appointed between annual meetings of shareholders. All of these restricted share units vest on the date of the next annual meeting of shareholders.

The fair value of share-based payment awards is estimated using the Black-Scholes option pricing model. There were 438,600 and 253,100 stock options granted during the three months ended March 31, 2009 and 2008, respectively. Options under the 2005 Plan have been granted to employees at fair market value at the date of grant. The weighted-average assumptions used to value the options granted were as follows:

	Three Months Ended
	March 31,
	2009			2008
Risk-free interest rate		2.8	%		3.5	%
Dividend yield		4.5	%		2.1	%
Expected volatility		27.9	%		20.0	%
Expected life (years)		6.5			6.5
Weighted-average fair value per share of options granted during the period	$	5.03		$	12.27

Under the company’s long-term incentive program, dollar-based target awards for three-year performance periods are determined by the organization and compensation committee of the board of directors. The target awards correspond to pre-determined three-year earnings per share growth rate targets. A portion of the awards is converted into a number of performance-based stock awards based on the price of the company’s common shares on the date of the award. There are no voting or dividend rights associated with the performance-based stock awards until the end of the performance period and a distribution of shares from the 2005 Plan, if any, is made.

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Compensation expense for these performance awards is calculated based on the grant-date fair value that is defined as the closing price of the company’s common shares on the date of grant. During the three months ended March 31, 2009, the award for the 2006-2008 performance period was distributed resulting in the issuance of 157,721 common shares and the deferral of 112,411 common shares into a deferred compensation plan. During the three months ended March 31, 2008, the award for the 2005-2007 performance period was distributed resulting in the issuance of 134,578 shares and the deferral of 96,969 shares into a deferred compensation plan.

Nonvested performance-based stock awards at March 31, 2009 and changes during 2009 were as follows:

				Weighted-
				Average
	Share			Grant Date
	Units			Fair Value
Nonvested at January 1, 2009		232,161		$	53.07
Granted		290,520		$	27.77
Forfeited		(11,820	)	$	53.07
Nonvested at March 31, 2009		510,861		$	38.68

The following table identifies the number of shares expected to be issued based on current expectations of performance and the stock price on the date of grant for the nonvested performance-based stock awards outstanding at March 31, 2009:

	Expected		Weighted-
	Number		Average
	of Units		Grant Date
Award	to be Issued		Fair Value
2007-2009		220,341	$	53.07
2008-2010		–	$	58.45
2009-2011		290,520	$	27.77

In prior years, some international employees received stock-based awards that are similar to stock appreciation rights. The value of these awards is based on Lubrizol common shares and is paid in cash upon exercise. A portion of these awards expire through 2014, while the remainder expires upon retirement. At March 31, 2009, the unexercised portion of these fully vested stock-based awards was accounted for as a liability. Compensation (credit) expense recognized in the consolidated statements of income for the three months ended March 31, 2009 and 2008 related to these awards was $(0.6) million and $0.2 million, respectively.

Total stock-based compensation expense recognized in the consolidated statements of income for the three months ended March 31, 2009 and 2008 was $1.3 million and $4.2 million, respectively. The related tax benefit for the three months ended March 31, 2009 and 2008 was $0.5 million and $1.5 million, respectively. At March 31, 2009, there was $14.4 million of total pre-tax unrecognized compensation cost related to all stock-based awards that were not vested. That cost is expected to be recognized over a weighted-average period of 2.2 years.

The company is using previously purchased treasury shares for all net shares issued for option exercises, performance-based stock awards and restricted share units. The company issued 35,537 and 67,725 common shares from treasury upon exercise of employee stock options during the three months ended March 31, 2009 and 2008, respectively.

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14. Restructuring and Impairment Charges

During the three months ended March 31, 2009, the company recorded aggregate restructuring and impairment charges of $11.4 million. The restructuring and impairment charges during the three months ended March 31, 2009 primarily related to severance and benefits associated with organizational restructuring decisions, which eliminated operating inefficiencies and improved profitability. The remaining charges related to the closing of a Lubrizol Additives blending, packaging and warehouse site in Ontario, Canada that was announced in 2008. We expect to record an additional $5.3 million of restructuring charges related to this facility closure, of which $0.8 million is expected to be recognized in 2009.

The following table shows the reconciliation of the restructuring liability since January 1, 2009 by major restructuring activity:

			Restructuring
	Liability		and					Liability
	January 1,		Impairment					March 31,
	2009		Charges		Cash Paid			2009
Performance coatings 2008 business improvement initiatives	$	0.9	$	–	$	(0.1	)	$	0.8
Lubrizol Additives plant closure and workforce reductions		0.7		0.5		(0.2	)		1.0
Corporate organizational restructuring		–		10.9		(6.1	)		4.8
Noveon International, Inc. restructuring liabilities assumed		0.5		–		–			0.5
	$	2.1	$	11.4	$	(6.4	)	$	7.1

During the three months ended March 31, 2008, the company recorded aggregate restructuring and impairment charges of $4.8 million primarily related to business improvement initiatives in the performance coatings product line of the Lubrizol Advanced Materials segment. The company completed the disposition of a textile compounding plant and recognized an asset impairment for a textile coatings production line.

15. Contingencies

General

There are pending or threatened claims, lawsuits and administrative proceedings against the company or its subsidiaries, all arising from the ordinary course of business with respect to commercial, product liability and environmental matters, which seek remedies or damages. The company believes that any liability that finally may be determined with respect to commercial and product liability claims should not have a material adverse effect on the company’s consolidated financial position, results of operations or cash flows. From time to time, the company also is involved in legal proceedings as a plaintiff involving contract, patent protection, environmental and other matters. Environmental matters and liabilities are addressed specifically below. Gain contingencies, if any, are recognized when they are realized.

Environmental

The company’s environmental engineers and consultants review and monitor environmental issues at operating facilities and, where appropriate, the company initiates corrective and/or preventive environmental projects to ensure environmental compliance and safe and lawful activities at its current operations. The company also conducts compliance and management systems audits.

The company and its subsidiaries are generators of both hazardous and non-hazardous wastes, the treatment, storage, transportation and disposal of which are regulated by various laws and governmental regulations. These laws and regulations generally impose liability for costs to investigate and remediate contamination without regard

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to fault and, under certain circumstances, liability may be joint and several resulting in one party being held responsible for the entire obligation. Liability also may include damages to natural resources. Although the company believes past operations were in substantial compliance with the then-applicable regulations, either the company or the predecessor of Lubrizol Advanced Materials International, Inc. (LZAM International), the Performance Materials Segment of Goodrich Corporation (Goodrich), has been designated under a country’s laws and/or regulations as a potentially responsible party (PRP) in connection with several sites including both third party sites and/or current operating facilities.

The company participates in the remediation process for onsite and third-party waste management sites at which the company has been identified as a PRP. This process includes investigation, remedial action selection and implementation, as well as discussions and negotiations with other parties, which primarily include PRPs, past owners and operators and governmental agencies. The estimates of environmental liabilities are based on the results of this process. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, remediation standards and evolving technologies for managing investigations and remediation. The company revises its estimates accordingly as events in this process occur and additional information is obtained.

The company’s environmental reserves, measured on an undiscounted basis, totaled $11.5 million and $12.7 million at March 31, 2009 and December 31, 2008, respectively. Of these amounts, $5.6 million and $6.5 million were included in accrued expenses and other current liabilities at March 31, 2009 and December 31, 2008, respectively. Goodrich provided LZAM International with an indemnity for various environmental liabilities. The company estimates Goodrich’s share of such currently identified liabilities under the indemnity, which extends through February 2011, to be approximately $1.4 million of which $0.5 million of the recovery is included in receivables and $0.9 million is included in other assets. There are specific environmental contingencies for company-owned sites for which third parties such as past owners and/or operators are the named PRPs and also for which the company is indemnified by Goodrich. Goodrich currently is indemnifying LZAM International for several environmental remediation projects. Goodrich’s share of all of these liabilities may increase to the extent such third parties fail to honor their obligations through February 2011.

The company believes that its environmental accruals are adequate based on currently available information. However, it is reasonably possible that approximately $8.1 million in additional costs may be incurred at certain locations beyond the amounts accrued as a result of new information, newly discovered conditions, changes in remediation standards or technologies or a change in the law. Additionally, as the indemnification from Goodrich extends through February 2011, changes in assumptions regarding when costs will be incurred may result in additional expenses to the company. Additional costs in excess of $8.1 million currently cannot be estimated.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(In Millions of Dollars Except Per Share Data)

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. Historical results and percentage relationships set forth in the consolidated financial statements, including trends that might appear, should not be taken as indicative of future operations. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including those described under the section “Cautionary Statements for Safe Harbor Purposes” included elsewhere in this Quarterly Report on Form 10-Q.

OVERVIEW

We are an innovative specialty chemical company that produces and supplies technologies that improve the quality and performance of our customers’ products in the global transportation, industrial and consumer markets. Our business is founded on technological leadership. Innovation provides opportunities for us in growth markets as well as advantages over our competitors. From a base of approximately 1,600 patents, we use our product development and formulation expertise to sustain our leading market positions and fuel our future growth. We create additives, ingredients, resins and compounds that enhance the performance, quality and value of our customers’ products, while minimizing their environmental impact. Our products are used in a broad range of applications and are sold into relatively stable markets such as those for engine oils, specialty driveline lubricants and metalworking fluids, as well as higher-growth markets such as personal care and over-the-counter pharmaceutical products, performance coatings and inks and compressor lubricants. Our specialty chemical products also are used in a variety of industries, including the construction, sporting goods, medical products and automotive industries.

We are geographically diverse, with an extensive global manufacturing, supply chain, technical and commercial infrastructure. We operate facilities in 27 countries, including production facilities in 19 countries and laboratories in 12 countries, in key regions around the world through the efforts of approximately 6,800 employees. We sell our products in more than 100 countries and believe that our customers recognize and value our ability to provide customized, high quality, cost-effective performance formulations and solutions worldwide. We also believe our customers highly value our global supply chain capabilities.

We use a broad range of raw materials in our manufacturing processes. The majority of our raw materials are derived from petroleum and petrochemical-based feedstocks, with lubricant base oil being our single largest raw material. The cost of our raw materials can be highly volatile. As a result, our financial performance is influenced significantly by how effectively we manage the margin between our selling prices and the cost of our raw materials.

We are organized into two operating and reportable segments called Lubrizol Additives and Lubrizol Advanced Materials, and we are an industry leader in many of the markets in which our product lines compete. Lubrizol Additives consists of two product lines: (i) engine additives and (ii) driveline and industrial additives. Engine additives is comprised of additives for lubricating engine oils, such as for gasoline, diesel, marine and stationary gas engines, and additives for fuels, refinery and oil field chemicals. Driveline and industrial additives is comprised of additives for driveline oils, such as automatic transmission fluids, gear oils and tractor lubricants and industrial additives, such as additives for hydraulic, grease and metalworking fluids, as well as compressor lubricants.

The Lubrizol Advanced Materials segment consists of three product lines: (i) engineered polymers, (ii) performance coatings and (iii) Noveon^® consumer specialties. The engineered polymers product line is characterized by products such as TempRite^® engineered polymers and Estane^® thermoplastic polyurethane used within the construction, automotive, telecommunications, electronics and recreation industries. The performance coatings product line includes high-performance polymers and additives for specialty paper, graphic arts, paints, textiles and coatings applications that are sold to customers worldwide. The Noveon consumer specialties product line is characterized by production of acrylic thickeners, film formers, fixatives, emollients, silicones, specialty surfactants, methyl glucoside, lanolin derivatives and cassia used within cosmetics, personal care and household products.

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The following factors most affected our consolidated results during the first quarter of 2009:

• The ongoing global recession has affected the markets we serve and negatively impacted our results. Volume declined 27% compared with the same period in 2008 as demand declined sharply and customers continued to reduce their inventory levels.

• Our disciplined margin management largely offset the volume decline and resulted in an increase in our gross profit percentage to 27.1% from 23.9% in the same period in 2008.

• Our aggressive cost reduction actions and organizational restructuring eliminated operating inefficiencies and improved profitability. We reduced manufacturing expenses during the quarter by curtailing production and reducing spending on supplies and services. Selling, testing, administrative and research (STAR) expenses declined by 12% due to reductions in travel and entertainment, salaries and benefits, information technology expenses, outside services and lower incentive compensation. Manufacturing and STAR expenses both benefited from a favorable currency impact. In conjunction with our organizational restructuring, we incurred $10.9 million of severance and benefit charges. We estimate these cost reduction and organizational restructuring actions will result in approximately $50.0 million to $60.0 million of pre-tax savings during 2009.

• Our inventory reduction initiatives contributed to the significant cash flow from operations. We significantly reduced production to achieve our inventory reduction goals and in response to lower sales volume. As a result of our abnormally low production, we incurred $38.1 million of unabsorbed manufacturing costs. The reduction in inventory quantities also resulted in incremental charges of $7.1 million due to a liquidation of LIFO inventory quantities carried at higher costs.

• As compared with the same period in 2008, currency fluctuations were unfavorable to revenues by 3%, favorable to operating costs and unfavorable to net income attributable to The Lubrizol Corporation by an estimated $0.08 per share.

• Our issuance of $500.0 million of 8.875% senior unsecured notes at a price of 99.256% in January 2009 was intended primarily to repay our 4.625% notes due October 1, 2009. We entered into a $150.0 million term loan in February 2009 to fund, in part, the acquisition of the thermoplastic polyurethane business from The Dow Chemical Company (Dow). The proceeds from these borrowings will be sufficient to retire in full the 4.625% notes due 2009 and enabled us to repay in full our outstanding U.S. revolver balance, while strengthening our liquidity with approximately $175.0 million of additional cash. However, the additional interest costs associated with these borrowings, coupled with lower interest income, reduced our earnings by approximately $0.12 per share as compared with the same period in 2008.

During the year ended December 31, 2008, we determined goodwill associated with our performance coatings, Estane and TempRite reporting units within our Lubrizol Advanced Materials segment was impaired as the carrying value of goodwill within these reporting units exceeded its fair value. No goodwill remained within our performance coatings reporting unit at March 31, 2009. The remaining value of goodwill associated with our Estane and TempRite reporting units totaled $61.8 million and $73.3 million at March 31, 2009, respectively. A 10% decrease in the fair value of our Estane reporting unit or any further decrease in the fair value of our TempRite reporting unit could indicate the potential for an additional impairment of goodwill. The products within our Estane reporting unit are used within film and sheet for various coating processes, wire and cable insulation, athletic equipment (such as footwear), medical applications, pneumatic tubing and automotive molded parts, and the demand for these products are affected by overall economic conditions. Our TempRite reporting unit serves customers who produce plastic piping for residential and commercial plumbing, fire sprinkler systems and industrial piping applications, and is thus subject to cyclical demand patterns within these markets. To the extent the weakness in the economy, including the residential and commercial construction markets, persists longer than expected or our cost of capital increases, our Estane or TempRite reporting units could experience a decline in fair value that may result in an additional impairment of goodwill.

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008

	Three Months
	Ended March 31,
(In Millions of Dollars Except Per Share Data)	2009			2008			$ Change			% Change
Revenues	$	1,012.4		$	1,227.3		$	(214.9	)		(18	%)
Cost of sales		738.5			934.5			(196.0	)		(21	%)
Gross profit		273.9			292.8			(18.9	)		(6	%)
Selling and administrative expenses		93.8			108.6			(14.8	)		(14	%)
Research, testing and development expenses		49.0			54.1			(5.1	)		(9	%)
Amortization of intangible assets		6.3			7.0			(0.7	)		(10	%)
Restructuring and impairment charges		11.4			4.8			6.6			*
Other income – net		(5.2	)		(4.9	)		0.3			6	%
Interest income		(2.7	)		(4.2	)		(1.5	)		(36	%)
Interest expense		29.4			17.9			11.5			64	%
Income before income taxes		91.9			109.5			(17.6	)		(16	%)
Provision for income taxes		26.7			33.5			(6.8	)		(20	%)
Net income		65.2			76.0			(10.8	)		(14	%)
Net income attributable to noncontrolling interests		1.0			2.4			(1.4	)		(58	%)
Net income attributable to The Lubrizol Corporation	$	64.2		$	73.6		$	(9.4	)		(13	%)
Basic earnings per share attributable to The Lubrizol Corporation	$	0.95		$	1.07		$	(0.12	)		(11	%)
Diluted earnings per share attributable to The Lubrizol Corporation	$	0.95		$	1.06		$	(0.11	)		(10	%)

* Calculation not meaningful

Revenues The decrease in revenues during the first quarter of 2009 compared with the same period in 2008 was due to a 27% decrease in volume and a 3% unfavorable currency impact, partially offset by a 12% improvement in the combination of price and product mix. Included in these factors were incremental revenues from the thermoplastic polyurethane businesses acquired from Dow and SK Chemicals Co., Ltd. (SK), which contributed 1% to revenues for the quarter.

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The following table shows the geographic mix of our volume during the first quarter of 2009 as well as the percentage changes compared with the same period in 2008:

							Excluding
							the Impact of
	2009			2009 vs. 2008			Acquisitions
	Volume			% Change			% Change
North America		42	%		(30	%)		(31	%)
Europe		28	%		(25	%)		(25	%)
Asia-Pacific / Middle East		23	%		(24	%)		(25	%)
Latin America		7	%		(27	%)		(27	%)
Total		100	%		(27	%)		(28	%)

We experienced volume decreases across all geographic zones and product categories as a result of inventory destocking by our customers and the continued weakness in the global economy and its impact on demand for our products.

Segment volume variances by geographic zone, as well as the factors explaining the changes in segment revenues during the first quarter of 2009 compared with the same period in 2008, are contained within the “Segment Analysis” section.

Cost of Sales The decrease in cost of sales in the first quarter of 2009 compared with the same period in 2008 primarily was due to lower volume. Average raw material cost increased 1% in the first quarter of 2009 compared with the same period in 2008. Total manufacturing expenses decreased 2% in the first quarter of 2009 compared with the same quarter last year primarily due to a favorable currency impact, reductions in spending on supplies and services and lower utility costs, offset by $38.1 million of unabsorbed manufacturing costs due to abnormally low production. Cost of sales during the first quarter of 2009 also included incremental charges of $7.1 million associated with a liquidation of LIFO inventory quantities carried at higher costs.

Gross Profit Gross profit decreased $18.9 million, or 6%, during the first quarter of 2009 compared with the same period in 2008. The decrease primarily was due to lower volume, the impact of unfavorable manufacturing cost absorption and an unfavorable currency impact, partially offset by an improvement in the combination of price and product mix. Our gross profit percentage increased in the first quarter of 2009 to 27.1% compared with 23.9% in the same quarter last year as a result of price increases initiated in 2008 to recover higher costs.

Selling and Administrative Expenses Selling and administrative expenses decreased $14.8 million, or 14%, during the first quarter of 2009 compared with the same period in 2008. The decrease primarily was due to our cost reduction initiatives that resulted in lower travel and entertainment, salaries and benefits and expenses associated with information technology and outside services, along with lower incentive compensation and a favorable currency impact.

Research, Testing and Development Expenses Research, testing and development expenses decreased $5.1 million, or 9%, during the first quarter of 2009 compared with the same period in 2008. The decrease primarily was due to a favorable currency impact and our cost reduction initiatives that resulted in lower spending on supplies and services.

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Restructuring and Impairment Charges The components of restructuring charges recorded during the first quarter of 2009 are as follows:

	Three Months Ended March 31, 2009
	Asset		Severance
	Impairments		and Benefits		Total
Corporate organizational restructuring	$	–	$	10.9	$	10.9
Lubrizol Additives plant closure and workforce reductions		–		0.5		0.5
Total restructuring charges	$	–	$	11.4	$	11.4
Restructuring charges of $10.9 million related to our organizational restructuring initiated during the first quarter of 2009, which eliminated operating inefficiencies and improved profitability. These organizational changes are expected to result in approximately $14.0 million of pre-tax savings for 2009.
Restructuring charges of $0.5 million related to the decision made in the third quarter of 2008 to close a Lubrizol Additives blending, packaging and warehouse facility in Ontario, Canada. We expect to record an additional $5.3 million of restructuring charges related to this facility closure, of which $0.8 million is expected to be recognized in 2009.
The components of restructuring and impairment charges recorded during the first quarter of 2008 are as follows:
	Three Months Ended March 31, 2008
	Asset		Severance
	Impairments		and Benefits		Total
Performance coatings 2008 business improvement initiatives	$	4.0	$	0.8	$	4.8

We recorded aggregate restructuring and impairment charges of $4.8 million primarily related to business improvement initiatives in the performance coatings product line of the Lubrizol Advanced Materials segment. We completed the disposition of a textile compounding plant and recognized an asset impairment for a textile coatings production line.

Interest Expense The increase in interest expense in the first quarter of 2009 compared with the same period in 2008 primarily was due to the incremental interest expense associated with the issuance of our 8.875% notes due 2019 and borrowings under our $150.0 million term loan in the first quarter of 2009. In addition, we repurchased $177.0 million of our 4.625% notes due 2009 at a purchase price of 100.5% per note, resulting in a loss on retirement of $1.3 million and accelerated amortization of $0.6 million in debt issuance costs, Treasury rate lock agreements and original issue discounts associated with the repurchased notes.

Provision for Income Taxes Our effective tax rate of 29.1% in the first quarter of 2009 decreased from 30.6% in the same period in 2008 as the prior-year period did not contain a benefit from the U.S. research credit.

Net Income Attributable to The Lubrizol Corporation Primarily as a result of the above factors, net income per diluted share attributable to The Lubrizol Corporation decreased 10% to $0.95 during the first quarter of 2009 compared with $1.06 in the same period in 2008.

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SEGMENT ANALYSIS

We primarily evaluate performance and allocate resources based on segment operating income, defined as revenues less expenses identifiable to the product lines included within each segment, as well as projected future performance. Segment operating income will reconcile to consolidated income before income taxes by deducting corporate expenses and corporate other income that are not attributable to the operating segments, restructuring and impairment charges and net interest expense.

In the fourth quarter of 2008, the company reorganized its reporting structure for the following two businesses:

• The AMPS^® specialty monomer business, with 2008 annual revenues of $35.3 million, which previously was reported as part of the Noveon consumer specialties product line, and

• The ADEX^TM explosives emulsifier business, with 2008 annual revenues of $45.0 million, which previously was reported as part of the engineered polymers product line.

The results for these two businesses now are reported in the driveline and industrial additives product line within the Lubrizol Additives segment.

Additionally, upon the adoption of Statement of Financial Accounting Standards (SFAS) 160, the company revised its measurement of segment operating income to include income attributable to noncontrolling interests. Previously, segment operating income excluded the portion of income attributable to noncontrolling interests. The results for the prior period presented have been retrospectively adjusted to conform to the current year presentation.

The proportion of consolidated revenues and segment operating income attributed to each segment was as follows:

	Three Months Ended
	March 31,
	2009			2008
Revenues:
Lubrizol Additives		72	%		69	%
Lubrizol Advanced Materials		28	%		31	%
Segment Operating Income:
Lubrizol Additives		82	%		80	%
Lubrizol Advanced Materials		18	%		20	%

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OPERATING RESULTS BY SEGMENT

	Three Months Ended
	March 31,							%
	2009		2008		$ Change			Change
Revenues:
Lubrizol Additives	$	727.8	$	844.7	$	(116.9	)		(14	%)
Lubrizol Advanced Materials		284.6		382.6		(98.0	)		(26	%)
Total	$	1,012.4	$	1,227.3	$	(214.9	)		(18	%)
Gross Profit:
Lubrizol Additives	$	188.7	$	193.0	$	(4.3	)		(2	%)
Lubrizol Advanced Materials		85.2		99.8		(14.6	)		(15	%)
Total	$	273.9	$	292.8	$	(18.9	)		(6	%)
Segment Operating Income:
Lubrizol Additives	$	118.7	$	116.8	$	1.9			2	%
Lubrizol Advanced Materials		25.5		29.2		(3.7	)		(13	%)
Total	$	144.2	$	146.0	$	(1.8	)		(1	%)
Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008
LUBRIZOL ADDITIVES SEGMENT
Revenues Revenues decreased 14% during the first quarter of 2009 compared with the same period in 2008. The decrease was due to a 24% decrease in volume and a 3% unfavorable currency impact, partially offset by a 13% increase in the combination of price and product mix.
The following table shows the geographic mix of our volume during the first quarter of 2009 as well as the percentage changes compared with the same period in 2008:

	2009			2009 vs. 2008
	Volume			% Change
North America		34	%		(25	%)
Europe		32	%		(24	%)
Asia-Pacific / Middle East		26	%		(23	%)
Latin America		8	%		(24	%)
Total		100	%		(24	%)

We experienced volume decreases across all geographic zones as a result of weak end-market demand and continued destocking of customers’ inventories. We believe that this customer destocking substantially is complete. Declines were seen in both of our product lines; however, our driveline and industrial additives were affected more severely than engine additives. By comparison, demand in the first quarter of 2008 was very strong and benefitted from business gains in our international regions.

Gross Profit Gross profit decreased $4.3 million, or 2%, in the first quarter of 2009 compared with the same period in 2008. The decrease primarily related to lower volume, higher manufacturing costs and an unfavorable currency impact, offset by improvements in the combination of price and product mix. Average raw material cost increased 1% during the first quarter of 2009 compared with the same period in 2008. Total manufacturing costs increased 5% in the first quarter of 2009 compared with the same period in 2008. We significantly reduced production to

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achieve our inventory reduction goals and in response to lower sales volume. As a result, we incurred $27.6 million of unabsorbed manufacturing costs due to abnormally low production. Although we experienced higher manufacturing costs, we realized savings from a favorable currency impact, lower utility and other variable production costs and cost reduction initiatives at our plants. Cost of sales during the first quarter of 2009 also included incremental charges of $6.3 million associated with a liquidation of LIFO inventory quantities carried at higher costs.

The gross profit percentage increased to 25.9% during the first quarter of 2009 from 22.8% in the same period in 2008 as a result of price increases initiated in 2008 to recover higher costs.

Selling, Testing, Administrative and Research Expenses STAR expenses decreased $5.4 million, or 7%, during the first quarter of 2009 compared with the same period in 2008. The decrease in STAR expenses primarily was due to a favorable currency impact and cost reduction initiatives taken during the first quarter of 2009, including decreases in travel and entertainment.

Segment Operating Income Segment operating income increased 2% during the first quarter of 2009 compared with the same period in 2008 due to the factors discussed above.

LUBRIZOL ADVANCED MATERIALS SEGMENT

Revenues Revenues decreased 26% during the first quarter of 2009 compared with the same period in 2008. The decrease was due to a 35% decrease in volume and a 3% unfavorable currency impact, partially offset by a 12% increase in the combination of price and product mix. Included in these factors were the incremental revenues from the thermoplastic polyurethane businesses acquired from Dow and SK in 2008, which contributed 5% to revenues in the quarter.

The following table shows the geographic mix of our volume during the first quarter of 2009 as well as the percentage changes compared with the same period in 2008:

							Excluding
							the Impact of
	2009			2009 vs. 2008			Acquisitions
	Volume			% Change			% Change
North America		66	%		(36	%)		(38	%)
Europe		18	%		(31	%)		(31	%)
Asia-Pacific / Middle East		13	%		(31	%)		(37	%)
Latin America		3	%		(47	%)		(47	%)
Total		100	%		(35	%)		(37	%)

We experienced volume decreases across all geographic zones and product lines. Volume declined as a result of weak end-market demand, product discontinuations in our performance coatings product line and continued destocking of customers’ inventories. We believe that this customer destocking substantially is complete. While our Noveon consumer specialties product line experienced a decline in volume, the decline was less severe than in our engineered polymers and performance coatings product lines. Acquisitions contributed 2% to our overall volume in the first quarter of 2009 compared with the same period in 2008.

Gross Profit Gross profit decreased $14.6 million, or 15%, in the first quarter of 2009 compared with the same period in 2008. The decrease primarily related to lower volume and an unfavorable currency impact, partially offset by improvements in the combination of price and product mix and lower manufacturing costs. During the first quarter of 2009, average raw material cost remained level with the same period in 2008. Total manufacturing costs decreased 14% in the first quarter of 2009 compared with the same period in 2008 primarily due to cost reduction initiatives, a favorable currency impact and previously announced manufacturing restructurings and product discontinuations. These manufacturing cost reductions partially were offset by $10.5 million of unabsorbed

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manufacturing costs as we significantly reduced production to achieve our inventory reduction goals and in response to lower sales volume.

The gross profit percentage increased to 29.9% during the first quarter of 2009 from 26.1% in the same period in 2008. The increase in gross profit percentage primarily was a result of price increases initiated in 2008 to recover higher costs.

Selling, Testing, Administrative and Research Expenses STAR expenses decreased $9.4 million, or 14%, during the first quarter of 2009 compared with the same period in 2008. The decrease in STAR expenses primarily was due to cost reduction initiatives, a favorable currency impact, lower costs associated with the implementation of a common information systems platform, and the benefits from previously announced restructuring programs predominately in our performance coatings product line.

Segment Operating Income Segment operating income decreased 13% during the first quarter of 2009 compared with the same period in 2008 due to the factors discussed above.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the major components of cash flow:

	Three Months Ended
	March 31,
	2009			2008
Cash provided by (used for):
Operating activities	$	165.6		$	43.1
Investing activities		(43.6	)		(50.4	)
Financing activities		319.0			(41.5	)
Effect of exchange rate changes on cash		(3.5	)		5.7
Net increase (decrease) in cash and cash equivalents	$	437.5		$	(43.1	)

OPERATING ACTIVITIES

The increase in cash provided by operating activities during the first quarter of 2009 compared with the same period in 2008 primarily was attributable to a significant decrease in our working capital investment. Cash flow from inventories improved by $194.3 million due to our initiative to reduce inventories during 2009. Cash flow from accounts receivables improved by $68.2 million due to a significant decline in volume caused by the global economic recession. Cash flow from accounts payable declined by $120.1 million primarily due to reduced purchases of raw materials.

We manage inventories and accounts receivable on the basis of average days sales in inventory and average days sales in receivables. Our average days sales in receivables slightly increased to 49.4 days during the first quarter of 2009 from 49.1 days for the year ended December 31, 2008. Our goal is to minimize our investment in inventories while at the same time ensuring reliable supply for our customers. Although we achieved our inventory reduction goals, our average days sales in inventory increased to 104.5 days during the first quarter of 2009 from 77.1 days for the year ended December 31, 2008 due to lower sales volume.

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INVESTING ACTIVITIES

Cash used for investing activities decreased during the first quarter of 2009 compared with the same period in 2008. The decrease primarily related to lower capital expenditures of $44.3 million during the first quarter of 2009 compared with $51.5 million for the same period in 2008. During the first quarter of 2009, capital expenditures for the Lubrizol Additives segment primarily were made to maintain existing manufacturing capacity and plant infrastructure. The majority of the capital expenditures in the Lubrizol Advanced Materials segment primarily related to increasing our capacity, mainly in China. In 2009, we estimate consolidated annual capital expenditures will be approximately $160.0 million to $170.0 million.

FINANCING ACTIVITIES

Cash provided by financing activities increased $360.5 million during the first quarter of 2009 compared with the same period in 2008. Cash provided by financing activities of $319.0 million during the first quarter of 2009 primarily consisted of the net proceeds received from the issuance of our 8.875% notes and term loan, partially offset by the repayment of $177.0 million of our 4.625% notes and the balances outstanding under our revolving credit facilities and the payment of dividends. Cash used for financing activities in the same period in 2008 of $41.5 million primarily consisted of the repurchase of common shares and the payment of dividends.

CAPITALIZATION, LIQUIDITY AND CREDIT FACILITIES

At March 31, 2009, our total debt outstanding of $1,703.8 million consisted of 80% fixed-rate debt and 20% variable-rate debt, including $200.0 million of fixed-rate debt that has been swapped for a variable rate. Our weighted-average interest rate at March 31, 2009 was approximately 6.6%.

Our net debt to capitalization ratio at March 31, 2009 was 39.8%. Net debt represents total short-term and long-term debt, excluding original issue discounts and unrealized gains and losses on derivative instruments designated as fair value hedges of fixed-rate debt, reduced by cash and cash equivalents. Capitalization is calculated as shareholders’ equity plus net debt. Total debt as a percent of capitalization was 51.2% at March 31, 2009. This calculation includes the remaining $204.9 million of 4.625% notes due October 1, 2009 that will be repaid with a portion of the proceeds from our January 2009 issuance of 8.875% notes due 2019. Excluding the October 2009 maturity, our debt as a percent of capitalization was 48.0% at March 31, 2009.

Our ratio of current assets to current liabilities was 2.8 at March 31, 2009.

Our $350.0 million revolving credit facility, which matures in September 2011, allows us to borrow at variable rates based upon the U.S. prime rate or LIBOR plus a specified credit spread. Our €250.0 million revolving credit facility, which matures in September 2010, allows us to borrow at variable rates based on EURIBOR plus a specified credit spread. We have guaranteed all obligations of the borrowers under the euro credit facility. At March 31, 2009, we had no borrowings outstanding under these agreements.

In February 2009, we entered into a $150.0 million term loan. The term loan is an unsecured, senior obligation that matures on February 2, 2012 and bears interest based upon LIBOR plus a specified credit spread. Beginning in April 2010, we are required to make quarterly principal payments. The total annual principal payments are $28.1 million in 2010, $54.4 million in 2011 and $67.5 million in 2012. The term loan is prepayable without penalty. We used a portion of the proceeds from this loan to repay in full the $75.0 million of indebtedness outstanding under our U.S. revolving credit facility at December 31, 2008. We intend to use the remaining proceeds for general corporate purposes.

In January 2009, we issued senior unsecured notes having an aggregate principal amount of $500.0 million at a price of 99.256%. The notes mature on February 1, 2019 and bear interest at 8.875% per annum, payable semi-annually on February 1 and August 1 of each year. Including debt issuance costs, original issue discounts and losses on Treasury rate lock agreements, the 2019 notes have an effective annualized interest rate of 9.2%. The notes include a step-up in interest payable following certain ratings downgrades by credit rating agencies. Upon the occurrence of a change of control triggering event, as defined in the indenture, we would be required to make an offer to repurchase the notes at 101% of their principal amount. We used a portion of the net proceeds from

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these notes to repurchase $177.0 million of our 4.625% notes and intend to repay in full at maturity the $204.9 million remaining aggregate principal amount of these notes due on October 1, 2009. We estimate that the interest savings generated from the repurchase of $177.0 million of our 4.625% notes will increase our full-year earnings by $0.02 per share. We intend to use the remaining net proceeds for general corporate purposes.

Under our U.S. and euro bank credit agreements, we are required to comply with financial ratios of debt to consolidated earnings before interest, income taxes, depreciation and amortization, extraordinary, unusual or non-recurring non-cash gains or losses, including the sale of property and equipment and goodwill impairments, and non-cash gains or losses from less than wholly owned subsidiaries and investments (Consolidated EBITDA), as defined in the credit agreements, and Consolidated EBITDA to interest expense. In March 2009, we amended the required debt to Consolidated EBITDA ratio within our bank credit agreements. Effective with the amendments, to the extent we maintain cash or cash equivalents in an amount sufficient for the payment of the outstanding 4.625% notes, we may exclude these notes from the calculation of debt for all periods prior to October 1, 2009. At March 31, 2009, the credit agreements required that the ratio of debt to Consolidated EBITDA be less than 3.5:1 and the ratio of Consolidated EBITDA to interest expense must be greater than 3.5:1. At March 31, 2009, we maintained a ratio of debt to Consolidated EBITDA of 2.4:1 and a ratio of Consolidated EBITDA to interest expense of 7.2:1.

We have an investment in a money market mutual fund that froze all distributions on September 17, 2008 due to liquidity constraints. Although we gave our redemption notice to this fund prior to September 17, 2008, we have not yet received our full distribution. Our original investment in this money market mutual fund was $50.0 million. At March 31, 2009, $6.4 million of the original investment had not yet been distributed. This fund is being liquidated under the supervision of the Securities and Exchange Commission (SEC).

We believe that our cash flow from operations, borrowing capacity under our credit facilities and our current cash and cash equivalents provide sufficient liquidity to maintain our current operations, pay dividends, pursue acquisitions and service our debt.

CONTRACTUAL CASH OBLIGATIONS

Our contractual cash obligations at December 31, 2008 are contained within our 2008 Annual Report on Form 10-K. During the first quarter of 2009, our total debt obligations increased approximately $362.9 million to $1,711.1 million. At March 31, 2009, our total debt obligations by period were $209.9 million, $83.2 million, $67.9 million and $1,350.1 million for the 2009, 2010-2011, 2012-2013 and 2014 and later periods, respectively. During the first quarter of 2009, our estimated interest payments increased approximately $440.1 million to $1,228.4 million. At March 31, 2009, our estimated contractual interest payments by period were $83.2 million, $191.8 million, $191.8 million and $761.7 million for the 2009, 2010-2011, 2012-2013 and 2014 and later periods, respectively. Other than the changes in total debt obligations and estimated contractual interest payments, we do not believe there have been any significant changes in our contractual cash obligations since December 31, 2008.

Our debt level will require us to dedicate a portion of our cash flow to make interest and principal payments, thereby reducing the availability of our cash for acquisitions or other purposes. Nevertheless, we believe our future operating cash flow will be sufficient to cover debt service, capital expenditures, dividends and other obligations, and that we have untapped borrowing capacity that can provide us with additional financial resources. We currently have a shelf registration statement filed with the SEC pursuant to which debt securities, preferred or common shares, or warrants may be issued. In addition, at March 31, 2009, we maintained cash and cash equivalents balances of $623.7 million and had $350.0 million available under our U.S. revolving credit facility and €250.0 million available under our euro revolving credit facility.

At March 31, 2009, we had $36.5 million of contingent obligations under standby letters of credit issued in the ordinary course of business to financial institutions, customers and insurance companies to secure short-term support for a variety of commercial transactions, insurance and benefit programs.

NEW ACCOUNTING STANDARDS

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1 and APB 28-1

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increases the frequency of fair value disclosures for financial instruments that are not currently reflected on a company’s balance sheet at fair value. FSP FAS 107-1 and APB 28-1 requires disclosure of the fair values of assets and liabilities not measured on the balance sheet at fair value on a quarterly basis, in addition to qualitative and quantitative information about fair value estimates for those financial instruments. This FSP is effective for interim and annual periods ending after June 15, 2009, with early application permitted. As FSP FAS 107-1 and APB 28-1 only requires enhanced disclosures, we do not expect that the adoption of this standard will have a material effect on our financial statements.

In December 2008, the FASB issued FSP FAS 132R-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets.” FSP FAS 132R-1 amends SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132R-1 requires additional disclosure surrounding the benefit plan investment allocation decision making process, the fair value of each major category of plan assets, the valuation techniques used to measure the fair value of plan assets and any significant concentrations of risk within plan assets. This FSP is effective for annual periods ending after December 15, 2009, with early application permitted. As FSP FAS 132R-1 only requires enhanced disclosures, we do not expect that the adoption of this standard will have a material effect on our financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133.” This statement amends the disclosure requirements for derivative instruments and hedging activities in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. At initial adoption, comparative disclosures for earlier periods are encouraged, but not required. We adopted this standard on January 1, 2009. Refer to Note 7 to the consolidated financial statements for further discussion.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Financial Statements - an amendment of ARB No. 51.” This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement requires consolidated net income attributable to both the parent and the noncontrolling interest to be reported and disclosed in the consolidated financial statements. This statement also requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the noncontrolling owners of a subsidiary. We adopted this standard on January 1, 2009 and retrospectively applied the presentation and disclosure requirements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” This statement replaces SFAS No. 141, “Business Combinations,” and requires an acquirer to recognize the assets acquired, the liabilities assumed and any noncontrolling interests in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. SFAS No. 141R requires that costs incurred to effect the acquisition be recognized separately from the acquisition as period costs. SFAS No. 141R also requires recognition of restructuring costs that the acquirer expects to incur, but is not obligated to incur, separately from the business combination. Other key provisions of this statement include the requirement to recognize the acquisition-date fair values of research and development assets separately from goodwill and the requirement to recognize changes in the amount of deferred tax benefits that are recognizable due to the business combination in either income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. At March 31, 2009, we had amounts recorded in our financial statements for unrecognized tax benefits and deferred tax valuation allowances related to past acquisitions that will affect the income tax provision in the period of reversal under SFAS No. 141R. With the exception of certain tax-related aspects described above, this statement applies prospectively to business combinations for which the acquisition date is on or after fiscal

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years beginning after December 15, 2008. The adoption of this standard on January 1, 2009 did not have a material effect on our financial statements.

CAUTIONARY STATEMENTS 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. 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. These uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by any forward-looking statements, although we believe our expectations reflected in those forward-looking statements are based upon reasonable assumptions. For this purpose, any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements.

We believe that the following factors, among others, could affect our future performance and cause our actual results to differ materially from those expressed or implied by forward-looking statements made in this quarterly report:

• The cost, availability and quality of raw materials, especially petroleum-based products.

• Our ability to sustain profitability of our products in a competitive environment.

• The demand for our products as influenced by factors such as the global economic environment, longer-term technology developments and the success of our commercial development programs.

• The effects of required principal and interest payments and the access to capital on our ability to fund capital expenditures and acquisitions and to meet operating needs.

• The risks of conducting business in foreign countries, including the effects of fluctuations in currency exchange rates upon our consolidated results and political, social, economic and regulatory factors.

• The extent to which we are successful in expanding our business in new and existing markets and in identifying, understanding and managing the risks inherent in those markets.

• Our ability to identify, complete and integrate acquisitions for profitable growth and operating efficiencies.

• Our success at continuing to develop proprietary technology to meet or exceed new industry performance standards and individual customer expectations.

• Our ability to implement a new common information systems platform primarily into our Lubrizol Advanced Materials segment successfully, including the management of project costs, its timely completion and realization of its benefits.

• Our ability to continue to reduce complexities and conversion costs and modify our cost structure to maintain and enhance our competitiveness.

• Our success in retaining and growing the business that we have with our largest customers.

• The cost and availability of energy, especially natural gas and electricity.

• The effect of interest rate fluctuations on our net interest expense.

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• The risk of weather-related disruptions to our Lubrizol Additives production facilities located near the U.S. Gulf Coast.

• Significant changes in government regulations affecting environmental compliance.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We operate manufacturing and blending facilities, laboratories and offices around the world and utilize fixed-rate 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 uncertainties, import and export limitations, and market risks 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 and commodity hedges and forward foreign currency 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 our earnings and cash flow. Our objective in managing the exposure to changes in foreign currency exchange rates is to reduce volatility on our earnings and cash flow associated with such changes. Our primary currency exposures are the euro, the pound sterling, the Japanese yen and the Brazilian real. Our objective in managing our exposure to changes in commodity prices is to reduce the volatility on earnings of utility expense. We do not hold derivatives for trading purposes.

We measure our market risk related to our holdings of financial instruments based on changes in interest rates, foreign currency rates and commodity prices utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in fair value, cash flow and earnings based on a hypothetical 10% change (increase and decrease) in interest, currency exchange rates and commodity prices. We use current market rates on our debt and derivative portfolios to perform the sensitivity analysis. Certain items such as lease contracts, insurance contracts and obligations for pension and other postretirement benefits are not included in the analysis.

Our primary interest rate exposures relate to our cash and cash equivalents, fixed-rate and variable-rate debt and interest rate swaps. The calculation of potential loss in fair value is based on an immediate change in the net present values of our interest rate-sensitive exposures resulting from a 10% change in interest rates. The potential loss in cash flow and income before tax is based on the change in the net interest income/expense over a one-year period due to an immediate 10% change in rates. A hypothetical 10% increase or decrease in interest rates would have had a respective favorable or unfavorable impact on fair values of $73.5 million and $41.7 million at March 31, 2009 and December 31, 2008, respectively. In addition, a hypothetical 10% increase or decrease in interest rates would have had a respective unfavorable or favorable impact on annualized cash flows and income before tax of $0.2 million and $0.7 million in 2009 and 2008, respectively.

Our primary currency exchange rate exposures are to foreign currency-denominated debt, intercompany debt, cash and cash equivalents and forward foreign currency exchange contracts. The calculation of potential loss in fair value is based on an immediate change in the U.S. dollar equivalent balances of our currency exposures due to a 10% shift in exchange rates. The potential loss in cash flow and income before tax is based on the change in cash flow and income before tax over a one-year period resulting from an immediate 10% change in currency exchange rates. A hypothetical 10% increase or decrease in currency exchange rates would have had a respective unfavorable or favorable impact on fair values of $13.9 million and $8.6 million at March 31, 2009 and December 31, 2008, respectively. In addition, a hypothetical 10% increase or decrease in currency exchange rates would have had a respective unfavorable or favorable impact on annualized cash flows of $26.2 million and $26.4 million and on annualized income before tax of $11.3 million and $11.9 million in 2009 and 2008, respectively.

Our primary commodity hedge exposure relates to natural gas expense. The calculation of potential loss in fair value is based on an immediate change in the U.S. dollar equivalent balances of our commodity exposure due to a 10% shift in the underlying commodity prices. The potential loss in cash flow and income before tax is based on the change in cash flow and income before tax over a one-year period resulting from an immediate 10% change in

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commodity prices. A hypothetical 10% increase or decrease in commodity prices would have had a respective favorable or unfavorable impact on fair values of $1.0 million and $1.4 million at March 31, 2009 and December 31, 2008, respectively, and on annualized cash flows and income before tax of $1.0 million and $1.4 million in 2009 and 2008, respectively.

Item 4. Controls and Procedures

At the end of the period covered by this quarterly report (March 31, 2009), we carried out an evaluation, under the supervision and with the participation of the company’s management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our chief executive officer and chief financial officer concluded that as of the end of such period, our disclosure controls and procedures were effective and designed to ensure that information required to be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the first quarter of 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)	On January 1, 2009, we issued 2,314 common shares in transactions exempt from registration under Regulation S of the Securities Act of 1933 (Securities Act). We issued the common shares to 21 employees of a wholly owned Canadian subsidiary under an employee benefit plan.
	On January 28, 2009, we issued 468 common shares in a transaction exempt from registration under Regulation S of the Securities Act. We issued the common shares to one employee of a wholly owned United Kingdom subsidiary under an employee benefit plan.
	On February 5, 2009, we issued 468 common shares in a transaction exempt from registration under Regulation S of the Securities Act. We issued the common shares to one employee of a wholly owned United Kingdom subsidiary under an employee benefit plan.
	On February 9, 2009, we issued 468 common shares in a transaction exempt from registration under Regulation S of the Securities Act. We issued the common shares to one employee of a wholly owned United Kingdom subsidiary under an employee benefit plan.
	On March 16, 2009, we issued 348 common shares in a transaction exempt from registration under Regulation S of the Securities Act. We issued the common shares to one employee of a wholly owned United Kingdom subsidiary under an employee benefit plan.
	On March 25, 2009, we issued 1,564 common shares in a transaction exempt from registration under Regulation S of the Securities Act. We issued the common shares to one employee of a wholly owned United Kingdom subsidiary under an employee benefit plan.
(c)	The following table provides information regarding our purchases of Lubrizol common shares during the quarter.

							Maximum Number
					Total Number		(or Approximate Dollar
					of Shares (or Units)		Value) of Shares (or
	Total Number of		Average Price		Purchased as Part of		Units) that May Yet be
	Shares (or Units)		Paid per Share		Publicly Announced		Purchased Under the
Period	Purchased		(or Unit)		Plans or Programs		Plans or Programs1
Month #1 (Jan. 1, 2009 through Jan. 31, 2009)		–		N/A		–		3,755,918
Month #2 (Feb. 1, 2009 through Feb. 28, 2009)		–		N/A		–		3,755,918
Month #3 (Mar. 1, 2009 through Mar. 31, 2009)		–		N/A		–		3,755,918
Total		–				–		3,755,918

¹ This column represents common shares that we are permitted to purchase pursuant to a share repurchase program authorized by our board of directors and announced on April 27, 2007. This share repurchase program permits the company to repurchase up to 5.0 million of its common shares in the open market or through negotiated transactions. The program will expire when all authorized shares have been repurchased. In the third quarter of 2008, we suspended temporarily our share repurchase program.

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Item 6. Exhibits

3.1	Second Amended and Restated Articles of Incorporation of The Lubrizol Corporation, effective as of May 6, 2009.
3.2	Amended and Restated Regulations of The Lubrizol Corporation, effective as of April 27, 2009.
4.1	Indenture, dated as of January 27, 2009, by and between The Lubrizol Corporation and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the company’s current report on Form 8-K filed with the SEC on January 27, 2009).
4.2	First Supplemental Indenture to the Indenture dated as of January 27, 2009, by and between The Lubrizol Corporation and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the company’s current report on Form 8-K filed with the SEC on January 27, 2009).
4.3	Form of $500,000,000 8.875% Notes due 2019 (incorporated by reference to Exhibit 4.3 to the company’s current report on Form 8-K filed with the SEC on January 27, 2009).
10.1	Credit Agreement dated as of February 2, 2009 among The Lubrizol Corporation, the Initial Lenders named therein, KeyBanc Capital Markets, as joint lead arranger and sole bookrunner, PNC Capital Markets LLC, as joint lead arranger, PNC Bank, National Association, as syndication agent, and KeyBank National Association, as administrative agent (incorporated herein by reference to Exhibit 10.1 to the company’s current report on Form 8-K filed with the SEC on February 5, 2009).
10.2	Letter Amendment No. 3 dated March 4, 2009, to the Credit Agreement dated as of August 24, 2004, among The Lubrizol Corporation, Citigroup North America, Inc., as agent, and the banks, financial institutions and other institutional lenders named therein, as amended and restated as of March 29, 2005, and as further amended as of August 23, 2005 and September 20, 2006 (incorporated herein by reference to Exhibit 4.1 to the company’s current report on Form 8-K/A filed with the SEC on March 10, 2009).
10.3	Letter Amendment No. 2 dated March 4, 2009, to the Five Year Credit Agreement dated as of September 14, 2005 among Lubrizol Holdings France S.A.S. and Lubrizol Advanced Materials Europe BVBA, The Lubrizol Corporation, ABN AMRO Bank N.V. as agent and the lenders named therein, as amended as of September 20, 2006 (incorporated herein by reference to Exhibit 4.2 to the company’s current report on Form 8-K/A filed with the SEC on March 10, 2009).
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer, as created by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer, as created by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer of The Lubrizol Corporation pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

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Signatures

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/ W. Scott Emerick  

W. Scott Emerick 

Chief Accounting Officer and Duly Authorized Signatory of The Lubrizol Corporation 

Date: May 8, 2009

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Exhibit Index

3.1	Second Amended and Restated Articles of Incorporation of The Lubrizol Corporation, effective as of May 6, 2009.
3.2	Amended and Restated Regulations of The Lubrizol Corporation, effective as of April 27, 2009.
4.1	Indenture, dated as of January 27, 2009, by and between The Lubrizol Corporation and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the company’s current report on Form 8-K filed with the SEC on January 27, 2009).
4.2	First Supplemental Indenture to the Indenture dated as of January 27, 2009, by and between The Lubrizol Corporation and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the company’s current report on Form 8-K filed with the SEC on January 27, 2009).
4.3	Form of $500,000,000 8.875% Notes due 2019 (incorporated by reference to Exhibit 4.3 to the company’s current report on Form 8-K filed with the SEC on January 27, 2009).
10.1	Credit Agreement dated as of February 2, 2009 among The Lubrizol Corporation, the Initial Lenders named therein, KeyBanc Capital Markets, as joint lead arranger and sole bookrunner, PNC Capital Markets LLC, as joint lead arranger, PNC Bank, National Association, as syndication agent, and KeyBank National Association, as administrative agent (incorporated herein by reference to Exhibit 10.1 to the company’s current report on Form 8-K filed with the SEC on February 5, 2009).
10.2	Letter Amendment No. 3 dated March 4, 2009, to the Credit Agreement dated as of August 24, 2004, among The Lubrizol Corporation, Citigroup North America, Inc., as agent, and the banks, financial institutions and other institutional lenders named therein, as amended and restated as of March 29, 2005, and as further amended as of August 23, 2005 and September 20, 2006 (incorporated herein by reference to Exhibit 4.1 to the company’s current report on Form 8-K/A filed with the SEC on March 10, 2009).
10.3	Letter Amendment No. 2 dated March 4, 2009, to the Five Year Credit Agreement dated as of September 14, 2005 among Lubrizol Holdings France S.A.S. and Lubrizol Advanced Materials Europe BVBA, The Lubrizol Corporation, ABN AMRO Bank N.V. as agent and the lenders named therein, as amended as of September 20, 2006 (incorporated herein by reference to Exhibit 4.2 to the company’s current report on Form 8-K/A filed with the SEC on March 10, 2009).
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer, as created by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer, as created by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer of The Lubrizol Corporation pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

EX-3.1

Exhibit 3.1

SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE LUBRIZOL CORPORATION

     FIRST: The name of the Corporation is The Lubrizol Corporation.

     SECOND: The place in the State of Ohio where its principal office is located is Wickliffe, Lake County.

     THIRD: The purposes of the Corporation are as follows:

     To manufacture, produce, process, buy, sell, develop, acquire, distribute and otherwise deal in chemicals, chemical products and compositions, including lubricants, fuels and additives for lubricants and fuels, and to do all things necessary or incidental thereto.

     To invest in high technology companies and in companies with substantial growth possibilities and to acquire such companies.

     To engage in any other lawful act or activity for which corporations may be formed under Section 1701.01 to 1701.98, inclusive, of the Revised Code of Ohio, as now in effect or hereafter amended.

     FOURTH: The authorized number of shares of the Corporation is 147,000,000, consisting of 2,000,000 shares of serial preferred stock without par value designated Serial Preferred Stock (“Serial Preferred Stock”); 25,000,000 shares of serial preferred stock without par value designated Serial Preference Shares (“Serial Preference Shares”); and 120,000,000 common shares without par value (“Common Shares”).

     No holder of any class of shares of the Corporation shall, as such holder, have any preemptive or preferential right to purchase or subscribe to any shares of any class of stock of the Corporation, whether now or hereafter authorized, whether unissued or in treasury, or to purchase any obligations convertible into shares of any class of stock of the Corporation, which at any time may be proposed to be issued by the Corporation or subjected to rights or options to purchase granted by the Corporation.

     No holder of shares of the Corporation shall be entitled to vote cumulatively in the election of Directors of the Corporation.

     The shares of such classes shall have the following express terms:

DIVISION A
EXPRESS TERMS OF THE SERIAL PREFERRED STOCK

     Section 1. The Serial Preferred Stock may be issued from time to time in one or more series. All shares of Serial Preferred Stock shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of each series shall be identical with all other shares of such series, except as to the date from which dividends are cumulative. Subject to the provisions of Sections 2 to 8, both inclusive, of this Division, which provisions shall apply to all Serial Preferred Stock, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and with respect to each such series prior to the issuance thereof to fix:

     (a) The designation of the series, which may be by distinguishing number, letter or title;

     (b) The number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease (but not below the number of shares thereof then outstanding);

     (c) The annual dividend rate of the series;

     (d) The dates at which dividends, if declared, shall be payable, and the dates from which dividends shall be cumulative;

     (e) The redemption rights and price or prices, if any, for shares of the series;

     (f) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;

     (g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Corporation;

     (h) Whether the shares of the series shall be convertible into Common Shares, and, if so, the conversion price or prices, any adjustments thereof, and all other terms and conditions upon which such conversion may be made; and

     (i) Restrictions (in addition to those set forth in Sections 6(b) and 6(c) of this Division) on the issuance of shares of the same series or of any other class or series;

provided, however, that the aggregate amount which the holders of Serial Preferred Stock at any time outstanding shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation shall not exceed $50,000,000, plus accrued and unpaid dividends.

2

     The Board of Directors is authorized to adopt from time to time amendments to the Articles of Incorporation fixing, with respect to each such series, the matters described in clauses (a) to (i), both inclusive, of this Section 1.

     Section 2. The holders of Serial Preferred Stock of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Serial Preferred Stock, shall be entitled to receive out of any funds legally available and when and as declared by the Board of Directors, dividends in cash at the rate for such series fixed in accordance with the provisions of Section 1 of this Division, and no more, payable quarterly on the dates fixed for such series. Such dividends shall be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends may be paid upon or declared or set apart for any of the Serial Preferred Stock for any quarterly dividend period unless at the same time a like proportionate dividend for the same quarterly dividend period, ratably in proportion to the respective annual dividend rates fixed therefor, shall be paid upon or declared or set apart for all Serial Preferred Stock of all series then issued and outstanding and entitled to receive such dividend.

     Section 3. In no event so long as any Serial Preferred Stock shall be outstanding shall any dividends, except a dividend payable in Common Shares or other shares ranking junior to the Serial Preferred Stock, be paid or declared or any distribution be made except as aforesaid on the Common Shares or any other shares ranking junior to the Serial Preferred Stock, nor shall any Common Shares or any other shares ranking junior to the Serial Preferred Stock be purchased, retired or otherwise acquired by the Corporation (except out of the proceeds of the sale of Common Shares or other shares ranking junior to the Serial Preferred Stock received by the Corporation subsequent to January 1, 1969):

     (a) Unless all accrued and unpaid dividends on Serial Preferred Stock, including the full dividends for the current quarterly dividend period, shall have been declared and paid or a sum sufficient for payment thereof set apart; and

     (b) Unless there shall be no arrearages with respect to the redemption of Serial Preferred Stock of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Division.

     Section 4.

     (a) Subject to the express terms of each series and to the provisions of Section 6(b)(iii) of this Division A, the Corporation may from time to time redeem all or any part of the Serial Preferred Stock of any series at the time outstanding, (i) at the option of the Board of Directors at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Division, or (ii) in fulfillment of the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price, fixed in accordance with the provisions of Section 1 of this Division, together in each case with accrued and unpaid dividends to the redemption date.

     (b) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Serial Preferred Stock to be redeemed at their respective

3

addresses then appearing on the books of the Corporation, not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for such redemption. At any time after notice has been given as above provided, the Corporation may deposit the aggregate redemption price of the shares of Serial Preferred Stock to be redeemed with any bank or trust company in Cleveland, Ohio, or New York, New York, having capital and surplus of not less than Twenty-Five Million Dollars ($25,000,000), named in such notice, directed to be paid to the respective holders of the shares of Serial Preferred Stock so to be redeemed in amounts equal to the redemption price of all shares of Serial Preferred Stock so to be redeemed, on surrender of the stock certificate or certificates held by such holders, and upon the making of such deposit such holders shall cease to be shareholders with respect to such shares, and after such notice shall have been given and such deposit shall have been made such holders shall have no interest in or claim against the Corporation with respect to such shares except only to receive such money from such bank or trust company without interest or the right to exercise, before the redemption date, any unexpired privileges of conversion. In case less than all of the outstanding shares of Serial Preferred Stock are to be redeemed, the Corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by its Board of Directors.

     If the holders of shares of Serial Preferred Stock which have been called for redemption shall not within ten years after such deposit, claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company and the Corporation shall be relieved of all responsibility in respect thereof and to such holders.

     (c) Any shares of Serial Preferred Stock which are redeemed by the Corporation pursuant to the provisions of this Section 4 and any shares of Serial Preferred Stock which are purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series and any shares of Serial Preferred Stock which are converted in accordance with the express terms thereof, shall be cancelled, and not reissued. Any shares of Serial Preferred Stock otherwise acquired by the Corporation shall resume the status of authorized and unissued shares of Serial Preferred Stock without serial designation.

     Section 5.

     (a) The holders of Serial Preferred Stock of any series shall, in case of voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, be entitled to receive in full out of the assets of the Corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Serial Preferred Stock, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Division plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the Corporation. In case the net assets of the Corporation legally available therefor are insufficient to permit the payment upon all outstanding shares of Serial Preferred Stock of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon outstanding shares of Serial

4

Preferred Stock in proportion to the full preferential amount to which each such share is entitled.

     After payment to holders of Serial Preferred Stock of the full preferential amounts as aforesaid, holders of Serial Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

     (b) The merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into it, or the sale, lease or conveyance of all or substantially all the property or business of the Corporation, shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section 5.

     Section 6.

     (a) The holders of Serial Preferred Stock shall be entitled to one vote for each share of such stock upon all matters presented to the shareholders; and, except as otherwise provided herein or required by law, the holders of Serial Preferred Stock and the holders of Common Shares shall vote together as one class on all matters.

     If, and so often as, the Corporation shall be in default in the payment of six (6) full quarterly dividends (whether or not consecutive) on any series of Serial Preferred Stock at the time outstanding, whether or not earned or declared, the holders of Serial Preferred Stock of all series, voting separately as a class and in addition to all other rights to vote for directors, shall be entitled to elect as herein provided, two members of the Board of Directors of the Corporation; provided, however, that the holders of shares of Serial Preferred Stock shall not have or exercise such special class voting rights except at meetings of the shareholders for the election of directors at which the holders of not less than thirty-five percent (35%) of the outstanding shares of Serial Preferred Stock of all series then outstanding are present in person or by proxy; and provided further that the special class voting rights provided for herein when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on the Serial Preferred Stock of all series then outstanding shall have been paid, whereupon the holders of Serial Preferred Stock shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event hereinabove specified in this paragraph.

     In the event of default entitling the holders of Serial Preferred Stock to elect two directors as above specified, a special meeting of the shareholders for the purpose of electing such directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least ten percent (10%) of the shares of Serial Preferred Stock of all series at the time outstanding, and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the Corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be held within one hundred twenty (120) days after the date of receipt of the foregoing written request from the holders of Serial Preferred Stock. At any meeting at which the holders of Serial Preferred Stock shall be entitled to elect directors, the holders of thirty-five percent (35%) of the then outstanding shares of Serial Preferred Stock of all series present in person or by

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proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which the holders of Serial Preferred Stock are entitled to elect as hereinabove provided. The two directors who may be elected by the holders of Serial Preferred Stock pursuant to the foregoing provisions shall be in addition to any other directors then in office or proposed to be elected otherwise then pursuant to such provisions, and nothing in such provisions shall prevent any change otherwise permitted in the total number of directors of the Corporation or require the resignation of any director elected otherwise than pursuant to such provisions. Notwithstanding any classification of the other directors of the Corporation, the two directors elected by the holders of Serial Preferred Stock shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.

     (b) The affirmative vote of the holders of at least two-thirds of the shares of Serial Preferred Stock at the time outstanding, given in person or by proxy at a meeting called for the purpose at which the holders of Serial Preferred Stock shall vote separately as a class shall be necessary to effect any one or more of the following (but so far as the holders of Serial Preferred Stock are concerned, such action may be effected with such vote):

     (i) Any amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of the Regulations of the Corporation which affects adversely the voting powers, rights or preferences of the holders of Serial Preferred Stock; provided, however, that, for the purpose of this clause (i) only, neither the amendment of the Articles of Incorporation so as to authorize or create, or to increase the authorized or outstanding amount of Serial Preferred Stock or of any shares of any class ranking on a parity with or junior to the Serial Preferred Stock, nor the amendment of the provisions of the Regulations so as to increase the number of directors of the Corporation shall be deemed to affect adversely the voting powers, rights or preferences of the holders of Serial Preferred Stock; and provided further, that if such amendment, alteration or repeal affects adversely the rights or preferences of one or more but not all series of Serial Preferred Stock at the time outstanding only the affirmative vote of the holders of at least two-thirds of the number of the shares at the time outstanding of the series so affected shall be required;

     (ii) The authorization or creation of, or the increase in the authorized amount of, any shares of any class, or any security convertible into shares of any class, ranking prior to the Serial Preferred Stock; or

     (iii) The purchase or redemption (for sinking fund purposes or otherwise) of less than all of the Serial Preferred Stock then outstanding except in accordance with a stock purchase offer made to all holders of record of Serial Preferred Stock, unless all dividends upon all Serial Preferred Stock then outstanding for all previous quarterly dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.

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     (c) The affirmative vote of the holders of at least a majority of the shares of Serial Preferred Stock at the time outstanding, given in person or by proxy at a meeting called for the purpose at which the holders of Serial Preferred Stock shall vote separately as a class, shall be necessary to effect any one or more of the following (but so far as the holders of Serial Preferred Stock are concerned, such action may be effected with such vote):

     (i) The sale, lease or conveyance by the Corporation of all or substantially all of its property or business, or its consolidation with or merger into any other corporation unless the corporation resulting from such consolidation or merger will have after such consolidation or merger no class of shares either authorized or outstanding ranking prior to or on a parity with the Serial Preferred Stock except the same number of shares ranking prior to or on a parity with the Serial Preferred Stock and having the same rights and preferences as the shares of the Corporation authorized and outstanding immediately preceding such consolidation or merger, and each holder of Serial Preferred Stock immediately preceding such consolidation or merger shall receive the same number of shares, with the same rights and preferences, of the resulting corporation; or

     (ii) The authorization of any shares ranking on a parity with the Serial Preferred Stock or an increase in the authorized number of shares of Serial Preferred Stock.

     Section 7. The holders of Serial Preferred Stock shall have no preemptive right to purchase or have offered to them for purchase any shares or other securities of the Corporation, whether now or hereafter authorized.

     Section 8. For the purpose of this Division A:

     Whenever reference is made to shares “ranking prior to the Serial Preferred Stock” or “on a parity with the Serial Preferred Stock,” such reference shall mean and include all shares of the Corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, are given preference over, or rank on an equality with (as the case may be) the rights of the holders of Serial Preferred Stock; and whenever reference is made to shares “ranking junior to the Serial Preferred Stock,” such reference shall mean and include all shares of the Corporation in respect of which the rights of holders thereof as to payment of dividends and as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, are junior and subordinate to the rights of the holders of Serial Preferred Stock.

DIVISION B
EXPRESS TERMS OF THE COMMON SHARES

     The Common Shares shall be subject to the express terms of (i) the Serial Preferred Stock and any series thereof and (ii) the Serial Preference Shares and any series thereof. Each Common Share shall be equal to every other Common Share and the holders thereof shall be entitled to one vote for each share of such stock on all questions presented to the shareholders.

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DIVISION C
EXPRESS TERMS OF THE SERIAL PREFERRED STOCK, SERIES A

     Section 1. Designation and Amount. The shares of such series shall be designated as “Serial Preferred Stock, Series A” (“Series A Stock”) and the number of shares constituting such series shall be 2,000,000. No shares of Series A Stock may be issued except upon the exercise of a Right, as defined in, and pursuant to the terms of, the Special Rights Agreement, dated as of October 31, 1988 (as from time to time amended or supplemented in accordance with the terms thereof, the “Rights Agreement”), between the Corporation and National City Bank.

     Section 2. Dividends and Distributions.

     (A) Except as provided in this Section 2, the holders of shares of Series A Stock shall not be entitled to receive dividends or other distributions with respect to any shares of Series A Stock.

     (B) From and after the date on which shares of Series A Stock are issued and outstanding (the “Dividend Accrual Commencement Date”), the holders of issued and outstanding shares of Series A Stock, in preference to the holders of Common Shares and of any other capital stock of the Corporation which ranks junior to the Serial Preferred Stock in respect of dividends or distributions of assets on liquidation of the Corporation (all of which classes, other than the Serial Preferred Stock, are hereinafter embraced in the term “Junior Stock”), shall be entitled to receive as and when declared by the Directors out of the assets of the Corporation which are by law available for the payment of dividends, cumulative cash dividends, payable quarterly on the last days of March, June, September and December, and accruing from the applicable Dividend Accrual Commencement Date, at, but not exceeding, the rate per share per annum equal to the Dividend Rate (as hereinafter defined). For purposes of this Division C, the “Dividend Rate” shall be equal to 8% of the Cash Redemption Amount (as defined in Section 5(A) of this Division C) as of the last day of the calendar month immediately preceding the applicable dividend payment date.

     Section 3. Redemption.

     (A) From and after (but not before) the Earliest Redemption Date (as defined in Section 5(C) of this Division C), the Series A Stock may be redeemed in whole or in part, at any time or from time to time, at the option of the Corporation, for a cash redemption price per share equal to the sum of (x) the then-applicable Cash Redemption Amount plus $1.00 and (y) an amount equal to the sum of all dividends accrued to the date fixed for redemption and remaining unpaid, whether or not declared, together with any applicable Deferred Payment Entitlement (as defined in Section 5(D) of this Division C).

     (B) So long as any shares of Series A Stock shall be outstanding, but subject to Section 3(E) of this Division C, the Corporation shall, as a sinking fund applicable to the Series A Stock, commencing on the date two years after the first date on which any shares of Series A Stock are issued, and annually thereafter, redeem, for a cash redemption price per share equal to the sum of (x) the then-applicable Cash Redemption Amount plus $1.00 and (y) an amount equal to the sum of all dividends accrued to such date and remaining unpaid, whether or not declared, together with any applicable Deferred Payment Entitlement, a number of shares of

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Series A Stock equal to 25% of the greatest number of shares of Series A Stock at any time outstanding. The Corporation shall be permitted to satisfy in whole or in part the requirements of this Section 3(B) with respect to any year by applying in whole or in part as a credit in reduction of the obligation of the Corporation to make redemptions for the sinking fund in such year shares of Series A Stock purchased by the Corporation and shares of Series A Stock redeemed otherwise than for the sinking fund. Shares purchased by the Corporation for application as a credit as provided above may be purchased in such manner as the Directors may determine from time to time, subject to the restrictions on such purchases set forth elsewhere herein or arising under applicable law.

     (C) On the date five years after the first date on which any shares of Series A Stock are issued, but subject to Section 3(E) of this Division C, the Corporation shall redeem all shares of Series A Stock remaining outstanding for a cash redemption price per share equal to the sum of (x) the then-applicable Cash Redemption Amount plus $1.00 and (y) an amount equal to the sum of all dividends accrued to such date and remaining unpaid, whether or not declared, together with any applicable Deferred Payment Entitlement.

     (D) Notwithstanding anything contained in this Division C to the contrary, but subject to Section 3(E) of this Division C, at the option of any holder of Series A Stock, upon written notice given by such holder at any time during the 30-calendar day period following the date on which the last notice was mailed pursuant to the next sentence of this Section 3(D) the Corporation shall, prior to the filing of a certificate of dissolution or such other instrument as may then be prescribed by applicable law to effect the dissolution of the Corporation, redeem all shares of Series A Stock outstanding as to which such holder shall have made such election for a cash redemption price per share equal to the sum of (x) the then-applicable Cash Redemption Amount plus $1.00 and (y) an amount equal to the sum of all dividends accrued to such date and remaining unpaid, whether or not declared, together with any applicable Deferred Payment Entitlement. The Corporation shall give notice to all holders of Series A Stock no fewer than 45-calendar days prior to making any filing referred to in the immediately preceding sentence, which notice will be so given by first class United States mail and publication in The Wall Street Journal and any other nationally recognized publication the Corporation may elect, accompanied by an appropriate form of election and such other information as may be required to permit an informed election.

     (E) In addition to the limitations that may apply under applicable Ohio law, the Corporation shall be required to redeem any shares of Series A Stock under Sections 3(B), 3(C) or 3(D) of this Division C only to the extent that, after giving effect to such redemption, the consolidated retained earnings of the Corporation and the corporations with which it is consolidated for financial reporting purposes are greater than zero. For purposes of the foregoing sentence, consolidated retained earnings shall mean the sum of (1) the consolidated retained earnings as of September 30, 1988 of the Corporation and the corporations with which it was then consolidated for financial reporting purposes and (2) the consolidated retained earnings accumulated subsequent to September 30, 1988 of the Corporation and the corporations with which it is consolidated for financial reporting purposes determined in accordance with generally accepted accounting principles as in effect as of such date (except as otherwise provided in this sentence) and after giving effect to dividends or other distributions on, and redemptions and other purchases of, Serial Preferred Stock, but without giving effect to dividends or other distributions on, or redemptions or other purchases of, any Junior Stock, or to any transfers from retained earnings to additional capital or capital stock accounts, and including as a credit to retained earnings, in all events (and notwithstanding any contrary

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treatment for financial reporting purposes or otherwise), the amount of the Recovery then collected. If the Corporation is not required to redeem shares of Series A Stock in the manner otherwise provided herein by virtue of the first sentence of this Section 3(E), or if a legal or contractual restriction prevents the Corporation form effecting the redemption of any shares of Series A Stock then outstanding in the manner otherwise provided herein, then (x) to the extent required and not restricted, payment of redemption amounts shall be made daily on a pro rata basis or in such other manner as the Directors of the Corporation may determine in good faith to be fair to the holders of Series A Stock, (y) in the case of any such legal or contractual restriction, the Corporation shall use its best efforts to remove such restriction as soon as possible, and (z) the Corporation shall give notice to each holder of shares of Series A Stock of any such restriction and the efforts by the Corporation to remove it. Postponement of payment of redemption amounts shall not in any way diminish or restrict the right of the holders of shares of Series A Stock to have their shares redeemed as provided in this Section 3. If amounts payable to retire shares of Serial Preferred Stock are not paid in full in the case of all series for which a sinking fund has been fixed, the number of shares to be retired for the sinking fund of each such series shall be in proportion to the respective amounts that would be payable if all such amounts were paid in full.

     Section 4. Liquidation Rights.

     (A) The provisions of Section 7(F) of this Division C will apply to any voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation and will not be limited or otherwise affected by this Section 4.

     (B) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation (all of which are hereinafter embraced in the word “liquidation”) occurring on or after the Earliest Redemption Date, the holders of Series A Stock who do not exercise their rights pursuant to Section 3(D) of this Division C, shall be entitled to receive, subject to the limitations, if any, then applicable in such event pursuant to Division A, from the assets of the Corporation available for distribution to the shareholders, all amounts (including without limitation any Deferred Payment Entitlement) which they would be entitled to receive if on the date of such liquidation the shares of Series A Stock held by them had been redeemed at the option of the Corporation in accordance with the provisions of Section 3(A) of this Division C. In the event of any liquidation occurring prior to the Earliest Redemption Date, all rights of the Corporation in respect of the Covered Cases and any portion of the Recovery (as defined in Section 5(A) of this Division C) theretofore collected by the Corporation, and such additional funds or assets as may be required, shall be placed in trust for the benefit of the holders of the Series A Stock (and the holders of any other class of capital stock of the Corporation to the extent hereinafter provided) upon such terms so that (1) the holders of Series A Stock shall be entitled to receive, from the assets of the Corporation available for distribution to shareholders, units of beneficial interest in such trust which shall as nearly as practicable entitle them to receive, per share of Series A Stock held, a fractional undivided interest in the proceeds of the Recovery equal to the Per Share Allocation Factor, plus $1.00, and (2) the holders of the other classes of capital stock of the Corporation shall be entitled to receive out of such assets available for distribution units of beneficial interest in such trust which shall as nearly as practicable entitle them to receive any balance of the proceeds of the Recovery in accordance with their respective rights upon liquidation. In the event of any liquidation, the holders of the Serial Preferred Stock of the respective series shall be entitled to be paid in full the respective amounts fixed for such series before any distribution or payment or setting apart for payment shall be made to or for the holders of the Common Shares or any other Junior Stock. After such

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payments shall have been made in full to the holders of the Serial Preferred Stock, the remaining assets and funds of the Corporation shall be distributed among the holders of the Junior Stock of the Corporation according to their respective rights. In the event that the assets of the Corporation are not sufficient to make the payments required to be made to the holders of the Serial Preferred Stock in full, such assets shall be distributed to the holders of the Serial Preferred Stock of the respective series pro rata in proportion to the respective amounts fixed for such series.

     Section 5. Amount Payable on Redemption or Liquidation.

     (A) For purposes of this Division C, the following terms shall have the meanings indicated:

     (1) “Adjusted Value” of any “Assigned Value Assets” shall mean, initially, the value assigned thereto as provided in Section 5(B) of this Division C, and, in the event any such Assigned Value Assets shall be sold for cash within two years of the Corporation’s receipt thereof, shall mean, thereafter and in lieu of the value initially assigned, the cash proceeds of the sale, increased by the amount of any revenues derived by the Corporation from, and decreased by any costs and expenses incurred by the Corporation after receipt of such Assigned Value Assets in respect of, such Assigned Value Assets during the period prior to such sale.

     (2) “Assigned Value Assets” shall mean any assets collected as a part of the Recovery to which a value has been assigned as provided in Section 5(B) of this Division C and shall also include the proceeds of any sale or other disposition thereof.

     (3) “Cash Redemption Amount” shall mean, at any time of determination on or after the Dividend Accrual Commencement Date, the product obtained by multiplying (a) the sum of (i) the amount of the Recovery which shall have been collected in the form of cash and (ii) the Adjusted Value of any Assigned Value Assets, less (iii) all amounts which shall have been paid by the Corporation as dividends on, in redemption of, or for the repurchase (in accordance with the provisions of Section 3(B) of this Division C) of, shares of Series A Stock, and all dividends which shall have accrued but not been paid (whether or not declared), on shares of Series A Stock by (b) the Per Share Allocation Factor.

     (4) “Covered Cases” shall mean, collectively, the civil actions captioned The Lubrizol Corporation, an Ohio corporation vs. Exxon Corporation, a New Jersey corporation, in the United States District Court for the Southern District of Texas (Civil Action Nos. H-84-1627 and H-85-2450), and in the United States District Court for the Northern District of Ohio (Civil Action Nos. C84-1064 and C85-3135), and all civil actions, whether in or before a state, federal or foreign court or other authority, designated either specifically or generically, as Covered Cases by majority vote of the Directors of the Corporation prior to the first date on which shares of Series A Stock are issued, and all the right, title and interest of the Corporation in and under all such actions, and in and under all actions, suits or proceedings determined by majority vote of the Directors of the Corporation, prior to the first date on which shares of Series A Stock are issued, to be directly related thereto or to have arisen therefrom, and to all claims

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asserted therein (whether asserted in such actions or any action to enforce any judgment or order therein or otherwise).

     (5) “Deferred Payment Entitlement” shall have the meaning referred to in Section 5(D) of this Division C.

     (6) “Recovery” shall mean the collective total amount which the Corporation (or its successors and assigns to the extent permitted hereby) shall collect, whether in cash or other assets and whether collected in one of more payments or transactions, on account of favorable judgments in the Covered Cases or settlement in respect thereof, less the sum of (a) an amount equal the product of (i) such collective total amount and (ii) the Corporation’s effective income tax rate disclosed by the Corporation in the notes to the financial statements of the Corporation last published and furnished to shareholders immediately prior to the first issuance of any shares of Series A Stock and (b) any amount which the Corporation (or its successors and assigns to the extent permitted hereby) shall collect in respect of any interest assigned by the Corporation as a Deferred Payment Entitlement.

     (7) “Per Share Allocation Factor” shall mean, at any time of determination, the fraction which results from dividing 1 by the sum of (a) the total number of shares of Series A Stock then outstanding and (b) the total number of shares of Series A Stock then subject to issuance upon the proper exercise of outstanding Rights.

     (B) If and whenever the Corporation shall receive any proceeds of the Recovery in a form other than cash, there shall be assigned to such assets an amount equal to the fair market value thereof as determined in good faith by the Directors, unless the Directors of the Corporation shall determine that it is not possible to assign a fair market value to such assets with a reasonable level of confidence. The Directors of the Corporation shall make such determination at the time such assets are collected or, if it is determined as aforesaid that it is not possible to assign a fair market value thereto with a reasonable level of confidence, at the first opportunity thereafter when it is possible to make such a determination in good faith. The assets to which a value has been assigned in accordance with this Section 5(B) are referred to therein as “Assigned Value Assets” and the value so assigned shall be the initial Adjusted Value of such assets. If a fair market value cannot reasonably be assigned to any assets, the Corporation shall use its best efforts to dispose of such assets as promptly as practicable, subject to the judgment of the Directors as to the best interests of the holders of Series A Stock. Pending such disposition the Corporation shall keep accurate records relating to such assets.

     (C) The “Earliest Redemption Date” shall mean the first date on which the Corporation shall have collected, in respect of any of the Covered Cases, in the form of cash and/or assets constituting Assigned Value Assets, aggregate proceeds of the Recovery having a value (based on the amount of cash to be received together with the Adjusted Value of any Assigned Value Assets) in excess of $50,000,000.

     (D) Whenever the Corporation shall redeem any shares of Series A Stock when either (1) the prospect remains that additional amounts will be collected in respect of the Covered Cases or (2) any portion of the Recovery then collected consists of assets other than cash or Assigned Value Assets, the Corporation shall, in connection with such redemption, assign to the holder of each share of Series A Stock then being redeemed an undivided

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fractional interest equal to the Per Share Allocation Factor then in effect in all the Corporation’s right, title and interest in (x) such additional amounts as may be collected in respect of the Covered Cases as provided in the foregoing clause (1) and/or the proceeds thereof and (y) the proceeds of the sale or other disposition of any assets other than cash or Assigned Value Assets plus the revenues derived by the Corporation therefrom. The form and manner of assignment shall be as determined by the Directors of the Corporation so as to best convey to the holders of the shares of Series A Stock being redeemed the benefits contemplated hereby; provided, however, that such holders shall not by reason of the assignment of the Corporation’s interest in the foregoing proceeds have any right to control the prosecution of the Covered Cases, the collection of any amounts recoverable thereunder of the operation or disposition of the aforesaid assets, and provided, further, that the Corporation may provide that the interests as assigned shall be non-transferable. The interest assigned in accordance with this Section 5(D) in respect of any share of Series A Stock being redeemed is referred to herein as a “Deferred Payment Entitlement” in respect of such share.

     Section 6. Voting Rights. The voting rights relating to the Serial Preferred Stock set forth in Section 6 of Division A of Article Fourth are applicable to the Series A Stock. Except as so provided, and except as required by applicable law, the holders of shares of Series A Stock shall have no voting rights with respect to any action by the Corporation or its shareholders by virtue of being a holder of shares of Series A Stock.

     Section 7. Limitations.

     (A) So long as any shares of Series A Stock are outstanding, no shares of any series of Serial Preferred Stock or other capital stock of the Corporation may be issued by the Corporation except for (i) Common Shares having the express terms applicable to Common Shares on the Share Acquisition Date (as defined in Section 8(B) of this Division C), (ii) shares of capital stock which are Junior Stock (as that term is defined in Section 2(B) of this Division C), and (iii) shares of Series A Stock issuable pursuant to and in accordance with the Rights Agreement.

     (B) So long as any shares of Series A Stock are outstanding, the Corporation shall not invest any portion of the proceeds of the Recovery (other than any non-cash assets collected as a part thereof) in other than “Permitted Investments.” For purposes of this Section 7(C), “Permitted Investments” shall include the following obligations and securities:

     (a) United States Treasury bonds, notes and bills;

     (b) certificates of deposit issued by major commercial banks;

     (c) Eurodollar time deposits placed with major commercial banks;

     (d) corporate bonds, debentures and notes (none of which shall be convertible into any equity security) rated A or better by Moody’s Investors Services and by Standard & Poor’s Corporation;

     (e) non-convertible preferred stock rated A or better by Moody’s Investors Services and by Standard & Poor’s Corporation; and

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     (f) commercial paper rated Prime-2 or better by Moody’s Investors Services and A-1 or better by Standard & Poor’s Corporation.

In no event shall any portion of the proceeds of the Recovery be invested in any obligation or other security of a Prohibited Transferee.

     (C) So long as any shares of Series A Stock are outstanding, the Corporation shall not settle or otherwise compromise the Covered Cases, direct counsel to make any change in the strategy for conducting the Covered Cases, fail to pay any costs or expenses of conducting the Covered Cases which might diminish the likelihood of a favorable result therein or otherwise adversely affect the conduct of the Covered Cases, except, in each case, with the approval of the Directors of the Corporation.

     (D) So long as any shares of Series A Stock are outstanding, the Corporation shall not sell, assign or otherwise transfer the Covered Cases or any interest therein unless the Directors of the Corporation shall have previously determined in good faith that the proceeds to be realized thereby are fair to the holders of the Series A Stock.

     (E) So long as any shares of Series A Stock are outstanding, the Corporation shall not (i) consolidate with, (ii) merge with or into, (iii) sell or transfer to, in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries, taken as a whole, any Prohibited Transferee or any Affiliate or Associate thereof (as such terms are defined in Section 8(B) of this Division C), or (iv) liquidate, dissolve or otherwise wind up the affairs of the Corporation, if at the time of, after or as a result of such consolidation, merger, sale, liquidation, dissolution or winding up there would be any charter or regulation provisions, including without limitation any provisions of the Corporation’s Amended Articles of Incorporation or Regulations, as from time to time amended, or any rights, options, warrants or other instruments or securities outstanding or agreements in effect or any other actions taken, which would eliminate or otherwise diminish the benefits intended to be afforded by the Rights of the Series A Stock, without proper provision being made for the redemption of the Series A Stock in accordance with Section 7(E) of this Division C.

     Section 8. Contributions and Transfer.

     (A) The Series A Stock shall not be transferable to or by a Prohibited Transferee and any attempt to transfer shares of Series A Stock to or by a Prohibited Transferee shall be null and void. The Corporation reserves the right to require (or to cause any transfer agent of the Corporation to require) any Person who submits a share of Series A Stock for transfer on the transfer books of the Corporation or for redemption pursuant to Section 3 hereof to establish to the satisfaction of the Corporation that such Person did not acquire such shares of Series A Stock while or from a Prohibited Transferee.

     (B) As used in this Division C, the term “Prohibited Transferee” shall mean, at the time any determination is to be made, (1) any Person other than the Corporation or any Related Person (as such terms are hereinafter defined), who or which, together with all Affiliates and Associates (as such terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and in effect on the date of first issuance of any shares of Series A Stock (the “Exchange Act”)) of such Person, shall be the

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beneficial owner of 20% or more of the Common Shares then outstanding or (2) any Person (other than the Corporation or any Related Person) who or which, together with all Affiliates or Associates of such Person (A) commences or announces its intention to commence a tender or exchange offer the consummation of which would result in beneficial ownership by such Person of 20% or more of the Common Shares then outstanding, or announces its intention otherwise to purchase or acquire (b) 20% or more of the Common Shares then outstanding. The term “Person” shall mean any individual, firm, corporation, partnership or other entity, and shall include any successor (by merger or otherwise) of such entity. The term “Related Person” shall mean (x) any subsidiary of the Corporation, (y) any employee benefit or stock ownership plan of the Corporation or any entity holding Common Shares for or pursuant to the terms of any such plan, or (z) any Person who acquires Common Shares from the Corporation or any other Related Person in one or a series of related transactions, each of which is approved by a majority of the Directors of the Corporation; provided, however, that if any Person who becomes a Related Person solely by virtue of subsection (z) above, or any Affiliate or Associate of such Person, subsequently becomes the beneficial owner of any additional Common Shares in a transaction or transactions not approved by a majority of the Directors of the Corporation, such Person shall no longer be deemed a “Related Person” with respect to all Common Shares of which it, or any of its Affiliates or Associates, is the beneficial owner. The term “Distribution Date” shall mean the close of business on the fifteenth calendar day (or such other date as any be specified by a majority vote of the Directors then in office) after the Share Acquisition Date. The term “Share Acquisition Date” shall mean the first date of public announcement by the Corporation or a Prohibited Transferee (by press release, filing made with the Securities and Exchange Commission or otherwise) that a Prohibited Transferee has become such. For the purposes of this Division C, a Person shall be deemed the “Beneficial Owner” of and shall be deemed “beneficially to own” any securities: (i) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time or the occurrence or nonoccurrence of an event) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, other rights (other than the Other Rights), warrants, options or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or beneficially to own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right or power to vote or dispose of, or to direct the vote or disposition of, including pursuant to any agreement, arrangement or understanding (whether or not in writing); or (iii) which any other Person is the beneficial Owner if such other Person or any of the Affiliates or Associates of such other Person has any agreement, arrangement or understanding (whether or not in writing) with the first Person or the Affiliates or Associates of the first Person with respect to acquiring, holding, voting or disposing of any securities of the Company; provided, however, that a Person shall not be deemed the Beneficial Owner of, or beneficially to own, any security (A) if such Person has a right to vote such security pursuant to an agreement, arrangement or understanding (whether or not in writing) which (i) arises solely from a revocable proxy given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report), or (B) if such beneficial ownership arises solely as a result of such Person’s status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act; and provided, further, however, that nothing in this paragraph shall cause a Person engaged in business as an underwriter of securities to be the Beneficial Owner of any securities acquired through such Person’s participation in good faith in an underwriting syndicate pursuant to an agreement to

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which the Company is a party until the expiration of 40-calendar days after the date of such acquisition. The term “Rights” shall mean the rights to purchase shares of Series A Stock issued pursuant to the terms of the Rights Agreement. The term “Other Rights” shall mean the rights to purchase Common Shares of the Corporation issued pursuant to the terms of the Rights Agreement, dated October 6, 1987, as from time to time amended or supplemented, between the Corporation and National City Bank.

DIVISION D
EXPRESS TERMS OF THE SERIAL PREFERENCE SHARES

     Section 1. Serial Preference Shares may be issued from time to time in one or more series. Subject to the provisions of this Division D, which apply to all Serial Preference Shares, the Directors are hereby authorized to adopt amendments to the Articles of Incorporation in respect of any unissued or treasury Serial Preference Shares and thereby fix or change any or all of the express terms of such Serial Preference Shares as from time to time may be permitted or required by law, including without limitation the following:

     (i) The division of such shares into series and the designation and authorized number of shares of each series;

     (ii) The dividend or distribution rate;

     (iii) The dates of payment of dividends or distributions and the dates from which they are cumulative;

     (iv) Liquidation price;

     (v) Redemption rights and price;

     (vi) Sinking fund requirements;

     (vii) Conversion rights; and

     (viii) Restrictions on the issuance of shares of any class or series.

     Section 2. The holders of Serial Preference Shares shall be entitled to one vote for each Serial Preference Share held by them upon all matters presented to the shareholders and, except as required by law, the holders of Serial Preference Shares and the holders of Common Shares (and the holders of all other shares of voting stock of the Corporation that vote together as a class with the holders of Common Shares) shall vote together as one class on all matters.

     Section 3.

     (a) The holders of Serial Preference Shares shall be entitled to receive dividends, when and as declared by the Directors, out of the assets of the Corporation

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which are by law available for the payment of dividends at the rate per share per annum as shall have been fixed by the Directors pursuant to Section 1 of this Division D.

     (b) No dividends (other than a dividend payable in Common Shares) or other distributions shall be paid or declared on any Common Shares or any other shares ranking junior to the Serial Preference Shares (such Common Shares and other shares ranking junior to the Serial Preference Shares being hereinafter referred to as “Junior Shares”), nor shall any Junior Shares be purchased, retired or otherwise acquired by the Corporation, unless:

     (i) all accrued and unpaid dividends on all series of Serial Preference Shares, including the full dividends for the current period, shall have been declared and paid or provision shall have been made for such payment; and

     (ii) there shall be no arrearages with respect to the redemption or sinking fund obligations, if any, of the Corporation for any series of Serial Preference Shares.

     Section 4. In the event of a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, before any payment shall be made to the holders of Junior Shares, the holders of the Serial Preference Shares shall be entitled to be paid from the assets available therefor the liquidation price fixed by the Directors pursuant to Section 1 of this Division D and all accrued and unpaid dividends on the Serial Preference Shares.

     Section 5. All Serial Preference Shares shall be shares “ranking junior to the Serial Preferred Stock” as such phrase is defined in Division A, Section 8 of the Articles of Incorporation.

     FIFTH: Except as otherwise provided in these Articles of Incorporation or in the Regulations, the holders of a majority of the outstanding shares are authorized to take any action which, but for this provision, would require the vote or other action of the holders of more than a majority of such shares. In order for a nominee to be elected as a director of the Corporation in an uncontested election, the nominee must receive a greater number of votes cast “for” his or her election than “withheld.” Shareholder abstentions will not count either as “for” or “withheld.” In a contested election, the nominees receiving the greatest number of votes “for” will be elected. An election will be considered contested if, as of the record date, there are more nominees for election than director positions to be filled in that election.

     SIXTH: Except as otherwise provided in these Articles of Incorporation, the Corporation, by its Board of Directors, may purchase issued shares, to the extent permitted by law.

     SEVENTH:

     Section 1. In addition to any affirmative vote required by law or these Articles of Incorporation, any Related Party Transaction shall require the affirmative vote of not less than both a majority of the Corporation’s outstanding Voting Stock and a majority of the portion of the

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Corporation’s outstanding Voting Stock excluding the Voting Stock owned by the Related Party involved in the Related Party Transaction.

     Section 2. The provisions of Section 1 of this Article Seventh shall not be applicable to Related Party Transactions in which (a) the aggregate amount of the cash and the fair market value of consideration other than cash received per share by holders of shares of each class or series of Voting Stock of the Corporation who receive cash or other consideration in the Related Party Transaction is not less than the highest per share price (with appropriate adjustments for recapitalizations and for stock splits, stock dividends, and like distributions) paid by the Related Party in acquiring any of its holdings of each class of series of such Voting Stock, and (b) the form of consideration received by holders of shares of each class or series of such Voting Stock is cash or the same form used by the Related Party to acquire the largest percentage of each class or series of such Voting Stock owned by the Related Party.

     Section 3. The provisions of Section 1 of this Article Seventh shall not be applicable if the Continuing Directors of the Corporation by a majority vote have expressly approved the Related Party Transaction.

     Section 4. For the purpose of this Article Seventh:

     (a) The term “Related Party Transaction” shall mean (i) any merger or consolidation of the Corporation or a Subsidiary with a Related Party, irrespective of which party, if either, is the surviving party, (ii) any sale, purchase, lease, exchange, transfer, or other transaction (or series of transactions) between the Corporation or a Subsidiary and a Related Party involving the acquisition or disposition of assets for consideration of $10,000,000 or more in value (except for transactions in the ordinary course of business), (iii) the issuance or transfer of any securities of the Corporation or of a Subsidiary to a Related Party (other than an issuance or transfer of securities which is effected on a pro rata basis to all shareholders of the Corporation), (iv) any reclassification of securities of the Corporation (including any reverse stock split) or any recapitalization or other transaction involving the Corporation or its Subsidiaries that would have the effect of increasing the voting power of a Related Party, except for any mandatory redemption required by the terms of outstanding securities, and (v) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation in favor of which a Related Party votes its Voting Stock.

     (b) The term “Related Party” shall mean (i) any individual, corporation, partnership, or other person, group or entity which, together with its Affiliates and Associates, is the beneficial owner of ten percent (10%) or more but less than ninety percent (90%) of the Voting Stock of the Corporation or (ii) any such Affiliate or Associate.

     (c) A person shall be a “beneficial owner” of any shares of Voting Stock:

     (i) Which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

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     (ii) Which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or

     (iii) Which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

     (d) The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Act of 1934, as in effect on January 1, 1985 (or any subsequent provisions replacing such Act, Rules or Regulations).

     (e) The term “consideration other than cash” as used in Section 2(a) of this Article Seventh shall include, without limitation, Voting Stock of the Corporation retained by its existing shareholders in the event of a merger or consolidation with a Related Party in which the Corporation is the surviving corporation.

     (f) The term “Subsidiary” shall mean any Affiliate of the Corporation more than fifty percent (50%) of the outstanding securities of which representing the right, other than as affected by events of default, to vote for the election of directors is owned by the Corporation or by another Subsidiary (or both).

     (g) The term “Voting Stock” shall mean all securities of the Corporation entitled to vote generally in the election of directors.

     (h) The term “Continuing Director” shall mean a director who either (i) was a member of the Board of Directors of the Corporation immediately prior to the time that the Related Party involved in a Related Party Transaction became a Related Party, or (ii) was designated (before his or her initial election as a director) as a Continuing Director by a majority of the then Continuing Directors.

     Section 5. A majority of the Continuing Directors shall have the power and duty to determine conclusively for the purposes of this Article Seventh, on the basis of information known to them, (a) whether a person is a Related Party, (b) whether a person is an Affiliate or Associate of another, (c) whether a transaction between the Corporation or a Subsidiary and a Related Party involves the acquisition or disposition of assets for consideration of $10,000,000 or more in value, (d) the fair market value of consideration other than cash received by holders of Voting Stock in a Related Party Transaction, and (e) such other matters with respect to which a determination or interpretation is required under this Article Seventh.

     Section 6. Nothing contained in this Article Seventh shall be construed to relieve any Related Party from any fiduciary obligation imposed by law.

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     Section 7. Notwithstanding any other provisions of these Articles of Incorporation or the Regulations of the Corporation or any provision of law which might otherwise permit a lesser vote, but in addition to any affirmative vote of the holders of any particular class or series of stock required by law or these Articles of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the Corporation’s Voting Stock, voting as a single class, shall be required to alter, amend or adopt any provision inconsistent with or repeal this Article Seventh.

     EIGHTH:

     Section 1. Any direct or indirect purchase or other acquisition by the Corporation of any shares of Voting Stock from any Selling Shareholder who has beneficially owned any of such shares of Voting Stock for less than two years prior to the date of such purchase or other acquisition, or any agreement in respect thereof, shall, except as expressly provided in Section 2 of this Article Eighth, require the affirmative vote of the holders of not less than a majority of the shares of Voting Stock represented in person or by proxy at a meeting at which a quorum is present, excluding Voting Stock beneficially owned by such Selling Shareholder, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law, or in any agreement with any national securities exchange or otherwise.

     Section 2. The provisions of Section 1 of this Article Eighth shall not be applicable (a) to any purchase or other acquisition by the Corporation from a Selling Shareholder of shares of Voting Stock owned by said Selling Shareholder which purchase or acquisition is made as part of a tender or exchange offer by the Corporation to purchase Voting Stock of the same class or series made on the same terms to all holders of such Voting Stock and complying with the applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations), or (b) to the purchase from any Selling Shareholder of shares of Voting Stock by the Corporation at a price not in excess of the Fair Value thereof, and any such purchase or acquisition shall require only such affirmative vote, if any, as is required by law and any other provisions of these Articles of Incorporation or otherwise.

     Section 3. For the purpose of this Article Eighth:

     (a) “Selling Shareholder” shall mean any individual, firm, partnership, corporation or other person, group or entity (other than the Corporation or any corporation of which a majority of its voting stock is owned, directly or indirectly, by the Corporation) who or which:

     (i) is the beneficial owner of more than five percent (5%) of the class or series of Voting Stock to be acquired; or

     (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of more than five percent (5%) of the class or series of Voting Stock to be acquired; or

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     (iii) is an assignee or has otherwise succeeded to any shares of the class or series of Voting Stock to be acquired which were at any time within the two-year period immediately prior to the date in question beneficially owned by a Selling Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

     (b) “Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Act of 1934, as in effect on January 1, 1985 (or any subsequent provisions replacing such Act, Rules or Regulations).

     (c) A person shall be a “beneficial owner” of any shares of Voting Stock:

     (i) Which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

     (ii) Which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or

     (iii) Which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

     (d) For the purpose of determining whether a person is a Selling Shareholder pursuant to paragraph (a) of this Section 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (c) of this Section 3, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

     (e) “Voting Stock” shall mean all securities of the Corporation entitled to vote generally in the election of directors.

     (f) “Fair Value” shall mean the highest closing sale price of such Voting Stock during the thirty-day period immediately preceding the date in question, on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such Voting Stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such Voting Stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such Voting Stock is listed, or, if such Voting Stock is not listed on any such exchange, the highest closing bid quotation with respect to such Voting Stock, during the thirty-day period immediately preceding the date in question, on the National Association of Securities Dealers, Inc.

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Automated Quotations System or any system then in use, or if no such quotations are available, the Fair Value on the date in question of such Voting Stock shall be as determined by a majority of the Board of Directors of the Corporation in good faith.

     Section 4. A majority of the Board of Directors shall have the power and duty to determine conclusively for the purposes of this Article Eighth, on the basis of information known to them, (a) whether a person is a Selling Shareholder, (b) the Fair Value of Voting Stock owned by a Selling Shareholder, and (c) such other matters with respect to which a determination or interpretation is required under this Article Eighth.

     NINTH: [REPEALED IN ITS ENTIRETY]

     TENTH: The provisions of Section 1701.831 of the Ohio Revised Code, as amended from time to time, or any successor provision or provisions to said Section, shall not apply with respect to any particular Control Share Acquisition, as such is defined in said Section, regarding this Corporation so long as Article Ninth of these Articles of Incorporation, as such Articles of Incorporation may be amended from time to time, remains an Article of these Articles of Incorporation and remains substantially in full force and effect, disregarding any renumbering of such Article Ninth resulting from any amendment of these Articles of Incorporation.

     ELEVENTH: These Amended Articles of Incorporation supersede the existing Amended Articles of Incorporation of the Corporation.

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED REGULATIONS
OF THE LUBRIZOL CORPORATION

ARTICLE I
MEETINGS OF SHAREHOLDERS

Section 1. Annual Meeting.

     The annual meeting of the shareholders of the Company shall be held at the principal office of the Company, or at such other place within or without the State of Ohio as the directors may determine, on the fourth Monday of April of each year, if not a legal holiday, or, if a legal holiday, then on the next succeeding business day. The directors shall be elected thereat and such other business transacted as may be specified in the notice of the meeting.

Section 2. Special Meetings.

     (a) General. Special meetings of the shareholders may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President, or by the Board of Directors, or by a request in proper written form by holders of fifty percent (50%) or more of the outstanding shares. These meetings may be held at the date (other than a legal holiday), time and place, within or without the State of Ohio, as is specified in the notice of the meeting.

     (b) Form of Shareholder Notice. Any shareholder entitled to call a special meeting who desires to do so, must deliver either in person or by registered mail to the President or the Secretary of the Company a written request, which sets forth the matters to be acted upon and the information described in Section 7(c) of this Article I or Section 2(d) of Article II, as applicable.

Section 3. Notice of Meetings.

     (a) General. Written or printed notice of every annual or special meeting of the shareholders stating the time and place and the purposes thereof shall be given to each shareholder entitled to vote thereat and to each shareholder entitled to notice as provided by law, by mailing the same to his last address appearing on the records of the Company at least seven days before any such meeting. Any shareholder may waive any notice required to be given by law or under these Regulations, and by attendance at any meeting, shall be deemed to have waived notice thereof.

     (b) Notice and Timing of Special Meetings Requested by Shareholders. Within thirty (30) days after written request of any persons entitled to call a special meeting of shareholders is delivered to the President or the Secretary in accordance with Article I, Section 2(b), the Company will provide to each shareholder of record entitled to notice as provided by law, a notice setting forth the date, time and place and the purpose for the meeting; the date of which will be determined by the Company and will not be earlier than seven (7) nor later than ninety (90) days after receipt of the meeting request submitted in accordance with Section 2(b) of this Article I.

Section 4. Persons Becoming Entitled by Operation of Law of Transfer.

     Every person who, by operation of law, transfer, or any other means whatsoever, shall become entitled to any shares, shall be bound by every notice in respect of such share or shares which previously to the entering of his name and address on the records of the Company shall have been duly given to the person from whom he derives his title to such shares.

Section 5. Quorum and Adjournments.

     Except as may be otherwise required by law or by the Articles of Incorporation, the holders of shares entitling them to exercise a majority of the voting power of the Company shall constitute a quorum to hold a shareholders meeting; provided, however, that at any meeting, whether a quorum is present or otherwise, the holders of a majority of the voting shares represented thereat may adjourn from time to time without notice other than by announcement at such meeting.

Section 6. Order and Conduct of Business.

     At any meeting of shareholders, only the business as is properly brought before the meeting may be conducted or considered. To be properly brought before an annual meeting of shareholders, business must be (i) specified in the notice of meeting (or any supplement thereto), (ii) otherwise properly brought before the meeting by or at the direction of the chair of the meeting or by or at the direction of the Board of Directors, or (iii) otherwise properly requested to be brought before the meeting by a shareholder in accordance with Section 7 of this Article I for proposals regarding business other than nomination of a person for election as a director or, for business regarding nomination of a person for election as a director, Section 2 of Article II. To be properly brought before a special meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto), or (ii) otherwise properly brought before the meeting by or at the direction of the chair of the meeting or by or at the direction of the Board of Directors.

     The Chairman of the meeting of shareholders may, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6, and if he should so determine, any such business shall not be transacted.

Section 7. Shareholder Proposals Regarding Business Other Than Nomination of a Person for Election as a Director.

     (a) General. For business (other than nomination of a person for election as a director) to be properly requested to be brought before an annual meeting by a shareholder, the business must be a proper matter for shareholder action and the shareholder must (i) have given timely notice in proper written form to the President or the Secretary of the Company in accordance with the procedures set forth below, (ii) be a shareholder of record at the time the notice is given for the meeting, and (iii) be entitled to vote at the meeting.

     (b) Timing for Delivery of the Shareholder Notice for the Annual Meeting. To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the date of the previous year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) calendar days prior to or delayed by more than thirty (30) calendar days after the anniversary of the previous year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth (90th) calendar day prior to the annual meeting or the fifteenth (15th) calendar day following the day on which public announcement of the date of the annual meeting is first made.

     (c) Form of the Shareholder Notice. To be in proper written form, a shareholder’s notice to the Company must include:

     (i) as to each matter the shareholder proposes to bring before the annual meeting: (A) a description in reasonable detail of the business desired to be brought before the annual meeting; (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and, if the business includes a proposal to

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amend these Regulations or the Articles of Incorporation of the Company, the language of the proposed amendment); and (C) the reasons for conducting the business at the meeting;

     (ii) as to the shareholder giving notice and any Shareholder Associate (defined below): (A) the name and address of the shareholder, as they appear on the Company’s stock ledger, and, if different, the current name and address of the shareholder, and the name and address of any Shareholder Associate; (B) a representation that at least one of these persons is a holder of record or beneficially of securities of the Company entitled to vote at the meeting and intends to remain so through the date of the meeting and to appear in person or by proxy at the meeting to present the business stated in the shareholder’s notice; (C) the class and number of any securities of the Company that are owned of record or beneficially by each of these persons as of the date of the shareholder’s notice; (D) a description of any material interests of any of these persons in the business proposed and of all agreements, arrangements and understanding between these persons and any other person (including their names) in connection with the proposal of the business by the shareholder; (E) a description of any agreement, arrangement or understanding that has been entered into as of the date of the shareholder’s notice pursuant to which any of these persons directly or indirectly has other economic interests in securities of the Company (including, but not limited to, derivative or short positions, profit interests, options, hedging transactions, borrowed or loaned shares, warrants, convertible securities, stock appreciation rights, or similar rights with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, whether or not the instrument or right is subject to settlement in the underlying class or series of capital stock of the Company or otherwise); (F) a description of any proxy, contract, arrangement, understanding or relationship pursuant to which any of these persons has a right to vote any shares of any securities of the Company; (G) a description of any performance-related fees (other than an asset-based fee) to which any of these persons is entitled based on any increase or decrease in the value of shares of the Company as of the date of the notice; and (H) a representation that after the date of the notice and up to the date of the meeting each of these persons will provide written notice to the Secretary of the Company as soon as practicable following a change in the number of securities of the Company held as described in response to subclause (C) above that equals one percent (1%) or more of the outstanding shares of the Company, and/or entry, termination, amendment or modification of the agreements, arrangements or understanding described in response to subclause (E) above that results in a change that equals one percent (1%) or more of the outstanding shares of the Company in the economic interests underlying those agreements, arrangements or understanding; and

     (iii) a representation as to whether the shareholder giving notice and any Shareholder Associate intends, or intends to be part of a group that intends, (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve or adopt the proposal, and/or (B) otherwise to solicit proxies from shareholders in support of the proposal.

     For purposes of these Regulations, “Shareholder Associate” of any shareholder means (A) any person controlling, directly or indirectly, or acting in concert with, the shareholder, (B) any beneficial owner of shares of stock of the Company owned of record or beneficially by the shareholder, (C) any person controlling, controlled by or under common control with the Shareholder Associate, or (D) any person on whose behalf a notice is given.

     Notwithstanding the foregoing provisions of this Section 7, in order for a shareholder to submit a proposal for inclusion in the Company’s proxy statement for an annual meeting of

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shareholders, the shareholder must comply with all applicable requirements of the Exchange Act, including Rule 14a-8 (or any comparable successor rule or regulation under the Exchange Act), and the rules and regulations thereunder. The provisions of this Article I, Section 7 will not be deemed to prevent a shareholder from submitting proposals for inclusion in the Company’s proxy statement pursuant to those rules and regulations.

ARTICLE II
BOARD OF DIRECTORS

Section 1. Number.

     The number of directors constituting the whole Board of Directors will be not less than nine (9) nor more than thirteen (13). The exact number of directors will be fixed from time to time within that range by a duly adopted resolution of the Board of Directors.

Section 2. Nominations.

     (a) General. Only persons who are nominated in accordance with the procedures set forth in this Article II, Section 2 will be eligible for election as directors. Nominations of persons for election as directors of the Company may be made at an annual meeting or a special meeting duly called for that purpose (i) by or at the direction of the Board of Directors or any nominating committee of the Board of Directors, or (ii) by any shareholder of the Company who is a shareholder of record at the time of giving the notice provided for in this Article II, Section 2 and is a shareholder of record at the time of the annual meeting, who is entitled to vote for the election of directors at the meeting, and who complies with the notice procedures set forth below.

     (b) Timing for Delivery of the Shareholder Notice for the Annual Meeting. For nominations of persons for election as directors to be made at an annual meeting, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the date of the previous year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) calendar days prior to or delayed by more than thirty (30) calendar days after the anniversary of the previous year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth (90th) calendar day prior to the annual meeting or the fifteenth (15th) calendar day following the day on which public announcement of the date of the annual meeting is first made.

     (c) Timing for Delivery of the Shareholder Notice for a Special Meeting. For nominations of persons for election as directors to be made at a special meeting duly called for that purpose, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than seventy-five (75) days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be so received not later than the close of business on the fifteenth (15th) day following the day on which public announcement of the date of the meeting is first made.

     (d) Form of the Shareholder Notice. To be in proper written form, a shareholder’s notice must include:

     (i) as to each person who is not an incumbent director whom the shareholder proposes to nominate for election as a director, (A) the name, age, business address and residence address of each nominee proposed by the shareholder; (B) the principal occupation or employment of each nominee; (C) the class and number of

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securities of the Company that are beneficially owned or owned of record by each nominee; (D) the date or dates the securities were acquired and the investment intent of each acquisition; (E) any other information relating to each nominee that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act (or any comparable successor rule or regulation under the Exchange Act); and (F) any other information relating to each nominee that the Board of Directors or any nominating committee of the Board of Directors reviews in considering any person for nomination as a director, as will be provided by the Secretary of the Company upon request;

     (ii) as to the shareholder giving the notice and any Shareholder Associate, (A) the name and address of the shareholder, as they appear on the Company’s stock ledger, and, if different, the current name and address of the shareholder, and the name and address of any Shareholder Associate; (B) a representation that at least one of these persons is a holder of record or beneficially of securities of the Company entitled to vote at the meeting and intends to remain so through the date of the meeting and to appear in person or by proxy at the meeting to nominate the person or persons specified in the shareholder’s notice; (C) the class and number of securities of the Company that are owned of record or beneficially by each of these persons as of the date of the shareholder’s notice; (D) a description of any material relationships, including legal, financial and/or compensatory, among the shareholder giving the notice, any Shareholder Associate and the proposed nominee(s); (E) a description of any agreement, arrangement or understanding that has been entered into as of the date of the shareholder’s notice pursuant to which any of these persons directly or indirectly has other economic interests in securities of the Company (including, but not limited to, derivative or short positions, profit interests, options, hedging transactions, borrowed or loaned shares, warrants, convertible securities, stock appreciation rights, or similar rights with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, whether or not the instrument or right is subject to settlement in the underlying class or series of capital stock of the Company or otherwise); and (F) a representation that after the date of the notice and up to the date of the meeting each of these persons will provide written notice to the Secretary of the Company as soon as practicable following a change in the number of securities of the Company held as described in response to subclause (C) above that equals one percent (1%) or more of the outstanding shares of the Company, and/or entry, termination, amendment or modification of the agreements, arrangements or understanding described in response to subclause (E) above that results in a change that equals one percent (1%) or more of the outstanding shares of the Company in the economic interests underlying these agreements, arrangements or understanding;

     (iii) a representation as to whether the shareholder giving notice and any Shareholder Associate intends, or intends to be part of a group that intends, (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve or adopt the proposal, and/or (B) otherwise to solicit proxies from shareholders in support of the proposed nominee; and

     (iv) a written consent of each proposed nominee to serve as a director of the Company, if elected, and a representation that the proposed nominee (A) does not or will not have any undisclosed voting commitments or other arrangements with respect to his or her actions as a director, and (B) will comply with these Regulations and all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Company.

     Notwithstanding the foregoing provisions of this Section 2, in order for a shareholder to

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submit a proposal for inclusion in the Company’s proxy statement for a meeting of shareholders, the shareholder must comply with all applicable requirements of the Exchange Act, including Rule 14a-8 (or any comparable successor rule or regulation under the Exchange Act), and the rules and regulations thereunder. The provisions of this Article II, Section 2 will not be deemed to prevent a shareholder from submitting proposals for inclusion in the Company’s proxy statement pursuant to those rules and regulations.

     The chair of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions of this Article II, Section 2, and that the defective nomination will be disregarded.

Section 3. Term of Office and Election of Directors.

     (a) Term of Office. Each member of the Board of Directors will be elected at each annual meeting of shareholders to serve a one-year term and until his or her successor is duly elected and qualified, or until his or her earlier resignation, removal from office or death; provided, however, that each member of the Board of Directors serving on the date of the 2009 annual meeting of shareholders, including those elected at that meeting, for a term that is to expire after the 2009 annual meeting of shareholders, will serve the entire term for which he or she was elected and until his or her successor is duly elected and qualified, or until his or her earlier resignation, removal from office or death.

     (b) Majority Voting in Uncontested Elections. In order for a nominee to be elected to the Board of Directors in an uncontested election, the nominee must receive a greater number of votes cast “for” his or her election than “withheld.” Shareholder abstentions will not count either as “for” or “withheld.” In a contested election, the nominees receiving the greatest number of votes “for” will be elected. An election will be considered contested if, as of the record date, there are more nominees for election than director positions to be filled in that election.

Section 4. Removal.

     Except as otherwise provided by law, all the directors, or any individual director, may be removed from office with or without cause, by the affirmative vote of holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares of the Company present in person or represented by proxy and entitled to vote in respect thereof, at an annual meeting or at any special meeting duly called for that purpose.

Section 5. Vacancies.

     Whenever any vacancy occurs within the Board of Directors, the remaining directors will constitute the Board of Directors of the Company until the vacancy is filled or until the number of directors is changed as provided in Article II, Section 1. The remaining directors, though less than a majority of the whole authorized number of the Board of Directors, may, by a vote of a majority of its number, fill any vacancy for a term ending with the next annual meeting or until a successor is duly elected and qualified.

Section 6. Quorum.

     A majority of the directors in office at the time shall constitute a quorum; provided that any meeting duly called, whether a quorum be present or otherwise, may, by note of a majority of the directors present, adjourn from time to time and place to place within or without the State of Ohio without notice other than by announcement at the meeting. At any meeting of the directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of not less than a majority of the directors present.

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Section 7. Organization Meeting.

     Immediately after each annual meeting of the shareholders at which directors are elected, or each special meeting held in lieu thereof, the newly elected directors, if a quorum thereof be present, shall hold an organization meeting at the same place or at such other time and place as may be fixed by the shareholders at such meeting, for the purpose of electing officers and transacting any other business. Notice of such meeting need not be given. If for any reason such organization meeting is not held at such time, a special meeting for such purpose shall be held as soon thereafter as practicable.

Section 8. Regular Meetings.

     Regular meetings of the directors maybe held at such times and places within or without the State of Ohio as may be provided for in by-laws or resolutions adopted by the directors and upon such notice, if any, shall be so provided for.

Section 9. Special Meetings.

     Special meetings of the directors may be held at any time within or without the State of Ohio upon call by the Chairman of the Board, the Vice Chairman of the Board, the President, or any two directors. Notice of each such meeting shall be given to each director by letter or telegram or in person not less than forty-eight (48) hours prior to such meeting; provided, however, that such notice shall be deemed to have been waived by the directors attending such meeting, and may be waived in writing or by telegram by any director either before or after such meeting. Unless otherwise indicated in the notice thereof, any business may be transacted at any organization, regular or special meeting.

Section 10. Compensation.

     The directors are authorized to fix a reasonable salary for directors or a reasonable fee for attendance at any meeting of the directors, the Executive Committee, or other committees elected under Section 2 of Article III hereof, or any combination of salary and attendance fee, provided that no compensation as director shall be paid to any director who is a full-time employee of the Company. In addition to such compensation provided for directors, they shall be reimbursed for any expenses incurred by them in traveling to and from such meetings.

ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES

Section 1. Membership and Organization.

     (a) The directors, at any time, may elect from their number an Executive Committee which shall consist of not less than three members, each of whom shall hold office during the pleasure of the directors and may be removed at any time, with or without cause, by note thereof.

     (b) Vacancies occurring in the Committee may be filled by the directors.

     (c) The Committee shall appoint one of its own number as Chairman who shall preside at all meetings and may also appoint a Secretary (who need not be a member of the Committee) who shall keep its records and who shall hold office during the pleasure of the Committee.

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Section 2. Meetings.

     (a) Meeting of the Committee may be held upon notice of the time and place thereof at any place within or without the State of Ohio and until otherwise ordered by the Committee shall be held at any time and place at the call of the Chairman or any two members thereof.

     (b) A majority of the members of the Committee shall be necessary for the transaction of any business and at any meeting the Committee may exercise any or all of its powers and any business which shall come before any meeting may be transacted thereat, provided a majority of the Committee is present, but in every case the affirmative vote of a majority of all of the members of the Committee shall be necessary to any action by it taken.

Section 3. Powers.

     Except as its powers, duties and functions may be limited or prescribed by the directors, during the intervals between the meetings of the directors, the Committee shall possess and may exercise all the powers of the directors in the management and control of the business of the Company; provided that the Committee shall not be empowered to declare dividends, elect officers, nor to fill vacancies among the directors of Executive Committee. All actions of the Committee shall be reported to the directors at their meeting next succeeding such action and shall be subject to revision or alteration by the directors, provided that no rights of any third person shall be affected thereby.

Section 4. Other Committees.

     The directors may elect other committees from among the directors in addition to or in lieu of an Executive Committee and give to them any of the powers which under the foregoing provisions could be vested in an Executive Committee. Sections 9 and 10 of Article II shall be applicable to such other committees.

ARTICLE IV
OFFICERS

Section 1. Officers Designated.

     The directors at their organization meeting or at a special meeting held in lieu thereof, shall elect a President, a Secretary, a Treasurer and, in their discretion, a Chairman of the Board, a Vice Chairman of the Board, one or more Vice Presidents, an Assistant Secretary or Secretaries, an Assistant Treasurer or Treasurers, and such other officers as the directors may see fit. The President, the Chairman of the Board and the Vice Chairman of the Board shall be, but the other officers may, but need not be, chosen from among the directors. Any two or more of such offices other than that of President and Vice President, or Secretary and Assistant Secretary or Treasurer and Assistant Treasurer, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity.

Section 2. Tenure of Office.

     The officers of the Company shall hold office until the next organization meeting of the directors and until their successors are chosen and qualified, except in case of resignation, death or removal. The directors may remove any officer at any time with or without cause by a majority vote of the directors in office at the time. A vacancy, however created, in any office may be filled by election by the directors.

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Section 3. Chairman of the Board and President.

     The Chairman of the Board shall preside at meetings of shareholders and at meetings of directors. The President shall, in the absence of the Chairman of the Board, preside at meetings of the shareholders and in the absence of the Chairman of the Board and of the Vice Chairman of the Board shall also preside at meetings of the directors. The directors shall designate either the Chairman of the Board or the President as chief executive officer of the Company. The chief executive officer of the Company shall have general supervision over its property, business and affairs, and perform all the duties usually incident to such office, subject to the directions of the directors. He may execute all authorized deeds, mortgages, bonds, contracts and other obligations, in the name of the Company, and shall have such other powers and duties as may be prescribed by the directors. During such time as the President or Chairman of the Board, as the case may be, is not the chief executive officer, he shall have such authority and perform such duties as the directors may determine. In case of the absence or disability of the chief executive officer or when circumstances prevent the chief executive officer from acting, the President (if the Chairman of the Board is the chief executive officer) or the Chairman of the Board (if the President is the chief executive officer) shall perform the duties of the chief executive officer.

Section 4. Vice Chairman of the Board.

     The Vice Chairman of the Board, if any, shall, in the absence of the Chairman of the Board, preside at meetings of the directors and shall have such other powers and duties as may be prescribed by the directors.

Section 5. Vice Presidents.

     The Vice Presidents shall have such powers and duties as may be prescribed by the directors or as may be delegated by the chief executive officer. In case of the absence or disability of the Chairman of the Board and the President or when circumstances prevent them from acting, the Vice Presidents, in the order designated by the directors, shall perform the duties of the chief executive officer, and in such case, the power of the Vice Presidents to execute all authorized deeds, mortgages, bonds, contracts and other obligations, in the name of the Company shall be coordinate with like powers of the chief executive officer and any such instrument so executed by such Vice Presidents shall be as valid and binding as though executed by the chief executive officer. In case the chief executive officer and such Vice Presidents are absent or unable to perform their duties, the directors may appoint a President pro tempore.

Section 6. Secretary.

     The Secretary shall keep the minutes of all meetings of the shareholders and the directors. He shall keep such records as may be required by the directors, shall have charge of the seal of the Company and shall give all notices of shareholders and directors meetings required by law or by these Regulations, or otherwise, and shall have such other powers and duties as may be prescribed by the directors.

Section 7. Treasurer.

     The Treasurer shall receive and have in charge all money, bills, notes, bonds, stocks in other corporations and similar property belonging to the Company, and shall do with the same as shall be ordered by the directors. He shall keep accurate financial accounts, and hold the same open for inspection and examination of the directors. On the expiration of this term of office, he shall turn over to his successor, or the directors, all property, books, papers and money of the Company in his hands. He shall have such other powers and duties as may be prescribed by the directors.

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Section 8. Other Officers.

     The Assistant Secretaries, Assistant Treasurers, if any, and any other officers that the directors may elect, shall have such powers and duties as the directors may prescribe.

Section 9. Delegation of Duties.

     The directors are authorized to delegate the duties of any officers to any other officer and generally to control the action of the officers and to require the performance of duties in addition to those mentioned herein.

Section 10. Compensation.

     The directors are authorized to determine or to provide the method of determining the compensation of all officers.

Section 11. Bond.

     Any officer or employee, if required by the directors, shall give bond in such sum and with such security as the directors may require for the faithful performance of his duties.

Section 12. Signing Checks and Other Instruments.

     The directors are authorized to determine or provide the method of determining how checks, notes, bills of exchange and similar instruments shall be signed, countersigned or endorsed.

ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

Section 1. Indemnification.

     The Company shall indemnify any director or officer and any former director or officer of the Company and any such director or officer who is or has served at the request of the Company as a director, officer or trustee of another corporation, partnership, joint venture, trust or other enterprise (and his heirs, executors and administrators) against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by him by reason of the fact that he is or was such director, officer or trustee in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by applicable law.

     The indemnification provided for herein shall not be deemed to restrict the right of the Company (i) to indemnify employees, agents and others to the extent not prohibited by such law, (ii) to purchase and maintain insurance or furnish similar protection on behalf of or for any person who is or was a director, officer, employee or agent of the Company, or any person who is or was serving at the request of the Company as a director, officer, trustee, employee or agent of another corporation, joint venture, partnership, trust or other enterprise against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such, and (iii) to enter into agreements with persons of the class identified in clause (ii) above, indemnifying them against any and all liabilities (or such lesser indemnification as may be provided in such agreements) asserted against or incurred by them in such capacities.

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ARTICLE VI
MISCELLANEOUS

Section 1. Corporate Seal.

     The corporate seal of this Company shall be circular in form and contain the name of the Company.

Section 2. Provisions in Articles of Incorporation.

     These Regulations are at all times subject to the provisions of the Articles of Incorporation of the Company (including in such term whenever used in these Regulations, all amendments to the Articles of Incorporation in force at the time) and in case of any conflict, the provisions in the Articles of Incorporation shall govern.

Section 3. Amendments.

     These Regulations may be altered, changed or amended in any respect or superseded by new Regulations, in whole or in part, by the affirmative vote of the holders of a majority of the voting power of the Company, at an annual or special meeting duly called for that purpose. In addition, the Board of Directors may amend or repeal any part of these Regulations to the full extent permitted by applicable law. Notwithstanding the two preceding sentences and notwithstanding the fact that a lesser percentage may be specified by law or in any agreement with any national securities exchange or any other provision of these Regulations, the amendment, alteration, change or repeal of, or adoption of any provisions inconsistent with, Sections 1, 3 and 4 of Article II of these Regulations will require the affirmative vote, at an annual or special meeting duly called for that purpose, of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the Company, unless an amendment, alteration, change, repeal or adoption has been recommended by at least two-thirds percent (2/3%) of the Board of Directors of the Company then in office, in which event shareholders may approve the amendment, alteration, change, repeal or adoption by the affirmative vote of the holders of a majority of the voting power of the Company.

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EX-31.1

Exhibit 31.1

THE LUBRIZOL CORPORATION
Rule 13a-14(a) Certification

I, James L. Hambrick, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Lubrizol Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
(d)	disclosed in this report any change in registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ James L. Hambrick                              
James L. Hambrick

Chief Executive Officer and President

May 8, 2009

EX-31.2

Exhibit 31.2

THE LUBRIZOL CORPORATION
Rule 13a-14(a) Certification

I, Charles P. Cooley, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Lubrizol Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
(d)	disclosed in this report any change in registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Charles P. Cooley                              
Charles P. Cooley
Chief Financial Officer

May 8, 2009

EX-32.1

Exhibit 32.1

THE LUBRIZOL CORPORATION
Certification of Chief Executive Officer and Chief Financial Officer of
The Lubrizol Corporation Pursuant to 18 U.S.C. Section 1350

I certify that, to the best of my knowledge and belief, the Quarterly Report on Form 10-Q of The Lubrizol Corporation for the period ending March 31, 2009:

(1)	fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of The Lubrizol Corporation.

/s/ James L. Hambrick                              
James L. Hambrick
Chief Executive Officer and President
May 8, 2009

I certify that, to the best of my knowledge and belief, the Quarterly Report on Form 10-Q of The Lubrizol Corporation for the period ending March 31, 2009:

(1)	fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of The Lubrizol Corporation.

/s/ Charles P. Cooley                              
Charles P. Cooley
Chief Financial Officer
May 8, 2009